This document sets out the analysis of the responses to our consultation "In the public interest?". The consultation dealt with matters falling to the Government arising from the Office of Fair Trading (OFT) report "Competition in professions".
Our consultation paper "In the public interest?" examined the possible implementation of legislation on opening up the conveyancing and probate markets; multi-disciplinary practices and other new business structures for providing legal services; the possible extension of legal professional privilege to non-lawyers; and the Queen's Counsel (QC) system. The consultation was aimed at both professionals and members of the public in England and Wales. It was conducted in line with the Code of Practice on Written Consultation issued by the Cabinet Office. The Code criteria set out in annex D were followed.
On publication, we initially sent some 199 copies to the main professional bodies, representative groups, Government departments, public bodies and others. Following publication, we received requests for over 1000 further hard copies and we recorded 3992 visitors to the consultation document on the website, during the period of consultation.
We received 185 substantive replies to the consultation. 132 of those were identifiable as from individual lawyers or lawyer affinity groups. The rest were from companies, Government departments and other groups and individuals. A list of respondents appears at annex A. We are grateful to all those who responded and for the time and effort given to their replies.
Following this analysis, the Government will decide how to take forward its policy in respect of the issues raised in the consultation: it is planning to set out the way forward in a statement before the summer break.
Any queries concerning this report may be addressed to:
Mrs Susan Samuel
Lord Chancellor's Department
Legal Services Development Division
6th Floor West
Selborne House
54-60 Victoria Street
London SW1E 6QW
Tel: 020 7210 1454
Fax: 020 7210 0613
Email: Susan Samuel
Further copies of this report can be obtained from Mrs Susan Samuel at the above address or by phoning 020 7210 1454.
In July 2002, the Government consultation "In the public interest?" looked at the issues that fell to it following the Office of Fair Trading's (OFT's) report published in March 2001 entitled "Competition in professions."
Restrictions on competition may be justified if, for example, they are in the public interest. The OFT report had highlighted some of the potential anti-competitive restrictions found in the legal professions but it did not examine whether or not these restrictions could be justified (for example, on the basis of countervailing consumer benefits).
The Government is committed to ensuring that the professions are properly subject to competition. In most cases, open and competitive markets are the best way to ensure that consumers get the best possible service. On all the issues raised in the consultation, the Government's position is that the market should be opened up to competition unless there are strong reasons why that should not be the case, such as evidence that real consumer detriment might result from such a change.
This report sets out the analysis of the responses to our consultation on the matters falling to the Lord Chancellor's Department arising from the OFT report. The report follows the format of the consultation paper and is divided into five chapters on (1) implementation of legislation on conveyancing and (2) probate, (3) the multi-disciplinary environment for solicitors, (4) legal professional privilege, and (5) the QC system.
We looked at how conveyancing services are provided now; explained how implementation of the existing legislation would work (including what would need to be done to implement it); and asked what the likely 'take up' by new providers and benefits to the consumer might be if sections 34 to 52 of the Courts and Legal Services Act 1990 were implemented.
Most respondents thought there would be a demand from new providers wanting to join the Authorised Conveyancing Practitioners scheme. But a significant proportion of respondents did not expect that to be sustained beyond an initial flourish.
Most respondents did not consider that the Authorised Conveyancing Practitioner scheme provided enough safeguards to protect consumers, and took the view that Authorised Conveyancing Practitioners should be regulated to the same degree as solicitors. However, about a quarter of respondents considered the safeguards would be sufficient.
Almost all respondents considered there would be a significant impact on solicitors' practices, with smaller high street practices, and those in rural areas feeling the pinch most. Again, most respondents felt there would be implications for access to justice, particularly for those living in rural communities.
About two thirds of respondents considered there were more disbenefits to introducing the Authorised Conveyancing Practitioner scheme, with the remaining third taking the view that there would be a net benefit in introducing the scheme.
The chapter on probate looked at how probate services are provided now; explaining how implementation of the existing legislation would work (including what would need to be done to implement it); and tried to gauge the likely 'take up' by new providers and benefits to the consumer. Given that sections 54 and 55 of the Courts and Legal Services Act 1990 have quite different applications, the chapter, which explained how the new arrangements would work, was in two parts.
Most respondents thought there would be a demand from new providers wanting to become authorised to provide probate services.
Most respondents did not consider that there was sufficient protection for consumers included in the arrangements for authorising new providers under either section 54 or section 55 of the Courts and Legal Services Act 1990. Many thought that new providers should be regulated to the same degree as solicitors, and some considered that existing controls should be tightened. However, 20% of respondents considered the safeguards were sufficient to protect consumers.
This chapter considered the restrictions in legislation that inhibit solicitors from developing new business models. We were concerned with sounding out the appetite for, and the possible effects of, possible change in the legislation, in regard to the provision by solicitors in England and Wales of legal services, with particular reference to new business models; and with sounding out the appetite for, and possible effects of, extension of the provision of legal services by employed solicitors. Our consultation did not put forward particular new business models nor the means of their regulation.
We sought views on whether the Law Society powers to regulate solicitors and solicitor partnerships should be broadened, to enable them to regulate non-solicitor partners and any business entity through which solicitors provide services, irrespective of its structure or ownership. It is for the Law Society to bring forward detailed proposals that would satisfy the Master of the Rolls or the Lord Chancellor that they safeguard the public interest in maintaining a competent, independent and honest profession.
118 respondents commented on this chapter. 47 of the responses made general comments whilst the remainder addressed one or more of the specific questions asked in the chapter. The majority of respondents were providers of legal services rather than users of legal services which meant that user demand for new services was difficult to gauge.
Appetite for change was mixed: for some solicitors providing services through new business models was seen as an exciting opportunity; for others a concept incompatible with the core values of the profession.
Of those that responded to the question on the effect of new business structures on the current legal market, a large majority predicted a reduction in the number of solicitors' practices (but that solicitor numbers would remain constant as more jobs were created in the firms using new business structures). It was felt that rural areas would suffer more from such a reduction.
Particular concern was expressed about publicly funded work; it was felt that such work would not be taken on by new providers and the providers that already existed would struggle if profitable work, which often cross-subsidised their publicly funded work, was 'cherry picked' by commercially minded new entrants. There was no groundswell of opinion that provision of privately funded legal work would be detrimentally affected by the introduction of new business models, except possibly in some rural areas.
Over 50% of respondents who answered the questions on regulation saw the Law Society as the natural regulators of a new system.
The chapter sought to explore how the concept of LPP might be developed. We looked at the options to restrict, maintain or extend LPP.
46 respondents addressed the questions on LPP. Of these, more than half (52%) expressed a preference for not extending LPP beyond its present scope. On the other hand, 37% of respondents advocated an extension of LPP. A considerable majority of these would rather see this achieved by according privilege to the advice given by members of designated bodies, as opposed to attaching it to the nature of advice given, irrespective of the profession of the adviser.
The chapter sought evidence to enable us to address the OFT's concerns.
76 respondents answered the questions on the QC system. These included the Bar Council, the Law Society, the DTI, the Treasury and the Judiciary, as well as many individual law firms, local law societies and a commercial bank. The majority did see some benefit in a QC system (although the reasons varied).
There was much support from law societies, law firms and solicitors' associations for an appointment body independent of Government. The Treasury and the DTI, supported by the Law Society, suggested some form of re-accreditation system which could result in the removal of the award if performance declined. The Judiciary and the Bar were against such a system. There was a range of views about the value and quality of the present consultation system.
REVIEW OF THE REGULATORY FRAMEWORK
The consultation document announced a review of the regulatory framework. The Government is aware that the legal services market is changing in nature and that some of the matters discussed in the consultation (for example, removing the barriers to legal services being provided through new business structures) would add to and accelerate that change. The current regulatory framework, involving a wide range of regulators with overlapping powers and responsibilities, is complex and in some respects is not delivering what the public has a right to expect. The Government therefore decided to undertake a review of the regulatory framework for legal services, the first step being to settle the detailed parameters of such a review and the machinery for completing it.
