What are Damages Based Agreements?

Damages Based Agreements (DBA) are an alternative source of legal funding, in which the risks of litigation are shared between the solicitor and the client.

In such an arrangement, rather than an hourly rate, your solicitor’s fee depends on the success of the case and is calculated as a percentage of the compensation you receive.

This means that your lawyer invests their time and conducts litigation without charge in exchange for a share of any damages awarded or settlements reached.

If the case is unsuccessful, your lawyer receives no payment. It is therefore vital for your representative to establish the merits of your claim before entering into a DBA with you.

This method of legal finance is still a recent innovation, for it is only since 1st April 2013 that DBAs have been permitted for all civil litigation claims in England and Wales.

Lawyers working on this basis are thus at the forefront of litigation funding.

Pros

  • Shared Risk: the lawyer invests their time, not your money
  • Recover Costs: if you win you can still recover costs from the other side
  • Confidential: your opponent won’t know about the DBA, which has strategic uses
  • Cash Flow: pay no legal fees until you are awarded damages; when you eventually pay legal fees, you do so only as a proportion of the compensation you receive. As a result, you won’t have any money tied up and your cash flow will remain positive

Cons

  • Feasibility: only certain cases qualify for a DBA because your solicitor requires a high chance of success if they are to shoulder the risks of pursuing your claim
  • Initial Costs: your solicitor may charge to assess the merits of your case
  • Opponent’s Costs: if you lose, you may still be liable for the other side’s legal costs – it is advisable to apply for After the Event Insurance (ATE) to mitigate this risk

As specialist litigation solicitors, we can connect you with various alternative funding sources if you instruct us to take your claim forwards. For a FREE consultation, just call 020 7963 8690 or email law@cgnaylor.co.uk.

Written by James Naylor

Partner, CG Naylor LLP.