A senior Conservative peer has tabled a legislative amendment to shield insolvency-related claims from the effects of the Legal Aid, Sentencing and Punishment of Offenders Act.

At present, insolvency cases are exempted from the rules limiting the recovery of costs from a losing party. That exemption is set to end in April.

Lord Flight, a former deputy chairman of the Conservative party, wants to amend clause 119 of the Small Business, Enterprise and Employment Bill. According to the insolvency practitioners’ group R3, if the amendment passes then insolvency would receive a permanent exemption from LASPO.

At stake is the estimated £160m to be recovered each year from negligent and fraudulent directors. R3 has claimed that LASPO’s costs caps would make these claims uneconomic. While the Ministry of Justice has given no sign of a policy change, R3 says the Department for Business, Innovation & Skills is sympathetic.

Andrew Tate, deputy vice-president of R3, said: ‘The upcoming end of the exemption is already causing significant volatility in the legal funding market.’