Legal Services Act

The first of a series of extracts from Climate Change, a report on the impact of the Legal Services Act published by accountants Baker Tilly, considers what kinds of law firms and investors will be interested in taking advantage of alternative business structures. And just what would a big law firm do with a £50m cash injection?

Solicitors are set to shoulder the vast majority of the Legal Services Board (LSB) and Legal Ombudsman’s (LeO) £25m annual running costs for the next three years at least, it emerged today. The LSB confirmed that it would proceed with its plan to levy its own £5m costs on the basis of the number of authorised persons overseen by each approved regulator, and most of LeO’s £20m costs based on the number of complaints generated by each group.

The AA and Saga have today launched legal services websites targeted at Middle England as pressure on high street solicitors cranks up. Both companies – which are owned by the same private equity businesses – have tied up with volume law firm Cogent Law to offer services sitting behind an online document-assembly platform provided by legal IT company Epoq Legal.

Confusion in the rules around complaints means law firms are having to “err on the side of annoyance” by referring commercial clients to the Legal Ombudsman even though it does not have jurisdiction to deal with them, it has been claimed.

Legal Services Board chief executive Chris Kenny has spoken out in favour of the “holy grail” of diversity neutral aptitude testing across legal careers. Addressing a legal education conference at Harvard University in America – one of the first times the LSB has seriously addressed its role in legal education – Mr Kenny also hit out at lawyers who see their ethical training as creating “a wall of professional exclusivity”.

The chairman of the Legal Services Board has called on the Solicitors Regulation Authority (SRA) to be more flexible in its approach to law firms which are looking to do deals with external investors before alternative business structures (ABSs) become a reality on 6 October 2011. In a major speech, David Edmonds also suggested that the rules which prevent solicitors having unregulated separate businesses carrying out unreserved legal work are anti-competitive.

The introduction of controversial new standard contractual terms for solicitors instructing barristers has been further delayed by confusion over the split of responsibilities between the Bar Council and Bar Standards Board, Legal Futures can reveal. The BSB also has a new director and has formally launched its chambers monitoring scheme.

There is real potential for alternative business structures (ABSs) to have a positive impact on both the profession and consumers, the Solicitors Regulation Authority has said. The provisional conclusions of an equality impact assessment said solicitors would benefit from improved employment opportunities, while ABSs would facilitate improved access to legal services for consumers.

Australian law firm Slater & Gordon – the first in the world to go public – is keeping a close eye on developments in England and Wales and would consider entering the market, its managing director has revealed. Andrew Grech also gave an insight into the lengthy process they went through to float.

Over half of all law firms have either lost business to a non-lawyer competitor or expect to in the future, a new survey from accountants Baker Tilly has revealed. Some 29% of firms with 25 partners or fewer had already lost business to a non-lawyer competitor, compared to 12% of larger practices.

The Legal Ombudsman has added his voice to concerns at plans to merge the Legal Services Consumer Panel into Citizens Advice. He said that whatever happens, he will still “need someone I can talk to who I believe truly represents consumer interests… Unfortunately, for all its virtues, Citizens Advice cannot do that.”

The updated draft of the single Handbook that will govern both traditional law firms and alternative business structures from October 2011 is being unveiled today by the Solicitors Regulation Authority (SRA). This is the last opportunity to comment on it. The latest stage in the SRA’s move to outcomes-focused regulation also includes a call for the Legal Services Board to extend the definition of reserved legal activities to cover all “solicitor activities”.

An expert advisory group to help the Legal Services Consumer Panel design its Consumer Welfare Index has been unveiled. The index – first announced in the panel’s 2010/11 workplan – will be a basket of indicators that, taken together, will assess whether the legal services reforms are having a positive impact on consumers. It will then form the basis of an annual “consumer health check”.

In the final part of his series on external investment in law firms, Jeremy Black of Deloitte explains that private equity firms have one goal – to make money – and briefly looks at the implications of raising funds through listing.

Personal injury claims and other low-value legal matters should be “delawyered” to some degree, former Lord Chancellor Lord Falconer has argued. The peer, who was the architect of the Legal Services Act, said alternative business structures would help in this process. Welcoming the “commoditisation” of personal injury work, he said it is “fundamentally a good thing that the market should only be charged what the service requires”.