Six years ago Parliament passed the Courts and Legal Services Act and Section 58 promised nothing short of a revolution in access to civil justice.
It allowed the introduction of conditional no win, no fee arrangements, and the Conditional Fee Agreements Order 1995 brought in conditional fees for insolvency work, European Court of Human Rights cases and personal injury work.
In PI cases, the solicitor decides whether to take the case on a no win, no fee basis. This risk assessment has caused much agonising for many considering conditional fees.
The Law Society's personal injury panel, of which I am a member, issues an insurance certificate to the client under a conditional fee agreement. The insurance premium of £85 gives the client an indemnity of up to £100,000 for the defendant's costs, should he lose, plus his own disbursements. The disbursements are paid only if proceedings are issued, so there is no risk to the client.
In return for solicitors taking the risk of losing and getting no fee, firms claim extra costs – the success fee – if the case is won. There is no limit on the percentage of the client's damages the solicitor may take but the Law Society's model conditional fee agreement imposes a cap of 25 per cent plus VAT.
There is an extra restriction, imposed by Parliament, that the success fee cannot be more than 100 per cent of the base fee – the solicitor's costs at the full solicitor and client rate. However, in nearly all cases this is purely academic if a 25 per cent limit is imposed.
In fact solicitors have operated on a speculative funding or deferred payment basis for decades and the advent of conditional fees has simply regularised an existing situation with the added benefits of allowing the client to insure against losing and allowing solicitors to market openly no win, no fee arrangements.
Conditional fees have been introduced for private clients, where the client could be vulnerable, and are proving a huge success. Their extension to contract and commercial litigation, where there is far less need to protect clients, seems certain.
Conditional fees give everyone access to the best lawyers, the best experts and the best advice. They are likely to become the standard way of funding civil litigation and solicitors who fail to acknowledge their potential do so at their peril.