Payment of referral fees for personal injury claims should be banned, says Jackson

Lord Justice Jackson has called for an end to referral fees in his review of civil litigation costs.

In his report, Lord Justice Jackson said: "It is a regrettably common feature of civil litigation, in particular personal injuries litigation, that solicitors pay referral fees to claims management companies, before-the-event (BTE) insurers and other organisations to “buy” cases. Referral fees add to the costs of litigation, without adding any real value to it. I recommend that lawyers should not be permitted to pay referral fees in respect of personal injury cases."

In his assessment of BTE insurance for personal injury claims, Jackson said: "If the recommendations made elsewhere in this report are accepted, the world in which BTE insurers operate in the future will be very different from the present world. BTE insurers will not be permitted to receive referral fees. Success fees and after-the-event (ATE) insurance premiums will be irrecoverable. General damages will be 10% higher for personal injuries. Personal injury claimants will have the benefit of qualified one way costs shifting. Costs in the fast track will be fixed."

If the recommendation is accepted, Jackson said it could be implemented in one of two ways. "There could be primary legislation, which would prohibit anyone from buying or selling personal injury claims. Alternatively, the Solicitors’ Code of Conduct could be amended, so that solicitors are prohibited from paying referral fees. In the latter event, the codes of conduct binding upon other legal representatives would have to be similarly amended."

He concluded: "If my primary recommendation is rejected, then I recommend that referral fees be capped at a modest figure, which I suggest should be £200."

For more, see: Jackson Review: key findings.

To download the full report, click: Jackson Review: Final Report.