Civil Justice Council recommendations for reform of Damages-Based Agreements (DBAs)

The Civil Justice Council has today issued its report and recommendations following its review of the regulations governing DBAs. The review was prompted by a request from the Ministry of Justice last November (see post). The working group was chaired by Professor Rachael Mulheron of Queen Mary University London and included Maura McIntosh of Herbert Smith Freehills.

In setting up the review, the government made it clear that it ruled out the introduction of “hybrid” arrangements which combine a DBA with some other form of retainer such as hourly rates - despite widespread criticism of the restriction including by Lord Justice Jackson and other senior judiciary, and the fact that it has widely been blamed for the slow take-up of DBAs.

In fact the terms of reference for the review clarified that the government's policy objection is only to what the report calls "concurrent hybrids", where the two forms of retainer exist at the same time. It does not object to "sequential hybrids" where there are different types of retainer for different stages of a case.

As the report notes, the working group was divided on the question of whether concurrent hybrid DBAs should be permitted, contrary to current government policy: some members considered that there was no good reason to prohibit their use, and that market freedom should prevail; others considered that the case in their favour had not been proven. However, the working group recommended that the government should be encouraged to evaluate the arguments in favour of concurrent hybrid DBAs.

In relation to sequential DBAs, the group recommended that the government should clarify whether the solicitor can retain the fees payable under the non-DBA funding agreement, or whether that sum must be offset against the contingency fee under the DBA.

The report makes a total of 45 recommendations, including proposing a number of technical amendments aimed at clarifying the regulations. The Master of the Rolls has welcomed the report, urging the government to consider amending the regulations to help promote confidence in DBAs and encourage their greater use. We will report further once the government's response to the report is available.