Kennedys expresses concerns that payments could continue via the ‘back door’


The government’s proposed referral fee ban contains significant loopholes that could allow referral arrangements in through the ‘back door’, solicitors Kennedys has warned.

Kennedys head of liability division Richard West expressed concern that a law firm could pay to “receive” services in return for receipt of cases.

Services which might be used as “payment” include training, risk management assistance, commercial expertise and business consultancy from those referring the prescribed business, according to Kennedys .

The firm could also make significant payments towards a referrer’s marketing costs, or provide funds for the running of the new jointly owned business as set out under the Legal Services Act 2007.

West said that the potential loophole could be closed by the government clarifying the limit of “paid for services” in legislation.

This could be done by setting the limit along lines that are proportionate to the service being paid for, for example, by reference to the usual commercial rate.

West said: “Whilst we welcome the intention of the ban on referral fees, Kennedys is keen to ensure that there is no room for exploitation of any loophole”.

“Kennedys is concerned that a law. Such firms would therefore receive “for free” the claimant injury cases thus exploiting the current loophole”.

Kennedys welcomed the proposal to deal with breach of the rules by way of regulation, but expressed concern that each regulating body would be required to pass its  own rules. West said: “Guidance and consistency is required as to what sanction a breach should involve - any sanction imposed must be greater than the benefit that is being obtained in return for the referral fee payment(s).”

“Kennedys is also disappointed that the proposed reduction of fixed costs has been dropped by the amendment. We maintain that a reduction is necessary in combination with referral fee ban.”