The arguments are over and the ­lobbying is done - the Legal Aid, Sentencing and Punishment of Offenders Act is now fully inscribed in the law of the land. The views of politicians, stakeholders and the media over the merits of each ­provision are moot; attention should now fall to the practical implications of the changes which made the cut.

One such change which rightly demanded considerable attention last year was the ban on referral fees. The campaign for the ban divided the opinion of professionals within the claims management, insurer and legal sectors alike. In my view, it was clear that the practice of insurers charging solicitors for legal work had created perverse commercial incentives which did little more than drive up costs and tarnish the reputation of the personal injury (PI) system. I welcomed the government’s announcement that an amendment would be included in LASPO outlawing the practice.

However, my elation was short-lived - when details of the ban were revealed it became demonstrably clear that they were inadequate and constituted nothing more than an insurer’s charter. No heed had been paid to the fact that alternative business structures will undoubtedly be a significant part of the legal landscape when the ban comes into force in 2013. Coupled with this oversight is the ambiguous wording of the ban itself - failing as it does to preclude insurers in particular from creating a model which can function as a referral fee in all but name.

As disappointed as I was with the half-baked approach the government took towards creating a ban, I must admit that I was not entirely surprised. With respect to the PI system, LASPO represents little more than a succession of missed opportunities. Major reforming efforts only come about every decade or so, and this attempt has unfortunately failed to tackle systemic problems. The infinitely sensible holistic approach Lord Justice Jackson recommended has been eschewed in favour of a haphazard, piecemeal method, of which the referral fee ban is a primary example.

For better or worse we now all have to live with the consequences, for the time being at least. PI law firms which have been forced to use the referral fee model for a significant proportion of their work will have to make some very serious decisions about the future of their businesses. However, before any kind of commitment to a future business plan can be countenanced, one serious ambiguity needs to be cleared up urgently - the position on collective advertising.

Legal opinion is divided as to whether the referral fee ban includes law firms using collective advertising arrangements. The government says it does not cover collective advertising, but leading regulatory experts such as Andrew Hopper QC are certain that it does; and as it is now primary legislation, the government’s view is a near irrelevance. Hopper argues that section 57 of LASPO is clear: if party A, such as a claims management company (CMC) or insurer, passes information identifying potential PI claimant clients to law firm B, and B makes any payment or provides any value by any means to A, that is a prohibited arrangement. If a consortium of law firms band together to fund advertising, the advertising arm or outsourced facility would act like a CMC or insurer in passing on information. Therefore, the pooled contributions of the consortium would be a breach.

If the judiciary agree with Hopper and consider that the wording of the ban does cover collective advertising, it will be enforced, and the impact on the legal sector will be substantial. To fully understand why, we need to consider what options are open to PI law firms in a post-referral-fee-ban world. For medium-sized PI firms, converting to an ABS and working with an insurer offers a relatively quick fix.

Larger firms, which do not follow the ABS route, can ramp up their advertising spend to increase the proportion of directly captured clients. However, for smaller firms, many of which are solely dependent on the existing referral fee model for survival and for whom an ABS is not a realistic proposition, their future hinges on collective advertising. If the practice is included in a ban, the future could look very bleak for many PI law firms.

The PI market is likely to undergo a series of consolidations and ABS conversions. By 2013, we are likely to see far fewer law firms operating in the field, with a large proportion owned by insurers or CMCs. Such a position will be highly undesirable, given the inherent conflicts of interest and opportunities for abuse that will be open to insurers and CMCs which own law firms. Freedom of choice for the consumer will be restricted, transparency (particularly with regard to cashflows) will become even more opaque, and the independence of the PI legal sector will likely be jeopardised. Crucially, costs will continue to climb as referral fees will undoubtedly continue under a new name, potentially giving insurers further ammunition in their future lobbying efforts.

When the next round of reforms for the sector is envisaged, large swathes of the legal industry will be hamstrung by ownership by insurers or CMCs. The net result could be a reduction in the protection offered to the fundamental legal tenets of access to justice and the protection of clients.

John Spencer is director of Spencers Solicitors, Chesterfield