The draft Legal Services Bill fails to come up to expectations as it could compromise the work of the frontline regulators, says Kevin Martin

It is as well to remember that the Law Society signed up to the broad principles of Sir David Clementi’s final report, which were later incorporated in the government’s White Paper – Putting Consumers First: the Future of Legal Services. These included the establishment of an independent office for legal complaints and the creation of new ways of providing legal services to the public through alternative business structures (ABSs), for which we have long argued.


The draft Legal Services Bill, with which we are now confronted, does not provide a faithful translation of these principles. The Bill has been produced to a tight time-scale which has resulted in bad drafting and, more worryingly, fails to ensure the basics – independence of the profession, proper protection for consumers, minimal bureaucracy and real light-touch regulation. Early this month, Law Society Vice-President Fiona Woolf and I put these concerns to the joint committee of MPs and peers who are currently debating the draft Bill.


The Bill provides for the establishment of a legal services board (LSB) to act as an oversight body to the frontline regulators. An LSB that is independent from government, adopts a light-touch approach, offers value for money to the profession and acts in a strictly oversight capacity would enable solicitors and the public alike to have confidence in the regulatory framework. But the proposals in the draft Bill do not achieve this. Their LSB is a frontline regulator by any other name.


The LSB, of course, needs sufficient powers to be effective, but the Bill reinforces suspicions created by the White Paper that the LSB will too easily be allowed to duplicate and second-guess the work of the frontline regulators.


Law firms need to be able to plan their future with the knowledge that a stable regulatory framework is in place. If the LSB is allowed to intervene too easily in the work of the frontline regulators, such stability and certainty would be lost, costs increased and delays worsened. Consumers will not benefit.


We will continue to make the case strongly that the proposals for the LSB in the draft Bill must reflect the government’s stated intention that it will be a light-touch oversight body.


Sir David Clementi and the Lord Chancellor have publicly advocated maintaining the independence of the profession from government. We welcome this commitment. But there are aspects of the Bill that do not reflect this pledge – the secretary of state has been given the power to appoint the LSB members.


To ensure confidence in the independence of the LSB, the Law Society has suggested that appointments should be by the secretary of state and the Lord Chief Justice jointly. Recommendations by a demonstrably independent panel, chaired by a figure such as the Commissioner for Public Appointments, and including a senior judge would also assuage concerns and worked well in the appointment of members to the Judicial Appointments Commission. We have to insist that the Bill will incorporate these safeguards.


We also have serious misgivings about the ABS proposals as drafted. Solicitors have told us for some time that they want more flexibility about the way they manage and run their businesses and we have therefore called for the introduction of ABSs for many years.


As a potential regulator of ABSs, the Law Society has relevant experience of allowing firms to run their businesses in different ways. In recent years, many firms have been looking to change their status, for example, to limited liability partnerships. Therefore, we are particularly aware that the take up of ABSs will depend, to a large extent, on effective proportionate regulation.


The application process for frontline regulators to license new business arrangements must not be unnecessarily burdensome. And firms will need to be clear that it will be possible to overcome the regulatory and bureaucratic hurdles that the Bill puts in place.


However, the Bill proposes a totally separate licensing system for ABSs. The onerous requirements for frontline regulators and others to become a licensing body as they stand could create significant disincentives to seek these powers.


We hope that during the passage of the draft Bill, a system that builds on the existing powers for regulators is introduced. This will ensure there is no regulatory gap between the powers over existing legal services providers and those over ABSs.


All of this matters. If the government wants to achieve its aim of a more consumer-focused legal profession, solicitors, other legal professionals and new entrants must be enabled to meet this challenge.


That means a clear, fair and cost-effective regulatory and consumer complaints framework, and a licensing process for ABSs that encourages, rather than deters, firms from taking advantage of these new opportunities. The obstacles outlined above could significantly damage the intended impacts of the Bill.


I valued the opportunity to give evidence to the joint committee, and we now look forward to the publication of the report on 25 July. Incidentally, the transcript of the session will be made available on the committee’s Web page at: www.parliament.gov.uk. I urge you to have a look.


Following this, we anticipate that the Bill will then be introduced in the next session of Parliament starting in November. Full implementation of the measures in the Bill could follow 18 months to two years after royal assent. That means that the substantive changes are unlikely before late 2008 at the very earliest.


In the meantime, the Law Society will be putting the case of its members to government so that the eventual Bill becomes a good Bill that will truly benefit consumers, be consistent with the vision of Sir David Clementi and be acceptable and workable for the profession.


Kevin Martin is the Law Society President