RURAL PROOFING
The Government is committed to ensuring that all its policies take account of specific rural circumstances and needs. We asked to what extent any impact future schemes might have, could affect smaller practices and whether this might create disproportionate impact on access to legal services for those in rural communities. We shall have to assess:
whether resulting policy is likely to have a different impact in rural areas from that elsewhere, because of the particular characteristics of rural areas; and
where necessary, what policy adjustments or compensations might have to be made to reflect rural needs and circumstances (bearing in mind the likely costs).
REGULATORY IMPACT ASSESSMENT
In taking matters forward and developing policy after the consultation, the information from responses to the consultation will be used to inform any regulatory impact assessment that will be needed.
IN CONCLUSION
The next step for the Government is to decide how to take forward the issues raised. In doing so, it will have to gauge the impact on the market in legal services and the impact on consumers.
We are grateful to all of the respondents for the care and time they took in responding the consultation paper.
Section 22 of the Solicitors Act 1974 reserves conveyancing work to solicitors and, since the Administration of Justice Act 1985, to licensed conveyancers1. However, the Courts and Legal Services Act 1990 provided for further competition to be introduced by means of an exemption from Section 22 of the Solicitors Act. This would allow, subject to appropriate regulation, other potential providers of conveyancing services (e.g. banks and building societies) to be designated as 'authorised practitioners' to undertake conveyancing work.
In his report, 'Competition in professions', published March 2001, the Director General of Fair Trading stated: "Fresh consideration should be given to implementing the parts of sections 34-52 of the Courts and Legal Services Act not so far implemented, with a view to increasing competition in the provision of conveyancing services."
In its consultation paper 'In the public interest?', the Government said that it favoured opening up the conveyancing market further, and, in principle, was willing to incur the cost of establishing an independent regulator, if that represented good use of public funds and the public interest could be protected. The Government sought views on whether the opening up of the conveyancing market to new providers could be achieved successfully by implementation of sections 34-52 of the Courts and Legal Services Act 1990. Under these provisions a range of practitioners would be possible, including banks and building societies. These would be authorised and regulated by an Authorised Conveyancing Practitioners Board. The Board would need to prepare detailed operating procedures and rules for approval by the Lord Chancellor. These would include:
arrangements for the authorisation of practitioners
regulations about the competence and conduct etc of authorised practitioners
arrangements for ensuring no conflict of interest arises
the setting up of a Conveyancing Appeals Tribunal to hear appeals from any person aggrieved by certain decisions of the Board
a Conveyancing Ombudsman Scheme
compensation arrangements
investigation, enforcement and intervention powers
There were 185 responses to the consultation. Of these 128 commented on proposals to use existing statutory powers to open up the conveyancing market to new providers. Just over half of these (68) chose to answer specifically one or more of the questions raised in the consultation on the Authorised Conveyancing Practitioner scheme. The remainder of respondents chose to express their views by way of general comments. It is difficult to attribute some of the general comments made to each of the questions raised in the consultation. This chapter therefore sets out below, first, the responses to each question raised, followed by a breakdown of the points made by respondents in the general comments.
| Question 1 - What is the likely level of demand from other potential providers (e.g. banks and building societies) to be able to offer conveyancing services under the arrangements provided for in sections 34-52 of the Courts and Legal Services Act? Would this demand be affected if the Law Society were to allow employed solicitors to provide services (including conveyancing services) to the public? Is the introduction of e-conveyancing likely to affect the demand? |
A number of respondents expressed the view that it was difficult to predict the likely level of demand if the Authorised Conveyancing Practitioners Board were to be established. There were 57 specific responses to this question. Most of those (60%) thought there would be a good degree of interest from new providers in becoming authorised under the scheme. There were some concerns expressed, in particular that "lighter" regulation of Authorised Conveyancing Practitioners (when compared to existing providers) would be unfair and that consumers would suffer because of a lack of safeguards. There were also concerns that Authorised Conveyancing Practitioners (e.g. banks) would "cherry pick" straightforward work leaving more complex and/or less profitable work to existing providers. Most of the respondents to this question were lawyers or organisations representing lawyers. However, the response did include two potential institutional providers.
A smaller number of those who responded specifically to the question (35%) felt that, while there may be an initial flourish of interest, there would not be any significant or sustained interest in the scheme, particularly if Authorised Conveyancing Practitioners were regulated to the same degree as existing providers of conveyancing services. Again these responses came almost exclusively from lawyers or organisations representing lawyers. But it did include one response from a potential institutional provider.
The introduction of e-conveyancing was not considered to be of major significance, although a small number of respondents felt it might attract more potential providers to join the scheme. Equally, of those respondents who addressed the issue, most did not consider that allowing employed solicitors to provide services (including conveyancing services) to the public would affect significantly the likely "take up" of the Authorised Conveyancing Practitioners scheme.
| Question 2 - Are these safeguards [those set out at Section 40 of the Courts and Legal Services Act 1990 which provide for the Lord Chancellor to make regulations about the competence and conduct of authorised practitioners] sufficient to protect the consumers' interests? Will they be sufficiently flexible to avoid excessive regulation when separate rules for electronic conveyancing have been introduced? |
Of those who responded specifically to the question (59), the majority (56%) did not believe that the safeguards would be sufficient to protect consumers. However, some commented that it was difficult to reach a considered view in the absence of detailed regulations, which would need to be prepared by the Authorised Conveyancing Practitioners Board. These responses were almost exclusively from lawyers or organisations representing lawyers. Notably, the General Council of the Bar took the view that: "The obligations placed upon solicitors both by professional regulation and the common law are onerous and, given that residential conveyancing involves the largest financial obligation undertaken by most households, rightly so."
An additional 15% responded by saying that Authorised Conveyancing Practitioners should be regulated to the same degree as solicitors. Again these responses were almost exclusively from lawyers or organisations representing lawyers. But it did include one response from a potential institutional provider.
Some 28% of those who responded to the question thought the safeguards would be both flexible and sufficient to protect consumers' interest provided they were properly enforced. A number of incidental points were raised by individual respondents:
that the Authorised Conveyancing Practitioners Board should be charged with regulating all conveyancing activity,
that setting up the Authorised Conveyancing Practitioners Board would create another regulator and add to the existing regulatory maze, and
that Authorised Conveyancing Practitioners would lead to a loss of professionalism and "personal service".
Most of the responses came from lawyers or organisations representing lawyers. However, about 25% were from potential institutional providers or organisations representing non-lawyers.
| Question 3 - If the Government were to introduce the authorised conveyancer scheme, would there be any likely impact on solicitors' firms, particularly the smaller practices? And if so, is any impact likely to have implications for the location of firms, particularly in relation to the availability of access to legal services for those in rural communities? Is there likely to be any innovation in service delivery to rural communities as a result of these changes? |
Almost all of those who responded specifically to this question (59) considered there would be a significant impact on solicitors' practices if the Authorised Conveyancing Practitioners scheme were to be introduced. Most felt this would result in the centralising of solicitors' firms in large conurbations, with smaller high street practices, and those in rural areas, feeling the pinch most. Again, most respondents felt there would be implications for access to justice, particularly for those living in rural communities. Some respondents also felt that the closure of smaller/rural practices would lead to a reduction in consumer choice, that institutional providers might "cherry pick" the more profitable services, or seek to "hide" the true cost of their services by making them part of wider package deals (e.g. mortgage services). However, one respondent took the view that lifting restrictions in other areas (e.g. facilitating multi-disciplinary partnerships) might reduce the impact on solicitors' firms.
Almost all responses were from lawyers or organisations representing lawyers. However, about 7% of the responses came from new institutional providers or organisations representing non-lawyers.
| Question 4- What do you perceive may be the benefits that could flow from widening provision of conveyancing services through implementation of this legislation? Are there disadvantages? |
Of those who responded specifically to this question (57), most (67%) considered the disbenefits of introducing the Authorised Practitioner Scheme would outweigh the benefits. Particular concerns included:
loss of small firms of solicitors with implications for access to justice, particularly in rural areas,
conflicts of interest if "package deals" by lenders are permitted,
loss of independent advice to consumer,
lack of ability of Authorised Conveyancing Practitioners to deal with "follow on" or ancillary work/difficulties, and poor quality of work generally,
loss of the trust which exists between existing practitioners on which conveyancing depends,
lack of consumer protection.
