Government plans to crack down on the use of contingency fees in employment and other tribunals are politically motivated, it has been alleged.

The Ministry of Justice last week published a consultation paper on regulating contingency fees, having inserted a provision in the Coroners and Justice Bill that provides a statutory framework to do so.

The consultation paper contains few specific proposals on the scope of regulation, such as what should be the maximum percentage of damages that can be taken as fees.

Regulation will also focus on providing clear information to clients, and controlling the use of unfair terms and conditions.

Kerry Underwood, senior partner of Hertfordshire firm Underwoods and a leading exponent of contingency fees in employment work, said the underlying reason was not that clients are complaining. He said the real issue is that trade unions are losing work to law firms such as Newcastle-based Stefan Cross Solicitors, which are taking mass equal pay cases on a contingency fee basis.

Cross said that the proposals are ‘a sop to the trade unions because they don’t like the competition’ and said his firm acted in line with them anyway.

He added that it was positive nevertheless that the government accepted that contingency fees provide access to justice and that ‘as a yardstick against which we can be measured, it may not be a bad thing’ – but this depends on how ‘draconian’ the detail of the regulation is.

Both Cross and Underwood said it was wrong to ignore the need for regulation of cases funded by trade unions and before-the-event legal expenses insurance, a view echoed by research published recently by Professor Richard Moorhead of Cardiff Law School.

Moorhead, whose work the government relied on in deciding to legislate, said well-judged regulation is likely to be beneficial. But his research generally found no evidence of overcharging, meaning ‘limiting percentage fees charged would limit the types and number of cases brought’.

Underwood said a cap would make him unable to take on complex and lengthy cases such as discrimination claims.