Move to bolster ATE market launched

A move to clean up the after-the-event (ATE) insurance market is to be launched by the Civil Justice Council (CJC), it has emerged.

The move comes as the government last week named the date for the new regime for conditional fee agreements (CFAs), meaning that all client-care requirements will be moved from regulations to the solicitors' practice rules from 1 November.


The Gazette's sister publication, Litigation Funding, reveals this month that the CJC hosted a behind-closed-doors forum in Buckinghamshire in July, at which leading claimant and defence lawyers, liability and ATE insurers, judges, union representatives and government officials all met.


Agreement in principle was reached that it would be possible to develop guideline minimum terms, cover and premiums for ATE policies.


It is understood that the meeting's general feeling was that the market is not working effectively. While not overly fragile at the moment, there were doubts about its long-term sustainability.


There are plans to commission Professor Paul Fenn of Nottingham University to collate data, and the CJC will set up a management group to take the project forward. Chief executive Robert Musgrove said: 'This event was the toughest test yet of the CJC's ability to promote constructive debate in highly technical and contentious areas of litigation funding. There was willingness from all participants to engage in frank debate on the realities of the present ATE market and it was encouraging to see all sides eager to contribute opinion on how to develop a sustainable future for ATE.'


The Department for Constitutional Affairs (DCA) last week published its response to the June 2004 consultation which proposed simplifying the CFA regulations; however, it has now concluded that there is no need for any. The response said abolition is a 'practical, cleaner and logical extension of the simplification objective'.


It said: 'This should benefit consumers, solicitors and defendants, as agreement should be more transparent and the length of time solicitors need to spend explaining the CFA requirements reduced, as very simply there is much less to explain.'


Under new professional conduct requirements, solicitors will have to make clear to the client the terms of the agreement and in what circumstances, if any, the client will be required to pay anything. The DCA envisaged that this may introduce an element of competition between solicitors over the terms they are prepared to offer clients.


Failure to comply with the rules could result in solicitors facing disciplinary action. If a CFA is not materially compliant with the Law Society's rules and model agreements, the courts may rule it unenforceable.


The Law Society has also unveiled a new, shorter model CFA to complement the reform. A spokesman said: 'Our new model agreement is intended to simplify arrangements and help consumers have a better understanding of the system.'


A statement from the Association of Personal Injury Lawyers said: 'This has been a long process and we welcome the announcement of the new agreement. We are pleased consumers will benefit from a shorter and simpler form, and sincerely hope that the simplified regulations will reduce the number of unnecessary technical challenges experienced in the past.'


Last year's consultation also encompassed the use of CFAs in defamation, and media organisations' claim that the potential for success fees to double their costs liability has a 'chilling effect' on freedom of speech.


But the government has refused to intervene, instead backing a CJC-run mediation on success fees in such cases. It also noted that the courts have sufficient powers to address unreasonable and disproportionate costs.


Despite unanimous support among respondents to the consultation for abolition of the indemnity principle, the DCA gave no sign that it would take this issue on.


The new regime will be reviewed after three years.