Referral fee ban will go in legal aid bill
The justice secretary has confirmed that a rule banning the payment of referral fees in personal injury cases will be introduced into the Legal Aid, Sentencing and Punishment of Offenders Bill and debated next week in parliament.
Kenneth Clarke tabled the amendment, stating that a regulated person will be in breach of the rules if they refer prescribed legal business to another person and are paid or have been paid for the referral; or if the prescribed legal business is referred to the regulated person, and the regulated person pays or has been paid for the referral.
A person will also breach the regulations if they arrange for another person to provide services to the client and they are paid for making that arrangement.
The amendment states that payment includes ‘any form of consideration’, but not the ‘provision of hospitality that is reasonable in the circumstances’.
The amendment will leave it to regulators to ensure they have ‘appropriate arrangements for monitoring and enforcing’ the restrictions.
A breach of the rules will not make a person guilty of an offence and will not give rise to a right of action for breach of statutory duty; but the amendment will make a contract to make or pay for a referral or arrangement unenforceable.
Tabling the amendment, Clarke said: ‘Until now, middle-men have been able to profit from selling personal injury claims onto solicitors for a fee. So of course they encouraged people to sue as a first, rather than last, option. We all ended up paying through higher prices and insurance premiums.
‘Our ban on referral fees, together with our changes to no win, no fee arrangements, will reduce legal costs and speculative suing, so that businesses, schools and individuals can be less fearful of unnecessary claims encouraged by those looking for profit rather than justice.’
The amendment was among a raft of other changes to the bill, including removing the £5,000 cap on the fine that can be given by magistrates’ courts; making squatting in residential buildings a criminal offence; and strengthening people’s rights to use force to defend themselves from intruders in their homes.
Another amendment will extend the scope of legal aid in complex cases, where an individual has interconnected needs in relation to which they require civil legal services that would otherwise not be available because they fall out of scope.
The Bar Council has received advice from Treasury Counsel that referral payments, made or sought solely to decide who is instructed in a case, are an offence under the Bribery Act 2010.
In his monthly column, the bar’s chairman Peter Lodder QC said: ‘There are many tales of sets being offered work for a “kick-back”: quite properly, most refuse. But it is now clear that both offering and accepting work under these circumstances is a criminal offence.’
A statement from the Bar Standards Board said: ‘Our code currently prohibits barristers from making or receiving payments in order to obtain work. Solicitors also have a duty to ensure that the client is referred to the most appropriate barrister for their case and we strongly believe that this recommendation should not be influenced by financial reward.
‘We see no evidence or justification for altering our rules at this time.’
The new measures will be debated in the commons next week.
Comments
Quick questions
1. Insurer's have made millions and millions of pounds in selling on claims to solicitors themselves, so arguing that they have to put up the premiums because of the money being lost due claims, is not really a valid argument, is it? How did this ever make sense in the first place?
2. Once this has gone through, is the government actually going to ensure that insurers to lower their premiums? Or is it all just the normal talk, will the general public still have higher premium costs and the insurance companies just make even more money?
3. Has the government even thought about the thousands of people it about to put out of work and how much that is going to affect our already rising unemployment rates?
1) Insurers will continue to
1) Insurers will continue to make money through claims by owning law firms under ABS soon enough, like cogent solicitors already etc.
2) Insurers will come up with other reasons premiums have to be high just like they always have - harsh winter causing lots of accidents and burst pipes, poor global economy affecting their share price and capital reserves, excessive regulation by the government, staff insisting on stupid things like getting paid etc
3)If you think they care about putting people out of work you have evidently not seen the proposed changes to the law on unfair dismissal. If there are too many people on benefits they will simply lower the benefits, or bump up taxes. Rest assured we will still have money for cruise missiles for the next Libya.
A more fundamental question!
All of this could be an irrelevance if the advice obtained by the Bar Council that referrals are bribes is accepted as correct; if it is then all referrals (not just PI) will have to be banned immediately otherwise firms would fall foul of the Bribery Act by continuing to deal with them!
We currently have a situation where the Law Society advice is that they are not bribes, the Bar Council advice saying they are, and the SRA not having a position at present (as I understand it).
Under the government's proposals the Bar Council would be partly responsible for regulating referrals, but how can it do this if it has advice saying they are illegal?
Is it time the LSB stepped in with its own advice and ruled one way or another, for the whole profession, so the uncertainty is eliminated; if the Bar is right it would save the government having to discuss something unnecessarilly and allow more focus on the rest of the Bill?
Going underground, going underground.....
So there won't be a criminal offence, but the referral contract will be unenforceable.
I wonder what will happen.......?
Pull the other one Ken
In what reality does Ken Clarke QC (!) believe that the "middlemen" have the slightest interest in whether solicitors who have bought claims from them sue first or last? Once instructions are received from the client the "middle men" have no further involvement in the workings of the case, and nor should they. Furthermore my understanding of the Civil Procedure Rules are that solicitors who issue first and ask questions later simply aren't allowed to get away with it. Does Ken, as justice secretary, lack a working knowledge of the CPRs, or to be generous is he indulging in political showboating, knowing that he can deceive the general public and look as if he doing something he believes will be popular?
clear as mud then
but not if in "consideration for the provision of services"
so what does that mean?
Ken Clarke is useless-always
Ken Clarke is useless-always was and always will be. A fine example of a politician who has blagged his way through life and done well by it.
What on earth qualifies the
What on earth qualifies the LSB to provide any opinion as to whether referral fees are bribes or not?
Advice
The LSB is the top level regulator so if we have a stalemate it seems logical that it seeks it's own legal advice, and whatever this is, is what is used as the "party line". The LSB may not be everyone's choice but we are where we are!