Amid the £350m cut to legal aid, plans for success fees have slipped under the radar

How do you float a policy that can be so easily caricatured as bringing US litigation culture to these shores without an almighty row breaking out?

Well, the coalition Government, having been lent a helping hand by Lord Justice Jackson's report on civil litigation costs and the state of the public finances, has found the answer – announcing the measure as part of reforms that will yank hundreds of millions of pounds of taxpayer money out of the justice system. In delivering policy, as ever, it's all about the mood music.

Indeed, such was the overwhelming focus on the £350m that the Ministry of Justice (MoJ) last week announced would be cut from the annual legal aid budget, that few seemed to notice the plan to usher in many of Jackson's most radical recommendations – including allowing contingency fee deals in the domestic courts.

As any City litigator will tell you, allowing lawyers for the first time to take a cut of the damages as a success fee is a big deal. And, perhaps surprisingly, the consultation paper the MoJ issued last week on civil costs suggests that the Government may go even further on this contentious issue than Jackson recommended.

In particular, the MoJ is unconvinced that additional regulation for these so-called damage-based agreements is needed (Jackson floated the idea of an independent solicitor countersigning such deals) or that a cap is required outside of 25% of damages proposed for personal injury (PI) claims and 35% for employment.

Such measures would have huge implications for commercial litigation, providing a much more powerful and versatile tool to apply success fees to complex dispute work. In contrast, the existing conditional fee arrangements (CFA) were seen as too restrictive to give firms an incentive to put 'skin in the game' outside of the highly predictable volume disputes work like PI – a restrictiveness that, ironically, many would argue failed to stamp out abuse of the system.

As such, the introduction of full-blown contingency fees would surely attach booster rockets to the recent trend in litigation to explore risk-sharing fee deals. It would be very attractive to US trial firms that are more culturally suited to taking on such cases.

Elsewhere, the MoJ looks set to follow through on many of Jackson's most radical proposals – in particular, the move to abolish the recoverability of CFAs from the losing party and after-the-event insurance premiums. This leaves the awfully-named concept of one-way qualified cost-shifting (OQCS) winging its way towards the courts. This would stop individual claimants in most cases having to pay legal costs if they lost to bolster the access to justice credentials.

Here again the MoJ signals a willingness to go further than Jackson, floating the idea that additional costs in trade union-funded cases should no longer be recoverable. But commercial practitioners will note that the 'loser pays' model still looks safe in disputes between two organisations.

While most of this will be welcomed by City lawyers as a sensible move to rebalance the litigation regime that had become too friendly to claimants conducting litigation on a risk-free basis, there will be some head-scratching about proposals for a new test of proportionality of costs.

The MoJ suggests costs could be found to be disproportionate even if incurred necessarily and reasonably. All in, there is plenty for the profession to get their teeth into during the consultation. Controversy may have been deferred last week, but its time will surely come.