The Association of Personal Injury Lawyers (APIL) has alleged that a failure by the justice secretary to review the damages discount rate has led to some claimants being under-compensated by ‘hundreds of thousands of pounds’.

Launching a judicial review on the issue yesterday, APIL said that the discount rate, which is used to calculate the amount deducted from an injured person’s compensation to account for any income they may receive from investing their damages, should be lower than it is.

The discount rate was set at 2.5% in 2001, and is based on yields generated by index-linked government stock.

APIL said that these yields have fallen to less than 1% on average over the last three years.

The association said that a rate review promised by justice secretary Kenneth Clarke last year has not been completed, and no timetable for any review has been laid out.

A spokesman for the Ministry of Justice said today that it is aware of APIL’s judicial review.

APIL president Muiris Lyons said: ‘We are gravely disappointed that the government has failed to carry out its review, as injured people are continuing to be under-compensated - in some cases, by hundreds of thousands of pounds.

‘It has been nine months since we first brought this issue to the attention of [Clarke], and we find it unacceptable that no meaningful progress has been made since then.

‘This decision is not something we have taken lightly, but we feel that we are left with little alternative other than to seek a judicial review on behalf of the injured people we represent.’

APIL is being advised on a pro bono basis by London firm Hodge Jones & Allen and One Crown Office Row silk Philip Havers.