Top review heralds 'Tesco law' and MDPs

A host of banks, insurance companies, supermarkets and others are seriously considering offering legal services to the public in the wake of the government's announcement last week of a fundamental review of legal services regulation.

Unveiling the independent review, Lord Falconer, the Secretary of State for Constitutional Affairs, said the government favours Law Society proposals to allow both multi-disciplinary partnerships (MDPs) and employed solicitors to advise third parties - dubbed 'Tesco law' - although it will be up to the review to recommend how best to regulate them.

In all other respects, the review is to be open minded about the regulation of legal services.

It is headed by banker David Clementi, the chairman of Prudential and a former deputy governor of the Bank of England, who has until the end of 2004 to report.

In an interview with the Gazette this week, Lord Falconer emphasised that 'everything is up for grabs', with external radical reforms such as regulation, fusion and contingency fees all in the spotlight.

The RAC has been pushing to offer legal services for some time and is committed to becoming one of the first to do so.

Several institutions contacted by the Gazette this week also expressed a strong interest in the plans.

A spokesman for Lloyds TSB said it was interested in offering legal services 'in principle'.

He added: 'We would welcome anything that broadens the consumer choice, but this is just a review and we need to look at it in more detail.'

A Tesco spokesman said customers 'often tell us they'd like us to be in this market.

We will look at what is being proposed, although at the moment we have no firm plans to launch a service.'

An AA spokesman said it welcomed the changes and would now review its position on entering the market.

'We are not in the ambulance-chasing business,' he emphasised, 'but [the change] can enhance the service we offer members.'

Norwich Union described the moves as 'very interesting', while Sainsbury's said: 'We will always look at any new opportunity that arises.' Barclays said it would watch developments with interest.

The Prudential will not enter the market.

Lord Falconer - who it emerged this week is to give the keynote address to this year's Solicitors Annual Conference - criticised the 'complex and fragmented' regulatory system.

He told the Gazette that self-regulation could continue if Mr Clementi concluded it was the best way forward - but then told BBC radio this week that self-regulation was not the right model.

Early betting is on a legal equivalent of the Financial Services Authority.

As an immediate step, the Department for Constitutional Affairs (DCA) is to activate powers to open the probate market to banks, building societies and insurance companies.

It is also to audit other powers laying dormant in legislation 'to identify quick gains' in opening the legal market.

The moves come out of the 2002 consultation paper 'In the Public Interest?'.

Following the consultation, the DCA has decided against similarly opening convey-ancing, but has asked Mr Clementi to consider 'more efficient ways of liberalising the market for conveyancing services'.

The DCA has also decided against extending legal professional privilege to clients of non-lawyers.

Law Society chief executive Janet Paraskeva said the Society welcomed greater competition.

'However, the challenge is for the government to ensure proper regulation and consumer protections, and that any liberalisation does not reduce access to justice,' she said.

'Our concern is that new entrants might cherry-pick the more profitable and less complex areas of work, threatening the viability of established local firms that offer a full range of services at the heart of their communities.'

She expressed disappointment at the probate decision, saying it would weaken consumer protections.

Ms Paraskeva said self-regulation remains the best way of securing the necessary high standards of competence and integrity, and that the review would allow the Law Society to set out the measures it is taking to enhance self-regulation.

Bar Council chairman Matthias Kelly QC said the bar is 'well placed to argue its case on the regulatory framework of legal services', but pledged to 'fight MDPs tooth and claw'.

They would lead to the 'Enronisation of the legal profession', he claimed.