Costs (English Law) - "Costs Follow The Event"

"Costs Follow The Event"

The law of costs in England and Wales is typical of common law jurisdictions, save that of the United States. In general, "costs follow the event" so that the successful party to litigation is entitled to seek an order that the unsuccessful party pay his or her costs. Recoverable costs are limited to:

• Fees and charges of the solicitor (attorney), which may be hourly or daily;
• Disbursements, including barristers' fees;
• Witness allowances (conduct money), including fees paid to expert witnesses;
• Some professional fees for non-witnesses; and
• Lawyers' "success fees" allowable by the court under a valid conditional fee agreement (CFA).

A no win no fee is the conditional fee agreement between a law firm and its client that carries understanding that if the case is lost, the client will not have to pay their lawyer's costs.

In-house corporate legal teams can conduct litigation and have rights of audience. They can claim the remuneration and expenses of the lawyers involved. Litigants in person must prove their own financial loss in conducting the action or they will otherwise be awarded £18.00 per hour. The costs awarded to a litigant in person cannot exceed 2/3 of what could be claimed by a professional lawyer.

Litigants often benefit from before-the-event (BTE) legal expenses insurance against paying the other party's legal costs as part of their domestic or automobile insurance policies (although many are unaware of it). Otherwise, they can purchase after-the-event (ATE) legal expenses insurance at the start of litigation.

The law of costs is often known as the English rule. The situation contrasts with that in the U.S. where legal fees may be sought only if the parties agree by contract before the litigation, or if some special act or statute allows the successful party to seek such fees, the American rule. Federal district court and Court of Appeals judges award costs to the prevailing party under Federal Rules of Civil Procedure 54. Generally, state court judges have no common law right to award such fees against the losing party. It has been suggested that the American rule contributes to making the U.S. a litigious society. Individuals have little to lose beyond filing fees and a retainer to start a lawsuit, and they are not at risk of having to pay their opponent's fees if they lose. Conversely, the English rule has been criticised. It is sometimes pointed out that the English approach potentially hinders access to justice by increasing the risks of litigation, both by setting up the risk of having to pay both parties' full costs in the event of losing, and by creating incentives for parties to sink ever increasing resources into their respective cases in order to win the action and avoid paying any fees, a strategy that cannot succeed under the American rule, thereby increasing the overall cost-risk of litigation. The German costs rule, which allows for fixed recoverable costs, avoids this unfortunate consequence of full-fees recovery.