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Proposed changes to the no win-no fee agreement

[blockquote type="blockquote_line" align="left"]Interview with Mike Greenstein, solicitor from Goodge Law[/blockquote]

The Government is concerned about the perceived increase in the compensation culture and doesn’t want us to become like the States. However, statistics show that we don’t have a compensation culture – just the perception that we do.

The Government is concerned that the no win-no fee agreement is costing business through claims and the overheads of keeping paperwork in line with the law. These issues have prompted two reports. One by Lord Jackson and one by Lord Young. Both have some good suggestions when it comes to cutting down on paperwork. The current regulations require organisations to carry out a great deal of risk assessment administration for quite basic activities.

However, I don’t believe that the reports have fully understood the way the legal and insurance industries work – particularly when it comes to some of the details. For example, the insurance companies can be unbelievably awkward when it comes to paying out to people that have been injured by someone else’s mistakes. If a solicitor like me isn’t there representing them, these innocent people often find themselves being unfairly mistreated.

So the big change these reports are recommending is to the cost regime. At the moment the way it works is this – a solicitor, like myself, will take on a case because we think there is a legitimate claim. Of course there’s risk involved – but when we successfully conclude a case the losing party – usually an insurance company – has to make two payments. The first is to the client, which is the compensation that is either agreed or which a court has awarded them. The second payment covers my legal costs (known as base costs) and a success fee for taking the case on a no win-no fee basis. In other words, if you are injured in a car accident and the court awards you £5,000 you receive £5,000. My payment for legal costs is made separately in addition to your compensation.

The recent reports are recommending a new cost regime whereby the success fee will come out of the compensation award – but this amount can’t exceed 25% of the compensation awarded. The problem here is that many solicitors may decide not to represent clients with legitimate smaller claims which are riskier.

I could speculate that the proposed changes are because the Government wants to reduce the amount it has to pay in personal injury claims. It’s the biggest compensator in the country through the NHS Litigation Authority, which pays out millions of pounds due to botched operations and medical mistakes. Some might see these changes as a good thing because it would reduce the overall running costs of the NHS, but they might feel differently if either they or a relative had a horrendous and unnecessary experience during a hospital visit.

Personally I am very concerned about these changes to the costs regime. Of course I have a vested interest, but it’s important to look at the bigger picture. The ‘no-win no-fee’ costs regime was introduced by the Government to reduce the cost of Legal Aid by restricting access. In essence the Government said, ‘We won’t pay for representation if someone else injures you – but we’ll introduce a financial incentive for solicitors to represent you at no cost.’ They were shifting the cost of representation from the state to people like me, who were expected to then take a risk. It was a new way of working, but it meant that ordinary people could still have access to legal representation if they were injured through no fault of their own.

Now the Government is suggesting a system where there is limited access to Legal Aid and there is diminishing incentive for solicitors to represent them. In the future, when someone is wheeled into an operating theatre they will have to trust in the professionalism of the medical staff because there will be limited legal redress if mistakes are made. This issue isn’t just about compensation for injuries – it’s about access to justice and forcing big organisations to improve. After all, without the threat of big compensation claims many organisations like the NHS have little incentive to improve their practices. Personal injury claims do ensure that innocent people are given fair compensation – but they also encourage organisations to avoid causing injuries in the first place.