Commentary Referral fees Section 56: Rules against referral fees
326.Section 56 prohibits the payment and receipt by “regulated persons” of referral fees in respect of claims for personal injury and death. In particular, section 56 makes provision to prevent the prohibition on the payment of referral fees in personal injury cases being avoided by presenting the referral fee as a payment for the referral of a connected claim (for example, in a road traffic accident, a credit hire claim or a claim for damage to other property), irrespective of when the referral of information relating to that connected claim occurs. “Regulated person” is defined in section 60 and includes claims management companies (“CMC”s), barristers and solicitors, as well as descriptions of authorised persons under the Financial Services and Markets Act 2000 (such as insurers) if specified in regulations by the Treasury. The prohibition extends to the receipt of a referral fee by a regulated person from a party who, although not a regulated person, provides services to the regulated person’s client in connection with their claim, for example a doctor who provides a medical report at the request of a solicitor and who pays the solicitor a fee for the referral. It also enables the Lord Chancellor to make regulations to extend the ban to other types of claim and legal services (defined in subsection (6)).
327.As regards the meaning of “referral”, the effect of subsection (5) is to treat a referral as the provision by a person other than the client of information that a regulated person authorised to provide legal services would need to make an offer to the client to provide legal services.
328.Subsection (8) provides that a referral fee can be any form of consideration (which could, depending on the circumstances, include, for example, an offer by a solicitor to take on other work at a reduced rate or for no payment at all), other than normal hospitality, whether paid to the referrer directly or to a third party.