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The Government confirmed on Tuesday that it will be implementing most of LJ Jackson's recommendations for the reform of civil litigation funding and costs. The Government response to last year's consultation, 'Proposals for the reform of civil litigation funding and costs in England and Wales', includes the following key reforms:

  • abolishing the recoverability of conditional fee agreement (CFA) success fees and after the event (ATE) insurance premiums from the losing party
  • amendments to Part 36 of the Civil Procedure Rules (offers to settle)
  • permitting the use of damages-based agreements (DBAs) for civil litigation.

Although the majority of respondents to the consultation opposed the key reforms to abolish the recoverability of CFA success fees and ATE insurance premiums, the Government is pushing ahead with the reforms. The fact that, under these reforms, legal costs for the NHS will fall by around a third, with savings estimated at £50 million a year, will have been a significant political motivation for the reforms.

Tom Beezer, Commercial Dispute Resolution Partner comments: "Our view is that the reforms will certainly control costs.  More fundamentally, they have the potential to radically alter the approach that commerce takes to resolving disputes.  Of interest to many of our commercial clients is likely to be the introduction of damages-based agreements (contingency fees), where lawyers will only get paid if the claim is successful.  We are working with a number of clients and funders to prepare for this new litigation funding landscape."

1. Reforming Civil Litigation Funding and Costs in England and Wales - Implementation of Lord Justice Jackson's Recommendations - The Government Response

The key proposals for reform contained in the Government response include:

Reform of 'no win no fee' CFAs

The Government intends to implement the reforms proposed to CFAs, proposed as a package of measures by LJ Jackson. The Government intends to:

  • abolish the general recoverability of the CFA success fee from the losing side. In future any CFA success fee will be paid by the CFA funded party, rather than the other side
  • abolish the general recoverability of after the event (ATE) insurance premiums.  In the future any ATE insurance premium will be paid by the party taking out the insurance, rather than the other side. The Government intends to have a tightly drawn power to allow recoverability of the ATE insurance premiums to cover the cost of expert reports only in clinical negligence cases
  • introduce the package of associated measures set out by LJ Jackson.

The associated measures in the package

  • There will be an increase of 10% in non-pecuniary general damages such as pain suffering and loss of amenity in tort cases, for all claimants.
  • In personal injury cases, there will be a cap on the amount of damages that may be taken as a success fee. The cap will be set at 25% of the damages other than those for future care and loss.

The maximum success fee under a CFA will remain at 100% of base costs.  In personal injury cases this would be subject to the 25% cap on damages (other than those for future care and loss).

The recoverability of the self-insurance element by membership organisations, equivalent to the ATE insurance premium, will also be abolished.

A regime of Qualified One Way Costs Shifting (QOCS) will be introduced for personal injury cases only, including clinical negligence.  The Government will continue to discuss with stakeholders how the rules should be drafted, including whether any minimum payment to a successful defendant's costs should be payable by the losing claimant in order to prevent speculative claims.

Part 36 of the CPR (offers to settle) will be amended to equalise the incentives between claimants and defendants to make and accept reasonable offers.  This will apply to all civil cases.  It will be made clear that where a money offer is beaten at trial by however small a margin, the costs sanctions applicable under Part 36 will apply.  An additional sanction (equivalent to 10% of the value of the claim) will be introduced to be paid by defendants who do not accept a claimant's reasonable offer that is not beaten at trial (the formal reversal of Carver v BAA). The Government is minded to explore an alternative sanction (linked to costs rather than damages) for claims where a remedy other than damages is sought, to avoid satellite litigation around the court's valuation of such claims.


Damages-based agreements (DBAs/contingency fees) will be allowed to be used in civil litigation. Under these agreements the lawyer's fee is related to the damages awarded, rather than the work done by the lawyer.  Successful claimants will recover their base costs from defendants as normal but in the case of a DBA the costs recovered from the losing side would be set off against the DBA fee, reducing the amount payable by the claimant to any shortfall between the costs recovered and the DBA fee. The amount of the payment that lawyers can take from the damages in personal injury cases will be capped (at 25% of damages excluding for future care and loss). 

A new test of proportionality in costs assessment will be introduced.  Only reasonable and proportionate costs may be recovered from the losing party.  

The prescribed rates which successful litigants in person may recover from losing opponents will increase in line with inflation since they were set. 

To read the Government Response in full see Response to proposals for reform of civil litigation funding and costs in England and Wales.

2. Government consultation on reforming the civil justice system - 'Solving disputes in the county courts: creating a simpler quicker and more proportionate system'

This consultation which sets out, and seeks views on, proposals to reform the civil justice system in the county courts in England and Wales includes the following proposals:

  • introducing a simplified claims procedure on a fixed costs basis, similar to that for road traffic accidents under £10,000, for more types of personal injury claim exploring the possibility of extending the framework of such a scheme to cover low value clinical negligence claims; and examining the option of extending the upper limit of those simplified claims procedures to £25,000 or £50,000
  • introducing a dispute management process and fixed recoverable costs by specific case types up to £100,000
  • increasing the upper jurisdiction threshold for small claims (excluding personal injury and housing disrepair) from £5,000 to £10,000, £15,000 or £25,000
  • requiring all cases below the small claims limit to have attempted settlement by mediation, before being considered for a hearing
  • introducing mediation information/assessment sessions for claims above the small claims limit
  • encouraging greater use of online services
  • providing a simpler and more effective enforcement regime
  • implementing reforms on enforcement already approved by Parliament in the Tribunals Courts & Enforcement Act 2007, in Orders for Sale, Charging Orders, Attachment of Earnings and Information Requests and Orders processes
  • introducing streamlining and efficiency reforms to the Third Party Debt Order and Charging Order processe
  • testing the public appetite for further enforcement reforms and jurisdictional changes
  • introducing a number of jurisdictional changes in the civil courts, including the introduction of a single county court jurisdiction for England & Wales.

The closing date for the consultation is 30 June 2011.  For the full consultation see Solving disputes in the county courts: creating a simpler, quicker and more proportionate system.

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