How Conditional Fees Really Work

Yesterday the House of Commons Delegated Legislation Committee voted down the attempt by the Ministry of Justice to reduce conditional fee arrangements (CFAs) for defamation, privacy and malicious falsehood cases.

(Best news report here.)

The current rate for the uplift in a CFA is up to 100% - and the government would like to reduce this to 10%.

(The very brief draft statutory instrument is here and explanatory notes here.)

So why does this matter?

Well, first of all it is important to know what a CFA actually is.

A CFA provides for an additional amount to be paid to the lawyers of a party in certain civil cases.

That is an amount over and above what the lawyers have actually incurred in a case.

It is a windfall for the lawyers, but with a slight catch.

So if a party's lawyer bills £50,000, the CFA will operate when that party is successful to give the lawyer a windfall of up to an additional £50,000.

This is paid by the losing side, on top of the normal legal costs.

And this is money which goes directly to the law firm, not the client - however poor the client is, and however much the client is not one of the "rich and the powerful".

Given the organisation of many law firms as partnerships, this windfall goes to the profits of the partners.

But there is a catch.

If the party with the CFA loses, then their lawyer gets nothing.

The losing party will still have to pay the the winning party's costs, which may also include the other side's CFA uplift.

There is, therefore, a downside; there is a risk.

The uplift is justified as covering the risk of the lawyer: a windfall of doubling their fees for no extra work, against not getting any fees at all.

But are there real risks being adopted here by the lawyers involved?

Undoubtedly.

But do the risks warrant the invariable 100% uplift adopted in libel cases?

The government, following a consultation exercise, thinks not: see paragraphs 7 and 8 of the Explanatory Notes.

And so, the government, in a bold move, proposed cutting the uplift from 100% to 10%.

That means that the successful lawyers will now only get an additional 10% windfall of unearned income.

However, there is a group of City lawyers strongly opposing this.

They are doing this, we are told, to ensure there is "access to justice".

But there is nothing in the government's proposal which goes to abolishing the CFA regime.

The government's proposal is only that lawyers should only have a reward of 10% of unearned income against their fees instead of a 100% when they take a case on a CFA basis.

There will actually be nothing stopping law firms acting for just the same clients on a 10% CFA.

And I doubt that even City libel lawyers will be callous enough to turn actually winnable cases down because they will get only 10% windfall instead of a 100% one.

Or they won't say so aloud, anyway.

There will be a great smoke and fog generated as the government presses to limit these uplifts - one expects "access to justice" to be invoked again and again.

But all this really means is that libel lawyers are threatening not do for 10% what they are currently doing for 100%.

In fact, "access to justice" is in their hands, not in those of the government's.

I do wonder if they are bluffing.

After all, there will still be libel and privacy litigation.

For media lawyers, like the poor, are always with us.


I plan to blog more extensively on this in a few days, including a full response to an upcoming blogpost by Tom Watson MP - one of the MPs who sought to block the reduction - on Liberal Conspiracy.


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