OVERVIEW REGULATION ENGLAND AND WALES

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OVERVIEW REGULATION ENGLAND AND WALES

Raj Daya – Acting Deputy Director General :Legislative Development

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CLEMENTI REVIEW

• In March 2001 the OFT produced a report, ‘Competition in Professions’, which recommended that unjustified restriction on competition should be removed. The government responded with a consultation paper and report into competition and regulation in the legal services market.

• General complaint as well on lawyers services• The Government’s report concluded that "the current

framework is out-dated, inflexible, over-complex and insufficiently accountable or transparent... Government has therefore decided that a thorough and independent investigation without reservation is needed".

Regulation England and Wales

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• In July 2003, Sir David Clementi was appointed to carry out an independent review of the regulatory framework for legal services in England and Wales. The terms of reference were:

To consider what regulatory framework would best promote competition, innovation and the public and consumer interest in an efficient, effective and independent legal sector; and

To recommend a framework which will be independent in representing the public and consumer interest, comprehensive, accountable, consistent, flexible, transparent, and no more restrictive or burdensome than is clearly justified.


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• In December 2004, Sir David published ‘Review of the Regulatory Framework for Legal Services in England and Wales’. His recommendations included:

Setting up a Legal Services Board - a new legal services regulator to provide consistent oversight regulation of front-line bodies such as the Law Society and the Bar Council.

Statutory objectives for the Legal Services Board, including promotion of the public and consumer interest.

Regulatory powers to be vested in the Legal Services Board, with powers to devolve regulatory functions to front-line bodies, now called Approved Regulators, subject to their competence and governance arrangements.


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Front-line bodies to be required to make governance arrangements to separate their regulatory and representative functions.

The Office for Legal Complaints - a single independent body to handle consumer complaints in respect of all members of front-line bodies, subject to oversight by the Legal Services Board.

The establishment of alternative business structures that could see different types of lawyers and non-lawyers managing and owning legal practises.


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SOME FACTS ABOUT LEGAL LANDSCAPE

•The UK has a population of around 62 million people•150,128 solicitors ( lawyers )•15,387 barristers ( advocates)•Approximately 31,000 solicitors and 3,000 barristers work outside private practice as in-house counsel or government lawyers.•There are around 10,400 solicitor’s firms, most of which have four partners or fewer (over 8,800, 84.8%)•10 Firms with over 80 partners only number 57.11•In 2009, legal services generated about $36 billion of the UK’s gross domestic product (1.8%),


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COMPLAINTS AGAINST LAWYERS

•According to the Clementi Report, complaints fall into three categories: inadequate professional,service, professional misconduct, and negligence.•Until the advent of the Legal Services Act 2007, complaints against lawyers were handled by a mixture of professional bodies including the Law Society, the Bar Council,and the Legal Services Ombudsman.•The professional bodies failed to meet targets set by the ombudsman to clear complaints within a particular time period.•Complaints included lawyers not telling their clients about how much they would be charged and being dilatory about giving estimates, with few given in writing.


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OTHER COMPLAINTS

•included rudeness, arrogance, lack of communication, delays, getting higher bills than expected, and incompetence•Delays came at the top of the list.•As the Consumers Association reported with complaints about house transfers:“According to one respondent ‘it would have been quicker to do a course in conveyancing.•Unfortunately for lawyers, the high number of complaints was accompanied by an inefficient and inept system of handling complaints, which included three levels for the client to go up before a final resolution might be achieved and multiple entry points


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IS THE LEGAL PROFESSION ANTI-COMPETITIVE?

•investigation by the Office of Fair Trading (OFT) into whether restrictive practices were distorting professional competition.•general view that the professions should be subject to competition law , same way as other economic actors•The OFT argued that the conveyance and probate markets should be liberalized to remove the lawyer’s monopoly•Cold-calling by lawyers should be permitted, and the Law Society changed its rules here•Multidisciplinary practices should be permitted:


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WHAT CHANGE - THE LEGAL SERVICES ACT BRING

•Separate representation from regulation•Create alternative business structures•Create super regulator : Legal Services Board independent body responsible for overseeing the regulation of legal services in England and Wales to reform and modernise the legal services marketplace in the interests of consumers, enhancing quality, ensuring value for money and improving access to justicefunded by, but wholly independent of, the legal profession. Annual budget equates to a little under £30 per year for each lawyer


