A part 36 offer is designed to offer parties a means of seeking to resolve proceedings which offers incentives to both parties to a dispute to settle. The incentive is actually the opportunity to avoid potential cost consequences (by accepting the offer), which a party rejecting a part 36 offer will face if it subsequently fails to beat that offer.
Some courts operate under fixed costs regimes. This generally means there are set caps at each stage of proceedings and overall that a party can recover from another during or, usually, at the conclusion of a claim. The Intellectual Property Enterprise Court (IPEC) – a division of the high court introduced to streamline intellectual property related claims – operates under a fixed costs regime, and the bottom line is that a party cannot recover over £50,000 overall. However, it is not uncommon for parties to exceed the cost caps in IPEC, meaning there can be a shortfall to be met by successful parties, even if the (usually) losing party is ordered to pay its costs subject to the fixed costs regime.
Until recently, it had been generally accepted that the consequences associated with part 36 offers would, in IPEC, be subject to the fixed costs regime. However, throughout 2016 there have been two decisions which appear to confirm that part 36 offers in IPEC will carry costs consequences outside the fixed costs regime. Those decisions can be found here and here.
The impact of the above developments is significant because it adds weight to the bargaining value of a part 36 offer, which will now apply increased pressure on a party faced with a well calculated part 36 offer, because a rejecting party could face significantly increased costs liability than it would in the normal course of proceedings if it rejects the offer.
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