Reforms’ character

The Clementi reforms may have made some high street practitioners a bit twitchy, but they still represent a giant step forward for the industry. By Jonathan Gulliford

In the noise and clutter that accompanies the weeks preceding a general election, there has been little time for the Government to reflect upon the proposals set out by Sir David Clementi in his review of the legal system. One hopes that when a new term of Parliament begins, Clementi’s recommendations are embraced and the impetus for the reform of the legal industry – to enable more competition and improve services to consumers – is urgently addressed.

As Clementi recognised in his report, one of the reasons the legal profession exists is to protect the interests of consumers; but when many consumers do not understand the legal process, feel uncomfortable approaching solicitors or mistrust the quality of the service – even to the extent that thousands choose instead to deal with the likes of The Accident Group or Claims Direct – the need for reform is obvious. Solicitors must ask themselves some serious questions relating to their customer service and communications, when even now consumers still phone these companies for legal advice two years after their demise.

The RAC’s own research revealed that only 7 per cent of the UK’s population think that solicitors are approachable. This perception arises partly as a result of the lack of frequency with which people deal with solicitors, but is also indicative of wider issues about how people relate to the profession.

It is not acceptable for the industry to continue in this state. The conclusions of the Clementi review are that the current system of regulation does not promote competition or encourage innovation and transparency for consumers. More competition is essential to provide consumers with access to justice, greater choice and better value for money.

The reform proposals laid down by Clementi, the changes to the regulatory framework under model B+, the creation of legal disciplinary practices (LDPs) and the proposals for non-lawyer ownership will improve consumer access to justice.

The RAC has long argued for amendments to the Solicitors’ Incorporated Practice Rules to allow the establishment of incorporated practices, wholly or partly owned by non-solicitors. This proposal does not create a multidisciplinary practice. It establishes a solicitor practice staffed and managed by solicitors, subject to the same regulation from the Law Society.

Consumers will benefit from the additional skills that LDPs can bring to the management of a legal practice. The RAC has a 200-strong legal department, run and staffed by lawyers and professional managers and regulated by the legal industry and the Financial Services Authority (FSA). However, it has a strong brand with an excellent track record for customer service. The business structure allows for the management of the practice to incorporate the expertise that the RAC already has in business management, finance, marketing, HR, IT and communications.

The current business structure for legal practices does not encourage long-term investment in IT, HR or communications. Consumers express dissatisfaction because they only communicate with their solicitor during office hours, and even then often with a secretary. Consumers express frustration because cases take too long – postal systems, dictation and typing pools slow the legal process. LDPs will be able to offer consumers advanced technology and multiple channels of communication, depending on individual needs.

The proposals for LDPs have led to debate and concern in the legal industry that change will lead to a de-lawyering of the profession. This is wrong. Change can be achieved without damaging the professionalism and integrity of the legal industry. Indeed, the RAC believes it will improve standards for the benefit of the profession and for consumers.

The RAC does not believe that client protections will be eroded. LDPs must ensure that guaranteed levels of indemnity insurance are in place, solicitor account rules are adhered to and staff properly qualified, subject to the continuing professional development requirements. The entire legal entity and the individual lawyers therein will be fully regulated and accountable. Furthermore, Clementi has recommended that the non-lawyer owners of an LDP must provide an indemnity in respect of all client monies.

It is also necessary to remove conflicts of interest and commercial concerns. It is completely inappropriate for any firm to own a solicitors’ practice where that firm has a commercial interest in the outcome of any legal case. For example, insurers should not be allowed to own and run a solicitors’ practice set up to run claims that arise from insurance policies where the insurer is also recovering its own outlay.

It has been suggested by the Bar Council that reform of the legal industry may expose the market to rogue practitioners, but this is precisely what the ‘fitness to own’ criteria will address. The reality is that greater competition, where trusted brands can offer legal services, will provide consumers with greater choice and allow them to make more informed decisions. In the proposed system, market forces will determine which firms are a success and those that are failing. And market forces, assisted by proper regulatory controls, will drive out rogue elements.

Of course, the reforms will have the potential to affect traditional high street practices. Change may drive out those that do not adapt, embrace new service standards, establish a specialism or attract external investment. No one wants to drive solicitors out of practice, but it is in the interests of the consumer for firms to evolve and improve services – and vital if the firm expects to grow and broaden its market share.

While the Bar Council has misgivings about proposed changes, it is interesting to note that the RAC has been inundated with calls from chambers wanting to develop business relationships. Many barristers now see the merits of the proposed changes and expect to gain from it.

Reform will not lead to a de-lawyering of the legal profession. With careful management and regulation, the result of change will be to allow market forces and competition to improve standards in the legal industry. Consumers will receive greater access to justice in the UK and gain more trust in solicitors. This is a unique opportunity to improve the reputation of the legal profession among the UK public. It is hoped that the Government will not squander it.

Jonathan Gulliford is head of legal affairs at RAC Legal Services