The Extended Fixed Recoverable Costs Regime | 18 Months On

A. The Landscape Shift | October 2023 Overhaul and Its Goals

October 1, 2023, marked the rollout of the extended Fixed Recoverable Costs (FRC) regime; a significant overhaul that expanded FRC to cover most civil claims with a value up to £100,000. Previously, FRC was largely confined to lower-value personal injury claims and small claims. The reforms brought the existing fast track (typically for claims up to £25,000) more comprehensively under FRC and, critically, introduced a new “intermediate track.” This new track was designed for simpler claims valued between £25,000 and £100,000, expected to be triable in three days or less and with limited expert evidence.

The core aims behind this expansion were ambitious: to inject greater certainty and proportionality into legal costs, thereby making the legal process more accessible and predictable for everyone involved.

A key feature of this new system is the introduction of four complexity bands (1 for the least complex, up to 4 for the most complex) within both the fast track and the new intermediate track. These bands determine the level of FRC applicable, based on the perceived intricacy of the case. Unsurprisingly, the allocation of a claim to a specific track and then to a complexity band has become a critical and often hotly contested issue in the early stages of litigation. While the overarching goal was simplification and cost certainty, the breadth of these changes and the initial learning curve meant that the early months were challenging for many legal practitioners.

B. Fine-Tuning the Machine | Key Legislative Tweaks and Procedural Clarifications (October 2023 – Early 2025)

The 18 months since the FRC regime’s extension have seen several legislative adjustments and procedural clarifications aimed at smoothing out some of the initial wrinkles.

One early point of confusion was whether parties could “contract out” of FRC, especially where pre-existing agreements on costs were in place. The Civil Procedure Rule Committee (CPRC) addressed this by amending Civil Procedure Rule (CPR) 45.1(3)(b), effective from April 6, 2024. This crucial amendment clarified that parties can expressly agree in writing that the FRC provisions won’t apply to their dispute, a move welcomed for upholding freedom of contract.

Procedural clarity also improved with the introduction of a structured process for the summary determination of costs in FRC cases, which took effect on October 1, 2024. This involves a new form, Precedent U. Parties looking to claim fixed costs or disbursements must now file and serve Precedent U at least 24 hours before a hearing. This form requires a breakdown of fixed costs claimed, any disputed amounts, and any claims for costs exceeding the standard FRC under specific exceptions. This aims to streamline FRC disputes, with a notable fixed fee of £500 (plus VAT) for a successful Fixed Costs Determination (FCD) application on paper.

The FRC figures themselves have also been adjusted for inflation. The initial tables were based on Sir Rupert Jackson’s 2017 figures, updated using the January 2023 Services Producer Price Index (SPPI). A further 3.2% uplift was applied from April 2024 to account for inflation between January and October 2023. Specific disbursements, like medical reports in low-value RTA whiplash claims, also saw an uprating (25.4% effective from April 6, 2025). These adjustments are vital, but the frequency of future upratings remains a key watchpoint.

These amendments show a responsive approach from rule-makers, but also suggest that the initial rollout didn’t anticipate every practical hurdle. Continuous monitoring of CPR updates is therefore essential for legal professionals.

C. The “Bedding-In” Period | Judicial Interpretation in Early 2025

Despite 18 months having passed, the extended FRC regime is still very much “bedding-in.” A significant reason for this is the relative lack of binding judicial precedent to interpret the new rules’ many nuances. Persistent court backlogs have contributed to this slow emergence of case law.

This means practitioners are often navigating complex FRC issues based on the CPR text, official (but non-binding) guidance, and expert commentary. This naturally leads to some uncertainty.

Furthermore, judges retain considerable discretion in key areas impacting FRC, such as:

• • Initial track allocation (fast, intermediate, or multi-track).
  • Assignment to a complexity band.
  • Interpreting “exceptional circumstances” or “vulnerability” that might justify departing from FRC. This judicial discretion highlights the need for robust, evidence-based arguments on these preliminary issues. The goal of cost certainty is only partially realised if the path to determining those costs is itself uncertain.

II. Key Challenges Emerging Under Extended FRC

The initial 18 months of the extended FRC regime have brought several key challenges and areas of dispute to the forefront.

