Changes to the Fixed Recoverable Costs Regime: What do they mean for business disputes?

Costs are a big consideration for companies when it comes to business disputes that need to go to court to get resolved, so keeping abreast of any changes to the court’s rules in relation to this topic is very important. One major change which was implemented from 1 October 2023 (and amended from 6 April 2024) relates to Fixed Recoverable Costs (FRC), which previously only applied to civil claims worth up to a value of £10,000 on the small claims track, but was extended to those with a value of up to £100,000 if they were ‘issued’ (formally started at court) on or after 1 October 2023 – with some exceptions.

The changes have involved some significant amendments to the Civil Procedure Rules (CPR) and are detail-heavy because of the fact they’re so extensive, but in this update, our business dispute lawyers will cover the main areas that are relevant to you as a business owner.

What are Fixed Recoverable Costs and what’s changed?

As suggested by the name, the FRC sets the amounts that the party who wins a civil claim can recover from the losing party for various stages in the litigation process. These fixed amounts were most recently increased in line with inflation in April 2024.

As mentioned above, the scope of the value of claims that fall into the FRC bracket was widened to include claims up to the value of £100,000 and there are various bands – formally known as tracks – within this limit. It’s worth highlighting here that as well as the longstanding small claims track, fast track and multi-track, a new intermediate track was created to deal with claims in the £25,000-£100,000 range, subject to certain suitability conditions.

Additionally, a new Fixed Costs Determination (FCD) process was implemented on 1 October 2024 with the aim of streamlining the handling of FRC-related disputes on paper. The successful party in this process is entitled to fixed costs of £500 plus VAT.

Which types of cases does the Fixed Recoverable Costs Regime cover?

Business disputes with a claim value of up to £100,000 (excluding interest) are covered, along with defended debt claims, professional negligence claims and property disputes, as well as commercial claims – unless the court decides that any of these types of claims are complex enough to justify being allocated to the multi-track instead.

How does the Fixed Recoverable Costs Regime relate to the new bands within the fast and intermediate tracks

Each of these two tracks have now been split into four bands and every case will be assigned to a particular band by the court once it’s been allocated to the relevant track, depending on the complexity of the case, with Band 1 being suitable for more straightforward cases and Band 4 being reserved for those that are more complex. This track and band allocation in turn determines how much by way of FRC is recoverable by the winning party for each stage of the litigation process, and there are detailed tables within the CPR that set out how much is recoverable at each stage.

Can parties agree to opt out of the Fixed Recoverable Costs Regime?

One of the amendments which took effect on 6 April 2024 was that parties are permitted to opt out of the FRC applying to their dispute as part of a settlement.

How are the changes to Fixed Recoverable Costs Regime likely to affect litigation tactics?

Whilst it’s undoubtedly a positive thing that parties to a dispute now have a clearer idea upfront about what costs they might recover or have to pay out if their claim is successful or not, there are important commercial considerations to bear in mind. It could well be that a party decides not to bring or defend a claim if it’s not financially viable to do so based upon the FRC, i.e. whether or not the actual costs they’re likely to incur will be covered by the FRC. If not, where a prospective claimant is assessing the risks, how much of their estimated damages will be eaten into by the difference between what they have to pay their lawyer and how much they get back from the other party under the FRC rules will be key.

In the context of developments in the world of litigation, it’s still fairly early days since the changes were implemented – but it’s only a matter of time before case law is likely to emerge and we’ll update this article as new developments arise. What we do however know at this stage is that the Ministry of Justice (MoJ) has confirmed that they’ll review the FRC regime in October 2026, and they’ve also promised to consult on how the rules are affecting vulnerable parties before then.

Clearly, when assessing the economics of pursuing or defending a claim up to £100,000, the lower the hourly rate charged by your solicitor, the better the chance of recovering a higher proportion of your legal costs if you win, given the recovery limits under the FRC. The cost-effective rates available under Harper James’ pricing plans are likely to become even more attractive to litigants concerned about high legal costs eroding their net gain from a successful outcome at trial.