Council to vote on radical rule reforms

A future of employed solicitors offering their services to the public, in-house legal teams spinning off into independent practices, external investment in law firms, solicitors paying referral fees, and companies licensing their brands to legal practices, could move a major step closer to reality this week.

The Law Society's Council will be asked to approve radical proposals from the regulation review working party, including abolition of restrictions on the services employed solicitors can provide to their employer's customers, and of the fee-sharing ban, as well as relaxation of the introduction and referral code.

The proposal relating to employed solicitors - first revealed in the Gazette (see [2002] Gazette, 4 January, 1, 8) - has excited considerable interest, with some building societies saying they would consider providing legal services.

The proposal before council emphasises that non-solicitor employers should only be able to provide legal services through solicitors provided that the same level of consumer protection applies to them as to private practice firms.

Ed Nally, chairman of the working party, said the underlying philosophy was that 'at different levels, solicitors protest to the Law Society that they want to be freed from what they see as unnecessary restrictions.

'But we then have to broaden the mind and ask whether high-street private practice is the only way to deliver legal services.'

High-street solicitors are concern ed about the plans - fearing competition from so-called 'Tesco Lawyers' - but Mr Nally said they are not aimed at destroying high-street firms but finding other ways to practise.

However, the Law Society's Commerce & Industry Group said: 'Expecting the employed solicitor to provide a service to the general public, which affords them sufficient protection and offers adequate insurance, as well as fulfilling their contractual duties to their employers, is, in practice, impossible.'

Council papers identify four opportunities if the fee-sharing ban is removed: licensing/franchising agreements, both allowing firms buying in services to tie payments to profits, and adopting the brand of, and receiving capital from, non-solicitor high-street names; rewarding referrers of business with a share of the profits, in line with many industries; maximising the effectiveness of in-house legal departments by spinning them off into independent law firms in return for a share of the profits for the employer; and allowing external investment in firms.

Mr Nally said responses to previous Law Society consultations have shown support for an end to the fee-sharing ban.

On referral fees, the working party contends that paying for introductions does not automatically compromise independence.

Last March, the Office of Fair Trading (OFT) issued a report on competitiveness in the professions, giving professional bodies 12 months to change or justify their rules.

An OFT spokesman said this week that it would issue a statement next month on the progress made.

The OFT would act against anti-competitive restrictions, he warned.

The Society is already working on reforming the conflicts and confidentiality rules, and has relaxed the publicity code, although it has maintained its ban on the cold-calling on individuals, contrary to one OFT recommendation.

Mr Nally said: 'Anything we do and anything we resist is on the basis of the public interest.'

See Editorial and Council watch (Features)

Neil Rose