 Felly, dweud i gael i'r Gwrsgafodau Rydym 28, 2017. Felly, rydyn ni'n fwy oeswlltion. Mae agenda item 1 yn ysgrifennu'r ddych chi'n cyfforddiant, ond i'r blaenau cyfnoddau, gwirio mewn gwirio, ysgrifennu'r ddweud y Saldigol, 2 ddweud i'r drafft 2017. Felly, ddweud i'r gweithio Annabelle Ewing, ddweud i'r Gweithfodol Llywodraeth Ysgol, Walter Drummond Murray, Law and Legal Systems Division, and Greg Walker, Solicitor and Director of Legal Services, with the Scottish Government. This will be a chance for members to put questions to the minister and the officials. At any points, they seek clarification on the instrument before we formally dispose of it, and I refer members to paper 1, which is a note by the clerk, and invite the minister to make a short opening statement. The Draft International Organisation's Immunities and Privileges Scotland amendment 2, order 2017, confers various legal immunities and privileges upon the Unified Patent Court, or UPC. The UPC is an international judicial body supported by 25 EU member states, including the United Kingdom. On 19 February 2013, the UK Government signed the Intergovernmental Agreement to provide for a unified patent court within participating European Union countries. The protocol on privileges and immunities was done in Brussels on 29 June 2016. The order before the committee today fulfills Scotland's part of the obligations that entail from these international agreements. Equivalent provision in respect of reserved matters and devolved matters in the rest of the UK is being conferred by legislation at Westminster, to the extent that the privileges and immunities relate to devolved matters in Scotland, however, can ferro rightly falls to the Scottish Parliament. When respect of parliamentary passage is complete, both orders will go before the Privy Council. Although the order is limited to the issue of privileges and immunities, it might be helpful to say a little about the background to the UPC itself. The Unified Patent Court will be a court common to the contracting member states and thus part of their judicial system. It will have exclusive competence in respect of European patents and European patents with unitary effect. Unitary effect means that the patent will not need to be validated in each of the contracting states, but that the patent will provide uniform protection in all 26 EU countries contracting to the agreement. The UPC's rulings will have effect in the territory of those contracting member states having ratified the agreement at the given time. The UPC will not have any competence with regard to domestic patents. The Preparatory Committee of the UPC, a committee of representatives from signatory states tasked with bringing the UPC into being, has stated its aim of bringing the agreement into force in spring of 2018. To meet that deadline, the United Kingdom and Germany must deposit their instruments of ratification late 2017. The decision to sign up to the international obligations providing for UPC falls within the reserved responsibilities of the UK Government and the Parliament at Westminster. Many stakeholders have welcomed the establishment of the UPC. For example, the Law Society of Scotland said that it strongly recommended that the UK should try to ensure that the UPC agreement does enter into force and that the UK can continue to participate fully in the agreement. To enable the UPC to fulfil its purposes and carry out its functions, certain privileges and immunities must apply by virtue of the protocol that I referred to earlier. The conferral of immunities and privileges is effectively a condition of membership and is necessary to enable the court to function as an international organisation in the UK. The specific purpose of the order is to provide immunities and privileges on the UPC and its officials in the course of official activities in Scotland in order to reflect the equivalent Westminster order and the terms of the protocol on privileges and immunities. The order provides that judges, registrar and the deputy registrar shall have immunity from suit and legal process in respect of things done or omitted to be done in the course of performance of official duties. That immunity can be waived by the presidium of the court. The court officers, I just mentioned, shall also be exempt from devolved and local taxes in respect of salaries, wages and the monuments paid to them by the court. No individuals are exempt from council tax. Representatives of a state party to the agreement will also enjoy immunity from legal process when they attend meetings in their official capacity of committee set up under the agreement. That immunity can also be waived by the presidium of the court. That immunity does not apply to a person who is a British citizen or any person who at the time of taking up his functions within the court is a permanent resident of the United Kingdom. In the particular case of motor vehicle incidents, the court itself has no civil or criminal immunity where the vehicle belongs to or is operated on behalf of the court. Immunities and privileges are therefore limited in that they apply only to official actions and can be waived. They do not give an individual carte blanche to commit criminal activity. An assault, for example, could still be prosecuted in the normal way. The immunity is therefore analogous but more limited than that which has been for generations conferred upon diplomats working in foreign jurisdictions. As with diplomatic immunity, all individuals benefiting from privileges and immunities in Scotland are expected to respect Scotland's law, both the criminal law and the civil law in conclusion. The order will help the UK to fulfil its international obligations in respect of Scotland, and it is the duty of the Scottish Government to bring it forward to the Parliament. I hope that that rather long summary, but hopefully members felt that it was useful. I would bring my remarks to a close simply by inviting any questions that members may have through the chair. Thank you for that comprehensive opening statement, which was very helpful. Do members have any questions for the minister, John Finnie? Good morning, minister, and thanks for that statement. You will be aware of a keen interest in this matter, as do my party. If I could ask you a couple of questions, please. It is about the location of the premises of this organisation, which seems to be a very worthy organisation, but where would they be located in Scotland? The position at the moment is that the way in which the court will be structured is that there will be no local division of the court cited at the present time or going forward in Scotland. However, I have further correspondence with the UK Government secured the undertaking that that matter will be under review and will be looked at in terms of future demand. So what could happen is that there could be a sitting of the court, the local division court in Scotland, depending on needs in any particular case. That would be the physical presence of the court as we anticipate it in the initial years, certainly, of the court being in operation. Were that to be the case in Scotland, that would be considered an occasional or temporary premise for which the provision of inviability of premises does not apply. That is correct. Why is that? I would ask the officials to give chapter inverse on the legal reasoning. In terms of the enabling powers for these orders under the international organisations act 1968, neither the Scottish nor the UK governments can go any further than the protocol enables, so the protocol does not require immunities in the situation of a temporary premises. We could not confer them and there is no policy reason to confer them in those circumstances. The order has been passed, the foreign office. We understand that interested the people preparing for the UPC are aware of this work and that is all in order. If I may, in relation to paragraph 9 and the covering note that we have here, which says that paragraph 4 provides that the court shall have like inviability of premises, which means that agents of the state, such as the police, cannot enter without permission, then, if something is termed an occasional or temporary location, the police could enter there? They will not have inviability. That is in circumstances that we foreseen in the initial years going forward whereby the court will not have a physical presence in Scotland, although we have asked for that, but, as I say, that is under advisement. However, there could be a sitting of the court in Scotland, depending on the needs of a particular case. In those circumstances, the inviability of premises is not required by the policy direction and therefore has not been provided for in this statutory instrument. It is good to hear that you are chasing work in the area. Would that be termed in a local or a regional division if it was cited in Scotland? I understand that if it were to be cited in Scotland in due course, which we will continue to press for in which the Law Society of Scotland supports, it would be a local court division. In relation to paragraph 12 of the covering note, there shall also be exempt from devolved and local taxes in respect of salaries, wages, monuments paid to them by the court. Has that been quantified? I suppose that it would be quite difficult to quantify, because the numbers would vary. Do we know the numbers on the minister? Well, the numbers would vary because we do not know what number of officials that could apply to in Scotland at this point. However, the important point to stress, which I did in my opening statement, is that the immunity obviously relates to acting in your official capacity and is concerned primarily with income tax. The reasons for that have been advised in a previous committee session on the integrity of the operations of the international organisation. The fact that they are in senior positions anyway, as far as this organisation is concerned, will all pay the same rate of income tax that is set by the rules of the international organisation. It is not an exemption from council tax, for example. For senior officials, the exemption for vis-a-vis income tax will not apply with regard to tax on pensions, for example. Therefore, it is not an absolute blank check. There are particular heads of categories involved, and in that there is a different approach in terms of income tax or tax on pensions, for example, for more senior officials of the court. With respect, minister, if we do not know the numbers and we do not know the sum, then we do not know the value of the check. In relation to what is referred to us to financial effects, there has been no business regulatory impact assessment undertaken. I am not sure how the conclusion that there can be no financial effects on the Scottish Government, local government or businesses can be made. I am not sure how you would be able to make that statement. The fact is that there is no direct impact at this time. This is an SSI that is extending the conferral of privileges and immunities as far as any potential devolved activity is concerned, as we are required to do in order to secure the UK Government being able to implement its international obligations. The UK Government, as far as we are actually proceeded with a fairly extensive process of impact assessment, if you like, in terms of the underlying principle piece of legislation concerning the joining of the UPC. That is where that engagement took place and where the impacts were looked at. What I am asking the committee to consider today is to look at the order favourably, which is to, as I say, in statutory instruments in Scotland, extend the conferral of privileges and immunities to Scotland, as far as devolved matters are concerned. Is it the case minister that most of them or everyone will be domiciled in London? That remains to be seen. Certainly, there is a difference in categorisation for the senior judges and they have a particular regime with regard to income tax. Then you have the next level down which is that they are the general members of staff. They may well be British citizens or have permanent residence in the United Kingdom. As regards the position of those individuals, if they are British citizens or are permanently resident in the UK and are deemed to be members of staff of the UPC, they will not be able to benefit from this immunity and privilege regime as far as income tax is concerned. It is a bit complicated because there are different categories of individual concerns. That is the position as far as your ordinary member of staff is concerned. Are you able to provide an aggregate number? If you recall, the last time we discussed this, there were some divides to the number. Even if you could write to the committee on that, that would be helpful. I am always happy to ask officials to look into the matter further. I think that it would be very difficult at this stage to anticipate exactly the numbers of people that you were talking about as far as devolved issues in Scotland were concerned, but I am happy to ask officials to look into that. Am I able to submit a patent in Gaelic? If not, could you chase the obligation for it to be submitted in Gaelic? I would be delighted to proceed with that. Just to pick up the issue of inviolability of premises and the fact that the temporary premises are not, I take it that in no way cuts across the provision that the official archives and papers of the court remain inviolable, even if, in temporary premises, they are not inviolable. I am fully supportive of the instrument. I think that it is picking up on John Finnie's question there around the impact assessment. Like John Finnie, I was struck by what was set out in Paris 16, particularly 17, where it talked about no impact at all. You have fairly pointed to the work undertaken by the UK Government where the responsibility for much of this resides. I think perhaps in future, if we are looking at those instruments, it would be helpful if that was fleshed out a little more in some of the detail, the findings from that impact assessment could be shared even if it has not been directly undertaken by the Scottish Government. Absolutely. I am happy to do that. Very good point from the member. Right. Thank you. If there are no further questions, we move straight to agenda item number two, which is formal consideration of the motion in relation to the affirmative instrument. The Delegated Powers and Law Reform Committee has considered and reported in this instrument and has no comment on it. The motion is motion 07771 that the Justice Committee recommends that the international organisations, immunities and privileges, Scotland amendment number two order 2017 draft be approved. Minister, do you want to make any further