1. Unleashing law and
order through
January 4, 2013
Contingent fee
agreements (CFA).
By Vishal Gupta, New Delhi
October 2012
1

2. How can you stop a bad guy?
Only a court can put someone behind bars or punish
January 4, 2013
… and no one else.
And even a court can’t put someone behind bars
till a lawyer proves it in court.
Lawyers are
most critical !! 2

3. What’s behind prosecuting?
It requires
January 4, 2013
• Lots of Time
• Lots of Money
• Specialized Legal knowledge
• Specialized investigative skills (detectives etc)
• Specialized evidence gathering (Forensics etc)
• Security of self (Life)
• Witness protection
• Willingness/ dedication of lawyer (professionalism, ethics)
• Will of complainant to prosecute ..
• Courage / pain / determination
• Chances of success 3
• Bait to settle vs investment (time and money)

4. What is the ground reality in India
?
• Govt is normally
January 4, 2013
• short on funds
• Lengthy internal approvals
• Ill-equipped
• Un-willingness to prosecute wealthy
• Lack of legal and investigative skills
• Police does not even file FIRs
Even after charges are framed, the conviction rate is less than
4%
4
Compliance and law enforcement is left to a select few officers..

5. Current summary..
January 4, 2013
The odds of getting caught,
then prosecuted
and convicted
are almost ZERO….
Thus crime… will never end.. 5

6. How other countries handle it?
January 4, 2013
Litigation is a profitable business.
• For lawyers
• For Complainants
Compliance does not have government monopoly.
6

7. How other countries handle it?
There are three pillars …
January 4, 2013
1. Contingent Fee
• success fee based lawyers
2. Fee shifting
• loosing party pays for all legal fees & court fees
3. Punitive Damages
• The looser pays for creating future deterrent.
• The winner gets FULLY compensated for harassment and effort.
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8. Part 1:
January 4, 2013
Contingent Fee
Agreements (CFA)
Success based fee..for the lawyers
8

9. Law in India – success fee
not allowed
• Rule 20 of Part VI, Chapter II, Section II (Rules Governing
January 4, 2013
Advocates) BCI Rules, which read thus:
• “An Advocate shall not stipulate for a fee contingent on the
results of the litigations or agree to share the proceeds
thereof.”
• if such agreements are brought to the notice of the Bar
Council or the Courts then not only would it be struck down
but the advocate concerned would be subjected to severe
disciplinary proceedings.
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10. Other countries….
• In 1998, the American Law Institute adopted the Restatement
January 4, 2013
(Third) of the Law Governing Lawyers (the “Restatement”).
• The Restatement provides that, unless the fee is unreasonable, “a
lawyer may contract with a client for a fee the size or payment of
which is contingent on the outcome of a matter.”
• The courts in many countries have stepped in and legalized
the contingent contracts to alleviate the large and currently
overlooked access to justice problem experienced by the
middle class including Canada, UK etc..
10

11. Also reduces case load…
• Economic modeling suggests that
January 4, 2013
• contingent fee arrangements reduce frivolous suits when
compared to hourly fee arrangements.161
• The reasoning is simple: When an attorney’s compensation is
based solely on success, as opposed to hours billed, there is great
incentive to accept and prosecute only meritorious cases.162
• At least one empirical analysis concludes that
• “hourly fees encourage the filing of low-quality suits and increase
the time to settlement (i.e., contingency fees increase legal
quality and decrease the time to settlement).”163
11

12. There are four principal policy
justifications for contingent fee
arrangements.
January 4, 2013
Firstly, such arrangements
• enable the impecunious (having no money) to obtain
representation.
• Such persons cannot afford the costs of litigation unless and
until it is successful.
• Even members of the middle- and upper-socioeconomic classes
may find it difficult to pay legal fees in advance of success and
collection of judgment.
• This is particularly so today as litigation has become more
complex, often involving suits against multiple parties or
multinational entities, and concerning matters requiring expert
scientific and economic evidence. 12

13. Secondly
Contingent fee arrangements can help align the interests of
January 4, 2013
lawyer and client,
as both will have a direct financial stake in the outcome of the
litigation.
13

