Scotland
There has been an increase in the quantity of litigations, the variety of claims being raised, and the willingness of large creditors to enforce court decisions against individuals. This trend is believed to continue as the wider economy remains in flux.
Several key trends are expected to shape the legal landscape in Scotland over the next twelve months. It is anticipated that there will be an increase in group proceedings (similar to class actions in England and Wales) as well as developments in the law of unjust enrichment, which is expected to impact contract disputes.
Further, the introduction of the Bankruptcy and Diligence (Scotland) Bill is likely to bring changes to insolvency proceedings, affecting both creditors and debtors and changes in national planning policies are expected to lead to more restrictive approaches to housing land releases which we anticipate will increase litigation in these areas.
1. Is third party funding permissible for disputes?
Yes, third-party litigation funding is permitted in Scotland.
It is governed by the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (the “2018 Act”). The 2018 Act mandates disclosure of financial assistance in legal proceedings from individuals not involved in the case. It requires revealing the funder’s identity, any intermediaries, and details of the assistance.
Commercial funding or cases where non-commercial funders get a share of damages need specific disclosure after the case’s resolution. The court can then impose expenses on the funder and intermediaries. Exceptions include non-commercial funding like success fee agreements, trade unions, or family funding in family proceedings. Payments from the Scottish Legal Aid Fund are exempt as they are already governed by the Act of Sederunt (Civil Legal Aid Rules) 1987.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
Yes, conditional or contingency fee arrangements are permitted.
The 2018 Act introduced reforms to civil litigation funding in Scotland, that permitted success fees.
There are however certain restrictions. The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (Success Fee Agreements) Regulations 2020 cap the success fees payable to solicitors to 35% of damages in employment cases, and 50% of damages in commercial cases.
Personal injury cases are subject to a sliding scale:
- 20% of the first £100,000 damages recovered.
- 10% of damages recovered over £100,000 and up to £500,000; and
- 2.5% of damages recovered over £500,000.
3. Can the court or tribunal order one party to pay the other’s legal costs?
Expenses (legal costs) are a key part of any Scottish litigated cause. While the court has an unfettered discretion in relation to the award of expenses, there are several rules governing levels of awards. The general rule is expenses follow success.
Whether an award of expenses should be made is a matter of discretion for the court. In the exercise of that discretion, the court also has inherent power to decide who the expenses should be paid by, on what scale, and to what extent expenses should be paid. An example where the court uses its discretion is where the court believes the solicitor for a party has acted improperly or unreasonably. The solicitor can be found personally liable for expenses in the action.
Reasonably incurred counsel fees may also be recovered if the court sanctions the cause suitable for the use of counsel.
Legislation has curtailed the court’s power to award expenses when a party is defending small value and Personal Injury actions where it is usually not possible to recover any expenses incurred, even if successful. There are limited exceptions if the claimant or pursuer acts unreasonably throughout the action.
4. Is insurance available to protect against adverse outcomes for funded litigation?
After The Event (ATE) insurance can be obtained in Scotland from various providers. This insurance can cover the costs of the opposing party alone or both the opposing party’s costs and a part of your own costs, depending on the policy’s level and terms of indemnity. ATE insurance can encompass expenses accrued prior to policy inception, with coverage amounts ranging from a few thousand pounds to £10 million or more.
Typically, ATE insurance is accessible only to claimants, though some insurers may offer coverage to defendants as well. ATE insurance does not include coverage for the insured’s own management time and expenses. It may, however, cover certain expenses incurred by solicitors, such as counsel fees, during the investigation and pursuit of the claim.
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