Referral fee ban faces axe

Regulation: Master of Rolls Lord Phillips of Worth Matravers 'not yet persuaded' on reform.The ban on solicitors paying referral fees could be set for relaxation, at least in respect of personal injury and financial services work.However, following a Law Society Council debate last week in which a majority supported some form of relaxation, the Society will have to overcome possible opposition from the Master of the Rolls, who has to approve any change to the Solicitors' Introduction and Referral Code.The debate followed a consultation which received just 158 replies but found 44% in favour of removing the ban entirely, with disclosure of any fee to the client.A further 13% supported removing the ban in certain areas - with investment and personal injury work the main fields cited, with very mixed views in relation to conveyancing - while 28% of respondents wanted to retain the ban and 'redefine the mischief' it addresses.The council vote was equally mixed, with 29 members voting to retain the ban, 24 supporting total relaxation and 18 partial relaxation.

The regulation review working party - which supports total relaxation - will meet to consider the vote.

Chairman Edward Nally said afterwards that when the council revisits the issue - alongside plans to liberalise the ban on fee-sharing - he expects a move towards targeted relaxation.

It would be difficult to rationalise relaxing the fee-sharing ban but not the referral code, he said.Concerns about using public funding to pay referral fees should be addressed by the Legal Services Commission inserting a ban in contracts with firms, he added.In initial thoughts before he saw the consultation results, the Master of the Rolls, Lord Phillips of Worth Matravers, said: 'I am not yet persuaded that the proposed deregulation would be in the public interest.'Mr Nally said he would be consulting with Lord Phillips.However, the director-general of fair trading wants the ban lifted.Mr Nally conceded to the council that this is a 'finely divided issue', and that 'we don't know whether we're letting the genie out of the bottle'.

Levelling the playing field with the likes of claims farmers was the key argument in favour, he said, while the possible erosion of professional standards counted against it.Speaking against relaxation, Richard Ford (West Country and Gwent) said: 'Buying clients is obnoxious.' Several members expressed concern that ending the ban in relation to conveyancing would drive many high street firms out of business.Patrick Allen, for the Association of Personal Injury Lawyers, said it had reluctantly concluded that the ban had to go as it was unworkable.However, he said there were concerns that an uneven playing field would be created, with clients ending up with the solicitors who pay the biggest referral fees.

He was also worried that law centres and charities would put relationships with solicitors on a commercial footing.See EditorialNeil Rose