A. The Battlegrounds: Disputes Over Track Allocation and Complexity Banding

Experience since October 2023 shows that track allocation and complexity banding are frequent and significant points of contention. These initial decisions are crucial as they directly set the FRC figures for the case. It’s common to see claimants arguing for higher tracks or bands to maximise cost recovery, while defendants push for lower ones to minimise exposure.

Factors influencing these decisions include the claim’s financial value, likely trial length (intermediate track cases generally don’t exceed three days), the number and type of expert witnesses (intermediate track usually allows no more than two per party for oral evidence), the number of parties, and overall case complexity. Judicial discretion is key here. Contesting these allocations can become a mini-litigation in itself, potentially adding costs and delays – a seeming paradox when FRC aims to streamline.

B. The Costs Conundrum | Are FRC Levels Adequate? Impact on Access to Justice

A persistent concern, voiced by bodies like the Law Society, is whether the FRC levels truly compensate for the work required, especially in more complex cases caught by the regime. The Law Society warned early on that FRCs are not the same as incurred costs, risking shortfalls for solicitors. This can mean a gap between costs recovered from the losing party and the solicitor’s actual bill to their client.

This has wider implications. It could make certain legal work economically unviable for some firms, potentially limiting client choice and, crucially, access to justice for those with meritorious claims but limited funds to cover cost shortfalls.

The regime does include CPR 45.10, allowing for higher costs if a party’s or witness’s vulnerability led to additional work causing costs to be at least 20% over FRC. The Ministry of Justice (MoJ) is also set to consult further on how rules affect vulnerable individuals. However, proving the direct link between vulnerability, extra work, and the 20% uplift presents practical challenges.

C. Specific Hurdles and Lingering Uncertainties

Beyond track and band disputes, several specific scenarios create ongoing uncertainty:

• • Counterclaims and Multi-Defendant Scenarios: CPR 45.7 generally allows for two sets of FRC if a defendant wins both the claim and a counterclaim, treating the counterclaim as a separate claim, though exceptions apply. The Civil Procedure (Amendment) Rules 2025 further clarify that counterclaims are generally treated as claims. Multi-defendant cases also bring complexity in how FRC applies, with potential for cost sharing or uplifts (e.g., Table 12 in Practice Direction 45 mentions an uplift “per extra defendant” for certain fast track bands ).

  • Cross-Border Litigation: Significant uncertainty remains for cross-border claims under FRC, especially those in the new intermediate track. The MoJ has so far left interpretation to the courts, creating risks in international cases where arguments for multi-track allocation due to complexity may be more common.

  • Housing Claims – A Temporary Exemption: Most housing claims (possession, disrepair, unlawful eviction) have a two-year FRC exemption, delaying their inclusion until at least October 2025. This was due to concerns about access to justice for often vulnerable tenants. Currently, these claims generally follow traditional costs rules, though they are still allocated to a track and complexity band, even if FRC tables don’t apply. The sector awaits news on their future FRC treatment.

D. The Shadow of Satellite Litigation | Costs Disputes About Costs

The Law Society’s early warning about the FRC regime’s ambiguities potentially leading to “years of satellite litigation” still resonates. While a flood of reported judgments hasn’t fully materialised, the potential for disputes over interpretation remains high due to limited precedent. This can lead to parties incurring costs arguing about the costs regime itself. The introduction of the Fixed Costs Determination (FCD) process via Precedent U is an attempt to streamline some of these disputes.

A related concern is the potential for more costs recovery claims by clients against their solicitors. If FRC leads to a significant shortfall between recovered costs and actual fees, and retainers don’t clearly address this, disputes can arise. This highlights the critical need for transparent client communication.

The stage-based FRC structure (costs fixed at defined litigation stages, see tables in PD 45, like Table 14 for the intermediate track ) can also influence settlement behaviour. Parties are aware that reaching the next stage unlocks a higher fixed fee, potentially leading to tactical settlements around these thresholds rather than purely on merit.

To successfully navigate the FRC regime in 2025 and maximise cost recovery, a proactive, informed, and strategic approach is essential from day one.

