The Lord Chancellor, Lord Irvine, has described the proposed code of practice on rehabilitation for accident victims as "a first class initiative".

The rehabilitation code, announced last month, aims to reduce the cost of claims by ensuring that where both sides are agreed, the injured party can benefit from early rehabilitation.

The existing system delays victims' treatment as claimant and insurance lawyers fight over liability. The voluntary code is supported by the Association of Personal Injury Lawyers (APIL) and for Forum of Insurance Lawyers (FOIL), two organisations which are traditionally at loggerheads .

The Lord Chancellor told the House of Lords: "It is highly progressive to put a duty on both the solicitor for the claimant and the insurer's solicitor to make an early assessment of how the quality of the victim's life can improved by early intervention."

The Lord Chancellor also reported a 35% drop in new cases coming before the courts since the Woolf reforms came into effect six months ago.

"Many more cases may be settling pre-court to avoid the disciplines of the new system. Litigation may be becoming the last, not the first, resort.

"Fears that reforms would result in a deluge of appeals have been misplaced. These are early days, but it is looking good."

The Lord Chancellor also said he would shortly be issuing a consultation document on giving courts the power to order income settlements.