Old conditional fee agreements did not breach human rights law, Supreme Court rules

Five of a panel of seven Supreme Court judges said that the fact that the fees in this case amounted to around £500,000 did not mean that old rules allowing successful parties to recover insurance premiums and their lawyers' success fees were disproportionate. In their leading judgment, Lords Neuberger and Dyson said that the test was whether something was proportionate and met a legitimate aim "even if it operates harshly in individual cases".

The judges said that there was a "powerful argument" that the scheme set out in the 1999 Access to Justice Act (AJA) was compatible with the European Convention on Human Rights (ECHR). This was because allowing successful parties to recover their lawyers' 'success fees' under conditional fee agreements (CFAs), and after-the-event (ATE) legal expenses insurance premiums, was "a general measure which was ... justified by the need to widen access to justice to litigants following the withdrawal of legal aid", they said.

"The scheme as a whole was a rational and coherent scheme for providing access to justice to those to whom it would probably otherwise have been denied," they said.

"It was subject to certain safeguards. The government was entitled to a considerable area of discretionary judgment in choosing the scheme that it considered would strike the right balance between the interests of appellants and respondents whilst at the same time securing access to justice to those who would previously have qualified for legal aid. It had to find a solution to the problem created by the withdrawal of legal aid," they said.

In February 2014, the Supreme Court ordered the operators of a speedway track in Suffolk to pay £10,350 in damages to a couple that lived in a bungalow backing on to the site as well as cover 60% of their costs, which now stood at over £500,000. In a further judgement, in July 2014, the court raised the possibility that these "disproportionate" costs suggested that the old regime was potentially incompatible with the ECHR right to a fair trial. However, Lord Neuberger said that it would be "wrong" for the court to decide on the point without the government having the opportunity to state its case before the court.

The previous recovery regime was replaced by a new civil court costs and funding regime from 1 April 2013, as set out in the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO). Changes made by LASPO, following the recommendations of Lord Justice Jackson in his review of civil litigation in England and Wales, included ending the recoverability of success fees and ATE insurance premiums from the unsuccessful party, save for very limited exceptions, and for CFAs and ATE policies entered into before the law changed.

Before publishing its latest judgment, the Supreme Court heard submissions from the attorney general and UK justice secretary, as well as from interveners including the Asbestos Victims Support Group Forum and the General Council of the Bar. It noted that the European Court of Human Rights had declared the AJA scheme incompatible with the ECHR in 2011, in a privacy case involving the supermodel Naomi Campbell. However, the court's reasoning in that case was based on a "balancing" of the newspaper's ECHR right to freedom of expression with Campbell's right to a fair trial, the judges said.

"The right to freedom of expression is always given particular weight by [the European Court]," the judges said.

"As the court said ... the most careful scrutiny is called for when measures are capable of discouraging the participation of the press in debates over matters of legitimate public concern. It concluded that a fair balance had not been struck between the article 10 rights of defendant publishers and the article 6 rights of appellants who allege defamation or breach of privacy. But in our judgment the balancing of the article 6 rights of appellants against those of respondents is an exercise of a wholly different character," they said.

Dissenting judges Lord Clarke and Lady Hale disagreed on this point, finding that this was not enough to overrule the "flaws" in the previous system identified by the European Court in the Campbell case. The system was "arbitrary" and "singled out from the class of unsuccessful litigants a subset of those who happened to have been opposed by CFA/ATE-funded litigants and imposed on that subset the burden of funding other unsuccessful cases which did not involve them at all", they said.

Legal costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com, said that the decision was "a victory for common sense … apart from the costs of all the lawyers and counsel on the point that arose from the earlier Supreme Court judgment".

"The combined expenses of up to 20 barristers, numerous lawyers, parties plus eight interveners and three days of hearing time must have been around £500,000," he said. "And all to challenge a system now largely abolished, and which had never really been doubted by judges over a 10-year period. But the decision does at last provide an answer to the issues raised in respect of the old CFA and ATE regime."