The Government has announced that it will now commence s44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (‘LASPO’) in relation to defamation and privacy cases meaning that, as of 6 April 2019, conditional fee agreement success fees will no longer be recoverable from the losing party. However, it has confirmed that parties to a defamation claim will continue to be able to recover after the event insurance premiums for adverse costs cover for the foreseeable future.
S44 of LASPO, which abolishes the recovery of success fees from the losing party, came into force for the majority of case types in April 2013 but was delayed for defamation and privacy cases pending the outcome of the Leveson inquiry.
The announcement represents an attempt to create a balanced approach to controlling the costs of both parties in defamation cases. On the one hand, cost protection is vital to preserve and promote access to justice, however, there is also a need to give effect to the legal obligations under the MGN v UK judgment of the European Court of Human Rights. In the MGN case, the court held that the obligation for the defendant to pay a 100% ‘success fee’ to the claimant was disproportionate and that the conditional fee agreements regime was in breach of the defendant’s rights under Article 10 of the European Convention on Human Rights.
In his statement, delivered on the 29 November 2018, The Lord Chancellor and Secretary of State for Justice, David Gauke, said that:
“This approach – of abolishing recoverability of the conditional fee agreement success fee but retaining it for the after the event insurance premium – will protect access to justice, since parties with good cases can still benefit from recoverable after the event insurance in respect of adverse costs; after the event insurance discourages weaker cases as these are unlikely to be insured.”
As part of the premium recovery process, the court will still apply the test of reasonable to the cost of the premium. This means that the ATE premium must relate to the costs exposure the policy purports to cover. When putting ATE insurance in place, whether on a case by case basis or through a scheme arrangement, it remains important to be confident that you have reviewed the market and negotiated competitive terms. There is no better way to do this than through instructing a broker to search the market on your behalf.
Please get in touch if you would like to discuss our approach to putting ATE insurance in place for defamation and privacy matters.