Proposal to abolish referral fees ban

Plans to relax the rules barring solicitors from paying referral fees for work could go to the profession for consultation for the third time in four years, under proposals going before the Law Society's council next week.

The suggestion comes in a paper from the Society's regulation review working party, which favours a relaxation of prohibition on payments in the Solicitors' Introduction and Referral Code.

The paper said a change to the code would allow solicitors to compete 'on a level playing field' with other service providers, particularly in the areas of financial services and personal injury.

Restrictions on solicitors' businesses are only appropriate if they are in the public interest or to retain the reputation of the profession, the paper said.

'Arguably the public interest lies in competition between providers,' it concluded.

A proliferation of Web site referral schemes, where it made 'economic sense' for firms to pay per referred client, also required a reconsideration of the code, the paper said.

The working party said the existing code is also proving difficult for the Law Society to enforce, with many firms already paying referral organisations administrative, marketing and management fees which make the code unclear.

Previous consultations have shown a profession divided about the code.

In 1996, 73% of 1,132 respondents supported a retention of the rule, whereas in 1998, 75% of 129 favoured abolition.

Under the proposals, the profession would be asked whether the rule should be relaxed, and whether solicitors should be under a duty to disclose the amount and the fact that a referral arrangement exists to introduced clients.

The ban could apply only in certain areas, such as personal injury and financial services.

Ian Muirhead, managing director of Solicitors for Independent Financial Advice, said he was in favour of the code being relaxed.

'Time and time again, solicitors work with accountants who would refer work to them, but because they cannot pay for that referral the work goes to an external independent financial adviser.'

Mark Harvey, secretary of the Association of Personal Injury Lawyers said he would prefer to see the government ensure that only those who are properly qualified may conduct personal injury work.

Leading personal injury lawyer Kerry Underwood said the ban should remain and be enforced by the Law Society.

To relax it would drag all solicitors into having to pay referral organisations for work, as they would be unable to compete with multi-million pound organisations in advertising and marketing, he said.