comments and to move the motion? I move the motion. Thank you. Do members have any comments to make? No. If not, then the question is that motion 07771 in the name of Annabel Ewing is approved. Are we all agreed? We are not agreed. There will be a division. All those in favour, please raise your hand. All those against? Thank you. The result is 10 in favour, one against. That concludes consideration of the affirmative instrument. The committee's report will note and confirm the outcome of the debate. Is the committee content to delegate authority to me as convener to clear the draft of the report? Thank you for that. Minister, can I thank you and your officials for attending today? I suspend briefly to allow a change of witness. Three is our third evidence session on the civil litigation expenses and group proceedings Scotland. I refer members to paper two, which is a note by the clerk and paper three, which is a spice paper. It is my pleasure to welcome our first panel, witnesses, Simon DiRolo QC, from the Faculty of Advocates, Andrew Stevenson, vice-president, Glasgow Bar Association and Kim Leslie, convener of the Civil Justice Committee with the Law Society of Scotland. I thank all the witnesses for providing written submissions. That is hugely helpful for the committee. Before I move to questions, I invite Liam Kerr to make a declaration. I declare an interest in so far as I am a director and 100% shareholder of Trinity Care Limited, which is a provider of legal services, and I am a member of the Law Society of Scotland. Thank you for that declaration. We now move to questions. If I could start perhaps in the area of successful fear arrangements and ask the panel members whether the changes in the bill that would allow lawyers to enter into damaged-based agreements are something that they support. The Law Society has welcomed the change in the way in which personal injury claims and other civil litigation could be funded. We understand that there has to be some regulation and cap to the DBAs for public protection, but, broadly speaking, we are welcoming this liberalisation of how solicitors can provide legal services to their clients. One of the things that we welcome is the simplicity of a damaged-based agreement. It is something that we hope will enable clear communication with the public so that the public can understand what it is that they are getting and what it is that they are going to be paying at the end of the day. Other views, just to open? I agree that those proposals are welcome and support them. The Glasgow Bar Association would also support the introduction of this legislation in so far as it permits that form of contract. There is clearly some degree of secondary legislation to be introduced as well, which we would be interested in seeing, but, in principle, we are agreeable to it. Given the damage-based agreements that give lawyers direct interest in the outcome of the case, does the panel consider whether any changes will be needed to the current professional standard regimes to deal with conflicts of interest? I think that we have to be mindful that there is already provision of this type of work being carried out. I do not foresee that there is going to be a need for a change in the regulatory regime, but what you have built in with the bill is where there are potential conflicts, for example, in future losses. The bill is already trying to build in visibility on that and putting some additional protections in place so that, when conflicts potentially could arise, there are ways of dealing with that for the public protection. Could you elaborate on what protections? Well, for example, what the bill seems to suggest is that where the legal provider has not recommended a future loss is taken as a periodical payment order, there requires to be independent scrutiny by an actuary to certify or the court must effectively certify that it is in the client's best interests for the future payment to be made by way of lump sum rather than PPO. We will be covering future losses in more detail as we continue with a line of questioning. The specific question that you asked about professional regulation, as far as council are concerned, it has a duty of independence and it also has a duty to not present a case unless it is stateable. There is also a case from the inner house in the 1930s which, as far as I am concerned, is still good law, which maintains that to conduct a case on a speculative basis, there must be reasonable prospects of success. So there is in place at the moment a requirement on council not to conduct a case unless there are reasonable prospects of success. A case may not be stated unless it is stateable, which I suppose is another way of saying the same thing. In terms of going forward, it may be that protocols are needed to ensure that cases are not presented where there is not a reasonable prospect of success. By that I mean that there are pre-action protocols that are in place. I believe that those protocols are envisaged. Also that case management procedures in the courts are also designed to ensure that cases cannot be presented unless there is a stateable basis and that a summary dismissal of cases that have no merit is possible. OK, supplementaries from Liam McArthur and Liam Kerr. Just following up on the point that Kim Leslie made about the involvement of actuarial advice, it came up during our evidence sessions last week that this would have to be sought in the absence of the solicitor and that had actually raised some eyebrows. From your perspective, do you see any problems with a client having to seek that actuarial advice and not having the solicitor present or is that something that is assumed to work and is in place for good reason? If that gives comfort effectively that there is no taint to the advice, that would be something that the law society would accept. Whether it is strictly speaking necessary, because in those high value cases you are generally going to have a legal provider, potentially senior and junior counsel, maybe even a financial guardian, what we want to accept is that, given that there is a change where effectively a solicitor is for the first time going to have a stake in the outcome of the litigation, if that gives comfort that the public is being protected then we understand the reasoning behind it. One of the things that we have as lawyers is always a duty to act in the best interest of our client. Those types of arrangements are on-going and what is comforting is that there are very few complaints to the Law Society of Scotland about those types of arrangements with claims management companies where they are being operated as a funding vehicle, but the work is being carried out by solicitors because of the transparency involved in it. The short answer is that we believe that the primary objective must be to include future losses at the appropriate tapered level. If that is something that the committee feels is essential for the public to have that protection then that is something that we can certainly understand and we will be prepared to accept. The point about the actuary and or the court certifying that the deal is in the client's best interest, is not that a tacit admission that the true independence of the profession, of which the profession is rightly proud, is potentially compromised and or could there be a perception that the independence of the profession is being compromised by the public? The point that I made earlier is that there is going to be a number of people advising in those types of cases. Absolutely. I have experience of this type of work and certainly I have not ever felt conflicted in my advice to a client. As I say, if this gives comfort that it is necessary, but in my view, I do not think that you are absolutely right. Effectively, what you are doing is anticipating if there is going to be a choice, which means that you are either going to be paid more by way success or less. The lawyer should always be able to make the right choice because it is in the interests of the client. I agree with you, but if there is an extra stage that says that this can be advice without taint, the advice is probably going to be the same as the lawyer was going to be giving in the first instance. Did someone want to comment on that? I wanted to comment on this particular point because I am concerned. On behalf of the faculty, we have made some comment about our concern about how the provision is clause 6 of the draft bill. Our concern here is that, as Mr Kerr has just indicated, it carries with it the statutory suggestion that there is a conflict and that the lawyers cannot be trusted. That is problematic. What I would say about this is that it is not clear to the faculty how an independent actuary is going to assist with the question that requires to be answered in a situation like this. The purpose of an actuary is to give advice on how a calculation will work out, but the decision as to what to do in the light of that calculation is something for the client to take. The client should have independent advice from council in cases of this kind normally, invariably in my experience, and a financial guardian will be usually a professional person. I have never come across a solicitor in my experience who is not conscious of the need to do what is in the best interests of the client in circumstances such as this. Taylor proposal creates a conflict and seeks to resolve it. I suggest that the way around this is to avoid the conflict. The way to avoid the conflict is to allow the solicitor to charge a fee where there is a periodical payment order. That means that there is not a conflict between a lump sum and a periodical payment order. Some mechanism of allowing some fee to be charged in those circumstances surely can be found. It would have to be some small percentage of the value going forward perhaps for a number of years of the periodical payment order. That money could be found from the damages but not affecting the future element. There will be enough in claims of the size that we are talking about here to pay the fee without affecting the ability to fund future care, etc. As a mathematician and someone who has been involved in financial things, I have undertaken actuarial calculations. In law, does that make me a naturally? I would imagine that the idea is that somebody who is a member of the faculty of actuaries would have to be. I do not know whether the faculty of actuaries are happy about all of this and their members are keen to get involved in cases and to do what they are being asked to do in this type of situation. I do not know whether that has been considered. I think that I am on the same page. I would not wish to be described as an actuary in these terms, but I just wondered if we were aware of a legal definition of actuary. Related to that, and this may not be a question for the panel really, whether there are professional standards for actuaries that would cover their independence, being part of their professional duties, etc. I am aware that they have, of course, professional standards as a professional body, and there is no doubt about that. However, you will have to ask them, or that body, or the representative body, to deal with this aspect of matters. Can I ask the panel what the impact will be on lower-value cases once caps on the fee levels under the SFA are introduced? Are you suggesting that the power to cap in a written speculative fee agreement? Once the lower value and the cap has been agreed and it is perhaps looking at a low value case, not worth the solicitor's time doing things, will that have an impact? We are always keen for the judicial expenses to be increased, to mean that what we are getting paid for the work done is met. However, in the lower value cases, the proportionality has to come into it, and it is about fairness again to the client. If it is a low value claim, what we do not want to do is take too much of their damages. Is it likely not to go on a no-wind, no fee basis? No, lower value claims, like any other claim, will be assessed as the best way, effectively, of doing the work. There are no options. That is what you are introducing here. There are no options. A client or a consumer is effectively going to have to then work out what is available on the market, and the lawyer is going to have to have an analysis of those cases and how they can work the cases profitably, while still ensuring that the client is getting the majority of their damages. I suppose that the fear is that the lawyers may be attracted to cases in which they know that there is guaranteed income and are more lucrative, and that, despite the bill trying to make access better for the individuals, if it is a very low value case, no-wind, no-fee may not be taken up? That has not been our experience. Some panel manuals highlighted that there are some missions that are successful arrangements where the lawyer gets a fee uplift that is currently used in family actions. That would be prevented by provisions in the bill. Can you explain your concerns in this area? The faculty indicated a concern there. It is important not to overstate the concern here because I do not think that it happens very often, but there are cases in which where there is a dispute about financial provision on divorce or dissolution of a civil partnership or cohabitation, where there is an asset that is to be preserved—or a share of an asset is to be sought—that counsel might be instructed on a no-wind, no-fee basis, not on a percentage of the asset to be recovered or preserved, but just on a—if there is an achieved result, then they will be paid, and if there is not, they will not be paid a fee. That does not happen very often, but it happens from time to time. It would be useful if that could be maintained as a possibility going forward. The current draft of the bill does not seem to permit that as the way in which it is framed. Our concern is if it is possible that it should be amended or altered in order to allow that to happen. That is very much a niche situation, in particular. Yes, it is. It would be very helpful for me, before we leave this line of questioning, if you could each give your estimate of at which points, maybe before an action starts, when you represent a client from whether that goes on to pre-action protocol, judicial expenses, SFA, DBA, any uplift, just at which point you receive a payment and approximately what percentage or how that is valued. Sorry, I am not following the question. At what point is this a lawyer then? I would like to know just when you are acting for a client, what stages do you receive payment and would you be receiving payment if all the expenses were paid, including the pre-action protocol, the SFA, the DBA, any uplift, judicial expenses? Okay, I