The Act Commentary on Sections Part 6 - Legal aid and other payments for legal services Section 154:  Damages-based agreements relating to employment matters
701.Section 154 provides for the regulation of damages-based agreements in respect of claims relating to employment matters. It does this by inserting a new section 58AA into the Courts and Legal Services Act 1990. Damages-based agreements cannot be used in court proceedings but are commonly used by solicitors and claims managers in cases before an employment tribunal.
702.Subsection (1) of the new section 58AA provides that damages-based agreements relating to employment matters which satisfy certain conditions are not unenforceable by reason only of being damages-based agreements. Those damages-based agreements relating to employment matters which do not satisfy the prescribed conditions are unenforceable by virtue of subsection (2).
703.Subsection (3) defines a “damages-based agreement" as an agreement between a person providing advocacy services, litigation services or claims management services and the recipient of those services. The amount that the recipient pays for those services is determined by reference to the amount recovered by him or her from the claim or from proceedings before an employment tribunal.
704.Subsection (4) sets out the conditions that damages-based agreements relating to employment matters must satisfy in order to be enforceable. Subsection (5) enables the Lord Chancellor to make regulations (by affirmative resolution procedure) under subsection (4) and allows different provision to be made in respect of different descriptions of agreements.
705.Subsection (6) sets out the persons who must be consulted before regulations are made. As with regulations made under section 58 of the Courts and Legal Services Act 1990 which regulates conditional fee agreements, this includes senior judiciary, those representing the legal profession and others as the Lord Chancellor considers appropriate. Subsection (7) defines the terms “payment” and “claims management services” for the purposes of the new section 58AA.