Ministry of Justice “admits” to major problems with banning referral fees

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By Legal Futures

18 October 2011


Wigmore: referral fee ban is a pantomime

There are a range of “practical and policy problems” with banning referral fees, a leaked Ministry of Justice (MoJ) memo has admitted.

The document – revealed at yesterday’s Legal Futures conference by Andy Wigmore, policy director of the Claims Standards Council – said that among the policy issues is why the ban should be confined to personal injury cases.

Others include the fact that lawyers will be allowed to continue direct marketing but not pay for introductions, and the possibility that small solicitors that currently pay referral fees will either go out of business or have to join a network/consortium and pay for joint advertising and case preparation.

The memo also indentified a range of practical problems, such as ensuring the technical definition of referral fees includes barter but allows for outsourced provision of services, and the need to seek a waiver from the government’s current policy of exempting micro-businesses from all new regulation.

It said the ban is likely to be on paying, rather than receiving, referral fees.

There are also continuing concerns about whether the abolition of referral fees comes within the scope of the Legal Aid, Sentencing and Punishment of Offenders Bill, which the memo described as “a matter for constitutional lawyers”.

It added: “The MoJ will try to get everything in the primary legislation as this will avoid the need for detailed scrutiny that would be required if there was a subsequent stand-alone regulation. However, this means that MoJ must get it nearly-right first time and the wording and the impact assessment will immediately show up the practical and policy problems.”

Mr Wigmore described the effort to ban referral fees as a “pantomime”. He added that the MoJ will publish the impact assessment this week.

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