Recent proposals from a number of large Personal Injury Firms, including Injury Lawyers 4u Ltd, relating to possible alterations to the Fees Determination posted by the Ministry of Justice in January 2010 have been rejected. The fees are currently judged based on the income of a company, with lower fees for smaller companies rising for the larger groups.
Injury Lawyers 4u Ltd have claimed that this is unfair, quoting the amount of work that must go into the authorisation process required to be licensed to practice Personal Injury Law as a factor in why the fee should not be scalable to the size of the business, but rather a flat fee based on the average cost of authorisation.
They believe that the annual fee paid by larger companies often goes into dealing with regulation of small or new law firms. They propose a flat fee that is paid by all companies looking to be authorised as the way forward.
Additionally, it has been recently unveiled that Parliament is looking at a method to fast track the compensation claims of people who have been injured in a car accident. Amongst the proposals mentioned is a method to fix costs for the defendant, which could potentially cause serious damage to companies that rely on claiming costs from their opposition as a way of offering "No Win, No Fee" agreements, with some estimates saying that claimant solicitors will see fees cut by up to 53%.
The damage these two proposals could cause to smaller law firms is unquestioned, with the claim from Injury Lawyers 4u Ltd especially verging on attempts to create a monopoly involving the larger firms at the expense of start-ups and small Personal Injury firms.
Asking for a flat fee regardless of whether a company's turnover is £5,000 or £5,000,000 is unfair to businesses that rely on small claims to stay afloat, as it essentially treats them as though they have the size and resources of the companies that claim that the current scalable system is unfair. They claim that smaller companies require more monitoring from the Ministry of Justice, so they should be liable to higher fees.
The possibility of this would be damaging enough, but the new Road Traffic Accident (RTA) Claims System, that is being touted to come into effect on April 30th, hold the potential to be more immediately damaging to companies that thrive off small claims. The amendments are specifically for claims between the £1000 - £10000 range, and the proposal has already come under fire from the Conservative Shadow Justice Minister, Henry Bellingham, and the Accident Compensation Solicitors Group. Bellingham believes that, while the plans may have some merit, the current government "...came up with what was basically a compromise: a fast-track for low-cost RTA but not employers' liability or other things."1 He proposes additional talks in April 2011 should the Conservatives come to power.
The problem with Bellingham's proposal is immediately self-evident as by 2011 it may be too late for many small law firms to take advantage of extra talks or amendments, and you can't help but feel that his statement is little more than an attempt at vote grabbing in the wake of the new proposals.
The massive cuts in fees that some firms will experience will put paid to their days long before 2011, especially if the estimates that some companies could lose as much as 53% of their fees prove true. This essentially amounts to a halving of the income of these companies, while doing little damage to those that deal primarily in cases that involve sums larger than the £1000-10000 range that the amendment deals with The proposal isn't running against complete opposition however. The Association of Personal Injury Lawyers and Motor Accident Solicitors Society have both come out in support of the system, however it is difficult to see how a fast tracked system such as this could reap any sort of benefits for any company outside of those that are already so large that losing some of their fees on such small claims wouldn't really affect them.
The wording of the new scheme also offers some problems as it simplifies some cases wherein a fixed fee paid by the defendant is simply not applicable or is at the very least disputable. There is potential for increased activity relating to this, causing the legal system to become more cluttered as a result, potentially slowing down claims rather than speeding them up as solicitors argue the finer points of the new proposals.
The overlying problem is that both proposals offer a disconcerting view of the potential future of Personal Injury law, especially for smaller businesses, and the idea that these proposals suit the larger compensation firms much more than smaller ones is difficult to escape. There is currently the distinct possibility that the new RTA system will drive smaller companies out of business. An amendment to authorisation fees would only exacerbate this problem, and play into the hands of the largest compensation companies, with the potential forming for a monopoly in the not too distant future.
As such, action must be taken in some form to prevent further damage being caused. It is extremely encouraging that the Ministry of Justice refused the proposals for changes in authorisation fees, however how long is it before the larger firms can lobby their way into an advantageous position on this matter? It already seems that one proposal that has immediate benefits solely for the big firms has found its way through, so what is the likelihood that the Ministry of Justice's mind can be changed on this issue in the coming months or years.
As it stands, the future for smaller companies in the world of compensation law is looking bleak, and further talks about the RTA Claims System that is now in place can't come soon enough.
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