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New approach to cutting legal costs backed

A report from consulting firm Indecon has found that a system of non-binding guidelines on legal costs, accompanied by “significantly improved” transparency measures, would be the best option for reducing the cost of litigation in Ireland.

The report looks at four different options for controlling legal costs, but highlights what it describes as “major gaps in information” on the current situation.

Indecon had been asked to look at the issue by the Department of Justice after a 2020 Review Group, chaired by Mr Justice Peter Kelly, failed to reach a unanimous agreement on how to reduce litigation costs.

A majority favoured non-binding guidelines, while a minority backed the introduction of a table of maximum cost levels.

‘No simple solution’

Indecon examines a number of different approaches taken by other countries to cut litigation costs, but finds “a lack of clear evidence of what has been successful in terms of reducing litigation costs or improving service quality”.

“There is no simple solution that can be transposed to Irish circumstances,” it states.

The report examines four different options:

• Non-binding guidelines on maximum litigation costs,
• Binding guidelines on maximum costs,
• Non-binding guidelines with “significantly enhanced transparency measures”, and
• Binding maximum litigation costs, but only for non-complex personal-injury cases below a €30,000 settlement.

Using a scoring system to evaluate the options, Indecon finds that the third option “is likely to best facilitate the objectives of enhancing competition, and is also likely to have significant potential impacts in terms of reducing the cost of litigation, maintaining the quality of service, and meeting other policy objectives”.

Divergence from guidelines

The additional transparency measures under this option include a requirement for all clients to be informed, in writing prior to appointment, of guideline costs and the factors, if any, that could lead to any divergence from the guidelines.

There would also be a requirement for legal professionals to submit details to the Office of the Legal Costs Adjudicators (OLCA) of any divergence in costs from the guidelines. There would also be an annual publication of such cases.

Indecon finds that the option of non-binding guidelines alone would not represent a significant change from the current system, while binding guidelines “may not have the desired results”.

“Indeed, while they [binding guidelines] have the potential to reduce costs, there is a risk that, if levels are set at average cost elements, costs would rise for most litigants,” the report states.

‘No comprehensive information’

Indecon’s report says that, despite some progress in recent years, a lack of data on costs is hindering the development of policy.

“In particular, there is no comprehensive information available on what are the detailed components of legal costs for most cases which proceed to litigation, or how these costs have changed over time,” the analysis states, adding that comprehensive data on how costs vary among different providers of legal services is also lacking.

Indecon describes as “helpful” a submission by the Law Society and the Bar of Ireland that used data on legal fees provided by the Institute of Legal Cost Accountants (ILCA).

The consulting firm says, however, that its analysis of these figures shows “the extent of variance in costs and the very small number of cases in the ILCA database for any given year”.

“This highlights the challenge in attempting to identify any trends in costs,” the report adds.