What level will the new exemption for costs budgeting in the Commercial Court be set at?

At an Association of Costs Lawyers’ event just over a week ago, District Judge Christopher Lethem, a member of the Civil Procedure Rules Committee (CPRC), indicated – without quite spelling it out, but his meaning was pretty clear – that exemption from costs budgeting for Rolls Building cases worth more than £2m was on its way out.

He phrased it in terms of, if he was going down to William Hill, that is what he would put his money on.

Lethem indicated that there would still be an exemption, but the limit would be a lot higher. I asked him how much higher, but he declined to say.

So what might the new limit be? Well the CPRC has been looking at three possible limits: £5m, £10m, or £15m.

If I myself were going down to William Hill, I would spend my tenner on some sort of ‘each way’ bet on either £10m (which would be a strong endorsement of the Jackson regime, but go against fierce opposition from the Commercial Court judges) or £5m (which would still be raising the limit, but to a level that the CC judges can live with).

Minutes which I’ve seen from a CPRC meeting back in November shed some light on the debate that has been going on.

At the meeting, the committee considered the responses to its consultation on the budgeting exemptions. It was looking at four different options:

  1. Do nothing and leave the exemptions as they are
  2. Remove the exemptions entirely, but with judicial discretion
  3. Give parties autonomy to agree to opt out of budgeting
  4. Increase the exemptions to £5m, £10m or £15m.

From Lethem’s comments earlier this month, it seems likely that option 4 is being taken forward. But which of the three monetary levels?

In their response to the rules committee’s consultation, the Commercial Court judges made a powerful and united case for keeping the exemption.

They said that ‘to ignore the consultation evidence and make fundamental changes to a procedure that currently works in a proportionate and satisfactory manner which is the evidenced in relation to Commercial Court practice, so as to introduce changes that are imposed by the courts, risks undermining the courts’ position as the pre-eminent court of choice for international business’.

But while the Commercial Court judges were ‘strongly opposed’ to removing the exemption, as long as it remained, they could stomach an increase to £5m; with Mr Justice Hamblem telling the committee that he would not regard the difference between £2m and £5m as being ‘that significant’.

Many other members of the CPRC were not supportive of an exemption, but some felt that if it were to remain, the level should be set at £10m.

Closing the CPRC meeting in November, the master of the rolls noted that the strong body of opinion that favoured scrapping the exemption must be ‘balanced’ with the effect that it may have on attracting work to the Commercial Court.

According to the minutes, Lord Justice Dyson was ‘troubled about the fact there is clearly a very strong body of opinion among those who use the Commercial Court in particular that there should be an exemption. He thought that lawyers’ views were very important in this debate, as they would be advising clients where to take cases. Knowing that lawyers feel very strongly about this, the question is, should the risk be taken’.

It looks like we will have to wait until the rules are made public before we know whether or not the risk was considered worth it.

Rachel Rothwell is editor of Litigation Funding magazine