The Government has announced a change to the recovery of legal costs in defamation and privacy cases funded by Conditional Fee Agreements (CFAs). Winning parties will no longer be able to recover CFA success fees from losing parties in cases where a CFA is entered into on or after 6 April 2019. After-the-Event (ATE) legal expenses insurance premiums will continue to be recoverable.
Conditional Fee Agreements (CFAs) can be used to fund civil litigation. Under a CFA, a lawyer receives no or reduced legal fees from their client if the case is lost, but if the case is won, the client pays their lawyer’s usual legal fees plus an extra “success fee” of up to 100%. For many years, a winning client could recover both their lawyer’s usual legal fees and the success fee from the losing party. However, the obligation to pay success fees significantly increased the overall costs that losing parties (usually defendants) had to pay, so in April 2013, section 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 came into effect, providing that success fees would no longer be recoverable.
Certain types of cases were excluded from section 44, including defamation and privacy claims, but the Government has announced that the defamation and privacy exclusion will now end, and success fees will no longer be recoverable in cases where a CFA is entered into on or after 6 April 2019.
This reform aims to control the costs of defamation and privacy cases and to give effect to the Government’s legal obligations arising from MGN v UK  in which the European Court of Human Rights concluded that the defendant’s obligation to pay the claimant a 100% success fee under a CFA was disproportionate and that the CFA regime was in breach of Article 10 (freedom of expression) of the European Convention on Human Rights.
For access to justice reasons, recoverability will be retained for “After-the-Event” (ATE) legal expenses insurance premiums. ATE insurance covers the risk of having to pay the other party’s costs in unsuccessful cases.
Many claimants are unable to fund prospective defamation and privacy cases without finding a solicitor (and often a barrister too) who is prepared to act on the basis of a CFA. We anticipate that this reform will lead to a spike in the number of claims in the short term as claimants seek to take advantage of the existing regime before the law changes. After 6 April, claimants will need to decide whether to agree to a CFA on the basis that the success fee will be payable by them from any damages (and will not be recoverable from the losing party) if they win. If they decide that such claims are not viable, fewer cases will be pursued in future.
If you’d like any further advice, please don’t hesitate to contact a member of Geldards’ Dispute Resolution Team.
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