Theory and Practice Part 1

One year on from its launch, COMBAR’s James Leabeater offers his views on BARCO.

Barristers need to get used to considering and evaluating credit risk. Since January 2013 barristers and solicitors have been agreeing contracts with each other. For some, not much has changed. Under the BSB’s Standard Contractual Terms, for example, the solicitor is liable to pay barristers’ fees, whether or not the lay client has paid the solicitor. The solicitor takes the credit risk.


But many law firms refuse to accept credit risk. In particular, in January 2013 the Law Society issued a Practice Note proposing amendments to the Standard Contractual Terms which would make the solicitor liable only if and when the lay client had paid the solicitor – a so called “pay when paid” provision.

In order to mitigate the obvious potential difficulties, COMBAR and the City of London Law Society negotiated a set of terms for commercial work. The terms set out four different bases for payment. Basis A is the traditional position: the solicitor is liable whether or not in funds. Basis B is “pay when paid”. Bases C and D both provide for direct payment to the barrister by the lay client – the difference is that D requires a further contract between the lay client and the barrister, whilst for C the solicitor acts as agent for the lay client.

No agreement could be reached about which basis should be the default one – so, if a barrister chooses to contract on the COMBAR/CLLS terms (and there is no obligation to do so) the basis for payment, as well as the amount and timing of fees, must be specifi cally negotiated.

Where the basis for payment is B, C or D, the barrister must consider and evaluate the credit risk posed by the lay client. That can be difficult and time consuming. It may also be impractical where instructions are urgent, or the lay client is abroad.

One potential solution to an unsatisfactory credit risk is for the lay client to pay in advance. But barristers cannot take money on account.

That is where BARCO’s escrow account service comes into play. The lay client lodges funds to be held in accordance with agreed terms, and BARCO disperses funds in accordance with those terms until the case concludes, for a fee of about 2% of earned fees with a cap of £250 per transaction.

In the event of a dispute, the funds are frozen pending resolution of the dispute. The lay client has the security of knowing that BARCO is regulated by the Financial Conduct Authority and it is subject to the jurisdiction of the Financial Ombudsman. All funds held within BARCO are segregated from all other funds associated with the Company and they are insured.

For those doing international work, BARCO also offers real advantages. If you are instructed by lawyers or clients abroad, and things go wrong, it may be difficult to recover your fees whatever the terms of your agreement. Using BARCO can give you the assurance that you will be paid; and it can give your client the assurance that cash paid on account will be safe, and returned, with interest, in the event that the sum paid on account exceeds the fees chargeable.

For cases where solicitors cannot or will not take fees on account, BARCO provides a useful service to limit barristers’ credit risk. And in this new contractual world, we all need to learn to think about credit risk every time we accept instructions.

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James Leabeater

James is a barrister at 4 Pump Court and COMBAR Executive Committee member.