Parliament's scrutiny of the draft legal services Bill is good news for lawyers


The joint parliamentary committee scrutinising the draft Legal Services Bill somehow managed to please just about everyone when it issued its report on the Bill last week (see (2006) Gazette, 27 July, 1).



The Department for Constitutional Affairs (DCA) welcomed the 'support for the overall framework put forward in the draft Bill', and claimed that 'measures to remove layers of red tape and bureaucratic regulation from the way legal services are provided moved closer' as a result - ignoring the report's misgivings over alternative business structures (ABSs).



Lawyers' groups, too, were pleased, and the likes of the Law Society, Bar Council, Legal Aid Practitioners Group and City of London Law Society called on the DCA to adopt the committee's recommendations.



Lawyers on balance have more reasons to be cheerful. The committee backed many of their concerns over how well the Bill entrenches the independence from government of both the profession and the proposed oversight regulator - the legal services board (LSB). Specifically, this meant that, in the committee's view, the Secretary of State for Constitutional Affairs should not have sole responsibility for appointing the LSB, and that the minister is generally granted far too many powers by the Bill - around 90 in total.



The committee's underlying ethos - as expressed by chairman Lord Hunt of Wirral - was 'to go back to the future as envisaged by Sir David Clementi', and Sir David said in evidence that he was concerned by 'how often the secretary of state seems to appear in this Bill as someone who is making decisions'.



He went on: 'I had envisaged that he would set up the framework, make sure the objectives of regulation were there and then as far as possible stand back from it.'



Indeed, Sir David's underlying report from 2004 argued that moving the oversight powers held by the secretary of state to the LSB would strengthen the profession's independence - the Bill as drafted appears to undo that good.



Sir David's model was that the minister would make the important public policy decisions - for example, what should be reserved activities - with the LSB responsible for more technical regulatory matters, such as whether an approved regulator should be allowed to regulate a reserved activity beyond the scope of its initial licence. But the Bill gives both powers to the secretary of state.



Thus the committee told the DCA to examine the need for each power given to the minister - and said the same exercise should be conducted for the LSB's powers to ensure primary regulation rests with the frontline bodies, and that the LSB does not evolve into a more authoritarian body.



In relation to ABSs, however, the committee was actually more conservative than Sir David. The acronym embraces others, such as LDPs (legal disciplinary partnerships between the different types of lawyer) and MDPs (multi-disciplinary partnerships), all rolled together with non-lawyer investment and ownership.



The Clementi report backed LDPs and external ownership. And while he saw merit in MDPs, Sir David was worried about the complexity of their regulation; he described LDPs as walking and MDPs as running. So it was a surprise when the DCA sprinted straight to MDPs.



The joint committee said it had not seen any justification for this and was concerned by the potential for conflicts of interest in MDPs.



It is on external ownership that the committee beat its own path. It took on board fears about an 'undesirable conflict' between shareholders and lawyers, and was 'persuaded by some of the evidence suggesting that the reforms may reduce geographical availability of legal advice'. More than anything, though, it saw a leap in the dark. Will access to justice be improved or diminished? 'There is clearly an issue here and the only conclusion we are able to draw is that no one can be sure how it will work out.'



This was augmented by the international angle. The committee was worried by evidence - such as from the German regulator (see (2006) Gazette, 6 July, 1) - which suggested that certain ABS models could be illegal in some countries. 'This would necessitate a fundamental rethink of this policy,' it said.



So it counselled the DCA to use 'less haste and more care', putting forward a four-stage plan for implementing ABSs, starting with LDPs and no external ownership and ending up with MDPs and free-market ownership.



Other recommendations to please lawyers include: introducing clear rights of appeal from decisions of the LSB and the proposed office for legal complaints; allowing the office to delegate the handling of service complaints to frontline regulators (a key desire of the Bar Council); and bringing will-writing into the regulatory net.



The final cheer came in the committee's scepticism about estimates of how much money will be saved with a single complaints body, and its call for the DCA to reconsider contributing to the new system's estimated £27 million start-up costs.



The question now is whether the government will respond; after all, it changed precious little from the proposals in last October's White Paper to the detail laid out in the draft Bill.



There is a sense at the DCA that this is a process that began several years ago and has already been much consulted on. The early signs are that it considers the safeguards in place - such as adherence to the Commissioner for Public Appointments' code of practice and the 'fitness to own' test for external ABS owners - to be sufficient.



Lord Hunt says the 'government will ignore our recommendations at their peril', in a climate where Parliament is restless about the extent to which government seeks control.



For others, it comes down to whether the DCA can see past the consumer interest - which has driven much of this process - and focus on the wider public interest. It is telling that the latter has been pushed so far into the background since the days of the DCA's In the Public Interest? consultation in 2002, that the committee had to recommend adding the need to protect and promote the public interest to the objectives of regulation.



How the DCA reacts to that recommendation should give a good indication of whether it is listening at all.



Neil Rose