Law Society: Brexit instability
Now is not the “appropriate time” to embark on wholesale regulatory reform, particularly because of the uncertainty caused by Brexit and the Solicitors Regulation Authority (SRA) rulebook changes, the Law Society has said.
The society said it would be “disruptive and counterproductive” to review the Legal Services Act before SRA reforms requiring firms to publish prices and to the rulebook, allowing solicitors to practise from unregulated firms, “could be evaluated”.
It made the comments in a position paper submitted to the independent review into the regulatory framework for legal services [1] led by Professor Stephen Mayson, supported by a high-powered advisory [2] committee, and funded by University College London.
But they came as Lord Keen, the Ministry of Justice’s spokesman in the House of Lords, said there was “room for review” [3] of the legal regulation regime.
The society said: “Put simply, we believe that the costs of a widescale regulatory reform, in terms of regulatory uncertainty, compliance burden, and international implications, would outweigh any perceived potential benefits.”
The society said Brexit had focused attention on the reputation of English law and “continuing with a stable regulatory regime” was an “important factor” in maintaining it.
“In light of the vote to leave the European Union, the legal services market is facing an unprecedented period of instability. Our legal services sector forecasts that Brexit is likely to have a significant negative knock-on impact on the legal sector.
“Because issues like Brexit are time-limited, we would argue that these risks and uncertainties should be managed before a far-reaching review of regulation is implemented.”
The society warned that regulatory change could also have an “unsettling impact” on the British public and consumers, and it was important that “as far as possible” that the public understood their legal rights.
“At the moment, a series of reforms have been proposed or implemented which will change the way that the public engages with solicitors. For example, from December 2018 solicitors must publish certain price and service information on their website.
“From 2019 there will be reductions in the consumer protections that the public will benefit from, as a result of the SRA handbook reforms.
“All of these changes need time to bed in and it would be disruptive and counterproductive from the public’s perspective to begin a review of the Legal Services Act before these changes can be evaluated.”
The society said the right time to review the Act would be when there were “discrete problems identified with the current regulatory framework”, when “workable solutions are identified which cannot be implemented without amending the framework” and when “analysis of the impacts on the legal services sector and the public” show a substantial benefit from regulatory reform.
In the first of three working papers published by the review [4] in October last year, Professor Mayson questioned the Legal Services Act’s “anachronistic” set of reserved activities and the title-based approach to regulating lawyers.
The society said there were “strong public interest justifications” for having reserved activities and these justifications aligned well to existing reserved activities.
“We therefore don’t agree with the strength of the review’s emerging conclusion that the reserved activities are ‘not fit for purpose’.”
The society argued that if the list of six reserved activities was reviewed, consideration should be given to extending it to new areas such as will writing.
On title-based regulation, the society said the only way to “level the playing field” between regulated and unregulated providers was to reduce or remove regulatory protections from the professions, such as by allowing solicitors to practise from unregulated firms.
“By removing the regulatory protections that distinguish professions like solicitors from unregulated providers, consumers will find it increasingly difficult to tell the difference between regulated and unregulated providers, because the quality mark of being a ‘solicitor’ would become less meaningful.
“In the longer term, it increases the risk that consumers lose trust in legal services regulation, especially where they may sustain uncompensated losses caused by a mistake from a regulated professional.”
Rather than trying to level the playing field, the society said regulators, professional bodies and market participants should “do what they can to help consumers distinguish between offerings” and if the public was better educated about the different features of professional titles, they could act as stronger quality marks.
“That is why the SRA has introduced a digital badge that allows consumers to verify the regulatory status and protections they get when they use a solicitor.
“While we acknowledge that at this point in time a digital badge will mean little to most consumers, over time we hope that it will become better understood.”