Explanatory note

Section 58(1) of the Courts and Legal Services Act 1990 provides that a conditional fee agreement is not unenforceable if it satisfies the conditions applicable by and under that section, which include conditions specified in Regulations made by the Lord Chancellor under section 58(3)(c). These Regulations make amendments to the Conditional Fee Agreements Regulations 2000 and the Collective Conditional Fee Agreements Regulations 2000 to provide that a conditional fee agreement will be enforceable even though the client is liable to pay his legal representative’s fees and expenses only if and to the extent that he recovers damages or costs in the proceedings. Amendments made to the Civil Procedure Rules 1998 provide that costs payable under such a conditional fee agreement are recoverable under Parts 44 to 48 of those Rules.

This in effect abrogates in relation to this type of conditional fee agreement the so-called indemnity principle—the principle that the amount which can be awarded to a party in respect of costs to be paid by him to his legal representatives is limited to what would have been payable by him to them if he had not been awarded costs. Solicitors will to this extent be able to agree lawfully with their clients not to seek to recover by way of costs anything in excess of what the court awards, or what it is agreed will be paid, and will no longer be prevented from openly contracting with their clients on such terms.