This response to the consultation is made by the City of Westminster and Holborn Law Society. In our area, firms are of all sizes and cover a wide variety of legal services. They probably handle more professional negligence and discipline cases than anywhere else in the country. Many of our members have experience of acting as disciplinary tribunal advocates, and of working in the field of international law. Our approach to this consultation is that the independence and integrity of the legal profession are fundamental to the interests of the consumer.
The consultation paper addresses matters of broad principle and is vulnerable to misinterpretation, especially as to the practical consequences. We have responded to the paper as we read it, but consider it vital that there be further consultation on the detail of any proposals before they are finalised.
While we are conscious of the perceived failings in the Law Society’s handling of complaints, we regard the involvement of the legal profession in its own regulation as crucial to any effective quality supervision, particularly if standards of advice and service are to be maintained. This Society therefore prefers option B+ as the future way forward allowing the separate administration of complaints handling from the other roles to be played by a Regulator.
The consultation paper does not seek to define legal services, and therefore does not provide a solution to the question of regulatory gaps. If a Legal Services Authority or Board is set up, it should determine the range of legal services for the purpose of regulation. The issue of what comes within the definition of legal services and therefore what is regulated is of great importance, both for practitioners in the legal professions and for the public. The Regulator will need to address the question of what protections are needed for the public, and whether the benefits of lower costs in any given area of work outweigh the disbenefits of lack of independent quality control.
Solicitors as a profession are highly regulated. The standards are set and maintained by the Law Society at a high level, with regulatory powers vested in the Master of the Rolls and the Lord Chancellor. It is crucial that the regulatory system in place does not have the effect of tying the legal professions to government or Parliament, but guarantees the independence of practice of the law and protects the interests of the individual. As a profession we are more likely to be in a position of defending the rights of an individual against government than any other group, and this freedom must be maintained.
There may be occasions when the regulatory and representational roles overlap, for example it might be necessary, if external pressures are placed on a lawyer for either body (if separate) to intervene on his/her behalf. Furthermore, we could quote several examples when the interests of both coincide, such as in the need to protect the good name of the profession. It is partly for this reason that we believe that entry standards and training, rule making, monitoring and enforcement are best left to the profession.
We also draw the review team’s attention to the important role played by the Law Society in maintaining the Roll of Solicitors and associated records, the issue of practising certificates and the imposition of, variation of and release from conditions on practice. It also monitors the provision of indemnity and provides a back up in the form of a compensation fund. We are probably the only profession to “guarantee” the financial performance of our competitors. The Law Society provides the most highly developed insurance and professional compensation scheme of any profession in the UK and, in our experience, in any legal profession in the rest of Europe.
There is an interesting parallel between the proposals mooted in the consultation paper and the regulation of railways currently being debated by the Government and others. In the latter, it was actually found undesirable for the supervision of the implementation of safety measures to be regulated by the same body as that which investigates matters when things go wrong, which has led to the establishment of a Railway Accident Investigation Board, in line with the aviation industry. It may be felt that there would be a similar advantage in separating the body that sets standards from that which investigates allegations of failure.
Turning to the questionnaire contained in the consultation paper, our comments are as follows:-
Question A1. There are a number of important possible objectives for a regulatory system covering the provision of legal services. What objectives do you believe should form the cornerstone of a regulatory system for legal services?
Maintaining the rule of law is dependent on the quality of the practice of the law, which in turn is dependent on effective regulation. These are also essential elements of consumer considerations, which also include good faith, integrity and cost. Access to Justice is also a matter for government policy and implementation through legal services; however, it is equally important that the regulatory system should not inhibit access to justice. In particular, regulation should be transparently and demonstrably independent of government influence. The commentary on competition considerations assumes that the regulatory system would encourage competition. In our view it is even more important to ensure that competition does not endanger the interests of the consumer, as competition is more likely to be ensured by the market place.
Question A2. What aspects of professional ethics, or legal
precepts, do you feel are essential to a properly functioning legal services industry
and in what way should they be reflected in the regulatory system?
All principles mentioned in the text of paragraph 13 are important as regulatory objectives. The most critical are independence and a high standard of ethics. The principles differ in how they are to be achieved. Independence must be guaranteed by statute. It is essential, and the regulatory system should support it through its effective working. The regulation of the legal profession ought to set out principles, and enforce them effectively, so that members of society believe that those practising in the regulated field have integrity. A duty to act in the best interests of the client (subject to the overriding requirements of the law and the courts) is crucial to the proper functioning of a legal service, as without it access to justice may be limited. Confidentiality is also crucial – without it proper advice cannot be given. Another principle, which has been omitted from the paper, is the need for lawyers to avoid acting where there is a conflict of interest.