These responses were almost exclusively from lawyers or organisations representing lawyers.
The remainder of respondents (33%) said they could see benefits in the introduction of the scheme. Particular benefits identified included:
greater competition/choice of provider and the driving out of inefficient providers,
the speeding up of e-conveyancing (large institutions being able to make the investment needed),
a quicker and more efficient service,
a "one stop" shop for conveyancing/mortgage services.
While most of these responses were from lawyers or organisations representing lawyers, about 40% came from new institutional providers or organisations representing non-lawyers.
Of the 128 respondents who commented on proposals to use existing statutory powers to open up the conveyancing market to new providers, 90 chose to make general comments either instead of, or as well as, answering specific questions raised in the consultation document.
Of the respondents that expressed general comments:
41% felt that existing providers would not be able to compete with large institutional providers and that this would have a significant impact on solicitors' firms, particularly smaller practices and those in rural areas, and that this could have implications for access to justice. One respondent felt that lawyers from ethnic minorities would suffer disproportionately as a result of this, given that most tend to be employed in smaller practices. Most of these responses came from lawyers or organisations representing lawyers. But the responses did include one from a potential institutional provider. The Legal Services Commission commented: "…the Commission is not at all averse to change or to exploring new ways of working, indeed just the opposite. Nevertheless, given that private practice firms operating under contracts with the Commission currently form the back-bone of the publicly-funded system, it will be vitally important not to make changes without a strategy being in place to address any resulting problems for legal aid. If the Law Society and Legal Aid Practitioners Group are right about the effect of the proposed changes on rural and high street practices, it might require very substantial increases in legal aid rates, with serious consequences for the legal aid budget, to avoid that consequence. We therefore agree that further evaluation needs to be conducted to establish the likely consequences of relaxation of regulation in this area, and urge that any programme of change needs to be managed carefully if the aims of the Community Legal Service and the Criminal Defence [Service] are not to be undermined."
The General Council of the Bar also commented: "Opening the market" for conveyancing and for probate services would be likely to undermine the viability of smaller firms of solicitors if banks or building societies succeeded in attracting away work. The problems of conflict and regulation will have to be overcome. The consumer would be the loser through the restriction that would be brought about in the local availability of legal advice as a result of the loss of smaller firms. The loss of smaller firms would be likely to impede the development of the Community Legal Service because smaller firms are essential members of the Community Legal Service Partnerships (CLSPs)."
27% of respondents felt that the conveyancing market was already very competitive, and that if the Authorised Conveyancing Practitioner scheme was introduced it would lead to an increase in "conveyor belt conveyancing" with poor levels of service to clients. Most of these responses came from lawyers or organisations representing lawyers. But the responses did include three from non-lawyers.
25% expressed concerns about the level of regulation to which Authorised Conveyancing Practitioners would be subject, with most believing that they should be regulated to the same standard as solicitors. Most of these responses came from lawyers or organisations representing lawyers. But the responses did include one from a potential institutional provider. The Legal Services Ombudsman commented: "I believe that any regulatory arrangements for the new providers will need to ensure that fairly rigorous standards of service and conduct are maintained. The obligations currently imposed on solicitors are a good benchmark for such standards". The Legal Services Ombudsman also expressed a concern that introduction of the proposed arrangements would add to the existing "regulatory maze" for legal services.
17% of respondents considered that if large institutions became Authorised Conveyancing Practitioners they would use their financial muscle to dominate the conveyancing market. For example, they would seek to tie their customers into package deals (e.g. mortgage deals), and disguise the true cost of their services. Most of these responses came from lawyers or organisations representing lawyers. But the responses did include one from a potential institutional provider.
14% of respondents did not consider there was a demand for the Authorised Conveyancing Practitioner scheme. Some were concerned that new providers might "cherry pick" simpler, or more lucrative work. These responses came principally from lawyers or organisations representing lawyers. But about 15% of the responses came from potential institutional providers or organisations representing non-lawyers.
7% felt that the proposed level of regulation of Authorised Conveyancing Practitioners would be sufficient to protect the public. They also felt that Authorised Conveyancing Practitioners would be likely to have access to capital needed to develop their businesses, would employ modern business techniques, and would provide a quicker and more efficient conveyancing service. These responses were exclusively from organisations representing non-lawyers.
6% of respondents were concerned about the potentially significant cost of setting up the Authorised Conveyancing Practitioners scheme and believed it would do little but add to the existing "regulatory maze". Responses were from lawyers or organisations representing lawyers.
The Law Society concluded that: "Having carefully weighed up the arguments presented in the consultation paper, the Society has concluded that in the wider public interest it is unable to support the introduction of ACPs [Authorised Conveyancing Practitioners] for a number of reasons". These are set out in detail in the Law Society's response.
While the Department of Trade and Industry confirmed the Government's position that it favoured opening up the conveyancing market to additional providers, it also noted that: "…the market [for conveyancing services] may have changed since the Act [Courts and Legal Services Act 1990] was introduced in 1990 and e-conveyancing will have an impact on the future provisions of services" and it concluded that: "…the Regulatory Review should be charged with examining what is the appropriate way to regulate conveyancing services, taking into account how the existing regulatory framework could be enhanced to deliver more effective consumer protection."
Most respondents thought there would be a demand from new providers wanting to join the Authorised Conveyancing Practitioners scheme. But a significant proportion of respondents did not expect that to be sustained beyond an initial flourish.
Most respondents did not consider that the Authorised Conveyancing Practitioners scheme provided enough safeguards to protect consumers, and took the view that Authorised Conveyancing Practitioners should be regulated to the same degree as solicitors. However, about a quarter of respondents considered the safeguards would be sufficient.
Almost all respondents considered there would be a significant impact on solicitors' practices, with smaller high street practices and those in rural areas feeling the pinch most. Again, most respondents felt there would be implications for access to justice, particularly for those living in rural communities.
About two thirds of respondents considered there were more disbenefits to introducing the Authorised Conveyancing Practitioner scheme, with the remaining third taking the view that there would be a net benefit in introducing the scheme.
Section 23(1) of the Solicitors Act 1974 prevents any unqualified person (i.e. persons other than a solicitor, barrister or duly certified notary public) from directly or indirectly, drawing or preparing for fee, gain or reward, any papers on which to found or oppose a grant of probate or letters of administration. If implemented Sections 54 and 55 of the Courts and Legal Services Act 1990 would amend section 23 of the Solicitors Act 1974 by opening up the classes of institutions or persons who could undertake this (paid) work. Section 54 of the Courts and Legal Services Act 1990 was intended to provide that institutions such as banks, building societies and insurance companies should be allowed to provide probate services. Section 55 of the Act would also enable the Lord Chancellor, subject to an approval procedure set out at Schedule 9 to the Act, to add to the list of approved bodies whose members should be regarded as qualified to provide probate services (e.g. licensed conveyancers, legal executives or other body approved under Schedule 9 to the 1990 Act).
In his report, 'Competition in professions', published March 2001, the Director General of Fair Trading suggested that consideration should be given to the implementation of both Sections 54 and 55. He said: "Fresh consideration should be given to the implementation of section 54 and 55 of the Courts and Legal Services Act to allow banks, building societies and insurance companies to provide probate services. Currently, such organisations may provide probate services when named as executors of a will, but they may not be instructed to act as agents of an executor. Implementation of sections 54 and 55 would be likely to increase competition in the market for probate services."
In its consultation paper 'In the public interest?', the Government said that it favoured opening up the market for probate services further and, in principle, was willing to incur the cost of so doing if that represented a good use of public funds and the public interest could be protected.
