Forcing solicitors to win judicial approval of their fee budgets in civil cases has been proven to reduce the costs of litigation, according to the judge who proposed the idea.

Lord Justice Jackson (pictured), author of a major report on civil litigation costs, told the Commercial Litigation Association annual conference last week that pilot schemes in London, Manchester and Birmingham had proved that his costs management recommendations ‘are a constructive way forward’. He said that some cases are settling ‘earlier and on a better basis’ as a result.

A mandatory costs budgeting pilot ran for 12 months from 1 October 2009 for all defamation cases run in London and Manchester, while a voluntary pilot ran from 1 June 2009 to 31 May 2010 in the Birmingham Mercantile Court.

Solicitors taking part in the pilots were required to prepare and exchange litigation budgets, and gain approval of those budgets from the presiding judge. The judge was obliged to manage the case so that it proceeded within the approved budgets, and at the end of the case, the recoverable costs of the winning party were assessed in accordance with the approved budget.

Jackson said that feedback from the pilots was ‘encouraging’. He added: ‘Some solicitors say it’s not very helpful, but the majority say it is extremely useful to exchange budgets at the start of litigation, and have these budgets cut down by a judge at the case management conference. They know what their costs liability will be if they lose the case.

‘My tentative conclusion is that [my recommendations on costs management] are a constructive way forward, but if they’re going to work, judges must be properly trained.’

In his report, Jackson said that ‘the objective of costs management is to control the litigation in such manner that the costs of each party are proportionate to the amount at stake, and to ensure that the parties are on an equal footing’.

The Law Society and the Association of Her Majesty’s Circuit Judges support Jackson’s proposals on costs budgeting, but the Bar Council and Council of Her Majesty’s Circuit Judges have opposed them.