A. Laying the Groundwork | Proactive Case Assessment and Early Strategy

The best chance of maximising recovery starts before a claim is even issued. Solicitors must focus on:

• • Accurate Valuation: A meticulous and realistic valuation of the claim is paramount. This is a primary driver for track allocation and FRC applicability. Over-inflating a claim can cause significant issues later if it’s discontinued or settles for much less, as FRC figures are often linked to claim value at various stages.
  • Early FRC Implications Analysis: A thorough analysis of potential FRC impact should be part of the initial case assessment and client advice. This includes identifying the likely track, complexity band, FRC figures at key stages, and any arguments for escaping or uplifting FRC.

B. Leveraging the Rules | Escaping FRC or Optimising Within It

While FRC aims to fix costs, there are avenues to argue for non-application or higher sums.

• Aiming for the Multi-Track: For claims under £100,000, escaping the intermediate track (and thus FRC) by securing multi-track allocation is a key strategy. Arguments can be based on:

  • The trial likely exceeding three days.
  • Needing oral expert evidence from more than two experts per party.
  • The case involving more than two defendants (if one claimant) or more than one claimant (if one defendant, depending on specific CPR wording).
  • Overall complexity, even if the value is below £100,000. The judgment in Attersley v UK Insurance Limited EWHC 884 (KB) is significant here. It confirmed that if a claim (even one starting under a pre-action protocol like the RTA Protocol) is later allocated to the multi-track, the FRC regime under Section IIIA of Part 45 ceases to apply – both prospectively and retrospectively, due to CPR 45.29B. This means costs incurred before multi-track allocation would then be assessed on the standard basis, not capped by FRC. This is a powerful precedent.

• Invoking Exceptions to Uplift FRC: If a claim remains in an FRC track, certain CPR provisions allow for arguments to recover more than the fixed amounts:

  • “Exceptional Circumstances” (CPR 45.9): The court may award costs (excluding disbursements) greater than FRC if “exceptional circumstances” justify it. “Exceptional” isn’t defined, and the threshold is high. With limited appellate guidance on CPR 45.9 under the extended regime, arguments must be meticulously built. The new Precedent U form (Section C) now formalises this application process.
  • Vulnerability (CPR 45.10): This allows for costs exceeding FRC if a party or witness is vulnerable, this vulnerability led to additional work, and that additional work alone caused the costs claim to be at least 20% greater than the standard FRC. This requires robust evidence of vulnerability, the specific extra work, and the 20% uplift calculation.
  • Unreasonable Behaviour (CPR 45.13): If the court finds a party behaved unreasonably, it can order the FRC payable to or by that party to be increased or reduced by 50% of the fixed costs (excluding VAT and disbursements). This can be a useful tool against obstructive opponents.

Effectively navigating these rules is becoming a specialist skill. “FRC optimisation” demands deep procedural and costs knowledge alongside substantive legal understanding.

C. The Power of Part 36 | Strategic Offers to Settle

Part 36 offers remain a critical tactical tool, with complex interactions with FRC. Claimants who beat their own Part 36 offer at trial may get an uplift on their fixed costs (e.g., some rules provide a 35% uplift on fixed costs accruing after the offer’s expiry until judgment).

D. Clarity is Key: Managing Client Expectations and Agreements

Given FRC can lead to a shortfall between recoverable costs and actual solicitor-client costs, transparent communication and robust retainer agreements are more critical than ever. Agreements must clearly explain:

• • The FRC regime.
  • The anticipated track and band.
  • The potential for recoverable costs to be less than actual costs.
  • How any shortfall will be handled (e.g., payable by the client from damages). This transparency is vital for informed client consent and managing firm risk.

E. Making Disbursements Count | Optimising Recovery

Generally, VAT and “reasonably incurred” disbursements are recoverable on top of fixed costs. However, specific disbursements, like counsel’s fees, need careful attention.

• Counsel’s Fees: This is a nuanced area.

  • For fast track claims under the extended regime (Section VI of CPR Part 45), CPR 45.44 states only FRC in Table 12 of PD 45 and disbursements in Section IX of Part 45 are allowed. Rule 45.59 details allowable disbursements.
  • Some commentary suggests counsel’s fees for general advice might be subsumed within main fixed stage costs under the extended FRC.
  • However, specific provisions cover trial advocacy fees (e.g., in Table 12 for fast track ). Amendments from April 2024 also cover brief fees if a case settles very close to trial in both fast and intermediate tracks. For instance, 100% of the advocacy fee is recoverable in intermediate track cases settling on the day of trial or one clear day before, and 75% if settling five clear days before.
  • Guideline Hourly Rates for Counsel are being developed, which could further impact fee assessment. Practitioners must meticulously check the specific CPR tables and rules for their claim’s track, band, and stage.

