Money spinning

There is no question the Young report into health and safety represented a missed opportunity for meaningful debate on compensation issues. It perpetuates the myth of compensation culture, ignoring preliminary research that suggests the alleged risks are exaggerated. But there is one aspect our team at the University of Lincoln's centre for dispute resolution, compensation and risk has welcomed: Lord Young's conclusion that the Jackson reforms on civil justice should be implemented.

The civil justice system is complex, expensive and unpredictable with regard to costs, meaning that many citizens are denied effective access to justice. Lord Young's recognition that Jackson's reforms could address these problems, via the system for claiming compensation, reflects our own research into products such as third-party litigation funding, after the event (ATE) and before the event (BTE) insurance.

While all have advantages, none is a panacea for the access to justice needs of small businesses and individual citizens. In particular, conditional fee litigation with recoverability has failed to gain widespread acceptance as a cost-effective mechanism for funding litigation and promoting access to justice.

No rise

Lord Young's report claims that the system for claiming compensation is a growing industry in itself, and implies that the fees paid to solicitors are excessive. Previous research and our own research contest the claim that there has been a rise in compensation claims. In 2004 the better regulation task force concluded that there was no compensation culture, and our preliminary analysis of data across a range of compensation activity does not indicate the expected compensation claims increase.

Figures from the government's own Compensation Recovery Unit, for example, show that employer liability claims have fallen 69 per cent from 2001/01 to 2009/10 '“ from 219,183 to 78,744 in 2009/10. Our research also shows that newspaper reporting of the compensation culture has itself diminished from its high point in 2004, consistent with societal reaction to andnormalisation of other social 'ills', such as ram-raiding and dangerous dogs.

Increasing predictability and affordability

Lord Young argues that excessive solicitors' costs are met by insurance companies which then increase premiums. His proposed simplified personal injury claims procedure, similar to that for road traffic accidents, for claims under £10,000, with a view to extending this to medical negligence claims, has the potential to complement the introduction of alternative business structures and bring low-cost claims within the remit of new legal services providers specialising in this work. The proposal that such work could be carried out on a fixed-costs basis has the welcome advantage of bringing about predictability in the costs regime and potentially making access to justice more widely affordable.

We welcome the government's acceptance of a role for contingency fees in civil litigation. The Jackson report criticised the recoverability of conditional fee agreement (CFA) success fees and ATE premiums because the regime has unfortunate unintended consequences, namely: litigants with CFAs have little interest in controlling the costs incurred on their behalf, and opposing litigants face an increased costs liability. The Jackson report recommended abolishing the recovery of ATE insurance premiums and uplifts on conditional fee agreements from the losing party.

If Jackson's non-recoverability of CFAs and ATE proposals are implemented, ATE may become more expensive and less available. This recommendation also means that success fees will be borne by the client rather than the opponent, allowing many businesses to litigate their claims without paying high legal fees, and instead pay their lawyers a percentage of the proceeds of the claim.

Extending the offsetting model

These benefits might be offset in personal injury litigation if the proposed ten per cent increase in damages fails to leave the successful claimant in a neutral position. While for some claimants with minor and self-limiting injuries a small reduction in a conventional general damages award might be worthwhile in return for having a financial stake in speedy and cost-effective litigation, for others regulatory protection might be required.

Our research into third-party litigation funding shows that a model of funding litigation that allows business to offset the risks and cost of pursuing litigation against the proceeds of a claim is already favoured. Extending this model to a wider range of litigation is to be encouraged if it promotes greater access to justice.

If the aim of the Young report is to address concerns about the compensation culture and make recommendations to provide for a cost-effective non-intrusive health and safety regime, we consider the report to be a missed opportunity. The perception of the compensation culture needs to be addressed, and perpetuation of its myths should not serve as the basis for legislative reform.