With respect to the sequential DBA, the group recommended that the government determine whether the lawyer can withhold the costs of the non-DBA funding agreement or whether this amount should be deducted from the DBA contingency tax. To date, the DBA has not been used significantly in commercial matters. This is largely due to the difficulties faced by regulations, including the lack of flexibility with regard to hybrids. The Personal Injury Lawyers Association has requested that qualified disposable costs be extended beyond personal injury and that the cap on compensation contracts for fast-track fixed-cost proceedings be doubled to 50%. On the other hand, if the action is successful, legal fees are calculated as a percentage of the damage recovered. If the deal is unsuccessful, either there is no fee (no profit, no fee) or a lower fee agreed in advance is charged (according to the terms of the DBA). Since 2013, no royalty DBAs have been allowed for commercial litigation in England and Wales, but it is not widely used because the risk to counsel is considered too high. However, it is essential that, unlike England and Wales, the rules allow the use of partial or hybrid DBAs, which means that a lawyer could, for example, benefit from a guaranteed hourly rate, at least sufficient to cover the costs of running the case, plus a percentage of damages if successful. First, the 2013 regulation does not allow a lawyer to levy fees during the proceedings (regardless of the outcome) on the basis of time, albeit at a reduced hourly rate, and, if successful, to collect a contingency tax – known as the “hybrid competitor” DBA. The business models of most law firms are not designed to carry important and taxable work for many years and bear the considerable cost of cash payments, such as lawyers` fees and expert reports. The financial distance is too great. It is interesting to note that the Tribunal`s interpretation of Regulation 4 of Lexlaw appears to support an argument that such a hybrid regime is effectively authorized by existing DBA regulations, even without the amendments presented in the proposed new draft. If the sole purpose of Regulation 4 is to determine the maximum amount and method of calculating the “payment” of the DBA and that it is exclusively to regulate the sharing of the spoils of successful litigation, it probably has nothing to say about what can be paid to counsel if there is no loot to be shared.
Since 1 April 2013, compensation or damages agreements (DBAs) have been allowed for litigation (i.e. legal proceedings or arbitrations) in England and Wales. This means that lawyers can execute disputes and arbitrations in that jurisdiction in return for a portion of the damages. The Civil Justice Council working group was divided on whether hybrid BODs should be allowed at the same time, contrary to the government`s current policy: some members felt that there was no valid reason to prohibit their use and that market freedom should prevail; others felt that the case had not been proven in their favour.