Costs. Given the comparable litigation procedures, the cost of litigating in England1 will be roughly equivalent to the cost of litigating in the US. The lack of depositions in English civil procedure avoids the significant costs often associated with that process, as does the lack of examination in chief during trial. However, significantly longer interlocutory hearings go at least some way to redress the balance.
The costs that can surprise those new to litigation in England are those associated with the instruction of barristers. The perception can be that clients are paying twice for the same work. However, with the proper management of the solicitor/barrister relationship, this is not the case: barristers and solicitors have distinct roles and, properly implemented, this will not result in unnecessary cost.
It is worth noting that there has been a significant increase in court fees in the last year, with the highest fee for issuing a claim now set at £10,000. There is a prospect that the issuing fee will be set at a percentage of the value of the claim in the future. This is, however, a point of heated debate between the legal profession and the UK Government.
Recovery. The most significant difference between the English and US approach to costs is recovery: in England, as a general rule, the winning party can recover its costs from the loser. This offers a significant advantage to those confident in the merits of their case and a real incentive to settle to those uncertain of the ultimate outcome. As such, the shadow of potential costs liability provides fertile ground for tactical manoeuvring.
It is, however, important to note that the general recovery rule is subject to the discretion of the Court. A successful party will never recover all of its costs: costs will be divided between issues in the case and deductions made in respect of any issue on which a successful party has lost; and the conduct of the successful party will be analysed and deductions made in respect of any costs that, in the Court's view, have been incurred unnecessarily. As a result, successful parties should expect to recover approximately 60% to 75% of their costs. This percentage may improve as a result of the increased cost management role assumed by the Court (as to which see further "Cost management" below).
In addition to the final costs reckoning, the costs of interlocutory hearings may be recovered immediately after the hearing. This can have material cash flow consequences when, as we have seen, these costs amount to hundreds of thousands of pounds. This is, in practice, the only real way to dissuade parties from seeking to draw out the litigation process by way of frivolous applications. However, for those parties with particularly deep pockets, this does not always represent a sufficient deterrent.
Cost management. The cost of litigation has been one of the hottest topics in the English legal world for many years and frequent changes to procedural rules have been and will continue to be made in an attempt to curb the excesses. This has resulted in the Courts taking a much larger role in cost management. However, in high value cases where a party is determined to wage a war of attrition by drawing out the process through persistent interlocutory applications and appeals thereof, there is little the opposing party or the Courts can do to prevent them (subject to pursuing the costs of such applications and appeals).
The most significant development in recent years has been the introduction of a requirement for parties to provide an estimate of its costs after the parties have served their statements of case. While costs estimates are nothing new, the significance of this requirement is that if at the end of the case the winning party has exceeded its costs estimate the excess will not, as a general rule, be recoverable. This is a very recent introduction and the Courts are still feeling their way (resulting in different approaches being taken by different judges) but the undeniable benefit is that there is much more certainty at an early stage in proceedings as to the likely worst case scenario that both sides face in the event of loss. It should, however, be noted that this requirement only automatically applies to claims with a value of £10 million or less and does not apply to claims in the Commercial Court (the court that deals with the majority of commercial disputes). The process can, nevertheless, be adopted (either by agreement between the parties or by order of the Court) in those cases where it is not automatically imposed.
This process presents an opportunity to take tactical control over key procedural steps: by way of example, where the limitation of disclosure would be beneficial, if a party presents an unattractively high estimate for the costs of ‘standard' disclosure (disclosure of all documents that could be relevant to all the issues in the case), judges will be receptive to suggestions as to how disclosure should be limited. An obvious tactic perhaps, but one that has been seen to work.
Offers to settle (‘Part 36' offers). Part 36 of the English Civil Procedural Rules provides that where a party makes an offer in the required form and the opposing party rejects the offer but fails to achieve a better result at trial, the rejecting party will be significantly penalised in costs: if the rejecting party wins (but does not beat the offer), it will not recover the costs incurred from the date of the offer; if the rejecting party loses, the winning offeror may be awarded costs on an indemnity basis from the date of the offer and, for successful claimants, an uplift on those costs of up to 10% of the damages awarded.
In high value cases these penalties can amount to millions of pounds and, as a result, this mechanism presents another opportunity for tactical manoeuvring: well-judged Part 36 offers can prove irresistible to even the staunchest of litigants; and where an opposing party is funded (as to which see "Funding" below) or the claim has been subrogated to an insurer, the need to avoid unnecessary risk can outweigh even the utmost confidence in the merits of the offeree's case.
Funding. There are various funding options available to cover some or all of the costs of litigation. While the majority of claimants and defendants will still self-fund any litigation, third party funding and after the event (ATE) insurance are becoming increasingly important tools for clients to consider, in order to off-load the expense of funding some or all of its costs and disbursements in fighting a case and to cover the associated exposure to disbursements and the opposing party's costs, in the event of loss. We will be looking at third party funding and ATE insurance in greater detail – including when these products might be appropriate – in our next post in the series, What US GCs Should know…
Cost is always one of the most significant issues in any litigation. Each case will, of course, have its own potential risks and rewards but cost must also be understood as presenting unique opportunities to put pressure on the opposing side to resolve the dispute.