The following information is important for everyone in the costs world to understand:
The ban on referral fees is based on the Review of Civil Litigation Costs by Lord Justice Jackson. The rationale for the same is limit the rising costs associated with personal injury cases which costs lawyer should note. Without going into the substance of the law, suffice it to say that there are two prohibited acts that apply to personal injury cases. The first are certain practices involving “no win no fee”. The second, is the ban on referral fees (payment and receipt). A statement made by the SRA their main focus when it comes time to implement is “on the flexibility of outcomes-focused regulation”.
Effectivity and Implementing Body
The ban takes effect on April 2013. The implementing law for the same is the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO).
Whereas the regulatory body are the following:
Solicitors Regulation Authority (SRA)
Financial Services Authority (FSA)
Claims Management Regulator
Post Approval of a Business Model
Affected professions i.e. law cost draftsmen have been clamouring for an early release of the implementing rules as well as useful procedures in order to aid a “pre-assessment” process of existing and soon to be incorporated business models. In particular those that define or enumerate the prohibited practice of referral fees are being requested. This request is made because there is some concern that the ban will not only be limited to personal injury claims cases and a costs lawyer should note this. This request has been denied by the SRA for being premature.
Impact on Alternative Business Models
The SRA admitted that other business models maybe affected, not because of some lapse in judgment on their part. Rather this is a conscious effort to stamp out individuals who want to find a loophole on the ban. For example, changing the nomenclature of the payment from “referral” to “joint marketing” will not be enough, said one SRA representative.
As a general rule, some business arrangements will be red flagged because the nomenclature does not fit the underlying purpose of the fee. This is specifically allowed by the LASPO, as just is a valid exercise of discretion. Most likely it is up to the business model in question to prove that the purpose is legal and the fee is reasonable.
Andrew Simon is an expert who provides professional costing services with years of expertise. With his supervision Cumberland Costings, a leading firm with team of highly professional costs lawyers and law costs has given a new direction to costing process. Together with his team he has set remarkable standards of delivering superior services to their clients.
Keywords: Law Costs, costs lawyers, cost draftsmen
By: Andrew Simon
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