Solicitors have ethical duties which they owe both to the courts and to their clients. These duties underpin the way in which solicitors work, and create a level of trust within the profession, with others practising law, and with the majority of clients. Clients in particular benefit from the heavy reliance in some areas (in particular domestic conveyancing) on solicitors’ undertakings, which are entirely dependant on this ethical framework for practice.
This response is made on behalf of a society of solicitors. If the principles set out in the paper are to be preserved, then it would appear necessary for them to apply to all those practising legal services. Legal services would be defined by the Regulator, who would use as the guideline the need for regulation in respect of such services. The points raised above as applying to solicitors – the compensation fund; ethical duties – should then apply to all those providing legal services.
Question A3. Do you consider that risks to the regulatory objectives should be a central consideration in determining how regulatory powers and resources should be used?
It is important that protection is given against threats to independence, integrity, the client’s interests and confidentiality. Regulation should also ensure the deployment of appropriate skills.
Determination of risk in certain areas of activity should never override the regulatory precepts referred to earlier. There should be no assessment that the risk associated with a particular kind of work is so low that a practitioner who does not have sufficient skill or expertise in the area is considered competent to advise or carry out the work in the context of a regulated service. In the example of domestic Conveyancing, some firms treat the work as so routine that a low level of expertise is applied to each case. While this may sometimes be adequate, it is also critical that there is sufficient supervision by someone with skill and expertise in the area to pick up any cases which are not routine. That person should be subject to full regulation.
Question B1. What do you see as the broad advantages and
disadvantages of Model A in comparison with Model B? In particular, what do you see as the
strengths and weaknesses of (i) combination and (ii) separation of regulation
from representative functions?
The principal advantage of Model A is the perception of independence by consumers. The view of this committee is that it is in practice not impossible to combine the regulatory and representational functions of a professional body. In the case of the Law Society there is very little trade union activity, the most prominent recent example being negotiations on behalf of legal aid practitioners in respect of pay rates for publicly funded work. Other representational activities include negotiations on rights of audience in other jurisdictions, which, while being of benefit to the solicitors’ profession, have a clear public benefit as well, in that it increases access to justice. This affects a minority of the profession only.
The Law Society also promotes and considers law reform, which fits into neither the regulatory nor the representation function, and it is important that this work is not lost in any re-organisation of the regulation of the professions.
However, we recognise the importance of not only being independent but also of appearing to be independent. With the addition of the Legal Services Board, Model B has demonstrable independence, but the additional cost (wherever it falls) is lower that that for Model A. Model A appears to be a disproportionate solution to the problem identified by government. One possible difficulty with Model B is the difficulty of regulating different legal professions in a consistent manner. This would be a responsibility of the Legal Services Board – the proposal works if the LSB has oversight for all providers of legal services and can work to ensure consistency based on the precepts identified as outcomes of this review process.
Any Regulator should have responsibility for encouraging public confidence in the system and practice of regulation in question, and this will be an important function of the Regulator following any change. It appears that one driver for change is a perception of a lack of independence in regulation. The Solicitors’ Disciplinary Tribunal is independent from the Law Society, the Law Society acting as prosecutor, and investigating and referring cases as appropriate for decision by the SDT.
The SDT deals with matters of serious professional misconduct (although not negligence, which is a matter for the courts). It would be possible to maintain model B, but to provide for adjudication of consumer complaints by adjudicators who were a different tier of decision makers within the SDT. By moving the adjudicators into the remit of the SDT, they are made independent of the Law Society; by keeping them at a lower tier, the costs are kept at a proper level.
Under this model, the Law Society would retain its role of setting entry criteria to the profession, and set standards. It would also have responsibility for the investigation of complaints and professional misconduct, but the decision and penalties would be in the hands of the independent SDT.
In this context, it is important to note that at present the disciplinary system is supported by unpaid time given by (often senior) members of the profession. If this were to be lost, the costs of regulation would increase significantly.
There is a concern that if regulatory standards for all areas of legal services were set by one Regulator, then the level of the standard would be the lowest common denominator. One effect of this is likely to be that legal practitioners would relinquish the status of solicitor (where a training as a generalist is required, and the standards of entry are high across the board) for status within a specialist group of legal practitioners. If the standards were to apply at the lowest, minimum level, then by doing so the legal practitioner would not be required to maintain professional indemnity, for example.
We think it important that complaints relating to professional conduct and to inadequate professional service should have a common point of entry. This is in part because it will enable the Regulator to monitor complaints, assess areas of greatest risk or claim for the profession, and take steps where a particular firm or individual is the subject of a number of complaints. It can also be difficult to separate the areas of complaint until an initial appraisal has been made.
