Further civil court fee increases could force international businesses to take their legal work outside the UK, City lawyers have warned.
In a joint letter to lord chancellor Michael Gove, the City of London Law Society and Commercial Bar Association warn that losses in tax revenue from legal work going abroad will ‘dwarf’ any additional income from court fees.
The Ministry of Justice is consulting on doubling the maximum court levy to £20,000 to generate an extra £60m in income each year.
But the City groups stress to Gove that the plans threaten to weaken one of the UK’s most successful exports and play into the hands of its rivals as an international leader in dispute resolution.
The letter explains that until March 2015, issue fees were already higher than in two key competitors, New York and Singapore. The existing fees, introduced in March, are already ‘far in excess’ of those required in those jurisdictions.
The fees, the groups argue, bear no relation to the court time actually taken by litigation and are paid merely to commence proceedings.
‘It is a payment demanded by the state to cross-subsidise other parts of the court system,’ they say. ‘It is, in essence, a tax on civil litigants to pay for the costs of the English family and criminal courts.’
The letter insists that international dispute resolution work is not dominated by oligarchs or high-value divorces, but commercial outfits that understand legal risks and how to best resolve disputes.
The increase in court fees will be a ‘serious own goal’ by the MoJ and act as a ‘boon’ to competitors, the City groups warn, running the serious risk of impairing London’s current position.
‘There is precedent for the loss of legal work through expense,’ the letter adds. ‘New York lost its pre-eminent position for maritime dispute resolution because it was perceived as too expensive. It is imperative that London does not suffer the same fate.’
The deadline for submissions to the consultation was earlier this month. A call for evidence by the justice select committee of the House of Commons will close tomorrow.
Justice minister Shailesh Vara has acknowledged that fee increases are not popular, but said the courts and tribunals ‘must continue to play their part’ in the ‘national effort’ to reduce public spending, eliminate the deficit and reduce the national debt.