Insolvency litigation will continue to be exempt from the Legal Aid, Sentencing, and Punishment of Offenders Act 2012 (LASPO) “for the time being”, the government has announced.
Justice minister Lord Faulks said in a written statement last week that insolvency proceedings had initially been given a two-year reprieve until April 2015 from Laspo to give insolvency practitioners and other interested parties “time to prepare for an adapt to the changes…the government now agrees that more time is needed”.
No win no fee agreements will therefore continue “for the time being” on a pre-LASPO basis with success fees and after-the-event insurance premiums recoverable from the losing party. Further details will be set out “later in the year”.
Shadow Justice Minister Andy Slaughter MP accused the government of performing a U-turn and a “humiliating climb down” by not making the exemption permanent. He said Laspo was “so pitted with faults that an early review of its impact is now essential”.
R3, the insolvency trade body, said the decision protects £160m of creditors’ money a year that otherwise could have been kept by fraudulent or negligent directors or third parties. It said court cases would be uneconomical without the exemption. R3 has campaigned for the exemption to be made permanent.
R3 president, Giles Frampton says: “Insolvency litigation brings back millions of pounds every year to small businesses and taxpayers owed money by negligent or fraudulent directors. This money would have been put at risk if insolvency practitioners lost their ability to use ‘no-win, no-fee’ funding from April.”
