As the Gazette revealed last month, the government’s plans to ban referral fees in personal injury cases have led insurers to start pushing for a cut in the fixed fees payable to claimant lawyers under the RTA portal scheme. The Ministry of Justice itself acknowledged that the fees would need to be renegotiated, adding that if claimant and defendant representatives could not reach an agreement it would step in to ‘facilitate’ the negotiations.

That prompted an outcry by claimant lawyers, with APIL and others involved in the original fee negotiations adamant that the level of fixed fees hammered out when then portal was set up did not contain any allowance whatsoever for referral fee payments - and so there was no basis to cut them.

But evidence given by justice minister Jonathan Djanogly to the Transport Committee last week makes it clear that the claimant lobby’s arguments have fallen on deaf ears.

Djanogly said: ‘We cannot get insurance premiums down, for instance, or it would be hard, without sorting out the fixed costs as well, or at least that will help the process. We have initiated that process.

‘Again, that it is not straightforward. I believe that there is a notional amount within those fixed costs that is attributed to referral fees. In effect we want to reduce the fixed cost by that amount.

‘However, the legal profession disputes that vociferously. They either say that there is no notional amount for referral fees or, if referral fees are banned, they will have to spend more on advertising and therefore they should keep that amount. There is going to be a negotiation there.

‘Last time this came up as an issue it was in effect brokered by the Civil Justice Council. They may have a role in this again. I have said to the Law Society that it is not the government’s intention to stop referral fees going to claims management companies just so that lawyers can take those referral fees in effect for themselves.

‘We want the benefit of that to feed through to the consumer in lower insurance premiums.’

That leaves little room for doubt that the fees are going to be cut - but there’s still a battle to be had over the depth of the cut.

On that front, claimant lawyers will not have welcomed the comments by Labour’s Jack Straw when he introduced his motor insurance bill during a ten-minute rule debate in the House of Commons last month.

The former justice secretary, who recently began a campaign against the payment of referral fees (though, of course, he did not do anything about them when he was heading the MoJ), said: ‘In my Blackburn constituency, and in many other constituencies, there are law firms with banners outside their offices promising £650 in cash in return for any new personal injury claim.

'They can make those promises and pay out because the flat fee that insurers pay the lawyers for claims below £10,000 has been set too high.

‘Such claims are now processed through an electronic portal, which costs the law firm no more than £100 in staff time to operate. The flat fee is £1,200, so even if a firm pays a £650 introduction fee it can make exorbitant profits. Clause 3 would cut the fee in half.’

No doubt Straw’s call for a halving of claimant fees will have attracted the attention of defendant insurers. Perhaps they will be quoting from Hansard during their negotiations.

Rachel Rothwell is the new editor of Gazette sister magazine Litigation Funding, the essential guide to finance and costs. See subscription details

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