The Legal Services Bill will have a huge impact on the regulation of solicitors. Sarah Clover and Marianne Robson look at light-touch regulation and a new approach to complaints


On 4 June 2007 the Legal Services Bill returned to the House of Commons for its second reading. Over the previous few months the House of Lords had made a number of amendments to the Bill, which were largely backed by the legal profession.



However, the government has indicated that it will reject a number of those amendments, some of which many in the profession consider to be key to a fair and effective new regime. The main area of complaint is regulation.



Under the current regime, regulation is dealt with by the Solicitors Regulation Authority (SRA), following the division of the representative and regulatory functions of the Law Society. The SRA now operates independently to enforce the rules which regulate the profession. These were previously enshrined in The Guide to the Professional Conduct of Solicitors, but from 1 July 2007 have been replaced by the new Solicitors Code of Conduct.



The Bill provides, for the first time, for a new legal services board (LSB) to be introduced to oversee the whole legal services market. The hope was that the LSB would be a ‘light-touch’ regulator which would serve to preserve the independence of the legal profession and not intervene to impose regulation, but would rather work with the frontline regulators to resolve controversial or difficult issues.



The government, however, arguably has other ideas. The first draft of the Bill provided for the members of the LSB to be appointed by the Lord Chancellor, thus leaving appointments effectively in government control.



Amid concerns, particularly from the major City firms, that this would risk compromising the way in which the independence of the legal profession was viewed abroad, thus affecting its international competitiveness, the Lords introduced a requirement that appointments to the LSB must have the agreement of the Lord Chief Justice.



The government has now pledged to overturn this provision with an apparent determination that the Lord Chancellor alone will retain control over appointments, subject to the Nolan principles of public appointment. This will undoubtedly continue to fuel fears that regulation by the LSB will be more heavy handed than many had hoped.



Under the Bill, the SRA will continue as the frontline regulator for the solicitors’ profession and will deal with all professional and disciplinary matters applying the principles enshrined in the code. The impact of the code is yet to be seen, but there is scope for less certainty in the application of the new system because the code involves a number of principles with which the profession should comply, rather than laying down rules with which solicitors must comply.



The SRA will continue to issue reprimands or make referrals to the Solicitors Disciplinary Tribunal (SDT), although it has now been determined that in future the reprimands made by the SRA will be published. Previously they remained private as long as no referral to the SDT was made. Solicitors will need to give careful consideration to how they deal with such complaints in future because the prospect of there being a serious effect on their reputation has increased.



The SRA has consistently flagged its intention to regulate where regulation is needed. It announced in October last year that it would like to move towards regulating organisations rather than individuals with a view to also being able to regulate with a lighter touch. A law firm which satisfied the SRA that it had an adequate system of self-regulation to qualify would benefit from this lower level of regulation rather than being subject to the more cumbersome system that currently exists.



Complaints of inadequate professional services – as opposed to professional conduct complaints – will in future be dealt with by the office of legal complaints (OLC), which is established for the first time by the Bill. The OLC will create a single and independent complaints-handling service for all branches of the legal profession. This is intended to foster consumer confidence and give quick and fair redress when things go wrong. The OLC will be able to award up to £20,000 in compensation, as opposed to the Law Society’s current maximum award of £15,000.



The establishment of the OLC is broadly supported by the legal profession but there is some concern about the potential for having to deal with a disgruntled client on a number of fronts. A client could, if it wished to do so, make a complaint to the OLC, refer alleged breaches of the principles enshrined in the code to the SRA and also institute a civil claim against the solicitor.



The provisions of the Bill forbid a complaint to the OLC being excluded on the basis that ‘it relates to a matter which has been or could be dealt with under the disciplinary arrangements of the respondent’s relevant authorising body’. There is therefore no doubt that these two types of action can be taken by a client at the same time. However, if no civil claim is pursued, solicitors will not usually be allowed to make a claim against their professional liability insurance and will have to bear their own costs of fighting on these two fronts.



The Bill also provides that a complainant cannot institute or continue legal proceedings in respect of a matter which was the subject of a complaint, after a determination by the OLC of an inadequate professional service complaint becomes binding and final. In the event that an adverse disciplinary finding is made following a complaint to the SRA and a civil claim is subsequently made, a solicitor is entitled to argue that a breach of the professional conduct rules does not itself give rise to a civil liability and should not therefore be regarded as determinative of negligence. However, to fight a civil claim in this way will add to the costs of dealing with what by then may already have become a very expensive process.



Regulation of the profession will no doubt be more complex in the future and – given general trends – the regime is most likely to lead to greater regulation.



Sarah Clover is head of solicitors’ professional liability and Marianne Robson an associate director at City firm Barlow Lyde & Gilbert