As far as recoverability is concerned, the fat lady has barely begun to clear her throat, let alone sing.

Disputes between claimants and defendants over how much, and in what circumstances, success fees and after-the-event (ATE) insurance premiums in conditional fee agreements (CFAs) are recoverable from the losing party are far from over.About the only thing which both sides do agree on is that the blame for the current uncertainty over the operation of conditional fees lies squarely with the government.

The drafting of the wording setting out how recoverability -- a cornerstone of the Lord Chancellor's access to justice reforms -- was to work was too vague, too ambiguous, and left far too much scope for issues to be battled out in the courts.This maybe so, but the government is showing little sign at the moment of wanting to act to sort out the mess by amending the existing legislation.Speaking to defendant and claimant solicitors, Baroness Scotland QC, parliamentary secretary to the Lord Chancellor's Department, suggested it was up to the legal profession to resolve this issue.

'I would encourage you and other stakeholders to continue in your efforts to agree an industry standard on the levels of recovery of success fees and after-the-event premiums.'She says that the level of test cases emerging around recoverability is only to be expected given the scale of the changes introduced.'Accepted practices have been overturned and this brings new challenges.

Already this has manifested itself in appeals to higher authorities on interpretation of legislation.

This is inevitable.

New legislation is invariably scrutinised and its parameters tested.

Where the court has discretion, that discretion will be tested.

Conditional fees are no different,' she adds.Far from being a mess, recoverability had increased access to justice, she says.

Conditional fees have 'democratised personal injury work'.It is only to be expected that a minister would talk up the government's reforms.

However, in a comment that suggests the government does not understand the dynamics of the situation it has created with recoverability, she adds that lawyers should sort out these matters between themselves.

'It cannot be in the interests of your clients and potential clients, for satellite litigation to restrict their access to justice,' she says.Given that she was talking to an audience where many of the lawyers act for defendant insurers, this did seem to be missing the point.

The fact is, of course, that it suits defendant clients for the uncertainty around recoverability to continue for as long as possible.

Defendant firms will acknowledge privately that, while a framework for recoverability is bound to emerge eventually, and while they would not wish to be seen to be being too obstructive, they are in no hurry for things to settle down.Uncertainty around recoverability has hindered the conditional fee agreement market from taking off in the way many had expected, which means that defendants are having to fork out for less claims than they otherwise would.Ashley Holmes, head of legal affairs at the Consumers Association, t old the same conference -- a seminar held last month at Westminster House and organised jointly by the Forum of Insurance Lawyers (FOIL) and APIL -- that the 'unexpected sticking point' of recoverability was acting as a brake on the widespread use of CFAs.'Clients need to know they can get their money back at the outset.

Take away that comfort and for most ordinary people the risk of litigation is simply far too great,' he says.However, defendants insist that they have been forced to take a hard line on recoverability because of 'abuse' by claimant firms.

Martin Staples, immediate past-president of FOIL, says that claimant firms greeted the arrival of recoverability by hiking up their success fees.

Some ATE premiums have also rocketed in recent months.Even where issues have supposedly been resolved by the courts, that may not be the end of the story.

In Callery v Gray, the appeal court ruled that a success fee of 20% was reasonable for a straightforward road traffic accident case, as was an ATE premium of £350.

The decision was greeted with relief by claimant firms.

Finally, they could advise at least their road accident clients with certainty over recoverability.However, the defendants in the case are seeking leave to appeal and, according to Frances McCarthy, president of the Association of Personal Injury Lawyers, a minority of insurers are using this as a hook to delay paying the extra costs of successful CFA clients.

If leave is granted, many more insurers are likely to follow suit, which could mean the punter being left in limbo for another year or so until the case reaches the higher court.In the other recoverability case that has been decided to date by the appeal court, Sarwar v Alam, the battleground shifted to the availability of before-the-event (BTE) cover.

In this case, the judges ruled that while claimant firms should not just take a client's word for the fact he does n0t have BTE cover before signing him up for ATE, firms do not have to embark on an exhaustive 'treasure hunt' for insurance policies, which might include legal expenses cover.

The amount of time spent checking for BTE cover should be proportionate to the amount at stake, they said.The decision in the Sarwar case was welcomed as sensible and workable by defendants and claimants alike.

But this unanimity is likely to be short-lived.

Already two other fronts have opened up: test cases are in the pipeline to look at whether ATE with deferred premiums should fall under the auspices of the Consumer Credit Act 1974; and whether the one-size-fits-all ATE premium, charged by claims management companies such as Claims Direct, should be recoverable.No doubt, other test cases will follow.

Where the stakes are high -- as they are with recoverability -- in an untested area, the scope for determined lawyers acting for clients with deep pockets to come up with further challenges must be almost limitless.What angers many claimant firms is that it was predictable that recoverability would create so many spin-off disputes in cases which were otherwise resolved.Kerry Underwood, author of No Win, No Fee: No Worries, warned when recoverability was introduced in April 2000: 'Satellite litigation won't be a cottage industry, it will be a palace industry.'He complains that, since then, claimant firms have been distracted fighting battles which -- with better-drafted legislation -- they should never have had to fight in the first place.

That attention should have been focused on developing their use of CFAs in other areas to benefit clients.Poorly drafted le gislation is not the only problem that now faces CFAs.

Insurance experts warn that the financial fall-out from the terrorist attacks in the US is likely to hit underwriters' enthusiasm for the still untested and relatively new area of ATE.Many will be facing massive losses following the 11 September attacks, and the inevitable loss of confidence means that even those insurers who have escaped relatively unscathed are likely to draw in their horns and stick with tried and tested areas of insurance.Premiums will probably rise -- a development likely to be resisted by defendant insurers, many of whom will also have suffered because of the attacks in the US.Chris Ward, managing director of Abbey Legal Protection, the insurance agent behind the Law Society endorsed ATE scheme, Accident Line, says: 'The level of underwriting capacity [for ATE] is going to be reduced.

Whether it will be significantly reduced is not sure at the moment.'However, he says that one thing is certain- the expansion in capacity will not happen in the foreseeable future.-- A forum -- 'Does anyone profit from litigation?' -- will take place at the Law Society's annual conference at the ICC in Birmingham on Saturday, 27 October, from 3.45pm to 5pm.

For more details, tel: 0121 355 0900 or visit: www.clt.co.uk