News releases

Referral fee ban help available

Guidance and support have been made available by the Solicitors Regulation Authority (SRA) for those still needing advice ahead of the introduction of the ban on the payment of referral fees in personal injury cases.

The ban has been introduced by the Government amid concerns of the high cost of civil litigation, rising insurance premiums, increasing numbers of claims and the perception of a "compensation culture", where people are encouraged to claim for minor or even fictitious injuries. The ban comes into force on 1 April 2013 as part of the Legal Aid Sentencing and Punishment of Offenders Act 2012 (LASPO).

The SRA is enforcing the ban through two new Mandatory Outcomes, which will be found in Chapter 6 and Chapter 9 respectively, and which state that "you are not paid a prohibited referral fee" and that "you do not pay a prohibited referral fee". On top of the two new outcomes, the Code of Conduct will seek to define referral fees, while Indicative Behaviours illustrate how the outcomes can be achieved, avoiding the need to include detailed prescriptive rules.

The SRA is writing to all those firms where personal injury work makes up more than half of their business to further outline the changes to the market, not just looking at the changes above, but also including some of the Jackson reforms, such as damages-based agreements being available in civil litigation for the first time, new sanctions on defendants to encourage early settlement. Those firms will also be signposted to the support being made available on the SRA's website.

This will include guidance outlining the Authority's interpretation of the relevant provisions of LASPO; a flow chart to help practitioners identify the risk of possible breaches; analysis of the issues, and the supervision and enforcement strategy. Case studies on compliant and non-compliant business models will be added as they become available.

Agnieszka Scott, SRA Director of Policy, said: "The most common theme arising from our consultation on enforcing the ban was the need for clarity about the activities that will be permitted and prohibited. The information available on the website should help with any firm that has still not fully considered the impact the ban will have on them.

"Responses to our consultation included requests for us to pre-approve arrangements before the ban came into force. It is not for the SRA to provide safe-harbour advice or approve business models.

"There are so many possible variations of how referrals could work and an infinite number of business models; some will be compliant, some will not. It will therefore be for individual firms to review their current business models and identify whether they are compliant with the ban. Those with concerns about their firm's ability to comply with the ban or the impact the ban will have on them should contact us through our Supervision function so risks can be identified and managed at an early stage.

"Firms need to remember that the ban comes into immediate effect on 1 April. There is no transitional period."

The guidance and support will be available here:

More on the referral fee ban guidance

The rule changes will be in the seventh version of the SRA Handbook, due to be published next week.  

 
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