Scales of justice
Civil litigation costs are criticised as "disproportionate and excessive"
Lawyers in "no win, no fee" civil cases should no longer have a "success fee" paid by the defendants, but should get a share of damages, a review has said.
Lord Justice Jackson found huge rises in civil litigation costs in England and Wales in recent years and said reforms could save people millions.
The system was not benefiting the public, with fees to lawyers sometimes more than 1,000% of damages, he said.
The government said it would consider the "significant recommendations".
The report said a "significant cost saving" could be made by ending the system of defendants paying success fees and footing the bill for insurance against a failed claim.
Currently, defendants can face a total bill four times the actual cost of a civil action.
The report suggested a 25% limit on the share of damages paid to lawyers in a successful claim.
It also called for a 10% rise in damages pay-outs to ensure claimants were still properly compensated.
'Proportionate cost'
The civil county court system is self-funding so must pay for itself from fees paid by claimants.
The review was ordered by the Master of the Rolls in 2008 to address judiciary concerns about the escalating costs of civil litigation.
Lord Justice Jackson was asked to make recommendations which would promote access to justice "at proportionate cost".
His final report said the sale of personal injury cases to lawyers by so-called "claims farmers" should be banned.
He criticised the "escalation" of referral fees to claims management companies since the introduction of the Access to Justice Act in 1999.
There is too much money swilling around in the personal injury compensation process
Lord Justice Jackson
Solicitors should compete on who would take the smallest share of a client's pay-out, rather than on paying the most to "buy" the case.
"The focus of our litigation process should be upon compensating victims, not upon making payments to intermediaries and others who have moved in recent years into the personal injury compensation process," the appeal court judge said.
"The fact that such substantial referral fees are being paid illustrates that there is too much money swilling around in the personal injury compensation process."
The report also said more homeowners should buy legal insurance to cover costs of "nuisance" rows with neighbours, or that should be included more in general household insurance.
Justice Secretary Jack Straw called the report "a remarkable piece of work which is based on extensive consultation and puts forward a broad range of significant recommendations for reform".
"I look forward to considering these proposals in detail," he said.
'Reluctant' lawyers
The review was welcomed by the Lord Chief Justice, Lord Judge, and the Master of the Rolls, Lord Neuberger.
"The judiciary has been concerned for some time that the costs of civil litigation are disproportionate and excessive," said Lord Judge.
Lord Neuberger said: "Without action, costs will continue to spiral out of control and justice will be undermined, and the public interest severely affected."
But Steve Hynds, director of the Legal Action Group, warned reforms would make it harder for people to find legal representation.
There are changes proposed which may increase the likelihood of litigation
Andy Millmore
Head of litigation, Harbottle & Lewis
"Solicitors are going to be more reluctant to take cases on - they already are, I think.
"They won't take a 50-50 case on; there needs to be a better chance than that to be worth taking the risk of taking the case on, particularly if you're relying on the damages to actually pay your success fee."
Andy Millmore, head of litigation at City law firm Harbottle & Lewis, said the proposals could herald "a sea change in how litigation is run".
He said: "The initial reaction suggests that defendants are generally the winners, as the amount of costs recoverable by claimants can be restricted in some cases and in certain ways.
"On the other hand, there are changes proposed which may increase the likelihood of litigation, in particular the suggestion that lawyers should be able to undertake work on a true 'contingency' basis, with their recovery directly linked to the recovery made by the claimant."
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