Neither in nor out but shaking it all about

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22 July 2016

Posted by Nigel Wallis, partner at Legal Futures Associate O’Connors LLP

Wallis: will red tape really be cut?

Wallis: will red tape really be cut?

We’ve started serving English Brexit tea in our office. Some say it leaves a slightly bitter aftertaste while others find it quite refreshing. The suppliers told us they weren’t sure how it would turn out when they were blending it but apparently they’ve thrown out all the old varieties now and so, for good or bad, we’re stuck with it.

I feel like a mug right now, as it happens.

The Ministry of Justice (MoJ) has clearly been watching all the excitement generated by the EU hokey-cokey and decided to launch its own referendum on proposed amendments to the Legal Services Act 2007. The consultation document, entitled Legal services: removing barriers to competition was published on 7 July and calls for responses by 3 August  (see the Legal Futures story here and consultation paper here). At least that gives everyone plenty of time to snatch a weekend break over the summer.

Flicking through the pre-amble, I half expected the MoJ referendum question to be: Should a solicitor remain a member of the legal profession or leave the legal profession? But it’s not that simple, I’m afraid.

The consultation document states that the proposed changes are broadly deregulatory. They aim to promote innovation and competition in the legal services market by reducing the regulatory burden on alternative business structures (ABSs), which MoJ research suggests have not attracted any greater regulatory risk than other legal services providers.

The four key proposals are:

  • Allowing frontline regulators to waive the requirement for ABSs to provide reserved legal activities from a practising address in England and Wales – putting ABSs on the same footing as other legal services providers;
  • Enabling frontline regulators to make their own ABS ownership rules and guidance (subject to Legal Services Board approval) and relaxing the current restrictions on non-authorised persons holding ‘restricted interests’ in an ABS – reducing the sometimes intrusive due diligence process experienced by some law firm investors;
  • Removing the requirement for frontline regulators to satisfy themselves that an individual ABS applicant will, if granted a licence, protect and promote access to justice – reducing the need for applicants to produce volumes of information to support this current requirement;
  • Limiting the requirement for heads of legal practice (HOLPs) and heads of finance and administration (HOFAs) to report only ‘material’ breaches of the licensing rules, as opposed to ‘all’ such breaches – bringing ABS office-holders into line with equivalent office-holders in other legal services providers.

The consultation document also includes an open invitation for respondents to suggest other changes to ABS regulation that will ensure ABSs are on a level playing field with other legal services providers.

Call me a cynic if you like, but the last time I saw red tape cut, my grandpa’s cavalry twills ended up round his ankles.

But at least we are being asked for our views and we should perhaps seize the democratic opportunity with both feet and shake them all about a bit.

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