• Expert Fees: Expert report fees are generally recoverable if reasonably incurred, proportionate, and often as provided for by pre-action protocols or court order.

• Contentious Disbursements: Recovery of medical agency fees and the need for detailed breakdowns beyond an MRO’s invoice is anticipated to be contentious in 2025, with limited binding case law. Detailed records and robust justification are essential.

F. Quick Reference | Key FRC Amendments and Effective Dates (Post October 2023)

Here’s a summary of key FRC amendments since its major extension:

Disclaimer: This table is for quick reference. Always consult the latest Civil Procedure Rules and Practice Directions.

IV. On the Horizon | Future FRC Reviews and What to Expect

The FRC regime is not set in stone. Further evolution is likely, with planned reviews and ongoing monitoring.

A. The MoJ/CPRC “Stocktake” – Now Expected October 2025

An initial “stocktake” of the extended FRC regime, first anticipated around February 2025, has been provisionally postponed to October 2025. This delay allows more time for cases to progress through the system, providing a better evidence base for the review. The CPRC’s open meeting in May 2025 is intended to gather initial practitioner views to help frame the stocktake consultation. The MoJ was tasked with drafting an outline stocktake consultation by May 23, 2025. This stocktake is the first major formal opportunity for feedback on the regime’s practical operation.

B. The 2026 Full Post-Implementation Review

A more comprehensive post-implementation review by the MoJ is slated for 2026, aligning with Sir Rupert Jackson’s original 2017 proposal. This broader review will likely assess wider impacts on access to justice, litigation behaviour, and the adequacy of complexity bands and FRC figures.

C. Ongoing Considerations and Consultations

Several specific areas remain under scrutiny:

• • Vulnerable Parties: The MoJ plans further consultation on how FRC rules affect vulnerable parties and witnesses, expected no later than October 2026. This reflects concerns that FRC might disadvantage individuals needing more support.
  • Inflation: Future FRC figure adjustments for inflation (likely using SPPI) will be a recurring factor.
  • Clinical Negligence FRC: FRC for clinical negligence claims under £25,000 is being progressed separately by the Department of Health and Social Care (DHSC) and wasn’t part of the October 2023 reforms. Implementation timelines have been uncertain, though some commentators suggested an October 2025 implementation remained possible as of late 2024.

This cycle of review and amendment means legal professionals must expect ongoing evolution and stay vigilant.

V. Concluding Thoughts | Adapting to the New Costs Landscape in 2025

Eighteen months in, the extended FRC regime clearly aims for long-term cost predictability, but its practical application continues to pose challenges. The “bedding-in” period is ongoing, and 2025 will see practitioners continue to adapt.

A. The Enduring Importance of Early Strategic Advice and Proportionality

Successfully navigating FRC in 2025 requires more than knowing the fixed cost figures. It demands early, insightful strategic advice integrated with case merits from the outset. Key elements include:

• • Meticulous case valuation.
  • Proactive track and complexity band analysis.
  • Realistic assessment of potential exceptions (CPR 45.9, 45.10, 45.13).
  • Candid appraisal of recoverable versus incurred costs for clients.

Proportionality remains paramount. This applies not just to claim value versus costs, but also to deciding which FRC-related battles are worth fighting. The FRC regime seems to be accelerating trends towards thorough early case assessment and greater use of Alternative Dispute Resolution (ADR), as the defined and often limited recoverable costs make litigation risks starker.

B. The Road Ahead: Vigilance and Adaptation

The journey through 2025 will likely involve continued adaptation. Practitioners must stay alert to emerging case law and any further rule changes, especially following the planned October 2025 stocktake.

The evolving nature of this costs landscape highlights the need for continuous professional development. Staying abreast of amendments and refining litigation strategies are essential for effective legal practice in claims up to £100,000. Law firms must also continue adapting their business models and client communication to thrive in this reshaped environment. The FRC regime is actively reshaping civil litigation in England and Wales.