Gove poised to back call for less overbearing regulatory regime for ABSs

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19 November 2015

Michael Gove

Gove: justice committee may want to reconsider timing of its own review

Lord Chancellor Michael Gove indicated yesterday that he would support legislative changes to make it easier to approve and regulate alternative business structures (ABSs) while the scope of the wider review of the Legal Services Act 2007 is worked out.

In a letter to justice select committee chairman Bob Neill, published yesterday, Mr Gove said he was “considering consulting on making deregulatory amendments to the 2007 Act in the near future and before the [main] review, following joint proposals I received from the Legal Services Board (LSB) and the frontline regulators.

“My officials are working with the LSB and regulators on the details of these proposals.”

In July, the LSB – on behalf of all the legal regulators – submitted proposed “minor” changes to the Act that would “simplify and remove prescriptive detail” that “assumes, without evidence, that ABSs are more risky than other types of providers, thereby imposing higher costs and burdens on them”.

These include the current obligation on an ABS’s head of legal practice and of finance and administration to report any failure to comply, whereas law firms only have to report material breaches.

The changes would also cut down the 21 pages of requirements on the process of deciding whether a non-lawyer should be allowed to own an ABS. Another change would remove the requirement that an ABS licensing authority must consider whether an application explicitly meets the regulatory objective of improving access to justice.

In relation to the wider review of the Act, which he promised soon after he became Lord Chancellor, Mr Gove said he was “currently considering” when it should begin and what it should cover, in the context of the spending review and “key priorities” for the Ministry of Justice.

“My officials are also discussing how this review might align with the work of the frontline regulators and others looking at the legal services market.”

In a separate submission in July, the LSB told the government that there was a “compelling case to introduce a new regulatory settlement” for the legal market in the medium term.

The justice committee is considering whether to conduct a post-legislative assessment of the 2007 Act. Mr Gove said the committee “may wish to consider the merits” of carrying this out, bearing in mind the “changes I am considering and the wider review I wish to undertake”.

Speaking at this week’s Legal Futures Annual Innovation Conference, Caroline Wallace, strategy director at the LSB, said she was “very hopeful” that the government would make the ABS changes.

She also indicated that the main review had the potential to lead to significant reform of the regulatory regime. “I think there is something of an appetite, not least because the government has a very strong pro-business, pro-growth agenda.”

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