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APPROVED REGULATORS / FRONT LINE REGULATORS

•The Law Society, which through the Solicitors Regulation Authority, regulates around 120,000 practising solicitors and 43 alternative business structures •The General Council of the Bar, which through the Bar Standards Board, regulates around 15,000 practising barristers •The Chartered Institute of Legal Executives, which through ILEX Professional Standards Limited, regulates around 8,000 practising fellows


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•The Council for Licensed Conveyancers, the regulator of over 1,000 practising licensed conveyancers and 16 alternative business structures •The Chartered Institute of Patent Attorneys, which through the Intellectual Property Regulation Board, regulates around 1,800 practising chartered patent attorneys •The Institute of Trade Mark Attorneys, which through the Intellectual Property Regulation Board, regulates over 600 practising trade mark attorneys •The Association of Costs Lawyers, which through the Costs Lawyer Standards Board, regulates over 500 practising Costs Lawyers •The Master of the Faculties who regulates over 800 notaries


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ALTERNATE BUSINESS STRUCTURES (ABS)

•Clementi deemed current regime as unnecessarily restrictive•Freedom to organize as professionals would assist the promotion of competition

•Legal Disciplinary Practices (LDP)composed of different types of lawyerscorporate, partnership, or otherwise.Lawyers or non-lawyers could manage itcould have outside owners, as long as they passed a “fitness to own” testLawyers would have to constitute the majority of the managers


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ALTERNATE BUSINESS STRUCTURES (ABS )

Multi Disciplinary Practices (MDP.s)

•lawyers and non-lawyers work together and share fees•Clementi could see lawyers and accountants practicing together delivering tax advice and investment services;•lawyers and real estate specialists, surveyors, and architects providing construction packages;•motoring organizations offering legal, insurance, health, and property repair•25% shareholding must be by lawyers•Tesco supermarket chain in US


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TRIENNIAL REVIEW BY THE MINISTRY OF JUSTICE OF THE LEGAL SERVICES BOARD

•11 January 2012, Part of the Government’s response to the Public Administration Select Committee report ‘Smaller Government: Shrinking the Quango state’ was a commitment to a triennial review of non-departmental public bodies (NDPB). •As part of this process the Ministry of Justice has decided to review the Legal Services Board (LSB) and the Office for Legal Complaints (OLC).•The Coalition’s Programme for Government stated that it would “reduce the number and cost of quangos.”


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• To achieve this the Government conducted a review of all public bodies to identify those which it felt were no longer necessary. The review focused on whether a body’s functions were necessary, and if it thought they were, whether it had to be delivered at arm’s length from Government


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TRIEANNUAL REVIEW

•Bar Council says : LSB should be actively discouraged by the Government from abusing the oversight regulatory powers envisaged by Parliament•This measure would be in accordance with the Government’s commitment to keep the size of the public sector, and expenditure on its activities, under careful control•the LSA, the LSB and the ARs are subject to identical regulatory objectives – the LSB under s.3(2); the ARs under s.28(2). It would make no financial or other sense for the LSB simply to duplicate the regulatory functions carried out by the ARs


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18Regulation England and Wales

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TRIEANNUAL REVIEW

•LSB might yield to the temptation, familiar to bureaucracies everywhere, to micro manage, over regulate,and indulge in ‐ ‐mission creep, notwithstanding the stipulation in s.2(3) of ‐the Legislative and Regulatory Reform Act 2006•However, despite the fact that the BSB has demonstrably been acting effectively, the LSB has been determined to impress its own stamp upon the BSB.

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TRIEANNUAL REVIEW

• The BC therefore recommends that the Ministry of Justice bring home to the LSB the limits of its regulatory remit. In particular, the LSB:

• (a) should be required not to interfere in proposals by the ARs to alter their

• regulatory arrangements unless it is able to demonstrate unreasonableness;• (b) should cease to play any role in the LETR unless

expressly requested so to do by the ARs; and• (c) should exercise its oversight powers only in cases

where it is able to show, that the ARs are acting unreasonably


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ISSUES FOR CONSIDERATION

•Do we allow several regulators to exist•Do we allow separate regulation for attorneys and advocates•Will the super regulator (national council) be best placed to achieve regulation for the entire legal profession•Do we give serious consideration to direct access for instructing advocates to limit costs and access to justice•Do we create a separate tariff for advocates•Should fees have a maximum cap•Should there be more public involvement in the regulatory affairs especially discipline•Should there be more public involvement in fee setting tariffs.


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Documents

OVERVIEW REGULATION ENGLAND AND WALES