From April 2016, the ‘No Win, No Fee’ reforms which were brought into force by the Jackson Reforms in 2013 for civil litigation will apply to insolvency proceedings.
In recent years the Government has reformed litigation funding, in order to tackle the high costs of civil litigation in England and Wales.
Section 44 of The Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 (the “Act”) reformed the operation of ‘no win, no fee’ conditional fee agreements. The effect is that the success fee in conditional fee agreements are no longer recoverable from the losing party in litigation. Additionally, due to Section 46 of the Act, ‘after the event’ (ATE) insurance premiums are no longer recoverable.
While the Act came into effect in April 2013 generally, the Government decided to temporarily exempt insolvency proceedings from the reforms, in light of the significant revenue that such proceedings bring into insolvent estates. There has been uncertainty as to how long this exemption would remain in force.
The Government has however announced today that it has decided to remove the exemption meaning from April 2016, the ‘no win, no fee’ reforms will be applied to insolvency proceedings. This is not welcome news to insolvency practitioners, who will no doubt recognise the restrictions that this legislation will place on bringing proceedings in respect of antecedent transactions.
In light of the above, we would urge insolvency practitioners to ensure that any potential proceedings that they are considering are issued before in 1 April 2016, when the exemption ends.
If you have any questions please contact me on 0113 336 3370.
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