The Solicitors Regulation Authority (SRA) is seeking views as to the best way to deal with the Government’s ban on referral fees in personal injury (PI) cases by publishing a discussion paper on the matter to encourage interested parties to put forward their views.

The ban, which comes into force in April 2013, was introduced as part of the Legal Aid Sentencing and Punishment of Offenders Act 2012 (LASPO) and is likely to have a profound effect upon the way in which many PI firms obtain work. The fear is that many will go out of business as a result.

The paper seeks views as to the effective implementation of the provisions on referral fees and sets out the SRA’s analysis of the issue and the potential effect on the sector. The paper also outlines the Authority’s current thinking on how the ban should be enforced in the context of risk-based, outcomes-focused regulation.

The SRA is seeking views not only from the profession but also from key bodies such as the Legal Services Board, the regulated community and the Law Society.

The Authority doesn’t feel that detailed rules would be consistent with outcomes-focused regulation, and that the best way forward would probably be to amend the mandatory outcomes within our code. This could be backed up by illustrative indicative behaviours. However, all options remain on the table.

David Hackett, Regulatory Policy Manager, said:

“We need to adopt a consistent and workable approach, informed by the views of all stakeholders, so we particularly welcome views from the firms and individuals we regulate, other regulators, consumers and those who refer work to lawyers. Discussion should hopefully focus on developing a workable regulatory framework that ensures the integrity of the profession is protected and the rule of law upheld.

“What we shouldn’t debate are the rights and wrongs of referral fees or the rights and wrongs of the Government’s decision to ban them in personal injury cases. Altering the provisions of the Act is not within the remit of the SRA and we hope to move the debate forward through setting out our thinking in this paper.”

The Government’s ban came about amid concerns of the high cost of civil litigation, rising insurance premiums, increasing numbers of claims and the perception of a “compensation culture”, where people are encouraged to claim for minor or even fictitious injuries. It believed that banning referral fees, along with a variety of other policy measures will reduce costs in individual cases and prevent this.

Once the SRA has considered the responses to this paper it will set out its policy position in a formal consultation document that will seek to attract further views on implementation, to be held in the autumn. Any changes made to the regulatory framework will come into effect in April 2013.

Those wishing to read the discussion paper (PDF 9 pages, 195K) can find it here: www.sra.org.uk/referralban