Experts warn that legal costs will be hidden, not removed

The government's reforms of no-win, no-fee rules will not reduce legal costs as claimed, legal experts have argued.

Last week the Department for Constitutional Affairs (DCA) published its proposals for reform of conditional fee arrangements (CFAs). The DCA said the existing regime was "unnecessary and ineffective" and that it would be dropped in October for a new system.

The DCA plans to establish a set of guidelines on what claimants should be made aware of by their legal counsel.

It is hoped this will reduce the number of legal challenges mounted, reducing litigation costs.

But past president of the Forum of Insurance Lawyers Claire McKinney said that while the reforms would lead to fewer legal challenges to the agreements in court, there would still be costly legal arguments behind the scenes.

She claimed the DCA was "passing the buck" to the Law Society, which will be responsible for policing the new rules.

She said: "The DCA wants to stop technical challenges. By doing this there will be fewer technical challenges [going through the courts]," she said. "But we won't know about what the costs are because they will become hidden."

She added there could also be some confusion about how lawyers and solicitors explain CFAs to clients. "If the Law Society doesn't do anything to police this, it could mean the client is not protected, and they may not even know what CFA means," she said.

But Allianz Cornhill development director Christine Harragan said the report showed the government's commitment to CFAs. "The DCA has taken the time to sort this out, and CFAs are here to stay," she said.

A DCA spokesman said the Law Society would amend its rules to "tighten up" the professional requirements on solicitors. He added: "A reformed Law Society with a separate regulatory arm will be in an even better position to enforce these requirements."