Discount rate announcement set to go ahead after ABI loses judicial review bid

Discount rate: announcement in 11 days

The Association of British Insurers (ABI) has today lost its High Court bid to halt the Lord Chancellor announcing the outcome of the consultation on the discount rate.

The ABI said it intended to appeal the decision to refuse permission and to grant interim relief, but subject to that, the Ministry of Justice (MoJ) confirmed in court that the decision on the rate would be announced on 31 January.

The insurers brought the judicial review in the wake of the MoJ revealing last month – in response to a judicial review proceedings started by the Association of Personal Injury Lawyers (APIL) – that the outcome would be known by the end of January.

The ABI argued that the government has not completed the underlying work needed to reach a conclusion, and had not shared any of the findings of two public consultations conducted in 2012 and 2013, or of the expert panel it convened.

It said that without changing the methodology behind setting the rate, the MoJ review would take a flawed approach based on “a fundamental misunderstanding of how people invest their compensation”.

James Dalton, ABI director of general insurance policy, said: “We are disappointed with today’s ruling and will appeal. It is vital that claimants get the compensation they are entitled to.

“Insurers are open to a proper dialogue on how to reform the system, but caving in to legal threats from personal injury lawyers is not the way for the Ministry of Justice to do it.

“Despite consulting over three years ago and not letting anyone know the outcome of that process, the Lord Chancellor seems to want to rush out a new discount rate at a time of significant global financial uncertainty.

“While we welcome today’s commitment not to make an announcement before 31 January, we call on the Lord Chancellor to provide a considered timeline which gives all stakeholders the opportunity to engage in a constructive dialogue on the way forward.”

APIL president Neil Sugarman said: “This desperate attempt to stall the review shows that the insurance industry would rather see seriously injured people face hardship than honour its responsibility to pay full and fair compensation.

“The Administrative Court’s decision today, to allow the Lord Chancellor to continue with her already long-overdue discount rate review, is the correct one.

“We hope that the Lord Chancellor makes the correct decision and reduces the discount rate substantially. In fact this is the only acceptable option. An increase in the rate is unthinkable.”

A report of yesterday’s proceedings by Alistair Kinley, director of policy and government affairs at leading insurance law firm BLM, explained that the first element of ABI’s challenge was to argue that there was a breach of its legitimate expectation that the earlier consultations would be concluded – neither had been followed up by a response from the MoJ – and that stakeholders’ views would be taken into account before any decision about the discount rate was made.

He said its second argument was that the Lord Chancellor should make transitional arrangements when setting any new rate so as to avoid the otherwise unlawful retrospective effect of any decision about the rate.

Mr Kinley reported that Mr Justice Baker dispensed with hearing from the Lord Chancellor and APIL on the first ground and heard their submissions on retrospectivity only.

“The argument for the Lord Chancellor was that the subject matter was all about the principle of full compensation and this principle would not be changed in the current exercise, whether retrospectively or otherwise. APIL’s concerns included difficulties about resolving current cases (whether at joint settlement meetings or trials) if there was delay much beyond the 31 January date set by the Lord Chancellor.”

Tweeting from court 22 of the Royal Courts of Justice throughout yesterday, Peter Todd, the partner at London firm Hodge Jones & Allen acting for APIL on the discount rate, said “I think the whole insurance industry has turned up!”

Jonathan Swift QC appeared for the ABI, Tim Ottey QC for the MoJ and Philip Havers QC for APIL.

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