Solicitors' Code of Conduct 2007

Guidance to rule 8 - Fee sharing

What is fee sharing?

• 1.

  Fee sharing is not defined in rule 8. It can have a variety of forms and includes relationships where you make a payment within a firm or to a third party by reference to a percentage of the fees charged to a client in respect of a particular case, or a percentage of your gross or net fees, or your profits.

Fee sharing with lawyers and colleagues

• 2.

  Sharing your fees within a firm, or with other lawyers, or in the other circumstances listed in 8.01, does not represent a serious risk to your independence and is therefore permitted.

• 3.

  Rule 8.01 allows you to share fees with a business carrying on the practice of lawyers. This allows you to share fees with a legal disciplinary practice, or with a multi-disciplinary practice outside England and Wales.

Fee sharing with charities and other non-lawyers

• 4.

  Rule 8.01(h) permits you to share fees with a charity. This rule applies to charitable giving where you have agreed with your client or a charity that you will share all, or some, of your fees in respect of a particular matter or matters with a charity. This will include situations where you use a conditional fee agreement and agree to pay to a charity fees you receive by way of costs from your client's opponent or other third party. By contrast, where you decide to make a donation to a charity without any binding commitment to do so, this will not constitute fee sharing and is permitted.

• 5.

  If you act in accordance with a pro bono conditional fee agreement and you advance disbursements on behalf of your client, and these disbursements are received by way of costs from your client's opponent or from another third party, you may retain from the costs which are received the element which covers such disbursements. The terms of this arrangement will need to be set out in the conditional fee agreement.

• 6.

  You may share your fees with other third party non-lawyers in the strictly defined circumstances set out in 8.02. The aim of 8.02 is to give practitioners greater freedom of choice as to the methods available to fund their firms or to pay for services provided to their firms, subject to safeguards designed to protect the public interest. Rule 8.02 allows you to enter into agreements with third party non-lawyers which provide that, in return for the third party making available capital and/or a service to you, you make payment to the third party by reference to a percentage of your fees.

• 7.

  You must take account of the requirements of rule 1 (Core duties), specifically of the requirements of independence, integrity, and your duty to act in the best interests of the client. This means that although a fee sharer may properly require you to, for example, observe certain service delivery standards, it would be improper for the fee sharer to interfere with your professional judgement in relation to the advice given to clients.

• 8.

  If the fee sharing relationship involves referrals between you and the fee sharer, you must also comply with rule 9 (Referrals of business) or 15.09 (which relates to referrals of business overseas).

• 9.

  You must also comply with rule 12 (Framework of practice), which sets out the types of business through which solicitors, RELs, RFLs and recognised bodies may practise. Solicitors who do share fees in accordance with 8.02 should take care that they do not, even inadvertently, enter into an unauthorised partnership with the fee sharer.

• 10.

  You must comply with rule 3 (Conflict of interests) to ensure that there is no conflict between the interests of the client and your own interests by virtue of your agreement with the fee sharer. Should a fee sharer become your client, you should be particularly conscious of the need to ensure that conflicts of interests do not arise, and that the wish to avoid offending the fee sharer does not colour the actions taken and advice given in respect of other clients.

• 11.

  Rule 8.02 allows you to share fees with a non-lawyer third party, but only in return for the fee sharer providing capital and/or services to your firm. The rule does not permit the fee sharer to provide services to your client as part of the fee sharing agreement.

• 12.

  Examples of the kind of arrangements which 8.02 permits include:

  • (a)

    A bank may provide a loan to your firm in return for a sum, in whole or part, calculated as a percentage of the gross fees of your firm. The fact that some clients of your firm are also customers of the bank would not, of itself, prevent the bank from sharing your fees.

  • (b)

    A supplier of information and communications technology may provide computer hardware, software, back-up and training to your firm in return for a share of the firm's gross fees.

  • (c)

    You may pay a supplier of an interactive web-based will-writing package on the basis of a percentage of the fee for each will.

• 13.

  Although 8.02 does not specify any cap or limit on the amount of fees which you may share with third parties, you must ensure that the extent of the fees shared does not put at risk your duties to act independently and in clients' best interests - see rule 1 (Core duties). Firms should carry out an assessment of any risk to these core duties that could be created by any fee sharing arrangement, and take action to limit or manage that risk. In assessing whether a firm may have been in breach of these duties, particularly where the percentage of all fees shared is higher than 15% of gross fees, the SRA may ask for evidence of this risk assessment.

• 14.

  If you have a fee sharing relationship with a third party non-lawyer in accordance with 8.02, you may need to disclose the existence and nature of the fee sharing relationship to any client whose affairs are significantly and directly connected to it. Service delivery standards agreed with a fee sharer need not normally be disclosed. See also 2.02(2)(e) and notes 16 and 17 of the guidance to rule 2 (Client relations).

• 15.

  There would, for example, be no obligation to disclose to clients that the firm has a fee sharing relationship with a bank which has supplied a loan to the firm, even to those clients who obtain banking services from that same bank.

• 16.

  Rule 8.02 states that you must, if asked to do so, make available to the SRA details of any fee sharing agreement. This may, for example, include the percentage of gross fees which has been passed to the fee sharer(s) pursuant to an agreement made under 8.02.

• 17.

  The SRA will respect the commercial sensitivity of any information supplied to it.

• 18.

  You are not allowed to share fees with a non-lawyer "fee sharer" under 8.02 in your European cross-border activities, because it is prohibited by rule 16 (European cross-border practice). The following are prohibited by rule 16:

  • (a)

    solicitors (wherever practising) sharing fees with a non-lawyer fee sharer situated in a CCBE state other than the UK; and

  • (b)

    solicitors practising in a CCBE state other than the UK sharing fees with a non-lawyer fee sharer (wherever situated).

  Further information can be found in rule 16 (European cross-border practice) and notes 6 and 7 of the guidance to that rule.