CSC threatens government with judicial review over referral fee ban

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By Legal Futures

1 November 2011


Referral fees: claimants might lose out, says government assessment

The Claims Standards Council (CSC), the trade body for claims management companies, has threatened the government with judicial review if it presses ahead with its proposed ban on referral fees in personal injury cases.

At the same time government impact assessments on the ban have concluded that claimants “might lose out”, including disabled people who have potential claims.

In a letter on behalf of the CSC, London law firm GSC Solicitors set out four reasons why the decision to implement the ban is unlawful:

  • The government has not provided reasons to justify a ban;
  • There has been procedural unfairness, not least in the way that the issue has not been subject to consultation, in contrast to other aspect of the Jackson reforms;
  • The government has ignored its own guidelines on consultation and on good regulation; and
  • “Relevant and material considerations have not been taken into account”, such as the findings of the Legal Services Board and Office of Fair Trading and “the practicalities of administering such a ban.

CSC chairman Darren Werth said: “It is time the government stopped treating claims management companies as being to blame for all that is wrong with motor claims. Its attention should be on better regulation to weed out those rogue traders and offshore marketers responsible for abuses like cold phone calling and SMS spamming.

“It is plain wrong to victimise legitimate businesses who provide a service to the public and help them achieve access to justice, as the Legal Standards Board reported only a few months ago.

“A ban would be unlawful, procedurally unfair, irrational and disproportionate. In any event, it would be impossible to enforce effectively.”

He argued that the ban would remove access to justice for thousands of people, “who would no longer know of their rights or how to access them”, and suggested that the government has put too much weight on “the unfair picture put forward by the very loud, powerful and well-funded insurance industry lobby”.

A Ministry of Justice spokesman said it would not comment on potential proceedings.

The ministry has published a general and an equality impact assessment ahead of the debate on referral fees likely in the House of Commons today.

The main assessment said some potential claimants may lose out if their claim is not brought without referral fees being paid. “It is unclear whether the exercise of claimant choice in relation to selecting a lawyer would be better or worse without going through CMCs,” it said.

It admitted that “the overall impact on lawyers is unknown”. Though they may have to spend more money on advertising, “these costs may be lower than paying the current referral fees”.

The equality assessment said banning referral fees “may make it more difficult for disabled victims of negligence to access legal services, as CMCs will be less likely to seek them out and victims might be unaware that they can pursue a case, or unaware of the chances of success and of the possible damages available… However, we consider that the potential impact is small since the types of cases involved in fee-paying referral arrangements are typically relatively low-value claims…

“We expect charities and lawyers to continue to provide information about making claims. Therefore we do not expect the policy to impact on meritorious claims.”

The main assessment said the government may extend the ban to other categories of cases in due course, such as employment cases, “should the need arise”.

See blog: Talk about a low impact

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One Response to “CSC threatens government with judicial review over referral fee ban”

  1. The big question is whether the government will now take the Treasury Counsel’s advice that has been provided to the Bar Council, which says referrals are bribes, and use it to avoid what could lead to an embarrassing U-turn on the ban if it were to go to JR!

    A ban on the basis they are bribes would also avoid the need for the government to provide evidence that supports its decision to impose the ban.

    Whatever happens clients, law firms, CMCs and many others will be affected by a ban, in whatever form it may take, so clarity is needed quickly on which way things are to go!

  2. Brian Rogers on November 1st, 2011 at 12:47 pm

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