There were 185 responses to the consultation. Of these, 122 commented on proposals to use existing statutory powers to open up the probate market to new providers, and about half of those (63) chose specifically to answer one or more of the questions about opening up the market for probate services. The remainder of respondents chose to express their views by way of general comments. It is difficult to attribute some of the general comments made to each of the questions raised in the consultation. This chapter therefore sets out below, first, the responses to each question raised, followed by a breakdown of the points made by respondents in the general comments.
| Question 5 - If section 54 of
the Courts and Legal Services Act were implemented it is unlikely
that banks, building societies or insurance companies would be (or
could be) regulated in the provision of probate services by the Financial
Services Authority. If this is the case, the only regulatory control
over these bodies would be the condition that they are a member of,
or otherwise subject to, a scheme which: |
52 respondents chose to answer this specific question. Of those, 79% did not consider that proper controls could be exercised over any new providers authorised under the provisions of Section 54 of the Courts and Legal Services Act 1990. Many felt conflicts of interest would arise and that there should be specific regulation to deal with those and that overall the change would not be in the consumers' interest. Most respondents also felt that any new providers should be regulated, in the provision of probate services, to the same degree as solicitors. Most of these responses were from either lawyers or organisations representing lawyers. However, it did include one response from a non-lawyer and one from a potential institutional provider.
10% of respondents considered that the proposed controls were sufficient. Most of these responses (75%) came from non-lawyers or potential institutional providers.
A small number of respondents (about 5%) expressed additional concerns that if the scheme were to be adopted, and there was any significant take up by new providers, there could be resulting closure of many solicitors' practices, many of whom relied on a steady flow of probate (and conveyancing) work to support their less profitable, publicly funded, work. The respondents considered that there could be resulting implications for access to justice if the scheme were introduced.
Again a small number of respondents (about 5%) expressed the concern that banks would "cherry pick" more profitable work.
| Question 6 - Is the procedure set out at Schedule 9 of the Courts and Legal Services Act 1990, under which the Lord Chancellor may add to the list of 'approved bodies' whose members should be regarded as qualified to provide probate services for reward, sufficient to ensure there is adequate protection for consumers? |
Of the respondents who chose to answer this specific question (53), 77% did not consider that the approval procedure at Schedule 9 to the Courts and Legal Services Act 1990 provided sufficient regulatory control to protect consumers. Most considered that the level of regulation should be the same as it is for solicitors providing probate services. Reservations expressed included concerns about the potential for dishonesty and negligence. Most responses were from lawyers or organisation representing lawyers. But there were two responses from non-lawyers and one from a potential institutional provider.
20% of those who responded specifically to the question did consider that the level of regulation provided for by Schedule 9 to the Courts and Legal Services Act 1990 would be sufficient to protect consumers. Most of the responses came from lawyers or organisations representing lawyers, but about 30% came from non-lawyers including potential institutional providers.
A small number of respondents (about 3%) expressed a concern about the need to ensure the sufficiency of qualification and training arrangements maintained by any new providers, and the concern that smaller/rural solicitors' practices would suffer if there was any significant take up in the scheme.
| Question 7 - The broad range of regulated activities by solicitors requires high levels of regulation. This may lead to higher costs which are passed on to consumers in the form of higher prices for services provided. The lower regulatory burden applied to new providers of probate services, approved under Section 55 of the Act, may lead to lower prices to the consumer, but do they provide sufficient protection for consumers? |
Of the respondents who chose to answer this specific question (45), 89% did not consider that the level of regulation which would apply to those new providers approved under Section 55 of the Courts and Legal Services Act would be sufficient to protect the public. Some considered that lesser regulation would lead to abuses and that there should be a level regulatory playing field in respect of existing and new providers. The need for appropriate indemnity cover was also commented on. The responses were from lawyers or organisations representing lawyers.
9% of respondents considered that the level of regulation provided for by Schedule 9 to the Courts and Legal Services Act would be sufficient to protect the consumers' interest. These were from non-lawyers including potential institutional providers or bodies representing non-lawyers.
One potential institutional provider also commented that, because it was being proposed to open up only a small part of the probate process, any change would be likely to have very little cost impact in the provision of probate services.
A further potential institutional provider also noted that there had been a limited take up in the licensed conveyancer scheme provided for by the Administration of Justice Act 1985 (there were 762 licensed conveyancers in April 2002) and wondered whether the public might prefer to use a lawyer for certain types of work including probate.
| Question 8 - What is the likely level of demand from other potential providers to be able to offer probate services provided for by either section 54 or section 55 of the Courts and Legal Services Act and how would this demand be affected if the Law Society were to allow employed solicitors to provide services (including probate services) to the public? |
Of the respondents who chose to answer this specific question (44), 61% considered there would be likely to be a take up in the scheme by new providers, but most of these did not believe that the change would be in the consumers' interest. There were calls for a level regulatory playing field, and particular concerns expressed about conflicts of interest, the increased risk of fraud and the potentially high costs that might be charged by new institutional providers. A small number of respondents expressed the additional concern that if the scheme was adopted, and there was any significant take up by new providers, this could result in the closure of many solicitors' practices, many of whom relied on a steady flow of probate (and conveyancing) work to support their less profitable, publicly funded, work. A few respondents also expressed the concern that new providers might "cherry pick" more profitable work. Most respondents considered there could be resulting implications for access to justice if the scheme were introduced.
About 18% of respondents (mostly lawyers or organisations representing lawyers) did not consider it would be possible to gauge the likely level of interest in the scheme.
A smaller number, about 11%, did not consider there would be any significant interest in the scheme by new providers. Most responses came from lawyers or organisations representing lawyers. But it included one response from a potential institutional provider.
Some 9% of respondents commented that there would be little impact on the probate market or the demand for the scheme if the Law Society were to allow employed solicitors to provide services (including probate services) to the public. 50% of these responses came from potential institutional providers.
| Question 9 - If the Government were to implement the measures provided for in Sections 54 and 55 of the Act, would there be any likely impact on solicitors' firms, particularly the smaller practices? And if so, is any impact likely to have implications for the location of firms, particularly in relation to the availability of access to legal services for those in rural communities? What innovations in service delivery might be made by providers to continue to satisfy customer demand, especially in rural areas? |
Of the respondents who chose to answer this specific question (48), 85% considered that significant probate work could go to new providers and that there would be likely to be a significant impact on solicitors' firms. Some respondents considered that larger firms may centralise their operations in main conurbations, and that many smaller high street or rural practices may be forced to close, with resulting implications for access to justice. However, a small number of these respondents commented that the impact would be dependent upon the level of "take up" by new providers - some expressed the view that it was difficult to see what other new providers would be interested in the scheme.
About 15% of respondents did not consider that there would be any significant impact for solicitors' practices. Some felt this was because many people would still prefer to obtain probate services from a solicitor.
Of the 122 respondents who commented on proposals to open up the probate market to new providers, 58 chose to make general comments either instead of, or as well as, providing specific responses to one or more of the questions raised in the consultation document.
Of the respondents that expressed general comments:
27% expressed a concern that the consumers' interest would not adequately be protected, with many believing that large institutions would put the interests of their shareholders before those of their customers. Some respondents also considered that large institutions may seek to disguise the true cost of their services by means of "package deals". The Law Society expressed in its response the view that "We are opposed to the introduction of authorised probate practitioners because - as the Government has itself indicated - it will not be possible through that route to provide the full range of consumer protections needed for this work.".
22% of respondents considered that there would be a significant impact on solicitors' practices, particularly on smaller firms and those in rural areas. Many of these respondents also considered there would be access to justice implications, either because of the resulting lack of legal services locally, or because many firms relied on a steady flow of probate (and conveyancing) work to support their less profitable, publicly funded work. The Legal Services Commission commented: "…the Commission is not at all averse to change or to exploring new ways of working, indeed just the opposite. Nevertheless, given that private practice firms operating under contracts with the Commission currently form the back-bone of the publicly-funded system, it will be vitally important not to make changes without a strategy being in place to address any resulting problems for legal aid. If the Law Society and Legal Aid Practitioners Group are right about the effect of the proposed changes on rural and high street practices, it might require very substantial increases in legal aid rates, with serious consequences for the legal aid budget, to avoid that consequence. We therefore agree that further evaluation needs to be conducted to establish the likely consequences of relaxation of regulation in this area, and urge that any programme of change needs to be managed carefully if the aims of the Community Legal Service and the Criminal Defence [Service] are not to be undermined."
