Law Society of England and Wales

Council Report (April 2011)

Disclaimer: I’ll begin by stating that the opinions in this article are my own and not those of my employer, Cardiff Law School. The law school does not favour any form of legal adviser – it educates prospective solicitors, barristers, FILEX, licensed conveyancers and paralegals. Similarly, it doesn’t prefer one regulator of legal services to another. I, on the other hand am a solicitor. I support solicitors and want them to flourish and dominate the legal services sector. As a member of the governing council of the Law Society, a body which the Legal Services Act 2007 (LSA 2007) designated an approved regulator, I wish the SRA to be the best regulator of legal service providers. I issue this disclaimer because this article is about regulation and identity.

Should SRA regulate ABS?

By the time you read this the council will have decided whether to apply to the Legal Services Board (LSB) to become a licensing authority for alternative business structures (ABS). This is the main business of the March meeting. Such an application is really an approval of the SRA’s proposals to regulate ABS. Once any application has been approved by the LSB, the SRA will be able to change its arrangements without recourse to council since the Law Society is prohibited from interfering with the SRA’s exercise of its regulatory functions. However, the council can prevent the SRA from obtaining these powers.

This is, therefore, an important decision, the most important that council has had to make in my 5 years as a member. If the Law Society (and the LSB) approve the proposal but the SRA’s arrangements turn out to be inadequate, the Law Society, as approved regulator, will suffer damage to its reputation, could face enforcement action from the LSB and may be at financial risk (of a fine or having to make up any deficit in the Compensation Fund, for example). The LSB will blame the Law Society for having approved the defective arrangements.

On the other hand, if the Law Society does not approve the licensing application in the March meeting, the SRA will be unable to regulate ABS from the start date of 6 October. In that case if the LSB decides that the ABS regime must, nevertheless, begin on 6 October and considers that there will be no competent regulator for ABS, it may exercise its powers under LSA 2007 s 73(1) to license ABS. In other words, the LSB could become a direct regulator as well as an oversight regulator. Many people, including the chairman of the SRA, regard this as undesirable. The LSB could make different provision for ABS than the SRA makes for solicitors – this is the level playing field argument. Although the Law Society would not suffer reputational damage if the LSB proved to be an inadequate regulator, the LSB would almost certainly blame the Law Society because its late refusal of the SRA’s application to licence ABS would have caused the LSB to draft its ABS rules in a rush. Furthermore, the LSB would look to the approved regulators (who pay for it) to pay any compensation or damages it becomes liable to pay any third party as a result of its inadequate regulation of ABS. The Law Society pays some 80% of the LSB’s upkeep so one would expect it to be required to pay 80% of the compensation. Thus the Law Society cannot win either way.

Council raised a number of concerns about the licensing application to the SRA’s chairman and chief executive during its February meeting. The SRA said they would consider these issues and they have now signed off their application. I understand that progress has been made on some issues but not on others. Since I have not seen the final application, I cannot be more precise.

I expect council to approve the application, the LSB to approve it too and the timetable for ABS will remain unchanged. But it is not that simple. Some sole practitioners are petitioning for a SGM of the Law Society at which they intend to condemn ABS and all those who have acquiesced in their implementation. They also seek a postal vote of all solicitors in an attempt to wreck the SRA’s application. Since only 100 signatures are needed to requisition the SGM this tactic might succeed. I hope not. I don’t like ABS but Parliament voted for these provisions and both this government and the last one planned for 6 October 2011 to be the launch date for ABS. All the postal ballot will achieve is a waste a lot of the Society’s money for no purpose.

Identity crisis

Until the passage of LSA 2007 it was clear what solicitors were and who regulated them. I am on the Roll but I don’t have a practising certificate. That makes me a solicitor (non-practising). I am regulated by the SRA just as practising solicitors are. The SRA regulates individual solicitors.

LSA 2007 added the complication of entity-based regulation to the mix. Although it is clear that the entities currently regulated by the SRA are solicitors’ businesses (sole practitioners, firms, LLPs, - and even LDPs are substantially owned by solicitors), this will change with ABS.

Will solicitors who work for ABS still be regarded as solicitors? This question is relevant because the SRA wishes to regulate ABS which are not exclusively legal services businesses. Will it matter if solicitor employees of ABS don’t have practising certificates because they don’t do reserved work? Will people who have been admitted and remain on the Roll but choose to be regulated by ILEX Professional Standards, the Council for Licensed Conveyancers or some other regulator still be solicitors? These are new questions for both the Law Society and the profession to address. What is our identity? What makes solicitors distinctive players on a playing field inhabited by legal services providers?

I started with a statement of identity so I’ll finish with one. I am a solicitor. I support solicitors and want them to flourish and dominate the legal services sector. As a member of the governing council of the Law Society, I wish the SRA to be the best regulator of legal service providers. 

David Dixon
Law Society Council Member for South Wales

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