Bar Council takes advice on whether referral fees fall foul of Bribery Act

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By Legal Futures

28 July 2011

Lodder: surprised and angered by LSB decision

The Bar Council is taking leading counsel’s advice on whether referral fees amount to bribes under the Bribery Act 2010 ahead of possibly promoting an amendment to the legal aid bill to ban them, chairman Peter Lodder QC has revealed.

Mr Lodder said the Bar Council was “surprised and angered” by the decision of the Legal Services Board not to ban referral fees.

He said: “The choice of lawyer should not be influenced by who paid what to whom but should be decided purely on the quality and skills of the individual and their ability to advocate the client’s best interests.

“In our view referral fees are bribes and we have instructed leading counsel to advise us on the impact of the Bribery Act 2010 on these payments. The Prime Minister has indicated support for a ban and we are considering the promotion of suitable amendments when the Legal Aid, Sentencing and Punishment of Offenders Bill reaches its Lords’ stages.”

Recent advice published by the Law Society is that referral fees do not fall foul of the Bribery Act.

Mr Lodder also outlined the Bar Council’s work in its “Prepare for Change” programme, which is designed to provide practitioners with “information and insights into new areas of practice, new ways of working and ideas for practice development in the more liberalised environment for delivering legal services ushered in by the Legal Services Act 2007”.

This includes the likely growth in public access and threatened changes in the procurement of publicly funded services, with an emphasis on direct contracting. “Like it or not (and there are many at the Bar who do not), these changes are affecting the way many barristers work or are likely to do so in the future,” he said.

Part of the programme is continuing work on the ProcureCo model, which gives chambers a corporate vehicle through which they can bid for work. Mr Lodder said oversight of ProcureCo had been restructured into a three-tier structure comprising a strategy group, a trouble-shooting group and ad hoc, issue-specific satellite groups.

As an example of the latter, a local authority contracting group has been established under the leadership of Catharine Otton-Goulder QC to facilitate ways in which the Bar might contract with local authorities.

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2 Responses to “Bar Council takes advice on whether referral fees fall foul of Bribery Act”

  1. The BSB make reference to referrals being based solely on “quality and skill…and the ability to advocate the client’s best interests”. And there we have it, that thorny word “quality”.

    When I am completing due diligence on panel firms I look at the systems they have in place, their staffing to caseload ratios, their complaints process and membership of the right schemes/accreditations etc. I check their practising and professional indemnity certificates. We talk to them, talk about the industry, the challenges, and their client base. I make sure that they know what they are talking about, that they can evidence practices and procedures before I consider letting them onto the panel. I only want ‘my’ customers to go to firms who specialise in personal injury work and know their stuff. And yes, the company gets paid a referral fee for putting customers to the right firm of lawyers. We have every interest in getting it right for the customer.

    But defining what is ‘quality’ and what is ‘skill’ is difficult. Lawyers have lots of qualities and lots of skills. They hold similar legal qualifications and are all bound to follow the same rules and regulations. Some call themselves specialists and some do not but from the layperson’s perspective shouldn’t all solicitor firms do the same thing?

    Customers access legal services through many points. If a solictor advertises in the local paper at significant cost to themselves that is no more of an assurance of the quality of service and skill to that individual client. It simply means that they want new customers and have the money to pay to acquire them.

    Quality can be chocolate, wrapped in shiny paper and put in a fancy tin but if you get the coffee creme your experience might not be the quality one you were hoping for. And like legal services the irregular chocolate eater might pick the wrong tin, wrong sweet and ends up with the lawyer equivalent of a coffee creme. Its not until somebody because a regular user of legal services that they stand the chance to identify the caramel centre without assistance.

    This comment covers my love of law and chocolate (except coffee creme).

  2. Barbara Hamilton-Bruce on July 29th, 2011 at 1:38 pm
  3. The person making a referral is in a position of trust. If asked, he or she should advise who is the best lawyer to act. This can be done from his knowledge and experience and should not be based on a financial inducement. A person receiving a referral fee has a conflict of interest. Should he advise the best lawyer, or the one paying the referral fee? It is easy to know what he should do, and easy to guess what he will do. So, the referrer is in receipt of a bribe if he is paid a referral fee.

    Equally, the person paying the referral fee is paying a bribe to obtain business which he may otherwise not get. He too is in a position of trust. His client is expecting him to be independent. The client thinks he is being recommended to the best lawyer, not the one who has paid for the business. He expects to be charged a proper fee, not one inflated by a referral fee.

    It is true that lawyers must disclose the referral fees they are paying, but there are rwo difficulties with such disclosures. First, they are buried in a large volume of small print with the client care letter. Second, and more importantly, the disclosure is after the event, that is, after the client has decided who to appoint.

    There is no doubt that referral fees should be banned. They harm the reputation of the profession at a time when reputations are under attack. Regulation is of little use. It cannot make right what is clearly wrong.

  4. Robert Twyford on August 23rd, 2011 at 6:29 pm

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