Now that the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act has entered the statute book, I'm looking at where the government is up to in terms of the overall Jackson package of reforms for personal injury compensation.

The foreword to Lord Justice Jackson’s review sums up its findings and recommendations with impressive brevity: 'In some areas of civil litigation, costs are disproportionate and impede access to justice. I therefore propose a coherent package of interlocking reforms, designed to control costs and promote access to justice.' This is the key to Jackson’s proposals - that they work as a cohesive package that will only achieve the overall aim if they are implemented in full. A piecemeal approach in which certain aspects are introduced whilst other elements are discarded or delayed will not deliver Jackson’s vision of effective reform.

The government is now in the process of implementing the reforms, but Lord Justice Jackson’s statement back in 2009 belies the complexity of the process involved. Implementing the reforms calls for the introduction of primary legislation as well as a series of changes to judicial rules and policies.

The legislative changes that LASPO brings in will take effect from April 2013, and there is still much to achieve in the next 12 months if the complete package is to be implemented in a cohesive way. This challenge is further compounded by the political and social importance of the reforms, which are almost certainly a ‘generational’ change, in that once they have been implemented it is unlikely that they will be re-visited for some years to come. There is therefore, every reason to try and get them right first time.

This is true both for those in need of redress and for those who pay for the system - the insurance premium payer, council tax and business rates payers, taxpayers and for all consumers of goods and services where the cost of the current system is reflected.

Jackson’s proposals

Lord Justice Jackson’s recommendations briefly comprise the following elements:

1. Ensuring that the level of legal fees are proportionate to the nature and complexity of the case in question.2. Banning the recoverability of success fees and after-the-event insurance premiums.3. Increasing the level of general damages awarded in personal injury cases by 10%.4. Banning the payment or receipt of referral fees for the details of injured claimants.5. The introduction of qualified one-way costs shifting - the importance being the interpretation of the word qualified.6. Introducing fixed costs across all classes of personal injury claims.7. The investigation of a market software tool for the evaluation of pain, suffering and loss of amenity.8. Allowing contingency fee agreements or "damages based agreements".9. Returning Part 36 to a hard-edged mechanism and further penalising defendants who do not accept reasonable offers to settle by claimants.

Legislative change

Certain of the above elements are incorporated in LASPO. These include non-recoverability of both ATE premium and success fees, Part 36, DBAs and referral fees. These clauses were subject to close scrutiny in both the Commons and the Lords and as a result of that process, the so-called Jackson Clauses were passed unamended save for one important revision tabled by Kenneth Clarke which places mesothelioma claims out of scope of non-recoverability of both the success fee and ATE premium. This is until a review is undertaken on the impact of these measures upon those who contract this terminal disease.

The remaining measures proposed by Lord Justice Jackson are not steps that require primary legislation and will be taken forwards by the Ministry of Justice, Civil Justice Council and the Rules Committee. Because of the interdependency of the measures proposed by Jackson, all of the elements - not just those addressed in the LASPO Act - need to be introduced simultaneously if they are to avoid giving unfair advantages or disadvantages to either claimants or defendants.

For example, the ban on recoverability of ATE insurance is dependent upon the successful implementation of qualified one-way costs shifting. Similarly, the banning of the recoverability of the success fee is linked to the 10% uplift in Pain and Suffering and Loss of Amenity damages which is intended to provide funding to the claimant to meet their solicitor’s success fee. Finally, on LASPO, there are concerns regarding the drafting of the referral fee ban. This is limited to personal injury claims only and to those who are currently regulated by the Financial Services Authority, SRA, Bar Council and the claims management company regulator. It omits from its scope credit hire organisations and other businesses including garages, body shops or rescue firms which are also known to charge referral fees as part of the process.

These omissions, allied to the advent of alternative business structures, means that circumvention of the ban as drafted is a strong probability and that little is likely to change in terms of overall behaviours. In fact, the key to controlling the worst excesses of claims farming is to manage down the level of legal costs. In the RTA Portal model, a claimant lawyer currently receives £1,200 for processing a claim to settlement at the end of Stage 2. That lawyer may have purchased the claim for £800 or more. The lawyer is therefore left with £400 and is still able to make a profit. If the referral fee is to be banned then let us see a commensurate reduction in the fixed fee.

