JUSTICE minister Ken Clarke yesterday announced plans to reform the UK’s no-win-no-fee system, lifting the ban on contingency fees that lawyers can claim for the work.
Instead of taking a so-called success fee solely from the losing side, lawyers will now be able to claim an agreed percentage of any damages won – sharing the risk with the claimant party.
The amount that a lawyer can claim will be capped at 25 per cent of any damage payment.
The change should reduce costs for businesses facing litigation claims, and discourage claimants from launching spurious cases. It should also mean companies are less pressured to settle, without the fear of huge legal bills hanging over them.
Clarke announced the proposed changes in the Commons yesterday, saying that he wanted to restore “proportion and confidence” to the system.
They follow a review by Lord Justice Jackson carried out in 2010 at the request of the previous government.
UK business group the British Chambers of Commerce (BCC), welcomed the proposals. “For too long the compensation culture in the UK has been allowed to grow, as claimants currently have nothing to lose by bringing even frivolous cases to court,” said a spokesperson for the BCC.
“Employers should be able to concentrate on running their business, instead of being faced with the constant risk of legal disputes.”
Public services have been particularly hard hit by litigation costs since the ban on contingency fees was introduced by Lord Woolf in 1999.
According to the Ministry of Justice, in 2008-09 the National Health Service paid out £465m in legal costs, on just £312m in actual damages.
But critics said the reform could hit genuine claims for personal injury.
Michael Frisby, head of litigation at law firm Stevens & Bolton said: “Although law firms are expected to provide the [no win no fee] service in place of legal aid, the reward for doing so has effectively been removed.”