14. Third
by predicating an attorney’s compensation on the success of a
January 4, 2013
suit,
the attorney is given incentive to function as gatekeeper,
screening cases for both merit and sufficiency of proof,
and lodging only those likely to succeed.13
14

15. Forth
and more generally, all persons of sound mind should be
January 4, 2013
permitted to contract freely,
and restrictions on contingent fee arrangements inhibit this
freedom.14
15

16. Three more reasons
• First
January 4, 2013
• clients, particularly unsophisticated ones, may be unable to
determine when an attorney has underperformed or acted
irresponsibly;15 in these instances, an attorney’s reputation would
be unaffected, and thus the risk of reputational harm would not
adequately protect against malfeasance.
• Second
• even when clients are aware of an attorney’s poor performance
or irresponsibility, they may lack the means, media, or credibility
to effectively harm the attorney’s reputation.
• Third
• the interests of attorney and client are more closely aligned,
ceteris paribus, when fee arrangements are structured so as to 16
minimize perverse incentives.

17. Two areas it does not work..
US ABA Model Rule 1.5(d), which states:
January 4, 2013
• A lawyer shall not enter into an arrangement for, charge, or
collect:
• (1) any fee in a domestic relations matter, the payment or
amount of which is contingent upon the securing of a divorce or
upon the amount of alimony or support, or property settlement
in lieu thereof; or
• (2) a contingent fee for representing a defendant in a criminal
case.48
17

18. Indian Constitution on CFA.
• 14. Equality before law – “The State shall not deny to any person equality before
the law or the equal protection of the laws within the territory of India.”
January 4, 2013
• Lawyers should have equal rights to make contingent contracts,
• 39A. Equal justice and free legal aid. – “The State shall secure that the operation
of the legal system promotes justice, on a basis of equal opportunity, and shall,
in particular, provide free legal aid, by suitable legislation or schemes or in any
other way, to ensure that opportunities for securing justice are not denied to any
citizen by reason of economic or other disabilities.”
• Lawyers should be accessible to all sections of society.
• 50. Separation of judiciary from executive. – “The State shall take steps to
separate the judiciary from the executive in the public services of the State.”
• It will enable individuals to get private lawyers in place of government lawyers.
• Compliance checking will get private participation.
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19. Why does it reduce case load in
Courts?
Lawyers simplify case and only allege charges that can be sustained.
January 4, 2013
• Use simple and concise arguments for the judges.
Faster Case Proceedings
• Multiple steps get completed in single hearings.
• They create urgency for clients to show up on every hearing.
• Lawyers spend more time and working hard outside the courts. Thus
increasing case quality.
Case withdrawals
• There are less takers if lawyer drops a case when there are surprises
by client which will adversely impact outcome.
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• Lawyers persuade complainants to settle when appropriate.

20. Less cases better filing…
• Complainants get genuine advice about chances of winning.
January 4, 2013
They do not file unless they get lawyer’s buy in.
• Comprehensive evidence gathering happen’s before Lawyer
decides to file a case.
• Lawyers screen cases for merit and sufficiency of proof before
filing.
• Lawyers don’t pick up bad cases to manage reputation.
• They do better preparation and take less adjournments.
• Lawyers do not unnecessarily appeal and stay matters because
they do not get paid per hearing and want quick results.
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21. Can lawyers misuse it ?
• It can only happen if there are punitive damages or fee shifting.
January 4, 2013
• it can be done even now.
• If lawyers are assumed to have low ethics then CFA is all the
more required to protect client interests.
21

