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As court fees in the UK rise, Annecto Legal’s Michael Lent considers the effect this may have on smaller businesses looking to take a case to court, and the alternative funding options available.

The British government has set out on a mission to improve the efficiency of HM Court service at a reduced cost to the taxpayer. Sounds too good to be true? Yes, because it is. The laws of physics state that each force must have an equal and opposite reaction, and so accordingly as the responsibilities of the taxpayer get reduced, court fees must rise in the other direction.

Back in March 2015, proposed fee increases to a significant range of court proceedings were implemented. These changes have, however, not put the matter to bed. Despite numerous reports of dissatisfaction with the fee increases from businesses, September 2015 has seen the government launch a consultation regarding potential further increases to court fees. The deadline for comment submission has now passed, the results are yet to be published but from the perspective of SME’s at least, another increase would certainly serve to worsen the situation.

How much are court fees going to increase?

The first wave of changes now mean that any business wishing to recover at least £100,000 from any law suit must pay an upfront cost of £10,000. In some cases this represents a 600% rise in costs, which shows the extent to which SME’s may be finding it tough out there.

Already, as a result of these developments, more SME’s than ever are finding themselves in a scenario where they perceive the act of seeking justice as too much of a financial risk, even if the potential rewards are significant and their case is strong. An estimate claims one third of SME’s decide not to take action when they could do so due to their struggle to justify what are likely to be lengthy court battles. In fact, as recently reported in the FT, the upcoming results of the most recent consultation could see a proposal to double the upfront fees to £20,000 become a reality.

In theory it’s possible that an upcoming announcement could see thoughts of future increases quashed and the previous changes reversed. However, given the Government’s desire to streamline and improve the court systems then it’s unlikely that any changes will be made, and even less so reversed, which would see more money coming from the taxpayers pocket in lieu of extra charges.

 So, how much are court fees going to cost my business?

If, the results of the consultation come back with a decision to double the charges, the financial implications for businesses could be severe. The prospect is particularly concerning, coming so soon after the March increases as the government will not have had time to assess the impact of those first changes, as Jonathan Smithers, president of the law society has already commented. Common issues such as professional negligence or breach of contract disputes could cause serious issues for SME’s.

 What help with court fees is available?

A foreseeable consequence of these changes is the rise of third party litigation funding. In fact, it has already gained impetus as a viable solution following the March increases. With the financial risks of a case being underwritten by a third party, at the expense of a percentage of the reward when the case is won, smaller businesses are able to have their day in court.

If you think your business has a cause for litigation but would prefer to transfer the costs and risks of litigating on to another party using funding and insurance, contact one of our experts today to discuss your commercial litigation funding options.