By Catherine Baksi


New civil legal aid fees may have to be scrapped in light of the appeal court's ruling last week that the Legal Services Commission's (LSC) unified contract is unlawful.



The Court of Appeal, led by the Lord Chief Justice, Lord Phillips of Worth Matravers, ruled that the new civil contract breached EU public procurement legislation and the LSC did not have the power unilaterally to amend the contract in the way it proposed.



In a strong judgment, the court emphasised that the case was extreme and Lord Phillips said: 'The power to amend is better characterised as a power to rewrite the contract.'



The court allowed the appeals by the Law Society and Reading firm Dexter Montague & Partners, from the earlier decision of Mr Justice Beatson, which found the LSC in breach in relation to technical specifications only.



A cross-appeal by the LSC and the Secretary of State for Justice was dismissed. The LSC was refused permission to appeal to the House of Lords and ordered to pay the Society's costs.



Following its victory, Law Society chief executive Des Hudson said counsel had advised that under the relevant EU procurement rules, the LSC has a positive duty to act to nullify the effects of its unlawful acts, which meant the new fixed and graduated fees introduced in October 2007 would need to be reconsidered.



The decision may also have implications for the General Criminal Contract and very high-cost case contract, which are due to come into force in January 2008.



Mr Hudson told the Gazette: 'The LSC has a big problem. We repeatedly advised it that the ability to unilaterally amend the contract terms was unreasonable, improper and unlawful.'



He said that, throughout the reform process, the LSC had acted in a high-handed way, but he urged it to work with the Law Society and practitioners to find a way forward.



The LSC insisted the judgment did not affect progress of the reforms. A spokesman said: 'Although the judgment states that the current power of amendment in the unified contract is too wide, this only affects how changes to legal aid can be introduced under existing contracts.



'We had already anticipated this outcome and it does not affect the fact that the legal aid reform programme is going ahead and remains on track.'



The LSC, he said, would be looking to develop an alternative amendment provision, which was not open to challenge. 'If this cannot be achieved, we will have no alternative but to terminate and re-tender for contracts much more frequently than in the past,' he added.



Joy Merriam, chairwoman of the Criminal Law Solicitors Association, welcomed the decision but cautioned: 'We can predict that the LSC will attempt to use this case... to blame the profession and the Law Society for any changes now required towards ensuring that they do operate within the law.'