Anyone involved in civil litigation needs to be aware of Lord Justice Jackson's recent report on civil litigation costs. If implemented, the proposals could result in widespread reform in the way litigation is paid for. The report affects almost every area of civil litigation, particularly personal injury matters as well as high-value commercial litigation.

Recommendations made in the report that will affect commercial claims include:

  • Lawyers should be able to enter into contingency fee agreements (where the lawyer is paid out of the settlement sum or damages awarded, usually as a percentage of that amount) with clients. Safeguards will be built in to such agreements, if implemented.
  • Ending the recoverability from the losing party of success fees payable under conditional fee agreements (CFAs – no win no fee) and after the event insurance (ATE) premiums paid to insurers to cover adverse costs of litigation. It will still be possible to enter into CFAs and ATE insurance but any success fee/premium will be borne by the client – thus reducing their overall recovery.
  • A campaign to ensure greater awareness of the benefits of alternative dispute resolution (for example mediation).
  • There to be a "menu" of options available for disclosing documents in large commercial claims where the cost of disclosing documents is likely to be disproportionate.
  • Greater case management measures and costs sanctions to control the content or length of witness statements and expert evidence. This will also include allocating cases to judges with relevant expertise and having the same judge deal with the case throughout.
  • Enhancing a claimant's recovery by up to 10% where a defendant fails to beat a claimant's offer of settlement.

Additionally, for non-commercial claims, a further important recommendation is abandoning the "loser pays" principle in some areas and replacing it with "one-way cost shifting" (subject to some qualifications) for certain categories of litigation (possibly personal injury, clinical negligence, judicial review and defamation claims). Where this is done, a claimant will not be required to pay the defendant's costs if the claim is unsuccessful but the defendant will be required to pay the claimant's costs if it is successful.

At 584 pages, there is much to consider in the report. The recommendation allowing lawyers to enter into contingency fee agreements is controversial. While it increases the types of litigation funding available and therefore access to justice, giving lawyers a cut of the damages may in turn lead to a boom in "US style" litigation.

Whether any of the recommendations are implemented will depend upon the position adopted by the Ministry of Justice. Several of the main recommendations will have budgetary implications as well as requiring further consultation and primary legislation. With a general election looming later this year (possibly May?), it remains to be seen how high on the Government's list of priorities reforming civil litigation costs will be.