follow. You get an interim payment, so the claim has not concluded, maybe before it has gone into court or after it has gone into court. If there is an interim payment, you would be entitled to deduct your success fee at that point of an interim payment. You may choose not to if there is a reason why you are getting an interim payment, because the client has to pay for something, but you would be entitled to do it at that point. At the crystallisation of the claim, so when you get your check or your funds in from your opponent when you have won the case, you take your success fee and you pay the balance. At that point, your files are reviewed by a law accountant and an account is drafted, negotiated and then the judicial expenses are either agreed or sent to taxation where an auditor will effectively determine what you are going to be paid by way of judicial expenses and you would get your judicial expenses at that point. I suppose that I am just trying to quantify when you are totting up your fee and any interim and final payment, the final settlement, will that include a payment having been taken for the pre-action protocol? No, no. If you have settled it for a pre-action protocol, that is out of court, so it is negotiated and there is a fixed fee effectively at that point and you would be paid when you have settled the claim. You have agreed with the opponent what you are getting paid for your client. It does not settle, it could still go ahead, so there would still be a charge for the pre-autocation. It has not settled, but for representing the client at the pre-action protocol, is it still not? No, it is either the pre-action protocol and that is out of court or it is litigation and that is judicial expenses. You get the fixed fee if it is settled out of court and you get your success fee over and above that. If it goes into court, you get your success fee and then there are judicial expenses based on a table of fees effectively for judicial work taken. You do not get anything for your pre-action protocol. That is what I wanted to get at. Anyone else want to add to that or are you happy with that explanation? I am happy with the explanation, just so that the committee understands the position of council, which is that if council is acting on a speculative basis and low-win, low-fee basis, then council will be paid at the end of the case. It is very unusual to be paid at any point before that. Council will probably not, almost certainly not, be acting on a damages-based agreement basis. That will not be happening. Council will continue to be instructed as they are at present, essentially on a no-win, no-fee judicial recovery basis. That is how it will work. There are reasons for that. Essentially, Slyster enters into a damages-based agreement with the client, but the council is not involved in that. We have brought in, at a later stage, essentially as an independent consultant and paid as a result of a judicial recovery from the person from whom the damages are being paid. Liam Kerr, you said earlier on how the lawyer can work the cases profitably. Are you aware of any evidence that suggests that extra rewards to Slyster's firms is actually required here? Secondly, to the whole panel, is this going to solve the problem in the sense that isn't there a risk that the Slyster still prefers to choose the easy, more straightforward claims, or the ones that are most likely to settle, such as, perhaps, road traffic accidents. Whereas the more difficult cases, the longer ones, the evidentially challenging ones, stress claims, for example, lower value, higher risk, remain unattractive, and the problem hasn't been solved of taking those on. You are solving that problem to an extent, Mr Kerr, by introducing qualified one-way cost shifting. You are absolutely right. Undoubtedly, there are cases where the fault element is very straight—it should be straightforward. No case is guaranteed to win, but there are some cases where the risks are higher than others. There are types of work that are more complex, more time-consuming, require greater investigation and financial outlay in the investigation and preparation of the case. What you are balancing—this is one of the things that this has to tie together—Principal Taylor has effectively looked at it on an overarching basis. What he has effectively acknowledged is that there is an issue with access to justice in certain types of case, which may not be attractive simply because, if you are balancing it out and analysing, I am going to have to invest so much money and time in investigating this, and indeed, if I lose it, the cost ramifications are significant and that becomes less attractive. What you are doing with the introduction of coax is effectively enabling certain work types to become viable, which may not be viable at present, given the risks involved in losing the case and paying adverse costs to your opponent. The question is whether it will improve the position but not resolve it altogether. Potentially, there will still be difficult cases that will be unattractive to take on. Those cases will probably carry on. That will not completely resolve that problem. There is still a need for legal aid in my view that that is an important resource to allow those cases to be brought. However, the very difficult cases where legal aid is not available will still be difficult to bring. However, the solution to that problem is not one that is easily found, I do not think. I was going to ask you about compensation for future loss, but I feel that that has been covered quite extensively. Can I ask for clarification on a point about periodical payments? If I understood correctly, Mr De Rolo, you were saying that, at the moment, a solicitor can decide on that, and I want to know your view on when the court can impose a periodical payment. The current law is that, in Scotland, a court cannot enforce or require parties to go down the periodical payment route. It has to be done either by agreement of the parties. Up until now, it is quite rare for an agreement to be reached, because either the pursuer does not want to do it, or the defender does not want to do it, and if one or the other does not want to do it, it does not happen. There are proposals for the law to be changed. There has been a recent consultation about that, and I am sure that you are aware of that. That will improve the situation. It will mean that the court will have power to say irrespective of what the parties want to do. The court will require it, and even if one party wants to do it, the court can enforce it as well. That will make a big difference to that. One of the problems about the legislation is that, writing into it this provision until we have resolved the periodical payment matter in the other proposal is perhaps not a good idea. It should perhaps make the requirement about an actuary, certifying it, and the court certifying it, is something that the court currently does not have power to do. I do not know whether that legislation that is proposed will be passed or not. Okay, that is fine. Can I ask the rest of the panel's views on that, please? I do not have anything to add to Mr DeRose's evidence. If I may, the essential component for that is that what we do not want is taking future damages out of the equation altogether. Periodical payment orders are something that may develop in Scotland. There might be more of an uptake for it. We have a situation in which the court is likely to be able to impose that on parties. Effectively, we are content with what the provisions are so far. To the law society view, that is acceptable. You are all right with that. Specifically why you think that damages for future loss should be included. Well, I think that Sheriff Principal Taylor said it quite clearly that, effectively, he's balanced it out. What the key thing is, rather than ring ffencing, is to get the percentage right so that it's a modest amount. That, again, doesn't benefit cases languishing, taking longer. Effectively, you want it to be incentivised that the cases are dealt with as expeditiously as possible. We are looking at the amount as being very important so that, if it's a modest amount, there's always likely to be enough in the past losses to ensure that the care is taken care of. If it's 2.5 per cent, frankly, with any future losses, there's always going to be a range. The pursuer is going to have a value for that. The opponent is going to have a value for it. It's not necessarily going to be the same value. It's not a fixed amount. There's always going to be a range. The reality is that the margin between those two figures is very unlikely to be as little as 2.5. Mr Stevenson, do you have a view on that, and why it should be included? If I could just say that my organisation, the Glasgow Bar Association, doesn't generally get involved in high-value reparation actions such as those that you are referring to. I don't really have anything to add to what the other speakers have said, because they, in my submission, are far more qualified than I am to give your committee useful information about those matters. I would like to discuss the qualified one-way cost-shifting that you raised earlier. The bill would apply to personal injury cases based on what Shared of Principal Taylor called the David versus Goliath relationship between pursuers and defenders. My concern with that had been that, while David and Goliath's scenario might be the majority of cases, what about the other cases that make up some of the other situations? If you had any examples of your own to highlight those other situations, which might be caught up in that. When I raised that last week with some of the organisations that we had giving evidence, I was told that the scenario—this is by Thomson solicitors—in which any of us or any of our colleagues in the profession would bring a personal injury claim against an ordinary person is virtually impossible. I said that that wouldn't really be the case, so I would just be interested to hear your take on that. If you have any examples to add. There are quite a number of examples of individuals being sued in the non-accidental injury area, for assault or for abuse or things of that kind. They may not be insured, they are not a public authority, they may not have resources and therefore you are in a David against David rather than a David against Goliath type scenario. We have suggested that coax could be only available to somebody who is insured, a public authority, somebody who has the backing of the Motor Insurance Bureau or somebody whose means and resources are such to enable them to make payment of expenses. That formulation that I have just given you is the same type of formulation that you get in the interim damages rule of court where you cannot get interim damages against someone who is not a public authority or insured or has whose means and resources are such to enable them to make payment. The idea would be that you would be protecting individuals against having financial ruin against them as being a reason for paying out in a case, paying a small amount to get rid of a claim, that is the protection. Those cases, I think that the word impossible is almost impossible or the phrase almost impossible is too strong. They are rare but they do occur from time to time. I extrapolate on that. It is not impossible for a case to arise where you are suing an individual. The abuse is going to be a feature. Survivor suing perpetrator, for example. Part of that analysis is whether that person is worth suing. Clearly what you cannot do is take a person through a court exercise, which is a paper exercise. In those circumstances, recoverability will be at the forefront of all the representatives of survivors and other assault harassment stalking. In those cases, the first primary question is that you might have a great case in law but will the person have the means to pay pownshilling and pence out to you at the conclusion of the action? Just to go back to what you suggested in your submission. Do you think that that would be relatively straightforward to apply as part of the legislation? I would have thought so. The concern is that you do not want to undermine the whole scheme by having exceptions to the coax protection, but I would have thought that it would be possible to build in a formulation of the type that I have indicated by using the phraseology from the interim damages rule. Given that, if the bill goes ahead, as it is currently drafted at the moment and with coax as part of that, you pretty much eliminate all the risk for the pursuer in bringing forward an action. Do you think that that would lead to a large increase in spurious claims that could come forward? It will lead to an increase, but whether it is a huge increase, I do not know. If you take away the risk, there are those who will be inclined to sue in circumstances where they might not have sued. That is why I think that there is a real problem with that. In my opinion, the whole scheme is predicated upon everyone having insurance, and that simply is not the case. A collision between a cyclist and a pedestrian is giving rise to a personal injury claim. It is unlikely that there is insurance involved there, but the fact is that, on this scheme, the pursuer is not running any risk unless he or she is essentially at it—a fraudster or someone who is behaving completely unreasonably. That would be very much the exception. As Mr De Rolo has suggested, it would be far more appropriate to restrict this to situations in which a defender is insured and has insurance covering his or her conduct of litigation, because otherwise it will give rise to unfairness. I have certainly come across cases in which there has been no insurance involved. It does not seem to me to be fair to take away the application of the general principle that expenses follow success, because it will essentially mean that anybody who gets sued in a personal injury case is going to be out of pocket, whether he or she is successful or not in defending the claim, and that does not seem fair to me. Can I ask a specific point that you say that you think that it should be someone who is insured, but in your submission you pose the question of what if the defender chooses not to involve his insurer because the value of the claim is low relative to his policy excess or does not want future loadings on his premium? I would suggest that, primarily, that should not apply at all. If it is going to apply, my suggestion to you would be to restrict it to situations in which the defender either has insurance or chooses to invoke insurance, but it should be restricted. However, my primary submission is that it should not apply at all. Oh, sorry, I just had one more question about that. It was just about to get your