Historically, the legal system in the countries throughout the developed world were established and developed in order to advance the interests of wealthy and powerful elites. However, as democracy emerged and civil rights movements began to become established, mechanisms began to be put in place which would allow the ordinary man or woman with a legitimate grievance to seek justice through access to the courts.
No-win-no-fee agreements therefore evolved to enable people of limited means to pursue their legal rights through the justice system. If only those people who were able to pay their legal fees irrespective of the outcome of their case had the ability to bring an action, the legal system would continue to be the preserve of the extremely wealthy.
As is the case in most areas of the law, the manner in which no-win-no-fee arrangements has evolved has varied from jurisdiction to jurisdiction, meaning that the systems that now operate vary significantly from country to country.
Under US-style contingent fee agreements the lawyer’s fee is usually calculated as a percentage of the client’s net recovery. Percentage rates of in the region of 30% to 45% are common. So, for example, an agreement might be arrived at whereby a client would have to pay 35% on a contingent fee basis. If the client was awarded $100,000 in damages for personal injuries they would then be obliged to pay their own lawyer $35,000 out of this award, meaning that they would be left with a net award of $65,000. If, however, the client’s case was unsuccessful and they were not awarded any amount in damages, they would not have to pay their own lawyers anything.
In England there has recently been a radical reform of what were previously referred to as ‘conditional fee arrangements’, resulting in the introduction of ‘damages-based agreements’ (DBAs). A DBA is a contingency fee arrangement whereby the client may agree with their lawyer that the lawyer will receive, by way of fees, a percentage share of the damages recovered from the defendant if the case is won. The DBA may also provide that if the case is lost, the lawyer will receive no fees or only discounted fees. The success fee is the percentage of damages the lawyer is allowed to charge in the event that the claim is successful. The percentage limit on the success fee depends on the nature of the litigation concerned but in personal injuries cases this figure is capped at 25%.
*In contentious business, a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement.