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government backs Jacksons litigation reforms

29 March 2011

The Government is to abolish the recovery of success fees from losing defendants as part of a package of reforms designed to overhaul the UKs litigation regime.

The measures introduced by the Justice Secretary Ken Clarke will see the Ministry of Justice drive forward changes that will mean claimants will in future have to pay their lawyers success fees, rather than defendants.

Other measures would see ATE premiums become irrecoverable (except perhaps in a limited class of clinical negligence claims), a cap on the amount that can be paid as a success fee to lawyers in personal injury cases, a 10 increase in general damages and the introduction of Qualified One Way Costs Shifting in personal injury and clinical negligence cases.

At the same time, the Government has published a further consultation in relation to the civil claims process. Solving disputes in the County Courts aims to dramatically reduce the number of claims reaching the Courts. It includes proposals to increase the small claims track limit for non-injury claims, to extend the low value motor claims processes to new areas of injury law, and to higher claims values, and to require ADR before claims come to trial.

Nichola Evans, Partner in the insurance sector team at Browne Jacobson, commented:

"It has been clear for some time that the Government is determined to make real changes to the litigation system, and the mechanisms by which it is funded. In that respect, these announcements are unsurprising. However, the pace of change and the sweeping nature of the measures carries its own risks.

"The days of personal injury lawyers charging effective rates of £500 -£600 per hour (including success fee) appear to be numbered, and many will welcome this. Respondents to the governments proposal for Qualified one Way Costs Shifting (QOCS) in injury claims, in place of recoverable ATE insurance were more cautious, highlighting the risk of satellite litigation and an increase in weak claims.

"However, while injury litigation has been the focus of much of the debate surrounding the consultation, the proposals will have much broader implications. CFAs and ATE currently form an important funding option in many categories of civil dispute. In these areas, ATE will not be replaced by QOCS. We are concerned at the impact this could have on some of our SME clients, though Damages Based Agreements (which are to be permitted under the proposals) may provide an alternative funding stream in many cases.

"The Governments enthusiasm for BTE insurance seems to have waned in this paper. The Government makes it clear that it would welcome greater use of BTE and the development of the market in this area, but makes no proposals aimed at bringing this about. It seems potential litigants will be left to decide for themselves whether reduced litigation funding options make BTE a worthwhile investment.

"This paper is unlikely to be the last word on funding issues. In many areas the Government acknowledges that further work is required before final legislation or procedural rules can be prepared, and it is unlikely that draft reforms will go unchallenged.

"Many groups have been vocal in their opposition to reforms. In a statement yesterday, the Access to Justice Action Group questioned the Governments ability to properly consider the options in the short time since the consultation closed.

"There may be scope for more than just criticism. There is a real possibility of legal challenges, either as the Government seeks to introduce reforms or on individual claims affected by them."

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Lakhbir Rakar

Lakhbir Rakar

PR Manager