The government must take a holistic approach to reforming the Legal Services Act, says the Law Society’s chief executive.

Just before Christmas HM Treasury announced that there will be a consultation in the spring on separating the legal regulators from their legal professional bodies. Also, in January the Competition and Markets Authority (CMA) announced that it is conducting a market study of legal services.

There is therefore major reform on the cards for legal services and for the solicitor profession. With change comes opportunities but the consultation on separation, in particular, raises serious concerns for the future of the solicitor profession.

If separation happens by merely severing the regulators from their professional bodies given the current definition of regulation, this will have significant implications for the future of the solicitor profession. In this article we explore why.

Consumer and business needs are changing and the legal services sector must adapt. The Law Society is determined to ensure solicitors are right at the forefront of this evolution. Simpler and better regulation should promote innovation and encourage fair competition, while protecting the interests of clients and the public.

Solicitors have always endeavoured to operate and conduct themselves to a high professional standard. The Society believes there is an opportunity to deregulate and apply simpler and better regulatory rules to protect clients who buy legal services and ensure that solicitors are competing on a fair playing field because currently they are not. Paradoxically, people who are the most qualified and trained (solicitors) are the most regulated, and people who may not have any legal qualifications or training are the least regulated.

We think that regulatory rules which should set the minimum rules and necessary protection for clients have become confusingly mixed up with professional standards.

We are therefore arguing that regulatory rules should be separated from professional standards. Regulatory rules should be applied consistently to all legal services. Professional standards should be owned and driven by the profession because solicitors have always differentiated themselves on the quality of the services that they deliver for their clients.

As your professional body, we see our role as raising the quality bar by maintaining world-class professional standards and supporting your efforts to meet them. This includes setting the high standards we expect of anyone seeking to enter a profession whose ethical behaviour and standards of conduct contribute so much to the fabric of society. We want to support the best joining the profession irrespective of their background but we don’t want a dilution of professional standards because we know that this will be bad for the profession and for clients.

Solicitors are rightly concerned that professional standards may become diluted and want to ensure that the reputation of ‘solicitor’ is protected and enhanced, both at home and abroad. We are facing strong competition at home from other providers many of which are unregulated and internationally from other bars (including New York, Hong Kong, Singapore and other northern European bars), which are quick to question the standing of the solicitor title and the independence of the profession in England and Wales.

The Society is committed to ensuring that England and Wales remains the jurisdiction of choice and to secure and enhance the contribution of the legal sector to UK GDP.

Current position

The Society supports:

  • independent regulation of the whole of the legal services market (provided the distinction between regulation and professional standards is clear for all participants);
  • independent enforcement and governance of regulation;
  • the profession taking responsibility for setting its professional standards which include conduct and ethics, entry levels into the profession and the ability to award the professional title of solicitor;
  • independence of the legal profession from the state; and
  • an independent system for complaints about all legal services.

The 2007 Legal Services Act, which emerged from the Clementi review, resulted in the regulation of the profession being independent from the profession itself. But there were very important provisos. It was understood that there would be professional oversight, to secure ownership of professional standards by the profession and ensuring that the profession was seen to be independent of the state. 

This structure ensured that the profession was not fettered (or more importantly was not seen to be fettered) in discharging its critical role of upholding the rule of law.

Although the Clementi reforms introduced independent regulation and mechanisms for consumer redress, and opened up the legal market, they failed to address the regulatory maze. The current regime is not fit for purpose because it applies to some but not all providers, and many legal services are unregulated. This has inhibited competition and in some circumstances may have failed to enable those who should be able to access legal advice to do so.

The LSA made provision for a limited number of reserved activities – the exercise of a right of audience; the conduct of litigation; reserved instrument activities; probate activities; notarial activities; and the administration of oaths. But irrespective of whether they undertake any of these, all solicitors are regulated in respect of all aspects of their work. Most legal services are not regulated unless they are provided by a solicitor (or barrister), who is regulated for all of their activity. Solicitors are therefore competing against unregulated providers, who can conduct any unreserved activity, including giving legal advice.

