Jackson LJ's Costs Reform Bill Receives Royal Assent

The Bill making CFA success fees and ATE premiums irrecoverable from an opponent, permitting contingency fees and increasing sanctions in Part 36 offers finally received Royal Assent on 1 May 2012, despite a tumultuous trip through the Parliamentary process. The Act will now come into force in stages over the next year, with full implementation expected by April 2013.

Background

The Final Report of Lord Justice Jackson's Review of Civil Litigation Costs was published in January 2010. His key reforms included a radical overhaul of the current "no win / no fee" regime and the introduction of "Damages-Based Agreements" (DBAs), better know as contingency fees, as a method of funding litigation. For further details on Jackson LJ's recommendations, please click here to view our previous Law-Now. In November 2010, the Government issued a Consultation on Jackson LJ's proposals, which closed on 14 February 2011. Six weeks later, the Government issued its response to the Consultation and confirmed that it would largely adopt Jackson LJ's recommendations. For further details on the Government's response to the Consultation, please click here to view our previous Law-Now.

The Act

On 21 June, the Government presented the Legal Aid, Sentencing and Punishment of Offenders Bill (now Act). Although not obvious from its title, the Act implements Jackson LJ's main reforms. The reforms introduced by the Bill are:

CFA success fees and ATE insurance premiums CFA success fees will cease to be recoverable from an opponent and, in certain cases like personal injury, will be subject to a maximum percentage of damages, which will probably be set at 25 per cent. Similarly, ATE insurance premiums will not be recoverable from an opponent, apart from in certain clinical negligence actions, where premiums relating to insurance taken out to cover the costs of instructing an expert will remain recoverable. The irrecoverability provisions will not apply to individual CFAs entered into or ATE policies taken out before the Act comes into force. Damages-Based Agreements DBAs will be permissible in all types of proceedings in which CFAs are currently permitted. Under a DBA, the client agrees to pay the solicitor an amount determined by reference to the amount of the financial benefit the client obtains. DBAs are usually referred to as contingency fees and are common in other jurisdictions and are also used in this jurisdiction in employment tribunal proceedings. Pursuant to the...