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By Tony Williams and Richard Tromans
Three regulatory upheavals will increasingly impact litigation in England & Wales: the Legal Services Act 2007, which created Alternative Business Structures (ABS) and which has already been implemented; and then the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) which comes into effect this April along with the Jackson Reforms. When combined, their effect will reshape the litigation landscape in this country.
End of referral fees
The ban on referrals via LASPO will primarily affect PI claimant law firms that have paid claims management companies (CMCs) for cases in the past. The symbiotic relationship of CMCs and PI firms is therefore set to collapse. The SRA is likely to rigorously enforce the ban on referral fees although it will be interesting to see if law firms are able to devise means of avoiding the impact of the ban.
We also will see, and already are seeing, CMCs buying law firms to integrate the two sides of the claimant business via ABS structures. This will leave traditional PI firms at a serious disadvantage unless they have the scale to reduce costs and/or the size to develop a national brand that consumers will be attracted to. Without a clear future source of cases smaller firms will face a severe challenge. We will see, and are seeing now, many PI firms going out of business, or selling-on their cases to firms that are able to adapt to the new environment. The extension of the RTA portal for matters up to £25,000 and reduction in fees will further hurt the profitability of many smaller PI law firms. The SRA
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Tony Williams, Principal, Jomati Consultants LLP
Tony Williams has more than thirty years’ experience in the legal
profession. Before founding Jomati Consultants in 2002, Tony was
Worldwide Managing Partner of Andersen Legal and head of its UK
practice, prior to that, he was Managing Partner of Clifford Chance.
0330 161 1234