The General Council of the Bar also commented: "'Opening the market' for conveyancing and for probate services would be likely to undermine the viability of smaller firms of solicitors if banks or building societies succeeded in attracting away work. The problems of conflict and regulation will have to be overcome. The consumer would be the loser through the restriction that would be brought about in the local availability of legal advice as a result of the loss of smaller firms. The loss of smaller firms would be likely to impede the development of the Community Legal Service because smaller firms are essential members of the Community Legal Service Partnerships (CLSPs)."
19% of respondents considered there should be a level regulatory playing field between solicitors and potential new providers. There were particular concerns about standards of service and qualification and a loss of professionalism. In relation to providers authorised under Section 54 of the Courts and Legal Services Act 1990, the Legal Services Ombudsman referred to the concerns regarding regulatory arrangements raised in respect of Authorised Conveyancing Practitioners: "I believe that any regulatory arrangements for the new providers will need to ensure that fairly rigorous standards of service and conduct are maintained. The obligations currently imposed on solicitors are a good benchmark for such standards". However, in respect of practitioners authorised under Section 55 of the Courts and Legal Services Act the Legal Services Ombudsman did not express the same concerns, commenting: "Section 55 deals with the possibility of extending the right to obtain probate to approved bodies, such as those regulating licensed conveyancers and legal executives. Since these practitioners are already established within the existing regulatory framework, I do not envisage any particular problems in giving them the right to provide probate services." The Legal Services Ombudsman also expressed a concern that introduction of the proposed arrangements would add to the existing "regulatory maze" for legal services.
14% of respondents considered that there was already scope for fraud in the delivery of probate services, and that while this generally occurred after the grant of probate (i.e. during execution of an estate) there were dangers in opening up the process as proposed.
12% expressed support for the proposal to open up the market in probate services, seeing no difficulties arising from the introduction of new providers.
10% of respondents did not consider that adequate regulatory control could be maintained over any new providers authorised under Sections 54 or 55 of the Courts and Legal Services Act 1990.
7% of respondents considered that any relaxation of the employed solicitor rules to allow solicitors to undertake conveyancing or probate work for the clients of their employer would create difficulties, in particular, conflicts of interest.
2% of respondents (potential institutional providers) considered they already had cost effective arrangement in place with solicitors' firms and would have little interest in joining the scheme.
While the Department of Trade and Industry confirmed the Government's position that it favoured opening up the probate market to additional providers, it also noted that: "We think the powers in the Courts and Legal Services Act, which would only require bodies to have a redress scheme in place, do not really go far enough in delivering effective protection for consumers and that the Regulatory Review should consider how to address this shortfall."
Most respondents thought there would be a demand from new providers wanting to become authorised to provide probate services.
Most respondents did not consider that there was sufficient protection for consumers included in the arrangements for authorising new providers under either section 54 or section 55 of the Courts and Legal Services Act 1990. Many thought that new providers should be regulated to the same degree as solicitors, and some considered that existing controls should be tightened. However, 20% of respondents considered the safeguards were sufficient to protect consumers.
Almost all respondents considered there would be a significant impact on solicitors' practices, with smaller high street practices, and those in rural areas feeling the pinch most. Again, most respondents felt there would be implications for access to justice, particularly for those living in rural communities.
In the consultation, we considered the restrictions in legislation that inhibit solicitors in England and Wales from developing new business models. We were concerned with the appetite for, and the effects of, possible change in the legislation and with the extension of the provision of legal services by employed solicitors.
We sought views on whether the Law Society powers to regulate solicitors and solicitor partnerships should be broadened to enable them to regulate non-solicitor partners and any business entity through which solicitors provide services, irrespective of its structure or ownership.
118 specific responses were received to this chapter.
| Question 1 - What is the likely level of demand from other potential providers (e.g. banks and building societies) to be able to offer conveyancing services under the arrangements provided for in sections 34-52 of the Courts and Legal Services Act? Would this demand be affected if the Law Society were to allow employed solicitors to provide services (including conveyancing services) to the public? Is the introduction of e-conveyancing likely to affect demand? |
| Question 8 - What is the likely level of demand from other potential providers to be able to offer probate services provided for by either section 54 or section 55 of the Courts and Legal Services Act and how would this demand be affected if the Law Society were to allow employed solicitors to provide services (including probate services) to the public? |
Although questions 1 and 8 were not part of the consultation chapter on employed solicitors and Multi-Disciplinary Practices (MDPs), the responses are relevant here, as they contain express references to the issues discussed.
54 respondents addressed the employed solicitor issue in either question 1 or 8 (or both). A majority of respondents stated that such a change would lead to increased demand from other potential providers, but a significant minority felt that this would not be the case. A considerable number of respondents raised concerns about the ethical issues, such as independence, surrounding possible relaxation of the rules on employed solicitors, when answering these questions.
| Question 10 - How much use do you make of any facility in present day legal services to obtain different services from the same source and what are the services involved? |
This question draws on the fact that at present many solicitors' firms also provide services ancillary to their main work, including financial and consulting services, and investment business.
There were 27 specific responses to this question. Most of the respondents were providers of legal services, with only a handful of users of legal services responding. The answers were therefore slanted more towards the provision of ancillary services than the use made of such services.
4 respondents stated that they made no use of any present facility (3 of these respondents were providers). 4 users said they used a range of different legal services from the same provider but did not mention using other affiliated services. One user had purchased services from MDPs abroad; their choice of firm was influenced by the quality of the professional service provided and not by the firm's status as an MDP. Another user said that "there are occasions where it would assist if other professional services, such as accounting or surveying could be obtained from the same source".
A number of providers of legal services set out the affiliated services they supplied. These ranged from financial and consultancy services to property services. One provider said that they used to offer property services but stopped in 2000, despite the service being popular, because of unsatisfactory changes to practice rules. The Motor Accident Solicitors' Society stated that they provide a diverse range of affiliated services connected to their area of law including treatment, evidence and car repairs.
General comments were that commercial clients liked the one stop approach but there was evidence that clients are using greater selectivity when choosing the teams they consider to have the right talents. It was thought that people would go wherever they felt they could find the right skills and specialisation. One respondent was of the opinion that those of limited experience would use services from any source they thought would offer a cheaper rate.
| Question 11 - In new business models, should the Law Society be empowered to regulate non-solicitor partners, directors and shareholders/owners, and non-hundred per cent solicitor controlled businesses? Question 12 - Do you object or agree in principle to the Law Society being enabled to regulate new style business structures and their participants whether or not they are solicitors? |
As both of these questions dealt with the Law Society's role as regulator they are dealt with together. 62 respondents answered question 11, while 61 answered question 12. It should be noted that the majority of replies came from solicitors or other organisations with links to the legal profession and the Law Society. Over 50% of respondents to both questions either agreed or strongly agreed that the Law Society should be empowered to regulate new business models and any non-solicitors involved in them. Those in favour of extending the Law Society's regulatory role provided a diverse set of arguments for why this should occur. Some thought that it would be important to have one regulator, and that the Law Society was best placed to perform the role. Others thought that it was the only way to protect solicitors' independence and professional values. The Law Society itself suggested that it could act as sole regulator as an interim measure, with shared regulation occurring later.
Those neutral to the proposition indicated that it was important that new business models were regulated correctly, but that who regulated was less important than the standards that were expected. Others expressed concern about how the Law Society may fund their extended regulatory role.
