The recovery of success fees and after-the-event insurance premiums from losing defendants is compatible with the European Convention on Human Rights, the Supreme Court has ruled in a long-awaited judgment.

Coventry v Lawrence concerned the pre-Jackson costs recovery regime in the Access to Justice Act 1999 (AJA 1999), which has since been replaced by a different scheme under the Legal Aid Sentencing and Punishment of Offenders Act 2012, although the previous scheme continues to apply for many pending cases.

By a majority of five to two, the court held that the AJA 1999 costs regime, although flawed, provided a proportionate way of achieving access to justice.

The Master of the Rolls, Lord Dyson, and Supreme Court President, Lord Neuberger, said the scheme was justified by the need to widen access to justice to litigants following the withdrawal of legal aid.

Dissenting, Lord Clarke argued that the old regime unfairly discriminated against some classes of respondent.

The case concerned a noise nuisance claim by bungalow owners against the operators of nearby speedway track. The appellant bungalow owners proceeded on a CFA. After their success at trial the judge ordered the respondents to pay 60% of the appellants’ costs, which included 60% of the success fee and ATE insurance premium. They challenged the liability, claiming it infringed their fair trial rights under Art 6 of the Convention.

The Bar Council, which had intervened in the case, welcomed the decision as being in the best interests of clients and practitioners.