Dumping conditional fees is good, says Andy Cook

Following hot on the heels of Stephen Byers' announcement that the Labour Party wants to attack compensation culture at the next general election, a new report is due to be published next week that reinforces the perception of "something being done".

It seems that 'director about town' David Arculus has finished his report to the Department of Constitutional Affairs after ten months and that he will announce next week that conditional fees should be replaced by contingency fees.

The initial reaction is likely to be shock, as the notorious US system is based on contingency fees (where claimant lawyers take a predetermined percentage of the damages). But in the US damages are set by juries. In the UK they are set by judges.

The big plus for contingency fees is that costs will be driven down. Indeed, claimant lawyers and their clients will be keen to keep costs down as they will eat into any prospective earn-out from damages. Under conditional fee, costs can dwarf damages.

Another benefit of contingency fees is that consumers are much more likely to understand their own risks than through the arcane working of conditional fees. And claimant lawyers will have to compete for the percentage of damages that they take. This fits in nicely with the Clementi Review which favours a consumer-driven legal sector.

The downside is that claimant lawyers might be tempted to push for ever bigger damages. But if this is controlled by the judiciary, it is a solution well worth considering as an alternative to the conditional fee system that has seen consumers let down by Claims Direct and The Accident Group.