Many respondents who did not support the Law Society expanding its regulatory remit believed that other professionals would not accept regulation by another body. This feeling was particularly strong amongst other professional bodies who replied to the consultation. There was a general call for a "super regulator" that would regulate all professional services provided by MDPs, although views on the exact nature and role of the body differed from respondent to respondent. Some simply suggested a common regulator was needed, others that professional bodies should work together to develop common codes of practice. The most radical suggestion was the creation of an independent regulator for all the professions, similar to the Financial Services Authority.
| Question 13 - What, if any, safeguards should be fundamental to any development of new methods of supply of legal services? |
63 specific responses were received to this question. A large number of the answers dealt with values respondents felt should be safeguarded. The values that emerged as important, with many of them being cited repeatedly, were:
Independence and impartiality of advice
professionalism, expertise, service and value
avoidance of conflict of interest
duty to the court.
honesty, integrity and probity
transparency and openness
confidentiality and privilege
These values were reinforced by a number of respondents specifically stating the importance of retaining Solicitor's Practice Rule 1, (which deals with independence/integrity, the duty to act in the best interest of the client, the good repute of the profession, the solicitor's proper standard of work and the duty to the court).
Most respondents agreed that to preserve these values, adequate regulation was required. Referring back to questions 11 and 12 some respondents, including the Law Society, said that the safeguards presently in place should remain. There were a couple of calls for regulation to be taken from the Law Society and given to an independent body. Many answers specified safeguards that should be incorporated into a regulatory system. These included:
Indemnity Fund
Compensation Fund
Training
Code of conduct
Safeguards for clients money
A complaints system, disciplinary powers and intervention powers
Other general comments included one respondent who felt that there should be a system of licensing for certain legal services which could be revoked if necessary and one respondent specifically referred to a ban on legal firms and auditors working together as a necessary safeguard.
The majority of respondents felt that there should be the same regulation for all providers of legal services, to ensure a level playing field. There were other views expressed about the level of regulation but these were picked up in more detail in answers to questions 14, 15 and 17.
| Question 14 - What are the essential safeguards that should not be compromised, if different levels of consumer protection were applied in different models of business offering legal services? |
There were 62 specific responses received to this question. 24 respondents referred back to the answer they gave to question 13 and a further 12 respondents, although not specifically referring to question 13, reiterated the values and components of a regulatory structure given in answer to question 13.
18 respondents, including the Law Society and the Bar Council, held that there should be one set of safeguards; there should not be different levels of consumer protection applied in different models of business. One respondent believed that any advantage given to new providers by offering different standards would prejudice existing providers. 2 respondents said that if differing standards were to be applied, it was essential there was clarity and that consumers understood this.
General comments included one respondent who felt, in addition to current professional rules, Chinese walls should be used as a safeguard when different professions worked together. 2 respondents emphasised the fact that alternative business models need to put the interests of the client first. One respondent felt that the regulation of solicitors was excessive and that "in a free market-place, protection can be by "ABTA-style" bonding. Cheap suppliers would not be bonded, or only to a lower level". The Treasury said that competition was the best way of protecting the consumer. The DTI suggested that both this question and question 13 would be best dealt with in the review of the regulatory framework for legal services.
| Question 15 - Should multi-disciplinary practices be bound by the same practice rules as present day firms? |
There were 63 specific responses received. The majority of respondents (49) felt that MDPs should be bound by the same practice rules as present day firms. There were only 6 respondents who expressly dissented from this, giving reasons ranging from thinking that the present rules provided inadequate protection for clients, through to the other end of the spectrum, that solicitors are overregulated and the rules needed to be relaxed.
Despite the fact that the majority believed MDPs should be bound by the same rules as present day firms, a number of respondents then went on to add that the present rules would need some modification in order to accommodate MDPs properly.
The Treasury and DTI both felt that this was a topic that should be covered in the regulatory review.
| Question 16 - Do you believe that the present set-up of firms and employed solicitors discourages or prevents entry into the profession of any groups of people? If so which and why? |
There were 56 specific responses. The respondents were fairly evenly split between those who thought the present set-up discourages entry and those who did not.
The following factors in the present set-up were thought to restrict entry:
The removal of grants to law students and the expense of training (3 respondents cited this);
the lack of training contracts (4 respondents);
being unable to allow non-lawyers to share in equity or the rewards of the business (4 respondents);
freemasonry (1 respondent);
partnership model being outdated and cumbersome and unattractive to potential new members of the profession (2 respondents).
One respondent considered that the present structure discriminated against ethnic minorities, and another that the present system was elitist and sexist. It was not, however, the opinion of everyone that restricted entry was a bad thing. 3 respondents said that restricted entry was positive, as it filtered out poor applicants or applicants that might bring the profession into disrepute.
Those who maintained the present system did not restrict entry made the following comments. One respondent thought that if an individual with the right aptitude and intellect wanted to become a solicitor, there was nothing to prevent them from doing so; another held that, "the Law Society, through its associations, operates positive discrimination in relation to minority groups (e.g. Association of Women Solicitors, Association of Black Lawyers)"
One general comment received was that the challenges faced by minority groups are the same as in any other area of employment and that the proposals discussed in the consultation would not have an impact. Indeed, other respondents picked up on this and commented that barriers to entry existed, but the problems surrounding these barriers were detached from the issue of new business structures and should be tackled separately.
It was asserted by one respondent that there was more diversity in the employed solicitor sector than in private practice and that there should be research to discover why this is so.
| Question 17 - Is it important to you that different transactions with a solicitor should be covered by the same level of consumer protection? |
There were 60 specific responses to this question. The majority of respondents (48) considered it important that different transactions with a solicitor should be covered by the same levels of consumer protection. One respondent referred to being a solicitor as, "a gold standard which all consumers recognise", and a number held the view that transactions should be governed by the highest level of protection in all cases. The comment was made that it was unfair for the public to be subject to less protection in some areas of work. 3 respondents said that they thought differing safeguards would confuse the public; the Law Society also considered this would erode confidence in the profession. 2 respondents said that all transactions required integrity and honesty and another referred back to safeguards cited in question 13.
There were some who did not think it important to have different transactions covered by the same levels of protection. 2 respondents thought that there should be different levels of protection for different consumers, with a lighter touch needed when dealing with sophisticated clients. There were 2 more, similar responses that stated a practical approach was needed, as some transactions would require more protection than others. One respondent believed that regulation should be tailored to the particular discipline being practised and not set at one level for the whole profession. Amongst other suggestions for differential levels of regulation one respondent suggested that "individual non-lawyers only need to be subject to detailed Law Society regulation where they work in conjunction with lawyers or their work impinges directly on work of the lawyers in the MDP and where such regulation is more stringent than their own professional rules". Another respondent was of the opinion that the important thing in a particular transaction was that the level of protection applied was the same for a private practice solicitor or an employed solicitor. 2 respondents felt that there should be greater protection when there were client funds/money involved in the transaction.
The DTI and Treasury said that they felt this area was suitable for being included in the regulatory review.
| Question 18 - Would you welcome
the development of new methods of supply of legal services? |
Responses to questions 18 and 19 overlapped and so they are analysed together. 64 specific responses were received to question 18. Of the respondents 51 were solicitors (either in private practice or employed), or solicitors' interest groups. 13 replies were received from non-solicitors. There were 50 specific responses to question 19. 22 were solicitors (either in private practice or employed), 24 were solicitors' interest groups or local law societies. Replies were also received from the interest groups for conveyancers and notaries and from two consultancy firms.
In response to question 18 there was a lot of interest in developing new methods of supply with 30 out of 51 solicitors and 12 out of 13 non-solicitors saying they would welcome such developments. 27 solicitors said that they would be interested in providing services through new models.
There were a couple of replies that welcomed new methods wholeheartedly and with a great deal of enthusiasm, commenting that reform would enhance the standing of the legal profession and encourage innovation. These replies suggested MDPs would increase availability of a wider range of skills and experience and offer the advantages of economies of scale. However, the more common response was a qualified one and, whilst welcoming the development of new methods, it was emphasised that there had to be adequate consumer protection (6 respondents). 4 respondents moderated their remarks by stating that everyone must be subject to the same rules and must be able to compete on a level playing field. The Law Society said that preliminary views they had ascertained indicated there would be a number of solicitors interested in providing services through new methods.
