Strip back the robust regulation that defines the legal system of England and Wales and we could find ourselves in a distinctly less stable, less prosperous jurisdiction. Plans for the future would rest on uncertain foundations, with clients unsure which legal service provider to trust. We ignore it at our peril.
There is much at stake – for clients, solicitors and the economy. At the most recent count, legal services contributed £25.7bn to the UK economy (approximately 1.5% of GDP) and £3.6bn a year in exports. More than 380,000 people are employed in the sector.
English and Welsh law, with its certainty and flexibility, is frequently first choice when two parties, wherever they may be, want to be confident of their agreement.
Clear, proportionate, consistent regulation is the bedrock which provides stability in our legal system and puts our jurisdiction in this enviable position. This same regulation, which provides gold-standard protection, is a key contributor to the trust clients have in solicitors.
The zeitgeist is towards deregulation and increasing competition, presenting both opportunities and risks for solicitors and clients. No matter what area of law or type of practice you are working in, there are some game-changing proposals in the air or already on the table. The Law Society argues that some of these could undermine the foundations of the profession and the sector.
The loudest alarm is being rung on proposals from the Solicitors Regulation Authority for sweeping changes to the solicitor rulebook (the SRA Handbook) that would leave clients unsure what regulatory protections they can expect when they see a solicitor. Trust in the profession is at risk.
Under the guise of a more targeted and proportionate approach to regulation, the SRA is proposing to remove vital client protections. The SRA believes the changes will offer solicitors more freedom and flexibility in the way they choose to practise. But we would argue that flexibility should never come at the expense of client or public interest.
Changes proposed by the SRA include simplifying and shortening the Handbook, allowing solicitors to work in unregulated legal entities and to deliver unreserved legal services directly to the public. They would also allow individual solicitors to provide legal services directly to individual clients without the need to be registered as a sole practitioner.
These proposals would see solicitors subject to entirely different regulations depending on where they practise. A new tier of solicitors, working in unregulated businesses, would not have to have the same insurance, pay into the solicitors’ compensation fund or inevitably afford their clients legal professional privilege (LPP).
The Law Society: holding the regulator to account
With the Legal Services Act 2007 the professional membership organisation for solicitors – the Law Society – became independent of the SRA. The act also paved the way for a separate government body to deal with complaints about solicitors’ services – now called the Legal Ombudsman – and created a super-regulator, the Legal Services Board, with oversight of all frontline legal regulators.
This means the Law Society, as the representative body for solicitors, can dedicate itself to representing, supporting and promoting the interest of its members on regulatory issues ranging from regulatory processes, complaints and enforcement, ethics, professional indemnity insurance, to education and training. It does not set or enforce legal regulation.
Policy experts and dedicated committees, overseen by the regulatory affairs board, scrutinise and respond to government and regulatory bodies’ proposals, commissioning research to secure the views of solicitors, clients and the general public to inform the positions the Society takes on behalf of the profession. The Society also produces resources for solicitors to help them comply with regulations and to keep them informed of changes or consultations in an area that is central to every member’s practice.
The Law Society asserts that the regulator has neither thought through the implications for consumer protection, nor has it suggested adequate safeguards. The Society champions the importance of client protections and urges all solicitors to add their voices by responding to the SRA’s consultation before the December deadline.
There are two main issues dominating the professional indemnity insurance (PII) agenda. One is the closure of the Solicitors Indemnity Fund (SIF). For three decades SIF has provided post-six-year run-off cover for firms which closed without a successor practice, but from 2020 it will not accept new claims. This means closing or closed firms will have to make a judgement as to whether they will need to purchase ongoing cover on the open market. The PII committee is supporting the development of replacement products, but research suggests that two-thirds of firms are unaware of the SIF’s impending closure.
The other major issue is that the SRA is expected to launch a consultation on reforming the minimum terms and conditions (MTCs) early in the new year. These are the requirements to which participating insurers must subscribe if they want to provide solicitors’ PII, and they include guidelines on indemnity limits and run-off cover. There have been indications the proposed reforms will look to reduce some of the protections set out in the MTCs.
Solicitors’ comprehensive PII regime – along with the compensation fund – provides reassurance to clients and acts as an important mark of distinction from the other legal professions and the unregulated sector.
The Law Society will continue working to ensure the protection of individual solicitors, their firms and clients. Through these safeguards, the Society will protect the solicitors’ profession, ensure faith in the legal system and promote access to justice, preserving consumer protections and safeguards.
Because PII is one of the largest regulatory costs solicitors face, the regulatory affairs unit has a policy adviser dedicated to dealing with PII and related issues. The adviser supports the PII committee, which is composed of practising solicitors who have specialist knowledge, and works with commercial colleagues and the insurance industry to ensure that the right products are in place to protect the profession and consumers of legal services.
Regulatory Affairs Board
- Sets and oversees the implementation of policy adviser proposals for the promotion of solicitors’ interests in regulatory matters.
- Assists the management board in making recommendations to council on the exercise of approved regulator functions.
Education and Training Committee
- Sets and oversees the implementation of policy for the promotion of solicitors’ interests in regulatory matters relating to education and training.
