Faculty stresses need for DBAs to be regulated if brought in to Scotland
The Faculty of Advocates has pointed to “the potential to enhance justice” if US-style damages based agreements (DBAs) are introduced in Scotland.
However, it stressed the need for regulation of such agreements, and voiced concern at the Scottish government’s decision not to regulate claims management companies which DBAs may attract to the Scottish market.
DBAs are common in the US and allow a lawyer’s fee to be calculated as a percentage of the client’s damages if the case is won.
Advocates are currently prohibited from entering into such arrangements by the Faculty’s Guide to Professional Conduct.
This reflects the Code of Conduct for European Lawyers which explains that an unregulated agreement for contingency fees may encourage speculative litigation and is liable to be abused.
In a response to a consultation paper on the Expenses and Funding of Civil Litigation Bill, which includes provisions for DBAs, the Faculty said: “Permitting solicitors and advocates to act on the basis of fees calculated as a percentage of the award has the potential to enhance access to justice.”
Given the significance of appropriate regulation of such agreements, the Faculty’s professional standards committee has been asked to consider whether or not the Guide to Conduct should be changed, assuming that this is permitted under the act, and, in the event that such a change should be made, to formulate appropriate guidance.
The response added: “The Faculty takes the view that the key requirement, if DBAs are to be permitted, is that they should be appropriately regulated.
“On the basis that there is a public interest in the proper regulation of DBAs, if they are to be permitted, it is a matter of concern that the Scottish Government does not propose to regulate claims management companies.”
The Faculty said it did not oppose legislation giving the Scottish Civil Justice Council power to develop a table of recoverable fees for counsel, but observed that a table was liable to promote rigidity rather than flexibility in fees.
“There is a risk that the specified recoverable rates may become, in practice, the minimum rate.
“Equally, if the table is not kept regularly under review, there is a risk that the fees which counsel may reasonably command in the market come to exceed those allowed under the table. This would undermine the aim of full cost recovery.
“It may be that alternative mechanisms can be devised which could secure transparency and control but without the rigidity of a table of fees.”
On another issue, the bill will make legal representatives personally liable for expenses caused by their own fault or an abuse of process.
The Faculty said it had no objection in principle to the provisions, provided the test for liability was appropriately framed and applied.
“In order to promote access to justice, lawyers are required to pursue unpopular and seemingly unmeritorious cases and should not be deterred from doing so by the risk of personal liability.
“Experience under the Human Rights Act has shown that some of the most significant changes in the law in recent times have come about because certain lawyers have been willing to persist in unpopular arguments even in the face of initially adverse rulings from courts.
“Unless the test is set at a level that recognises the public interest in promoting access to justice, there is a risk that the introduction of this jurisdiction could have a chilling effect on the legal profession to the detriment of the public,” said the Faculty.