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Government dancing to Jackson's tune

Lord Justice Jacksons proposals for civil justice reforms look set to be implemented (virtually) in their entirety by the Government, with little sign of resistance in parliament.  They are expected to be in force by the autumn of next year.

There are some very lengthy documents that you can read to find out about all of the changes and some of the details are not known at this stage but I thought I would highlight a couple of the changes that are likely to impact significantly upon commercial disputes.

The key change is that CFA's and ATE insurance will cease to be the "cost free" option for claimants.  Good news for defendants who will no longer rush to settle claims that are of dubious merit because of the threat of inordinate costs where there is a chance the claimant might win. 

Claimants will still be able to enter into CFA's and ATE policies (assuming insurers will continue to offer ATE) but the additional costs of those arrangements - the success fee and the premium respectively - will not be recoverable from the opponent at the end of the case.  The overall recovery by the claimant will be reduced where those costs will have to be met out of the damages awarded.

Contingency fees are going to be permitted - lawyers will be able to agree to receive a proportion of the damages recovered, in appropriate cases.  The costs that are recoverable from the losing party will still be limited to the basic charges that would be recoverable without a contingency fee arrangement being in place.  Like CFAs, this leaves the successful party to bear the difference between what is due to the lawyer and what can be recovered from the other side.

Although claimants will not like the reforms, they do correct an imbalance and create a more level playing field for the parties in commercial disputes.

The small claims track limit is to be raised from £5,000 to £15,000.  All claims on the small claims track are conducted on the basis that only in exceptional circumstances will the successful party be able to recover costs from an opponent.  This change will create a much larger number of claims where the parties cannot recover their legal fees.  Preventing cost recovery will result in fewer court actions (which is good news for the courts, who want to reduce their volumes of work) but a claimant with a good arguable case (as opposed to a nailed on certainty) facing an opponent who is being intransigent will have a tough choice between fighting a case in the courts, knowing that most of the costs will not be recoverable, or accepting a low settlement or even abandoning the claim!

There are many other measures to be introduced besides these that will make for some interesting times ahead in the world of commercial litigation.

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