thoughts on after the event insurance. Do you think that this is another alternative to that? Is that something that is commonly available in Scotland? It is available at a considerable price. After the event insurance, it is not available, really, from a practical point of view. I have a recent example. I am not speaking first hand, but my understanding is that it is extremely expensive to get. It is not worth trying to obtain, in fact. It is difficult to get premiums at a level that are manageable for a cash flow for most legal firms. I think that Mary Gougeon makes an important point about the removal of risk in that. Does the panel have any view on what impact that will have on settlement negotiations and the prospects of settlement throughout the process? I have to say that I think that the lawyers and both sides of the litigation have a real part to play in being gatekeepers for the courts effectively. One of the things that you are building in, we might want to talk a little bit more about the exceptions to quacks, but you are building in conditions that would remove the benefit of quacks, which is fraudulent representation. Apologies. So there is no need to go into that aspect. The question that you were specifically asking is the removal of risk and what the effect that will have on settlement. I do not think that most cases will make a massive amount of difference. Currently, the cases in which defenders can recover or actually do recover expenses are relatively rare. The most important incentive on the pursuing lawyer is that the pursuing lawyer will get paid if the case is settled or won and will not get paid if the case is not lost. There is a big incentive on the part of the pursuer's lawyer to resolve the case, if possible, on favourable terms. I do think that it would be wrong to overstate the effect that quacks will have on settling cases by removing the risk of an adverse finding of expenses. I do not think that it will have a serious effect on it. It will have some effect, but I do not think that it will have a very large effect, because I think that the big incentive is not to lose the case, otherwise you will not get paid. There are outlays that you will have to be responsible for for experts and medical witnesses and the like, and they are quite often very high. Tenders and the impact of tenders, which is the sealed bid effect of the offering to settle the claim, will have on quacks. In a situation in which the defender has offered to settle the claim and has lodged a sealed bid in the court to say, I am betting that this case is not going to be worth more than that, what is silent in this bill is the impact on quacks if the pursuer chooses to say, no, I want my day in court, I am not taking this offer, I am going to take my chances. In those circumstances, what Taylor had suggested was that that removed effectively the benefit of quacks, save that there was a restriction, the pursuer would still get 25 per cent of their damages, but if we effectively failed to beat this tender or sealed bid, then you would be paying the opponent their damages on a cat basis to 75 per cent of the court award. That is not here. Would you be satisfied if this is done by regulation or should it be on the face of the bill, given that it is supposed to reflect the findings of clarification? We are supposed to know exactly what we are talking about. One of the things that the Law Society did say in its response is that we are dealing with a lot of that will come in an accident sederant. That is an enabling, but there is an issue with if it is not here in the face of the bill, then we are relying on you getting it in for clarity so that we can advise our clients on it. If it is not in the bill, would you prefer to see it on the face of the bill or dealt with those rules of court? I would say that tenders are generally being dealt with, so it may be that there is a reason why it is not here, but I am just raising it for the committee. If it could be put into the bill, that is for your draftsman, but effectively I am surprised that it is not here and there must be a reason why it is not. I would say that there should be a specific reference to tenders in the bill, because they are a very important part of this form of litigation. Mr Daryl, do you want to pick up on some of the themes about anticipating where the legislation may take us? I appreciate that there are uncertainties around it. Obviously, Cox has been in place south of the border for a while now. At the time that Sheriff Taylor came forward with his report, the rate of increase of cases using DWP data was fairly significant. There was a sense of a compensation culture south of the border that did not exist north of the border. Since then, we have seen a rapid decline in the rate of increase in personal injury cases south of the border and a marked increase north of the border. I would be interested to know whether you believe that any safeguards that have been put in place alongside Cox in its application south of the border are ones that we could learn lessons from in terms of the legislation that we are scrutinising now or, indeed, subsequent SI's that may come forward in due course. One thing to say at this stage is that, although there may be an increase in personal injury claims, the bill effectively deals with civil litigation. Cox will deal with cases that are in court, and those have remained relatively steady over the past four or five years. As long as it is about legitimate claims, we effectively need to ensure that the cases where people are accessing justice are legitimate claims, where the public are choosing to exercise their legitimate rights and seek a remedy. Is this the point where you want to discuss fraud and the exceptions to Cox? I think that we are going to come on to that in a second. I will pause there. I bring Morrison. I think that you were going to go on to the Corks. Thank you, convener. Good morning to you. Do the panel members consider that the test for losing Cox's protection in the bill implements what Sheriff's Principal Taylor recommended? I think that it does quite on the reasonableness test. The wording does not seem to me to reflect what was suggested to you by another witness earlier in the month that the wording is the same as Weddensbury's unreasonableness. I am not sure that it is. I do not agree with that. What I suggest, or what the faculty has suggested, is that, in terms of reasonableness, we have set it out that the wording should be that, if in the opinion of the court, that person's behaviour is so manifestly unreasonable that it would be just and equitable to make an award of expenses against him. That is a stronger wording than is there. That is required in order to make it clear that it is only where you have behaved manifestly unreasonably that you should lose the benefit of Cox's. In relation to the abusive process, there is no issue about that, but there is an issue about potentially fraudulent representation. The wording there, as you will see from our submission, is a concern that it is a little bit too easy to meet the test. It should be a material fraud or something going to the root of the claim that results in you losing the benefit of Cox's. The three abusive processes are the essence of all of this. If you have abused the process, then you should lose the benefit of Cox's and fraud and unreasonableness are just examples of abusive process. Are you asking about the exceptions to the application of Cox's? It seems to me that B would really take A and C, although I think that B is a bit nebulous. The test that applies in relation to legal aid is quite interesting, because frequently where a party is in receipt of legal aid, there will be a motion made for modification of his or her expenses if he or she loses. The test there is that the court will not make someone in that situation liable for an amount that exceeds an amount that is reasonable having regard to all the circumstances, including the means of all the parties and their conduct of the proceedings, which might sound a bit bland as well, but the courts generally know what that means. In my experience, it works fairly, and I think that that would probably be the test that I think that if you are going to introduce Cox's, then I think that the exception should probably be worded in a way that is similar to that that applies in relation to legal aid, because I think that everyone understands what that means. It works reasonably well. The principle is that the introduction of Cox should give certainty, certainty of what our exposure is going to be. What we certainly do not want is that you are going to be protected unless, because that effectively will end up potentially making anxious legitimate pursuers who, given litigation perceived as a costly business, want total reassurance that they are protected. There is absolutely no doubt that the principle behind that is that Cox should apply in the majority of cases, but the exception to that should be a high standard. You should only lose Cox if the conduct is such that it would be unjust and inequitable for Cox to apply, but what you do not want to do is effectively push people back into having to get insurance because of the exceptions. In relation to subsection A, it makes a fraudulent representation. We at the society were concerned about that, because, again, what we are trying to avoid at all costs is satellite litigation. We talked in our response about the materiality. It makes material fraudulent representation designed to materially increase the value of the claim. We want it to go to the root of the litigation, rather than being ancillary. They claimed that they were off for three weeks and that it was two weeks, and that the paperwork had to be to the root. Abusive process, if I can pause and say that Lord Gill, in a case in 2004, made reference to there are many diverse ways in which a litigant can abuse the process of the court. For example, by pursuing a claim or presenting a defence in bad faith and with no genuine belief in its merits, or by fraudulent means, or by an improper ulterior motive such as that of publicly denouncing the other party. For my part, the abusive process could arguably be broader than that was suggested by Sheriff Principal Taylor, which was falsification of documents. Somebody had gone to court, borrowed out of process documents and then put back different documents that were more advantageous. That, of course, would be an abusive process, but arguably we would say that if you have A and C, you may not need B at all. A number of the respondents have suggested that the test of fraud should be replaced with the English test of fundamental dishonesty. Would you agree with that? I am slow to agree to it without considering it more carefully. All I can say is that I am keen that the test that is there at the moment is a little bit light. In relation to fraud, it needs to be strengthened. It should be stronger and clearer that there has been a fraud relative to the claim. Mr Stevenson, I do not think that there is any need to introduce English terminology. I think that if you have material fraud and abusive process, that should be the exceptions to quarks. Therefore, finally, do you have any other suggestions on how the current tests of the appearance of the bill could be improved? I have made a suggestion in relation to the B, which is the reasonableness one. I think that you should look more towards the legal aid section 18, which is a 1986 exception. That has been operating for decades now, and everyone knows how it works, and it seems to me to work very well. Is that a justification for continuing? I think that it is a justification for using or replicating that test in this bill, because as I say, we all know what it means and it works well. If someone in receipt of legal aid should not be able to use that as a means of pursuing a claim in bad faith, you would always advise clients in that situation that they are not immune from an award of expense simply because they have legal aid. They are not allowed to abuse that. I think that there is an analogous situation here. If you are going to introduce quarks, you need to have a safeguard that is similar to that that exists where parties in receipt of legal aid. In terms of subsection A, it makes materially fraudulent representation, which is designed to materially increase the value of the claim. Our position is that, with A and C, you may not need B, but if you maintain B, we believe that it should be a windsbury and manifestably unreasonable and effectively draw the wording from that. That wording does not quite match the wording suggested by Sheriff Principal Taylor. Sheriff Principal Taylor recommended that claims management companies should be regulated. Under the bill, they will not be regulated and they probably will not be for a number of years at least. What are the consequences of not regulating claims management companies under the bill? Effectively, you are putting the solicitor and a claims management company not on-level playing field. There is obviously a public protection. Sheriff Principal Taylor, the Law Society of Scotland, will say that we are welcoming the regulation of claims management companies. We understand that there is a consultation or review going on at the moment with Esther Robertson. One thing that I can appreciate is anxiety. The anxiety is that changes may make this a more attractive ground for claims management companies. We certainly do not have evidence on that. One thing that we could consider is that you cannot regulate claims management companies through the vehicle of the bill, but you can regulate solicitors' conduct of civil litigation as a reserved area. They would need a lawyer to carry out the appearance in court. There is a way of regulating the lawyers in what instructions they are able to take from claims management companies. It depends on how long the regulation review is going to be. If there is going to be a lag, how long is that lag? Clearly, it would be optimal to have it all wrapped up, but our position on balance is that we would not want to delay the implementation of the bill until the regulation review has concluded. However, if there is a way to manage it, it may well be by looking at regulation of the solicitors who accept instructions from CMCs. That is something that you think should be in the bill. In fairness, as we have not consulted on it, it is not in the bill. We want some more time to think about it, but I appreciate that, just from the discussion, there is a bit of anxiety about implementation of the bill without regulation, but it would need more quality thinking on it. The Scottish Government's position appears to be that there is a quasi-regulation in so far as the