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Damaged Based Agreements in Scotland

Damages Based Agreements (DBAs) can now be offered in Scotland since The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (Success Fee Arrangements) Regulations 2020 came into force on 27 April 2020. The introduction has received little press - as the world of course focuses on the worldwide pandemic – but it is an important development for the Scottish legal system.

The 2018 Act enacts the legislative recommendations of Sheriff Principal Taylor’s report: “Review of Expenses and Funding of Civil Legislation in Scotland (September 2013)”. Sheriff Taylor identified “The key issue for me was to improve access to justice in a meaningful way: in many cases, ‘meaningful’ means being affordable….”. The report made 85 recommendations, one of which being Damages Based Agreements (DBAs).

DBAs allow individuals or other organisations to enter into an agreement with their solicitor, to share the risk of litigating. They are essentially agreements to charge a fee based on a percentage of the damages recovered. These are subject to a cap, and the Regulations set out differing limits for personal injury actions, employment tribunals and commercial actions, anything over the cap is unenforceable.

Although DBAs have existed In England and Wales since 2013, the take up has been relatively slow. However, the rate of claim per head of population in Scotland is already significantly lower than England and Wales. Scotland has gone a step further by allowing hybrid arrangements for commercial (not personal injury) cases and it is hoped that this will make the option more attractive as it offers a better balance of risk. Hybrid DBAs are part DBA, and part hourly rate arrangements. This means that a ‘no win, lower fee’ damages based model will be allowed in Scottish commercial courts.

Solicitors are already under a duty to explain all funding options available to clients. DBAs provide yet another funding tool for individuals, or other organisations looking for financial help to fund disputes in Scotland. As with litigation funding, DBAs should offer increased flexibility, transparency and predictability. Scotland continues to be a credible litigation jurisdiction and an attractive place in which to resolve a dispute.

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