Conditional versus contingent fees: Litigation expenditure incentives

Many jurisdictions in the UK and Australia now allow conditional fees to be struck between a lawyer and their client. While both conditional and contingent fees are outcome-contingent, only under the former is the lawyer's remuneration a function of inputs. The public policy arguments put forward for each fee structure hinge importantly on litigation expenditure incentives. We show that conditional (contingent) fees are not better suited to the English (American) rule of fee-shifting. We also show that whether conditional fees result in higher or lower expenditure than contingent fees depends crucially on whether the inputs to litigation are determined by the lawyer or the client. If the latter, then conditional fees result in (weakly) lower expenditure than contingent fees. If the lawyer determines inputs then expenditure is higher under conditional fees.