Solicitors will be free to work for unregulated businesses after decision-makers approved plans for a radical overhaul of practising rights.
Oversight regulator the Legal Services Board today approved SRA plans to liberalise the market, after 90 days of deliberation. In effect, solicitors can now offer paid-for legal services through any business, outside the remit of SRA regulation.
The changes, which also allow self-employed solicitors to operate on a freelance basis, are hugely controversial. They create different tiers of protection and redress afforded to clients. Critics have accused the SRA of creating a two-tier sector and undermining public confidence.
But the LSB held that the plans maintain high standards of consumer protection and public confidence in solicitors, and will increase the number of people able to access legal services.
Legal Services 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.’
She added: ‘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 regulatory protections.
‘We are fully aware of the significance of these changes,’ she concluded.
But Law Society president Christina Blacklaws branded the LSB's decision 'a serious error'. She added: 'The regulators have sacrificed the best interests of the public they exist to protect,' she said, citing 'unprecedented levels of opposition from consumer bodies, legal experts and the extensive evidence of the risks of deregulation of this kind in this market'.
Blacklaws said: '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 to passers-by, 'will make it more difficult for people who need legal advice to reach informed choices often at very traumatic moments in their lives, such as divorce and bereavement. Flexibility for practitioners should never come at the expense of protection and clarity for consumers.'
Blacklaws said neither the LSB nor the SRA had 'developed any strategy to mitigate the risk that multiple solicitor brands will result in consumers and the public, particularly the most vulnerable, being confused and losing confidence in the system'.
The SRA has said that where solicitors are working on a freelance basis, 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 professional indemnity insurance. 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 SRA compensation fund if there is a problem with their legal matter.
The SRA, which consulted on its Looking to the Future plan last year, insisted it is removing restrictions it cannot justify, and allowing more freedom for those solicitors to innovate and provide services to meet consumer needs.
It already issues individual waivers for solicitors to work outside regulated entities, and argues in its application that a more formal easing of restrictions can help businesses create new models for offering legal services.
The Legal Services Consumer Panel warned the SRA that its reforms could compound existing complexity, creating different levels of regulated solicitors with varying consumer protections.
In its response to the SRA consultation, the panel said: 'We do not believe that the SRA has struck the right balance between flexibility and the need for consumer protection in a number of these areas. When taken together these proposals are unlikely to assist consumers, especially vulnerable ones, in choosing services at times of distress.'