The three areas of action against a solicitor are (1) negligence, which is, and should remain, a matter for civil action in the courts; (2) professional misconduct, which is for the regulatory body to deal with; and (3) inadequate professional service. IPS is service which falls short of the correct practice, but which, for practical or economic reasons, does not have the gravity or value to warrant action in the courts. This is an area which has given rise to much concern because of the recent large backlogs of cases, with consequent delays. The Solicitors’ Practice Rules impose a requirement on solicitors to have a complaints procedure within each firm, and to inform clients of that procedure. This process can work very effectively, but if solicitors are sometimes reluctant to create procedures or to follow them, it is important that the practice rule is enforced. We suggest that it would benefit the consumer (that is those making the complaint) if this system were rigorously enforced. Thus, the first attempt at resolution would take place between the solicitor and client (mirroring the courts’ move towards more mediation at the start of a civil case). If matters were not resolved, there would be recourse to the Regulator or Ombudsman. In other fields the relevant Ombudsman will not hear a complaint until the internal process has been resolved. This would have the effect of reducing costs, as there would be a reduced need for additional investigators and arbitrators; and also of reducing delays as the matter would be dealt with in the relevant firm.
On the question of allocation of cost, there is a danger in adopting the “polluter pays” principle. It is asserted above that access to justice is one of the fundamental principles of a regulatory system. In the context of the provision of legal services, this includes access for those who may have mental incapacity. Solicitors should not be deterred from such work by the possibility that if the client were to become a complainant, and complain regularly, this would attract a payment by the solicitor for each complaint. In this respect, the work differs fundamentally from the financial services industry.
We see a benefit to retaining an independent bar, which provides not only advocacy at a high level, but also the benefit of detailed legal understanding in specialised areas. Some firms will find it difficult to continue to supply a broad legal service if the independent bar were to come to an end. This is, we consider, a further reason why any harmonisation of regulation should not lead to fusion of the professions.
Question B2. Which model best meets the criteria of the
terms of reference?
The Society prefers option B+. B does not meet the requirement that the regulation be consistent and transparent; A does not meet the requirement that it be no more restrictive or burdensome than is clearly justified and may fail to guarantee the independence of lawyers.
Question B3. If it were felt appropriate to separate regulatory
and representative functions within professional bodies as is envisaged under
Model B+, how might it best be achieved.
It would be important to have separate channels of accountability and the roles of the heads of service and senior officers should be clearly identified. However, it should be possible to share admin functions and office space in order to keep basic overheads to a reasonable level.
Question B4. What powers would you wish to see delegated
from the Government to the Regulator?
We propose that the present functions of the Master of the Rolls to approve the Rules be maintained. We have emphasised throughout this response the importance of independence of legal service providers from Government, and this proposal is made on the basis that the Master of the Rolls retains his current position within the judiciary, thus enabling that essential independence to continue.
Question B5. What powers to instruct the Regulator would
you wish to see the Government retain?
There is no reason for the Government to retain powers to instruct the Regulator. The duties and obligations should have a statutory framework, which would provide sufficient control (with sensible disciplinary procedures if the Regulator failed to carry out the task).
Question B6. What international considerations should
influence the design of appropriate regulatory arrangement of legal services
within England and Wales?
The first point is that the independence of the legal profession from Government must be maintained. When considering the suitability of allowing those associated with foreign bars to practice here, the independence of that bar from the country’s government is an essential requirement. This is required to maintain the standing of the provision of legal services in the eyes of foreign jurisdictions. The Commercial Court has a standing in the international community which means that for many cases it is the preferred tribunal.
Secondly, there are at present discussions between the various European Bars concerning harmonisation of rules. Any changes in regulation here should not hinder the current attempt to harmonise rules.
Question C1. Should service complaints (which are consumer
centred) be operationally split from professional conduct and disciplinary issues
(which are centred on the practitioners and their professional bodies)?
It is important that professional conduct issues are correctly identified. Therefore the initial sifting of complaints should be common. There is no reason in principle why the 2 should be separated at the initial investigatory stages. However, it may be practically preferable to do so, enabling each arm to acquire expertise in the particular field, and deal with each type of complaint expeditiously. The danger of splitting the complaints is that they may not be correctly identified at the outset. The solution to this is to ensure that the bodies responsible for dealing with service complaints and conduct/disciplinary issues have quick and effective procedures for referring on complaints which have started with the incorrect body. Clients require speedy resolution of their complaints. However, speed is also important for professionals against whom an allegation of misconduct has been made. It may be unjustified, but until resolved, it will disrupt the professional’s work and career. The Law Society is unusual in handling service complaints.
