Legal-fees study could obstruct compensation-culture proposals
The Ministry of Justice could find itself at the centre of a policy battle on how to tackle the perceived compensation culture.
Lord Young is preparing to release his much-anticipated review of health and safety, and has indicated that he could recommend a ban on advertising by ‘no win, no fee’ companies.
In June, he told the BBC that referral agencies – which advertise for people who have been injured, and encourage them to get in touch for no fee – had helped increase “the number of people being sued”. According to Lord Young, the compensation culture – whether real or perceived – has influenced individuals and organisations to act in a more risk-averse manner for fear of being sued if an injury, or death occurs that can be linked to their action, or inaction.
Lord Young has also been heavily critical of the cost of litigation, with payouts made not just to successful claimants but to lawyers in the form of contingency fees, as well as referral agencies’ fees and insurance costs.
However, research from the Legal Services Board (LSB), which oversees the regulation of lawyers in England and Wales, suggests there is no evidence to justify a ban on referral fees. Papers released by the Board to legalfutures.co.uk under the Freedom of Information Act suggest it favours enhanced transparency around referral fees when dealing with consumers, and more consistent regulatory enforcement, though it plans to consult on its view.
Writing in The Guardian yesterday, editor of legalfutures.co.uk Neil Rose pointed out that no fewer than four influential reports published since May had argued that referral fees do not harm consumers but, in fact, enable claims-management companies to improve access to justice by informing people of their rights.
The Government, meanwhile, is planning to consult in the autumn on Lord Justice Jackson’s comprehensive review of civil-litigation costs, published in January this year.
Announcing the consultation last month, under-secretary of state for justice, Jonathan Djanogly, said: “The Legal Service Board is looking at the issue of referral fees, and their conclusions will inform the Government’s position. We will also consider Lord Young of Graffham’s conclusions from his ‘Review of health and safety law and the compensation culture’.”
How the Ministry of Justice manages the potentially conflicting policy views of the LSB and Lord Young – who was commissioned by David Cameron to carry out his review – will be interesting, as Rose speculates: “[If] the body charged with overseeing the legal sector (and which reports to the Ministry) comes to an evidence-based conclusion that there is not much wrong, how do Djanogly and the lord chancellor, Ken Clarke, handle Lord Young saying the opposite, with the backing of the prime minister?”
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