‘Shabby’ Ministerial Proposal Makes Autumn 2021 Discount Rate Change in Northern Ireland an Unlikely Eventuality

Later this month, judicial review proceedings are set to commence in Northern Ireland, in respect of the Department of Justice’s (DoJ) decision not to introduce an interim personal injury discount rate (PIDR) under the Wells v Wells (Damages Act 1996) approach,[i] in expectation of new legislation which will change the way that future rates are set.

If the applicant is successful, this could result in a temporary rate reduction from 2.5% to (-)1.75%, or even as low as (-)2% – we first reported this potentially fateful outcome in edition 305 of BC Disease News (here).

Of course, PIDRs in England & Wales and Scotland stand at (-)0.25% and (-)0.75%, respectively, with both rates no longer following the Wells v Wells method, since the House of Lords’ assumption that personal injury claimants invest their lump sum damages in extremely cautiously in ‘very low risk’ index-linked Government gilts jeopardised the 100% compensation principle. Indeed, there was a genuine risk of ‘overcompensation’ if the status quo ensued.

Former Lord Chancellor, Elizabeth Truss MP, discovered this when she conducted a rate review in 2017 and established a (-)0.75% rate, sparking intense insurance market lobbying and an immediate consultation to bring forward drastic legislative reform.

The current predicament in Northern Ireland is the consequence of the Northern Irish Assembly (known as Stormont) being suspended for a 3-year period, which has created a backlog of devolved Parliamentary affairs.

Until recently, the DoJ has been unable to persuade the Committee for Justice (CfJ) to grant ‘accelerated passage’ of revised framework, to the effect that a new PIDR is effective by the end of 2021, rather than late 2022 (without expedition).

In a material development last week, news reports revealed that the Justice Minister, Naomi Long MLA, had obtained permission from the Northern Ireland Executive to introduce the so-called Damages (Return on Investment) Bill, sometime today.[ii] It is believed to have been drafted to mirror the Damages (Investment Returns and Periodical Payments) (Scotland) Act 2019, given the conclusions drawn by the 2020 PIDR consultation – read our analysis, here.

Assuming that the Bill is published and progresses as planned, it will be transferred 1-week from now to the CfJ for a ‘condensed’ scrutiny stage, lasting 21-days, with the hope of legislation receiving Royal Assent by the summer recess and a new PIDR being announced this autumn.

However, it would appear from the legislature’s pre-emptive feedback that the Justice Minister’s proposal is highly speculative and unlikely to come to fruition as envisioned.

During the latest CfJ meeting, on 19 February 2021, Ms. Long was roundly criticised for her recommended timetabling of events, which is usually at the discretion of the Committee itself, the Clerk remarked. It was concerning to some that ‘condensed’ scheduling would put at ‘significant risk’ the full, close scrutiny of the Bill, whilst also having unintended knock-on effects for other pending Committee business.

Not a single member voiced support for the proposal. In fact, the Minister’s work was described as ‘shabby’ and ‘a disgrace’. Advancing on the Committee Chair’s suggestion, views of the Speaker and of other committee Chairs were subsequently sought.

We will continue to report on any new developments in due course.

 

[i] [1998] UKHL 27.

[ii] Alistair Kinley: Further tension between minister and justice committee over NI discount rate’ (23 February 2021 Irish Legal News) <https://www.irishlegal.com/article/alistair-kinley-further-tension-between-minister-and-justice-committee-over-ni-discount-rate> accessed 26 February 2021.