Reform approaches for Conditional Fee Agreements

13 March 2012

Reform approaches for CFAs The European Court of Human Rights (ECHR) has decided in a landmark case that the conditional fee agreement regime is a breach of European rules on human rights. The conditional fee agreement, under which the loser of a case becomes liable for an uplift on their opponents legal fees, has been said to be a disproportionate regime that only serves as an infringement of the fundamental right to freedom of expression. The case in question (Mirror Group Newspapers (MGN) v United Kingdom) stems from the publication of a story by Mirror Group Newspapers in 2004 of the supermodel Naomi Campbell attending treatment for drug addiction. The paper was originally ordered to pay just £3,500 in damages, but the conditional fee agreement that the claimant had with those representing her meant that they could claim an uplift (or "success fee") upon winning the case – this took the total cost of the claim to £800,000, of which a staggering £365,000 was included as a success fee. Article 10 versus Article 6 It can be argued that this is a momentous point in the development of the law of privacy, that the system was fundamentally flawed and that radical reforms are the only solution. Clearly there are serious issues concerning compatibility with Article 10 of the European Convention on Human Rights (freedom of expression) when such disproportionate success fees can be allowed to exist. However, it should not be forgotten that conditional fee agreements originally came into existence to allow those unable to afford the cost of litigation access to the courts (Article 6), and by completely abandoning conditional fee agreements we increase likelihood of depriving people of a fundamental human right. The exact fate of the conditional fee agreement remains unknown, but the ECHR has clearly recognised a need for change and this has been highlighted by the outcome of the case. A review of the future of conditional fee agreements and success fees was already underway and the publication of the Jackson Report supports the abolition of success fees from a defendant. This case will only place further pressure on the government to implement the Jackson proposals for reform which have not been supported by all, particularly those who have concern that the change will prevent access to justice for those who cannot afford to fund some or all of their own legal costs and who have suffered injury through a third party's negligence. Conditional fee agreements and recovery of success fees from defendants were originally designed to give access to justice for those who could not afford it, particularly with the ever increasing withdrawal of legal aid. A capping system limiting the amount of success fees already applies to a number of specific types of cases. Placing a cap on success fees is an ideal way of returning to the original aims of the success fee system. However, if the Jackson proposals for reform are implemented in full this will involve the abolition of the recovery of the success fee from the defendant and will result in the claimant losing a percentage of their damages as well as having to fund other costs along the way. This may put significant pressure on a claimant, who does not have the financial means to continue, to settle at undervalue. No doubt we will see significant changes to the legal costs system in the very near future. • For additional information please contact: Alexandra Dean of Gepp & Sons. The above is not legal advice; it is intended to provide information of general interest about current legal issues.