One day to go

So, per the header, my year of blogging starts in earnest tomorrow.

In a bit of panic, however, I thought I'd better dust off the old blogging format and get ready / remove the excuses for getting started come January 1st.

I'm still not really sure what I shall be writing about. Music seems certain to be a major part of it (I sing - quite a bit), together with my tendency to get mildly cross about pseudo-science, quackery and other such tripe. And I am sure that examples of poor, if not downright evil, government will be highlighted if there happen to be any *sets four-hourly alarm*.

In my work life I am involved in the legal system and I have very strong views about (the lack of) access to justice and where we have gone badly wrong over the last few years. I'm going to try and steer away from that because it gets pretty heavy, and because for me this isn't about work. But you can be sure something during the year will wind me up enough to get onto the page.

Throw in some diet / health stuff and perhaps something about whatever books I'm reading right now and that's probably a fair starting point.

What there won't be much of: films (don't do much of them), reality TV - in fact, TV generally (others do it well enough and to comment on it I probably have to watch it) and sport - which I do love but can be a bit alienating.

So, here's to it - let's see how far we get!

History II - recoverability to Jackson

Last week, I looked briefly at the Legal Aid system, and the efforts to replace it that led to the Conditional Fee Agreement.

The 1999 Access to Justice Act led to the next big change. Until this point any claimant in certain types of action could take out a CFA and ATE insurance (see last posting for definitions) but would have to bear the costs of these themselves. From April 2000, these additional charges fell to be paid by the other party if the claimant won her case.

So, think through the logic of this for the moment. As a defendant, who happens to be faced by a claimant using CFA / ATE insurance, you know that if you lose the case you will have to pay damages, ‘normal’ lawyer’s fees, a success fee which could be the same as the fees again, and an ATE premium. As a claimant however, you can bring your case at no cost – win or lose.

This is a pretty significant change in the legal model. Before CFAs it was pretty common ground that you never recovered al your costs in a won action – so as claimant, you always had some (as Americans and business school graduates seem to charmingly refer to it) ‘skin in the game’. Now defendants see immediate increased costs, and claimants get a free shot. Or, from a claimant perspective, a wronged individual gets her entitlement and the wrongdoer absorbs all the costs.

To say that this found favour with claimants and their lawyers would be an understatement. If a personal injury lawyer wishes to compete in the normal market space then ‘no cost’ law has to be a guarantee. Any lawyer who can set success fees successfully should at least balance the books from them. Defendants have the view that claimant lawyers do rather better than this – if one were to select only the strongest cases and use all sorts of reasons to justify why they might lose – it is possible to run a book of cases which you assess as being marginally better than 50/50, but where you actually win 80%.

Where it gets really bizarre though is if you think like an economist about it. What controls prices in a market? Well, we all usually look for value for money. This doesn’t mean we all buy the cheapest – the free market has allowed Waitrose to flourish at the same time as Lidl does. It does however mean that we try and shop around, and feel that what we are paying for makes sense to us. This means that for commodity products – where the features are pretty much standard – priced tends to be the deciding factor. If you want further evidence of this theory, think about the insurance on your car. I accept that if you drive a Bentley or an import you might need to go to a specialist, but for most of us, we are encouraged to use the services pimped by a stereotypical Italian tenor, or a Russian meerkat. These scour the market for quotes and did, I must admit, save me a packet (though I’ve never felt the same about Meerkat Manor since).

So back to law – here we have products (CFA and ATE) which the buyer will NEVER pay for! Lose and they are free – win and the other side pays. How much competitive pressure is there on the pricing of these products? About the same as the concentration of active ingredients in a 30C homeopathic arnica. The only check on these sums is what the courts and the CPR will allow you to recover.

This is an unusual market model. There is clearly competition, so it’s not a monopoly which sets its own price. Equally, it is not a cartel – no-one suggests the purveyors of these products are getting together and fixing prices – apart from anything else they don’t need to because the buyer is told – ‘you won’t ever have to pay it’. It feels to me closer to the economics of a basic utility post-privatisation. The reasons for the market structure are different, but there is no supply and demand check on prices in either – if Thames Water is expensive – I can’t go elsewhere.

Utilities get round this by having a regulator who caps prices – Ofwat etc. Whilst this was aired for ATE particularly, it never happened.

And now along comes Jackson. My next blog will look at what he’s trying to do, where it will work, and where it won’t, and the rather large elephant in the corner of his study.

JLS (Jackson's Legal System)

To people working in the Law, the Jackson review is big news. We’re not talking about Michael’s post mortem here, our Jackson is Rupert, and he is very much alive.
Lord Justice Jackson was commissioned in late 2008 to look into the way civil (i.e. not criminal) cases were funded. His remit took in two areas – the cost of litigation and access to justice.

In January 2010, Jackson LJ’s final report was published. Prelims and final together get towards the ‘small deciduous forest’ category of publications.

So we have a set of recommendations which the (or given current timings a future) government will look at and decide what to do with.

Over the next few weeks I’m going to look at some of the bits of Jackson, where the cure will be good, and where it may just kill the patient.

But first – week one – history.

Remember Legal Aid? In the 1940’s, while William Beveridge was tackling his 'giant evils', in a report that would lead to the NHS and the Welfare State, the lawyers were also busy. The Rushcliffe Report in May 1945 led to the enactment of the Legal Aid and Advice Act (1949).

The aim of the Act, which came into force on 30th July 1949, was that no-one should be ‘financially unable to prosecute a just and reasonable claim or defend a legal right’.

Now, it won’t surprise you to know that, despite this rapid legal action, it took a little longer for things to get going. Nevertheless, the ambit and effectiveness of Legal Aid grew over the next forty years. So, unsurprisingly, did the cost.

In an effort to rein in what was seen as vast expenditure (well if you think that was vast, wait to see what came next) the government, by means of the Courts and Legal Services Act 1990 allowed for Conditional Fee Agreements.
You’ve seen these on TV, in the middle of some crappy morning chav-fest, advertised as ‘no win-no fee’. You know you sneak a peak when you’re working from home. ADMIT IT!

The idea is economically simple. Let a lawyer charge a bit (technical legal term) more in case that she wins and she can afford to not charge people at all in cases where she loses. Allows access to law for good claims and cuts out Legal Aid at a stroke.

Of course, if you know your English legal system, you know that costs usually follow the event. This means that the loser usually pays most of the winner’s costs. So, it’s all very well not having to pay your own solicitor – you’ll just be bankrupted to pay the other side’s solicitor, barrister, expert etc.

Here it starts getting really odd, because someone came up with insurance for this, called After-the-Event or ATE. Now, if you know insurance you’re thinking ‘car, house – buy it in case the worst happens’. I know you’re not thinking ‘a good way of getting the better part of my holiday paid for when my dad’s Rolex is stolen, honest’ because you’re reading this blog, and not watching daytime TV. This insurance is that you know you’re injured, but Mr Insurer will pay the costs if you lose (and take a premium for his trouble). To me, whilst this may be called insurance, the word I’d use is gambling, but what do I know!

So, you get your solicitor on a CFA, you buy some ATE and sit back and let the case happen:

you lose – you pay nothing, walk away not exactly happy, but no poorer than you were.
you win – you get your damages, but you have to surrender part of it to pay the solicitor’s mark-up (the ‘levy’ to deal with the losers, and the ATE premium.

Now, some people don’t like this ‘deductions’ business – especially when Watchdog or its 1990’s equivalent gets wind of some poor sod being left with Bus Fare Home after everyone else has taken their share.

So, the system was changed to deal with this, and that’s where the whirlwind began. In the interests of suspense etc, I will be leaving that for the next instalment.