(Re)Insurance Weekly Update 27 - 2015

Welcome to the twenty-seventh edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2015

This week's caselaw:

Coventry v Lawrence

Supreme Court holds that recoverability of success fees and ATE premiums does not breach the ECHR

http://www.bailii.org/uk/cases/UKSC/2015/50.html

When the claimants won in the Supreme Court, Lord Neuberger expressed concern at the level of costs incurred in this case. The claimants' costs amounted to more than £1m, including a success fee and ATE premium. The Defendants (who were individuals rather than a corporate entity) argued that the requirement to pay the success fee and ATE premium was inconsistent with their rights under the European Convention on Human Rights ("ECHR") - specifically Article 6, the right to a fair trial. In particular, the provisions of the Access to Justice Act 1999 ("the Act") - which meant that such costs were required to be paid if they were reasonable (but not necessarily proportionate) - were, in the Defendants' view, manifestly unfair.

The costs hearing was relisted to allow the Court to hear from interested parties, including the Government. By a majority of 5-2, the Supreme Court has now held that the Act's costs regime is compatible with the ECHR. Whilst acknowledging that there were flaws inherent in the regime (which has now been superseded by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ("LASPO")), Lords Neuberger and Dyson (delivering the leading judgment) found that the regime was a proportionate, rational and coherent method of achieving a legitimate aim; namely widening access to justice, such that it was not incompatible with Article 6.

Clarke LJ and Baroness Hale gave strong dissenting judgment, though, asserting that the regime was disproportionate and discriminatory because it imposed liabilities, far beyond the bounds of what may be reasonable or proportionate, on defendants who happened to have been opposed by CFA/ATE-funded litigants.

COMMENT: The judgment will no doubt be welcomed by the Government, as the ruling means that a prospective flood of compensation claims from unsuccessful litigants who have paid out ATE premiums over the years will now no longer be forthcoming. Indeed, the potential sums at stake (some commentators estimated that recoveries could run into billions) had the Supreme Court found the Act to be incompatible with the ECHR may lead to the suggestion that this decision is a matter of public policy.

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