MoJ to crack down on contingency fees

The government is seeking a new power to regulate contingency fees – which is likely to include a percentage cap - in a bill tabled today.

A new clause in the Coroners and Justice Bill introduced into the House of Lords today will provide the statutory framework for regulation of contingency fees, which are widely used in employment tribunals.

The Ministry of Justice has launched a consultation coinciding with the bill to look at exactly how the regulation of contingency fees should work.

It seeks views on the merits of introducing a general maximum percentage of damages that can be charged under a contingency fee. It also considers a ‘sliding scale’ which would reflect the complexity of the case, the work done and the likely level of damages awarded.

The consultation makes it clear that the government intends to control the use of ‘unfair’ settlement clauses and exit clauses in contingency agreements, which it says are designed to ‘penalise claimants’ when they wish to change representative. It points to ‘anecodotal evidence’ that a claimant who ends their agreement can be forced to pay the solicitor or other representative ‘up to £500 for every six months during which their file has been open, regardless of the work carried out’.

The consultation also states that current requirements for solicitors and claims managers to provide information on costs are insufficient and lead to confusion for clients. It asks for views on how these should be improved.
The full consultation is available at: http://www.justice.gov.uk/consultations/regulating-damges-based-agreements.htm