Legal Aid Increases Settlement Delays

A frequent criticism of legal aid in England and Wales is that is relieves aided litigants from cost pressure since they do not generally have to meet opponents'' costs – or their own – if the case is lost. It is argued that this shifts the balance of bargaining power in favour of the claimant, providing him or her with an incentive to hold out for as long as possible. New research by Paul Fenn and Neil Rickman, published in the latest issue of the Economic Journal, confirms for the first time that there is indeed such an effect.

Fenn and Rickman''s research examines why legal disputes often take such a long time to settle or go to trial. They reveal that settlement delay increases: l when the litigants face low costs of bargaining – for example, when the plaintiff is legally aided; when the estimated damages are high; and when the defendant feels that he or she is not liable for the damages being claimed.

These results suggest that the Lord Chancellor''s proposals to make legally aided parties more cost sensitive might assist in reducing settlement delay. Of course, the effects of such reforms on delay should ultimately recognise their wider effects on the number of accidents and cases brought, as well as on the size of settlements achieved.

Fenn and Rickman note that in England and Wales, filed cases take between 18 and 40 months to reach trial. Such delays can mean that evidence deteriorates, that injured parties do not receive compensation when they most need it and that individuals are deterred from bringing cases. As a result, the legal system may fail to achieve key objectives: efficient deterrence of future offences and equitable compensation in individual cases.

Lord Woolf''s inquiry into civil justice reform was established in 1994 to recommend ways of simplifying and speeding up litigation. His review expressed a desire to reduce costs and make them more predictable, and to introduce case management by a court official in order to clarify litigants'' positions as early as possible in the case.
Fenn and Rickman analyse the factors that affect litigants'' settlement decisions over time, using data from a number of English health care providers, who have contributed to a database of both clinical negligence and employee claims. Their analysis suggests that Lord Woolf''s recommendations may have opposing effects on settlement delay: on the one hand, speedier transfer of information between the parties should aid settlement and reduce delays; on the other hand, lower costs may reduce the cost pressure faced by litigants and thereby increase delays. This raises the importance of the inquiry''s complementary proposals for tighter case management by court officials to keep cases moving.

''Delay and Settlement in Litigation'' by Paul Fenn and Neil Rickman is published in the July 1999 issue of the Economic Journal. Fenn is at the University of Nottingham; Rickman is at the University of Surrey.