Damages-Based Agreements Regulations 2010

With the leave of the House, I shall speak also to the draft Conditional Fee Agreements (Amendment) Order 2010. The Damages-Based Agreements Regulations 2010 prescribe the regulatory requirements for these agreements in employment matters. The Conditional Fee Agreements (Amendment) Order 2010 seeks to reduce the success fee in some "publication proceedings" to 10 per cent of the base costs. Both of these seek to make changes in limited circumstances to protect the public interest. I will deal with the two instruments separately. The Damages-Based Agreements Regulations are made under Section 58AA of the Courts and Legal Services Act 1990 and prescribe certain requirements for damages-based agreements relating to employment matters. Section 58AA was inserted by Section 154 of the Coroners and Justice Act 2009. A damages-based agreement is a type of contingency or "no win, no fee" agreement, under which a representative agrees to act for a client in return for a percentage of any damages recovered by the client. If damages are not awarded, the representative is not paid. These agreements are of course different from conditional fee agreements, or CFAs. CFAs are typically used in court proceedings, and allow for an uplift or success fee on top of the representative’s normal fee. I emphasise that damages-based agreements are not permitted in court proceedings or litigation and that the regulations will not change this. They are, however, commonly used by solicitors and claims managers in proceedings before the employment tribunal. The Courts and Legal Services Act 1990, as amended, controls the use of damages-based agreements to claims that are capable of being heard by the employment tribunal. As I say, these agreements are commonly used in employment tribunal cases. We are concerned that many claimants do not understand these fee arrangements, which sometimes include unfair terms. The Government therefore believe that it was necessary to regulate damages-based agreements in employment tribunals to ensure that claimants are protected from unfair agreements. Noble Lords will recall that Section 154 of the Coroners and Justice Act 2009 gave the Lord Chancellor the power to regulate these agreements. This is the first set of regulations made under that power. The regulations specify for the first time certain requirements with which the agreements must comply in order to be enforceable damages-based agreements. The key emphasis is on the provision of clear and transparent information for the client before the agreement is signed. The regulations require that a—