While the Society supports the principle of a ban on the payment of referral fees, we have reservations about the way in which the prohibition is drafted in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and believe that it will potentially capture activities which are not problematic. We think that the SRA's approach is along the right lines, though we have a number of areas of concern and suggestions that we believe would improve this.
Referral fees play an important part in the business models of many firms which undertake Personal Injury work. Such firms find that paying referral fees is an efficient way of sourcing work. They will need to find alternative ways of doing so following implementation of the Act and it is particularly important to them that they do so in a way which complies with LASPO.
There is a fine line between perfectly legitimate advertising and the payment of an illegal referral fee. Most advertising will involve an element of payment by results and it may therefore be difficult to ascertain precisely where the boundary is crossed. Similarly, it is clear that a firm operating as an ABS that took a marketing function in-house would probably not infringe the ban. Given that there are potentially a number of business models that are possible in respect of joint ventures, firms will need to be clear how far they can go with insurers or claims managers in such arrangements. Firms will expect a degree of certainty about what is and what is not permitted under the new regime.
We are pleased that the SRA has taken a positive approach by providing guidance and giving examples for solicitors who will need to comply with the ban under LASPO. However, we maintain that LASPO is ambiguous and difficult to interpret. A strict interpretation is likely to go wider than was intended by Government and may well prohibit legitimate arrangements. We recognise that the SRA cannot provide a definitive ruling. However, as the body enforcing the Act, it is important that it should be clear about what it regards as breaching the provisions and consistent as to how it will use enforcement powers.
We remain concerned that the SRA's approach does not go far enough and that there is scope for additional detail. We recognise that the SRA cannot provide guidance to cover every situation but we think that it could provide more than is provided in the draft and could commit to providing ongoing information to the profession. We are heartened by the SRA's proposals on enforcement, which appear to us to take a proportionate approach that we can support. The proposals recognise the element of uncertainty that will exist. The SRA can reduce that uncertainty further and the application of a consistent approach is vital to the credibility and reputation of the profession.