SRA targets three-month approval for ABSs aimed at new criminal legal aid contracts

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By Legal Futures

19 July 2013


Plant: SRA won’t be overstretched

The Solicitors Regulatory Authority (SRA) should be able to process would-be alternative business structures (ABSs) wanting to bid for the new criminal legal aid ‘super-contracts’ in as little as three months, it has told MPs.

Responding to a written request for information from the justice select committee, SRA chairman Charles Plant said it could approve new ‘traditional’ law firms targeted at the reforms within a month as a result to improvements it has made in recent months to the authorisation process.

The government has identified ABSs as one response to its plans for price competitive tendering in criminal legal aid, but critics have pointed out that with most ABS applications taking several months – or in a few cases more than a year – to receive approval, there seemed little prospect of being able to bring ABSs on stream in time for the procurement process as envisaged.

Legal Futures first revealed last month that the SRA would consider fast-tracking such ABSs.

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Mr Plant said the regulator did not believe it would be over-stretched dealing with applications, “given the information we have available about the size of the current market, the planned exercise and the number of likely contract awards”.

He also said that the SRA had not received any expressions of interest from potential ABS specifically directed at the PCT exercise and only a small number of questions from existing criminal legal aid firms during normal conversations.

He explained that applications can take longer when there are parties holding a “material interest” in licensed bodies, such as very complex ownership or business structures, foreign ownership, complex financing structures and financing through private equity vehicles.

But Mr Plant added: “We believe it is relatively unlikely that these factors will exist within applications. Our view is that the majority of applications are likely to arise from the restructuring of entities currently providing these services.”

The draft timetable for PCT envisages a pre-contract questionnaire stage in October-November 2013, and those who make it through being invited to tender in February and March 2014. The contracts would be awarded in June 2014 and begin operating three months later.

The same questions were put to the Bar Standards Board (BSB), for whom Ewen Macleod, head of professional practice, said it hoped to have been approved as an entity regulator by the Legal Service Board by late 2013 or early 2014, subject to resolving outstanding issues about the BSB’s powers, allowing it to regulate bodies owned and managed by lawyers. If the outstanding issues need further legislative action, however, it could take longer.

“We would [then] anticipate needing at least three to six months to approve any new entities, possibly more if we receive a significant number of complex applications (although we would seek to prioritise applications from criminal legal aid entities).”

The BSB is also to apply to the LSB for designation as a licensing authority for ABSs and could be able to authorise by the end of 2014. He said that barristers could also be authorised by the SRA in the meantime.

On the level of demand, Mr Macleod said: “Our intelligence is patchy at the moment, but we would anticipate a number of applications from criminal practitioners to form entities. It should be noted that the Legal Aid Agency’s proposals do not envisage tendering for advocacy services.

“Nevertheless, once the new BSB Handbook is introduced (expected January 2014, subject to LSB approval) all barristers will be able to seek authorisation to conduct litigation. In any

case, barristers may wish to form entities with solicitors to tender for litigation services.

“A recent survey of the profession (albeit on a relatively small sample) suggested that around a third of criminal practitioners were considering forming an entity but relatively few of those had definitely decided to do so at the time of asking.”

LSB chairman David Edmonds informed the select committee that, after a lot of “public discussion” about the time it was taking the SRA to process ABS applications, the SRA was now taking a more “risk-based” approach and collecting better data.

Mr Edmonds said that the SRA has set itself public targets of approving 100% of completed medium or high risk ABSs within six months and 90% of simpler applications within 30 days.

Currently, of the 150 plus ABSs that have been licenced so far, it has taken an average of seven months – after the second stage application has been submitted. The SRA’s work in progress has an average age of 4.5 months.

Mr Edmonds said 45% of ABS licence holders were granted approval within six months of second stage application submission and that the figures should improve so as not to repeat the “substantial number” of applicants who waited more than nine months.

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