Jersey Discount Rate: Draft Law Published

Proposed discount rates of +0.5% and +1.8% are dependent on whether award period is greater than 20 years

The Damages Act, the legislation which currently deals with the discount rate in England and Wales has no application in the Channel Islands. Therefore the provisions of the Civil Liability Bill relating to the discount rate are not applicable either.

Addressing this, the States of Jersey last week published the Draft Damages (Jersey) Law 201 ("the Draft Law"). The Draft Law addresses two issues relating to the awards of damages for those with long-term injuries requiring significant future care:

The setting of a statutory discount rate, used where determining damages awarded as a single lump sum; Creating a statutory power to award damages by way of a Periodical Payment Order to cover future care costs and lost earnings. Review

The Draft Law is the product of a review carried out by the States of Jersey's Senior Economist and the Director of Treasury Operations and Investments. The report confirms that the proposed discount rates have considered and been informed by the following sources of information:

15-year inflation data which shows that there no long-term difference between inflation in Jersey and the UK respectively; The jointly launched consultation by the MOJ and the Scottish Government into the discount rate. This included the detailed analysis by the UK Government Actuary's Department into investment returns; The analysis carried out by the UK Government Actuary's Department in relation to investment returns which suggested that claimants adopt a "low-risk" as opposed to a "very low-risk" strategy towards investment. This analysis was considered to have equal application in Jersey. The conclusion of the review states that the Draft Law is intended to bring Jersey into line with the England, Wales and Scotland regarding a statutory discount rate and PPOs. The Draft Law fulfils the existing common law position of full compensation, and thus has "no financial or resource implications for the State."

Proposed discount rates

Having given consideration to the above, the Draft Law proposed that the discount rates would be:

+0.5% - where the lump sum is to cover a period of up to 20 years +1.8% - where the damages will cover a period of more than 20 years (applicable to the whole of the award, not just the costs arising after the first 20 years). The Draft Law does allow the Chief Minister of Jersey...

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