Life after the insolvency exemption

Life after the insolvency exemption

What does the removal of the insolvency exemption mean for lawyers and insolvency practitioners? Frances Coulson, managing and client services partner at Moon Beever, offers her reactions to the recent announcement.

Original news

Government plans to introduce no win no fee reforms in respect of insolvency proceedings will enter into effect in April 2016, Minister of State for Civil Justice Lord Faulks has announced. In a Written Ministerial Statement, Lord Faulks also set out the period in which a review of the reforms would be carried out.

This means that conditional fee agreements (CFA) success fees and after the event (ATE) insurance premiums will no longer be recoverable in proceedings brought by liquidators, administrators, trustees in bankruptcy, and companies in liquidation or administration.

What is your immediate reaction to the announcement?

Strangely the announcement started with the words:

‘The Government has made a priority of addressing the high costs of civil litigation in England and Wales. To that end, Part 2 of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 reforms the operation of no win no fee conditional fee agreements. Those reforms came into effect generally in April 2013 but were delayed in respect of insolvency proceedings. After further consideration the Government has decided that the no win no fee reforms should now be applied to insolvency proceedings. The provisions will come into force for these cases in April 2016.’

This appears to miss the point of the exemption entirely. It seems that history (and reason) has been overlooked. CFAs were permitted in order to address the virtually total removal of legal aid. It was part of the ‘Access to Justice’ reforms of the Blair government when they surprisingly (to my mind) got away with very little public reaction to newspaper headlines which said ‘Legal Aid to be Abolished’.

What does this mean for insolvency litigators and insolvency practitioners (IPs) in practice?

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