Of course, the great irony in this system is that the claimant lawyer who bids the most to procure the case then has the least amount of money to actually investigate and press the claim. It also often ends up with a claimant having a lawyer based 200 miles away whom they never see. That is what many call access to justice in today’s form. In the LASPO debate in the Lords on 14th March, Lord McNally, for the government, predicted that the £1,200 figure will be 'reduced significantly'.

Review of legal fees

At the moment, the legal fees paid to many claimant solicitors are ultimately used to pay referral fees to acquire new cases and this in turn creates the market for claims management companies to operate in. Therefore the proliferation of claims management companies - so often referred to as a cause of the perceived compensation culture - is, in fact, a symptom of the excessive costs paid to the lawyers negotiating compensation claims.

To deliver a more sustainable and affordable compensation system, a thorough review of legal costs in personal injury claims is required. This needs to cover not just Portal claims but cases outside the Portal and the Guideline Hourly Rate. In February, Jonathon Djanogly MP issued a consultation letter to stakeholders asking for comment and evidence to support introducing fixed fees in all personal injury accident claims up to £25,000 in value and on the horizontal and vertical expansion of the RTA Portal approach.

The deadline to respond to this consultation is the 25th May 2012 and what happens as a result of this will be key to the overall effectiveness of any reforms. The level of the fixed fee will dictate the overall cost of the claims process, influence the behaviours of participants such as claims farmers, and provide consistency and predictability to those who pay for the system.

It is important that access to justice is not impeded. The balance the MoJ needs to strike is to deliver a system in which those who need redress can access the right lawyer at the right price but that, overall, the process is affordable and delivers for all of society.

For this reason, there is a strong argument for broadening the scope of the consultation. If there is any significant differential between Portal and non-Portal costs then this is likely to see claimant lawyers striving to exit as many claims from the Portal as is possible. Whilst the process must incentivise speedier settlements in a less adversarial environment, there must be no perverse incentives for lawyers to exit claims and litigate.

The Djanogly letter is also careful to refer to accident cases on Employers and Public Liability (EL and PL) policies. Many see this as a missed opportunity as there is in fact no good reason why certain ‘legacy’ or ‘long-tail’ claims such as deafness and vibration cannot be subject to a fixed-costs regime and a more streamlined process which would see claims settled quicker and at reduced transactional cost.

The position on costs reform has been somewhat overtaken by very recent announcements by government who have undoubtedly been agitated by extensive media coverage on the epidemic that is whiplash. The government have committed to consulting on medical reporting/evidence issues and more fundamentally, the limit of the Small Claims Track. Whilst we have yet to see this latter consultation paper, we understand that it will consider whether it is appropriate to increase the Small Track Limit to £5,000.

This would represent significant change and would need to be considered carefully against the need for access to justice. Such a move may encourage the utilisation of DBAs allowed for in LASPO and that may ultimately become the landscape for pursuing lower-value personal injury claims. The costs element of Jackson, and the current and forthcoming consultation, is really the crux of the whole issue. It is not about reducing damages for the injured, nor about impeding access to justice - it is about delivering compensation and, where appropriate, rehabilitation at a reduced transactional cost.

The process is capable of being streamlined and there is scope for all parties to improve their game in terms of handling. The injured victim deserves a better system but those who fund the compensation process should also get a better deal in terms of reducing cost, which in turn should be reflected in savings for the consumer across the board.

A once-in-a-generation opportunity

The goal is to move the injured claimant back into the centre of the process and deliver compensation swiftly and in an efficient and affordable process that delivers access to justice for all - both claimants and defendants. It is about removing the so-called fat from the process by setting legal costs at a proportionate level to curtail the buying and selling of injured people’s details.

Legislators and those who amend the Civil Procedure Rules must consider the detail and seek to clearly define the new procedure. For those who remember the period after the Woolf reforms, it is important that there is no re-visiting of the years of satellite litigation experienced then to determine the intent and meaning of the new drafting. Ultimately, the goal is to move back to a position where insurance is more affordable for all consumers - and especially for our young motorists to ensure that they have both social and work mobility.

We have a once-in-a-generation opportunity to fix a civil justice system that has become highly dysfunctional and enormously costly to the UK economy as a whole. The success of the reforms now depends on what happens in the melting pot of Westminster, but all parties have a responsibility to ensure that pressure is maintained on decision-makers to ensure all aspects of the reforms are implemented in a coherent way.

Steve Thomas is director of market affairs, Keoghs