LSB tells SRA: liberalisation of local authority solicitors charging for work does not go far enough

SRA: LSB tells regulator to get on with in-house review

The Legal Services Board has criticised the Solicitors Regulation Authority for restricting liberalisation of the rule that previously prevented local authorities from charging charities and voluntary organisations for legal services.

The change is one of 10 made this week to the SRA Handbook as part of its ‘red tape initiative’, which the LSB otherwise wholeheartedly supported.

It said the authority had shown “imagination and thoroughness in identifying a raft of deregulatory measures which should improve access to justice by empowering not for profit bodies and others to reach a wider range of clients and give them greater flexibility by enabling a wider range of staff to fulfil key functions”.

The amendment to rule 4.15(e) of the SRA Practice Framework Rules 2011 allows local authority solicitors to charge for work provided to charities and voluntary organisations – where previously they could not – but retained the provision that they could only work for charities “whose objects relate wholly or partly to their employer council’s area”.

This has drawn criticism in particular from Geoff Wild, the pioneering director of governance and law at Kent County Council, who has claimed it would act as “a real brake” on growth to local authority legal departments.

The SRA told the LSB that removing the geographical limit while enabling local authorities to provide legal services to a much wider range of consumers, would mean doing so “without the protection of such services being provided through a regulated entity”. The SRA said it therefore needed to examine the issue in more detail as part of its review of in-house rules, but could not confirm when that review would end “or what its outputs would be”.

In the notice that approved the rule changes, the LSB said the SRA had failed to consider that no local authority will be an SRA-regulated entity. It explained: “So, for example, if Local Authority A can act for charities and voluntary organisations that are situated in Area A without Local Authority A being an SRA-regulated entity, we do not understand why the lack of regulation at entity level is a factor if Local Authority A acts for charities and voluntary organisations in Local Authority B’s area.

“We do not consider it adequate for the SRA to say that it will consider this issue in the future but not to give any indication of a timescale and outputs for such a review.”

However, the LSB said that while it did not agree with the SRA’s position, it did not have the power to substitute an alternative form of wording, and did not have grounds to refuse the application (which the Legal Services Act proscribes).

It concluded: “Nevertheless, we expect the SRA to review quickly, particularly given the context of the Localism Act 2011, whether it should remove this additional element of red tape and, separately, to publish a timescale and the scope for its review of in-house rules.

“If the SRA decides in principle to remove the employer’s area restriction but considers that changes can only be made in the context of the wider review, the LSB suggests that it makes a statement on its position and waivers this provision in the intervening period.”

The Law Society opposed this change in its entirety, saying the issue should have been considered as part of the SRA’s in-house review. The society was concerned that in-house solicitors would be able to compete with private practitioners without entity regulation, in areas where previously this would not have been possible.

The seventh version of the SRA Handbook – including these 10 rule changes and the new provisions around the referral fee ban – came into force this week. Other changes resulting from the red tape initiative include:

  • Removing restrictions on charging by in-house lawyers employed in not-for-profit organisations;
  • Approval of registered European and foreign lawyers as new managers and owners;
  • Approval of a single COLP and COFA in related authorised bodies;
  • Simplification of the regulation of training contracts; and
  • Simplification of pre-admission processes and requirements.

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