Law in store?
30 May 2007
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Baked beans, tuna, cling film, writing your will Could Clementi make legal services just another tick-off on your shopping list? By Nina Goswami
Nowadays opening a bank account or taking out a loan at your local supermarket has become the norm. But if you fast-forward three years, not only will you be able to pick up insurance and financial services with your baked beans, you might also be able to instruct a lawyer.
Tesco law, as it has been dubbed, is currently causing a storm in the legal profession. If it goes ahead it could change the face of law as we know it.
The debate on the future of the legal profession kicked off more than five years ago, when questions were raised as to how accessible justice was to the ordinary man on the street. It was felt that the legal industry lacked a consumer-friendly focus and that something radical had to be done.
The result was that the Lord Chancellor Lord Falconer kick-started an independent review into the regulation of the legal services market in 2003.
Sir David Clementi, the former deputy governor of the Bank of England, was given the task of running the review, with the aim of promoting competition and innovation, and improving services for the consumer.
Within 18 months Clementi presented his vision of the future of the legal profession, although it received a mixed reception. The industry agreed with him on one of his major recommendations and has already implemented it, even though the Legal Services Act, which was formed as a result of Clementis review, will not come into force until 2010.
Clementis suggestion, which was backed unanimously by the profession, was that there was a need to make those who regulate lawyers independent from those who represent barristers and solicitors.
It led to the Law Society and Bar Council at the beginning of this year splitting into two. The Law Society and Bar Council continue to represent the views of lawyers, but the Solicitors Regulation Authority (SRA) and the Bar Standards Board (BSB) have been set up to deal with the regulation of the profession.
This is where Clementis vision and the views of the legal profession part ways.
The first obstacle, on which the Government so far will not budge, is the creation of the Legal Services Board (LSB) to oversee the legal sector and ensure that standards of the regulatory bodies are met.
The issue is not so much the creation of the LSB, but the fact that the Government, through the Lord Chancellor, will appoint the board. This, according to Bar Council chairman Geoffrey Vos QC, will put too much power in the hands of the Government.
Vos says the chairman and members of the LSB should be appointed by the Lord Chancellor with the concurrence of the Lord Chief Justice.
This feeling is echoed across the profession, which feels that a lawyer, the Lord Chief Justice, and not a politician, the Lord Chancellor, should decide on appointments for the sake of keeping the legal profession independent.
The provisions relating to appointments to the new Legal Services Board will weaken the perceived independence of the legal profession, says Vos. We also believe that the Governments approach could have a detrimental effect on our overseas markets, which will see the loss of independence as a black mark against our legal profession. This approach could well threaten the bars 200m contribution to the value of the UKs service exports.
As part of the radical overhaul, in an effort to follow Clementis proposals, the Government has drafted into the Legal Services Bill the creation of an Office for Legal Complaints (OLC), which would be set up to deal with consumers concerns.
Again, the legal ranks were outraged by the decision. The profession believes that the OLC could lead to a one size fits all approach to dealing with complaints, which would be detrimental to justice. It will also overlap with the current functions of the SRA and BSB and could result in a waste of taxpayers money.
The Bar Council, with the support of the Law Society, has called for an amendment to the Legal Services Bill that would allow the OLC to take a more flexible approach.
Vos says: A more flexible approach would allow the proposed new OLC to delegate services and conduct complaints to approved regulators, such as the BSB and SRA, which would mean work isnt duplicated.
The biggest shake-up, however, is not these acronym changes OLC, LSB, SRA and BSB. It is Tesco law that will rock the legal world.
A huge chunk of the Legal Services Bill looks to implement Clementis idea that the law should be more competitive, which would result in the cost of legal services coming down.
The details are still relatively vague, with Parliament still trying to tweak the finer details. The general concept, known as alternative business structures (ABSs), would be to allow law firms and barristers chambers to get on board with commercial companies such as Tesco and the Automobile Association (AA).
Tesco, however, has not become the first supermarket to throw its hat into the ring. That honour goes to the Co-op Group, which owns the Co-op supermarket chain.
At the end of March 2007 Co-op set up a dedicated legal services arm, although it will not be fully up and running until 2010, when the Legal Services Act comes into force.
The supermarket is hoping that it will be able to offer a full range of legal products, from writing wills to suing someone for damages.
Russell Jones & Walker (RJW) became the first influential law firm to announce that it will take advantage of the Clementi reforms, which will result in a radical overhaul of its entire business structure. The firm aims to be the first to utilise ABSs in order to transform itself into a household brand for consumer legal services in time for the implementation of the Legal Services Bill.
RJW managing partner Neil Kinsella says that since taking over personal injury (PI) companies such as Claims Direct, which resulted in the firm inheriting a call centre, it is in a strong position to move over to an ABS.
Kinsella says: The core of our services will be higher value and therell be degrees of joint venture with different parties a group structure with different product lines.
The firm also hired Louise Restell, from Which? (formerly the Consumers Association). Restell, who worked
alongside the Government campaigning for the legal services reforms, has been brought in to hone the firms consumer focus. RJW, however, has competition to become the first firm to shift to an ABS.
Irwin Mitchell, another PI powerhouse, has kicked off its move towards the new Clementi world by merging with Scottish firm Golds. Irwin Mitchell managing partner Howard Culley says the repositioning strategy was needed because the proposals to allow lawyers and non-lawyers to work together had already affected the legal marketplace.
Were already seeing companies such as Co-op and the AA offering legal services and I can see that other household brands will come on board after the Legal Services Bill comes into force, says Culley. With such strong brands coming into the market we felt the need to reposition ourselves.
Although the merger will allow Irwin Mitchells brand to strengthen in the eyes of the public, we feel were a long way off becoming a high street brand.
Irwin Mitchell will be looking to provide legal packages that could potentially be put on shelves much like any other supermarket product.
And it is not only solicitors who are getting in on the act. Barristers are also contemplating how the Legal Services Bill might benefit them.
In March 2007 common law set Seven Bedford Row became the first chambers to announce its intention to overhaul its structure, should the Legal Services Bill allow it.
Seven Bedford Row chief executive Stephen Allen says: Were looking at ABSs, if Clementi allows it, as a way to overhaul our business support structure to add greater value and leverage to both our barristers and clients through additional services.If the reforms allow barristers to form companies with solicitors and non-lawyers, it could change the face of the bar from how it is known today.
But Mark Stobbs, a director at the BSB, says it is very much a waiting game. Under current rules barristers cant create partnerships or companies, or work with other professionals, says Stobbs. This doesnt mean to say that the Legal Services Board when established may not change the benchmarks, so its not outside the realms of possibility.
With everything still to play for, the future structure of firms is still very much in the air. Indeed, as some market commentators have suggested, some might one day even float on a stock exchange.