'No Win, No Fee' and the Costs of Civil Litigation
26 Pages Posted: 17 Jul 2012
Date Written: July 17, 2012
Abstract
Expenditure on civil litigation in the UK has been rising for much of the last two decades and has attracted considerable policy attention. We argue that an important reason for this increase lies with changes to the implementation of `no win no fee' arrangements. These interventions allowed claimants and their lawyers to shift the risk of paying legal costs onto defendants and, as a consequence, reduced the incentive for claimants to monitor these costs. We use a simple theoretical model to illustrate how these interventions may have increased costs before presenting evidence using data on employers' liability claims. As well as helping us to understand the role of previous policy in relation to trends in litigation costs, our results also allow us to assess current policy proposals aimed at reversing these trends. In addition, the paper indicates the important interplay that exists between the effects of legal fees and procedural rules for allocating costs between litigants; an issue of wide jurisdictional interest.
Keywords: Litigation, Cost-shifting, Legal fees, Risk, Policy
JEL Classification: K4
Suggested Citation: Suggested Citation