The impact of the referral fee ban

The ban on referral fees could sound “the death knell” on personal injury work for high street solicitors.

Referral fees will be banned for personal injury cases when the Legal Aid, Sentencing and Punishment of Offenders Bill comes into force, which is likely to be October 2012 at the earliest.

Andrew Twambley, senior partner at Amelans, who was taking part in last week’s NLJ newscast debate on the subject, said: “The banning of referral fees is aimed at a certain part of the market.

“However, it’s going to completely miss that part of the market and hit solicitors who are trying to make a living on the high street, trying to look after injured clients.”

Twambley said the ban would not reduce costs, and called on the government to engage in further consultation.

“There’s got to be some kind of consultation on this,” he said.

“There’s an acquisition cost for every case and some people prefer to pay referral fees and outsource their acquisition costs.”

He questioned the assumption in the impact assessment document on the ban that referral fees lead to an overall increase in costs in each case.

“Why? It also continues in part to assume that referral fees are added to the bill and recovered from insurers. That’s one major assumption that this document relies upon. That is not the case. I’ve never added a referral fee onto a bill and had it paid. Certainly it would never be paid in any court or assessment in this land.”

However, Dominic Regan, an expert on civil procedure and costs who is helping Lord Justice Jackson with costs reforms, argued the ban would drive down costs. Jackson LJ “was appointed, not by government, but by the judiciary, because the judiciary was concerned about costs and that is what drives this forward, the judiciary don’t like it,” he said.

Regan suggested the ban could be extended to other areas, such as conveyancing and divorce law, arguing there was “no logical reason why the ban shouldn’t be universal.

“You’ve got two people in the same office building, one’s paying out money for divorces or conveyancing, and his partner in the next room is banned for offering tuppence,” he said.

“There’s no logic to that.”

The NLJ newscast panel agreed the ban would not lead to the end of TV advertising, text and telephone, and other “hard sell” tactics.

Twambley said that, in order to compete with claims management companies, law firms would have to take to advertising, marketing and “every means available to them that’s not a referral fee” to “create their own brands”.

Regulation could impose extra work on the “already stretched” Solicitors Regulation Authority, and should be a civil or a professional offence, the panel said.

The debate was chaired by David Greene, senior partner at Edwin Coe and NLJ consultant editor. NLJ subscribers can register at www.newlawjournal.co.uk to view the newscast online.