‘Tesco law’ will change legal services

The Law Society’s decision to back an application by its regulatory arm to oversee alternative business structures applications is a significant step The march towards alternative business structures (ABSs) took a significant stride forward on Thursday. ABSs, commonly dubbed “Tesco law”, represent the radical relaxation of the tight ownership restrictions on legal businesses and mean that from 6 October this year, non-lawyers will for the first time be able to invest in and own them. It could even mean law firms floating on the stock market. On Thursday the Law Society decided that its independent regulatory arm – the Solicitors Regulation Authority (SRA) – should apply to regulate ABSs as well . As the dominant regulator in the sector, this will make the introduction of ABSs far more straightforward for the overarching regulator responsible for doing so, the Legal Services Board. The other, smaller legal regulators can apply to issue ABS licences – one already has – and the Legal Services Act 2007, which underpins this regime, introduces the slightly odd concept of regulators competing with each other for ABSs’ business. It will be for the board, which is not overly keen on this aspect of the act, to ensure there is not a race to the bottom. Had the Law Society not approved the application, the act would have forced the board itself to regulate ABSs, making it both a supervisory and frontline regulator. This could have in turn unravelled the whole regulatory infrastructure and led to the end of the SRA and its ilk, and the board morphing into a Financial Services Authority for lawyers. Given that prospect, the Law Society’s options were not huge, despite residual concerns about ABSs on principle and also the ability of the SRA to deliver effective regulation of these new businesses. Indeed, the group representing 4,500 sole practitioner solicitors is considering whether to call a special general meeting of the Law Society and then trigger a profession-wide poll on solicitors’ support for ABSs – although any result would be symbolic at most. They argue that allowing commercial interests to dominate the law will damage the independence of the profession and ultimately access to justice. Certainly one of the SRA’s biggest challenges will be to ensure that the “fitness to own” test it will apply to all prospective non-lawyer owners is sufficiently robust. Law firms, through holding client money, have a quasi-banking role and access to other’s people cash, making them “attractive targets for organised crime”, the Law Society chief executive, Des Hudson said on Thursday. ABSs aim to promote competition and innovation in a market where both are lacking. While it is commonly held that there are too many solicitors (there are about 10,500 law firms), competition between them is gentlemanly – there is no “We’re cheaper than Bloggs & Co” advertising. Instead law firms tend to sell themselves in similar ways, as a quality, personal service, making it hard for consumers to distinguish between them. The Legal Services Board and its consumer panel are looking at the problems consumers have in identifying quality in legal services – research shows that people focus on service levels, which they can understand, rather than the ability of the lawyer to do the job, which is much harder to judge. They hold lawyers with a degree of respect “bordering on awe”, the panel reported recently and trust that the lawyer knows what he or she is talking about. It is into this void that solicitors fear brand names will come and offer a consumer-friendly service that will win the loyalty of a public intimidated by the legal process. A recent survey by YouGov found that 60% of people would consider buying legal services from one of 16 named brands, from Barclays to Kwik-Fit, indicating interest in the concept but also a certain reticence at such a radical change in the traditional model. Research consistently shows that there remains a place for an accessible, quality and local legal service, and there are fledgling efforts to bring order to the current chaos, most notably in the form of QualitySolicitors , a franchise-like grouping of rebranded existing law firms up and down the country, while other initiatives such as HighStreetLawyer.com and Face2Face Solicitors are also trying to get off the ground. This is in addition to the flourishing number of comparison websites. Nobody yet knows what the new market will look like – and Hudson says that anyone predicting whether ABSs will be good or bad for the public is “chancing their arm”. But this is what makes it exciting; without doubt some people are quietly hatching some groundbreaking ideas. There has been growing interest in the market for some time as only a relatively small number of legal activities must actually by law be handled by qualified lawyers working in law firms or barristers’ chambers. A few big names have made their intentions clear, most notably the Co-op, which since 2006 has grown its legal services from offering nothing to a £20m-plus business and intends to become an ABS. Others, such as the AA, Saga, Halifax and a host of other financial services businesses have dipped their toes into the water by offering online legal document production and other relatively straightforward services. For many years lawyers have largely ignored the oncoming storm, but with less than seven months to go, they can do so no longer. To generalise, lawyers are second movers and there is a great deal of “wait and see” going on at the moment, although the profession’s history is littered with moments when it has let others take the initiative and eat its breakfast. This October will not be the “big bang” some characterise it as – the law just doesn’t move that quickly. But in five or 10 years’ time, the face of legal services could look very, very different. Neil Rose is the editor of legalfutures.co.uk Alternative Business Structures Solicitors Neil Rose guardian.co.uk

Posted by on March 25, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.