A legal policy thinktank has today (23 February) called for an urgent shake-up of the regulation of City law firms. Trying to regulate the high-street practitioner and global firms under one regime produces ‘unhappy compromises’, argues the College of Law’s Legal Services Policy Institute.

The institute has published a paper that considers options for the regulation of those law firms that provide services to corporate and commercial clients.

Three are considered:

  • Continuing regulation by the Solicitors Regulation Authority with adjustments to rules to apply different regulatory approaches to different types of client;
  • Establishment of a parallel regulatory regime by the Law Society, either within the SRA or through a parallel regulatory body;
  • Establishment of an entirely new regulatory body as an approved regulator under the Legal Services Act.

The paper argues that a new regulatory framework ‘would bring business benefits to law firms and their clients, would sharpen the competitive edge of corporate firms in the global market, and avoid the conflicts and compromises inherent in trying to squeeze very different types of practice, and very different client interests, into a single regulatory structure’.

Institute director Professor Stephen Mayson said: ‘The case for change is powerful. It rests on a recognition that different types of law firms operate in very different markets. Trying to regulate the high street practitioner and the global law firms under one regime produces unhappy compromises that will serve the interests of neither client group. The growth in global legal practice means that tensions are likely to increase rather than decrease. The Legal Services Act provides an opportunity to address those tensions through a new approach to regulation.’

The institute commissioned the study nearly a year ago. Publication of the paper follows the Law Society’s appointment of Lord Hunt to review the regulation of law firms in general and the appointment of Nicholas Smedley to review the regulation of City practices. Smedley is expected to report to the Law Society within the next few days.