Government set to rein in indemnity principle

The much-maligned indemnity principle is set to be reigned in by the middle of next year in a government bid to ease the troubled conditional fee agreement (CFA) regime - but it will not be abolished altogether.

Unveiling the plans this week at the latest 'big tent' meeting organised by the Civil Justice Council's predictable costs working party, the Lord Chancellor's Department said it would bypass the need for primary legislation on the matter by making changes to secondary legislation by spring/summer 2003.

These would stop challenges to CFAs for breaching the indemnity principle, and prevent similar problems arising with any fixed-fee scheme.

The principle - widely blamed by all solicitors for problems with CFAs - means solicitors can only claim from the defendant what they have agreed their client would pay.

The problem is that CFAs involve the promise that clients will not pay anything.

There has been a long impasse over the principle.

The government asked the rules committee to work on abolishing it through rules of court; however, the committee said legislation was needed.

Working party chairman Professor John Peysner said it would be difficult to introduce fixed fees with the indemnity principle in its current form.

'I would like to see as much done as early as possible, and this might involve the rules committee giving it more of a priority,' he said.

A Law Society spokeswoman said: 'The proposals are welcome but address only a small part of the problem.

Many of the difficulties affecting CFAs will be unaffected.

It is our policy that the indemnity principle should be abolished.'

Tim Wallis, president of the Forum of Insurance Lawyers, said any progress was welcome.

But he warned: 'The government needs to pick this up now and run with it, and not sit back saying we must all accept that these things take time.'

Paula Rohan