Competitive tendering for criminal legal aid contracts would have a ?disproportionate and adverse impact? on ethnic minority firms, an independent report that will inform the Carter review concluded last week.

Ethnic minority lawyers seized on the report as evidence that Lord Carter?s interim proposals for competitive tendering would breach the Race Relations Act 1976, and threatened legal action against the government if they are implemented.

The research was commissioned by the Legal Services Commission (LSC) last year to assess what effect its original plans for price-competitive tendering in London would have on ethnic minority firms, following pressure from the Black Solicitors Network (BSN).

The LSC?s proposals have now been shelved in favour of Lord Carter?s review of procurement. However, ethnic minority lawyers claim any adverse impact caused by the original proposals will be even greater under the Carter plan.

Sailesh Mehta, chairman of the Society of Asian Lawyers, said: ?We are astounded by the report, which confirms everything we have been saying. The parameter of the LSC proposals [was] not as difficult as the Carter proposals, which are based entirely on size. The report shows that if [the bidding] is based on size, there will be an even greater disproportionate effect on BME [black and minority ethnic] firms.

?The society would seriously consider instructing counsel to take legal action as soon as [Lord Carter?s interim proposals] were put into practice. This report confirms that the requirements in the Race Relations Act may well be breached. We are in discussions with the Carter team, but we do not see how they can get around this.?

The report, by research company MDA, said price-competitive tendering would disproportionately affect small firms. As ethnic minority firms are over-represented in the small category, it said they are ?most likely to lose out in the competition for contracts?.

Up to 102 ethnic minority firms in London could be excluded from the process if the LSC?s proposed minimum value of ?50,000 for contracts were introduced, the research found. BSN chairwoman Yvonne Brown said: ?The report leads to the conclusion that the proposals, as originally designed, were indirectly discriminatory and thus unlawful. [They] were rightly shelved.

?The BSN calls on Lord Carter to ensure that a similarly thorough equality impact assessment is undertaken prior to the publication of his final report? the original proposals and the current interim proposals of Lord Carter would not only severely damage the prospects of the owners of BME firms, but also the prospects of BME solicitors employed by these firms.?

Under Lord Carter?s current proposals, firms will be bidding against each other for criminal defence work by 2009. By then, the report predicts there will be a ?smaller number of larger, more efficient, good-quality suppliers.?

Law Society chief executive Janet Paraskeva said the report sent a ?clear signal? to Lord Carter that ?diversity issues must be considered fully before any changes are made to the legal aid system?.

A LSC spokesman said the research has been passed to Lord Carter.