Loss of defendant cost orders for regulatory crime

Posted by John Mitchell on
Companies will no longer be able to recover their legal costs if acquitted in the criminal courts.

Currently, when a company pays privately for legal representation in the criminal courts to defend regulatory crime matters such as health and safety or environment prosecutions, and they are subsequently aquitted, the court would normally award, from the public purse, an amount to compensate them for their legal costs.

The amount received is normally not enough to cover the entire legal bill but it is usually several times greater than the amount that the public purse would have paid had the company been able to receive Legal Aid instead of paying it privately.

The Labour Government attempted to reform the system in 2009 and introduced regulations which would have capped payments for all defendants, including companies, to the equivalent of Legal Aid rates. The Law Society brought a judicial review challenge of the 2009 regulations and the court quashed the amendment stating that the Lord Chancellor did not have the appropriate power to cap such payments.

The current Government have used the Legal Aid, Sentencing and Punishment of Offenders Act 2012 to amend the Prosecution of Offences Act 1985, which gives the power to the court to order the defence costs, to give the Lord Chancellor the power to set the rates at which an award of legal costs must be calculated by the court and additionally to restrict the availability of legal costs to certain type of proceedings and to individuals.

The result of Schedule 7 to the 2012 Act, which will come into force in October 2012, is that the court will no longer be able to make an award in respect of legal costs to companies, except in relation to proceedings before the Supreme Court.

For individuals the court no longer has the power to award successful defendants an amount in respect of any legal costs incurred where Legal Aid is available (such as most crown court cases), and where it is not available (such as cases at the Magistrates court), the Lord Chancellor has the power to set the rate at which any such award may be calculated and this is likely to be set at Legal Aid rates.

The effect of this will be that companies who successfully defend themselves will have to bear the costs themselves or obtain insurance. This will have a significant effect on small companies who may not be able to afford to mount a successful defence and therefore will plead guilty purely on a financial basis.

This move has been done purely to save money as the consultation carried out by the previous government was overwhelming in favour of maintaining the current system which was considered to be both fair and transparent and in the interests of justice where it allowed defendants to defend cases which they felt had been brought inappropriately.

Companies must now ensure they have appropriate insurance cover to cover their defence costs but may find themselves under pressure from their insurers to plead guilty in any event as there is no chance of recovery of the costs even if successful.

About the Author

John specialises in risk and compliance, advising businesses in those areas of commercial life where the criminal law or penal sanctions are used to regulate business.

John Mitchell
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