A law to worry lawyers

The Legal Services Bill, which was introduced in the House of Lords last November, broadly reflects the recommendations in Sir David Clementi’s review of the regulatory framework for legal services, published at the end of 2004. It falls into three main parts.

First, it sets up a new Legal Services Board to oversee the regulatory work of the frontline professional bodies — such as the Law Society and the Bar Council. Secondly, it centralises the handling of consumer complaints about all lawyers into an independent Office for Legal Complaints. And thirdly, it establishes so-called ‘Alternative Business Structures’ to allow lawyers and other professionals to become partners in a law firm and to permit outside investment.

These are important reforms which modernise the way the legal profession is regulated and the way legal services can be provided. It would be wrong to assume, as some have, that they are being foisted upon a reluctant legal profession, or amount to some kind of punishment for perceived failings in the past. On the contrary, the profession has generally welcomed the Bill: few solicitors, for example, would disagree with the government’s depiction of the current regulatory system as a ‘maze’, overly-complex and lacking in consistency and transparency.

And while consumer complaints-handling has undoubtedly improved over recent years, the public are unlikely to ever have complete confidence in decisions on solicitors’ complaints perceived to have been made ‘in house’. A fully independent Office for Legal Complaints, therefore, has to be the way to go.

As for liberalising business structures, this is something for which the Law Society has long argued. The present arrangements, whereby solicitors can only provide legal services to the public through traditional firms, in which only solicitors can be partners, are unduly restrictive.

Nevertheless, lawyers’ bodies do see some real problems with the Bill as it stands. The trouble lies in the detail. For example, the new Legal Services Board (LSB) is meant to be a supervisory body, leaving lead responsibility for regulation of the professions to bodies such as the Law Society and the Bar Council.

The government has explicitly accepted this, and yet this is nowhere made clear in the Bill. Indeed, the LSB has a raft of intervention powers and sanctions that are exercisable on the flimsiest of grounds.

This is dangerous. Any suggestion of micro-managing the work of the professional bodies would undermine confidence in the independence of lawyers and damage their international standing. A small number of short amendments would put the matter right, but these have so far been resisted by the minister during Lords Committee stage.

Concerns about possible damage to professional independence and standing, as well as fears over adequate public protection, have also coloured the debates on the establishment of alternative business structures. However, government assurances that these are to be regulated only by approved regulators and will be subject to a strong ‘fitness to own’ criteria have largely calmed fears on that score.

But the Law Society and many other commentators remain concerned about the possible effects that these new structures could have on access to justice.

While new entrants to the market may bring about some benefits, there is a risk that they could ‘cherry pick’ more profitable and less complex areas of work, driving down the profitability of established local firms who offer a full range of services at the heart of their communities.

What we need is a requirement that the likely impact on access to justice informs the decision-making process for licensing an alternative business structure (ABS) firm. So far, the government has been sympathetic to the argument, but has not yet accepted that this requirement should be made explicit in the Bill

On complaints handling, the concern centres on the relationship between the new Office of Legal Complaints (OLC) and the existing regulators, essentially the Law Society and the Bar Council, who will continue to deal with complaints about conduct. As the Bill is presently drafted there is no clear obligation on the OLC to give these regulators the information they need to deal with conduct issues.

This is unhelpful; information derived from consumer complaints is a key source of regulatory information, and the OLC should pass it on to the other regulators when they need it. The present Bill is an improvement on the draft Bill in this regard, but further changes need to be made.

Overall the problems with the Bill lie not with a difference of opinion with the principles but with a general reluctance on the part of ministers to clarify the respective roles of the various bodies on the face of the Bill. Committee stage in the Lords is about to be completed and concerns have been well aired.

The minister responsible, Baroness Ashton has shown a great deal of sympathy with the arguments and we hope that government amendments will be forthcoming at Report.

John Ludlow is Head of Parliamentary Unit at the Law Society.