Justice, restructured

Whether you consider it a blessing or a curse, there can be little doubt that these are interesting times for civil justice.

A decade has now passed since the Access to Justice Act 1999 made its way through parliament. As its name implies, the aim of the Act was to make it easier for individuals to bring legal action without burdening the rapidly increasing legal aid budget. This it did by enabling claimant lawyers to work on a 'no-win, no-fee' basis - allowing them to recover 100% uplift on their fees from the losing party and by withdrawing legal aid funding from a number of categories of legal case, most notably personal injury.

The Act has achieved many of its aims but still attracts considerable criticism from some parties, and there have been a number of efforts - mostly emanating from the defendant insurance industry - to ameliorate some its less desirable consequences.

This led the Ministry of Justice to launch a review of the PI regime, concluded last July, with the aim of speeding up the progress of cases. The result was the introduction of a new fixed costs regime and timetable for road traffic accident cases with a value of between £1000 and £10,000. However, by failing to introduce similar disciplines on higher value cases and other types of PI claim, this fell well short of what many in the defendant insurance industry had been hoping for.

Proportionality is an issue that is not going away in 2009. Lord Justice Jackson is now conducting a more fundamental review of the civil justice costs regime on behalf of the MoJ. This is the first comprehensive examination of the system since the Act was passed a decade ago.

It is hard to envy him his task - the scope is extremely wide and he will need to steer a course through the inevitable torrent of self-interested lobbying before he reaches a conclusion. The breadth of Lord Justice Jackson's remit means he will have to make more than mere technical changes if any real difference is to be made - some significant points of principle could be altered as a result of this review. This has potential ramifications for legal aid and the system of conditional fee agreements that has replaced it in many areas.

With the report not due until the end of the year, it is difficult at this stage to predict its conclusions. However, as with the fixed costs review, the focus is likely to be on proportionality and the extent to which CFAs and after-the-event insurance premiums should be recoverable from the losing party to civil litigation. The insurance industry claims that legal costs now amount to 40p for every pound that is awarded in damages and the Civil Justice Council seems to be becoming more sympathetic to this point of view. If Lord Justice Jackson does water down the regime established by the Act, it could spell bad news for the principle of widening access to justice in general; claimants of all kinds; their lawyers; and the ATE market.

Coming together

Another issue that Lord Justice Jackson is likely to examine is how to encourage the growth of group actions. Progress in this area has been slow, not least because the powers that be in the UK and at the European Commission wish to balance, for lawyers, the ease and attractiveness of leading group actions against the risk of unleashing a US-style litigation culture.

He could recommend that some element of contingency fee be permitted to encourage more lawyers to take on group actions by increasing the potential rewards for success. This would be unfortunate were it to happen, because it could divert lawyers' attention toward more lucrative cases as well as deprive clients of a proportion of their awards - something that has earned parts of the claimant industry a bad name in the past.

Even without the stimulus of contingency fees, there are already plenty of cases in the pipeline, and the number going public can be expected to rise substantially this year.

Third-party funding

One development that was not anticipated by the authors of the Access to Justice Act was that of third-party funding for civil litigation. Often financed by hedge fund money, this hit the commercial litigation scene in 2007, promising to bankroll litigation in return for a share of the winnings.

By the beginning of 2008, third-party funding looked set to prosper. The CJC had apparently given it its blessing, confidence abounded that it would not become subject to regulation and the backing by hedge funds and other investors was rolling in. But by the end of the year, the landscape was very different. The landmark third-party funded case - Moore Stephens v Stone & Rolls - was lost (although may yet be appealed); the Financial Services Authority was actively considering extending full regulation to the sector; and, most importantly, the credit crunch meant that investment for new cases had substantially dried up.

As you might expect, from the client's point of view, CFAs backed by ATE insurance are always the better solution because they enable the client to keep all of their award in the event of a successful claim.

ATE litigation insurance has begun to get some significant traction in the high-value commercial litigation market over the past year, and we are confident that it will continue to do so in to 2009.

- Peter Smith is managing director of First Assist Legal Protection.