- Assists the Regulatory Affairs Board in carrying out its function in scrutinising the regulatory boards in relation to education and training.
Professional Indemnity Insurance Committee
- Monitors and investigates issues around indemnity insurance and post-six-year run-off cover.
Professional Standards and Ethics Committee
Monitors the ethical values, professional principles and standards regulating and governing solicitors, their organisations and their areas of practice. In particular:
- develops proposals for best practice and changes to principles and standards for submission to the SRA and elsewhere.
- responds to consultations on changes to professional principles and standards promoted by the SRA, the LSB and others.
- provides support and advice on interpretation, management, and best practice in relation to ethical values, professional principles and standards.
Reports to the Regulatory Affairs Board and seeks approval from that board for policy adviser proposals and for responses to consultations.
Regulatory Processes Committee
Monitors the processes and procedures employed by the SRA and SDT in performance of their role in regulating solicitors. In particular:
- responds to consultations on processes and procedure from the SRA and other regulators.
- develops proposals for changes to processes and procedure for submission to the SRA, SDT and elsewhere.
- provides advice on proper processes, procedures and good practice in relevant areas as appropriate.
- monitors the systems in place for complaints about solicitors.
Price and service transparency
Meanwhile, the SRA has just outlined plans to require some practitioners to publish a raft of information about their services to improve transparency in the legal services market.
To begin with, this could affect solicitors engaged in conveyancing, wills and probate, PI, family, employment tribunal and road traffic matters. Alongside this, the SRA suggests it will publish information on complaints. Solicitors have until 20 December to respond to the consultation.
The Society asserts that in this case regulation is a blunt instrument, that more information is not always better information and that rigid requirements for large amounts of information could cause consumer confusion or information overload. Market forces already drive the way information is provided on legal services.
Law firms already take great care over the way they provide services, their prices, and how this information is presented. Every client is different, and a one-size-fits-all regulatory solution will not be right for everyone. Solicitors need to ensure they can meet a diverse range of needs.
The Law Society has developed the price and service transparency toolkit to help firms consider the best ways to provide relevant, useful information to clients and potential clients. There are other Society resources available, from practice notes on publicising information on letterheads, emails and websites, to a webinar on pricing strategies.
Not only are solicitors highly regulated and insured, they also operate to an exceptionally high ethical standard and are faced with dilemmas that have to be navigated with precision and a wide-angle view, encompassing the law, clients’ interests and regulated professional standards. Ethics are at the heart of what it means to be a solicitor; the minimum standards are written into the SRA Code of Conduct.
Increased competition in legal services, time pressures, billing targets, economic uncertainty and Brexit are some of the things which may put ethics under pressure. The more familiar issues of managing conflicts of interest, confidentiality and disclosure; speaking up as a junior solicitor; or client pressure also remain concerns.
The professional standards and ethics committee scans the professional ethics horizon for emerging issues and cultural shifts which may have an impact on ethical decision-making.
One of the aims of the Society’s work is to embed ethical behaviour, support solicitors to recognise and handle difficult professional situations, and make choices that can be substantiated by reference to the Code of Conduct. Online resources, seminars, discussion papers and practice notes help solicitors think through the implications of ethical dilemmas before they arise and provide clear guidance.
Key recent regulatory consulations
- 1 June 2016: SRA Handbook consultation phase I, ‘Looking To The Future – flexibility and public protection’, published.
- 21 September 2016: Phase I consultation closed.
- 13 June 2017: decision on the outcome of phase I Handbook consultation announced.
- 27 September: consultation on phase II Handbook reform announced.
- 20 December 2017: consultation closes.
- Autumn 2018: SRA due to implement all Handbook reforms proposed under phases I and II.
- 3 October 2016: SRA consultation on the SQE.
- 9 January 2017: consultation closed.
- 25 April 2017: consultation responses published.
- 31 May 2017: consultation on new route to qualification announced.
- 21 September 2017: consultation closed.
- 27 September 2017: SRA consultation on price transparency announced.
- 20 December: consultation closes.
- 21 April 2016: SRA consultation on switching regulators opened.
- 14 July 2016: consultation closed.
- 13 July 2017: consultation responses published.
- 5 October 2017: LSB approved SRA rule change.
Competition and Markets Authority
- January 2016: CMA launched market study of the supply of legal services in England and Wales.
- December 2016: CMA published final report.
Financial Conduct Authority
- 26 July 2017: FCA consultation on extension of senior managers and certification regime.
- 3 November 2017: consultation closed.
Legal Services Board
- 20 June 2017: Regulatory performance assessment consultation.
- 25 September 2017: consultation closed.
- 11 August 2017: LSB enforcement consultation.
- 12 October: consultation closed.
- 9 November 2017: LSB consultation on Internal Governance Rules for legal services regulator.
- 9 February 2018: consultation closes.
The Law Society
- 16 October 2017: consultation on standard of proof.
- 1 December 2017: consultation closes.
- Professional Indemnity Insurance arrangements (SRA): late 2017.
- Practice Framework Rules changes (SDT): during 2017.
- Consultation on changes to standard of proof (SDT): late-2017