Success fees and after-the-event (ATE) insurance premiums should no longer be paid by the losing party in civil court cases, a major report on civil litigation costs recommended today.

Winning parties in personal injury cases should benefit from a 10% uplift in their damages award to compensate for such a move, Lord Justice Jackson recommended in his final report following a year-long review of civil litigation costs. Solicitors’ success fees should be capped at 25% of their clients’ damages award, he suggested.

Lawyers should not be allowed to pay referral fees for personal injury cases, Jackson recommended, and warned that claims management companies and other intermediaries will see their income reduced if his proposals are implemented.

Speaking this morning, Jackson said that his measures will not lead to a decrease in fee income for lawyers working on civil cases. ‘Solicitors and barristers will continue to earn a reasonable living,’ he said. ‘Competitive forces will have the effect [of allowing for] proper remuneration.’

Jackson said that the focus in personal injury cases had shifted away from the compensation of claimants, and instead onto the remuneration of lawyers and intermediaries.

‘The fact that such substantial referral fees are being paid illustrates that there is too much money swilling around in the personal injury compensation process,’ he said. ‘Under the current regime, personal injury solicitors are not competing on quality of service or charges to the client, but on who can pay the largest referral fee – so the beneficiaries of the regime are the referrers, like the claims management companies.’

He emphasised that he wants solicitors to compete on the basis of offering clients the lowest success fees, rather than relying on payouts from the losing party.

Jackson did not recommend any major changes to big-ticket commercial litigation, and suggested that contingency legal aid funds and supplementary legal aid schemes might not be financially viable methods of funding litigation.

Jackson made a number of other recommendations in his 557-page report, including:

  • Introducing ‘qualified one-way costs shifting’, whereby claimants need only make a small contribution to a defendant’s costs in the event of an unsuccessful claim;
  • Allowing lawyers to enter into contingency fee agreements in areas where they are not currently permitted, such as personal injury;
  • Fixing costs for fast-track cases;
  • Establishing a costs council to review annually fixed costs and lawyers’ hourly rates;
  • Increasing general damages in libel cases by 10%; and
  • A campaign to highlight the benefits of alternative dispute resolution.

Jackson, Lord Chief Justice Lord Judge, and Master of the Rolls Lord Neuberger all acknowledged that government legislation will be required to implement the substance of the proposals. ‘The time for discussion and debate is over, it is now time for action,’ Neuberger said.

Law Society President, Robert Heslett, said: ‘We are very pleased that Lord Jackson has accepted the Law Society’s recommendation that the small claims personal injury limit remains as it is. We regard that as a litmus test of Lord Jackson's commitment to enhancing access to justice through his review.

‘However, his report is a substantial and thorough body of work which demands detailed assessment. We are hopeful that the recommendations will provide for fairness between the wronged and the wrong-doer and that the proposition to abolish the recovery of success fees from the wrong-doer does not result in less, rather than more, access to justice.’

He added: ‘The Society hopes that the impact of the changes proposed under the review would remove personal injury work from the claims farm industry, which we agree adds no value to the process, only middle man’s costs.

‘Implementation of these recommendations must be based on fairness of the outcomes and how they serve the public interest, and we look forward to working with Lord Justice Jackson’s team. Given that much of the implementation work would require statutory change, we look forward to working with parliamentarians to ensure that the voice of the public interest is heard.

‘In the coming months, when the review is debated and discussed, we look forward to contributing positively to that debate.’