MPs: Case to review Legal Services Act “growing stronger and stronger”

Neill: Time for review of LSB

The case for re-examining the regulatory framework created by the Legal Services Act 2007 is “growing stronger and stronger”, MPs have told the government.

The justice select committee has also called for a review of the Legal Services Board (LSB) and suggested the Bar Standards Board (BSB) needs greater independence from the Bar Council.

It expressed scepticism about CILEX’s proposal to switch regulator to the Solicitors Regulation Authority (SRA).

The committee took evidence late last year on the regulation of the professions, having not looked at it since 2016. This involved two hearings (here and here) and receiving written submissions.

In a letter to Lord Chancellor Alex Chalk, committee chair Sir Bob Neill said: “In summary, we heard about a legal services market which has already changed a great deal since the Legal Services Act 2007 came into force, and is likely to change even more as the effects of technological advancement are felt.

“We saw some indications that the needs of consumers are not being met as much as they should be. We also heard about a vital and internationally significant industry which makes a major contribution to the economy.

“The success of the legal services in England and Wales should not deter the government from examining the problems with the current regulatory framework.

“The Post Office Horizon Scandal will inevitably have damaged the public’s perception of the legal professions. It is imperative that the public can see that that the regulatory framework is robust and responsive enough to identify and punish egregious breaches of regulatory standards.”

Sir Bob said the professional bodies and the regulators would not welcome a wholesale review of the 2007 Act and the instability that it might cause.

But would be “wrong” for the government to ignore the conclusion of Professor Stephen Mayson’s independent review of regulation in 2020, followed up in 2022, that many of the recent issues relating to regulation were evidence of the fundamental flaws of the 2007 Act.

“Professor Mayson’s evidence highlighted the following areas to us: the scope of regulation, regulator performance and enforcement, professional integrity and regulatory oversight,” Sir Bob said.

The Legal Services Consumer Panel’s evidence was that the current regulatory framework did not provide a sustainable model of consumer protection or support.

Sir Bob also cited the CILEX issue as another proof point: “Setting aside the merits of the change, the proposed re-delegation [of regulation] by CILEX raised serious concerns around the model of the 2007 Act.

“It is difficult to see how the 2007 Act can provide a stable and efficient model for independent regulation when it is possible for an approved regulator to decide to re-delegate regulatory authority to another body.”

He concluded: “We recognise that there is relatively little appetite in the sector for far-reaching regulatory change, however, it is undeniable that the case for re-examination of the legislative framework underpinning regulation is growing stronger and stronger.”

There was disagreement before the committee of the breadth of the LSB’s statutory remit. Sir Bob said it accepted the LSB’s own analysis – that the Act was broadly drawn and it was for the LSB to decide how to interpret its remit.

“However, we share the Bar Council and Professor Stephen Mayson’s concern that the LSB’s wide-ranging approach to its remit risks raising expectations that cannot be delivered upon…

“Considering the evidence as a whole, we conclude that it is now right to carry out a review of the Legal Services Board and we recommend this to the government.”

He also formally requested that the government add the role of the LSB chair to those which are subject to pre-appointment scrutiny by the committee.

The committee identified confusion too about the operation of the internal governance rules, whose role is to ensure the independence of regulatory arms of the approved regulators (eg the SRA from the Law Society).

Sir Bob said MPs backed LSB plans to review the operation and effectiveness of the rules. “We… would encourage the LSB to consider whether recent events indicate that the internal governance rules should be further clarified and strengthened.”

The committee said it was “concerning” that the BSB continued to fail to meet any of the LSB’s performance criteria and supported the regulator’s prioritisation of operational improvements.

“However, the BSB should consider whether greater institutional independence could also help to facilitate improvements in its effectiveness as a regulator,” the letter said.

The question of CILEX changing regulator was discussed during the hearings and Sir Bob said the committee was “sceptical” that the plans to change both regulator and the title of chartered legal executive to chartered lawyer “would represent a simplification that would help consumers”.

He explained: “There is a risk that by creating a more recognisable title for legal executives, ie lawyer, it becomes harder for the public to recognise the distinction between a solicitor, who is qualified to operate across all areas of the law and legal executives who are qualified only in the specific area of the law in which they are qualified.”

While there was “a respectable argument for simplifying legal titles”, this should be through legislation, Sir Bob said.

Axiom Ince was another topical issue raised before the committee and Sir Bob said it received “a significant amount of correspondence from solicitors who criticised the way that the SRA has handled the collapse of Axiom Ince and the way it was communicating with solicitors”.

With changes to compensation arrangements on the horizon, the letter said: “We encourage the SRA to ensure that it communicates clearly and effectively with solicitors before it takes the big decisions that may have a profound impact on their working lives.”

The committee acknowledged too concerns about in-house lawyers’ independence, welcoming the SRA’s publication earlier this month of draft guidance to support them.

“We would encourage the Law Society and the SRA to take a proactive approach to the needs of in-house lawyers and to demonstrate that they understand the challenges they face at present.”

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