Peninsula Business Services, one of the largest unregulated providers of legal services in the country, has blamed Solicitors Regulation Authority (SRA) rules for scuppering its plans to set up an alternative business structure.
The company, which provides employment law, HR and health and safety advice to over 30,000 small businesses in the UK, said it viewed the arrival of ABSs “with interest”, as it was intended to give consumers “a true choice on how to obtain legal services” without going to a traditional law firm.
Peninsula said its preference would be regulation by the SRA, but “it is their rules which create the most significant barriers to us becoming an ABS”.
Responding to a Legal Services Board (LSB) discussion paper on the regulation of in-house lawyers, Peninsula said: “We had considered converting the entirety of the company to become an authorised ABS, but we have concluded that that was simply not feasible.
“We have considered separating out the litigation function of the business into a separate company and having that company apply for ABS status.
“However, the separate business rule currently creates a barrier to that because the SRA rules classify the work that would continue to be carried out by the parent company as prohibited separate business activities even though this work is unreserved.”
Peninsula said that a further problem was that the SRA “would not be looking to grant ABS status to a company” unless it was planning to carry out reserved work.
“This would mean that unless we are willing to go into areas of law where we do not currently work, and for which we would have to employ people specifically as solicitors, we would not be able to obtain ABS status even if the separate business rule was waived.
“This has the effect of making the legal services market a ‘closed shop’ in respect of our current services.”
The business services firm also complained that the SRA’s restrictive rules on in-house lawyers prevented it from hiring solicitors to carry out unreserved employment litigation work.
Peninsula said it could employ solicitors as consultants to do the work, but they could not hold themselves out as a solicitor and their work would not fall “within the regulatory remit of the SRA”.
The company went on: “We are able to hire in-house lawyers to work within our advice service providing telephone advice only to clients, with a follow-up letter when necessary.
“However, that in-house lawyer could not give the identical advice to that client in person or in writing.”
Peninsula said it “made no sense” for in-house lawyers to be restricted in this way. It described the current rules as “overly restrictive”, argued that they denied clients access to solicitors and put them at a disadvantage on professional privilege.
“We have seen and encountered the regular comments made by solicitors about non-traditional firms with the unfounded criticism that they are simply out to take all the money they can from clients without giving a quality service in return.”
Peninsula attacked the “knee-jerk prejudice against non-solicitors and protectionism of the traditional law firm” and called for the restrictions permitting individuals to call themselves a solicitor only if they had a practising certificate and worked for an authorised firm to be removed.
Crispin Passmore, SRA executive director for policy, said: “Peninsula’s comments appear to be based on our approach at the start of ABS licensing. We would welcome discussions with Peninsula or any other legal services business about how our approach to regulation has changed and continues to evolve.
“Our approach now is markedly different as we have adapted our processes to ensure it is proportionate – encouraging innovation without putting clients’ interests at risk.
“For example, the LSB has just approved our changes to the Separate Business Rule, and we will be asking our September Board to make a decision on regulating ABSs that don’t carry out reserved legal activities.
“As far as in-house solicitors go, which was the purpose of the LSB’s discussion paper, we will be consulting on a revised approach to the Code of Conduct and practice framework rules, including in-house rules, before Christmas. The new approach should allow much more freedom and flexibility for solicitors and businesses. We would be happy to discuss potential waivers before that if firms want to talk to us.”