The Court of Appeal have made their first full
protective costs order (PCO) which protects poorly funded and campaigning groups against having to pay the full costs of their opponent if the case is brought in the public interest.
The order was made in December 2004 to protect the NGO,
The Corner House, in their case against the
Exports Credit Guarantee Department, a branch of the
Department for Trade and Industry. However the detailed reasoning behind the judgement was only released this week. It includes practical guidance on how the rules for PCOs will be applied in the future.
The
Court of Appeal judgement paves the way for NGOs and other publicly minded groups with minimal resources to apply for PCOs with more certainty and, it is hoped, with more success than previously.
Where an individual or NGO does not have the resources to become involved in legal action but has a case that raises issues of
general public importance which need resolution, then a PCO can protect them from the legal costs of the other side, no matter what the eventual outcome of the case.
PCOs will make it far more viable for NGOs and other groups to bring cases to court in the public interest
The PCO was made to protect The Corner House, a small but influential NGO concerned with
corruption and bribery particularly by
British companies operating in the developing world. They were challenging the rules issued by the Export Credit Guarantee Department (ECGD) to reduce corruption in the industry.
The ECGD provides subsidised insurance for British companies mainly for high risk business in developing countries, such as defence contracts. The Corner House had prepared an influential report on the extensive nature of the problem and the steps which should be taken by the ECGD to address it.
Partly in response to this report, the ECGD tightened up the rules in May last year so that companies had to provide far greater information about their anti-corruption measures to ensure that no bribes or other corruption would be involved in the deal.
In November, The Corner House discovered that following intense secret lobbying from the CBI and leaders in the aerospace industry, involving senior ministers, the rules had been substantially watered down. Neither The Corner House nor any other anti-corruption campaign groups had been consulted on the changes.
The ECGD had taken an unfair and illegal approach
They contacted Leigh Day & Co and were advised that there was clear unfairness and illegality in the approach taken by the ECGD. A letter before claim was sent to the DTI threatening judicial review. The response from their lawyers was that they had behaved entirely appropriately and that any legal challenge was bound to fail. The ECGD was not prepared to agree to review the new rules, taking account of the Corner House criticisms.
Unfortunately, The Corner House is a very small group. It is grant funded for individual pieces of work and has no money for legal action. The Corner House’s lawyers (Leigh Day & Co together with Counsel Lord Lester of Herne Hill QC and Ben Jaffey) agreed to represent them on a conditional fee basis. However, because of the costs rules, if they lost they could have faced a bill of many tens of thousands of pounds to cover the government’s costs.
At the end of the case, if the Corner House had lost, the court might have decided that the case had been brought in the public interest and not order them to pay the government’s costs. But, they would not have known this until the end of the case and the risk would have been much too great. They were not in the position to take this risk and would not have been able to pursue the case in the public interest.
PCO’s have been around for ten years or so but before this case no full PCOs had been made. The courts can make a PCO at an early stage where a case with merit, brought in the public interest, could not continue because of the risk of exposure to the defendant’s costs. In the CND case against the government in 2003, challenging the legality of the invasion of Iraq, an order was made at an early stage limiting their costs exposure to £25,000. This was the nearest a court had previously come to making a full PCO.
In the face of the DTI’s refusal to agree not to seek their costs against the Corner House, in the event they won the case, we made an application to the court for a PCO. Although it was unsuccessful in the High Court, a strong Court of Appeal comprising Lord Phillips MR and Brooke & Tuckey LJJ made a full PCO.
This allowed the Corner House to proceed with the case. The DTI maintained its position that the case had no merit and would not succeed. In January this year, at the door of the court, the DTI agreed to carry out a full public consultation on the new watered down anti-corruption rules and to pay The Corner House costs. They have now also been forced to make available extensive internal documents which show how the one-sided lobbying and negotiations had taken place.
Without the PCO, the public would have never got to the bottom of this story. It is to be hoped that the fresh, public consultation will result in the restoration of firm anti-corruption policies, in the public interest.
Richard Stein, Partner of Leigh, Day & Co solicitors said, ‘The business interests who lobbied the DTI so effectively in this case have no problem in funding any legal challenges which they might wish to bring against public bodies. Ultimately, the Corner House case should lead to the courts leaving behind their past reluctance to grant PCOs and go some way towards levelling out the playing field in favour of those without wealth and power, when they are acting in the public interest.’
For more information please contact
Richard Stein or
Jamie Beagent on 020 760 1248.
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