The Jackson reforms – the UK’s new litigation rules – went into effect in England and Wales on April 1, 2013. These new rules have a significant impact on how litigation is conducted in the UK.
While the reforms may, at first blush, appear to only affect certain mechanical aspects of the litigation process, they actually go to the basic foundations of the dispute resolution process in the UK.
A shift from “loser pays” to “no-win, no-fee”
The UK has traditionally been a country where the winning party usually recovers its costs (including attorneys’ fees) from the losing party. This principle applied whether the winning party prosecuted or defended a case.
This type of “loser pays” system has long been a hallmark of litigation in the UK and is one of the reasons why the UK has traditionally been much less litigious than the United States, where each party pays its legal costs or a plaintiff can retain an attorney on a “contingency fee” basis.
For example, a plaintiff in a personal injury case in the United States can hire an attorney and not be obligated to pay the attorney’s fees unless the suit is successful and money is recovered in an action against the responsible parties who caused plaintiff’s damages.
Indeed, perhaps the most significant change coming to the UK is a fundamental alteration of this long-standing “loser pays” system. Specifically, pursuant to the “Jackson Reforms,” claimants will be able to hire lawyers on a “no-win, no-fee” basis that is similar to US-style contingency fee agreements.
UK adopts new contingency fee agreements
Under the new UK system, lawyers will be paid an agreed percentage of the damages actually recovered, up to 50%, including VAT. In personal injury cases the cap will be 25% and in employment cases 35% of the damages.
Costs on the “normal time basis” will be recoverable from a defendant and the plaintiff will be responsible for the balance of the costs from the damages. This is a monumental change in the way that litigation will be handled in the UK and its effects may dramatically increase the amount of litigation activity in the UK.
General damages for claims in contract and tort will also be increased by 10% for nonpecuniary loss (e.g. pain and suffering damages). This will apply primarily to claims for personal injury, nuisance and defamation.
Pursuant to these reforms, personal injury plaintiffs will also be able to recover costs if their case is successful, but will not have to pay the defendant’s costs if they lose, unless the claim is fraudulent or otherwise an abuse of the process of the court.
Jackson reforms: effects
It is likely that there will be frequent amendments and clarifications of the rules, as various questions about the new procedures reach the court. There are a number of issues which will arise in relation to the interpretation of the new rules, and during the first few years after they come into effect there will, no doubt, be a number of cases which go to the Court of Appeal for clarification.
Regardless, these changes represent a movement toward a US-style litigation system and will likely have unintended consequences not just in the UK, but also for companies and attorneys around the world who may need to serve process in the UK.
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