Removing the ban on referral fees in criminal cases could lead to “arrest chasing” by solicitors, the Bar Council has warned, and result in “as much public opprobrium” as ambulance chasing.
Responding to a consultation by the Solicitors Regulation Authority (SRA) on lifting the ban for legal aid work, the Bar Council joined the Law Society and the Criminal Bar Association in condemning the move.
Summarising its arguments, the Bar Council said: “Referral fees are against the public interest and, in particular, the consumer interest, and are fundamentally unethical.
“Referral fees compromise the independence of lawyers. Referral fees distort competition. This is so in an open market, but even more so in markets where fee levels are already lower than open market rates and are in many respects fixed by a third-party funder – the government.
“Referral fees in a market in which fees levels are low or fixed are incompatible with a sustainable legal profession.”
The Bar Council said there was “no basis even for suggesting that referral fees in such a market could have competition benefits”, and any suggested benefits had been “dismissed comprehensively” by Lord Justice Jackson in his review of civil costs.
“The permissibility of referral fees would allow solicitors to create a financial incentive to engage in unethical practices. Some will inevitably find it difficult to resist such an incentive.”
In a 15-page denunciation of referral fees in legal aid cases, the Bar Council said there was “no reason” to see the move as a way of improving access to justice.
The barristers’ body said it did not see how the cost of providing advice at police stations would be reduced by solicitors paying intermediaries to introduce clients.
“It is also not clear what it is suggested that an introducer will (and can lawfully) do in practice at a police station to increase the take up of legal advice; nor is it clear that any such activities would be desirable or in the public interest. ‘Arrest chasing’ is likely to lead to as much public opprobrium as ‘ambulance chasing’.”
However, the Bar Council was “strongly in favour” of another proposal contained in the SRA’s Improving Regulation consultation paper: allowing solicitors to use third-party client accounts.
“One of the highest risks to consumers of legal services is the operation of solicitor client accounts. The approval of third-party managed accounts will allow solicitors to lower their insurable risk and to provide a more secure and transparent service to their clients.
“Expanding the ways solicitors can carry out work also allows solicitors to determine the best business arrangements for themselves and their clients.
“The SRA should identify a minimum set of safeguards that should apply to all third-party managed accounts. It would then be for solicitors using those accounts to obtain reassurance from the third party that the managed account meets the SRA requirements.”
The Bar Council added that there was no need for the SRA to assess third-party accounts on a “case by case” basis, because they were already regulated by the Financial Conduct Authority.
The Bar Council has previously said it would be prepared to allow solicitors to use its BARCO third-party account, should the SRA be prepared to grant the law firm involved a waiver, but no firm is known to have taken up the offer.