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By Michael Scutt, 25/11/2009 10:30 am

Three things connected with Tesco Law caught my eye last week and we saw some interesting developments in the liberalisation of the legal profession, aka the legal services industry. 

Firstly, On the 18th November, the Legal Services Board (“LSB”) published its consultation paper “Alternative Business Structures: approaches to licensing”  .  The LSB will become the regulator of the regulators when ABSs come into existence in 2011..  The Act contains eight “regulatory objectives” and five “professional principles”. There will be several frontline regulators and barristers could be regulated by the SRA, Solicitors by the Institute of Legal Executives and Legal Executives by the Archbishop of Canterbury(apparently he is not only the supreme authority in the Church of England but he also oversees Notary Publics when he isn’t trying to prevent the Pope from half-inching his dioceses).  The regulatory structure seems overly complicated.

In the meantime, pending the new structures coming into force, the LSB needs to set rules for how the frontline regulators will apply the new core principles enshrined in the LSA.  They are a bit “motherhood and apple pie” in nature; for instance Part 1 1(1) sets out the regulatory objectives.  They are

(a) protecting and promoting the public interest

(b) supporting the constitutional principle of the rule of law

(c) improving access to justice (haven’t we seen this elsewhere?)

(d) protecting and promoting the interests of consumers

(e) promoting competition in the provision of services (by authorised persons)

(f) encouraging an independent, strong, diverse and effective legal profession (stop laughing at the back there)

(g) increasing public understanding of the citizen’s legal rights and duties

(h) promoting and maintaining adherence to the professional principles

S.3 states the “professional principles” that apply to “authorised persons” who should;

(a) act with independence and integrity

(b) maintain proper standards of work

(c) act in the best interests of their clients

(d) (in litigation) comply with their duty to the court  to act with independence in the interests of justice, and

(e) keep client affairs confidential

All good stuff and hard to disagree with the sentiments expressed, save that many in the profession will give a hollow laugh to 1(1)(f) above. The consultation paper seeks to put these principles into practice and in the foreword the Chairman of the LSB David Edmonds states that the LSB doesn’t want to regulate ABSs themselves, that is a job for the “front-line” regulators such as the SRA, the Bar Standards Board and ILEX, to take three.   The consultation paper is 113 pages long and I must confess to not having read it yet.  It’s next on the list. 

Secondly, another document on my reading list is “The Big Bang report – opportunities and threats in the new legal services market“ compiled by the Byfield Consultancy.  It was launched at the offices of City law firm Fox Williams LLP last Thursday to an audience of the great and the good.  I went along as well.     The report has the advantage of being only 42 pages long and contains an overview of the history of the LSA and the impetus behind it, as well as interviews with some of the main players.  

Finally, the Bar Standards Board announced last week that barristers would be allowed to join Legal Disciplinary Partnerships (LDPs) as managers (but preferably not as shareholders) in LDPs with up to 25% non-lawyer managers, be regulated by the SRA and not be required to requalify as a solicitor.  The BSB hasn’t given the green light to barristers joining ABSs; that must wait until 2010 at the earliest when more consultation has occurred.  Barrister only partnerships will be allowable (at the moment barristers practicing from chambers are all self-employed).   This decision is of historic significance – it could mark the end of the Bar as we know it. 

I will be reading the above reports and blogging on them again in due course, once the current deluge of work in my day job has calmed down.  We are now entering the beginning of the festive season when many employers like to present their staff with a gift of a compromise agreement and a visit to an independent solicitor to be told their rights.  The next few weeks look like being particularly busy this year.

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By Michael Scutt, 07/09/2009 12:17 pm

Last week I gave a talk to solicitors and practice managers at a workshop addressing the issues arising from the Legal Services Act 2007 (“LSA”) and, in particular, what the implications of the so-called “Tesco law” will be for firms.  There was some good discussion between all the delegates and there have also been some interesting comments left on the earlier post I wrote on the subject.

The LSA or, to be more precise, Alternative Business Structures (ABSs) will mean different things to different people, depending upon where you are positioned in the profession.  For instance, the Magic Circle firms will not be at all concerned by the prospect of “Tesco law” offering wills and residential conveyancing as they no longer do that sort of “private client” work. They probably have no need for external injections of capital from non-lawyers either.  They are, however, concerned that other legal markets will remain tightly regulated and will not be able to enter into multidisciplinary partnerships in the US, for example.  Smaller law firms who are not interested in cross-border work may well welcome the opportunities that private equity can provide – perhaps to fund an upgrade of IT systems as one delegate suggested to me.  For firms that are prepared to dilute the partner’s/member’s ownership by allowing in non-lawyers the introduction of ABSs is potentially exciting. The message that came through is that Tesco Law offers opportunities to these sorts of firms.

There was consensus though that for the smaller law firms, based on the high street and relying on “commoditised” legal services (e.g. wills/probate and conveyancing) for their bread and butter, Tesco law is a threat.  All delegates were sure that high street firm of solicitors as we now know them offers a quality service to clients but competing with Tesco law on price grounds alone would be an unwinnable battle.  Many high street practitioners face the future with dread. 

I don’t think this necessarily has to be the case, particularly for practitioners undertaking non-commoditised work (by which I broadly mean family disputes, all litigation apart from lowish-value road traffic accident personal injury claims and anything with any emotional involvement in for the client).  Clients are increasingly price-sensitive but they also want a quality service: the “dial one for wills. Dial two for conveyancing and dial 3 if your ex-partner won’t let you see the kids this weekend” type approach just won’t work for most people. One of the respondents to my earlier post, John Flood suggests this may be too complacent though – what will happen if Trade Unions, who are used to funding personal injury litigation, decide to get involved more directly and either buy into a law firm or set up a new business structure with a Citizens Advice Bureau or Law Centre? I think that is a good point albeit I can’t see that a Trade Union would want to get involved where it couldn’t recover its costs from the losing party.  In other words they may be happy to fund personal injury litigation but not a bitterly fought costly residence/contact dispute between parents. 

Clients  may initially want to adopt a Tesco law solution but they won’t do so again if the service they get is cheap and unimpressive.  Many of the delegates at the workshop made the point, strongly, that the potential clients using Tesco Law in the first place (before getting disillusioned) would represent a huge loss to the profession.  I agree and, in my view solicitors need to be promoting themselves much more pro-actively to compete against this.

 Change is on the way and it doesn’t necessarily have to mean the destruction of the profession.  I will suggest how they can do that without utilising massive financial cost in my next post.  As ever I would welcome your comments on these issues; please feel free to let me know what you think, or email me directly at michaelscutt@dalelangley.co.uk or phone on 0207 464 8433