U.K. LEGAL REFORM MAY INCREASE SUITSPosted On: Oct. 26, 1997 12:00 AM CST
LONDON-Revamping the British legal aid system to extend the use of U.S.-style contingency fee arrangements to most civil damage claims in England and Wales will give far more people access to the courts, the U.K. government says.
Lord Irvine of Lairg, the government's Lord Chancellor, took the British legal profession by surprise by announcing in a speech last week plans to limit the types of legal claims eligible for assistance from the Legal Aid Board, specifically those seeking monetary damages.
In its place, the use of "conditional fee arrangements" would be allowed in all civil proceedings other than family cases, beginning in April 1998, the Lord Chancellor said in a speech to lawyers in Cardiff, Wales, earlier this month.
Conditional fee arrangements-in which a lawyer agrees to represent a client for a preset percentage of any award but gets nothing if the suit fails-were introduced in England and Wales a few years ago and were limited to personal injury cases.
AIRMIC, the Assn. of Insurance & Risk Managers, welcomes the plan, claiming it will stop spurious claims and make it easier for a wider group of people to gain access to justice.
However, the association warned in a statement it is important that the system operate efficiently "so that administrative costs are minimized and the benefits of saving optimized."
"We are pleased that the individual's basic right to litigation will be protected," said AIRMIC's executive director, Ina Barker. AIRMIC is "pleased that our members will face fewer costly cases funded by legal aid that should never be brought."
The reforms will make lawyers "face up to the fact that they must act as professionals (and) take cases truly on their merits as opposed to just taking the case because it is legally aided," she said.
AIRMIC said conditional fee arrangements with insurance protection will enable genuine cases to proceed and will also in the long term reduce the total number of claims and cases being brought and reduce the administrative costs borne by defendants.
However, "it is imperative that the insurance industry be able to respond to the need to provide an insurance product at a reasonable premium," said Ms. Barker. As future claims are more likely to succeed, "companies must therefore ensure they have sound risk management practices in place to reduce the potential for claims to an absolute minimum."
According to the Lord Chancellor, extending the application of conditional fee arrangements would increase the ability of many middle- and upper-income people to litigate. Legal aid is only available to people with very low incomes, and the expense of litigation precludes many others from taking advantage of the legal process, he said.
But, the "no win, no fee" arrangement has risk. In the United Kingdom, unsuccessful plaintiffs in most cases must also pay the defendants' legal costs.
Although policies exist to cover this risk, including the Law Society's own insurance plan, managed by Abbey Legal Protection Ltd., lawyers say the poor who are covered by legal aid are likely unable to afford the premiums.
To answer this, the government is considering setting up a provision "to meet insurance premiums (for) those who wish to enter into conditional fee arrangements," the Lord Chancellor announced in his speech.
The latest proposals come in the midst of legal system changes in England and Wales to streamline the litigation process. The proposals are known as the Woolf Reforms, named for Lord Justice Woolf, Britain's most senior civil judge, who led the reform committee (BI, March 3).
David Mackintosh, a partner with law firm Davies Arnold Cooper in London, said the Lord Chancellor is being too hasty in abandoning a legal aid system that is "the envy of most other jurisdictions worldwide."
The government should wait to see the impact of the Woolf recommendations to improve the effectiveness of the British legal process before revamping legal aid, he said. In addition, Mr. Mackintosh questioned whether the government has explored the availability of insurance to replace the loss of legal aid. He said the decision to cut legal aid has been made for financial reasons rather than increasing access to justice.
According to the Lord Chancellor's own figures, Legal Aid expenditures rocketed to 1.48 billion pounds ($2.42 billion) in the 12 months ended March 31, 1997, from 682 million pounds ($1.12 billion at a current exchange rate) during the same period ended March 31, 1991.
"Widening conditional fee arrangements will open the door to litigation of a type not widespread at the moment," with lawyers taking the cheapest cases and demanding larger fees, Mr. Mackintosh said.
James Innes, chairman of Abbey Legal Protection, warned that unless "strict controls are put in place, (lawyers) could become greedy, speculating wildly and marking up fees unreasonably."
Although he said the insurance industry will be able to expand its capacity for covering winning defendants' legal costs under the extension of conditional fees, consultation must begin soon if the Lord Chancellor's April 1998 deadline is to be met.
It is vital for the system to be properly thought out and managed, Mr. Innes warned. "Our experience in running the Law Society's Accident Line Protect conditional fees scheme for personal injury cases shows that it works because of the rules we and the Law Society have imposed, such as allowing (lawyers) to mark up their fees by a maximum of 25% of the damages awarded to the plaintiff."
Mr. Innes also thinks insurers should be able to deny coverage for clients whose lawyers they do not think "have the relevant expertise" and that the government "should offer some tangible inducement to the insurance industry to make the new scheme work, perhaps by making premiums tax-deductible."
Mr. Innes is optimistic that the insurance industry will be able to fill the gap left by the reduced Legal Aid scheme, pointing out that Abbey last week launched a policy to cover costs incurred by the defendant should a plaintiff lose a medical negligence case, widely regarded as one of the most complex areas of litigation.
Underwritten by Lloyd's of London syndicates, the policy offers a minimum of 100,000 pounds($163,500) protection to cover opponents' costs and legal disbursements (such as experts and medical reports) with premiums likely between 4,000 pounds ($6,500) and 7,500 pounds ($12,300). Due to the relatively high cost, plaintiffs may pay initial premiums for investigation, further premiums should proceedings continue and a final set to cover any subsequent trial, said Mr. Innes.