Justice Select Committee reports on Discount Rate legislation

 “setting the discount rate is more than a technical decision: it involves balancing the interests of the claimants with the defendants and also balancing the social costs”

Today the Justice Select Committee published its analysis of the draft discount rate legislation. We set out our initial thinking on the report below.

The Committee had been asked to report on this by the end of November, following the Government publishing the legislation in early September.

What happens next is not totally clear. The Government has already indicated that it will respond to the report within two months. On that basis, its plan should be clear by the end of January.

We fully expect the Government to press on with the proposed legislation but to take some note of the Committee’s recommendations about research and clarity on the necessary balance to be struck here between claimants, defendants & indemnifiers and society generally. But it seems to us that a good deal of those issues have been already addressed, for the most part, in the materials published by the Ministry following its consultation.

The tone of the Committee’s report today may be cautious, but from remarks by Ministers in the consultation material and in evidence to the Committee, the Government clearly intends to proceed as promptly as it can. If it is able to respond to this report as planned and to hold to its sense of urgency then we would expect the proposed legislation to be introduced in the New Year and before the Easter recess.

This is a hugely controversial area and it is realistic to expect the Bill to be subject to robust, and perhaps hostile, scrutiny in Parliament. It could still even be the subject of yet another judicial review; which would bring a very real risk of delay if it were to happen.

We shall provide further information as this issue develops.

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Extending the scope of QOCS protection

The basis of QOCS is that the protection it affords against adverse costs applies to unsuccessful claims for personal injuries. These are conventionally argued in negligence against the defendant whose conduct caused the accident e.g. the negligent driver or employer. But should a statutory claim against an organisation which was not the tortfeasor be regarded as a claim for damages for personal injuries protected by QOCS?

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Personal injury discount rate to change to minus 0.75%

The Lord Chancellor (LC) Liz Truss bit the bullet today and set the discount rate at minus 0.75%, to apply from 20 March. The news was issued via this statement to the Stock Exchange at 07:00 this morning. As a matter of process, Ms Truss should be congratulated for not ducking a very awkward decision – even if the financial implications of her decision are of huge importance for new and current outstanding cases alike. As to substance, views will inevitably differ hugely.

The lowered rate (it’s decreasing by a staggering 325 basis points from 2.5%) has attracted notable criticism this morning from insurers because of its inflationary effect on awards and reserves. The LC said today that she “recognise[s] the impacts this decision will have on the insurance industry. My Rt. Hon. Friend the Chancellor will meet with insurance industry representatives to discuss the situation.” It could be expected that that might be a fairly high-tempered discussion.

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