Question C2. In connection with complaints, what are the
advantages and disadvantages of a) having a uniform complaints organisation, independent
of the bodies, similar to the FOS or b) each body remaining responsible for its
own complaints? Is the New South Wales
example a useful model?
Professionals need to take responsibility for complaints as well as for professional conduct issues. Complaints can be misguided, malicious, wrong, or right. However, if members of the profession are not engaged in the process, then the incentive to reduce complaints is less pressing. An advantage of each body remaining responsible for its own complaints is an understanding of the circumstances in which such a complaint might arise. A disadvantage could be a lack of independent consideration. The NSW model is attractive, but there may be a question of whether the volume generated by all the legal professions in England and Wales could sensibly be accommodated.
It would probably be more cost effective to leave the receipt of complaints to each professional body. While we believe that this happens at present, there should be an express obligation on each regulatory body to ensure that any misdirected complaints are passed to the appropriate body immediately.
Question C3. If you believe that each body should remain
responsible for its own complaints, what form of regulatory oversight would you
wish to see?
The Regulator should also have oversight of complaints handling.
Question C4. How do you think that disciplinary
arrangements should relate to the underlying practitioner bodies? Is there a case for one single uniform
disciplinary body for all lawyers?
This depends on whether the regulation of each of the professions is brought broadly in line. If it is not, then separate disciplinary bodies are more effective. The only advantage of one uniform body would seem to be cost. If different rules and regulations are being enforced, then the cost saving would be at the expense of confusion.
Question C5. What should be the mechanism for funding the
handling of complaints?
Bearing in mind the precept of Access to Justice, it matters that the funding mechanism should not result in legal providers having to withdraw from providing certain types of legal advice. If lawyers are required to pay a fee on receipt of a complaint by the relevant body then, for example, the numbers acting for those of mental incapacity would rapidly decrease. There should be a fault based system, subject to some protection for consumers making complaints, which would be covered by the professions as a whole.
Question C6. What should be the mechanism for funding the
handling of disciplinary processes?
Funding by the profession, with costs awards against those against whom findings are made.
Question D1. Should the Regulator be a board or an
individual?
A board. Too much responsibility for one individual, and possibility of bias.
Question D2. What sort of Board should the Regulator have
and how should it be constituted? What
would be an appropriate split between practitioner involvement and lay content
in the Board? As regards the
practitioner content, would you favour the inclusion of individuals on their
merits, or formal representatives from different parts of the industry?
This depends on what functions the Regulator will have. In principle, a board consisting of a mixture of representatives of the profession or professions regulated, with others, lay members, appointed on merit.
Question D3. Who should appoint the
leadership of the Regulator? With whom
should that person consult? How should
the appointments of the other directors of the Board be made?
We suggest
that this could be a judicial committee.
This should not be a function of a government minister, as independence
from politics and the administration must be maintained, and therefore the
suggestion for a judicial committee is only appropriate if the selection of the
judiciary is not by government appointment.
Question D4. What period should the appointments be
for? In what circumstances and by whom
could directors be removed?
3 years with one possible renewal – continuing expertise, but not renewed if not completely satisfactory. Directors to be removed by majority of the board.
Question D5. Having regard to the need for independence
both from Government and providers of legal services, what qualities and
background would you wish the leadership of the Regulator to possess? Is there anything you believe it would be
important for the leadership of the Regulator not to be?
Important for leadership not to have any connections with Government. If the professions regulated are on the board, then the leadership should be consumer-facing. If they are not, then a senior member of the judiciary would be appropriate.
Question D6. What mechanisms would you propose to ensure
the accountability of the Regulator: (1)
to Parliament; (2) to Ministers; (3) to public interest groups? Is there anyone else to whom a Regulator for
legal services should be accountable and how?
It is essential that the Regulator should be accountable for his actions and decisions. However, it is also vital that the Regulator should not be accountable to Ministers or Parliament since this will undermine the independence of the Regulator.
Question D7. What consultation arrangements would you wish
to see the Regulator follow before exercising its powers?
None before the exercise. Consultation should be required before the powers are put in place.
Question D8. To where should the right of appeal against
decisions made by the Regulator lie? On what matters should appeal be
permitted?
Certain decisions to be appealed to a higher authority within the Regulator. More important decisions to the Divisional Court.
Question D9. This section refers to the funding issues
arising from different models. What
would be your suggested mechanism for dealing with these issues?