The public is unaware of who is and who is not regulated or of the levels of protection afforded to them if they instruct a solicitor as opposed to an unregulated provider. This means that clients are unable to make informed purchasing decisions. This problem is exacerbated by the fact that the title ‘lawyer’ is not legally protected. Anyone can call themselves a lawyer or offer legal services as a lawyer, irrespective of whether they have any legal training or qualifications. This is confusing for the public and in some cases misleading.

There is an opportunity here to make the current regulatory regime simpler and better and to ensure that there is a fair playing field for competition while simultaneously providing the right level of protection for consumers.

Regulation for solicitors – current position

Clementi recognised the importance of ensuring that the profession had ownership of professional standards and legal independence from the state.

As a result, following the 2007 Act and the split between the Law Society and the Solicitors Regulation Authority, the meaning of regulation and its application to solicitors was very broadly interpreted. This broad definition, which includes professional and entry standards and the awarding of the professional title, was agreed because it was always anticipated that the profession would be involved in the oversight of the setting of professional and entry standards – as envisaged by Clementi. The result was that, in broad terms, the SRA currently:

  • sets the standard of entry;
  • sets standards of professional conduct and behaviour which are treated as regulatory minimum standards;
  • awards the professional title of solicitor; and
  • enforces regulation against solicitors, including regulation relating to professional standards, because there is no distinction between solicitors’ professional standards and the regulatory rules.

Although it was envisaged in the act that the profession would input into the setting of professional standards, the governance rules which established regulation effectively preclude such involvement. This means our profession is unable to set and has no control over its own professional standards (which should be distinct from a ‘minimum’ set of regulatory requirements needed to ensure consumer protection across all legal services).

Moreover, the SRA’s consultation on entry into the profession may result in the standard of entry being lowered, which has the potential to damage both the profession’s reputation, and the envied global status of England and Wales as a centre of legal excellence and jurisdiction of choice.

The reason for this lowering of standards is to enable deregulation. We support deregulation but not at the expense of lowering professional standards and entry into the profession because we know this to be damaging to our profession and to the clients we serve.

The Society also believes regulatory change which devalues the solicitor qualification will not deal with the fact that solicitors are still competing against unregulated providers and address concerns about unmet legal need. It also goes against the direction of travel in other professions, including teaching and nursing, which are requiring higher levels of academic rigour; and is causing grave concern to many of our larger commercial and City firms in particular.

This is not about protectionism but rather consistent, better and simple regulation; fair competition; client protection; and protection of the standing of solicitors and of England and Wales as the jurisdiction of choice.

Taking away the input and ownership by the profession of professional standards has been a mistake – and is at odds with what Clementi envisaged. The lack of input from the profession into standards has resulted in some of the concerns raised by government about the ethical conduct of certain sections of the profession. These issues are likely to multiply if the profession has no ownership of, or input into, quality and standards of ethical behaviour. The blurring between professional standards and regulatory rules means professional standards are being diluted.

In seeking to avoid the dilution of standards, in 2004 Clementi envisaged that the legal profession should be free to set the quality standards under which it operates, and also education and training requirements for entry so that professional standards were set and owned by the people who practise law. Our proposals align with this.

As Clementi observed: ‘Leaving day-to-day regulatory rule-making and oversight as far as possible at the practitioner level is more likely to increase the commitment of practitioners to high standards; such commitment is important, particularly in the area of professional conduct rules, where rules of behaviour and ethical standards should be seen as an aid to raise standards, not as a constraint to be circumvented’ (paragraph 29 (a)).

The current arrangements for solicitors are also highly anomalous. In most leading professions, it is the profession that awards the title and sets and drives professional standards (as opposed to regulatory rules).

One example is accountancy. The title of chartered accountant is awarded by the professional body which sets entry standards.

There is also inconsistency within the legal profession itself. The title of barrister is awarded by the Inns of Court, although regulation is set separately. It is seemingly only solicitors who have their professional title awarded by a regulator which is independent from the profession.

Single regulator

The legacy of the 2007 act is 11 regulators of the sector, and the Legal Services Board (LSB). This is too complex and costly and needs reform and consolidation.

A single legal services regulator could set the minimum regulatory rules (but not professional standards) for all legal services, so that consumers are protected, competition is fair and market confidence is assured.

