Incentives matter enormously. To Economist Steven Levitt, incentives were bullets, or keys; often tiny objects, but ones with astonishing power to change a situation. A new fixed costs regime is set to be implemented from 1 October 2023, which will see the incentives for many lawyers change – and in many cases be completely reversed. These changes are quite technical, but they represent the biggest change to civil justice for more than a decade. They will also provide a fascinating case study into how incentives govern how lawyers work. What Are the Fixed Costs Reforms? In summary, these changes will apply to the vast majority of disputes worth up to £100,000 in England and Wales. This includes personal injury, debt collection and any form of dispute involving money, whether between businesses or individuals. The usual rule in litigation is that the loser pays the winner’s costs. Outside of personal injury (where legal costs have been fixed for claims under £25,000 for a decade), the winning side’s legal costs are usually calculated on the basis of time spent multiplied by an hourly rate. From 1 October, these legal costs will be fixed, based on a sliding scale relating to the complexity of the case and the stage of settlement. The more complex the claim and the later it settles, the higher the fixed costs. For non-personal injury claims, the changes have retrospective effect and will apply to most money claims where proceedings are not issued before 1 October. What this means is that legal costs paid to the winning party are no longer related to time and effort spent on the case, 38 LAWYER MONTHLY AUGUST 2023 Special Feature A significant change will come to the UK legal sector this autumn as a new fixed costs regime is introduced, changing the way many lawyers are compensated for their work. What will this mean for the profession, and how will it provoke a new wave of legal tech adoption? Jonathan White, Legal & Compliance Director at National Accident Helpline, offers his thoughts. Why the Fixed Costs Reforms Will Spark a Legal Sector ‘AI Explosion’
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