My Lords, Amendments 41L, 41M and 41N place certain restrictions on the amount of legal costs that can be awarded to a representative. The Government agree with my noble friend Lord Hodgson: they do not want lawyers gaining excessive financial benefit from this regime. Any damages should be awarded to the claimants. We agree with the overall objective of getting the cash to consumers. For that reason, the Government have placed in the Bill measures to restrict the costs lawyers can claim.
The first key safeguard is that the CAT must certify that a representative is suitable to bring a collective action. The draft secondary legislation requires the CAT to consider whether the representative has a material interest that conflicts with the interest of class members. That means a law firm will not automatically be able to bring a claim. Secondly, the Bill prohibits the CAT from awarding treble damages, which limits the scope of unclaimed damages. Thirdly, the Bill contains restrictions on the financing of claims because it prohibits damage-based agreements, which means that lawyers cannot take away some of the damages from claimants. The Bill also does not provide for a claimant to be able to recover any uplift in legal costs from a conditional fee agreement—so-called no-win no-fee agreements.
A conditional fee agreement provides for a success fee for lawyers who win a case. Unlike standard legal fees, which can be recovered from the losing party, a conditional fee agreement has to be paid by the party being represented. In a collective action case, that may be the consumer organisation or the trade body. Therefore, it is in their interest to avoid conditional fee agreements or, where they enter into them, to negotiate the success fee so that it is as low as possible.
It is imperative that damages are paid to claimants. Therefore, if a representative wishes to use any unclaimed damages to cover their legal costs, two stages are set out in the Bill. This comes to the heart of the points that my noble friend Lord Hodgson raised. First, legal costs may be recovered from unclaimed damages only after claimants have had an opportunity to come forward and claim their damages. That means that if all claimants come forward and claim their redress, there will be no unclaimed damages to apply for to pay legal costs.
Secondly, any award of unclaimed damages has to be approved by the CAT. Additionally, the draft CAT rules, which noble Lords will recall is secondary legislation on which we will consult, require the CAT to consider the ability of the representative to cover legal costs if ordered to do so and will require an estimation of the legal costs. Any further restrictions may discourage representatives from taking on these cases completely, as they will have very limited means of recovering their costs, which may mean that the consumer receives little or no redress.
I hope that my noble friend is reassured by the discussion we have had on these three amendments that we are aware of the concerns around introducing an opt-out regime; that we have addressed the concerns that have been expressed through safeguards; and that we stand ready to undertake a strong consultation on some of the details we have debated. I hope that he feels able to withdraw his amendment.
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