Changes in English Case Funding: More Litigation

Writing in the January newsletter of the Pharmaceutical, Medical Device and Biotechnology newsletter, Sarah L. Croft and Stephen E. Scheve, of the London and Houston offices of Shook, Hardy & Bacon, respectively, consider the effects of England's wary approach to contingent fees: A major difference between civil litigation in England and the United States has been the fact that historically contingency fees were not available in England. This changed in July 1995 when a version of contingency fees was introduced, known as fees. The Courts and Legal Services Act 1990 gave the Lord Chancellor powers to introduce regulations under which conditional fees would operate. These regulations were contained in the form of two statutory instruments, Conditional Fee Agreements Order 1995, S.I. 1995 No. 1674, and Conditional Fee Regulations 1995, No. 1675. Although there had been pressure for some years to allow some kind of win, no arrangement between solicitors and their clients, this had been resisted. Opponents' fears included an increase in frivolous claims, high damages awards and conflicts of interest between lawyers and their clients. Funding before conditional fees In order to appreciate the changes engendered by the introduction of conditional fees, it is helpful to explain briefly how litigation traditionally has been funded in England. Of central importance is the fact that in England, unlike the United States, the loser rule applies-the losing party usually pays the winner's legal costs. Thus, an unsuccessful defendant in a personal injury case would be ordered to pay damages and probably the plaintiff's legal costs, as well as paying its own lawyers. Another factor to bear in mind is that in most civil litigation in England, again unlike the United States, the level of damages awarded is decided by a judge, not by a jury, so the tendency is for damages to be lower. Before the introduction of conditional fees, as far as personal injury cases were concerned, plaintiffs often applied for legal aid to fund their claims. Legal aid is the system whereby the government pays the individual's legal costs. The applicant must pass a means test and the claim is subjected to a merits test involving a cost/benefit analysis. The legally aided party may have to make a contribution to the cost of the legal aid. Almost all large multiparty actions, including those against pharmaceutical companies, have involved groups of plaintiffs, the vast majority of which were legally aided. If a defendant is successful against legally aided opposition, the successful defendant may not recover its costs, because a costs order typically will not be enforced without leave of court, and the legally aided party is likely to be impecunious. A driving force behind the introduction of conditional fees was the concern of plaintiffs' lawyers and consumer groups that some plaintiffs who failed the means test for legal aid did not bring claims because they could not afford to pay their own lawyers, or risk losing and paying the other side's costs too. What are conditional fees? Conditional fee agreements can only be entered into at present in a relatively small number of types of case. However, these categories include personal injury claims and there have been indications that other categories will be added. Conditional fees are contingent in the sense that if the client wins the litigation, the solicitor will get paid, but if the client loses, he will not. Conditional fees are not the same, however, as contingency fees in the United States. If the party in a conditional fee case wins, the solicitor fees are typically paid at a basic hourly rate, which is based on the firm's normal billing rates. The Law Society, the body which represents solicitors, has developed a model conditional fee agreement, and it is the terms of this agreement that are referred to here. …