Any formal separation of the professional bodies from the regulators will require the creation of up to 11 statutory regulators for legal services. The Society believes this would be expensive and contrary to the goals of the enterprise bill – and it would certainly not deliver simpler and better regulation. Competition between regulators may also result in a ‘race to the bottom’ – a lowering of standards to attract more individuals to sign up with a particular regulator.

Even if the regulators are separated from their professional bodies, this will not address the more pressing problem that regulation applies unevenly across different providers of legal services. We believe therefore that professional standards should be set by the profession: by the people who understand what ‘good’ looks like and want to differentiate themselves (on the basis of a higher standard) from other, non-professional but regulated, legal services.

Separation of professional standards from regulatory rules will also enable deregulation and facilitate simpler and better regulation, which could drive down the costs and benefit consumers.

That said it is still important that certain activities remain reserved to the legal profession, because higher standards of professional behaviour and conduct apply here. As you know, these include, but are not limited to, litigation and advocacy, because solicitors’ role as officers of the court means that they have a professional duty to the court as well as to their client and the ability to give advice which is legally privileged, again because of the higher standard of professional conduct expected.

Legal independence, upholding the rule of law and acting in the public interest

The profession has a unique role in upholding the rule of law and holding government to account. It is important that the profession is seen to be independent from the state, in order to ensure protection of the public and safeguard the reputation of England and Wales as a jurisdiction of choice.

Effective public protection can only be assured if freedom from government intervention is an essential cornerstone of our justice system and underpins the rule of law. Any suggestion that government is able to fetter our independence will seriously jeopardise our global standing and threaten the huge contribution that solicitors make to our economy (£23bn of GDP). Large commercial and City firms which operate overseas, and are global leaders, will be particularly exposed to reputational damage.

In addition, our ability to make representations on the conduct of foreign jurisdictions in their dealings with their citizens relies substantially on the acknowledged pre-eminence of the rule of law and the independence of the legal profession from the state.

Much of the damage arising from the diminution of our brand will become apparent when fewer foreign students seek to qualify here. If fewer foreign lawyers obtain a second internationally recognised qualification in the UK, that would result in fewer cross-border contracts being drawn under the law of England and Wales and in our law being less frequently chosen for cross-border dispute resolution.

We are not aware of any mature jurisdiction in the world where both the legal profession is regulated by, and legal professional title is granted by, either the state or by a state-controlled body.

Such an arrangement would also make it less likely that foreign bars would recognise the solicitor qualification internationally, placing us at competitive disadvantage. It is entirely possible, perhaps even likely, that cross border firms would downsize their activities in London and move resources overseas, which would in turn damage the economy and reduce employment in the sector.

Separating the professional bodies from the regulators

In summary, the Society welcomes the CMA review of the legal services market and the consultation on separating the legal regulators from their professional bodies because this is an opportunity to reform to benefit solicitors and their clients. It is an opportunity to introduce better and simpler regulation across the legal services sector, with one regulator applying consistent rules to all legal services in order to protect consumers and ensure market confidence and ensure that solicitors are operating on a fair playing field with other providers which are currently unregulated.

However, because professional standards, education and training, and entry are all currently the responsibility of the regulator, we would be gravely concerned if the split were simply to sever the professional bodies from the regulators without fully considering the implications both for the profession and the wider legal services sector.

Excluding the legal profession from setting and owning its own professional standards will not ensure that professional standards and quality are increased. On the contrary, it will damage both the reputation of both the solicitors profession and our jurisdiction. This will be particularly the case if the legal profession is not, and is not seen to be, independent from the state as our ability to uphold the rule of law and hold government to account must not be fettered as this is the very cornerstone of our justice system.

The Law Society has a public interest role, recognised in statute, involving, amongst other matters, upholding the rule of law, supporting and enabling access to justice, enabling individual rights and freedoms and representing and promoting solicitors and England and Wales as a jurisdiction of choice internationally (including opening up legal markets, which we have successfully achieved, thereby boosting the value of legal services to the economy).

We are committed to reviewing the current funding arrangements – but must do so only as part of a holistic reform of the current overly complex regulatory landscape, and only after the role of the profession in setting professional and entry standards and awarding the professional title has been properly addressed.

If we fail to do this we will end up as a profession with no ability to set our own professional standards or have any say as to who joins our profession without which, it raises the question as to whether we could truly call ourselves a profession in the future.