Legal action can be stressful. On top of worrying about the outcome of your case, you may also be concerned about legal costs. Many people delay or avoid making a claim simply because they are unsure how they will pay their solicitor if things do not go their way.
To deal with this issue, the law allows alternative funding arrangements that help you share the financial risk of litigation. Two of the most common options are Conditional Fee Agreements (CFAs) and Damages Based Agreements (DBAs).
This guide explains both in clear, simple terms, so you understand how they work, what you may have to pay, and whether they could be right for you.
Why funding arrangements matter
Court cases and disputes can be expensive. Solicitors’ fees, barristers’ fees, expert reports, and court costs can add up quickly. If you are unsure whether your case will succeed, paying legal fees upfront can feel risky.
CFAs and DBAs exist to make it easier for you to pursue a genuine claim without having to fund everything at the start. They allow you and your legal team to share the risk, instead of you carrying it alone.
What is a Conditional Fee Agreement (CFA)?
A Conditional Fee Agreement, often called a “no win, no fee” agreement, is a contract between you and your solicitor.
Under a CFA, some or all of your solicitor’s fees are only payable if your case is successful.
In simple terms:
- If you win, you pay your solicitor and may also pay an extra success fee.
- If you lose, you usually pay reduced legal fees or no solicitor’s fees at all (depending on the terms of the agreement).
A CFA must always be in writing and is legally binding.
How does a CFA work in practice?
When you enter into a CFA, you and your solicitor agree clear success criteria. This usually means winning the case or achieving a specific outcome, such as recovering an agreed amount of damages.
If that success criteria is met:
- Your normal legal fees become payable
- A success fee is added
If the success criteria is not met:
- You may pay reduced fees or no solicitor’s fees
- You will usually still have to pay disbursements and expenses
Each CFA is different, so the exact wording matters.
What is a success fee under a CFA?
A success fee is an additional amount your solicitor can charge if your case is successful. It is separate from normal legal fees.
In commercial cases (not personal injury CFAs entered after 1 April 2013), the success fee can be up to 100% of the solicitor’s normal fees.
The level of the success fee is based on how risky your solicitor considers the case to be. Factors they may look at include:
- The strength and value of your claim
- The likelihood of settlement
- The amount of work and costs involved
- The quality of evidence available
Importantly, a CFA success fee cannot be a percentage of the damages you recover.
Who pays the success fee?
You are primarily responsible for paying all fees under a CFA, including the success fee.
If the CFA was entered into before 1 April 2013, the success fee may sometimes be recovered from the losing party.
If the CFA was entered into on or after 1 April 2013, the success fee is generally not recoverable from the opponent, except in limited cases such as:
- Certain insolvency cases (until April 2016)
- Publication and privacy cases including defamation (until April 2019)
- Mesothelioma claims
In most modern cases, the success fee is paid by you.
What happens if you lose under a CFA?
If your case is unsuccessful or the success criteria are not met:
- You usually do not pay your solicitor’s full fees
- You may still have to pay disbursements, such as expert fees and court costs
- You may also be ordered to pay some of the opponent’s legal costs
This risk is important to understand before you sign a CFA.
Do CFAs cover barristers’ fees?
Sometimes, a barrister may agree to enter into a CFA, placing part of their fees at risk. However, this is not guaranteed.
In commercial disputes, many barristers may:
- Decline a CFA entirely
- Agree to risk only a small portion of their fees
You should check carefully whether counsel’s fees are included or treated separately.
What is a Damages-Based Agreement (DBA)?
A Damages-Based Agreement (DBA) is another way of funding litigation, but it works differently from a CFA.
Under a DBA:
- Your solicitor only gets paid if your case succeeds
- The payment is calculated as a percentage of the damages you recover
In effect, your solicitor takes a share of the compensation instead of charging time-based fees.
How does a DBA work?
When you enter into a DBA, you and your solicitor agree success criteria and a percentage fee in advance.
If the case is successful:
- The solicitor’s fees, counsel’s fees and VAT are paid out of the damages recovered
- The fee is deducted directly from the compensation you receive
If the case is unsuccessful:
- You usually pay no solicitor’s or barrister’s fees
- You still pay disbursements and expenses
DBAs must be carefully drafted and are strictly regulated.
What are the limits on DBA fees?
The law places caps on DBA percentages, depending on the type of case.
- Personal injury claims:
- Up to 25% of general damages and past financial loss
- Employment claims:
- Up to 35% for solicitors’ fees and VAT
- All other claims (excluding employment):
- Up to 50% of the sum recovered
For appeal proceedings, there is no statutory cap on the DBA percentage.
Can costs still be recovered from the opponent under a DBA?
If your case succeeds and you are entitled to costs from the opponent:
- You cannot recover costs based on the DBA percentage
- You may recover reasonable solicitor’s fees based on time spent and hourly rates
- Disbursements and VAT may also be recovered
However, you cannot recover more than the total amount actually incurred under the DBA.
DBAs can sometimes lead to higher irrecoverable costs, especially if cases settle early.
What if you lose under a DBA?
If the success criteria are not achieved:
- You do not pay solicitor’s or counsel’s fees
- You remain liable for disbursements and expenses
- You may have to contribute to the opponent’s costs
This is why understanding cost risk is essential before agreeing to a DBA.
Can you protect yourself against paying the other side’s costs?
It may be possible to reduce your risk by taking out After the Event (ATE) insurance.
ATE insurance can:
- Cover some or all of the opponent’s legal costs if you lose
- Protect against unexpected financial exposure
Whether ATE insurance is suitable depends on your case and should be discussed with your solicitor.
Do CFAs or DBAs need to be disclosed to the opponent?
For most CFAs and DBAs entered into after 31 March 2013, there is no requirement to notify the opponent.
Exceptions apply for certain older CFAs and specific types of claims.
Where notification is required:
- Only limited information is disclosed
- The success fee amount and terms are not revealed
You should not disclose details of your funding arrangement without legal advice.
What are the advantages of CFAs and DBAs?
These funding arrangements offer clear benefits:
- You can pursue a claim without paying full legal fees upfront
- Financial risk is shared with your legal team
- Access to justice improves, particularly for strong claims
- DBAs can be cost-effective if damages recovered are modest
They can make legal action possible where it might otherwise be unaffordable.
What are the disadvantages?
There are also risks:
- Under a CFA, success fees can substantially increase your overall costs
- Under a DBA, the percentage fee may be higher than traditional charges if damages are large
- Disbursements and adverse costs may still be payable
- Some costs may not be recoverable from the opponent
You should always weigh the potential outcome against the total financial exposure.
Final thoughts
CFAs and DBAs are powerful tools that allow you to pursue claims while managing financial risk. However, they are not “risk-free”.
Before entering into any funding arrangement, it is essential that you:
- Fully understand what you may have to pay
- Consider what costs are recoverable
- Think about the realistic value of your claim
Taking the time to understand these agreements can help you make informed decisions and avoid unexpected surprises later in your case.
If you are unsure, professional advice should always be taken before signing any funding agreement.