As well as the ongoing impact of the pandemic on the way in which dispute resolution is conducted, and litigation arising from the Official Injury Claim (OIC) portal, one of the most significant developments expected this year is the extension of the fixed recoverable costs regime.
With a newly announced discount in Northern Ireland, and the discount rates in Scotland, Northern Ireland and England & Wales expected to be reviewed by the end of 2024, insurers should turn their attention to whether they need to allow for a change in the methodology and estimation of the rates within their reserves.
In November 2021, Kennedys responded to the UK Ministry of Justice’s Call for Evidence on the future of dispute resolution in England & Wales, highlighting that technology has the potential to resolve disputes on a more efficient, humanised, simpler and inclusive basis.
Progression of access to remote justice and technological advancements in dispute resolution will assist the UK in establishing itself as a modern, resilient legal system.
Continuing the theme of open justice, from Spring 2022 thousands of court and tribunal judgments will be available via The National Archives for the first time, increasing transparency and securing free access for all.
On 15 November 2021, the Civil Justice Council (CJC) published an interim report for consultation on the role pre-action protocols (PAPs) should play in an increasingly digitalised justice system. The report canvasses a number of reform options, including making all PAPs available online via portals, formally recognising that compliance with PAPs should be mandatory, along with requiring parties to complete a joint stocktake report/list of issues as a final step before the start of proceedings. The report also discusses strengthening the management of pre-issue disclosure. The CJC Working Group will draft a final report for consideration by the CJC, likely in the Spring of 2022.
It is important for insurers and compensators to consider what impact different rates and approaches to setting the rate may have on pricing risk, and whether localised pricing reflects the outcome sufficiently.
The discount rate in England and Wales is currently -0.25%. The UK Government has said it will revisit the rate every five years, at most. The next rate review must start by 14 July 2024 at the latest and finish by no later than 10 January 2025 (180 days thereafter).
Whilst this may seem a long time, many personal injury claims and in particular, catastrophic injury claims, can have significant life spans and therefore can expect to settle on a future discount rate.
In Northern Ireland, rather than allowing the Damages (Return on Investment) Bill to pass through the Assembly as planned (before setting the rate), on 25 March 2021, the department proposed that secondary legislation should be used to change the discount rate under the Wells v Wells  framework, and introduced an amended discount rate from +2.5% to –1.75% from 31 May 2021.
The Northern Ireland Damages (Return on Investment) Bill received Royal Assent on 2 February 2022, and on 21 March 2022 the Department of Justice confirmed that a new discount rate of -1.5% would come into effect on 22 March 2022. This will result in Northern Ireland continuing to have the lowest discount rate in the UK.
This will be disappointing news for insurers and compensators, many of whom predicted the new rate would be -0.75% in line with the rate in Scotland.
The next review of the rate will be in July 2024.
Fixed recoverable costs
In September 2021, the UK Ministry of Justice confirmed that fixed recoverable costs (FRCs) will be introduced in the fast track for most civil cases worth up to £25,000. The fast track will also be extended (rather than the creation of a new separate intermediate track as originally thought) to include ‘intermediate’ cases valued between £25,000 and £100,000.
The new rules will include a greater emphasis on penalising delays in the resolution of cases. The Government will implement an uplift of 35% of FRC where Part 36 offers are beaten, and further, there will also be a 50% uplift on fixed costs where a party has engaged in ‘unreasonable behaviour’.
Based on the CPRC minutes from November 2021, it appears that October 2022 is when the extension of fixed costs should take effect. Will this deadline be met? Only time will tell.