Charging fees for the use of a courtroom has got many people’s blood up. But in fact, even with the trial fee, litigation is a cheaper option than arbitration.

Everyone knows that litigation can be expensive. There was therefore understandable controversy when the government introduced fees for the use of a courtroom for a trial. The fixed hearing fees took effect on 1 October. They are £500 for a fast-track case (claims between £5,000 and £15,000 with an estimated trial of one day) and £1,000 for a multitrack case (anything bigger than fast track).

This is a big departure from the principle that courtroom time is free. Furthermore it opens the door to increased costs in the future.

The change was born out of a consultation back in 2004, when the government was considering the following dilemma. On the one hand the Treasury strives to make the court system self-sufficient, with users paying for the service through fees.

The Treasury strives to make the court system self-sufficient by getting the court users to pay fees. But there is a need to ensure access to justice

On the other, there is a need to ensure access to justice. Thus while the court fees exist, there are exemptions for people on means-tested benefits.

Under section 92 of the Courts Act 2003, the lord chancellor (currently Jack Straw) has the power to prescribe all fees relating to the administration of justice. His latest civil proceedings fees order was tabled in September and was intended to put right mistakes in July’s order.

As the average length of a trial is 11 hours, it was originally calculated that a trial fee could itself generate £5.7m a year. This was based on an hourly rate of £200. For the construction industry there will be relief that this proposal was replaced with the fixed fee because complex cases with a variety of disputed facts (such as Wembley) could easily have generated a bill of about £40,000 just for using the courtroom. The government seemed to recognise that, as well as making the UK a far less attractive jurisdiction for resolving disputes from an international perspective, a vicious circle would have been created. If fewer people used the courts, less revenue would be generated, and the fees would have to be increased.

Complex cases with a variety of disputed facts (such as Wembley) could easily generate a bill of about £40,000 just for using the courtroom

The fixed trial fee of £500 or £1,000 is only payable after the notification by the court of the trial date. This occurs quite far into proceedings. If a case is settled before then, then the court trial fee would not be payable. Furthermore, once the fee has been paid, there is a sliding scale of refunds if the matter is settled before trial. For example, 75% is refunded if the court is notified between 14 and 28 days before the hearing. There is no refund if the settlement takes place in the last six days before trial.

How does this make the courts compare to arbitration as the main dispute resolution option under a contract? With arbitration you have to pay the arbitrator’s hourly rate throughout the proceedings. In addition you always have to find a venue for the hearing. This is a significant cost, as the parties usually want a neutral venue rather than a boardroom in one of the party’s solicitors’ offices (which might be free). In terms of the comparative costs of the venue, therefore, the court is still likely to be cheaper, even with this hearing fee. Furthermore, and perhaps more importantly, litigation has the advantage of allowing multiple parties to be joined into the proceedings, with all the evidence heard just once, and resulting in a consistent decision binding all the parties. Arbitration normally requires separate proceedings for each contracting party. In a construction dispute, if all but one of the contracts refers to court proceedings, and the other arbitration, there will be the need to have two sets of proceedings, which could result in inconsistent decisions on the same facts, and, inevitably, more costs.

Adjudication or mediation must be considered as cheaper options, but even with the trial fee, litigation is still preferable to arbitration.