Independent Costs Lawyer: A Key Component of Collective Actions in the CAT
The Competition Appeal Tribunal (CAT) has increasingly become a central forum for collective actions in the UK, particularly claims arising from competition law infringements. While the legal and procedural framework for these claims continues to evolve, one role stands out as crucial in ensuring fairness and transparency: the independent costs lawyer.
The Role of an Independent Costs Lawyer
An independent costs lawyer is a specialist tasked with reviewing and certifying legal costs in complex litigation. In the context of collective actions before the CAT, their involvement is particularly significant because these claims often involve large groups of claimants and correspondingly substantial legal costs.
The independent costs lawyer operates independently of the parties involved, providing an objective assessment of whether the legal costs claimed are reasonable and proportionate to the work undertaken. This oversight helps maintain confidence in the collective action process, ensuring that claimants are not overburdened by legal fees and that defendants are not unfairly penalized.
Why They Matter in Collective Actions
Collective actions in the CAT often feature “opt-out” or “opt-in” mechanisms, meaning that a large number of individuals or entities may participate indirectly. This structure presents unique challenges:
- Cost Transparency: With multiple claimants, it can be difficult to track and justify costs. The independent costs lawyer ensures that legal fees are transparent and justified.
- Proportionality: Legal costs in collective actions can escalate rapidly. Independent review helps ensure that costs are proportionate to the potential benefit to claimants.
- Settlement Oversight: When settlements are proposed, the costs lawyer can verify that fees and expenses are reasonable before any distribution, protecting the interests of the group.
Procedure in the CAT
In the CAT, costs are governed by both general rules and the tribunal’s specific practice directions. The independent costs lawyer often prepares a detailed report, which the tribunal may rely upon in determining the amount of costs to be awarded or recovered. The role is akin to a “checks and balances” mechanism within the litigation process.
Benefits for Claimants and Defendants
For claimants, the presence of an independent costs lawyer offers reassurance that legal costs are managed responsibly, avoiding unnecessary depletion of potential damages. For defendants, it provides confidence that any costs awarded are fair and not inflated, supporting an equitable litigation environment.
Hammond & Stephen v Amazon
The Hammond & Stephen v Amazon CPO judgment makes clear why the Competition Appeal Tribunal (CAT) requires the involvement of a costs lawyer in such proceedings:
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Scrutiny of legal costs is essential – In both Hammond’s and Stephan’s cases, the Tribunal noted that proposed class representatives (PCRs) are not well placed to review and challenge complex and high-value legal bills without professional assistance. Given the scale of CAT collective proceedings, proper oversight is needed to ensure legal fees are reasonable and proportionate.
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Protection of the class members’ interests – The Tribunal stressed that funders’ and solicitors’ interests are not identical to those of the class. Funders recover their expenditure on costs from any damages award, potentially at the expense of class members. A costs lawyer provides independent oversight so that invoices are not simply rubber-stamped.
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Tribunal’s developing standard practice – The judgment explicitly referenced prior authority (Bulk Mail Claim Ltd v IDS) and stated that appointing a costs specialist to assist PCRs should “become the standard approach in collective proceedings”.
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Practical implementation in this case –
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Professor Stephan agreed to appoint independent costs lawyers to provide monthly oversight reports and flag issues with invoices.
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Mr Hammond agreed to instruct a costs draftsman to review interim invoices quarterly, applying the level of scrutiny a corporate client would expect, and to assist in challenging or clarifying fees where necessary.
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On that basis, the Tribunal granted both CPOs conditional upon the appointment of such costs specialists.
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Conclusion:
A costs lawyer is needed in CAT collective proceedings to ensure transparency, independence, and proper scrutiny of high legal fees; to safeguard the interests of the claimant class (who otherwise risk diminished recoveries due to unchecked costs); and because the Tribunal is moving towards making this a standard requirement for certification.
Bulk Mail Claim Case
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Ensuring independent scrutiny of legal costs
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The Tribunal emphasised that in collective proceedings the normal dynamic of a client hiring lawyers is reversed: here, it is often the lawyers and funders who originate the claim and then identify a Proposed Class Representative (PCR) to front it.
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Because PCRs may have little or no experience in litigation costs, the Tribunal considered it essential that measures be put in place to ensure that PCRs receive independent, specialist advice on both funding arrangements and legal costs.
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Protecting class members’ interests
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The Tribunal noted that funders’ interests diverge from those of the class: funders recover their costs (and profit) out of any damages, potentially reducing the return for the class.
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Therefore, it is vital that fees and funding terms are reviewed by a costs expert to avoid unreasonable depletion of damages.
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Part of the Authorisation Condition
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Under Rule 78, the Tribunal must be satisfied that the PCR “would fairly and adequately act in the interests of the class members.”
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Proper oversight of costs was treated as a key component of this safeguard: without expert review, the Tribunal was concerned that PCRs could not adequately protect class members from excessive costs or unfair funding arrangements.
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Developing Tribunal practice
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The Tribunal cited earlier and contemporaneous cases (e.g., Riefa v Apple) to underline that collective proceedings require heightened judicial oversight of funding and costs.
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In Bulk Mail, the Tribunal expressly observed that PCRs should obtain costs specialist advice on legal fees to assist in approving costs arrangements and invoices.
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Conclusion:
The CAT required the involvement of a costs lawyer in Bulk Mail v Royal Mail to guarantee independent scrutiny of legal fees, ensure funding arrangements protect the class (not just the funder), and to satisfy the authorisation condition that the PCR is acting fairly and adequately. This is becoming a standard requirement in CAT collective proceedings, reflecting the scale of costs and the structural imbalance between funders, lawyers, and class members.