SRA pokes hornets’ nest as it asks whether to drop referral fee ban in legal aid cases
Referral fee: time to reconsider ban
The Solicitors Regulation Authority yesterday started an “open” debate about allowing solicitors to pay referral fees for legal aid and criminal work, saying the present ban acts as a barrier to consumer choice.
The move is likely to be met with anger by the Bar Council, which has been campaigning against the apparent growth of solicitors demanding referral fees from barristers, and in January extracted a promise from the Lord Chancellor, Chris Grayling, to strengthen the Legal Aid Agency’s ban on them.
The SRA – which has taken no position on the issue at this stage – acknowledged that many lawyers find it “distasteful and unethical to use referral fees to pass clients between businesses”, particularly where consumers are making a distress purchase such as in many criminal matters.
But it continued: “However, the criminal legal market has been in a state of flux for some years, with changes to legal aid fees, the introduction of means testing, and wider changes in the justice system, all of which have led to smaller volumes in many parts of the systems.”
The SRA said these changes are all having impacts on the structure of the market, to the extent that the traditional roles of solicitor and barrister have become blurred, with the former more involved in advocacy, and the latter offering services beyond advocacy.
“The breakdown of these roles means that the flow of cases through the system, or sections of the legal market, is different to that it might have been historically. It is right to therefore question if the traditional rule banning referrals from this market is still sustainable.”
Though the Legal Aid Agency may in any case ban referral fees, it said the question was whether the SRA as a regulator should “restrict business practices given our regulatory objectives”.
The SRA said that there were unproven rumours of referral fees already being paid directly or indirectly, for example, to acquire advocacy cases or swap multi-handed cases, and asked consultees for evidence of this and the impact on consumers, access to justice and the rule of law.
The SRA said a balance had to be struck between the potential for improving access to justice and the fact that the ban was put in place on ethical and public policy grounds – albeit 15 years ago, “in a very different environment”.
“We understand the economic imperatives that might lead to referral fees being an important part of the business model throughout the criminal market, but that does not necessarily mean that it is in the interests of vulnerable consumers or the rule of law.
“However, a business that refers clients to an appropriate lawyer might increase the take up of legal advice in the police station or reduce the costs of providing such services. The lawyer would still be bound by the same obligations relating to competence and ethical standards.
“Similarly, the need for the criminal client to navigate between police station adviser, solicitor and advocate may mean that properly aligned incentives can ensure that any lawyer or business involved refers appropriately rather than retaining cases when it may not be in the client’s best interests to do so.”
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