There must not be an obligation to pay arising simply from the existence of a complaint. This can be used to blackmail potential complainees; and also has the potential to deter solicitors from taking on particular types of work where the risk of complaints is higher.
The main principle should be a combination of a levy on the profession and payment of a proportion on a “polluter pays “basis. It is not practical to depend on the “polluter pays” principle to cover the cost of the regulatory system, as (a) this is overburdensome on those with lower incomes and (b) collection then becomes a significant issue.
It is also important that the levy be calculated on the basis of income for individuals or firms. If this were done reasonably, then any additional costs of model A would be negligible to the payers.
Question D10. What relationship should there be between the
Law Officers, the Regulator and professional bodies with advocacy rights?
None, as between the Law Officers and the others.
Question E1. Should the Government have power to determine
which legal services should be included in, or removed from, the regulatory
framework? What consultation with the
Regulator, with the providers of legal services, and with public interest
groups, should there be in reaching these decisions?
The Regulator and not the Government should have power to determine which legal services should be included in the regulatory framework. There should be consultation with the representative arms of the profession and with public interest groups. This needs to be clear, and therefore set with a view to as little change as possible. However, the process for adding additional areas should be simple, and not requiring primary legislation.
Question E2. What are the main factors one should consider
in determining whether a service requires regulation?
The Regulator would have responsibility for determining this, based on the principles of Chapter A paragraph 12, plus independence.
First, the risk assessment referred to earlier in the paper.
Secondly, clarity for consumers. They need to know what protection is lost in taking a service which is cheaper for want of regulation.
Question E3. What characteristics of the regulatory
framework would facilitate the inclusion of new services within the regulatory
net, or the exclusion of a service presently included?
Clear principles as to what areas of practice require regulation, and why. The Regulator would be responsible for monitoring new service areas as they arose, and testing them against the principles set.
Question F1. Is there a potential demand, from users and
providers, for Legal Disciplinary Practices?
Not formulated.
Question F2. How do you see the advantages and
disadvantages of LDPs? Can the current
restrictions (by professional bodies) preventing the development of these
practices still be justified?
Advantage in that different specialisms would be available for the consumer. However, this may lead to a reduction in choice in the following scenario. If LDPs become the norm, then there will no longer be an independent bar, with the result that smaller firms will not be able to call on expertise in a wide range of areas of law. It will then not be possible for smaller firms to supply all legal services, and there will be a reduction in choice for the consumer. This may also have cost implications for the provision of the service.
Difficulty may lie in regulation. Most important point is clarity – clients know how to complain, and to whom; co-operation between Regulators if not the same body, to ensure seamless resolution. If the regulation of all professions is under one Regulator who is responsible for common standards, then the main disadvantages disappear.
Question F3. What restriction, if any, would you wish to
see imposed on LDPs in the area of management? What restriction, if any, would you wish to
see imposed on LDPs in the area of ownership?
None
Question F4. Is there any reason why the regulatory system
should distinguish between practices in the commercial and the not-for-profit
sector?
It may be appropriate to have some simplification for the not-for-profit sector. The same underlying principles must apply.
Question F5. What body would you expect to regulate
LDPs? What , if any, additional
safeguards do you believe need to be put in place to protect the consumer?
See above.
Question F6. Is there potential demand, from users and
providers, for MDPs?
We assume there would be because of the convenience of access to different skills. For example, an MDP between estate agents and solicitors could be attractive to those selling or buying houses. It seems that the attraction of MDPs for larger companies has decreased in the post-Enron age.
Question F7. How do you see the advantages and
disadvantages of MDPs? Can the current
restrictions (by professional bodies) preventing the development of these
practices still be justified?
The major problems for MDPs are regulation and discipline. The solutions proposed for LDP cannot assist in the case of different areas of practice.
Question F8. What restrictions, if any, would you wish to
see imposed on MDPs in the area of management?
What restrictions, if any, would you wish to see imposed on MDPs in the
area of ownership?
Question F9. What body would you expect to regulate
MDPs? Would your answer be different if
lawyers were not in a majority? What, if
any, additional safeguards do you believe need to be put in place to protect
the consumer, and to ensure respect for independence and integrity in the
exercise of professional judgment?
The regulatory difficulties are problematic. We do not consider that it is possible to have separate regulatory bodies for different parties within an MDP.
Lawyers would have to be regulated by the legal services Regulator, to ensure quality of service. This applies whatever the proportionate make up of the organisation.
Question F10. What are the international implications for
the legal professions in England and Wales if legal services were allowed to be
delivered through alternative business structures?
This would lead to prejudice to the principles set out in chapter A paragraph 12, and to independence.