There were a number of neutral responses which, whilst not ruling out new methods, indicated that matters needed to proceed cautiously and that all the ramifications of any new model needed to be considered. The Sole Practitioners Group said that whilst some of their members would see the opportunity to share fees with another profession as a means of developing their practice, others would regard it as an anathema and would have concerns about conflict and confidentiality.
13 solicitors/solicitor interest groups said that they would not welcome new methods of supply, whilst 15 solicitors said they were not interested in providing services through new methods. A number of respondents mentioned a lack of demand for new methods, amongst these Preston Law Society, Bedfordshire Law Society and the Solicitors Property Group all saw no evidence of demand. Another respondent commented, "there appears to be no public clamour to provide services through new models".
One respondent thought there were other areas on which the Government should concentrate at the moment, such as enforcement of judgments, rather than looking at alternative business methods. 3 respondents commented that, rather than new business models, they would rather have less regulation of the current system.
| Question 20 - Do you think that the new structures could offer a type of service, or a mix of services, not at present available and for which there is a significant demand? |
There were 61 specific responses to this question. The majority of respondents thought that new structures could offer new types of services. However, the number of respondents who disagreed, or felt they could not offer an opinion because of lack of evidence, did not trail far behind.
Of those who thought new structures could offer new services, 8 respondents referred to the creation of one-stop shops and believed these would be welcomed by consumers. The sort of professional combinations that were thought suitable for a one-stop shop approach were: accountants/solicitors and surveyors/estate agents/solicitors. It was thought the benefits of a one-stop shop approach were that it presented the opportunity for the sharing of costs and could offer a comprehensive service.
One respondent believed the business sector would be the biggest beneficiary of a new approach whilst another commented that new business structures and services could help save rural practices by the creation of "limited practices". Such limited practices could exclude themselves from offering certain types of work (e.g. corporate) and be less heavily regulated and charged less for professional indemnity, helping them stay more profitable.
A number of responses predicted that new types of service could be offered under new structures, but they were unsure that the demand existed for these services. One respondent felt unable to gauge demand without some form of market research being undertaken. A couple of respondents were concerned that under any new structure there would be the risk of firms 'cherry picking' work. One respondent did not consider that any new service would meet a previously unknown demand.
General comments received were that standards and safeguards must be reviewed if new ways of working emerged. One respondent asserted that the issue of alternative business structures was more about having access to a wider pool of talented people to deliver the current type and mix of work. One respondent said, "new structures could offer a mix of services not presently available, for example family law needs lawyers, accountants, IFAs. However … these services can often be provided just as well by separate organisations."
| Question 21 - In considering the development of new models, should such developments be limited to the inclusion of other professionals or widened to include non-professionals? If you believe that restriction to professionals only is important, your reasons for your view would be appreciated. |
63 specific responses were received. More people favoured the inclusion of non-professionals in new models than advocated their exclusion.
The main argument put forward for limiting entry was that professionals are already subject to a degree of regulation meaning the public are provided with some protection. Some respondents considered the introduction of non-professionals would mean the dilution of protection afforded to the public. Regulation was also important to those who argued for the inclusion of non-professionals. They said that they would want to see non-professionals subject to proper regulatory control before inclusion.
Other views expressed by those who favoured limitation to professionals were that a professional ethic existed and that there would be an increased likelihood of conflict of interest if non-professionals entered the equation. One respondent thought that limiting inclusion helped maintain public confidence in the legal system. Another respondent considered that delivery of legal services should be restricted to the legally qualified; the changes that were needed to the system related instead to the method of delivery these professionals could use.
On the other side there were a number of arguments put forward to support the inclusion of non-professionals in any new system. One respondent said that non-professionals are already substantially involved, whilst another was concerned that if non-professionals were excluded this could reduce the take up of MDPs and might exclude highly regarded employees. Exclusion was a concern for the law management section of the Law Society which commented, "Many of the Section's members will have attained their current positions through experience and ability, rather than professional qualification". One firm said they would welcome the inclusion of non-professional practice managers, as being able to offer them partnerships was an issue of status, not just a matter of financial reward.
3 respondents believed there should be a staged introduction of non-professionals. Initially only professionals could be admitted to new structures, with this then gradually being widened to non-professionals if it was felt the scheme was working well.
Some respondents replied that concerns about MDPs would remain whether or not non-professionals were included and another said that the term "professional" needed further clarification.
One respondent offered the cautionary note that the practical difficulties of new models should not be underestimated.
| Question 22 - If the legislation were amended to allow non-solicitor partners, directors and shareholders, should a percentage of solicitor partners, directors and owners be specified? Should there be a majority of solicitors in control of the businesses? Do you want to suggest a percentage? Is this something that should be for the professional rules or should it be framed in legislation? Would specific proportions be necessary to ensure the appropriate level of solicitor practitioner independence and freedom from external pressure? |
60 specific responses were received to this question. More respondents felt that there should be a majority of solicitors in control than felt otherwise.
Reasons given for having majority solicitor control were that it would ensure an ethical culture, integrity and maintenance of standards. It was also believed that a majority was needed to guarantee the independence of the lawyers in a practice. Some respondents who said there should be a majority referred specifically to the Legal Practice Plus model proposed by the Law Society. The Bar Council said that "Only solicitors should exercise significant influence functions (as they have been defined for the purposes of the financial services regulatory regime, e.g. chief executive, chief financial officer, and oversight and apportionment functions)". Another believed that, as well as having a majority of solicitors, in a mixed practice legal services should be ring fenced and handled by solicitors or legal personnel only. The comment was made by a couple of respondents that having a majority of solicitors in control was more important if a firm was holding itself out as a solicitors' practice. A handful of respondents specified actual percentages for majority control, with some going as high as 75% but most specifying 51%.
Arguments proffered by those who did not see the necessity for majority solicitor control were that they were anxious not to stifle outside investment by the inclusion of rules on numbers of lawyers and that insisting on a majority could be viewed as anti-competitive. One respondent did not believe that it was realistic to seek regulatory observance by loading the structure with solicitors whilst another couple thought that if there was appropriate regulation in place or professional ethics, this would be enough to guarantee solicitor independence without insisting on a majority.
One respondent said that it was not legitimate to argue for a majority of solicitors as solicitors in private practice were no more 'free' or 'independent' than their commercial counterparts - they were still driven by profits.
A few respondents set out the fact that they firmly opposed MDPs. One said that it would be against the public interest to have firms of 'quasi solicitors' and that if solicitors wanted to join new style set-ups they could, but the public must be clear that these were business set-ups rather than solicitors' firms.
One deemed the concern to be the protection of the client and conflict of interest.
Most respondents who expressed a preference said that the issue was something for legislation rather than professional rules.
| Question 23 - For clarity for consumers, should a practice using the term 'solicitor' in its name have a majority of solicitor partners /directors/ shareholders? |
59 specific responses were received. Most agreed with the question and said it was important to have a majority of solicitors in control if a practice was using the term 'solicitor'. It was considered that this would help avoid confusion.
Some were more prescriptive and said that, in addition, the name should incorporate the relevant professions contained within the practice and that the professional status of each partner/director should be available on request. It was seen as important that clients of MDPs could readily identify to which profession members of the firm belong and who was regulating them. One suggestion was that the entities should be covered by legislation similar to the Business Names Act 1985.
Some responses stressed the importance of partners in solicitors' firms being regulated by the Law Society or bound by professional rules. A number of respondents said that they did not think mixed partnerships should be described as 'solicitors' at all and that another name should be applied. One respondent suggested the term 'Law Agency'. One said that it was the level of consumer protection that was important, rather than what an organisation was called, and another said "The issue relevant to most consumers is the knowledge of whether the person actually providing the legal service to them is a solicitor. They are less interested about the qualifications held by those owning the organisation from which the legal services are purchased".
