a gestation period of about twelve months, Lord Justice Rupert Jackson’s
Final Report of his Review of Civil Litigation was published in
January 2010, a two-volume Preliminary Report having appeared in
May 2009. The Final Report contains some potentially useful recommendations
and some very puzzling recommendations, but above all, in my opinion,
it misses the opportunity to get to grips with most of the real
issues, which I list towards the end of this article. I conclude
by looking at the highly successful simple German model, which I
believe would go a long way towards solving the serious costs problems
that we face here today.
The Jackson report identifies conditional fee agreements (“CFAs”)
as “the major contributor to disproportionate costs in civil
litigation in England and Wales”. The chief culprits targeted
are lawyers’ success fees and after-the-event (“ATE”)
insurance, which the report recommends should no longer be recoverable
from unsuccessful defendants. These suggestions will of course be
welcomed by defendants, many of whom are these days finding themselves
pursued by unduly emboldened claimants. But there is a danger that
these changes may enable defendants in libel cases – usually
media magnates – to go back to the balmy days when they could
simply shrug off the threat of litigation as hardly more of a nuisance
than a gnat. .
Perhaps to prevent this from happening and to compensate claimants
who would otherwise have taken out ATE insurance cover, the Jackson
report recommends that for certain (unspecified) types of litigation
a losing claimant should not have to pay the successful defendant’s
costs at all, but an unsuccessful defendant will still have to pay
a winning claimant’s costs (p.xvii). This would be particularly
unfair if applied to personal injury claims in which the defendant
is a private person or small business.
puzzling recommendation is that the hitherto sacrosanct indemnity
principle be abolished. This is a reference not to the indemnity
basis of assessment of costs but to the indemnity principle, which
is defined as holding “that a successful party cannot recover
from an unsuccessful party more by way of costs than the successful
party is liable to pay his or her legal representatives.”
(p. x). So, while the report is concerned to keep costs down it
is here suggesting that in certain circumstances a winning party
could be awarded more than that party would have had to pay its
own lawyers! This may be connected with a recommendation allowing
contingency fees, which, as distinct from conditional fees, are
not currently allowed in contentious matters. This recommendation
clearly needs to be reconsidered. Assistance may possibly be had
from other jurisdictions, like those of the United States, where
contingency fees do not cause any such problems.
That legal costs in England are far higher than in most other jurisdictions
is not in doubt. The World Bank’s current Doing Business report
places the United Kingdom in 23rd position for ease of enforcing
contracts – as compared with France in 6th place, Germany
in 7th and the U.S in 8th position. In 2009 the World Economic Forum’s
Competitiveness Report likewise ranked Germany 4th out of 134 countries
for the efficiency of its “legal framework” –
with the UK only in 18th place. Among other things, efficiency covers
value for money, and German legal costs are among the lowest in
the world, averaging out at about 14.4% of claim value. (See Jackson’s
Preliminary Report, vol II, p. 565). .
These are dry figures. But the alarming thing is that, of all the
jurisdictions with which I am familiar, that of England and Wales
is the one where it is most likely that the cost of even a comparatively
small court-case could wipe out a person’s life savings and
force them into bankruptcy. By contrast, in the other legal systems
I have mentioned the likelihood of such an outcome is extremely
question is: why are legal costs here are so high? My answer covers
a number of factors, most of which are not even mentioned in the
Duplication: The high degree of unnecessary expense resulting from
the two-lawyer model that is still prevalent here but is absent
from most other jurisdictions.
Retainer system: The client pays a solicitor a “retainer”,
after which the solicitor can run up costs without consulting the
client, who may then be faced with a bill beyond anything he originally
contemplated, and which he can then pass on to somebody else if
he is fortunate enough to prevail at trial or in a settlement. If
these costs are challenged in detailed assessment, additional costs
Dyslexic premium: The hourly billing system in which the more slowly
a lawyer reads the more he can charge – coupled with the fact
that there is no check on how many hours he has really spent on
doing anything and the fact that he does not normally even have
to produce an itemised breakdown of his costs unless ordered to
do so by a court.
Single judge: In Germany, for example, a single trial judge is uncommon,
except in low-level local courts. There is more usually a bench
of two or more judges sitting together, sometimes with the addition
of lay assessors. In the U.S. trial by jury is a constitutional
right even in civil courts (as long as the claim is for more than
20 dollars!). Civil jury trials were common in England too until
the 1930s, and the main reason for the present system was expense.
Yet, allowing one person to decide a case on their own is not a
guarantee of justice and tends to cause a proliferation of appeals
– and further costs.
Tail wagging the dog: Once costs reach the high level that they
have now done in England & Wales, where it is by no means unknown
for costs to outstrip the sum in issue, costs are likely to loom
larger than the merits of the case, which does not bode well for
justice. By contrast, on the continent, notably in such jurisdictions
as France and Germany, costs are hardly mentioned at all –
because they do not and cannot play a major role.
German sliding scale
Like the English system, in Germany the loser normally pays the
winner’s costs – what the Jackson report calls “two
way cost shifting”. But there the similarity ends. The German
system is based on a sliding scale in which costs are inversely
proportional to the value of the claim.
fees (not including court fees) range from less than 1% of the value
of the claim in the biggest cases to about 20% in the smallest cases.
So, in a case worth, say, 10,000 euros, the losing party will have
to pay the winner about 2,000 euros in costs. At the other end of
the scale, if the value of the claim is 30 million euros, the unsuccessful
party will be liable to pay the winner just under 1% of the claim,
or about 275,000 euros – which is the highest award of costs
that can be made in any single case no matter how high the value
of the claim. (Costs are scaled down proportionately if the judgment
sum is less than the amount originally claimed). (See Preliminary
Report, vol. II, p. 555ff.).
The rationale behind this sensible system is simply that every court-case,
no matter how small, entails a certain minimum amount of work –
and, by the same token, that the amount of work does not grow in
proportion to the size of the claim.
is also based on several fundamental German legal principles
• Rechtsstaat: or the rule of law, which in Germany is clearly
differentiated from the rule of lawyers (and judges).
• Equality before the law
preliminary Jackson report devoted a whole chapter to the German
system of costs (Chapter 55), but it is dismissed in five lines
in the final report (p. 172), which does however recommend “a
comprehensible scheme of fixed or predictable costs”, but
only for fast track cases.
the great beauty of the German system and the reason it has worked
so well over a period of nearly 150 years is that it is applicable
across the board, as applicable to high-value as to low-value cases,
to commercial litigation as to personal injury claims, to product
liability as to administrative law. It allows lawyers to charge
fairly for their work without being greedy – and it enables
citizens to go to court without the threat of financial ruin hanging