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Proposed increases in the cost of litigation to hit small businesses

Last year, the government dramatically increased the cost of civil litigation in England and Wales.

This controversial hike in court fees, designed to raise funds for the Treasury, was opposed by 90% of respondents during the initial consultation stage. But, despite this, the government went ahead with its proposals, stating that the increase was necessary to fund a cash-starved court system.

As such, from March 2015, the cost of starting a civil claim valued at £40,000 increased from £610 to £2,000. What’s more, the maximum cost of issuing a civil lawsuit jumped to £10,000 for a claim of £200,000 or more – a rise of nearly 600%!

Despite creating one of the most expensive civil legal systems in the world, the government is now proposing that this fee is doubled to ‘at least’ £20,000, representing an overall increase of over 1,000%.

Today, there are real concerns about access to justice here in the UK, and any further increases are only going to exacerbate this situation.

Indeed, The Law Society – the representative body for solicitors in England and Wales – has warned that the government’s latest fee proposals will further hit those that need legal help the most, with low-income individuals and SMEs the most likely to suffer.

 The impact on small businesses

In addition to putting people and businesses off even starting a civil claim, the cost of going to court is likely to encourage large companies to deny liability when a claim is made against them. Secure in the knowledge that the injured party – no matter how justified – won’t be able to afford to go to court.

Furthermore, this assault on access to justice could cripple small businesses trying to recover unpaid invoices or making claims over other money owed to them.

In such situations, particularly when cashflow and overdrafts are already stretched, for some companies insolvency could be the only option.

Specialist legal advice can help to identify cheaper alternatives to court action, such as negotiation, mediation, adjudication, and arbitration. However, it’s important that we all do what we can to stop any further increases in court fees as this will only serve to restrict access to justice for many and will only make the courts accessible to the wealthy.

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