The report, “Cost benefit analysis of policy options related to referral fees in legal services”, looked into the impact on clients of referral fees and fee-sharing in criminal advocacy, conveyancing and personal injury. The LSB is considering the Law Society’s call for referral fees to be banned, and is expected to make a decision later this summer.

Referral fees are not used in criminal advocacy, although fee-sharing is common and can have similar effects.
The report, carried out by Charles River Associates, found there had been an increased use of solicitor-advocates as changes to the Advocate Graduated Fee Scheme (“AGFS”) encouraged more solicitors to obtain higher rights of audience. However, it was “not possible to conclude that this has reduced quality”.

Interview evidence revealed that some solicitors appoint external advocates on the basis of fee sharing, which caused them to prefer solicitor-advocates compared to barristers in order to avoid the Bar Protocol which sets out how fee sharing among barristers should occur under the AGFS, and to prefer those solicitor-advocates who were prepared to accept non-Protocol fees.  The report found no evidence that fee-sharing itself reduced quality.

It noted: “However, there are concerns that a focus on profitability causes solicitor advocates to be appointed for cases beyond their competency although the greatest impact of this is observed on less complex cases.

“It is also possible that this will lead to a potential reduction of experienced barristers in the future or a change in career path for advocacy with more in-house advocates and fewer independent barristers.”

Referral fees in personal injury have risen from about £250 per case in 2004 to about £800 today, the report found. There was no evidence that this had led to an increase in the price of legal services.