A review of civil litigation costs in Scotland recommends overturning a ban on referral fees – in part because they are too difficult to police.

The Taylor Review, published last week, concludes that the public interest is best served by accepting that referral fees are a ‘fact of life’ for securing claims.

The review is the Scottish equivalent of the Jackson report in England and Wales, which called for a ban in personal injury cases. Payments to third parties for referrals have been outlawed since April.

The author of the Scottish review, Sheriff Principal James Taylor (pictured) says there is evidence that the present ban on referral fees is regularly circumvented and that there is ‘no appetite’ to enforce it, ‘perhaps due to the difficulty in so doing’. Despite this, he says, there is no evidence that paying for referrals has increased the number of claims initiated in Scotland.  

Taylor also reported several respondents’ concerns that a ban would lead to Scottish firms losing work to alternative business structures formed in England and Wales by insurance firms and claims management companies with the aim of keeping referrals in-house.

The issue of referral fees was a rare departure from Jackson’s proposals, with Taylor echoing Jackson in favouring damages-based agreements and qualified one-way costs shifting.

Under the changes recommended by Taylor, solicitors will be able to offer their clients agreements in which fees are calculated as a percentage of the damages recovered. The maximum percentage that can be deducted from damages in personal injury cases would be set on a sliding scale in which the percentage falls as the award increases.

In the foreword to his report, Taylor says he sought to address what he called the ‘David and Goliath relationship’ of pursuer and defender of claims by proposing qualified one-way costs shifting.