It is no secret that litigation costs can be substantial, meaning that claimants are often reluctant to embark on expensive litigation with its inherent risks. To mitigate this, however, the range of ways in which parties to litigation can access justice and fund their legal expenses has expanded greatly in recent years.
One such funding mechanism is Damages-Based Agreements, which have been available under UK law to fund civil litigation in England and Wales since the introduction of the Damages-Based Agreements Regulations 2013.
Summary
This article covers
- Damages-Based Agreements are a type of ‘no win no fee’ litigation funding mechanism, under which a legal representative receives a predetermined percentage of the client’s successful damages award as their fee.
- The solicitor’s fees are contingent on the client winning the case, and if the claim is unsuccessful, they receive nothing.
- These agreements differ from a Conditional Fee Agreement, where fees are determined by the amount of time a lawyer spends on the case, along with an additional success fee.
- You may consider using a DBA if you lack the funds to pay for legal services upfront to pursue your claim and if you want to share the risk of litigation with your legal representative.
- Damages-Based Agreements are regulated by the Damages-Based Agreements Regulations 2013, which set limits on the percentage of damages a legal representative can charge.
What is a Damages-Based Agreement?
A Damages-Based Agreement (“DBA”), also commonly known as a ‘contingency fee’ agreement, is a type of ‘no win no fee’ funding arrangement for legal fees whereby a legal representative’s fees are only paid if the case is successful.
Under a DBA, the legal representative takes on some of the risk of litigation in exchange for a percentage of any damages or financial settlement obtained if the claim succeeds. If the claim fails and the client does not receive any compensation, they owe the law firm nothing for their services. DBAs must comply with the provisions of the Courts and Legal Services Act 1990 and the Damages-Based Agreement Regulations 2013 (the ‘DBA Regulations 2013’).
A DBA is distinct from a conditional fee arrangement, where your solicitor will usually not charge a fee or will charge a reduced fee if the claim or defence is unsuccessful, but will bill for time spent working on the case, plus an additional success fee if the case is won.
How DBAs Work In Practice
When a DBA is in place, the solicitor’s earnings are contingent on the success of the case. If the case does not succeed or you do not recover anything, your lawyer will not receive any payment for their efforts. This arrangement creates a shared risk between the client and the lawyer, aiming to promote early resolution by aligning the interests of both parties.
Before entering into a DBA, a client and their solicitor will agree on the percentage that will be deducted from any compensation recovered. In the event of a successful claim, the lawyer will not receive their usual hourly legal fees. Instead, they are paid a pre-agreed percentage of the compensation recovered from the losing party. The percentage charge will typically reflect legal fees that are higher than would otherwise be incurred on a standard basis, to account for the risk taken by the lawyer, both in terms of the prospects of success and the potential lack of cash flow.
A DBA can be used in both a settlement between the parties to resolve a dispute without a court trial and in a court judgment handed down by a court after trial. In both scenarios, the solicitor will receive a percentage of the outcome in the settlement or judgment, if the claim is successful.
If you are a claimant in litigation proceedings, you will still be entitled to claim your solicitor’s standard time costs from an unsuccessful defendant. A bill will be sent to the losing party that will include solicitor’s fees (based on time spent at the agreed hourly rates), plus all their disbursements, reasonably and proportionately incurred, together with VAT. Importantly, though, those charges cannot be higher than what the solicitor would have received from the client under the terms of the DBA. The recovery of such costs may help you partially finance the percentage payable to your solicitor under the DBA.
You will still be responsible for paying any expenses (such as court or experts’ fees) that cannot be recovered from the defendant, in addition to the DBA percentage fee.
Even if you lose your case and your lawyer does not receive any fees, there is still the risk of you being liable for your opponent’s legal costs (notwithstanding the DBA). This risk can, however, be avoided by taking out an insurance policy, such as an After the Event Insurance policy.
The DBA Regulations 2013 Explained
The DBA Regulations 2013 establish the legal framework for DBAs in the UK, outlining the rules for their content, the requirements to ensure they are enforceable and the limits on the fees a lawyer can charge under a DBA.
DBAs in the UK are exclusively available for claimants involved in civil litigation, including commercial litigation, personal injury and clinical negligence. They are also applicable in employment tribunals. However, they are not permitted in other areas of law, such as family or criminal proceedings.
Before entering into a DBA, the legal representative must provide the client with detailed information about the agreement. The DBA Regulations 2013 require that any DBA agreement be made in writing and should clearly specify the terms of the agreement, including the particular legal claim and the conditions under which the lawyer’s payment and expenses will be due. It should also explain the reasoning behind the level at which the payment was set.