22. January 4, 2013
Part 2:
Fee shifting
Looser pays legal fees for both sides.
22

23. Laws in India – Fee Shifting
ineffective
• Rule 100 of the Karnataka Civil Rules of Practice, 1967
January 4, 2013
provides that while awarding costs the fees of the advocates
may also be included. It provides for a schedule which
prescribes the manner in which the court is required to
calculate the same.
• The minimum fee payable in the case of an original suit is Rs.
250, in a regular appeal it is Rs. 350 in case of a small cause
suit it 7% of the value of the amount of the claim set forth in
the plaint subject to a minimum of Rs. 100. Similarly, the
maximum fee prescribed in case of original suits as well as an
appeal is Rs. 15,000.
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24. Consider..
• Is it practical to sue a corrupt business house in Rs. 15,000?
January 4, 2013
• Why should the person helping prosecute pay from his
pocket?
• Should poor or middle class citizens not have Access to good
lawyers?
The prospect of the losing party paying costs provides a strong
incentive for litigators or third parties to settle at an early stage,
and avoid the costs of litigation altogether. The removal of this
incentive potentially places an additional burden on the courts. 24

25. Indian Constitution on fee
shifting…
January 4, 2013
• 39A. Equal justice and free legal aid. – “The State shall
secure that the operation of the legal system promotes
justice, on a basis of equal opportunity, and shall, in particular,
provide free legal aid, by suitable legislation or schemes or in
any other way, to ensure that opportunities for securing
justice are not denied to any citizen by reason of economic or
other disabilities.”
• This will give all plaintiffs and defendants freedom to choose
any legal assistance.
25

26. January 4, 2013
Part 3:
Punitive Damages
More than just mere compensation..
26

27. Law in India – Punitive damages
very limited.
Being influenced by Rookes v Barnard,[73] the India Court ruled that
punitive damages can be awarded in only three categories:[74]
January 4, 2013
• Cases where the plaintiff is injured by the oppressive, arbitrary or
unconstitutional action by a servant of the Government
• Cases in which the defendant’s conduct has been calculated by him
to make a profit for himself which may well exceed the
compensation payable to the plaintiff, and
• Where provided by statute.
However, this stand has since shifted with an expanding tort
jurisdiction. The Supreme Court accepted a Committee's suggestion to
evolve a "principle of liability – punitive in nature – on account of
vandalism and rioting”.[75] The reasoning given was that it "would deter
people from similar behaviour in the future".[75]
• In an environmental tort case, the defendant was made to pay
exemplary damages “so that it may act as deterrent for others not to 27
cause pollution in any manner”.[76]

28. Punitive Damages..
According to Posner,
January 4, 2013
“Knowing that he will have to pay compensation for harm
inflicted,
the potential injurer will be deterred from inflicting that harm
unless the benefits to him are greater.
If we do not want him to balance costs and benefits in this
fashion, we can add a dollop of punitive damages to make the
costs greater. “
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29. Punitive damages
A flawed and dangerous process was most famously brought to
January 4, 2013
public attention in the 1981 Ford Pinto “exploding gas tank” case,
Grimshaw v. Ford Motor
• In that case, Ford knew its gas tank design exposed consumers
to serious risk of injury or death but decided not to make
necessary design changes, instead finding it cheaper to pay
liability claims.
There, the court observed that unlike “compensatory damages”
which a manufacturer may find “more profitable to treat as a
part of the cost of doing business rather than to remedy the
defect,” punitive damages cannot be treated as such and so
“remain as the most effective remedy for consumer protection
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against defectively designed mass-produced articles.”

30. Punitive Damages –
deterrence..
• Must not be capped..
January 4, 2013
• Linked to companies or individual’s wealth.
• Unpredictable…so that it may not become a budget item.
Benefits..
• Creates deterrence
• More compliance
• Higher safety standards
Laws that restrict punitive awards place the public at serious risk.
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31. Punitive Damages
• The availability of punitive damages protects us all by holding
wrongdoers accountable for egregious misconduct and
January 4, 2013
deterring its future occurrence.
• Perhaps the most significant latent function of punitive
damages is to supplement criminal law. Public authorities
seldom prosecute corporations or their officers for deaths and
serious injuries created by defective products or practices.
• The scams like 2g and commonwealth, the complexity of
bringing groups of people to justice, and the difficulty of
prosecuting high net worth individuals are just a few examples
of the need for a civil supplement to punish and deter
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organizational Misdeeds.

