City lawyers: no reason to remove Commercial Court budgeting exemption

City: commercial clients can look after themselves

The Civil Procedure Rule Committee is wrong to consider introducing automatic costs budgeting to the Commercial Court so soon after implementation of the Jackson reforms, City litigators have said.

A CPRC consultation issued last month said the “Admiralty and Commercial Courts’ blanket exception… may be unnecessary and inappropriate”.

However, the robust response of the City of London Law Society’s litigation committee – chaired by Clifford Chance partner Simon James and comprising lawyers from 17 other top firms – said “there is no evidence that automatic costs budgeting is either needed or wanted in commercial litigation of the sort conducted in the Commercial Court”.

It added: “Indeed, the evidence is firmly in the opposite direction.”

The newly published response said that echoing the findings of the Jackson report – which recommended the exemption – its members “have not experienced any demand from their clients for the Commercial Court to become involved in setting budgets”. It also said that costs are “already usually proportionate” in the court.

Arguing that Commercial Court clients are “well able to look after their own interests” and so do not require the court’s supervision, the committee said: “Absolute certainty of recoverable costs if successful and of costs payable if unsuccessful is not generally as significant in complex commercial cases as it may be for parties in some other types of litigation.

“With the aid of their lawyers, parties can decide how much they wish to spend on litigation, when and on what terms, and can estimate in broad terms their potential liability in costs.

“The parties may, indeed, consider it unacceptable for the court to compel them to reveal their budgets and plans to the other side because of the light the budget may shed on their tactical approach to the litigation.”

The CPRC is concerned that the absence of automatic costs budgeting in the Commercial Court could parties to prefer it over other specialist courts, but the committee said the “proper response” to this was to amend the rules for those courts.

The committee also said it was “premature to make major changes to the implementation of Sir Rupert Jackson’s report” and that there are significant practical differences between work in the Commercial Court and that in other parts of the court system that render automatic costs budgeting in the former “inappropriate”.

The difficulties of predicting at the outset what shape complex commercial litigation will take would lead to parties either submitting budgets as high as possible – “possibly in itself inflating costs” – or include an extensive list of assumptions on which the budget is based in order to ensure that there are grounds for amending it in the future.

This, and the whole costs management process, is likely to be “itself costly and time-consuming”.