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Costs of litigation

On this page:  

  1. Background
  2. UK Implementation
  3. Oxford Conference in 2010
  4. EU Legal Directive

Background

In 2008, Lord Justice Jackson was asked to report on the costs and funding of civil litigation in England and Wales. His report ws finished in November 2009 and published in 2010.

EJF was able to influence this report using research data generated by the law department of Oxford University.

Broadly, Jackson Lord Justice's recommendations were welcomed by EJF and should significantly reduce defendants' exposure to costs.

The main recommedations were:

  1. As a quid pro quo, damages awarded in personal injury cases for pain suffering and loss of amenity would be increased by 10%, and the maximum amount that lawyers could take under a success fee would be limited to 25%.   Note that damages for pain, suffering and amenity are not the whole damages normally awarded.  Indeed, such damages are normally a relatively small proportion of the total damages awarded.
  2. The normal two-way costs shifting should apply in collective litigation (except PI litigation).  However, there should be further consultation on categories of litigation where “qualified one-way costs shifting” should be considered – i.e. the claimant would not be liable to pay a successful defendant’s cost, but a defendant would be liable to pay a successful plaintiff’s costs.
  3. Contingency fees would be allowed provided an unsuccessful party would only pay the equivalent of a normal fee, and provided that the terms of contingency fee arrangements were regulated to safeguard the interests of clients
  4. Further consideration should be given to contingency legal aid funds (CLAFs) and supplementary legal aid funds (SLAs).
  5. Concern is expressed about the extent of disclosure in civil litigation.  Training should be given about the efficient conduct of e-disclosure.  Changes to disclosure are recommended in large commercial cases, but not in personal injury cases.
  6. There should be stronger case management, e.g.: judges with relevant experience of the type of litigation; standardising case management directions; cases remaining with the same judge throughout.
  7. To further encourage settlement, the defendant will be under greater pressure to accept settlement offers by the claimant[1], because if he fails to beat the offer in a final judgement, his opponent’s damages would be enhanced by 10%.
  8. There should be greater use of ADR. 

  

[1] Either party to a case can make an offer rejects such an offer to settle – a “part 36 offer”.  If a party rejects an offer made to him and then fails to secure a judgement that gives him more than was offered to him, his ability t recover costs will be impaired. 

 

Costs of litigation are becoming a key element in reforms of justice systems of various European states as well as by the European Union. There is no doubt that they may be a barrier to effective access to justice. Their proportionality to the amount at stake and their predictability seem to be the cornerstones of balanced civil justice systems. Clearly, not many European systems can claim to be so balanced, and there is scope for reform in this area. 

UK implementation 

In the UK in 2008 Lord Justice Jackson was asked to undertake a fundamental review of costs and funding of civil litigation in England and Wales. It is widely regarded that the reforms of civil procedure rules undertaken ten years ago in the UK following the Woolf Reports (Woolf Reforms, leading to the adoption of the new Civil Procedure Rules) did not achieve one of their fundamental objectives: decreasing the costs of litigation. Thus, the Jackson review is meant to assess the position and make recommendations.  

 

The Review was very comprehensive – it included all levels of litigation, and all courts – also specialist courts. The report was published in January 2010. 

 

The report has been broadly seen as favourable to the defendant and from EJF Members’ viewpoint, there are significant improvements in the final report compared to the May 2009 preliminary report (a which EJF commented in detail).  In particular, cost exposure will greatly reduced if the recommendation is followed that the winning party can no longer recover the costs of ATE insurance or the success element of any attorney fees.  The normal rule of two-way cost shifting is confirmed as the norm in collective litigation (except important personal injury cases), whereas the preliminary report recommended one-way cost shifting in all collective litigation (in personal injury cases, the plaint if would normally not be exposed to paying a winning defendants' costs (one-way qualified cost shifting)

 

   

 EJF Response to Lord Justice Jackson's Report:

     

In February 2010, EJF submitted its response to the Report both to Lord Justice Jackson and to the Ministry of Justice. We broadly welcomed the response and the reductions in costs that it should bring. However, we also argued for:    

  • an extension of circumstances in which personal injury litigation should remain exposed to the loser pays rule
  • the loser pays rule to apply in all collective litigation
  • the continued prohibition of US-style contingency fees (where by a lawyer takes part of any damages awarded)
  • tighter control of third party process funding

Our full response to Jackson report can be accessed here.

 

Oxford Conference on Costs of Litigation

 

The Centre for Socio-Legal Studies and the Institute of European and Comparative Law at the University of Oxford held an important International Conference on Litigation Costs and Funding in July 2009. Their work was influential in relation to Jackson LJ's report.

The  Conference looked at international data in 30 jurisdictions on:

  • How much does litigation cost?
  • How can claimants fund claims?
  • Who funds claims?
  • Who ends up paying, and how much?

These are questions of fundamental importance for civil justice systems. Lord Justice Jackson attended the conference and the data contributed to his report. A report of the conference is available at http://papers.ssrn.com/abstraxt=1511714 

The European Union – Legal Aid Directive

As part of the policy of judicial cooperation in civil and commercial matters (by clicking on this link, you will be taken to our Legislation Section, where you can read about the key legislation, drafts and policy papers. Click also Here to find a short description of judicial cooperation in civil and commercial matters in our Glossary), the EU is involved in the issues of costs and funding of litigation. Also the latest initiatives from DG COMP (Green Paper and White Paper on damages for breach of EC antitrust law) and DG SANCO (Green Paper on collective redress) mention costs of actions as an important issue to be considered.

Formal EU legislation in the area is very limited. So far, only a Directive on Legal Aid has been adopted: Directive 2002/8/EC of 27 January 2003 to improve access to justice in cross-border disputes by establishing minimum common rules relating to legal aid in such disputes.

Minimum standards to ensure an adequate level of legal aid in cross-border cases were mentioned as one of the priorities of the Tampere Summit in 1999. In February 2000, the Commission adopted a Green Paper on 'Legal aid in civil matters: the problems confronting the cross-border litigant.' The Council adopted the directive in January 2003. It should have been transposed into national law not later than 30 November 2004.

The purpose of this directive is to improve access to justice by establishing minimum common rules relating to legal aid in cross-border disputes.It shall apply to civil and commercial matters, but only if the party applying for legal aid is domiciled or habitually resident in a Member State other than the Member State where the court is sitting or where the decision is to be enforced.

Within the context of this directive, Member States shall grant , under certain conditions, legal aid to persons who are partly or totally unable to meet the costs of proceedings as a result of their economic situation, in order to ensure their effective access to justice.

Moreover, the directive contains provisions which organise judicial co-operation between Member States to simplify and accelerate the transmission of legal aid applications. To this end, two standard forms have been established by the Commission.