A UK Guide to Funding Civil Claims: Understanding CFAs, DBAs, ATE & Fixed Costs
The prospect of a civil dispute can be daunting, and a primary concern for many is the potential for high and unpredictable legal bills. For individuals and businesses alike, the fear of unaffordable legal costs can be a significant barrier to pursuing a legitimate claim or defending their position.
Fortunately, the UK legal system offers several funding arrangements designed to improve access to justice. This guide will demystify the key options available, including Conditional Fee Agreements (CFAs), Damages Based Agreements (DBAs), After The Event (ATE) insurance, and the recent changes brought by the Fixed Recoverable Costs (FRC) regime.
What Are My Options for Funding a Civil Claim?
There are several ways to finance legal representation in the UK, moving beyond the traditional payment model.
Traditional Funding: The Private Retainer
The most conventional method of funding legal action is a private retainer, in which a client pays their solicitor’s fees on an ongoing basis, typically at an hourly rate. While this approach offers the client complete control over their case, it comes with the significant drawback of high, often unpredictable costs that can accumulate quickly. It is this traditional model that led to the development of alternative funding arrangements to make litigation more accessible.
Conditional Fee Agreements (CFAs) or “No Win, No Fee”
A Conditional Fee Agreement, commonly known as a “no win, no fee” agreement, is a popular funding option. It is a formal written agreement between you and your solicitor, which stipulates that you will only pay their full fees if your case is successful. If you lose the case, you do not pay your solicitor’s fees, though you may still be responsible for expenses known as “disbursements,” which include court fees and the cost of expert reports.
If you win, you pay your solicitor’s standard charges plus a “success fee”. This success fee is an additional amount, calculated as a percentage of the solicitor’s base fees, which cannot exceed 100% of those fees.
Damages-Based Agreements (DBAs)
A Damages-Based Agreement (DBA) is a “no win, no fee” arrangement where the solicitor’s payment depends on the outcome of the case. If the client succeeds, the solicitor receives an agreed percentage of the compensation recovered. If the case fails, the client does not pay any legal fees.
The Damages-Based Agreements Regulations 2013 outline the conditions that must be met for these agreements to be legally valid. One of the main provisions is the limitation on the percentage of damages a solicitor can claim as their fee, ensuring clients are fairly protected.
In most civil claims, this payment is capped at 50% of the recovered damages. For personal injury claims, the cap is lower, at 25%. This provides certainty for the client, as the legal fee is directly proportionate to the amount of compensation they receive.
How to Protect Yourself from the Other Side’s Costs
In UK litigation, the “loser pays” principle generally applies, meaning if you lose your case, you could be ordered to pay your opponent’s legal costs. This creates a significant financial risk.
After The Event (ATE) Insurance Explained
After The Event (ATE) insurance is a legal expenses policy taken out after a dispute has begun. It is designed to shield you from the risk of paying your opponent’s legal costs if your claim is unsuccessful and can also cover your own expenses, such as court fees and expert reports.
Solicitors often recommend or require clients entering into a CFA to take out an ATE policy to mitigate the risks of litigation. The premium for an ATE policy is often deferred, meaning it is not paid up front. In most cases, ATE insurance is self-funding, meaning the premium is only paid if you win your case and receive compensation.
You should read: Mediation Services in London: What to Expect
The Impact of Fixed Recoverable Costs (FRC) on Civil Claims
A significant development in UK civil litigation has been the extension of the Fixed Recoverable Costs (FRC) regime, which took effect on October 1, 2023.
What are Fixed Recoverable Costs (FRC)?
FRC, or Fixed Recoverable Costs, refer to predetermined sums that a successful party can claim from the losing party to cover legal expenses at various stages of a case. The Civil Procedure Rules predetermine the amount and depend on factors such as the value of the claim and the stage at which the case is concluded. The aim of FRC is to provide greater certainty and control over legal costs from the outset.
The Expansion of the FRC Regime
As of October 2023, the FRC regime was extended to cover most civil cases with a value of up to £100,000. This includes all cases on the ‘fast track’ (claims valued up to £25,000) and a newly created ‘intermediate track’ for simpler claims valued between £25,000 and £100,000. The intermediate track is split into four distinct complexity bands, each setting out the amount of legal costs that can be recovered.
How FRC Affects Your Funding Agreement
The FRC rules limit the amount of legal fees you can reclaim from the losing side. This means there is often a “shortfall” between the actual costs charged by your solicitor and the fixed amount you can recover.
This shortfall is typically payable by you, often from the damages you are awarded. The introduction of FRC makes cost-effectiveness a critical consideration for both solicitors and clients when deciding to pursue a claim and choosing a funding model.
Get to know about: Derivative Claims: When Can You Sue on Behalf of the Company?
Take Control of Your Legal Journey with Civil Litigation Lawyers
At Civil Litigation Lawyers, we recognise that concerns about rising legal expenses often discourage individuals and organisations from taking the necessary steps to seek justice. Our team is committed to removing that barrier through transparent, flexible funding options, from Conditional Fee Agreements (CFAs) and Damages-Based Agreements (DBAs) to After The Event (ATE) insurance.
Whether you’re starting a claim or defending one, we’ll help you make an informed decision that balances risk, reward, and cost-effectiveness, especially under the new Fixed Recoverable Costs regime. Contact us today for a confidential consultation and discover how we can help you move forward with confidence and financial clarity.
