Will the rise in court fees deter small companies from making claims in the future and incentivise larger firms to deny liability?

Given my understanding of how many small enterprises use the court system to recover large sums of money, the rise in fees will be a disincentive to pursuing claims and will strengthen the hand of defendants, who will take more comfort in the fact that many of these businesses no longer have the financial resources to initiate court action. From a commercial perspective, this is a real access to justice issue. Cash flow is the lifeblood of SMEs. The government is supposed to be a champion of business, but this decision will make it harder for companies to get paid what is owed to them.

Does it lessen the attractiveness of the UK as a jurisdiction for litigation/dispute resolution?

In my experience, the attractiveness of coming to the UK is not predominantly costs-driven. Foreign litigants use our system because it's perceived to be beyond corruption and English law and jurisdiction are the preferred choice for many types of dispute. While I doubt that a significant amount of commercial work will be steered away from the UK, it may make parties more alive to the costs involved in bringing a claim in this country and wary of future sudden increases: if the government has bumped up fees considerably overnight despite opposition from the judiciary, what assurances do litigants have that they won't rise again in a year's time?

Will we see SMEs becoming more scrupulous in finding alternative means to justice?

Small firms will need to find a set of rules to follow that don't also incur big upfront fees. We may find the trade organisations that SMEs belong to or are affiliated with establishing and promoting arbitration rules and procedures, or refining them where they exist, that SMEs can use in place of litigation. The secretarial costs associated with these are low, and an arbitrator can deal with the case quickly and efficiently, and won't charge excessively. I think the more inventive trade bodies may well see this as an opportunity to enhance their arbitration reach.

What should litigators be doing now as a result of the rise in fees?

  • Make sure you are vigorous in your assessment of the claim at the outset and what its true value is.
  • Don't put in inflated damages claims, because it will cost you more due to the increased upfront fees.
  • Encourage clients to consider including  mediation requirements into their contracts and provide that failure to engage in ADR would be a breach; and consider a provision that, if mediation fails, the mediator is to act as an expert and determine the dispute
  • If the claimant genuinely has not got the money, consider acting on a CFA and fund the issue costs.  Look at alternative structures such as third party funding which would cover the higher upfront fees. Litigators may try and cast claims in new and inventive ways which avoids quantifying the claim, but this is difficult to do in practice when dealing with monetary claims for damages or debt, which require quantification at the outset.

What we can say is that it's unlikely that the rise in court fees will ever be reversed. Money-saving initiatives are very rarely overturned, because no government likes to admit it got something comprehensively wrong. We have seen for example with the progressive cutting back of legal aid that the legal system carries on despite higher costs and slashed budgets, and does not stop dead. The government will assume this will be the case with the rise in court fees. The challenge for the premier litigation  funders, where  the size  of claims they typically fund is  high, so that as a result the issue fee is in reality immaterial,  is whether to fund lower value claims which still have the same high issue fees. If the economics work, they may- watch this space.

More information at lawsociety.org.uk

Notes to Editors:

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