CLEMENTI: consultation paper sets out key issues facing the legal profession regulators

On the regulatory maze

Sir David Clementi agreed with the conclusion of the Department for Constitutional Affairs that the current framework was 'outdated, inflexible, over-complex and insufficiently accountable or transparent'.

On regulatory structures

The consultation paper set out two 'polarised approaches' to regulation.

These are:

- Model A: all regulatory functions are taken from professional bodies and given to a single regulator called the Legal Services Authority.

- Model B: professional bodies retain regulatory functions, subject to oversight by a new regulator called the Legal Services Board.

The consultation paper recognised that there are different regulatory functions, such as entry standards and practice rules, and suggested that a view could be taken for each function as to which of these models should apply.

One 'possible solution', Model B+, is that professional bodies retain their regulatory role, but are required to separate that function from representation.

On complaints and discipline

The consultation paper put forward three options for the handling of complaints and discipline:

- Creating a uniform, 'single point of entry' consumer complaints body, the Legal Services Complaints Office, which would be independent of professional bodies and similar to the Financial Ombudsman Service.

- Allowing professional bodies to retain direct responsibility for complaints, subject to oversight.

- Adopting the system used in New South Wales, Australia, where a legal services commissioner provides a single gateway into the complaints system.

The commissioner can retain the cases or delegate them to the professional body.

On alternative structures

Sir David made the distinction between legal disciplinary practices (LDPs), where different lawyers and other professionals work together to provide solely legal services, and multi-disciplinary partnerships (MDPs), where lawyers and other professionals work together to provide legal and other professional services.

He also emphasised the potential split between ownership and management in LDPs and MDPs.

The consultation paper points to the fact that law centres already act as de facto LDPs, with lawyers from different professions working together.

On the prospect of the so-called 'Tesco law', where banks or supermarkets would offer legal services to their customers, Sir David said that no supermarket group had yet approached him.

He added that the onus was on those who wished to retain restrictions to prove they were justified.

On regulatory gaps

Sir David proposed that the determination of which legal services should be regulated, and which should not, must rest with the government.

He has rejected establishing a definition of legal services on the basis that it is hard to prescribe the boundaries of any industry.

But he would like to put in place a framework that allows the scope of services that are regulated to be broadened and narrowed.

The paper cited as one possible solution existing arrangements in the financial services sector, where the legislation broadly defines the scope of services covered but allows the Treasury to bring other services under regulation.

Other issues for consideration

The consultation paper identified a number of other key areas for the review.

These included:

- The appropriate objectives of a regulatory regime.

- Who the regulator should be, how that regulator will be appointed, what sort of board it should have, and, importantly, how it will be funded.

Advisory board

Sir David has set up an advisory board to assist him.

The members of the board include Edward Walker-Arnott, consultant and former senior partner of City firm Herbert Smith, and Robert Webb QC, general counsel at British Airways.