claims management companies are caught by section 1, as they are providers of relevant legal services. Is it the panel's view that claims management companies are providers of relevant legal services and therefore caught? I am not sure that, comprehensively, they would be, because not all CMCs are operated and structured in exactly the same way. You might have a claims management company who employs paralegals and carries out work in house, but you might have a claims management company who, effectively, is nothing more than a funding vehicle and then contracts a firm of solicitors to undertake the provision of legal services. Any other views on that? No, I am just thinking that it is fair to say that the wording may not look at it necessarily, depending on how the claims management company is structured, might not necessarily be caught by section 1, depending on how they go about their business. I think that you make a very good point, Kim Leslie, earlier on. The point was made in last week's session that there was a hope that the claims management companies will, the phrase used, was wither on the vine. I think that the argument was that law firms following this bill would start to take claims management companies in house. Do you have any view on that, particularly given that, presumably, if one is a claims management company and one remains unregulated, if a law firm takes a claims management company in house, it becomes subject to all the perfectly appropriate regulation that the law society would expect and therefore becomes less attractive? Is that fair? It seems a bit more attractive, because, effectively, what you are doing is allowing businesses to compete solicitors firms who, with the introduction of the bill, would not need a claims management company to offer a DBA. Arguably, it is a selling point to the public. We are regulated. There are additional protections available to you that you would not get from a claims management company. What, effectively, you are doing is widening the market by introducing damages-based agreements. Whether claims management companies, in part, have existed because there is no alternative to funding. On one of you, if you are offering this work as a solicitor's firm, you might not need a claims management company. What are they adding? What are they bringing to the party that you cannot do yourselves? Lack of regulation. The solicitor is regulated, so they are the ones that are providing the legal services. Recommendation 75 in Taylor's report suggests that the law society should make it a ground of professional misconduct for a solicitor to accept a referral from a claims management company, which is called COALS. My understanding is that just north of 40 per cent of COALSs are around excellent claims. Will the law society be looking to implement that recommendation? I would want to take some advice on that. I can't add to you today. Can I move on now to discuss third-party litigation funding, because the bill would make it possible for third-party funders to be found liable for legal expenses. The evidence that we have had, the law society spoke of unintended consequences, and Mr De Rolo, your submission suggests that certain sections of the bill should be reworded, because there are concerns that trade unions, insurers and solicitors might be caught up in this. The Scottish Government has given an assurance that those organisations will not be exempt, and that is not who the bill is aimed at. Could you perhaps expand on your concerns and tell us how you think those concerns should be dealt with? In relation to this, I think that it is really a drafting problem. The concern is that the way that the bill is currently framed, it would catch people that it is not intended to catch. The idea behind this provision, as I understand it, is to deal with more in the commercial context people using as an investment vehicle the funding of litigation and to make them liable for expenses in these kinds of situations. The concern is that the way that the bill is framed is wide enough to catch potentially even solicitors firms themselves offering the service, not just trade unions and the like. As I understood having read Mr Goodall's evidence, there is an understanding that it needs to be looked at again and redrafted in order to make it clear that that is not going to happen. Would you like it to state explicitly who would be caught up with this? It should be clear and explicit how you achieve that as a matter for the draftsman. That is not accepted from family proceedings, so just who could be caught? Imagine a divorce proceeding where a father is providing funding to a daughter who is going through a divorce. Arguably they are caught by that. Do you also have a situation where solicitors offering DBAs would be caught if they paid for an outlay, which then creates a bizarre situation where the solicitor might be better just simply not preparing the case, because if they pay for an outlay, they are effectively putting themselves forward as third party funders. It is clearly a drafting issue that it needs to be looked at again. Okay, so do you think that if nothing was done potentially, particularly solicitors, might be put off taking cases because it might get caught up in this? I mean, effectively, if you're offering a damage-based agreement and you're saying, I'll pay for your outlays, as soon as you pay for a medical report, you're caught, and that means that if you lose the case, the solicitor's firm would be found liable in the expenses. Mr Stevenson, do you have anything you'd like to add? Well, the concerns that have already been expressed are ones that I would share. I do think that it's a drafting issue as well. I think that it needs to be tidied up and just made clear who's going to be liable to be drawn into the net here. Okay, thank you. The Scottish Government has stated that it would amend the bill so that transparency requirements around funding were not linked to liability to pay expenses. Do you have any other concerns about the revealing funding arrangements? At the moment, I have to say. I mean, there may be things that I'm not suggesting that everything's okay, but I can't think of anything at the moment, I'm afraid. Okay, but if you do, it would be helpful. We will, I will, yes indeed. We would appreciate that. Ms Leslie. Tad. Mr Stevenson. I don't know. Okay. Thank you, convener. Vinnie. Oh, Ben Grant. Just a small point, and just for clarity and transparency, I'm no longer a non-practicing member of the Law Society of Scotland, but I'm still on the role of solicitors. Section 32 of the Law Society submission states that it would suggest an exclusion of after-event insurers. I just wondered if you could just specify why you think that's important. Well, again, it's effectively the cost, so if you're allowing solicitors to offer DBAs, it's got to be meaningful, and so, again, the cost involved in that will still be prohibitively expensive if the after-event insurers are caught by third-party funding arrangements. Okay, thank you. John Finnie. Thank you, convener. Morning, panel. I'd like to ask about group proceedings. The bill will empower the court of session to bring forward rules. Could you maybe outline your position on the provision of the bill regarding that, please? Yes, certainly. The Law Society originally was a bit more ambitious, but on reflection agreed that this is novel. We haven't got this before, so the simplest rule is maybe not the wrong choice. The Law Society has suggested in its response that we distinguish between liability and causation, because in the bill there is a restriction for jury trials, so you're not allowed jury trials, which, given that there may be scope once all common issues of liability and causation have been dealt with, there may be some people, some pursuers whose claim may be better dealt with or could be dealt with by juries. We didn't quite understand why that restriction was encapsulated to both liability causation and quantification of damages. We wanted to bring that to the attention and say that, of course, there is always an argument that can be made by the defender if a pursuer is making an application for the case to be heard by jury, which is that it's too complex, it's not suitable, so there's a hurdle to be got over at that point anyway. I welcome those proposals. There is a long-standing need for provision in relation to group proceedings. It's not the easiest matter to resolve by way of legislation, as long as the provisions are enabling and will allow the court system and court rules to work through a method of dealing with those matters. However, it's a significant improvement on what we have at the moment, which is nothing by way of provision at all, so it's very important. There are lots of examples of cases going through the courts where there are groups involved, and there isn't a specific provision in the rules for this. It's something that Gil's report highlighted, and it's long overdue. Finally, if I may, it's just something that's mentioned in the Law Society, even as Leslie, and something was mentioned by Principal Taylor, Sheriff Principal Taylor, but it's not in the middle, and that is the contingent legal aid fund. Could you comment on that, please? Yes, certainly. That was something that we picked up on that was in the recommendations, but it didn't find its way into the bill. The contingent legal aid fund is effectively for cases where you don't know if you've got a case or not. For example, clinical negligence, somebody comes to you, something has gone wrong medically, but we don't know whether that is a case that has merit or not, so you'd have to get a report from a suitable expert to say whether, in fact, there has been a clinical negligence. That is effectively where you would go to the fund before you offer a DBA as a precursor to enable you to get the outlay paid for to determine whether there's a case or not on the understanding that, if there is a case and you're successful, you pay back that outlay to the legal aid board. Does the absence from the bill suggest that anything has changed with that? We were just suggesting that it was a good idea, and it may well benefit from being on the face of the bill. A very small point goes back to the group proceedings in section 17. I read with interest in the Law Society submission that it states that, interestingly, England and Wales distinguish class actions and group actions, and it is not clear whether that has been deliberately omitted from the current draft, and it would be helpful for that to be considered. I wonder if you could substantiate and elaborate on that. That is novel, and there is some terminology that is interchanging. As I understand it, class actions are opt out, whereas GLOs or group procedures are opt in. I do not want to elaborate yet further, but that is something that we have picked up on, that there may be some language that has been used that may not mean the same thing. It is almost about making sure that the public's expectations are not inflated. I suppose that the provisions in the bill will have the net effect of over-rewarding solicitors. There is still an issue with the recoverability of judicial expenses. The fact of the matter is that we are looking for ways, imaginative ways, of getting paid properly for the work that we do. The essential point is that there is going to be a cap that is going to be done by statutory instruments or, I presume, some mechanisms. Therefore, the ability to recover or obtain a fee will be subject to control. If there is a need to modify matters in due course, then that can be done. That is right. As I indicated in the outset, there is still secondary legislation to come in, so that will no doubt keep things reasonable. Is it dependent on that to keep it reasonable? It is clearly envisaged that there will be further control. It is a package, so I do not think that one can look at one in isolation from the other. We need to see what the secondary legislation says, but I would anticipate that we will ensure that there is control over how the primary legislation operates and that that will provide a reasonable package. I thank the witnesses for attending what has been a very comprehensive evidence session. I now suspend to allow a change of witnesses and a short comfort break of 10 minutes. Welcome our second panel of witnesses, Callum McPhail, from the Association of British Insurance. Luke Peatherbridge, senior public affairs manager association of British travel agents. Andrew Lodian, member of the expenses sector focus team and partner with the WFLLP forum of insurance lawyers. David Holmes, head of legal, Scotland and corporate medical and dental defence union. I thank again all the witnesses for providing written submissions, which again is hugely helpful for the committee. I start by asking the panel whether they support the introduction of damaged-based agreements. Who would like to start? Mr Peatherbridge. I am happy to start. In the main, those are contracts between pursuers and pursuers solicitors. The members of my organisation, FOIL, are comfortable in principle with damaged-based agreements being available for solicitors. I should say that they are available just now, they are just unenforceable, and there is a distinction, but it makes sense for them to be regulated. The issues that we have with them, I suspect, are going to come on to separately in relation to future losses, so I will just pause there. So it is a qualified yes? A qualified yes. Anyone else? Mr McPhail? I would echo Mr Lodian's comments that no objection in principle is very much something for a pursuer and their agent to have an agreement on, but we do have concerns about future losses. Is that the view of the other panel members? That would also be helpful. That would also be helpful. The Association of Precision ensures has highlighted research that suggests that consumers do not understand the DBAs and do not shop around between providers, can perhaps the representatives from the DBA explain the results in more detail. I am not sure that I have that information immediately to hand, can I just check with one of my colleagues? Yes, absolutely. We could perhaps move on to that. If not, then you can get back to the committee. The bill's provisions would allow a solicitor to keep judicial expenses awarded in the case, as well as a charge, a success fee. Do the panel members think that that is justified? The comments that my organisation has made are looking to draw out that for a claimant solicitor there are three levels of recovery. There are the judicial expenses that are recovered at the moment. There will be the DBA agreement with the client. Thirdly, as of now, a claimant can apply for an additional fee from the court. There