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The LSB Advocates Full Regulatory Independence in the Legal Sector

27-July-2016
27-July-2016 19:24
in General
by Admin

The current chairman of the Legal Services Board (LSB) Sir Michael Pitt has recently written to the chairman of the House of Commons Justice Committee following its hearing on legal services regulation on 28 June 2016. Among other issues, the letter discussed the question of regulatory independence in the legal sector and confirmed the LSB’s support of full regulatory independence. As well as citing the issue of public perception, Sir Michael set out a number of advantages in separating the functions of regulatory bodies from representative bodies.

Firstly, the letter stated that it was necessary to simplify the situations where the approved regulator had responsibility for both regulatory and representative functions, such as in the cases of the Law Society and the Bar Council. It was also noted that under the current system, professional bodies were able to resist reforms that could be beneficial to competition and consumers. Sir Michael listed examples of this behaviour, including “opposition to the Institute of  Accountants of England and Wales’ (ICAEW’s) application to become a regulator for probate activities and resistance to the Legal Ombudsman establishing a voluntary scheme”.

Further, Sir Michael voiced his concern at a “lack of transparency of the cost of regulation under the current arrangements” due to regulators and professional bodies sharing resources and some costs being taken from a compulsory regulatory levy instead of from optional professional membership arrangements. As examples of the latter, the letter stated that in 2014, 30% of the Law Society practising certificate fee and 38% of the Bar Council practising certificate fee was spent on non-regulatory permitted purposes. The effect of legal disciplinary practices and multi-disciplinary practices in the marketplace was additionally noted to have reduced the relevance of tying regulation to specific representative bodies.

Sir Michael’s letter finally addressed the question of whether training and education and professional standards should be matters for a representative body at all. Whilst acknowledging that standards of education and professionalism could act as a potential barrier to entry, Sir Michael stated “There could… be considerable scope for a conflict of interest to arise if these standards were the responsibility of the representative body. In short, there could be a risk of gold-plating of entry standards and less competition and choice for consumers, alongside the opportunity for rolling-back of liberalising reforms in the market”.

When the legal regulation was at the white paper stage it was to abolish the profession regulating itself. During the passage of the bill both the Bar Council and Law Society successfully obtained change and it allowed them to create their own independent bodies – the BSB and the SRA. This was always contrary to the ideal that there should be a single regulator for all legal services. Sir Michael has without doubt re-opened that debate 10 years later.

Sir Michael's letter to the House of Commons Justice Committee can be found here.

 

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