Damages-based agreements (DBAs) have been a topic of conversation in the legal industry for several years. In 2013, the UK government passed the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO), which made it legal for lawyers to take a percentage of their client`s winnings from a case as payment, rather than charging an hourly rate. This type of agreement is known as a DBA or a contingency fee agreement.
The Law Society of England and Wales has recently issued guidelines on DBAs to help lawyers understand their responsibilities when entering into these agreements. The guidelines aim to ensure that both the lawyer and the client are aware of their obligations to each other and that the DBA is fair and transparent.
One of the main concerns in DBAs is ensuring that the lawyer is not incentivized to take on cases with a low chance of winning, as this could result in the client receiving less compensation than they deserve. The Law Society recommends that lawyers assess the viability and complexity of the case before agreeing to a DBA and that they provide the client with an honest appraisal of their chances of success.
Another concern is ensuring that the client understands the terms of the DBA and the potential costs involved. The Law Society recommends that lawyers provide clients with a clear and concise explanation of the agreement, including the percentage of the winnings that will be taken as payment, any additional costs that may be incurred, and what happens if the case is unsuccessful.
It is also important for lawyers to ensure that the DBA complies with the rules of professional conduct. The Law Society recommends that lawyers review the guidelines and seek legal advice if they are unsure of their obligations.
In conclusion, DBAs can be a beneficial alternative to traditional hourly billing for both lawyers and clients. However, it is important for lawyers to ensure that they are entering into fair and transparent agreements that comply with professional conduct rules. With the Law Society`s new guidelines, lawyers can have a better understanding of their responsibilities when entering into DBAs, and clients can have more confidence in the legal profession.