After refusing to consider the US system of funding cases by way of rewarding lawyers for success in their client’s cause, the UK government in the Access to Justice Act 1999 executed an about-turn. The Act created what lawyers now call the conditional fee agreement or CFA. Most people know it by the more popular name of no win, no fee.
Specifically, where the rule is that the winning party’s costs are paid usually by the losing party, the Act authorises a court to order that a payment is made in respect of insurance premiums. The result is that the losing party will be subject not only to an order in respect of costs, but also in respect of the insurance premium.
It doesn’t end there, however. Since the lawyers may be undertaking a sizeable risk of not being paid, as well as carrying out all the work ‘up front’, being paid only at the end, then an uplift – usually known as a success fee – is payable as well.
This means that the winner has no costs to pay, since the losing party is subject to an order to pay i) the costs, ii) the insurance premium and iii) the lawyer’s success fee of the victor.
In the event that a litigant with a CFA loses, since there has been ‘no win’, there is ‘no fee’. However, few litigants can afford take the risk of losing the claim and having to pay those sums to the other side. Furthermore, CFAs do not normally cover the payment of ‘disbursements’ – things the solicitor pays for (such as the court fee, travel expenses and most importantly, the barrister’s fees). Usually, therefore, a conditional fee agreement is run in parallel with ATE insurance; this is structured to meet the cost of the disbursements and to come into effect if the insured is subject to adverse costs orders as a result of losing the case.
