The Government has, today, announced that the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 reforms for insolvency proceedings are being delayed for the time being, and will therefore not come into force on 1 April 2015.

Lord Faulks QC has, today, issued a Ministerial Statement that will delay the LASPO Act reforms coming into place. The LASPO Act aims to reform the operation of ‘no win, no fee’ Conditional Fee Agreements (“CFAs”). These reforms, generally, came into effect on 1 April 2013. However, as far as insolvency proceedings were concerned, reforms were delayed and were due to come into effect on 1 April 2015. This delay was established in order to allow insolvency practitioners and interested parties time to prepare and adapt to changes. Following today’s announcement, CFAs in insolvency proceeding will continue for the time being.

CFAs are a means of funding litigation, where the solicitor agrees not to take a fee if the claim fails, but in the event that the claim is successful, the solicitor will charge a success fee in addition to his base costs. Prior to LASPO, the winning party’s success fee is payable by the losing party in addition to the ordinary legal costs of the winning party.

Today’s announcement has come about following the lobbying and campaigning of R3. R3 work with Government, key policy makers, opinion formers and the media to ensure that the work and views of Insolvency Practitioners are reflected.

The result of this announcement will mean that, until the Government makes a further announcement which is predicted to be later in the year, CFAs in insolvency proceeding will continue for the time being, meaning that any success fees and ATE insurance premiums will remain recoverable from the losing party.