One of the regulator’s proposals for replacing current arrangements for protecting retired solicitors from ‘long tail’ claims is potentially unlawful, according to a legal regulation expert. In the latest round of critical responses to the Solicitors Regulation Authority’s discussion paper on the future of the Solicitors Indemnity Fund (SIF), Frank Maher, partner at Legal Risk Solicitors, states that converting SIF into a discretionary compensation fund would be unlikely to save money and be in the interests of neither consumers nor solicitors.

’Abolishing the entitlement of solicitors and their staff to indemnity would in our submission be unlawful, in breach of the SRA’s statutory duties and regulatory objectives,’ Maher concludes.

A compensation fund model is one of three options put out by the SRA for the future of SIF, which is scheduled to close next September. The others are to maintain the current SIF or to set up a new indemnity scheme, run by the SRA. 

In his response, Maher notes that SIF was funded by the profession under compulsion of law. 'For the SRA to withdraw cover and apply the remaining sums in a manner which does not provide indemnity for solicitors and their staff… would in our submission be irrational, Wednesbury unreasonable (being a decision which no reaonsable person could have made), unlawful and susceptible to judicial review.’

Such concerns are echoed in the response by Birmingham Law Society, the largest regional law society, which states that ‘the only sensible option’ is to retain the SIF. ’Although scant on detail, we question the SRA’s latest proposal for what appears to be replacing SIF with the SRA Compensation Fund Mark Two.’ It notes that the existing  Compensation Fund is a wholly discretionary fund designed to replace losses from client account particularly where there has been an intervention. ’It has its own rules and there is no right of appeal against decisions made by in-house SRA staff.’

The Law Society of England and Wales and the Sole Practitioners Group also made strong statements calling for the retention of indemnity cover. The SRA is expected to discuss the future of the SIF, which indemnifies against claims brought following the ending of six-year run-off cover, at its board meeting next week.