The Law Society and Legal Services Commission have reached an impasse on legal aid reform. Andrew Holroyd is braced for another court battle


Two weeks ago (see [2008] Gazette, 10 January, 10) Carolyn Regan talked here about wanting to work with the profession to implement reforms  which she sees as 'necessary to ensure legal aid continues to deliver' the  services needed by vulnerable clients.



The reaction in the letters page last week should give pause for thought. The  Legal Services Commission (LSC) may be spending a lot of public money fighting the wrong  battle.



In November, the Court of Appeal ruled that European procurement law applies to legal aid contracts. A key provision of the relevant regulations is the principle of  transparency. That provision was breached by the commission when it offered a  contract containing an amendment clause that permitted it to rewrite virtually  the entire contract at any time, including all the payment provisions, without any requirement to compensate firms for the disruption and loss caused by such  changes.



The Law Society objected strongly to this clause when the unified contract was being discussed, but the LSC used its power as a monopsonist purchaser to force through the provision in the face of our objections. It is true that, at the time of the discussions, we had not identified the specific  legal provision which subsequently enabled us to have the clause ruled out. However, the LSC had been left in no doubt that we considered the contract as a whole to be unrealistic as a commercial agreement. Our solicitors, Bircham Dyson Bell, prepared a full critique of the contract, and advised that this was  not a contract they would recommend a client to sign.



The Court of  Appeal judgment leaves us in a new world. The obligation of transparency will  limit the extent to which the LSC is entitled to amend contracts during their  life, but the obligation goes much wider than that. What changes can be made  to audit measures, such as key performance indicators? What right does the LSC have to change your standard monthly payment at short notice? How will peer  review be developed? These are all questions that must be viewed afresh in the  light of the obligation of transparency.



There may be  things that we would like the LSC to be able to do that will no longer be  possible. For example, the renewal of contracts solely to those firms with  existing contracts offends against procurement law. The practice of phoning and asking for more matter starts may be at an end, since other firms may have  a right to seek those same limited matter starts. But the overall contract that results will now be much more of a standard commercial contract, giving  firms more certainty than they have had since contracting was  introduced.



However, we also need to address the direct impact of the Court of  Appeal's decision on the current unified contract. Our counsel is clear  about the effect. The wide amendment provision in clause 13.1 of the contract  ceases to have effect, as do any amendments brought in under that clause. The  Society says that this includes the fixed and graduated fee schemes brought in  by the new specification in October 2007. The LSC denies this, saying that these provisions were brought in under a contract clause allowing them to  change the contract in response to changes in the law. We say that in law they  could not do this, and in fact they did not do this.



And so we have an  impasse. This is why we are now in the position of having to instigate further  litigation against the LSC. We are keeping channels of communication open to  see whether there is another way forward, but unless the LSC can come up with  a viable alternative option, we will be back in court.



Andrew Holroyd is President of the Law Society