Jackson’s pricing predicament

On 8 May all eyes in the legal world will be on the preliminary report of Jackson LJ’s year-long review of litigation costs, when the terms of reference for the review will be set out for all to see. 

We probably all agree that the UK litigation system is in need of an overhaul, particularly one promising such a fundamental review of costs, as we are all keen to stop London losing ground to the world’s other centres for litigation.  (We may win in terms of certainty of law, transparency of process and enforceability of our judgments in other jurisdictions, but our Achilles heel is the cost of litigating in London).  However, some cynics have gone on the record saying that the process is doomed from the start, as its roots are in the abject failure of the Woolf reforms to control the cost of civil justice. 

We should also not forget the role that costs play in providing, or indeed blocking, access to justice: why should the way litigation is funded prevent any individual or corporate, large or small, asserting their commercial rights when they have a meritorious claim?  It will be interesting to see the extent to which the terms of reference unveiled on the 8th May address this issue in all its aspects.

We expect the review to consider the English Costs Rule, which creates one of the greatest uncertainties and risks in litigation: the award of costs against an unsuccessful party.  This rule certainly has its flaws, but is the alternative that is most often talked any better? Do we want to usher in the type of litigation excesses we see so regularly in the US, where there is (almost) no risk of having to pay the other side’s costs in addition to your own, and where the existence of Conditional Fee Arrangements means in any event that your own costs are covered if you lose, have arguably led to the US’s ‘Litigation Culture’?  The UK’s far better response has been to innovate and find superior ways to back litigation and underwrite the costs.  As we all know, the market for After The Event (ATE) insurance has mushroomed in the last 12-18 months in the commercial litigation market: once seen as the preserve of personal injury cases, ATE insurance has now entered the mainstream for increasingly big-ticket commercial litigation.

However there is one issue relating to litigation costs that has not been much discussed by pundits and commentators on the subject, but which if addressed could really make a difference in terms of levelling the playing field for all parties in commercial disputes and in terms of improving access to justice: the rules regarding payments into court providing security for costs.  Why should this rule only play to the benefit of defendants?  Why is it assumed that only plaintiffs may have difficulty in covering the legal costs on losing, when the point applies equally to defendants?

From a litigation funders point of view (I am declaring my interest here!) we would be prepared / able to back far more cases were both plaintiffs and defendants providing security for costs (it’s a simple point about what this security means to the balance of risk for a person underwriting the litigation costs).  And given that the advances in litigation funding products have potentially such a key role to play in improving the cost dynamic of the London litigation market, and access to justice for people who believe they have been wronged, this is not a point to ignore.

Let’s hope the draftsmen working for Jackson LJ are regular readers of this blog and listen to what practitioners on the ground have to say.