The Civil Liability Bill – Is there a light at the end of the tunnel?
With the chorus to the gospel-inspired finale track from the musical Starlight Express blaring from the radio as I made my way to the railway station this morning en route to Chambers, I thought it summed up neatly the questions that have been hovering on practitioners’ lips since September 2017 when the Government first confirmed its intentions to review the discount rate by introducing legislation into parliament.
Is there now a light at end of a tunnel in respect of the setting of the discount rate? Will the prescribed rate be revised in a positive direction and when?
On Tuesday 20th March 2018 the Civil Liability Bill was presented in the House of Lords. It now begins the long process of parliamentary scrutiny with its second reading due to be heard on 24 April 2018. For those of us drafting Schedules and Counter Schedules, the uncertainty as to when this process would start has now been lifted.
In line with the Ministry of Justice’s expressed intentions in September 2017, Part 2 of the published Bill (Part 1 is concerned with Whiplash claims) sets out a new process for setting the discount rate which includes:
- The rate being set by reference to an approach that assumes that the relevant damages are invested in a manner that involves “more risk than a very low level of risk”, but “less risk than would ordinarily be accepted by a prudent and properly advised individual investor”;
- The rate being set by the Lord Chancellor following advice from an expert panel; and
- The rate being reviewed at a minimum of three year intervals.
The Bill contains express provision for a court taking a different rate of return into account if any party to the proceedings shows that “it is more appropriate in the case in question”. To ensure transparency the Lord Chancellor when making a rate determination will be required to:
- give reasons for the rate determination made;
- publish such information about the response of the expert panel established for that review as the Lord Chancellor thinks appropriate.
The Bill currently provides for the expert panel to be made up of the Government Actuary, who is to chair the panel and four other members appointed by the Lord Chancellor. The Bill makes it clear that those appointed members must have experience as an actuary, managing investments, as an economist and or with experience in consumer matters relating to investments. There are no lawyers or insurers joining the expert panel!
It remains obvious however that a change in the discount rate is not imminent. The best guess is that we might see a revision by the end of 2018 assuming smooth passage through the various parliamentary stages. And, whilst the Bill makes provision for periodical reviews, the timings of those reviews and the implementation of any rate change remains the responsibility of the Lord Chancellor of the day.
It could yet be a long tunnel!