Further deregulation of the market opens the door to a race to bottom on client protection, claims the Law Society. And there is no evidence it will boost access to justice
Solicitors will be free to work for unregulated businesses from next spring after the oversight regulator approved plans for a radical overhaul of practising rights. The Legal Services Board last week approved SRA plans to liberalise the market, enabling solicitors to offer paid-for unreserved legal services through businesses outside the remit of SRA regulation.
The changes, which also allow self-employed solicitors to operate on a freelance basis, are controversial. Critics say they create different tiers of protection and redress afforded to clients, and risk undermining both the profession and public confidence.
However, board chair Dr Helen Phillips said: ‘The board welcomes the SRA’s move to modernise its regulatory arrangements and make them more accessible. We recognise that one aspect of this package – the changes to permit solicitors to provide unreserved legal services from unregulated firms – presents some potential risks. The board’s view was that when set against the potential benefits that the proposal is likely to bring to the regulatory objectives as a whole, these risks do not create compelling grounds for refusing the proposal.’
In addition to ‘likely benefits’ to access to justice, promoting competition and the public interest, Phillips said, the LSB ‘considered that there was some merit in the SRA’s argument that these changes could be seen to increase consumer protection’, given that many consumers already use unregulated providers and in doing so receive no protections.
But Law Society president Christina Blacklaws branded the LSB’s decision ‘a serious error’. ‘The regulators have sacrificed the best interests of the public they exist to protect,’ she said, citing ‘unprecedented levels of opposition from consumer bodies and legal experts, and the extensive evidence of the risks of deregulation of this kind in this market’.
Blacklaws added: ‘This ill-conceived scheme creates an overly complex marketplace for legal services, jeopardising the public interest and the rule of law under the guise of driving access to justice. Yet there is no evidence deregulation will achieve this. On the contrary, the most vulnerable are the most likely to fall foul of a less-shackled marketplace for legal services.’
She added that the door was ‘now open for practitioners to cut their costs by slashing essential client protections that until today have provided cast-iron reassurance for clients’. A high street where different tiers of solicitor with different levels of protections offer the same services, ‘will make it more difficult for people who need legal advice to reach informed choices often at very traumatic moments in their lives’.
The SRA has said that where solicitors are working freelance, they would not be able to hold client money or employ people, and they would need ‘adequate and appropriate’ indemnity insurance. Solicitors working for unregulated businesses could not hold client money but would not require PII. Clients must be told in advance about insurance arrangements and it should be made clear they will not be eligible to submit a claim to the compensation fund if there is a problem with their legal matter.
WHAT THE REFORMS MEAN
Reserved legal activities including litigation, conveyancing, probate and some advocacy must be regulated. Any solicitor presently delivering these activities to the public has to do so through a firm regulated by the SRA or another legal services regulator.
SRA rules currently extend this restriction to all other legal activities, even though the law does not say they must be carried out by a regulated person.
As the SRA stresses, there are many unregulated legal services providers delivering unreserved activities including will-writing firms or employment advice services. If a solicitor wants to work in one of these business advising clients, they have to give up their PC and become a ‘non-practising solicitor’.
Under the new regime, practising solicitors will be able to provide non-reserved legal services in any type of business, whether the SRA regulates it or not. So a will-writing firm or an employment advice service will be able to employ a practising solicitor to advise clients.
An architect firm or a travel agent – or a membership or consumer support organisation – could employ a practising solicitor as part of the services offered to clients or members without needing to become an alternative business structure. Like most businesses, the SRA notes, they have insurance cover too.
Unlike non-practising solicitors, these solicitors can use the title – and will have to meet standards expected of all solicitors, subject to the Code of Conduct. Their clients will have access to the Legal Ombudsman.