Hourly billing still tops for companies, survey finds

FUNDING: ignorance of alternatives to traditional payment

Conditional fee agreements (CFAs) and after-the-event (ATE) insurance have passed the business world by, with more than 40% of in-house lawyers sticking to traditional methods of funding commercial litigation and almost the same amount unaware of alternatives, a survey has found.

The study of 75 FTSE-250 businesses by Surrey firm Stevens & Bolton showed that around 90% of respondents had been involved in court action in the past three years, but just 7% had taken out some form of legal insurance to cover the cost of litigation.

Some 57% knew about the availability of ATE insurance for individual cases - compared to 77% who were aware of before-the-event policies - but not one of these had used ATE insurance to finance a case.

Around 45% said they still preferred hourly charging, while 24% favoured CFAs, with 21% leaning towards US-style contingency fees.

The rest expressed no preference.

Stevens & Bolton litigation partner Michael Frisby said CFAs and ATE insurance remained mainly a tool of personal injury lawyers because companies were more prepared to accept risks rather than pay out for policies.

'CFAs are attractive to owner-managed businesses because as smaller corporate entities they are not as well financed and more akin to individual litigants,' he explained.

'Corporate bodies are more sophisticated users of legal services, and not as interested.'

Ann Page, chairwoman of the Law Society's Commerce and Industry Group, said in-house lawyers wanted to keep their approach flexible because a 'one-size-fits-all' approach would not work in companies' favour.

'In-house lawyers are trying to discuss how to achieve value and look at a range of different mechanisms - but the main focus is on the value of the service and the price mechanism will be variable,' she said.

Paula Rohan