THIRD PARTIES: solicitors can pay for business introductions

Rules allowing solicitors to pay third parties for introducing new business and to enter into fee-sharing arrangements with non-solicitors were approved by the Master of the Rolls this week.

The approval of Lord Phillips of Worth Matravers means that the controversial provisions come into immediate effect.

The Law Society Council's decision to remove the ban on referral fees in December was upheld at a council meeting two weeks ago by a vote of 44-34.

Solicitors may now pay referral fees to third parties, such as estate agents, who introduce work to them.

However, the new rules will not apply to publicly funded work, or any criminal work.

Under the rules, solicitors who pay introducers to bring in business must make their clients aware of the payment - and the amount involved - before accepting instructions to act.

Solicitors must also be satisfied that the client was told about the fee by the introducer before the referral took place.

The rules do not allow solicitors to pay referral fees to companies that engage in cold-calling or other marketing activities that are against solicitors' rules.

The arrangement must not inhibit a solicitor's ability to give impartial advice.

Under new fee-sharing rules, solicitors will have greater flexibility in financing their practices by being able to share fees with third parties who provide capital or services, provided they do not become a majority stakeholder.

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

We believe they are clear, enforceable and in the public interest.'

Derek French, the council representative for Birmingham whose motion to reinstate a ban on referral fees was defeated two weeks ago, said he was still hopeful that a special general meeting could be called by local law societies to trigger a postal ballot.

He said: 'The Master of the Rolls has made a decision, but if a postal vote opposed the new rules he could reconsider it.'

Rachel Rothwell