Harry Kanter, who has been in private practice for more than 50 years, doubts that payments to third parties will improve service to clients

The Gazette recently reported that the Master of the Rolls has approved new rules allowing solicitors to pay third parties for introducing new business and to enter into fee-sharing arrangements with non-solicitors (see [2004] Gazette, 11 March, 4).

With immediate effect, solicitors may pay third parties for the introduction of work, except for publicly funded or criminal cases.

Law Society President Peter Williamson said the new rules 'will promote competition and choice for consumers whilst ensuring that independence of advice is not compromised'.

But precisely how will the practice of solicitors accepting referrals on this basis promote competition? Surely the only increase in competition we are going to see is in the marketplace for referrals, as those persons or companies who are able to introduce potential clients start to enjoy another source of income.

As for the assertion that independence of advice will not be compromised by the new rules, the position is far from clear; indeed, despite constant assurances from the Law Society, scant evidence is given to back up the claim.

Will the relationship - if referrer and referee introduce a contractual relationship between themselves - be inimical to the interests of the client? From the referrer's financial point of view, the commercial dynamic will be such that there is bound to be a continual temptation to prefer solicitors prepared to pay more for introductions, rather than on the grounds of ability, experience or appropriate specialisation.

Consider also the position of a referrer, perhaps looking forward to a fee based on future work, where the referee solicitor properly advises the client that he should in fact take no action.

With a new commercial dynamic to the relationship between referrer and referee, it is not difficult to imagine the possible effect on the future flow of referrals.

Precisely what does this do towards guaranteeing the interests of clients and protecting independence, impartiality - and indeed appropriateness - of advice?

But the biggest criticism of the new rules has to be that someone is going to have to pay the cost of the referral at the end of the day - and the most likely candidate for this is the client, whether directly or indirectly.

Forget increased competition, forget protections on impartiality of advice, surely this is the one real impact on consumers that the new rules can promise.

Has the Law Society, in its usually laudable attempts to turn our dusty professional practices into thrusting legal businesses, on this occasion gone too far and thrown the baby out with the bathwater?

An additional problem with the new rules is that despite the fact that virtually no detail has been given on the structure of allowed referral arrangements, the new rules came into force with immediate effect.

The devil is inevitably going to be in the detail and this is bound to give rise to problems - and indeed litigation - in the long run.

A cursory look at the case law surrounding estate agents' commissions quickly serves to demonstrate just how fraught and litigious the area of commissions can become.

The law states that a party is entitled to a commission if it can prove it was the effective cause of the sale.

There is a raft of cases looking at issues around 'effective cause of sale'.

Once commission arrangements start for lawyers, it will only be a matter of time before litigation begins.

But is this to be the irony? Will it be the new income stream from the litigation that will undoubtedly ensue that enables firms to cover the cost of referrals?

Harry Kanter is senior and founding partner of central London commercial law firm Kanter Jules