As trusted advisers, clients routinely look to us to make referrals to other professionals and suppliers. The making of referrals is regulated by the Code and you should note that referrals must be made in the best interests of the client and be independent. Further the referee should have the requisite experience to undertake the work. While this is no longer expressly part of the rules, the wide ambit of the Principles mean that the old rules are still informative and should be followed. See Outcomes 1.6, 1.15, 6 and 9 of the old rules for further relevant guidance. Neither the firm nor any of its lawyers should receive any financial benefit from making a referral. There is a risk in making a referral that we underwrite the work done by the referee. To avoid this, you must require the client to form their own view and not pass any qualitative judgement. Here is some sample wording you might like to use when making a referral.
"When considering the appointment of XXX you should note that you are entering into an agreement with them and will be responsible for their fees. You are also agreeing to contract on the terms in that letter. We would be happy to advise you on them if you wish, but note we have not done so. When reviewing the terms, you should pay particular attention to any limitations of liability and indemnities. Finally, you should ensure XXX is well suited to your needs, it is a matter for you as to which firm you instruct and we cannot be responsible for the acts or omissions of your other advisers."
If there is any opportunity, then you should look at the liability cap of the supplier and negotiate it up to at least the same as our cap with our client (£5 million unless you agree otherwise with the Director of Operations and Compliance.) This is because a lower cap increases the chance of the firm being left to pay for any shortfall the client suffers on account of poor advice from the referred party.
Similarly, we cannot pay any third party for making a referral to us. While this may technically be permitted by the Code (subject to proper disclosure) this always raises questions as to our impartiality and ability to act in the best interests of the client. We therefore have a policy that we will not under any circumstances pay a fee share or referral fee to a third-party firm.
We record in the Approved Suppliers section of Keyed-In the parties we recommend and the suppliers we use. If the party to which you wish to make a referral is not featured, then pass their details to the Administration Team who will add them to the database. For further details on how best to instruct a third party adviser/overseas law firm etc., please see the section entitled Instructing other law firms, experts, advisers etc.