New Fixed Costs Regime: Legal Implications for Businesses

You could face commercial litigation if you fall into a commercial dispute. Court proceedings should be the last resort to resolving a business disagreement. Instead, an alternative dispute resolution (ADR) method should be the route you take. Civil litigation can be lengthy as well as very expensive. However, if commercial litigation is the only way to resolve your dispute, you must know about Fixed Recoverable Costs (FRC), which are usually received from the losing party. You should also know that a new fixed costs regime recently came into force. This article will explore the new fixed costs regime and legal implications for businesses.

What Are Fixed Recoverable Costs (FRC)?

Fixed Recoverable Costs (FRC), such as commercial proceedings, are sometimes referred to as predicted costs or predictable costs. FRC refers to specific amounts of money one party can receive from the other in court proceedings, depending on the circumstances. FRC are usually possible for the party that wins the case. These are detailed in the Civil Procedure Rules (CPR), but a court could order against this if it wishes. 

The CPR will detail either the:

• amount of costs; or
• the method of cost calculation. 

However, no rules in the FRC scheme limit the amount your legal representative can charge for their services. 

What is the New Fixed Costs Regime? 

The newly fixed costs regime came into force on 1 October 2023, so it applies to court cases on or after that date. It changes the details of Fixed Recoverable Costs (FRC). Most claims valued at up to £100,000 will now be subject to FRC.

Currently, there are also the:

• small claims track;
• fast track; and 
• multi-track. 

For example, the fast track deals with commercial claims which:

• are up to £25,000;
• are likely to have a trial lasting more than a day; 
• have no more than two types of expert evidence; and 
• only one expert per field.

What Are the New Changes? 

We look at some of the changes the new fixed costs regime introduced. 

In addition to those we look at below, changes have also been made, for example:

• to the Part 36 offer to settle to encourage settlement; and 
• that there is no longer a need to budget for your claims.

New Intermediate Track

As explained above, the new change to the Fixed Costs Regime (FRC) is the introduction of the intermediate track regime. It is relevant to claims of a likely value of more than £25,000 but not exceeding £100,000. Before the changes, these cases would have been part of the multi-track. You should note that if the relief a claimant seeks is non-monetary, it will not usually be part of the intermediate track. 

However, if the court considers it in the interest of justice to allocate it, it will do so. Commercial claims in his track will also:

• last three days maximum;
• have no more than two experts per party; and
• involve one claimant with one or two defendants or one defendant with two claimants. 

Complexity Bands

Another aspect introduced by the new fixed costs regime is complexity bands, which determine the case’s complexity. Each new fixed costs regime track has four complexity bands. 

Guide to Resolving UK Business Disputes

This guide outlines how to resolve commercial disputes.

Download Now

You and the other party to your litigation can decide which complexity band applies to your case, but the court can disagree with this and change it. A court will consider:

• the financial aspects of your claim;
• the type of remedy the claimant is looking for; and
• how complicated the law, evidence, or facts are likely to be. 

Difference in Costs

Despite the fixed costs regime as fixed costs, there are times when these can vary depending on the factors in the case. 

For example:

• if the case involves a litigant in person, so a party with no legal representation;
• where there is a vulnerable party of witness, costs can exceed the fixed cost;
• where there are ‘exceptional circumstances’ the court can exceed the fixed costs;
• the ability to apply for fixed costs to be increased or decreased by the party if the court says the other party behaved unreasonably;
• it can sometimes be possible to claim specific reasonable and proportionate disbursements; 
• receiving an additional 12.5% for London Weighting; and  
• VAT may also be recovered where appropriate. 

Key Takeaways

If you are party to commercial litigation and are the winning party, you may be able to recover fixed costs. These are Fixed Recoverable Costs (FRC). You may be able to receive specific amounts in detail or calculate them in a specific way. The new fixed costs regime came into force on 1 October 2023, and some changes were made to FRC as a result. This means most claims up to £100,000 in value will be part of FRC. Changes include the introduction of a new track called the intermediate track. There are also changes made, for example, to part 36 offers. 

The latest fixed costs regime also means that each of the four tracks has four complexity bands, which you and the other party to the claim can decide upon, although a court could change this. The new regime also allows a court to change the relevant complexity band. FRC amount differences exist in specific situations, such as where a witness or party is vulnerable. 

If you need help understanding the new fixed costs regime in the UK, LegalVision’s experienced disputes and litigation solicitors can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions

1. What is the new fixed costs regime?

The new fixed costs regime, which came into force on 1 October 2023, changes Fixed Recoverable Costs (FRC).  

2. What are Fixed Recoverable Costs (FRC)?

Fixed Recoverable Costs (FRC) are costs you can claim when you are a party to commercial litigation. If you win your case, you can claim them from the other party.