The new regulations governing conditional fee agreements (CFAs) cleared their final hurdle yesterday after the government defeated a last-ditch Labour challenge to them.
MPs scrutinising the draft CFA Order 2013 and draft Damages-Based Agreements (DBAs) Regulations 2013 voted 10 to five to approve the former, while the latter went through on the nod.
It follows similar approval in the House of Lords  at the end of last month.
Labour justice spokesman Andy Slaughter mounted a strong attack on the CFA Order, arguing that it sets up a “false and pernicious choice” between restricting access to justice – by making it hard for lawyers to take on risky cases – and taking a “substantial” part of claimants’ damages in legal fees.
Though he said he did not agree with those who have called for the 25% cap on success fees to apply to future as well as past losses, Mr Slaughter said: “Many people who look at this proposal will say that it is set up to fail, because there will no longer be a success pool of sufficient size to allow litigation, save for in the most clear-cut and cast-iron cases.”
The “additional difficulty is that the proposal will encourage bad behaviour by defendant insurers”, he said. “They have the utmost incentive. Currently, the longer a defendant delays in settling or taking reasonable steps to resolve litigation, the more they stand to be punished, with the success fee that they need to pay being increased.
“That will no longer be any disincentive – indeed, as far as defendant insurers are concerned, there will be an incentive to continue to string out the litigation on the basis that the claimant’s lawyers, facing a reasonably small prospective pot of money, will not be able to continue.
“The government have never looked at poor behaviour by defendants, even though they were encouraged to by many of the responses to the consultation. They seem to think that insurers can do no wrong.”
Noting that insurers have been talking down the prospect of insurance premiums falling as a result of the reforms, he said “the only reason for [their] introduction that I can conclude is that the insurance industry has the ear of the government, as well as substantially funding the Conservative party”.
Mr Slaughter also complained about the failure to extend qualified one-way costs-shifting to other areas of litigation, such as professional negligence.
Justice minister Helen Grant told MPs that the government would not be moved on the 25% cap only applying to past losses, which she said was in line with Lord Justice Jackson’s recommendation. “We considered all his recommendations carefully and consulted widely. The 25% cap, as drafted, strikes the right balance between protecting claimants’ damages and allowing access to justice.”
She added: “If changes need to be made in future, we have the option of conducting a formal review in three to five years. If there were serious concerns, of course we would look at the matter again.”
Ms Grant argued that the reforms “restore balance, benefit business, protect claimants and tackle the compensation culture. Although he seemed to question this, they should ultimately reduce insurance premiums for all of us, which has to be a good thing”.
She added: “Meritorious claims will continue to be made, but we seek to deter unnecessary claims and avoid them where possible. I do not accept what he said about defendants not being dealt with. We are increasing the sanctions on defendants who fail to accept offers from claimants whom they do not subsequently beat at trial, which will encourage defendants to accept good offers from claimants.
“Finally, on reducing insurance premiums, the government are essentially following the recommendations of an independent Court of Appeal judge. It is neither right nor appropriate to say that it is only at the behest of the insurance industry.”
- Amendments to the amended Civil Procedure Rules were published today . As flagged up last month, they insert a transitional provision within rule 44.3 so that costs incurred in respect of work done before 1 April 2013 will not be subject to the new proportionality test, and also provide for the exclusion of Chancery, Mercantile Court and Technology and Construction Court cases from automatic costs management subject to the direction of the Chancellor of the High Court and President of the Queen’s Bench Division. This direction will say that cases worth more than £2m will be excluded.