In the present Parliamentary Session, the Government will introduce a Legal Services Bill to reform the regulation and delivery of legal services in England and Wales. Following Sir David Clementi’s 2004 report on reforming the regulatory framework which ‘offered confirmation that the case for reform is both clear and overdue’, the Lord Chancellor Lord Falconer has presented a White Paper ‘The Future of Legal Services: Putting Consumers First’

The paper sets out proposals for the creation of a regulatory Legal Services Board (LSB), an Office for Legal Complaints (OLC) and the provision for legal services to be delivered by means of ‘Alternative Business Structures’, with the costs of the new system to be met by the sector.

The Institute of Legal Executives (ILEX) supports the objectives and principles for the regulation of legal services as proposed by Sir David and adopted by the Government in the White Paper. ILEX President John Wells said, “We are particularly pleased to see the Government adopting a risk based approach to regulation. ILEX was clear during Sir David’s consultation that the regulation of legal services should allow for flexibility, diversity and innovation in delivery so a ‘one size fits all’ approach would not be appropriate.”

Legal Services Board
It is proposed that an ‘oversight’ Legal Services Board (LSB) will be established. It will have clear powers and responsibilities in its statutory role to authorise Front Line Regulators (FLRs), which will include ILEX, to carry out day-to-day regulation. This should create consistent enforcement of powers over professional bodies that is currently lacking.
However, John Wells said: “We are not convinced that Government proposals will result in a ‘light touch’ regulator. We feel that the model proposed does not reflect current thinking, even within the Government, on best practice in regulation. FLRs with direct responsibility for regulating must be trusted to do so appropriately.

“The role of the LSB should be to ensure that the FLRs achieve the objectives and principles of the regulatory system in their daily work. ILEX believes that the LSB should not be setting regulatory targets for FLRs unless it is clear that an FLR is failing. The LSB should not have power to amend rules or insist upon its own pro-active proposals.”

John Wells added: “It is crucial that the legal professions continue to be independent of Government, acting in the best interests of their clients within a regulatory framework. That is one of the objectives agreed for the new regime. This means that the LSB must distance itself from Government policy and policy making as well as distancing itself from inappropriate intervention in the day to day regulation of legal service providers.”

Achieving independence is closely linked to the method of appointment of the Board of the LSB. ILEX is concerned that it is proposed that the Secretary of State for Constitutional Affairs appoint the Chair and all members of the LSB. It is important that this process is as open and transparent as can possibly be achieved so that both those subject to regulation, and the public, have confidence in the Board.

What ILEX also considers that there should be a statutory duty upon the LSB to consult with each FLR on the setting of targets, on the funding of regulation, and on the LSB’s own costs and fees; “LSB regulation should be guided at all times by concepts such as risk assessment and proportionality.” John Wells continued: “Engagement with regulated persons or bodies is a fundamental requirement as identified by the Better Regulation Executive. At a time when the Government is calling for increased ‘accountability and transparency’, should the legal service providers not continue to define best practice and the setting of their own regulatory standards?”

Funding the LSB
Currently the White Paper proposes that the FLRs will pay both the transitional cost of implementing the new system, and the running costs of the LSB. ILEX can see no argument for the FLRs paying for the costs of implementing a Government policy.

John Wells was adamant: “A proportion of the running costs of the LSB should be paid for by Government. It should not be for those delivering legal services to pay for Government policy making. Currently the DCA’s budget pays for Government policy making in the area of legal services. That should continue.”

Office of Legal Complaints
ILEX has supported the ‘one stop shop’ approach to resolving consumer complaints of inadequate professional service since the inception of Sir David Clementi’s Review. John Wells commented, “The creation of a new, independent Office for Legal Complaints (OLC) will help to raise consumer confidence in legal services and ensure complaints are handled quickly and decisively. Of course, great care must be taken in setting up the OLC so that it is not, nor is it perceived to be, a ‘re-badged’ Consumer Complaints Service, which is currently managed by the Law Society.

“Once again there are funding concerns. We think the setting up of the OLC should be funded by Government and whilst it may seem reasonable that running costs could be assigned to the relevant FLRs, it is unrealistic to ask the professional bodies to effectively sign a blank cheque.”

Alternative Business Structures
The proposal to allow establishment of Alternative Business Structures (ABS) will enable legal services to be provided in a manner that better meets consumer demand. ILEX members will have the opportunity to make a greater contribution to the provision of legal services. John Wells emphasised; “ILEX is clear that it should position itself to be able to regulate Alternative Business Structures, whether that is in relation to external ownership of a Legal Executive business, a Legal Disciplinary Partnership or a Multi Disciplinary Practice. Whilst we recognise the current expertise gap of ILEX in this area, there is time and opportunity to close that gap and we will be working to do so.”

There will need to be regular discussion between all FLRs and the LSB to ensure the ABS structure does not become over complex. ‘One size will not fit all’. The important things are parity of standards, clarity in terms of robustness of enforcement and clarity for the consumer as to where responsibility lies in relation to any one service or service provider. .

John Wells concluded: “The thrust of the proposed reforms is on service providers delivering on the priorities of the public they serve. It is therefore imperative that the new legal services regulator does not weigh down the FLRs so that consumers will benefit from increased innovation and efficiency within the sector.”