The Late Payment of Commercial Debts (Interest) (Legal Aid Exceptions) Order 1998

Explanatory Note

(This note is not part of the Order)

This Order provides for certain contracts made by the Legal Aid Board for the provision of advice, assistance, mediation or representation to be excepted contracts for the purposes of section 2 of the Late Payment of Commercial Debts (Interest) Act 1998 (“the 1998 Act”). The contracts concerned are those where the charges and fees are not negotiated but rather are those determined in accordance with the relevant regulations under the Legal Aid Act 1988. Payments made under such contracts by the Legal Aid Board will therefore not carry statutory interest under the 1998 Act.

At the time of making this Order, the contracts affected are franchise agreements and multi-party action contracts. This Order does not affect pilot contracts for the provision of Legal Aid, where the charges and fees are negotiated by the solicitor or other service provider.

Statutory interest is not available–

(a) on barristers' fees payable by the Legal Aid Board;

(b) where advice, assistance and representation is provided by solicitors or not for profit organisations pursuant to the Legal Aid Act 1988 other than pursuant to a contract.

Nothing in this Order applies to payments made by the Scottish Legal Aid Board or by the Legal Aid Department of the Incorporated Law Society of Northern Ireland.

This Order comes into force on the same date as the 1998 Act is brought into force in relation to certain contracts by the Late Payment of Commercial Debts (Interest) Act 1998 (Commencement No. 1) Order 1998 (S.I. No. 2479 (C. 56)), that is to say, on 1st November 1998. The contracts concerned are those made by a supplier whose business is a small business with a purchaser either who is a United Kingdom public authority, or whose business is a large business. The terms “small business”, “large business” and “United Kingdom public authority” are defined in that Order. The 1998 Act does not apply to contracts made before it comes into force.

Two further instruments will come into force on the same date–

(a) the Late Payment of Commercial Debts (Rate of Interest) Order 1998 (S.I. No. 2480), which sets the rate of interest under section 6 of the 1998 Act;

(b) the Late Payment of Commercial Debts (Interest) Act 1998 (Transitional Provisions)Regulations 1998 (S.I. No. 2481), which provide that, while the Act is not fully in force, it shall be presumed until the contrary is proved that the business of the purchaser is a large business.