The Lord Chancellor's proposed 'no win no fee' scheme has provoked a spate of colourful headlines in the last few weeks. Some raise the spectre of litigation in the US, with all the imagined horrors of huge awards and overpaid ambulance-chasing lawyers. Others complain that the scheme will lead to a massive explosion in litigation.
The proposed scheme will only apply to personal injury, insolvency and human rights cases. It will allow solicitors to take on cases and only charge if they win. If successful, they will be allowed to receive an additional mark-up of 100 per cent on their normal fees. For the scheme to work, insurance against the possibility of having to pay the defendant's legal tees will be essential for claimants.
There are fundamental differences between the Lord Chancellor's proposals and true contingency fees as they operate in the US. Over there, legal aid does not exist so there is a far wider range of claimants for whom contingency fees are the only method of funding litigation.
In this country the significant growth in the UK legal expenses market, with cover often an adjunct to household insurance, will further reduce the number of people who would need to fund cases on a 'no win no fee' basis.
I do not believe that lawyers' integrity will be subverted. Solicitors will not be receiving a percentage of their client's damages; the proposals only allow an additional mark-up to be applied if the case warrants it.
I think it is likely that there will be some small increase in litigation that would not otherwise have been brought. I expect that, in a few years, this scheme will simply be seen as one alternative method of funding cases. As a defendant litigator, the good news is that plaintiffs who lose will at least be insured for the defendant's costs.
Paul Parke is an insurance litigation partner at Wansbroughs Willey Hargrave.