are a range of factors that could come into play, the importance of the case, the value of the case, the complexity of the case, the amount of work that has to be done. That is a reimbursement to the solicitor who is representing the claimant if they are the successful party in the case. As an organisation, we do not have an issue with the DBA success fee, the recovery of judicial expenses, but we think that there might be room for looking at reforming some of the means of recovery of additional fee in the circumstances that I have described. If I could just echo that, the position of the additional fee is quite important, because I think that there was some evidence perhaps about this last week. In higher value cases, the solicitor's judicial expenses, which is the first type of recovery that Mr Holmes mentioned, will be normally a five-figure sum. The additional fee is calculated as a percentage of that, and that can sometimes be 100 per cent, 150 per cent of the first amount. On top of that, there is potentially a DBA under the bill as well, so the solicitor is being effectively paid three times already for working on the case. The reason I mentioned all of that is that it plays into some points that we might develop later on in the discussion this morning. That is helpful to set that out at the moment. I have just had a little bit of clarification. I think that the point that was made was actional relation to CFAs, and I think that we are happy to write to you further on that with the details of the report that was referred to. That would be very helpful. I wonder whether the panel would like to see greater protection for compensation for future loss included in the bill. We have covered that quite a lot with the earlier panel, so I would like your views on it. If I could go first, I think that the answer is yes. Our position is that future losses, and here in the main, we are talking about the most seriously injured victims. Future losses are calculated very carefully according to an actuarial table. There are care reports. The losses are calibrated in order to provide care for the future. There is no basis as far as we can see why some of those losses should be paid over to lawyers and that they should stay with the victim. I think that in the Taylor report, Sheriff's principle, Taylor recognised that issue. His difficulty, as I understand it, was more to do with the practicalities. If a case settles out of court, as most cases do, how do we know which part of the £5 million settlement is for the future and which part is for the past? That is a practical issue. There are a number of ways that that could potentially be dealt with, but one of them would be to set a threshold above a certain level. The deduction is not 2.5 per cent under the DBA but could be, for example, nothing. The solicitor is still going to be paid because they are still paid their judicial expenses and they are still, in cases of that value, always going to get an additional fee. That is the position that exists just now. Do you feel that it is more heavily weighted towards the solicitor to benefit as it stands? Our members think that it is unnecessary. That is the pursuer's money, it should stay with the pursuer and there are ways that that can be addressed. A threshold could be set beyond which there could be no deduction. The pursuer's solicitor still has an incentive to pursue the case above that level because they have a professional obligation to do so and they will be paid the judicial expenses and an additional fee anyway. Any other views? I think that from an insurer's point of view, our view is that people who have been injured through no fault of their own should be compensated for pain suffering and that includes past and future losses. We would support that. We get to a situation where as close to 100 per cent of their damages are received by the pursuer themselves. It is relevant to bear in mind the context of the discount rate change that we have had in February this year that I am sure the committee will be aware of. That change brought in by the Lord Chancellor and ministers in Scotland was said to be to ensure that full damages are available for the severely injured party for all their future care. Mr Bretherbridge, I think that the only thing that I would say on that is to echo the comments of Callum to say that we would support the principle that the claimant should retain as much of any award as possible. Okay, thank you. We have a number of supplementaries, Liam McArthur, followed by Ben Macpherson and then Liam Maccair. Thank you, convener. Good morning. You will have heard the response to the same line of questioning from the deputy convener in the previous panel. Restensibly, what the Law Society was saying is that you would have an actuarial table, but you would also then have a range of projected future costs put forward by the defence, put forward by pursuers. Actually, the gap between those is very often going to exceed and exceed by some margin, the 2.5 per cent cap being proposed here. In a sense, all of us would want to ensure that any future costs of a claimant are fully and properly met. Does it pose the risk that it is inherent in the line of argument that you are prosecuting, given that what we are dealing with here generally is a range of estimates of future costs going forward? There is a range of estimates, but what is ultimately determined is the right amount of compensation for the pursuer. It would not be surprising if the pursuer's solicitors argued for a higher figure and the defender's solicitors for a lower figure—that is their job—but, at the end of the day, the figure that has arrived at is intended to be the correct figure to provide for their future care. You do not see a risk—again, this was, I suppose, put to us less so today, but in the evidence session last week, the additional work and complexity involved in some of those cases would mean that it is potentially the case that some of them would not be taken forward as successfully, were there not some form of reward. In the sense that that is a risk that, while we want to see future costs met going forward, we would also want to make sure that no case that had validity and all the rest of it was embarked upon in the first instance because of that complexity and the additional workload that would be involved in bringing it forward. No, I do not see a risk because that position that you have just described is the position now and solicitors are more than adequately compensated in her view for those cases. The fees with the addition of the additional fee can be very significant and rightly so in those higher-value cases. The more work that the solicitor does, the higher the judicial expenses are, the additional fee will be higher too because it is calculated as a percentage of that. I have a question for Angela Lothian. The written evidence that you have supplied makes two strong statements around that. At 19 to safeguard pursuers, we strongly support an overall cap on the success fee. At 21, you believe that a complex mechanism is unnecessary and that, to avoid that entirely, you would submit ring-fencing future losses and make them exempt from the DBA stroke SFA. For clarity, can you put that in the context of the other statements that you have made around the threshold and the answer to Liam McArthur? In a case where an award is made by a judge or by a jury, it would be possible to identify what the future losses are and to ring-fence them because they are known and identified. However, in a case that settles out of court, that will be harder because it is settling for a lump sum and the distinction between future and past losses is not described within that amount. That is why, as an alternative, we are suggesting that a threshold would operate as a means of protecting what are likely to be future losses. There are other potential mechanisms—a threshold is only one—but what we are trying to avoid is the complex mechanism that the bill envisages to deal with the conflict of interest that the bill creates. That was a point that was made in the earlier session today. That can be avoided either by some sort of cap or threshold in cases that settle out of court and ring-fencing future damages in cases that settle where the court makes the award. I thank you for clarifying that point around threshold and cap. That is helpful. That was a point that I made to a previous panel, because it does concern me. Is there a risk in this panel's view that there is ultimately an inflation of awards given by the court? To ensure that future losses—one of you made the point earlier that a pursuer should get the full amount—I think that Mr Holmes said that the pursuer should get the full amount, does the court say that, to ensure that the pursuer gets the full amount, we will add the legal fees on, whether explicitly or not explicitly, and you end up with inflation of the awards. With your insurer's hat on, if there was inflation, what impact does that have on your business models and the premium to the consumer at the other end? It raises potentially a driver or an expectation for the pursuer being aware that an element of their damages is not going to be theirs and that they will look for a higher amount than they might ordinarily. That might have the result of driving cases into litigation that might otherwise have settled out of court. I understand the point that you are making about how the courts would view that. I am not sure that I am entirely qualified to comment on how any individual court would view that, but I can certainly understand the concern that that awareness might colour how they approach it. Obviously, if we see that particularly in court awards, we will see an increase to expectation in pre-litagation awards. We will see claims that damages inflation, which increases the cost of claims. Ultimately, we would have an impact on our customer's claims experience or on some of our customers. We handle claims with their money, so it is a direct impact to their bottom line or to our customer's claims experience, which obviously colours how their renewals are viewed. I will give you a second leg of your question about the impact on premiums. The MDUS that I represent today is a rather different organisation because it is not an insurer. It is a not-for-profit organisation that has no shareholders. It has 14,000 members of the medical and dental profession in membership in Scotland. If there are claims that inflation is either in a level of award or in a number of cases coming forward, that will directly correlate to what GPs and dentists have to pay for their indemnity subscription on an annual basis. There is a slight difference with the organisation that I represent today, because there is not a shareholder body sitting behind an insurer. It is a more direct correlation with the membership. Claims inflation, either in a level of damages or frequency of claim, would be a significant concern for us. I would highlight here as well that, for the travel industry, we are also not, but the vast majority of claims in the travel sector do not fall back on an insurer. They are within the deductible of the TOR operator. Again, I would echo that comment that we have some concerns around claims inflation and do not con the impacts of that in terms of premiums that our membership will be paying. The point that I would like to come to is about qualified one-way cost shifting. In particular, it was foil in the written evidence that you submitted to the committee where you commented that, if coax is implemented without appropriate safeguards, there will be significant adverse consequences, including increase in nuisance calls, increase in fraudulent claims and higher insurance premiums, and then you go into further detail about that. I was wondering if you could elaborate on that point and outline what additional safeguards you would like to see if the bill goes through. Thank you. The safeguards that we think are important to coax are really to balance it. Some of them were in the Taylor review and are not in the bill, but the world has moved on since Sheriff Principal Taylor finished his report. In the Taylor review, as has been discussed previously, there was provision that claims management companies should be regulated. We might come back to that, I imagine, but that is one thing. The second part of Taylor that is not in the bill is something that was discussed earlier, where a pursuer does not beat a tender, the sealed offer. The offer is £10,000, the pursuer rejects it, they go to court, they only get eight, they still have full coax protection, despite the defender offering more than the case is worth. That is not in the bill. We might come back to that, too. Sheriff Principal Taylor recommended that it should be a criminal offence to pay a referral fee to someone who is not a regulated person or an unregulated person to receive a referral fee. If you are paying or receiving a referral fee, you should be a regulated person, otherwise it is a criminal offence. That is not in the bill either, as I read it. There are important safeguards that were in Taylor that are not in the bill. Over and above that, because, in our view, the world has moved on and we might talk in a minute about the fact that there are now more claims in Scotland, more injury claims in Scotland than there have ever been before, there are other safeguards that we think would assist. I am not yet coming to the exceptions to coax, but there are procedural steps that can help. For example, there are steps that the courts have put in place in England and Wales that might assist. I can write to the committee with some detail on that if that would help, so I do not get too far into the detail now. However, there is no anticipation of those coming through here. At least they are not in the bill and we have no indication that they will be coming through the court system either. Those are some of the things. I am just going to pause there, because the next thing that I would say would be about the exceptions to coax. That might take me into someone else's area, but that is the answer to your question just now. Thank you. Yes, because it enters claims management companies that will be covered by other members. I wonder if anybody else had anything further to comment on that. I think that we have a real concern that we will see a further influx of claims management companies into Scotland. It is already identified that that is happening, as it is. We are conscious of what is happening in England and Wales. The work that has been done to try and deal with that, we are conscious that there is regulation in England and Wales of claims management companies for the protection of the man on the street, of the consumer. We do not