Federal lawyers have agreed to a fast-track formula that will see roughly 900 of the country's most severely injured veterans compensated for a clawback of their disability pensions.

A letter signed by the lawyers involved in a class-action lawsuit against the Conservative government — obtained by The Canadian Press — calls the payments an interim step while negotiations continue towards a settlement with more than 4,500 former soldiers.

Up until last spring, the federal government was fighting a drawn-out legal battle against the class-action claim by veterans whose long-term disability benefits were reduced by the amount of their monthly disability pensions.

Last May, a Federal Court judge "unreservedly" rejected the government's arguments.

Defence Minister Peter MacKay ordered the clawback to end July 1, but the most severely disabled veterans continued to lose disability benefits because other payments exceeded the limit of 75 per cent of their military salaries.

The lawyers say interim payment to those clients will begin on Oct. 22.

Those with the most grievous injuries, known as "zero-sum" clients, should have seen an immediate reinstatement of the benefits, particularly since many can't work and must rely solely on pain and suffering awards, veterans' advocates have argued.

Veterans of the war in Afghanistan will benefit the most from the fast-track process, they added.

The payments are being made regardless of the outcome of the overall negotiations; it remains unclear how much money will be involved.

The private insurance company that manages the file, Manulife Financial, has a list of those who qualify and will do a case-by-case assessment in the new year to determine whether each individual's payments will be permanent, and at what rate.

Final deal still months away

After deciding not to appeal the Federal Court ruling last spring, the government appointed a negotiating team to arrive at an overall settlement, something that is now not expected to be finalized until January.

Internal government estimates have suggested the settlement could run to $600 million, but that figure could prove on the low side: negotiators have discussed setting the compensation cut-off date at 1976, the year the program was established.

Earlier this week, Veterans Affairs Minister Steven Blaney announced his department was immediately ending the controversial policy of clawing back the benefit payments of disabled soldiers, a separate program from the one run by National Defence.

Blaney's decision was also a consequence of the Federal Court ruling.

The government will no longer deduct the amount of a veteran's pension from benefits for lost earnings and Canadian Forces income support, a move that is expected to cost the federal treasury over $177 million in the next five years.