The hotly anticipated Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) finally came into UK law on 1st April 2013. The new regulations have been eagerly awaited by everyone in the litigation industry including third party funders, solicitors, lawyers and commercial businesses.
The reform follows Lord Justice Jackson’s review in 2009 and his published report in 2010. However, to date many parties are unclear as to what the changes mean for them on a practical level.
The Act has caused many to feel uncertain. Some parties have set out to try and understand the new requirements and look at the positives it will bring to the industry; whereas others have dwelled on negative views and claim it will only cause obstacles.
Whether you are optimistic or pessimistic, reality remains the same. UK legal costs have endured a reform and if you work in the industry, you will be affected.
Many of the details are still hazy and for this reason, we have looked at both sides of the argument.
Negatives
It has to be said that the biggest reform is the replacement of Conditional Fee Agreements (CFAs) with Damage-Based Agreements (DBAs). This has caused a lot of speculation given the ambiguity around the fees.
Fundamentally, this funding option allows a client to pay their lawyer a fraction of the damages. In return, the lawyer will take the risk that if the case loses, they don’t get paid.
However, the percentage of counsel’s fee, VAT and disbursements has still not be clarified and as a result, the Legal Services Board (LSB) has issued a stark warning that consumers will be the targets of mis-selling practices.
What’s more, many argue that there will be a reduction of commercial law firms taking these cases on, as there is the risk that they won’t get paid if the case loses.
In order for DBAs to be successful, they need to become clear-cut. The client MUST know how much it will cost them and what they are signing up for.
Positives
Many parties in the industry have hailed one of the reforms which is greater transparency on cost budgeting. The law states that cases must be budgeted at the very beginning, as well as during the trial.
What does this mean? Businesses will no longer be landed with an unexpected, expensive legal bill right at the end of the case. If the costs are not comparative to the claim at the start, it won’t be deemed worthwhile and therefore clients can know if they are pursuing a weak claim.
What’s more, new disclosure rules will improve collaborations making the proceedings more cost-effective. However, it needs to be clear which costs are not recoverable from the losing party i.e. lawyers’ success fees and After-the-Event Insurance (ATE).
Financing packages- surely a good thing?
Following the new law, litigation funding companies will be giving clients new financing packages. The number of third party funding providers has dramatically increased in the last three years, giving businesses and lawyers’ greater scope of funding routes, as well as legal insurance products.
The rise in funding companies has unfortunately given way to a number of rogue firms. It is imperative when approaching a third party funder that they demonstrate good practice. Before agreeing to take your case on board, they should fully assess the risks involved and produce a budget.
So will the long-awaited LASPO be an opportunity or an obstruction? Only time will tell. But surely greater transparency and better budgeting is just what the industry needs?
This article was provided by Vannin Capital, one of the UK’s leading specialist litigation funding providers.