have that in place at the moment. That is currently under review in England and Wales to transfer to the FCA. However, understanding where changes have happened in England and Wales around the compensation culture, as it might be described, we are seeing that that has created more pressure on less scrupulous bodies. Our concern is that, with the advent of coax removal of the risk, we will see that happening in an accelerated way in Scotland. If I can use a bit of conjecture, the UK Government has said that it intends to stop entitlement to claim PPI claims by mid-2019. Those are very sophisticated companies that use or pursue those claims on behalf of people. They will be looking for somewhere else to generate their revenue. Some of the activity that is being considered around whiplash changes small claims track in England and Wales will move business models. As we see it at the moment, there is a real risk that we will see an influx with all the challenges, increased nuisance calls that have been referenced into Scotland. It is probably worth adding our experience since the introduction of coax, which is certainly the travel industry in England and Wales. We have seen an increase in claims of more than 500 per cent on average across our membership since the introduction of coax. We certainly think that there is a risk here for increasing the activity of claims management companies in Scotland for an introduction of the regime. I just have a question. I presume that you heard the last session of evidence that we took as well. It was the suggestion from the faculty of advocates that this David and Goliath situation that we talked about before, that if coax was limited to people who either had insurance or the larger organisations, is that a suggestion that you would be in agreement with? Yes, it is. I have a couple of issues that we have touched on. Again, drawing on the evidence, we heard from the last panel in relation to the shifting picture of claims from the time that chef principal Taylor was taking his evidence and producing his report to now, where we have seen a rapid increase year-on-year over a period in claims being brought forward south of the border, a less pronounced increase in Scotland, and that is effectively reversed in the more recent past. We tend to suggest that the point that Mr Pitheridge, you were making about a rapid increase in terms of claims that you are seeing, 500 per cent. I am not sure where it is coming from, but it must be matched by a significant decrease in other areas if those figures are to be believed. However, the point that the Law Society was making was that coax will apply to cases that are brought to coax and that civil action is brought forward. A lot of the DWP data reflects claims that go nowhere in the air court and therefore get an accurate picture of what the impact that coax should have here, albeit the discussion around safeguards will be pivotal in determining that. However, the figures may not necessarily be as straightforward to interpret as perhaps they first appear. I will pick up on that. There are a couple of points, if I may. That is absolutely right in the sense that the majority of claims do not ever reach court. They are never litigated. It is something like 85 per cent of injury claims never even result in a court case being raised in the main. That is because they are settled before they reach that point. However, the rules that apply to litigated cases go right through to the very start of a claim, even if it is never litigated, because in the mind of the pursuer solicitor who is advancing that claim often through the protocol and in the mind of the insurer at all times is what will happen if that is litigated. That will have a huge impact on every single claim, whether it is litigated or not. It does not matter. The decisions about whether to pay a little bit more because the pursuer has got coax will be taken pre-litigation just as much as they will be taken post-litigation. If I can pick up on a couple of other points, the rate of claim in England is actually going down. It is a negative growth, if you like. It is declining. It is about 4 per cent a year that claims are going down in England. We are seeing this substantial increase in Scotland. From a much lower base, we have been told. From a much lower base, that is absolutely right. There are dangers with comparing ourselves to England. I do not know why we keep doing that, but I am leaving that to one side. The reality is that this is a form of arbitrage by claims management companies. It is not injured people choosing which place to litigate in. It is about business models determining where they are going to bring their activities, where they are going to generate, in many cases, claims. You raised the point about travel claims increasing, and I will let Mr Pethirbridge speak about that, but that is right because there had to be some other decline somewhere else. The decline somewhere else in England has been in road traffic claims because coax came in but claimant costs were capped. The margin reduced in that area of work. The risk reduced, but the margin reduced, too. What happened? The business model moved on to travel claims. The risk is that, for us in Scotland, because we are bringing in coax, we are not banning referral fees, we are not immediately going to regulate claims management companies, and there is no discussion about reducing costs that we are in the same position. Again, drawing on the evidence that we have already heard, I take the point in relation to the regulation of claims companies. There was a pretty heavy hint from the bill team a couple of weeks ago that that is coming down the track. If you were looking at your business model, would you seriously be looking at a business model that was ignoring the fact that this is coming down the track in terms of where you would seek to operate and how you would build that business model going forward? We are looking at a delay of several years as we are with the implementation of the bill. In the sense that they are going in parallel, so when those provisions come forward, it will march ahead at the same pace as the implementation of the legislation to be passed. If that is the case, that would be something that we would entirely support. Claims management company regulation and the bill becoming effective on the same date would be a major step forward. If that does not happen and if the bill is implemented before CMC regulation, as might be a risk, from the CMC's point of view, it is a flick of a switch. They are technology-enabled, they are, in many cases, highly efficient and they are largely call centres. It is very easy to add in some post-codes into the areas that they are going to phone. I will add a bit of clarity on the travel space. The big problem that travel has in England and Wales, and we will also have here in Scotland, is the exclusion of travel from the pre-action protocol, which made us particularly vulnerable to the activity of claims management companies and particularly attractive to claims management companies. We will pick that up separately with Scottish Government and Scottish Civil Justice Council. We would say, going back to the principle of sharing the risks of litigation within the bill, that we simply do not see and we are going to come on to coxing more details or uncover this in detail, but we simply do not see the right balance within the bill currently. Paragraph 59 of the financial memorandum accepts the premise that the bill incentivises settlement of claims that do not have merit. That does not seem to us to be good policy and certainly is an industry that struggled with that. We would not like to see that introduced. Although I think again the point was made that this is happening already. I mean what the financial memorandum does not go on to quantify the extent to which that may shift. Yes, John Finnie. A casual listener might think that this is incredibly public spirited of you making some of the representations that you do. You talk about the business model of claims companies, that is not in any way dissimilar from the business model of insurance companies that make massive profits. The distinction is that in Scotland, insurance companies are regulated and claims management companies are not. Do you operate the same sort of business model as the claims companies? I am not sure I understand in what sense it is the same. A claims management company can open we could open one this afternoon above a garage and would be in business and nobody would be regulating us or checking our contracts or there would be no one to complain to. Whereas with an insurance company, as I understand it, I am not an insurer but as I understand it, they are heavily regulated. Could I perhaps pick up on your point about the massive profits? I am just checking, but I think that I am correct in saying that in the last 25 years in the UK motor insurance market two companies have in individual years made underwriting profits on their motor books. Only two individual companies in 25 years. I am sorry, but I do not get the point of that. You are talking about massive profits that insurers are making. I am quite sure that the business model is not predigated in one form of insurance. You referred, Mr Brethren, about not the right balance. Can you explain more on that? I mean, certainly our experience in England and Wales has been a very low proportion of claims Cedar reversal of cox. I think that the financial memory rounder picks up that it is 0.1% of cases in England and Wales currently. We certainly do not feel that the balance is struck correctly in England and Wales or that the bill does so at present. I think that we would agree that there is some wording that needs to change around 4A. Fundamentally, we want to see a better balance in Scotland than what we have in England and Wales. That is the point that I have tried to make. Do the rest of the panel agree with Mr Brethren? Any comments to make on that? Are we coming to questions on tenders and exceptions more generally, or would you like comments on— Yes, we will be, yes. Can I ask a further question? A number of respondents have suggested that the test of fraud should be replaced with the English test of fundamental dishonesty, but Sheriff Principal Taylor thought that that would not be well understood in Scotland. What are your views of that, all of you? I could go first briefly. It is not a major issue. One of the benefits, potentially, of having fundamental dishonesty is that there is already case law in England and Wales on that definition, so the risk of satellite litigation might be less if we adopt a test that has already been considered by the courts in the context of personal injury claims. That might be a benefit. Any comments, Mr Hill? I think that I was aware of a comment that was made in the previous session about there being a material increase in the value of claim to try and identify what was fraudulent behaviour. I would certainly encourage that. I think that we have seen particularly in recent times cases where—I can think of one case that was recently in court—where the pursuer was claiming for £180,000 in terms of damages. The judge held that he had concerns about the credibility of the pursuer in a variety of areas of his evidence but found an award of £7,000. If that type of case is regarded as material, I would certainly support it, because the legal costs in dealing with that claim are quite astronomical. It really is about how we get to a clear and acceptable definition of that. I think that there are practical issues that arise on a public policy level. One would want to be looking for a deterrent against, for instance, embellishment of claims that could have a very significant effect on the overall outcome. That is certainly something that we have seen at MDUS, where we have had concerns and, ultimately, much lower settlements have been achieved when further evidence has been forthcoming. Can I ask one final question? Do you have any suggestions on how the current tests could be improved, mentioned in the bill? I have one, if I could. I think that the test that we have just been discussing in relation to fraud talks about fraud in connection with the proceedings. The majority of claims never reach courts, and it might be that that should be in relation to the claim rather than the proceedings. Otherwise, there is no incentive, if you like, to be telling the truth in the majority of cases that never litigate. It is a small point, but hopefully a sensible one. Anybody else? I would like to take us back to the claims management companies, if I may. First question, I have to the panel. What do you think are the practical consequences of not formally regulating the claims management companies as part of the bill? I think that we will—it has already been mentioned—see an influx of claims management companies into Scotland. We will see the onset of the type of activity that we see from their models, the increase in nuisance calls. We will see an increase in claims that have little or no merit. One of our fundamental concerns is that our customers expect us—their policy holders expect us—to investigate claims, to pay the correct claims and to pay the correct amount for those claims. We entirely agree with that, but where they think that there is a claim without merit, they have strong views that they do not want their insurer to make an economic decision to get rid of it. We envisage that as we see more of those claims with little or no merit, we will find that our claims departments are inundated with claims that require more investigation, and that operational strain will get in the way of our handlers dealing with the meritorious claims more expeditiously. Our concern is that we will see pursuers with valid claims experiencing delays in getting their settlements. I echo that last point. We have seen in the travel industry that the sheer increase that we have seen in volumes of claims has caused a problem to dealing with genuine claimants, and nobody is suggesting for a moment that there are not genuine holiday sickness cases out there. It is important that we deal with those as quickly as we can. I would like to make a couple of practical areas where I think that the bill could make some steps here, building on the previous evidence session. The first is around transparency obligations. One of the areas where claims management companies thrive is the lack of transparency in the links between claims management companies and solicitor firms. We have called, as part of the regulation in England and Wales, for an obligation to name sources of claims, which makes it easier to track things like referral bans, if that were to come in here and would certainly support