Although not obvious from its title, the Legal Aid, Sentencing and Punishment of Offenders Bill will implement Lord Justice Jackson’s key reforms. In summary:  

  • CFA success fees will cease to be recoverable and, in certain cases, will be subject to a maximum percentage of damages. ATE insurance premiums will also cease to be recoverable, apart from in certain clinical negligence actions, where premiums relating to cover for the costs of instructing an expert will remain recoverable. This will not apply to CFAs or ATE policies entered into before the legislation comes into force.  
  • Damages-based agreements (DBAs) or “contingency fees” will be allowed in all types of proceeding in which CFAs are currently permitted – potentially providing a new method of funding for large commercial claims. Under a DBA, the client agrees to pay the solicitor an amount determined by reference to the amount of damages the client obtains (eg if they recover £100,000 in damages, they pay the solicitor 10% of those damages). A DBA must be in writing and must relate to proceedings that can be the subject of a CFA. The Lord Chancellor has the power to limit the amount of the payment to be made under a DBA, prescribe certain information that has to be given before a DBA can be entered into, and to impose other terms and conditions.
  • New rules will be introduced to permit payment of an additional amount to a successful claimant in a money claim who obtains judgment equal to or better than its own Part 36 offer. This will be a percentage of the amount awarded to the claimant, and is likely to be set at 10%. This reform may result in an increase in the number of offers made by claimants, with a corresponding increase in defendants’ potential liabilities.  

Separately, the Civil Justice Council has formed a working party to consider technical aspects arising from the implementation of Jackson LJ’s proposals. The working party will not revisit the Government’s policy objectives, but will focus on practical proposals for implementation. In particular, it will consider atypical cases and behavioural aspects of qualified one-way costs shifting; possible additional sanctions and rewards under Part 36; and will work on a practice direction for the proportionality test. It will report on its findings by the end of September 2011.