Jersey: Draft Legislation in respect of discount rates and PPOs has been approved

This blog post is by William Audland QC of 12 King’s Bench Walk.

Following my earlier posts – for a summary on the discount rates see here – the Draft Damages (Jersey) Law 201 (as amended by Amendment P1.131/2018) to set a statutory discount rate and to create a statutory power to make a PPO was unanimously adopted by the States of Jersey yesterday.

From the date on which the Law comes into force – that date being 7 days after the registration in the Royal Court if sanctioned by the Privy Council – a court, including an appeal court, will apply the new provisions. It is anticipated that the Law will be registered in the Royal Court and therefore be in force by about the end of March.

The headline points are:

Discount Rates

The new rates will be:

  • where the lump sum is to cover a period of up to 20 years, +0.5%; and
  • where the damages will cover a period of more than 20 years, +1.8% (applicable to the whole of the award, not just the costs arising after the first 20 years).

Transitional Provisions:

In any action issued before the Law comes into force the new rates will apply to any award of damages made by a court (whether or not following an appeal) on or after the commencement date unless it appears to the court that to apply the rate would be contrary to the rights of a party to the action under Article 6 of the ECHR.

The power of a court under the Law to apply the discount rate (or to make a PPO) “does not of itself give rise to a right of appeal in respect of an action for damages started before the commencement date”.

PPOs (Variable)

A PPO can only be made if continuity of payment is “reasonably secure”.

Reasonable security will exist where:

  • the order is enforceable against a Minister;
  • the payment is protected by a scheme (statutory or otherwise and under jurisdiction) which the court is satisfied gives protection equivalent to a scheme established under section 213 of the Financial Services and Markets Act 2000 of the UK; or
  • it is made against some other public body but subject to a guarantee for payment given by the Minister for Treasury and Resources.

Significantly any PPO will be subject to future applications to vary “if there is a material change in circumstances”, and such applications can be made by either party.

There is no limit as to how many applications to vary can be made.

The Law includes a power for the States, by Regulations, to further define or refine what amounts to “material change in circumstances” justifying such a variation and in what circumstances an application can be made.

Observations

My immediate thoughts:

  • The new rates represent good news for insurers and bad news for claimants.
  • The contrary, however, may be said of the new PPO provisions. The circumstances in which PPOs may be varied are very wide indeed and mirror similar systems in some other European jurisdictions (e.g. Germany: the “festellungsklage” system). They give significant protection to catastrophically injured claimants where the prognosis is far from certain and subject to significant dispute. These forms of orders are likely to prove very expensive indeed for insurers, but the silver lining is the possibility of applying to reduce payments should a claimant make a better than anticipated recovery.
  • Variable PPOs are highly likely to become a new part of the litigation landscape in Jersey and there is likely to be a flurry of cases concerning PPOs, their variability, reasonable security, and also some interesting Art 6 ECHR arguments in issued cases which will be affected by the transitional provisions.

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