Plans for alternative business structures (ABS) to deliver legal services could be derailed by the additional regulatory burdens they will impose and by confusion over what level of privilege will apply to them, the government was warned this week.

Meanwhile, the Institute of Legal Executives (ILEX) has revealed that it intends to apply for approval to become an ABS regulator, which will put it in competition with the Law Society, the Council for Licensed Conveyancers (CLC) and possibly the Bar Council. ABS firms - made up of the different types of lawyer and also non-lawyers - will be able to choose which approved body will regulate them.


In the first raft of responses to the legal services reform White Paper, the government was told there needs to be leeway to allow, for example, a firm of solicitors to admit a single legal executive to its partnership without triggering the extra regulatory hurdles, such as the need to apply for an ABS licence.


The joint response from the Institute of Trade Mark Attorneys and Chartered Institute of Patent Agents argued that the lack of any de minimis provision could create a barrier 'that a firm might be reluctant to overcome, thus frustrating the whole point of the reforms'.


It also said firms made up just of regulated lawyers should be exempt from ABS rules: 'Why should an ABS of solicitors and barristers be thought likely to discard the culture of professional duty that already pervades such practices individually? If that were so, the safeguards would be needed as much for single discipline firms as for ABSs.'


ILEX secretary-general Diane Burleigh said these concerns showed how important it is for the final legislation to deliver differential risk-based regulation, as promised by the government. This would mean that in the low-risk situation of a legal executive joining a partnership of solicitors, the extra regulation could be kept to a minimum.


While overall offering a cautious welcome to the reform package, the joint response said the decision to retain the current position on privilege will create 'a minefield of conflicting levels of privilege' within an ABS firm and also criticised the suggestion that privilege could be bestowed on the individual practitioner rather than on the firm at large.


'That will inevitably lead to numerous challenges to privilege. Will the professional's secretary, who sees the correspondence and types the advice, be covered? The trainee? The IT staff inputting the data? The post-room or fax staff? If privilege is to be so narrowly drawn, we fear the ABS model will be fatally compromised.'


In her response, Zahida Manzoor - who holds the separate posts of Legal Services Ombudsman and Legal Services Complaints Commissioner - backed the plans for ABS firms, although she had 'largely theoretical' concerns about the potential for new providers to enter the market and cherry-pick work.


More generally, Ms Manzoor called on the government to be bold and not give in to 'those who will seek to preserve their own interests'. She said:


'This is a once-in-a-lifetime opportunity to transform the way legal services are regulated and delivered both in the interests of consumers and the legal professions.'


Ms Burleigh said she was confident ILEX can build the structure required to regulate ABS firms, thus helping its members, who in future will be able to own and run their own legal practices. She said ILEX would not look to overreach itself by regulating large City ABS firms.


Ms Burleigh added that while ILEX welcomes the White Paper, it is concerned to see that the proposed legal services board - which will oversee the frontline regulators - has the promised 'light touch', a worry shared by the CLC in its response. In line with other legal bodies, she called on the government to pay towards the board's set-up costs.


Responses to the White Paper must be in by 20 January, when the Law Society's and Bar Council's responses will be made public.