Background

Lord Justice Jackson conducted a year-long costs review with the objective of making recommendations "in order to promote access to justice at proportionate cost". His final report was published in January 2010. The Ministry of Justice has now consulted on the implementation of certain of Lord Justice Jackson's recommendations, including that:

  • conditional fee agreement (CFA) success fees and after the event (ATE) insurance premiums should cease to be recoverable from the opposing party in litigation;
  • contingency fees or "damages-based agreements" (where the lawyer is remunerated by way of a share in the client's damages) should be permitted for court litigation
  • the Part 36 (offers to settle) regime should be reformed to give greater incentives to claimants' offers and to increase certainty as to when the Part 36 costs sanctions will apply.

Current position

The consultation closed on 14 February and the government's response is awaited.

Although the proposed reforms to the CFA/ATE regime are likely to have the most dramatic impact in personal injury cases, they are relevant for business generally, especially when defending claims. For commercial claims, there is no obvious reason why defendants should be liable for the additional costs of claimants choosing to litigate on a risk-free basis.

The proposals relating to contingency fees are of potential relevance to all litigation, including commercial litigation. This issue is controversial among businesses. It is clear, however, that the ability to offer contingency fees would increase the options available for businesses seeking more creative fee arrangements in commercial litigation.

The proposed reforms to the Part 36 regime are also significant for all litigants, although the proposed enhancement to claimants' offers will have less impact for major commercial litigation if it is subject to a cut-off or phased reduction for high-value claims.

What's next?

The government intends to publish its response to the consultation this spring. Certain of the proposals, in particular relating to CFA/ATE recoverability and the introduction of damages-based agreements, would require primary legislation. Subject to the results of the consultation, it is envisaged that the proposals will be implemented in autumn 2012.