High cost of ATE claims pushes CFAs to brink of extinction

The conditional fee arrangement (CFA) model is at risk of collapse due to the high level of litigation relating to after-the-event (ATE) insurance premiums.

A Civil Justice Council (CJC) report has found that the cost of launching legal challenges to ATE costs and success fees often exceeds the cost of the original ­litigation, creating a block to access to justice. The report suggests that the contingency fee model would be a viable alternative.

The report states that there is “no pressing need to introduce any other type of costs system”, but cautions that “the problems in the present system are such that it has to be accepted that the system may break down”.

However, defendant lawyers raised concerns at the CJC’s growing acceptance of contingency fees.

The report also rebuffed claims that a US-style ­litigation system would ­create a flood of unmeritorious litigation, adding that fears were “almost certainly overstated”.

One senior litigator said: “How can you compare the UK and the US litigation systems – they’re totally ­different. Contingency fees provide a powerful ­commercial incentive for bringing cases which might not be legitimate.”