Are contingency fees legal in the UK?

For example, a solicitor offers their client a contingency fee agreement on the basis that the client pays the solicitor 40% including VAT of any compensation the solicitor recovers for the client.

If the client is successful with their claim and is awarded £1,000 including VAT in compensation, the solicitor will take £400 including VAT (40% of the compensation). If, however, the solicitor’s client is unsuccessful with their claim, the solicitor will not be able to recover any of their legal fees from the client.

By agreeing to enter into a contingency fee with the client, the solicitor is therefore taking a risk of not recovering any of their legal fees if their client is unsuccessful with their claim.

As stated above, contingency fees are only legal in non-contentious proceedings. Section 87 of the Solicitors’ Act 1974 defines contentious proceedings as work done for the purposes of proceedings begun at court. Therefore, it is possible to use contingency fees for all pre-action matters. Pre-action matters are tasks which are carried out prior to court proceedings being commenced. For example, writing a letter of claim and investigating liability into a claim and trying to reach a pre-action settlement.

Contingency fees can also be used in employment law matters heard in an employment tribunal. Another example of where they can be used is claims made to the Criminal Injuries Compensation Authority for compensation for personal injury suffered as a result of being a blameless victim of violent crime.

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