LSB going back to “first principles” as it mulls how to replace Legal Services Act

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11 March 2015

Pitt: regulators have been working well together

Pitt: regulators have been working well together

The Legal Services Board (LSB) is returning to “first principles” as work begins to consider whether the Legal Services Act 2007 should be replaced, its chairman said today.

Sir Michael Pitt also said that options for other ways to hold client money other than through client accounts are being drawn up as part of the reform agenda.

Speaking in London, Sir Michael said rethinking the Act was the “most challenging topic” on the agenda for legal regulators.

“It is not a task for a single organisation to undertake. Our aim is to channel the energy of all of the regulators who, day in and day out, deal with the consequences of the Legal Services Act and other related legislation. We are working constructively and systematically with partners by drawing on the best available evidence from the legal services sector in the UK and abroad.

“Is there a single unifying solution that will be embraced by all? I doubt it. Rather, this work is about identifying a range of realistic possibilities so that incoming ministers can make an informed choice and more fully understand the options open to them.

“We are returning to first principles and asking fundamental questions about: the case for sector-specific regulation of legal services; the definition of ‘legal services’ and consideration of the role and nature of the regulatory objectives; when a customer confronts a legal problem, what needs to be regulated in the public interest before, during and after the event; the extent to which future regulation should be built around reserved activities, individuals, titles or entities, and regulator independence and funding.”

The key issues, he said, include specifying the problems they were trying to solve and what needs to be regulated. “What matters less is the precise organisational design of the regulator or how many regulators there should be. In my view, form must follow function.”

In the meantime, work is continuing to deregulate as far as possible and improve the operation of the Act in the wake of last summer’s ministerial summit, which was followed by a meeting of the chairs of all the legal regulators.

Sir Michael said the regulators have been working well together, with six amendments to the Act identified so far to improve the current regime, including bringing the regulation of alternative business structures more closely into line with the regulation of other providers, and simplifying and reducing the time taken to make orders under the Act.

Assembling ideas around alternatives to handling client money is another of the work streams, and Sir Michael said: “The legal services regulators are working together to pool their expertise with the aim of identifying arrangements to avoid the handling of client money. We are particularly interested in the French experience (where lawyers are prevented from holding client money) and BARCO, organised by the Bar Council to offer escrow-type services in this country.

“The outcome of our joint working will be a document that can be used as a resource by regulators and providers seeking to understand the advantages and promote change.”

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