THE CONSULTATION PROCESSThe government paper - Conditional Fees: Sharing the Risk of Litigation- sought views on the practicalities of recovering the success fee and the insurance premium from the losing party in a conditional fee agreement (CFA).Success fee - the extra fee that can be charged by solicitors in a CFA, reflecting their view of the case's prospects (the riskier the case, the higher the fee).Insurance premium - for the policy paid to protect against meeting a party's own and the opponent's costs.The government propo ses that:-- the other party should be told immediately of the existence of a CFA, success fee, and policy;-- both success fee and premium should be subject to challenge by assessment by the court;-- recoverability should not be retrospective.It also sought views on other issues, including whether there should be sanctions if a party failed to disclose whether they were funding their case under a CFA and whether there should be a mechanism developed for settling disputes over the assessment of court fees in cases settled before trial.The Lord Chancellor's Department (LCD) is currently wading through the 100-plus responses to its consultation paper on conditional fee agreements (CFAs).

The government was seeking views on making the loser pay for both the success fee and the insurance premium (see above).Some of the more forthcoming responses will make depressing reading for the policy-makers, especially if they were thinking that its consultation was an exercise in last-minute fine-tuning to prepare CFAs to fill the gap left by the withdrawal of legal aid.

The LCD is planning to publish its conclusions early this year to tie in with the removal of legal aid from personal injury cases in April.Speaking at a conference at the University of Westminster last month, the LCD parliamentary secretary David Lock said CFAs were fundamental to opening up legal services to a large, but ignored, swathe of the population.

That group of 'ordinary, decent working class, middle class people' who because of a dearth of law centres, no legal aid, and insufficient money to fund their own cases, are left without access to justice.It is no use having legal rights unless they can be enforced, Mr Lock argued.

He went on to explain the thinking behind the recommendations in the consultation paper, 'Conditional Fees: Sharing the Risks of Litigation'.

'Why should all reasonable costs be paid by the innocent party out of damages rather than the wrongdoer out of the resources they've got?' he asked.

Such reasonable costs, he explained, should include the success fee, or uplift, and premium.Clearly, many respondents considered there were more fundamental issues at stake beyond the limited remit of the paper, and they were determined to take this opportunity to voice them.The Law Society acknowledged that it was right for the wronged party to bear these expenses.

But it also argued that recoverability would have an 'unpredictable effect' on CFAs and urged the government to wait and see how CFAs took off before scrapping legal aid.Law Society President Robert Sayer says it is unlikely that CFAs will ever replace legal aid.

'At the moment the market is so unstable that legal aid must be retained,' he warns.

'Any improvements to CFAs need to bed down before the government even considers withdrawing legal aid.'It is a call echoed by the Association of Personal Injury Lawyers (APIL).

Recoverability would lessen the dangers to clients, says APIL treasurer David Marshall, but it is too early for such a radical move.It is not surprising insurers took the opportunity to assure the Lord Chancellor, Lord Irvine, that there were no problems at their end.

The insurance industry was ready - 'and had been for some time' - to deal with increased demand, says Emmanuel Gilberts, operations manager at Litigation Protection.

He confidently predicts that there will be new entrants into the market with a wide choice of innovative insurance products to meet every need.Meanwhile, the Forum of Insurance Lawyers (FOIL) launched an impassioned attack on the governme nt.

FOIL president Martin Staples accuses ministers of 'not living in the real world', if they do not acknowledge that CFAs would result in some claimant solicitors 'lining their own pockets'.

He reckons that there is nothing to stop them claiming a 100% success fee every time, even though a claimant could have a more than adequate level of legal expenses cover.

Recovery of the uplift tilts the balance too far, he insists.In its submission, FOIL claims to be unconvinced that the recovery of success fees is justifiable 'beyond a 5% standard risk'.

But if that is 'politically unacceptable', the maximum success fee must stay at 100%.

It also calls for the Law Society's 25% cap on deduction from damages to become mandatory and for the scrapping of the possibility of recovering success fees before a case goes to trial.There is considerable scope for abuse under the government proposals, FOIL argues.

In particular, there must be no insurance duplication with solicitors ignoring existing satisfactory legal expenses insurance in favour of after-the-event insurance because of the temptation of inflated success fees.Unsurprisingly, claimant solicitors do not see it that way.

David Marshall says if solicitors claim 100% success fees as a matter of course or seek outrageous costs, they are likely to be hammered by the courts under new powers to assess costs.On the issue of legal expenses insurance he agrees with FOIL that solicitors ought to discuss all funding options with their clients, but adds that most solicitors are aware of this anyhow.

Mr Marshall warns that it is not as simple as ascertaining whether clients have such arrangements, but it must also be ascertained that they are better than a CFA.The Law Society's own submission strongly condemns the idea of an obligation on solicitors to advise on the merits of various insurance products as suggested in the paper.

It would turn solicitors into insurance brokers, which, the Society points out, would be 'highly undesirable'.Tony Girling is a member of the Society's conditional fees task force and contributed to its response, as well as making his own submission.

He says the government's proposals are running on a collision course with Lord Woolf's civil procedure rules, which were implemented last year.

In particular, he says the paper's plans for recoverability are a 'con trick' because the vast majority of CFAs involve personal injury cases which will be conducted on the fast track and be subject to fixed costs under Woolf.

Fixed costs might well mean that solicitors could not cover their basic costs, never mind their success fee.Mr Girling argues that another area of conflict is the power of courts under Woolf summarily to assess costs at every opportunity.

But he adds that the 'Sharing the Risk' consultation paper acknowledges that the level of the success fee and premium are indicators of the merits of the case.

The paper proposes that client and losing opponent should be able to challenge the success fee through an assessment by court.Richard Tattersall of the Tattersalls Partnership in Essex made his own submission, calling for the 'option' of having fixed success fees to avoid a new wave of satellite litigation arising from disputes over the level of the success fee.

'We're locked into a system where there is no reward for efficiency at all,' he claims, adding that for a long time he was against the idea of fixed fees but excessive haggling over costs has made him change his mind.The responses tend to follow predictable lines.

For example, the government sought vie ws as to whether a 'maximum' success fee of 100% was necessary.

FOIL said it was 'essential'; the Consumer Association agreed 'at least in the short term'; and the Society said there should be a 100% limit for personal injury cases but added that solicitors and clients should be able to 'exercise proper freedom of contract in the market place'.The LCD also wanted to know what should happen to the success fee when cases settled before trial.

The Legal Action Practitioners Group (LAPG) called for 'urgent clarification' that the fee could be recovered, as did the Law Society, but FOIL said it had received assurances that the fee can only be recovered after issue.The paper recommends immediate notification of a CFA and whether a success fee is being claimed.

The Society agreed that there should be such a warning, but not until the claim was intimated or by the date of the CFA, whichever is later.

It also agrees that the level of the fee should not be revealed.

FOIL called for immediate notification, but the LAPG said it would give defendants an 'unfair advantage'.Similar arguments were made on recovering insurance premiums.

The Society insisted that it would be 'completely inappropriate' to suggest a client could challenge the premium which was a matter of contract between client and insurer.

It also made clear that there was no need for the court to receive information about the level of insurance premium.While the response from the profession might vary from nervousness to outright alarm, recent research suggests that the likely response from clients is even greater incomprehension.

Last month, at the University of Westminster conference, the first research into the clients' experience of CFAs was released.

Of the 40 clients interviewed, only one understood the funding of his case in its entirety and he had 'considerable' experience of law.

One of the report's co-authors Stella Yarrow, noted that the recoverability proposals, while benefiting clients, were likely to add yet another layer of complication to CFAs.