The Institute of Trade Mark Attorneys advocated a system similar to that run under the Trade Marks Act 1994, which restricts firms holding themselves out as trade mark attorneys unless all partners are registered trade mark agents or they satisfy prescribed conditions.
| Question 24 - It has been suggested that the quality of non-legal personnel which firms of solicitors can attract, and thus the effectiveness of the competition they can offer in the markets for non-legal services, is constrained by the fact that they cannot currently offer such staff career prospects leading to principle appointments. Do you agree? What, if any, has your own experience been of this? |
54 specific responses were received to this question. The responses were fairly evenly split with the number who agreed attracting non-legal personnel was constrained by the present set-up, coming out slightly in the majority.
Examples cited of difficulties in attracting non-legal staff were that it had been hard to attract finance directors; also that some firms would like to be able to reward financial advisers with partnership: there had been problems with financial advisers leaving firms because they were de-motivated building up a business and not being able to share in its value. Other examples given were that practice managers were hard to recruit and retain as sometimes their careers could not develop, and also some clerks do work with little prospect of advancement. As one respondent put it, "if good staff are [to be] attracted they do want a career path and the inability of solicitors to share fees with non-solicitors can prevent good staff remaining with a firm as there is no perceived career progression". The Law Society said the issue of attracting non-legal staff was one of the reasons why they favoured non-professionals becoming partners. Other respondents said that the present set-up does not encourage investment or long-term growth and that without partnership prospects non-solicitors were more likely to join other firms where they could become partners.
A number of people dissented from this view and said that they had not had any experience of difficulty recruiting non-legal staff and there were many career paths open. One respondent said that there were plenty of opportunities for firms to create career paths with associated benefits if they used some imagination.
It was maintained by a couple of respondents that partnership is becoming a less attractive career option as people recognise the liabilities attached to the position. It was therefore becoming less important to be able to offer staff the chance of partnership.
One respondent put the difficulty in recruiting non-legal staff down to the pressure, currently faced by firms to increase competition and reduce costs.
| Question 25 - If you are a non-solicitor, do you have an interest in entering into MDPs with solicitors, if that were permitted? Do you believe interest exists among other organisations in your field of operation, in entering into MDPs with solicitors? |
There were 21 specific responses to this question. 14 of those responses expressed an interest in entering into MDPs with solicitors. Many of the respondents were solicitors' interest groups who said that they thought some of their members would be interested. 7 said they were not interested and one respondent that it would not benefit the public.
The Bar Council was one of those who said that they would not be interested and thought that permitting barristers to enter into partnerships with others would reduce the independence of barristers, reduce the choice to consumers and cause difficulties in the administration of justice. It would also undermine the 'cab-rank' rule and increase costs.
SIFA (Solicitors for Independent Financial Advice), the interest group for solicitor financial advisers, said, "In our view, if the current prohibition on MDPs were lifted to coincide with the implementation of the FSA's CP 121 and Sandler proposals, a substantial proportion of the existing IFA [Independent Financial Adviser] population, which might otherwise go out of business or tie to a product provider, would instead join the legal profession, thereby avoiding the reduction in the availability of independent financial advice which would otherwise result".
| Question 26 - Should employed solicitors be allowed to undertake reserved work, unreserved work, or both, for third parties? |
61 specific responses were received and the majority of these advocated employed solicitors being allowed to undertake reserved and unreserved work for third parties.
Comments made by those in favour were that they would welcome employed solicitors being allowed to undertake both reserved and unreserved work, subject to the proviso that they were fully regulated by the Law Society and fully covered by indemnity insurance. These two safeguards for the consumer were referred to by many of the respondents.
One respondent wanted to see employed solicitors undertaking both types of work, but would want to make sure it was on equal terms with private firms. Another supporter said it would be essential that professional obligations superseded all other obligations. The Treasury held that allowing employed solicitors to undertake both types of work for third parties is key to increasing competition in the market and that competition is the best way of protecting the consumer.
Those that did not think employed solicitors should be allowed to undertake reserved and unreserved work repeatedly argued that, if employed solicitors were allowed to do this work for third parties, then conflicts of interest would arise between the duty to the employer and duty to the client and it was difficult to see how the public could be protected from such a conflict. One respondent was worried that the indemnity insurance position had not been fully considered.
One respondent argued that employed solicitors should not undertake reserved work and should not be regulated by the Law Society, instead they should be governed by the law of contract. Other general comments were that the decision to allow employed solicitors to undertake both types of work would depend on the structure and type of business. Another asserted that there should be changes to ownership rules that would make Practice Rule 4 redundant.
| Question 27 - Will trainee solicitors be interested to join such enterprises? Are there any perceived benefits over private practice for entrants to the profession? |
57 specific responses were received. A majority thought that trainee solicitors would be interested in joining such enterprises. It was commented that there was a vast untapped resource of people with legal qualifications unable to secure contracts. Given the shortage of training contracts available, it would be unlikely that there would be any problem recruiting trainees to MDPs (although whether this would be the case long term was questionable). It was thought by some that in-house work has much to offer the trainee. One commented that it was a more secure career path and had more opportunities for diversification. Another thought that this would tempt trainees who would be attracted by the "risk adverse" route of being an employed solicitor. The benefits of security, pension arrangements and lack of personal liability were also pointed out. Others thought that wider commercial experience would be offered and that this might produce more commercially aware trainees. Many of these organisations would have the investment capital to offer better opportunities and facilities. Some considered that take up of training contracts would depend on the employer and the terms offered and opportunity for career progression.
A number of respondents expressed concern that trainees might not be able to obtain the necessary diversity of training in a non-solicitor organisation. One respondent worried there would be potential disadvantages if there was not scope for training for general practice and that the scope of training would become more restricted as growth focused on core profit areas. Some felt that trainees being able to get wider experience and more management experience would offset the loss of specialist training.
The only identified trainee solicitors to reply to the question were the Trainee Solicitors Group. They said that whilst "the number of training contracts might be increased, it will have a profound effect on the high street practitioner. The TSG is fearful that the creation of MDPs may lead to a reduction in the number of training contracts offered by high street firms, as they will no doubt struggle due to the increased competition. The MDPs will be able to offer higher remuneration, potentially better prospects and greater benefits and pension packages. This could also lead to a higher dependence on business/management skills rather than on legal skills such as advocacy and negotiation."
| Question 28 - Would new style business models encourage more diverse entry into the profession (for example in class, race, sex?) |
56 specific responses were received. The majority remained unconvinced that new models would encourage diverse entry.
9 respondents thought that the profession had a good record on diversity and that recent initiatives by the Bar Council and Law Society have already had a positive effect and may have addressed any issues.
A number of respondents commented that the main barrier to diverse entry was the cost of training and the amount of student debt; they felt that the factors that encouraged diversity were adequate funding, educational chances and experiences. One respondent commented that the increasing costs of qualifying meant that the profession was becoming progressively more middle class. Another suggested new models would help if they provided sponsorship to those from deprived areas and one felt there was an increased chance of diversity if MDPs were to include non-professionals.
Some did, however, think that different business models would encourage innovation, diversity and flexible working. One thought that the profession as it stands is elitist and sexist. The comment was also made that customer service organisations are light years ahead of the legal profession on recruitment issues.
| Question 29 - What features would you like to see in such models to encourage entry? |
46 respondents gave a variety of different answers to this question.
A few respondents said that they would not want to put forward suggestions for encouraging entry, as they did not agree with the whole premise of MDPs.
Popular suggestions to encourage entry were the provision of a proper career structure, also the offer of training contracts, and companies paying legal practice course fees or offering grants and bursaries to students. One respondent suggested that the training contracts should be altered to allow trainees to spend time with non-solicitors and another that entrants should be entitled to be members of more than one professional body.
Some respondents specifically cited the adherence to equal opportunity and anti-discriminatory policies as important in encouraging entry. It was also considered that the profession needed to act as a meritocracy when selecting entrants. One respondent held that there needed to be changes in the image of the profession as at present it was seen as stuffy and middle class, and this could put off entrants.
Two respondents felt that the ability to bring in outside investment and to be able to have non-solicitor principals as directors and partners was important. There were some thoughts on the type of business structure that would encourage entry; limited compan