Referral fee ban will go in legal aid bill

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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.

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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.

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