The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)
I am today announcing the Government’s intention to ban referral fees in personal injury cases. This complements our wider plans for civil litigation funding and costs, including fundamental reforms to “no win, no fee” conditional fee agreements.
Referral fees are usually paid by solicitors to third parties, usually claims management companies or insurers, who “refer” business to them. But current arrangements have led to the growth of an industry that actively encourages individuals to bring cases, regardless of the merits of their claim.
The Government strongly believe that it is not in the public interest for potential claimants to be sought out and encouraged to make claims by people who profit from their claims being pursued. We believe that referral fees add to the high costs and volume of personal injury litigation, one of the factors underpinning increases in insurance premiums. As my right hon. Friend Lord Young recognised in his report, “Common Sense, Common Safety” last year, referral fees also contribute to the risk of a corrosive compensation culture.
Lord Justice Jackson, in his review of civil litigation funding and costs which was published last year, recommended that referral fees should be banned or capped in personal injury cases.
Our aim is to reform the system to end the abuses that have occurred while ensuring that victims who have suffered a personal injury through someone else’s negligence remain able to make a claim for damages where they have an appropriate case. Alongside the planned reforms to conditional fee agreements, the ban on referral fees will contribute to the Government’s plans to tackle the compensation culture by discouraging unmeritorious claims and controlling the disproportionate costs of personal injury claims, without denying access to justice.