DBAs: a win for the vested interests

Today, the Civil Justice Council dropped the bombshell that government has ruled out hybrid damages-based agreements.

This will be a major disappointment to the litigators – particularly in the commercial sphere – who have been raring to start using DBAs, but have been waiting for government to turn the botched DBA Regulations into something workable.

From the lawyers’ side, the need for a hybrid option – allowing ‘no win, low fee’ contingency agreements instead of an ‘all-or-nothing’ approach – was so obvious, that I think many assumed that this was also recognised by government, and hybrid DBAs were only a question of ‘when’, not ‘if’. It seemed the only reason they were not clearly permitted in the first place was the fact that the regulations were so shockingly badly drawn up, and it was simply an oversight.

But not so. Only a few weeks ago, Lord Justice Jackson warned that, in fact, government had yet to be persuaded about the need for hybrid DBAs – and he spoke out against the ‘powerful vested interests’ that opposed their introduction.

Now, it seems, those vested interests have won out. According to the council, the hybrid option has been ruled out because government ‘considers such arrangements could encourage litigation behaviour based on a low-risk/high-returns approach.’

Speaking last month, Sir Rupert Jackson gave eight detailed and cogent reasons why hybrid DBAs should be permitted, including the fact that they have worked successfully in other jurisdictions, and that rather than encouraging weak and speculative claims, hybrid DBAs would actually have the opposite effect, as both lawyer and client have ‘invested’ in the case.

It’s a shame the government didn’t bother to read his speech.

CJC chair Lord Dyson is said to be ‘disappointed’ by the decision. No doubt Jackson LJ is furious. Without the hybrid option, DBAs have had their wings truly clipped, and are doomed to never get off the ground. Let’s not forget why DBAs were introduced in the first place – they were intended to increase the menu of funding options, to balance out other changes such as the end of success fee recoverability, and to help achieve access to justice for claimants.

The real losers here are not the lawyers, but the small business clients for whom it is simply too financially risky to enforce their contractual rights in the courts, unless they can find a law firm willing to share that risk with them. The hybrid DBA was a ray of hope that has now been extinguished.

The winners, of course, are the large corporate defendants who will find themselves called to account in the courts less often; the powerful vested interests.

Rachel Rothwell is editor of Litigation Funding magazine