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government embarks on CFA regime change

21 June 2011

The process of reforming the legal funding regime began in earnest today with the publication of the Legal Aid, Sentencing and Punishment of Offenders Bill.

The Governments support for reform was made clear in its reception of Lord Justice Jacksons recommendations and its response to a consultation on the subject earlier this year. However, this Bill is the first step towards making the legislative changes necessary to remove recoverable success fees and ATE premiums, and to introduce Damages Based Agreements.

The Bill, should it become law, will effect substantial changes, as well as empowering the Lord Chancellor to make secondary legislation:

  • Costs orders in proceedings may not require one party to pay the success fee or ATE premium of the other (applicable only to success fees or insurance policies entered into after the Bill becomes law).
  • Maximum limits expressed as a percentage of damages to be placed on success fees in certain categories of claim, to be subject to a cap specified by the Lord Chancellor
  • Restrictions which limit the availability of Damages Based Agreements to be lifted (though the Lord Chancellor may restrict the types of proceedings in which DBAs are available)
  • Little is said regarding costs recovery under a DBA, save that "rules of court may make provision"

There is scope for recoverability of ATE premiums to be permitted in clinical negligence claims, via an Order of the Lord Chancellor

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

"It is likely that the Bill will be a controversial one, and its passage is likely to be far from straightforward, with many interest groups already lobbying strongly against the proposed changes and a number of sympathetic MPs. Secondary legislation will also be vulnerable to challenge through Judicial Review.

"However, the Government appears determined to address the cost of claims, and sees this Bill as a key step in the process. We expect that it will pass into law, most likely this year, and that secondary legislation will follow soon after."

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Lakhbir Rakar

Lakhbir Rakar

PR Manager