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House of Lords

Thursday, 2nd March 2000.

The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Bristol.

Conditional Fee Agreements

Lord Ackner asked Her Majesty's Government:

    What research they have carried out into the practice of charging conditional fees and, in particular, into whether the way in which the risk is assessed and the success fee is calculated is operating fairly.

The Lord Chancellor (Lord Irvine of Lairg): My Lords, my department provided assistance to two research studies undertaken by the University of Westminster in 1997 and 1999. The first showed that solicitors were treating their clients fairly when setting success fees and that conditional fee agreements (CFAs) were increasing access to justice. The second found that most clients were satisfied with the damages they received and the success fees they paid to their solicitors, but made recommendations about improving the information clients received about conditional fees. I am carrying that forward in regulations which will come into force on 1st April.

A research project based at the Anglia University, with part funding from the European Social Fund, is aimed at helping solicitors with risk assessment, including through subsidised training workshops.

My department has also commissioned major research involving the Universities of Nottingham, Oxford and Surrey. It will be the first comparative evaluation of the effects of CFAs on all kinds of personal injury litigation and will provide a basis for policy evaluation of the forthcoming changes on recoverability of success fees and insurance premiums.

Lord Ackner: My Lords, I am most grateful to my noble and learned friend for that full and detailed Answer. Does he recall his Answer to a Question on 7th October 1998 (col. 432) that his department was currently considering research projects, and his later observation that he would shortly be publicising the terms on which that research was to be undertaken? If that is so, why has there been no announcement of the details of the results and the basis on which those researches have been conducted?

The Lord Chancellor: My Lords, on my feet, I am not clear that there has been no such announcement. However, I shall undertake to write to the noble and learned Lord and give him the fullest detail, which I also gave in my Answer, about all the pieces of research which I had hoped he might have acknowledged are comprehensive.

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Lord Goodhart: My Lords, does the noble and learned Lord the Lord Chancellor accept that the Access to Justice Act was largely based on the assumption that CFAs will work and that if it is proved that they are not working to their full extent, we must go back to the drawing board? In that case, does the noble and learned Lord accept that the research will be most important in assessing whether they are working?

The Lord Chancellor: My Lords, I accept that the research certainly is important. However, all common sense suggests that CFAs will succeed in giving access to justice for the first time to hundreds of thousands of people who are currently outside the legal aid eligibility limits. Research will keep the operation of the system under supervision. However, I have to say that the barrenness of the position of those who oppose CFAs in principle is that the only alternative is to pour more public money into legal aid and therefore to the lawyers who live a risk-free life under legal aid.

Our number one priority is schools and hospitals. I am confident that CFAs will work and that they will enable the existing legal aid budget to be directed to meet unmet and priority needs, such as child welfare, debt, housing and employment, giving an associated boost to the voluntary sector.

Lord Harris of Haringey: My Lord, what steps are being taken to ensure that the new scheme of CFAs is fair as between the interests of claimants and defendants?

The Lord Chancellor: My Lords, CFAs have been available for personal injury cases since 1995. They were made available by me in 1998 for all money and damages claims. From 1st April, claimants will be able to recover the success fee and any insurance premium from a losing opponent rather than having to meet those costs out of their damages. They will therefore retain 100 per cent of their recovery.

On the other hand, a losing opponent will be able to challenge a success fee as excessive and will not be liable for any part disallowed by the court. For the benefit of claimants, I am making a regulation to the effect that CFAs must include a term that a solicitor may not recover from a client any part of the success fee disallowed by the court. I believe that the scheme in its entirety is balanced and fair to both sides.

Lord McNally: My Lords, will those carrying out studies on behalf of the Lord Chancellor's Department also keep an eye on how law firms promote themselves under the new schemes? I have found extremely worrying some television advertisements inviting people to enter into no-risk litigation. At lunchtime on television a company called Claims Direct seemed to be offering viewers an invitation more to join the National Lottery than to enter into litigation. It showed happy, smiling litigants who had won between £50,000 and £70,000. Does the noble and learned Lord

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agree that this kind of aggressive promotion and advertising may hold dangers, and will he keep this matter under close review?

The Lord Chancellor: My Lords, regulations will shortly come before noble Lords that will require those offering conditional fee arrangements to hold a preliminary discussion with clients to see whether they are already covered for the cost of taking a claim under a pre-existing insurance policy or through membership of a scheme run by an organisation such as a trade union. There will also be obligations to discuss with the client the most appropriate means of funding his claim, and any financial liabilities that he may face; for example, for disbursements if the claim fails. Noble Lords will see in the regulations an impressive list of those matters which must be discussed and explained to clients before a CFA is entered into. This area will be effectively regulated.

Lord Kingsland: My Lords, the noble and learned Lord the Lord Chancellor is fully aware that crucial to the success of conditional fee arrangements will be the willingness of the private insurance market to provide appropriate insurance at reasonable prices. Will he undertake to publish all the work sponsored by his own department on the willingness of the insurance market so to behave?

The Lord Chancellor: My Lords, I shall certainly write to the noble Lord and make available to him all the information that we have. However, I have to say that there is growing public confidence in CFAs and insurance products. Insurance premiums are set according to risk. They are affordable and there is little doubt that the overwhelming majority of people who want to arrange CFAs will secure them on proper terms.

Lord Chancellor: McGonnell Judgment

3.15 p.m.

Lord Desai asked Her Majesty's Government:

    What is their response to the McGonnell judgment of the European Court of Human Rights in relation to the position of the Lord Chancellor.

The Lord Chancellor: My Lords, the position of the Lord Chancellor is unaffected by this decision. It is confined to the special position of the Bailiff of Guernsey and to his role in that particular case.

While this decision was awaited, there was a great deal of excitable speculation that Article 6 of the ECHR, which guarantees a fair trial, would set aside some of our basic constitutional arrangements. I have always said that that would be proved wrong; it would be extraordinary if it were not. The question in every case is whether Article 6 is complied with on the facts. The European court confirmed that, saying:

    "the question is whether, in a given case, the requirements of the Convention are met".

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The court also accepted the Government's submission that neither Article 6 nor any other provision of the convention required,

    "States to comply with any theoretical concepts as such".

That, too, is what I have said.

There are some absolutists (I hasten to say that my noble friend is not among them) on the doctrine of the separation of the powers--as distinct from British pragmatists--but they get no comfort at all from McGonnell.

Lord Waddington: My Lords, will the noble and learned Lord the Lord Chancellor bear in mind the conclusion of the Wakeham commission which pointed out the usefulness of having the Law Lords continue to sit in the second Chamber? The report also mentioned that it was important that the Lord Chancellor should continue to exercise the same functions in the second Chamber. However, having said that, perhaps I may say that I welcome enormously the remarks made by the noble and learned Lord the Lord Chancellor. We have had a great deal of constitutional upheaval and I am glad that we shall be spared yet more upheaval over this issue given that the present system works very well.

The Lord Chancellor: My Lords, I shall attempt a short answer to the noble Lord's question. I welcome the Wakeham commission's comments on the Law Lords, as does the noble Lord. They have direct, high quality, practical experience of the administration of justice. That is what makes their contributions so valuable to your Lordships' debates on this subject. The quality of what they say enhances our debates. They are much appreciated and I am glad to say that this ruling does not begin to compromise their independence or impartiality.

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