Jackson reforms clear final hurdle as Djanogly treads carefully over referral fees

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By Legal Futures

13 June 2011

Djanogly: ending recoverability could take money out of the system

The Jackson reforms have overcome their last hurdle to being presented as part of the Justice Bill later this month, Legal Futures can reveal.

An amended impact assessment has been approved by the Cabinet Office’s regulatory policy committee after it gave the original version a “red card” for not being fit for purpose.

The revised assessment should be published this week.

Legal Futures has it on very good authority that the Justice Bill – which will also include sentencing and legal aid reform – will be published this month, in line with the Ministry of Justice’s business plan.

It had been widely expected last week, but the Ministry of Justice’s (MoJ) official line is that it will be in the “next few weeks”.

The MoJ has not yet decided whether to go public with its response to the legal aid green paper consultation ahead of or at the same time as publishing the bill. There will be various changes made to the proposals, we understand.

Meanwhile, justice minister Jonathan Djanogly said last Friday that the government would have to move “very carefully” if it was minded to ban referral fees.

Speaking in London at the annual costs conference of defendant law firm Taylor Rose and costs consultants Jaggards, Mr Djanogly emphasised that the MoJ will review referral fees closely.

“We are open minded on this issue but there is a lot of conflicting evidence out there,” he said. “If the government is going to impede the free market, then it has to do so very carefully and the OFT [Office of Fair Trading] will want to see that as well.”

He noted that there seemed to be greater consensus around more transparency, as recommended recently by the Legal Services Board.

Mr Djanogly indicated that the MoJ will not act quickly, saying it will want to see the impact of greater transparency, while the “question will be to what extent our proposals [from the Jackson report] on ending recoverability will take money out of the system that would otherwise have gone into referral fees”.

Further, “the other issue is the extent to which the advent of ABSs will undermine the existing referral fee market”.

Insurers at the conference urged Mr Djanogly to take action over what they saw as the high level of fixed fees and hourly rates in personal injury work, which they said allowed claimant lawyers to pay large referral fees and still make a profit from the £1,200 fixed fee for claims going through the road traffic accident portal.

Figures released by Jaggards chief executive Adrian Jaggard indicated that, without a change in the level of hourly rates and fixed fees, the cumulative impact of the Jackson reforms could actually end up costing insurers more.

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