LASPO to apply to Insolvency Proceedings from April 2016
On 17 December 2015, Minister of State for Civil Justice, Lord Faulks QC, delivered the long awaited ministerial statement regarding the reforms to litigation funding in regarding to insolvency proceedings; being the subject of our previous articles: LASPO to apply to Insolvency Proceedings and Temporary Exemption to LASPO for Insolvency Proceedings Extended.
Despite strong resistance to the end of the exemption, Lord Faulks said in his ministerial statement:-
"The Government has made a priority of addressing the high costs of Civil Litigation in England and Wales.
To that end, Part 2 of the Legal Aid, Sentencing and Punishing of Offenders Act 2012 reforms the operation of no win, no fee conditional fee agreements. Those reforms came into effect generally in April 2013 but were delayed in respect of insolvency proceedings.
After further consideration, the Government has decided that the 'no win, no fee' reform should now be applied to insolvency proceedings. The provisions will come into force for these cases in April 2016".
From the statement it is apparent that Lord Faulks considers that there has now been sufficient time for insolvency professionals to adapt to the recent changes in civil litigation funding that civil litigators have been dealing with since April 2013. This opinion is not however shared by R3, one of the professional bodies who have continually opposed the implementation of Sections 44 and 46 of LASPO. R3's president, Phillip Sykes, expressed deep disappointment in Lord Faulks' decision to curtail the exemption to insolvency proceedings and said, in response:-
"The Government is potentially writing off hundreds of millions of pounds per year owed to not just HMRC, but to hundreds, if not thousands, of ordinary honest businesses as well.
The only winners today are the rogue directors and others who refuse to repay money owed to creditors after an insolvency. We're back to an uneven playing field, where rogue directors hold all the cards - and the cash.
The end of the exemption leaves a huge funding black hole for insolvency litigation. This is a blow to the wider business community and the insolvency profession".
Whilst the exemption is to come to an end in April 2016, there has already been an announcement (in the same ministerial statement) that there will be a post-implementation review of the LASPO Part 2 reforms between April 2016 and April 2018.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.