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Scotland’s Jackson decides against referral fee ban

Rule against fee-sharing is 'regularly circumvented' and 'no appetite to enforce it'

12 September 2013

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Sheriff principal James Taylor, who has produced a report on civil litigation costs in Scotland similar in many ways to the Jackson report, has rejected the English judge's recommendation that referral fees in personal injury cases should be banned.

The move sets Scotland, where a practice rule prevents solicitors sharing fees or profits with non-lawyers, on the opposite course to the profession south of the border, where a ban on referral fees is now in force. The Scottish rule on fee-sharing applies to all kinds of work, including conveyancing.

Taylor said in his report there was no evidence that referral fees in personal injury cases led to "unmeritorious claims" being raised.

"There is evidence that the present ban on referral fees is regularly circumvented and there is no appetite to enforce the ban, perhaps due to the difficulty in so doing," he said.

"With the imminent advent of alternative business structures in Scotland, any ban will become even more difficult to police effectively and may be redundant, depending on the rules when we have sight of them.

"Were I to be persuaded that there was a case for a ban, it would require extending it to 'payment in kind' arrangements for referrals. I consider this would have an adverse effect on access to legal services for a significant proportion of the public.

"In the interests of consistency, I would also feel it necessary to recommend a ban on solicitors making payment to be placed on a panel in order to receive referrals.

"I am unable to conclude that this would serve any useful purpose providing appropriate safeguards are put in place."

Taylor went on: "I share the widely held view that the commodification of personal injury claims is repugnant and that the means by which some organisations attract new business is unacceptable.

"However, I am persuaded that, on balance, the interests of the public are best served by accepting that referral fees are a fact of life and making sure that their operation is properly regulated."

Kim Leslie, convener of the Law Society of Scotland's civil justice committee, said the idea of solicitors paying referral fees to non-solicitors would be "a fundamental change for Scotland, and one which could have far-reaching implications into other areas of practice".

Taylor followed Lord Justice Jackson in recommending a system of QOCS and the use of damages-based agreements.

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