Court fees “serious own goal”

City lawyers have fired off an angry letter to the Lord Chancellor, Michael Gove, about proposals to hike court fees.

In a joint letter, the City of London Law Society and Commercial Bar Association warn Gove that he risks driving high-value legal business overseas to New York or Singapore. They argue that the resulting loss in tax revenue will “dwarf” any increase in income from court fees.

In the letter, the lawyers contest the “highly questionable assumption” that higher issue fees will not lead to a decrease in claims being issued, and remind Gove that “UK legal services added £22.6bn or 1.6% of total GDP to the economy in 2013”.

They explain that England, particularly London, does so well because of the dominance of English contract law, which “favours party autonomy” and has clear principles, and because of the reputation of English judicial decisions. However, Singapore, New York, Hong Kong, Dubai and Germany are “serious and active competitors”, and Singapore and New York, the main competitors, already have lower fees.

They brand the proposed fee hike “a serious own-goal” which “will act as a boon to our competitors”. They argue that the fee, paid merely to commence proceedings when most cases settle before any defence is filed, “bears no relationship to services provided” and is “in essence, a tax on civil litigants to pay for the costs of the English family and criminal courts”.

The government’s proposals to hike civil court fees for a second time—in April, they raised fees by as much as 600% in some areas—has attracted the ire of the law Society, Bar Council and several other legal groups and individuals. Last week, Law Society president John Smithers said it was “wrong in principle for the courts to make a profit for the government”, and said there had been no assessment of the impact of the previous increases, which solicitors believe will stop people bringing legitimate cases.

The Ministry of Justice has proposed doubling the cap on court fees to £20,000, or even removing it altogether, on the basis this could generate an extra £25m per year from the courts.

A Ministry of Justice spokesperson says: “Court fees are a small fraction of the overall costs of litigation and only around one in every 200 money claims will be affected by the proposed increases.

"It is right that those who can afford to—such as wealthy individuals or large corporations making very high money claims—should make a bigger contribution so that we have functioning and properly funded courts.”