In the Media

Legal Services: No surprises

PUBLISHED July 13, 2006

The Legal Services Bill contains few departures from the earlier White Paper. But it is no less far-reaching for its lack of the unexpected
If a classic is a book everyone wishes they had read, but no-one has actually read, then the draft Legal Services Bill may well be a classic of its kind. Running to some 250 pages, including notes, the draft Bill certainly looks (and weighs) the part.

Speed-reading of this classic may be required. The draft Bill was published on 24 May, 2006, and the closing date for written submissions expired on 15 June, with the Parliamentary Joint Select Committee to produce its report by 25 July.

So does it contain any surprises? And how popular will it be?

Consumer complaints

In terms of structure, the draft Bill expands on the proposals made in the October 2005 White Paper. For example, and as anticipated, there is to be an entire overhaul of the mechanism by which consumers can complain about the service they receive from their lawyers.

Under the proposed regime, once the lawyer?s in-house procedure has been exhausted, complaints against all lawyers will be directed to the Office for Legal Complaints (OLC). The OLC will operate the "Ombudsman?s scheme".

Consumers of legal services will certainly praise aspects of the scheme rules. To start with, a complaint must be determined by reference to what is "in the opinion of the Ombudsman? fair and reasonable in all the circumstances of the case". This could mean a less rigorous application of legal principles to a complaint.

Then there are the costs of determining the complaint. The Ombudsman can order the respondent to pay the complainant?s costs, but there is no complementary power to require a complainant, or even the Ombudsman, to meet the respondent?s costs.

Best of all for the consumer, he or she has the option to accept or reject the Ombudsman?s determination of the complaint. If accepted, further legal proceedings are barred. But the consumer also has the option to reject a determination, presumably at no personal risk as to costs, and then pursue the respondent through the courts.

Regulatory powers

There are no great surprises over the structure of the new regime. The Law Society and the Bar Council seem to have lost the battle to retain their regulatory powers. These will now be vested in the Legal Services Board (LSB) and delegated to "approved regulators" (such as the Law Society and the Bar Council).

The rules contain detailed provisions about the powers of the LSB to intervene in, fine and oversee the approved regulators as they go about their business.

While the Law Society and the Bar Council may have accepted that the LSB will be looking over their shoulders, they do not want it breathing down their necks. The need for ?light-touch? regulation and for the LSB to be independent of the Government remain issues of concern.

Alternative structures

Business, consumers and lawyers may all find something to like in the third area of change promoted by the draft Bill, concerning new ways in which lawyers conduct their businesses.

The Bill carries through the proposal in the White Paper that lawyers should be allowed to form alternative business structures (ABSs) ? new business vehicles for the delivery of legal services. For example, an ABS could be a mixed professional practice, with lawyers and accountants under one roof, or it could be a more traditional law firm partially funded or even owned by non-lawyers.

The draft Bill provides a template for the regulation of ABSs, but the detail is not yet apparent. Thus, approved regulators will be able to apply to become licensing authorities for different types of ABS. Each licensing authority will then make rules for its type of structure. Those rules must respect complex ownership and structural requirements. For example, an ABS must have designated heads of legal practice and finance and administration.

There are perhaps no surprises in the identity of those who are keen to embrace this opportunity or in the types of work they are keen to offer.

The Co-op and the AA have already expressed their enthusiasm for the opportunities which the new regime will bring to extend the range of services they can offer their members and customers. The sort of work they have in mind is that which commentators had previously identified as being ?ripe for commoditisation?, such as conveyancing.

While this may hold no attraction for the larger firms, recent reports suggest that others are indeed attracted by the possibility of outside investment.

For the legal sector as a whole, the draft Bill is required reading. While there is still some fine-tuning to be done, the OLC, the Ombudsman?s scheme, ABSs and the LSB are well on their way to becoming a reality.

Katherine Rees is a partner at Reynolds Porter Chamberlain.