Jackson reforms and insolvency

The current exemption for insolvency proceedings will come to an end in April 2015. The confirmation for this arose out of a written question put to the Secretary of State for Justice.

Source of the information

The confirmation that the insolvency exemption will come to an end in April 2015 came out of a written question to the Secretary of State for Justice:

  1. whether an impact assessment has been carried out on the amount of reduced income that creditors will receive as a result of the proposed end of the temporary exemption for insolvency litigation under the Legal Aid Sentencing and Punishment of Offenders Act 2012 which is planned for April 2015;
  2. what type of statutory instrument he plans to introduce to bring the temporary exemption for insolvency litigation under the Legal Aid Sentencing and Punishment of Offenders Act 2012 to an end in April 2015.

The response from Shailesh Vara, the parliamentary Under-Secretary of State for Justice responded as follows:

  1. In April 2011 the Government published an Impact Assessment in relation to the reforms set out in Part 2 of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012.
  2. It explained that while there may be a reduction in the number of cases brought where no win no fee conditional fee agreements are used, overall the LASPO reforms will tackle excessive costs. The Government does not propose to update the Impact Assessment in relation to insolvency proceedings.
  3. The LASPO reforms will apply to insolvency proceedings from April 2015. As provided in the Act, implementation will be by way of Commencement Order. (emphasis added).
The written response can be found here.

Basis for the exemption

The application of the Jackson reforms was delayed in relation to insolvency proceedings due to the Government requiring additional time to see how the reforms would impact, in particular in relation to the substantial revenue to the tax payer from such claims.

The delay is set out in CPR PD 48, para 3.1 but no date for the exemption coming to an end is provided. There has been lobbying for the exemption to be made permanent. It is now clear that that will not happen.

For further analysis of the likely effect removal of this exemption, see our news analysis from 12 September 2014 on the report commissioned by industry body R3: R3 report on the impact of the Jackson Reforms on insolvency litigation from April 2015

Further reading

If you are a LexisPSL Subscriber, click the links below for further information on the Jackson reforms:

Jackson final costs report (Subscriber access only)

Ways in which an IP can fund litigation/investigations where there are no assets in the estate (Subscriber access only)

Not a subscriber? Find out more about how LexisPSL can help you and click here for a free trial of LexisPSL Restructuring and Insolvency.

First published on LexisPSL Restructuring and Insolvency 

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