20 December 2018
Subsequent to its introduction to Parliament on 14 June 2018, the Scottish Parliament’s Economy, Jobs and Fair Work Committee (“the committee”) called for written submissions to be made on the terms of the Bill. The committee published its Stage 1 report on the Bill on 3 December 2018. In turn, the Scottish Government published its response to the issues raised by the committee on 13 December 2018. The key points are as follows:
Discount rate
- The Scottish Government acknowledged, in evidence, that the assumed 30 year period of investment that the hypothetical investor is assumed to invest their damages was designed to cater for a broad range of cases and there was no authority for the figure merely that it was chosen as a “useful duration that was neither too short nor too long”.
- The committee acknowledged that the process behind setting the discount rate was not an exact science and there appeared to be little information available on investor behaviour.
- The committee’s view was that the aim of the discount rate is to provide a standardised approach that seeks to work in the interests of fairness, regularity and credibility across a range of cases. It further commented that the 30 year assumed period of investment was “a workable average” to cover the profile of a number of cases.
- The Scottish Government has advised that it will keep the 30 year period of assumed investment under review and will give consideration to setting more than one discount rate if there is a significant divergence in outcomes over 15, 30 and 50 year periods of investment.
- The committee was satisfied with the Scottish Government’s decision to include standard adjustments within the Bill to avoid under compensation given the UK Government Actuary’s Department’s analysis that there is currently a 50% risk of under-compensation for pursuers.
- The committee acknowledged there was a risk of “gaming” the system where claims would be pushed forward or held back, depending upon the timing of the next review of the discount rate. One suggestion to prevent this was to factor in when the claim was raised rather than when it was settled. The Scottish Government does not consider this to be a feasible solution.
- In terms of the cycle for reviews of the discount rate, the committee favoured a 5 year period of review, as opposed to a 3 year review cycle “in the interests of finding that balance between flexibility and certainty”.
Periodical payment orders (PPOs)
- The committee welcomed the PPO provisions and invited the Scottish Government to bring forward amendments to the Bill to give more weight to the views of the pursuer when the Court was being asked to award a PPO in their case. It raised the possibility of providing for a statutory presumption in favour of the pursuer on this point.
- It sought clarification from the Scottish Government on how it proposes to promote the use of PPOs beyond the public sector, which appears to assume that PPOs will be favoured by public bodies in Scotland, as the committee suggest is the case in England and Wales.
- It also welcomed the provisions within the Bill dealing with the variation of PPOs to include the ability to vary a PPO to avoid under or over-compensation.
Conclusions / Next steps
The committee supported the general principles of the Bill, which were to reform the methodology underpinning how the discount rate is set – to make it clear, certain, fair, transparent, regular and credible, together with giving the Courts power to impose PPOs for future pecuniary losses. The committee has recommended to Parliament that the Bill’s general principles be agreed. The Scottish Government has announced that the Bill will be debated at Stage 1 of the legislative process on 18 December 2018.
BTO shall keep a close eye on the progress of the Bill throughout the legislative process and will issue a further update as matters develop. For further information, please contact:
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