Consumers just want a good, cheap lawyer

The SRA consultation on whether or not to relax
its separate business rule (SBR) closed in mid-February. The regulator had hoped that the proposal to 'liberalise' the rule would be a popular one with the traditional majority
of firms who don't want to go down the alternative business structure (ABS) route but do want the scope to do more to compete with the new types
of firm.

However, the national Law Society and the City of London Law Society have objected. In its response to the consultation, the latter said the proposals would cause 'irreparable damage' to the solicitor brand and that lead to unregulated lawyers dominating all legal activities other than those 'reserved' to solicitors. In the face of such opposition, will the SRA be forced to climb down?

During the negotiations which led to the Legal Services Act 2007, the Law Society fought hard to leave the SBR untouched by the Act. The SRA continued with
this line when it took over
from the society, fearing the unpredictable consequences of allowing the rule to be watered down. The separate businesses they were particularly concerned about were those intending to supply non-reserved legal activities, such
as drawing up wills, carrying
out estate administration or providing general legal advice. Since these separate businesses do not need to be authorised by an approved legal regulator, the Act forbids them from providing reserved legal work.

The SRA gave three reasons why a separate business rule was needed at all:

• relaxation would lead to confusion with the public, thinking that separate businesses were regulated by the SRA when they were not;
• client protection; and,
• concern about firms splitting cases so that clients lost statutory protection.

The SRA proposal is that the prohibition on separate businesses undertaking non-reserved activities be removed and replaced by defined outcomes, in order to secure consumer protection.

The main reason why the regulator wants to do this appears to be that it will help 'level the playing field' between traditional firms, ABSs and unregulated service providers. The LSB has attacked the current rule for being 'arbitrary' and pointed out that by August 2014 the SRA had issued as many as
57 waivers of the SBR, which accounts for 17 per cent of ABSs. The LSB also criticised the SRA for imposing the most restrictive rules when compared to other legal regulators. This view was echoed by the Legal Services Consumer Panel, which, in its response to the consultation, went as far as to claim that the existing rule had "fallen into disrepute".

City causes a stir

The views of the panel and the LSB are not shared by the national Law Society, which worried about the resultant destabilisation of the market and a growth in unregulated legal service providers, together with problems for "vulnerable inexperienced consumers". It is the City of London Law Society's comments which have caused more of a stir, with its forecast of doom for the solicitor brand, and its opinion that the change to the rule would drive thousands of solicitors out of the profession and into the unregulated sector.

In truth, the solicitor brand
has already seen its value eroded over a number of years. The Act concentrates on all types of 'lawyer', rather than just solicitors. For example, the compliance officer for legal practice (COLP) in solicitor firms does not have to be a solicitor; any type of lawyer is fine. The reserved activities each legal regulator has for its members
are increasingly becoming the domain of all legal regulators, not just solicitors. Since the LSB came into being, we have seen additional reserved activities granted to the Council for Licensed Conveyancers, CILEx, and, most significantly, three accountancy regulators.

As I pointed out last month
(SJ 159/5), legal executives can now do everything, in terms of reserved activities, that solicitors can. Those who work in the profession are very conscious
of the distinction between barristers, solicitors, and legal executives, but consumers of legal services are less bothered and are not interested in the subtlety of the differences - they just want a good, cheap lawyer. If the march of the accountants continues apace, they may in future be looking for a good professional adviser rather than a lawyer.

The City of London Law Society may be right. It may also be possible to persuade the SRA to change its mind, and the battle may be won. However, the war over the solicitor brand could already be lost. SJ

Stuart Bushell is managing director of SIFA

@Sifa_Pro