The new practice direction about costs supplementing parts 43 to 48 of the Civil Procedure Rules took effect at the same time as the amended rules on 3 July 2000.

The amended practice direction did not appear on the Lord Chancellor's Web site until 27 June, while the printed copy did not appear until delivery of the 16th update to the CPR which took place on the day the amendments came into effect.Those who thought they were one step ahead by having read the earlier draft on the Lord Chancellor's Department Web site should beware, for there are a number of important changes in the final version.

The following is a summary of the most important provisions of this lengthy and complex document from the perspective of conditional fee agreements.

However, it should be stressed that this review is not exhaustive.

In addition, there are provisions relating to other matters including the Community Legal Service.Summary of the provisions-- Section 3 states that when carrying out a summary assessment where there is an additional liability the court can assess either base costs alone or both base costs and the additional liability, dependent on the stage the case has reached.

Generally, an additional liability should not be assessed before the end of the case, as to do so would divulge the party's view of the risk.

On detailed assessments where there is an additional liability, the court can assess both base costs and additional liability or, where base costs have already been assessed, additional liability alone.

Section 4 deals with the form and content of bills of costs, as well as dealing with a number of specific items which might be included in a claim.

Specifically, solicitors will now be able to claim for routine e-mails sent (but not received), in six-minute units.

Under section 4.17, the success fee percentage will need to be shown separately from base costs.-- Section 6 defines 'estimates of costs' which are to be recovered from the other party to be limited to an estimate of base costs and not to include additional liabilities.

It was feared by many practitioners that if costs estimates were to be global, and include the amount of additional liabilities, that experienced and sophisticated representatives for the opponent would be able to estimate with reasonable accuracy the level of success fee, thus gaining an indication of how the claimant viewed the strength of their case.

The earlier drafts of the practice direction followed this course, but the final draft ensures that the confidentiality of the level of success fee is preserved during proceedings.-- Section 10 provides possible relief from sanction where there has been a failure to disclose the existence of the CFA under rule 44.3B.

This involves an application to a costs judge or district judge.

Notice of any such application will need to be served on counsel if they are affected.

This provision must be read in conjunction with the notification provisions set out at section 19.-- Section 11 states that while proportionality is applicable to base costs as one of the factors under rule 44.5, it is not applicable to the additional liability (including success fee).

This must be decided on the basis of what was reasonable at the time it was agreed.

Again, this represents a major change from previous drafts of the practice direction which had controversially applied proportionality as one of the factors in assessing the reasonableness of the success fee.

The Law Society viewed the level of success fee as a pure issue of risk management, to which proportionality was irrelevant, and lobbied hard on the point.

Similarly, a success fee may not be reduced simply because the total amount of costs appears disproportionate.-- Section 11 goes on to set out the factors which will be taken into account in determining whether the levels of additional liability are reasonable.

In respect of the success fee, they include the availability of other methods of funding and, in the case of an insurance premium, include the availability of pre-existing insurance cover.

Thus it is possible that a claimant who has taken proceedings under a CFA will not be able to recover some or all of their success fee or insurance premium if they ignored a pre-existing insurance policy.

Also note that the amount of commission payable to solicitors is a factor to be taken into account when assessing the reasonableness of recovery.

This raises the question of whether excessive amounts of commission might be disallowed against the other side.Where a solicitor is not acting under a CFA but seeks to recover an insurance premium, the court is to compa re the cost of that premium with a comparable premium if he were acting under a CFA.

The implication is that any difference will not be reasonably recoverable.

This may have additional implications where the policy covers the solicitor's own costs as well as those of other parties.

Section 11.11 states that membership organisation provision which exceeds the likely cost of an insurance premium is not recoverable.-- Section 17 deals with the costs only procedure under rule 44.12.

Under that rule, the court can only deal with such claims if both parties agree.

A claim will be treated as opposed if the defendant indicates in the acknowledgement of service that he intends to contest, and the court must automatically dismiss the claim in such circumstances.The literal wording of the section suggests that the court should dismiss if defendants indicate an intention to contest because they do not agree the amount of the claim, rather than that they do not agree the principle of the court adjudicating.

This surely cannot be the intention, and one suspects that any solicitor who adopts such a literal interpretation with a view to being awkward from a tactical point of view will get short shrift from the court, and may pay a penalty in costs.

If an additional liability is claimed where no substantive proceedings have been issued the court is to have regard to the circumstances of settlement as to whether it is appropriate, for example, the time settlement was reached, and what level.-- Section 19 deals with notification of funding arrangements, which is one of the most important aspects of the practice direction.

It confirms that there is a general obligation to inform other parties if a solicitor is claiming an additional liability, although there is no obligation to specify the amount or basis of calculation until assessment.

Generally, notice must be given to the court and other parties on commencement of proceedings, filing of 'first document' such as a defence, or within seven days of the funding arrangement being entered into if later.

Changes must be notified within seven days.The extent of the information to be provided is set out at section 19.4.

The practice direction does not specifically deal with notification before the start of proceedings but merely recommends a change in the protocol.

This omission seems unfortunate, as the recoverability of success fees in cases which settle without proceedings is a contentious issue and likely to arise regularly in practice.

Arguably, a factor to be taken into account is the timeliness with which notice was given after signing a CFA or taking out a policy.

Good practice will surely be to give notice sooner rather than later.-- Section 20 deals with the procedure under rule 44.16 where a practitioner wishes to recover from the client a success fee percentage disallowed on assessment.

Following a summary assessment, it must give a direction to enable the legal representative to apply for the disallowed percentage to be payable by the client.

The receiving solicitor should notify counsel who must respond or is deemed to accept the reduction.

The receiving solicitors must also notify the client and provide a written explanation of the points of dispute.

On a detailed assessment the court can decide there and then if the disallowed amount should be payable, or it can give directions and a hearing date.Other matters covered include a procedure for detailed assessment proceedings in respect of an additional liability only which may involve serving a copy of the insurance certificate showi ng what is covered.

Furthermore, where an additional liability is claimed, the paying party can request information about other methods of financing costs that were available.

There is provision for the client to have costs under a CFA assessed, including the success fee.Transitional provisions are set out at section 57.

Where an old style agreement was entered into before 1 April 2000, any subsequent agreement does not give rise to a recoverable additional liability.

If an agreement has been entered into since 1 April 2000 but is found to not be in compliance with the rules and practice direction, practitioners have until 31 July 2000 to bring the agreement into line.

Any costs incurred (including any additional liability) before the agreement was entered into are not recoverable from the other side.This represents a basic overview of the most relevant sections of the practice direction in the context of conditional fee agreements.

However, practitioners should study the relevant sections themselves in detail to ensure that they are in compliance.