The proposed legal services board (LSB) should be required by law to delegate day-to-day regulation to frontline regulators such as the Law Society and Bar Council, the government was told last week.

Research commissioned by the Department for Constitutional Affairs said there should be strict statutory conditions under which the LSB could activate reserve powers to regulate particular individuals or groups of lawyers directly.


It also said that, over time, competition could be developed to the greatest possible extent as an alternative to regulation.


During Sir David Clementi's review of legal services regulation, both the Law Society and Bar Council argued that they should retain their current statutory powers, with the LSB just having an oversight role. Both Sir David and the DCA rejected this.


However, the research into the roles and operational issues of the LSB said the delegation of day-to-day regulation needs to be laid down in statute to ensure it is not too heavy-handed in using its powers.


As statute can only create the framework, the paper recommended that the LSB agree a memorandum of understanding with each frontline regulator.


However, the researchers recognised that 'in a regime in which the LSB possesses all of the regulatory powers, there are dangers that the frontline regulators will be ill-placed to negotiate memoranda that ensure they are subject to light-touch regulation by the LSB'. Thus they suggested an informal dispute resolution process, involving the Office of Fair Trading setting up a panel with a judge as a member.


They said the LSB should only be able to take over regulation where: in its opinion, the frontline regulator was failing to act; action by the LSB was necessary to further its statutory objectives; the regulator had been given reasonable opportunity and notice to act, and was consulted before any action was taken; and the LSB publicly justified its actions.


However, the paper said that to avoid this happening, the LSB must have sufficient powers to control, and if necessary sanction, frontline regulators in the first place. Other proposals in the paper deal with the accountability and make-up of the LSB.


The research was conducted by London School of Economics legal academics Robert Baldwin and Julia Black, together with Martin Cave, director of the Centre for Management Under Regulation at Warwick Business School.


Link: www.dca.gov.uk/legalsys/lsreform.htm