07 December 2023
Fixed costs or online dispute resolution?
Guy Pendell explores options for civil litigation in England & Wales, the impact of the introduction of fixed recoverable costs (FRCs) and alternatives available for dispute resolution.
Civil litigation in England & Wales is a complicated business. There are different courts and different ‘tracks’ depending on your case. Outside of the small claims court, there are now three ‘tracks’: the fast track for cases up to £25,000, a new intermediate track for cases between £25,000 and £100,000 and the multitrack for larger cases.
In litigation in many countries there is a ‘loser pays’ principle. It means that whoever loses the case ends up bearing not only their legal costs but also the legal costs of the successful party. This principle does discourage unmeritorious, abusive or vexatious litigation, but it can also impose a significantly greater financial burden on the losing party, particularly if the cost of litigation is high.
Amid concerns that litigation was becoming too expensive, Sir Rupert Jackson conducted an in depth review of the costs of litigation in England & Wales in 2017. His report included recommendations that led to the introduction of fixed recoverable costs (known as FRCs). The concept is simple enough. For cases below a certain value, costs can still be claimed in the proceedings, but the amount that can be recovered from the losing party is fixed (and may only be a small proportion of the actual costs incurred by the successful party). From 1 October 2023, the FRC regime was extended to apply to most cases valued up to £100,000, and it may be increased further in the future.
These changes have not been welcomed by large parts of the legal sector. Concerns are understandable. If it costs more to bring a claim than can be recovered in the proceedings, is that fair for either party? The hope, presumably, is that the FRC regime will force parties to find ways to reduce the costs of those proceedings where they know they will have to bear a large part of their costs whatever the outcome. An admirable ambition, but is that achievable when the average case still takes over a year to complete?
Fixing recoverable costs probably will influence behaviours - in some cases it might dissuade a party from bringing a claim at all, or in others force a settlement of an unmeritorious claim because the cost of defending it will not be proportionate. That, however, is not access to justice, its not justice at all.
What are the options? A better way to make justice accessible and proportionate in cost is to re-engineer the process to make the actual time and cost of the process proportionate to the dispute.
That is why pinqDR has launched its online dispute resolution platform, with bespoke rules for B2B disputes. When parties can have their dispute determined in just 8 weeks, the entire process is far quicker and more efficient than any alternative binding process - whether it is arbitration or litigation.
Parties may still incur legal costs (if they wish) and they can ask the pinqDR arbitrator to decide how those costs should be allocated, but because the whole process only takes 8 weeks from commencement, those costs should only be a fraction of the realistic cost of running a case in the courts for over a year.