The Regulations impose strict statutory caps that apply to the percentage that lawyers can charge under a DBA. For most civil litigation claims at first instance, a solicitor’s fee is capped at 50% of the damages recovered. However, for personal injury claims, lawyers can only charge up to 35% of the total damages recovered. Importantly, this percentage sum includes VAT and any barrister’s fees, the latter of which is the solicitor’s own responsibility to pay if the claim fails. Regarding employment matters, the DBA fee is up to 35% of the sum recovered by the client (which includes VAT). A DBA that exceeds the maximum percentage permitted under the legislation is likely to be unenforceable.
In relation to any appeal proceedings, there is no cap on the maximum amount payable for the DBA percentage fee.
A DBA must be carefully drafted; drafting pitfalls include ambiguous terms regarding the claim, scope of the DBA or the fee due on a successful claim, as well as a failure to include mandatory requirements such as the basis for the DBA fee. If the DBA is not drafted correctly, the agreement may be deemed invalid, making the agreed-upon payment structure unenforceable.
Examples of DBAs in Action
Below, we set out some examples illustrating how DBAs operate in practice.
A claimant involved in an unfair dismissal and discrimination claim agrees to a 25% DBA with their solicitor. The employment tribunal awards the employee £30,000 in compensation. In this scenario, the solicitor is entitled to a fee of £7,500, being 25% of the £30,000. Additionally, the claimant is responsible for any other legal expenses, such as expert report fees, which should be explicitly outlined in the DBA.
A company believes it has a robust commercial claim worth £100,000 against another company. It enters into a DBA with a law firm, agreeing that the legal representatives will receive a 30% fee upon winning the case. The commercial claim successfully settles for £100,000. The law firm’s fee is 30% of the £100,000 recovered, totalling £30,000. Once more, the company will be responsible for any expenses and disbursements.
What are the Advantages of Using a DBA?
Below are some of the advantages of using a DBA:
- Lower Financial Burden: One of the key benefits of DBAs is that you only pay your solicitor a percentage of your damages or settlement if you win your case. If the case is unsuccessful, you are typically not liable for the solicitor’s fees, although you may still be responsible for disbursements and expenses.
- Access to Justice: DBAs offer access to justice for those with limited financial means and strong legal claims who cannot afford upfront legal costs.
- More Predictable Expenses: The agreement explicitly outlines the percentage of damages you will pay to your solicitor if you are successful, providing greater transparency and predictability in litigation costs.
- Alignment of Interests: A DBA enables you to pursue your claim with the knowledge that, due to the shared litigation risk, both you and your solicitor are striving towards the common goal of recovery from the opposing party.
Disadvantages and Risks Associated with DBAs
There are, however, certain disadvantages and risks associated with the use of DBAs:
- Limited Availability: Only specific cases qualify for a DBA, as your legal representative must assess a higher chance of success before agreeing to the risks involved in pursuing your claim.
- Potentially Higher Fees: The percentage fee that your solicitor charges may be significantly higher than what would have been incurred under a standard retainer agreement or through a conditional fee arrangement.
- Pressure to Settle Early: The structure of a DBA may pressure the solicitor to settle the case prematurely. While this might align with the solicitor’s financial interests, it may not serve your best interests if a more favourable outcome can be achieved through trial.
- Responsibility for Opposing Party’s Costs: Should you lose the case, you may still be liable for the legal costs incurred by the opposing party.
- Complexity: DBAs can be intricate, and failure to comply with the Regulations can lead to serious repercussions, possibly making the agreement unenforceable.
DBAs v Other Funding Options
Apart from DBAs, the main legal funding options include Conditional Fee Arrangements (CFAs), third-party litigation funding, and legal expense insurance. Below is a summary of how these options operate, as well as how they compare to DBAs.
CFAs
A CFA, which can be utilised by both claimants and defendants, allows you to defer solicitors’ fees until your case is successful. As with a DBA, if you lose, you generally pay nothing for the lawyer’s work. However, a CFA differs from a DBA if you win: in this scenario, instead of a percentage fee, the lawyer’s fees plus a success fee are deducted from the compensation received.
As with DBAs, only cases with strong legal merit qualify for CFA funding, and CFAs may also not cover all costs, such as court fees or expert witness expenses.
