The Bar Standards Board (BSB) is to regulate advocacy focused alternative business structures (ABSs) and allow barristers to conduct litigation, its board decided yesterday.
However, it has placed significant restrictions on the range of entities it is prepared to regulate, excluding multi-disciplinary practices, those with passive investors and those with more than 25% of non-lawyer owners/managers (partners).
A majority of the owners/managers of ABSs regulated by the BSB must be barristers or other advocates with higher rights of audience.
It is using the structural restrictions to maintain the advocacy focus of those entities it regulates, rather than explicitly restricting their services to advocacy and ancillary litigation services. “That is likely to be too difficult to define and it excludes too much of what the self-employed Bar can do,” a paper before the board explained.
Allowing suitably trained barristers to conduct litigation “should promote competition in the provision of one-stop advocacy and litigation services, including the provision of such services to the Legal Services Commission and other block purchasers”, the paper said.
“At the other end of the spectrum of sophistication, it should also assist access to justice for those lay clients who lack the expertise to conduct litigation themselves but whose case cannot bear the relatively high overhead, and does not need the resources, of traditional law firms.”
The BSB, which hopes to start regulating entities in early 2013, will not allow them to hold client money, but will investigate whether the Bar Council or Inns of Court could set up a “central custodian service” where money would be held and moved on instruction from the parties.
If this is not possible, then BSB-regulated entities “will need to manage fees, disbursements and settlements in the ways that the direct access bar has done historically, i.e. without handling client money”.
Patricia Robertson QC, who has led the entity regulation working party, told the board that it would cost around £400,000 to set up the regime, which would amount to £25-30 per barrister. Summarising the rationale for entity regulation as “specialism, choice and cost-effectiveness”, she said it provided a “genuine alternative” to the Solicitors Regulation Authority for those practices focused on advocacy.
She said not allowing entities to hold client money or be externally owned reduces regulatory, compliance and insurance risks.
Pointing out that “in one sense fusion is already with us” – with barristers working as partners in legal disciplinary practices, for example – Ms Robertson said the proposals would help “retain the culture of the Bar” in the public interest, a view echoed by other members. “Fusion is not on the agenda,” emphasised BSB chairwoman Baroness Deech. “What we’ve designed here is something that preserves the Bar’s independence.”
The board also decided that barristers will be permitted to practise as managers or employees of ABSs regulated by other approved regulators, and will be allowed to have ownership interests in ABSs subject to rules and guidance on managing any resulting conflicts of interest that it is to develop.
Baroness Deech said: “Nearly 75% of respondents to our consultation agreed that BSB regulation of entities would be in the public interest. I am pleased that the board has listened to the profession and other respondents and has taken this bold step forward, promoting choice and increasing access to justice.
“We intend to target our regulation on advocacy focused entities, taking a risk-based and proportionate approach. We hope that this decision will allow barristers the freedom to react to changes in the legal market and permit them to devise new ways of working in order to remain competitive and better serve the public.”
Bar Council chairman Peter Lodder QC strongly backed the move, saying it offers the flexibility for those practitioners who want the choice of how to offer their services. “It is important in a modern market that barristers are able to take advantage of the changes introduced by the Legal Services Act whilst remaining independently regulated, practising barristers.”
The next step will be for the BSB to develop a detailed regulatory framework, draft rules and options, which it intends to issue for consultation in the autumn.