32. Discussions….
• Who will catch the fish?
January 4, 2013
• Who will invest ?
• How else the system will get fixed ?
Discussions
• Chakravyuh
• Big people don’t have time to prosecute.
Lawyers get more money from culprit than a court would award or
32
a victim might pay.

33. Example:
Factories polluting rivers
• Who will invest money in gathering evidence ?
January 4, 2013
• Who will track the assets of promoters ?
• Who will fight the long drawn legal battle to shut down the
factories and recover money from promoters?
• How much time and money will a government officer invest ?
And how far will he go ?
We need India to invest and mobilize resources in prosecuting 33
the guilty and clean up the culture..

34. Even a rapist in India can’t be
prosecuted…
• The police is not interested in filing FIR.
January 4, 2013
• Normally the girl affected have poor financial background and
cant hire private lawyers.
• A government lawyer has little or perverse incentives.
• The expert help to record crucial evidence is not available.
• If the NGO tries to help, even then the girl withdraws the case
for mere 50,000 rupees.
If India has punitive damages, contingent fee contracts or fee
shifting then a lot of legal and private help could be available to
the victims family till the case gets to its logical end.
34

35. Indian Constitution
on Punitive Damages.
• 14. Equality before law – “The State shall not deny to any person equality before
the law or the equal protection of the laws within the territory of India.”
January 4, 2013
• Corrective penalties should have equitable impact.
• 39A. Equal justice and free legal aid. – “The State shall secure that the operation
of the legal system promotes justice, on a basis of equal opportunity, and shall,
in particular, provide free legal aid, by suitable legislation or schemes or in any
other way, to ensure that opportunities for securing justice are not denied to any
citizen by reason of economic or other disabilities.”
• How can people get lower compensation because they are from poorer
background.
• 50. Separation of judiciary from executive. – “The State shall take steps to
separate the judiciary from the executive in the public services of the State.”
• Punitive damages encourages private participation in catching and prosecuting
offenders.
• There is an element of judgment involved (by executive) while choosing to
prosecute which can at least be privatized.
35

36. Advantages of “full justice”
Old System New System
January 4, 2013
Poor people do not have access to Lawyers invest in prosecuting big fish
justice by contracting with poor people.
Low quality work by lawyers High quality fast work from lawyers
Low quality evidence collection High quality evidence collection
Complicated case Better framing of charges
Slow cases – pay per appearance Fast cases
Perverse incentives for lawyers Lawyer interest alignment with case.
Compliance done largely by Private participation in legal
government compliance.
Lawyers discourage settlements Lawyers facilitate settlement
Lawyers do not drops cases Lawyers drop cases as soon as they
loose hope. 36
Slow and clogged court system Fast and efficient courts.

37. Economic benefits
• Higher quality of litigation work.
January 4, 2013
• Attract better talent to the profession due to higher
profitability.
• Create more jobs in the economy.
• Offer higher pool of qualified people for judiciary.
• Better investment climate due to more reliability in business
transactions.
• Better quality of products and services (reduction in wastage
of natural resources)
• Lowers wealth distribution inequality.
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38. Conclusion
The proposal if accepted could:
January 4, 2013
• Provide equal access to justice for poor.
• Create deterrence for crime and civil offences.
• Increase conviction rates.
• Make Indian justice system more efficient.
People instead of ridiculing the government, themselves would
love to clean up the pond..
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39. Only active and keen
participation of lawyers
January 4, 2013
can eradicate
corruption.
Let’s encourage the lawyers do their job fully..
39

40. Society’s moral
January 4, 2013
values depend on its
real access to justice.
Which requires contingent fee agreements, punitive
damages and fee shifting.
40

41. If the end goal of an
economy is to produce
January 4, 2013
more happiness..
It must begin with access
to justice.
-Vishal Gupta
41

42. Lets compare….
January 4, 2013
42

43. Eradicating corruption…
January 4, 2013
Lawyers
Justice
Deterrents
43

44. Who want to invest in a
country like Nigeria?
January 4, 2013
Law & Order
Investments
Opportunities
India is ranked at
the bottom for
enforceability of
business contracts.
Jobs 44