By Sarah-Jane Dunhill, associate at law firm SAS Daniels

Small businesses looking to start litigation over a dispute may want to rethink their strategy as the Ministry of Justice has recently announced a massive increase in the court fees payable to start litigation. The changes mean that litigation will become more elitist as sky rocketing costs will force small and medium-sized enterprises (SMEs) to look for alternative ways to resolve disputes. Here are three things you need to know about the recent changes to litigation costs and what the future holds:

1. What is changing?

The cost of starting litigation has just gone through the roof. The changes will affect all monetary claims over the small claims limit of £10,000, which means it’s going to cost anyone commencing court action, with the help of a solicitor or not, more to bring their claim to court.

Before the recent changes, the cost of issuing a claim over £10,000, as with all court fees, fell into brackets against which the appropriate court fee was charged. For example, a claim of between £150,000 and £200,000 would have attracted a flat fee of £1,315. Now if you issue a £200,000 claim that fee will rise to £10,000!

The changes mean that for any claim of between £10,000 and £200,000, the fee charged will now be the equivalent of 5% of the total value of your claim. As such, a £150,000 claim would attract a court fee of £7,500 and a claim of £200,000 a fee of £10,000 rather than the flat fee mentioned above.

In addition to commencement fees, application fees, filing settlement agreements and commencing possession claims against tenants have all increased too, although by smaller margins.

The fees for commencing claims below £10,000 remains untouched though and within the old ‘brackets.’ Fees for claims of more than £200,000 will be capped at £10,000.

2. Will this lead to a reduction in claims?

Although at first glance it would seem that the new system will be fairer to litigators as the cost to issue is in direct correlation to the value of the claim, however, on the flip side, it is totally unfair to those who can’t afford the fees. You are likely to need a substantial bank balance or a willing funder to commence litigation proceedings before you even consider the costs of continuing litigation and the adverse costs risks involved.

This will undoubtedly result in a situation where those with good claims but limited funds will be put off or even priced out of taking further action. This goes to the very heart of a principle that underlies the legal system – access to justice.

3. What does the future hold for litigation?

So, if you’re an SME that can’t afford these elevated cost, what are your options? Although the severe price hikes mean we’re likely to see less litigation moving forward it does mean we’ll see more organisations take advantage of alternative methods of dispute resolution which include negotiation, mediation, collaborative law and arbitration.

If you’ve been thinking about issuing a claim in the near future, don’t be put off by these extortionate new costs, speak to a solicitor about other ways to resolve your issues so that your dispute can be resolved out of court thereby avoiding these hefty new charges.