Third-Party Funding
Third-party funding—where your claim is financed wholly or partly by an independent party not involved in the litigation —has become more popular in recent years. Under this arrangement, the commercial funder covers legal costs in return for a share (usually 30-50 %) of your damages if the case is successful. Again, as with DBAs, if the claim fails, the funder receives nothing and cannot claim against the client. In cases where a costs order is made against you, it will usually be the funder’s responsibility to pay your opponent’s costs.
This funding mainly suits commercial claims over £250,000, insolvency proceedings, or major group litigation, and, like DBAs and CFAs, is generally only available when the claim has a good prospect of success (typically over 60%).
Legal Expenses Insurance
Legal expenses insurance (LEI) is a policy that covers your legal costs and expenses for disputes that may arise, such as employment, property, or contract issues. It can also provide access to legal advice helplines and representation both in and out of court. Often purchased as an add-on to home or motor insurance, or as a standalone policy, LEI helps ensure access to justice by funding legal services when needed, relieving the policyholder from bearing potentially high legal costs.
Depending on the policy type and coverage, it covers legal fees for solicitors, barristers, and court costs, as well as opposing costs if you lose the case. However, if a dispute arises, the insurer will assess whether your case has a reasonable chance of success before agreeing to cover the costs. Furthermore, there is less flexibility than DBAs to pick your own lawyer during the pre-litigation stage, as you may be required to use a lawyer from the insurer’s panel. The premium can also be costly for your business, and delays may occur due to the insurer’s pre-approval process before legal action can commence or be defended.
Consulting with a legal professional is crucial to determine the most suitable litigation funding option for your specific situation. Our lawyers can review your litigation case, explain how different options might apply to your specific circumstances, and assist you in selecting the appropriate litigation funding to meet your needs.
Reform and The Future of DBAs
The 2013 Regulations created a strict regime for DBAs and have been criticised as being outdated, poorly drafted and failing to achieve their objectives. In particular, they precluded hybrid agreements, whereby a reduced level of hourly rate would be charged in return for a smaller share of the proceeds in the event of a win. As a result of this and other difficulties created by the Regulations, DBAs were not used widely.
However, in Lexlaw Ltd v Zuberi, the Court of Appeal ruled that the 2013 Regulations do allow for payment of time costs and expenses to lawyers if the DBA is terminated early. The decision has opened the door to the use of hybrid DBAs and has created more flexibility in litigation funding arrangements.
For example, businesses may now be able to agree that, as well as being entitled to a share of any damages recovered if the claim succeeds, their lawyers should be paid time costs if the claim fails.
In June 2025, the Civil Justice Council (CJC) published a review of litigation funding. As part of that review, it recommended that new regulations be issued for DBA-type agreements, with the primary objective of clarifying the legal framework surrounding DBAs and enhancing their flexibility and appeal for both lawyers and clients. Key proposals include the establishment of a single, unified regime for CFAs and DBAs, as well as a confirmation that hybrid DBAs are permissible.
It is hoped that reform would enhance access to justice by providing feasible funding alternatives, which are more pressing than ever in the current economic climate. Nonetheless, the future of DBAs will hinge on whether and how the UK government implements the latest reform recommendations.
How We Can Help
At Witan Solicitors, we understand that the cost of litigation is often viewed as one of the main concerns when facing a legal dispute, and we are here to advise you on the best possible litigation funding options based on your circumstances. To talk to us about your case or to find out more about fee options, call us on 0330 173 3041 or email us.
FAQ
What is a Damages-Based Agreement under UK law?
A Damages-Based Agreement is a type of ‘no win no fee’ funding agreement under which your solicitor’s fees depend on the outcome of your case.
How do Damages-Based Agreements Work?
Under a Damages-Based Agreement, if you win your case, your solicitor is entitled to a pre-agreed percentage of the damages you obtain. Conversely, if you lose, you are not required to pay your solicitor’s fees for the case.
What is the DBA Regulations 2013 cap?
The DBA Regulations 2013 impose a cap on the percentage of damages a solicitor may charge clients for their services under a DBA. For the majority of civil claims, the highest percentage fee they can charge is 50% of the total amount received by the client.
Are DBAs legal in the UK?
DBAs are legal in the UK for civil litigation, but they must follow the requirements outlined in the DBA Regulations 2013 to be enforceable.
What is the difference between a CFA and a DBA?
Under a CFA, the client typically pays standard legal fees, along with an additional success fee if the case is won. In contrast, under a DBA, the solicitor receives a percentage of the damages awarded to the client. The primary difference is that a DBA links the lawyer’s fee directly to the compensation, potentially providing more predictability, while a CFA’s fee structure can be more flexible and may be more appropriate for cases with uncertain values or non-monetary outcomes.
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