Guest Post: Understanding the Litigation Costs Reforms

Understanding the Litigation Costs Reforms

The much awaited recent reforms to UK legal costs have caused both unease and a great deal of interest among industry professions. On April 1st 2013, the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) became law, after Lord Justice Jackson’s review and report of 2010.

Despite this, many people within the legal community are unaware of the changes that have been made.

In this article, we look at the opinions and thoughts of legal professionals about the reforms to determine what they mean for the industry.

Damage-Based Agreements

One of the biggest reforms is the introduction of damage-based agreements, which are also known as DBAs. In a damage-based agreement, clients pay a percentage of the damages they’re awarded to their lawyer.

In exchange for this, their lawyer takes on the risk of being withheld payment if the case is not successful. As the fee depends on the damages awarded in the case, many legal experts believe that commercial law firms will avoid these cases due to a lack of commercial viability.

There also remains a great deal of confusion and concern regarding damage-based agreements. Counsel’s fees, disbursements and value-added tax, and protection for consumers from mis-selling remain important topics of discussion.

Costs Budgeting

Arguably the most popular aspect of the reforms is the change to budgeting that is now in effect. Solicitors are now required to budget overall costs at the beginning of their cases and update their budgets as the trial progresses.

This reform ensures that clients aren’t subject to unpredictably high legal bills at the conclusion of their cases.

In the event that the costs of a case aren’t proportionate to the claim being made, the client can enjoy security as the claim can be declared unviable. Because of the latest disclosure rules, clients also enjoy greater transparency in case budgeting.

Financing Packages

Over the last five years, the number of third party funding companies operating in the UK has increased substantially. Clients now have a great deal of choice when it comes to selecting suitable third party funders for their cases.

The new reforms reiterate an important factor in selecting a third party funder: that solicitors and clients ensure funders carefully weigh the risks and benefits of taking on your case before they accept it and create a budget.

In conclusion

There remains a great deal of discussion in the legal community about the nature of the reforms and their potential benefits. Some believe that they are an opportunity for both clients and solicitors; others that they’re an obstruction.

While no one can say for certain until the rules have been implanted and observed in practice, it can be said that clients will enjoy a greater degree of transparency in budgeting for their cases.

This increased focus on better budgeting, more transparency and an improved focus on disclosure could, in many ways, be exactly what the legal industry needs over the next year.

This article was written on behalf of Vannin Capital. Visit their website to learn more about corporate litigation.

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