that. Notification of alternative sources of dispute resolution is something that the bill could deal with. The Carol Brady review in England and Wales recommended that part of the regulation of claims management companies could be that, if there is an alternative dispute resolution scheme available to consumers at low or no cost, there is an obligation on the claims management company to notify the consumer of that. We see no reason why that could not equally apply to solicitors offering DBAs. Sorry, if I could just add a couple of points. At this stage, and until claims management regulation comes in to Scotland, the Scottish consumer is at a disadvantage compared to the consumer in England and Wales, the disreputable claims management company—and they are not all, by any means, disreputable, but those that are have an incentive to operate in Scotland, as opposed to England and Wales. As a result of that, what we see is that the deductions from damages can be quite significant. In the bill, it is envisaged—there was some useful discussion on this this morning—that section 1 would apply to claims management companies as well as to solicitors. The difficulty there is that the solicitor is regulated and the claims management company is not. If there is a cap on DBAs, the solicitor, if it breached that cap, would back properly be subject to professional discipline, whereas there is nothing to catch the rival claims management company. What we see at the moment is that there is sometimes that deduction twice, once by the solicitor, once by the claims management company, and there would be nothing, there would be no regulation to prevent that until they are regulated. If I might just pick you up on that point, Andrew Lodie and E, let's say that the claims management company does take a significant deduction, they used the words, a quite significant deduction from damages. What recourse would I have, as the man on the street, Mr McPhail, said earlier, what recourse do I have? How do I challenge that, either currently or in the immediate future, do I have any recourse? I'm not aware that you do. I think that in future you would have to understand the bill and the statutory instruments that lie behind it as an individual to know what's enforceable and what isn't, and there's nobody to complain to about that. I'd presumably have to go and consult a solicitor. You would have to go and find a solicitor. Just to pick up on another point that came up earlier, so is it your view, panel, that the claims management companies will wither on the vine when the bill comes in? Until they're regulated, it will be the opposite. I think that there's little doubt, at least that's our strong view. They may well wither on the vine when they are regulated, who knows, but the bill puts solicitors on a level playing field with claims management companies only after claims management companies are regulated until that time. There's no level playing field between the two, and therefore there's no reason why they should wither on the vine. I'd like to pick up a point on incentives for claims management companies to make profit, and there's more money to be made in the claims process in Scotland than there is in England and Wales. If I can just use an example, if you take a road traffic claim settlement where damages are awarded at £10,000 in both jurisdictions, the recoverable cost for a solicitor in England excluding any disbursements is £500, and in Scotland it's over £2,000. We have a situation where Sheriff Principal Taylor had no objection to referral fees, and I think that having that within our processing system and potentially accepting that that is part of what we're allowing is a fundamental driver for these businesses to continue operating here and to seek to operate here because there is money to be made out of the claims process. I have one final question, and it goes back to what we were talking earlier about premiums increasing in the cost to small businesses increasing. I notice that the holiday industry is in the evidence that a number of travel agents may often be SMEs and the claims may be below their insurance excess, so they don't have insurance backing. It seems to me that if the premiums go up, the people who are most impacted by that are the less well-off when purchasing insurance products or when purchasing it to cover their business, perhaps those in rural areas seeking motor insurance. Is it the panel's view that an unintended consequence of this legislation might actually be a long-term reduction in access to justice, effectively making the court system more accessible, but damages less recoverable? Does that make sense as a question? It makes sense as a question, yes. I think that that's a possibility. I don't think that I can speak as a solicitor and not an insurer. I don't think that I can speak about the effect on insurance premiums. I have had clients who have had to defend claims where it falls within their excess and they don't have the backing of insurance. That sometimes happens, and there are the risks that you have otherwise identified. I am not sure if anyone else would want to pick those up. I think that that is also a risk for many local authorities as well around the level of deductible they hold, so that it is a risk to public funds as well. The situation is that the majority of claims that are large ator operators are within deductibles and are therefore not insurer backed. What we have begun to see is that some of the SME members that previously were relying on insurance can no longer get their excess level to a level where they can pass this off to insurers. That would be a huge concern for the travel industry, particularly because next year the package travel directive is being extended, and that will extend obligations for travel sickness claims to many more small and medium-sized travel companies that do not currently have those obligations. There could also be the wider societal points impact that you were mentioning, Mr Care. I know that the convener has written to the NHS central legal office looking for more information about how they anticipate that the loss of this deterrent will have upon claims frequency and impact on the NHS generally in Scotland. That also would have an effect through my own organisation. If the deterrent is lost and there are more claims, subscriptions will rise for general practitioners and dentists, most likely. There are wide impacts across the NHS generally and perhaps something for discussion whether coax should apply across all sectors or just in relation to insurers or public bodies. Just briefly, on claims management companies, in the file submission at paragraph 39 there is a suggestion at the end that regulation could be provided most expediently via the financial guidance and claims bill at Westminster. I wonder if you could expand on that. That is a bill that is going through Westminster just now, as I understand it. There was a debate in the House of Lords about whether an amendment to include Scotland within the regulation of claims management companies should be allowed. I think that, ultimately, the amendment was dropped, but that vehicle is still available. I think that the bill is not yet enacted, as I understand it. It would be possible for the Scottish Government, if it were so minded, to make representations to the UK Government, at least for the time being, that Scotland should be included. The other purposes of the bill include transferring England or Wales of the regulation of claims management companies to the FCA, which is a UK-wide body, so that would be possible. There are other parts of that bill that apply to Scotland in relation to financial assistance, debt management and so on. It would be one option if setting up a claims management regulator in Scotland for Scotland is going to take some time, then that could step into the gap, perhaps. I raised it with a bill team that revealed that they were anticipating moves in relation to regulation sooner rather than later. I hope that the minister will be looking at that evidence and will come with a response to that specific suggestion, which does not seem unreasonable. I go back to the responses to the Incair's line of questioning. I am slightly concerned with the suggestion about claims management companies withering on the vine because, with regulation in other parts of the UK, we have not seen a withering on the vine. There is an acceptance that there are highly reputable claims management companies operating. Despite the margins that Mr McPhail referred to north and south of the border, we are still dealing with a market in Scotland that is very much smaller than a market in the rest of the UK. I wonder at the extent to which Scotland is somehow going to be seen as a great nirvana in which the unregulated can rump to the heart's content, making massive profits when the bulk of the work remains in other parts of the UK, albeit regulated. We are slightly in danger of inflating the risk here to make an entirely valid point. What we are talking about is probably going to be more marginal in terms of the impacts over the next few years. We have already seen the increase in claims that has been discussed previously in previous sessions, so I do not need to go into that. Of course, Scotland is a smaller market, but we have seen more evidence of claims management company activity in Scotland. For example, in about the last 18 months, 16 new claims management companies have opened up in Scotland, according to Companies House. As Mr McPhail has said, the margins are better here. Of course, the volumes are lower, but the profit per claim is better, so how that plays out may be an unintended consequence of the bill. I do not want to overstate things, that is not my intention. The Scottish Government has given assurances that third-party funding provisions will not apply trade unions or solicitors. There has also been a statement that will amend the bill to remove the link between transparency requirements and liability to pay expenses. Do panel members have any concerns about those changes? Happy to go first. The point about third-party funding is, in our view, a very important part of the bill. I think that the origin of that lay with Sheriff Principle Taylor's view that a venture capitalist or someone buying part of a commercial claim who would benefit and derive a profit from that claim should also be liable if there are any adverse consequences. The way that the bill is drafted is wider than that. There is an analogy between a claims management company taking a percentage of an injured person's claim and a venture capitalist taking a percentage of a commercial claim, so it would be important. The financial memorandum mentions that a claims management company should be caught and would be caught under their current provisions. If a trade union—as I understand it—don't take a percentage of their members' damages, so they ought not to be caught by that. If inadvertently they are, that's something that I recognise and I wouldn't think is appropriate. I agree with what Mr Lothian said. I think that it is probably of interest how the disclosure is actually achieved and that it is adhered to and whether there should be implications for failure to disclose, but in terms of the world principles and objections. John Finnie. It's a question primarily to Mr Holmes, but I'm happy to hear from others on it. It's a question asked in the previous session about group proceedings. You specifically mentioned that at quite a bit of length, Mr Holmes, and acknowledging that it would be for the unactive sederm to bring forward specifics, but you say that you have some concerns. I remember that you had to outline those, please. Well, the MDDS has been engaged in the group litigation concerning the vaginal mesh material, which is working its way through the Court of Session. We have some concerns about the current arrangements that are there, but we readily acknowledge that the efforts that are being made by the Lord President in particular to improve those matters. We felt particularly issues around adequate judicial resources and also continuity in the judge hearing the case was particularly important, so that was really why we had focused on those issues at the tail of our submission. What is the solution to that, then, with the continuity? I mean, that's presumably desirable in every case, but why does that become an issue? Is it the duration of any case that would mean that? Well, I can't be precise in terms of figures, but the cases in this group have been raised for a matter of years, I think, now, and are not at any stage of reaching a conclusion. That's going to be some considerable time until they are resolved. They are very complex issues that are being raised in these cases, and they involve a number of parties. Just to clarify, it's more than the one-case-outline there, as a general principle. Our experience comes from that group of cases where we have quite a number of cases in that cohort, so that's where the experience lies in that particular set of cases for now. Okay, thanks. Are the other members of the panel any comment in the group proceedings at all? It's supportive in as much as it brings better efficiency and a quicker resolution of these cases, then. We would support it. There's just one last question. Some of the insurance responders have suggested that insurance premiums in Scotland may increase because of those provisions. If, now and in the past, the environment in Scotland has been less conducive to furious claims in England, did Scottish customers benefit from reduced premiums in comparison to English customers on this basis? I'm not sure that I'm in a position to comment on that, sorry. You could perhaps follow up with some written evidence. If so, I'd also like to see if the reverse is true. Is the market for mainstream insurance products currently structured on a UK basis? If so, is it likely to be worth to insurance companies identifying Scottish customers who are a small proportion of that market to charge them more? I think that that would be something that individual-mend-book companies will look at on an individual basis, so it's probably difficult to give a generalised view on that. You can answer the first part. Anyone else got a view on that, whether that's likely to be the case? If you could come back with a more full explanation or thoughts on that, that would be much appreciated. In the meantime, that concludes our questioning. I thank all the witnesses for appearing before the committee today. We now move to close the meeting. The next meeting will be on 3 October, when we begin taking evidence on the offensive behaviour of football and threatening communications repeal Scotland Bill. I formally close this meeting.