Joe Bryant, partner, CMS Cameron McKenna
Opinion: Proactive regulation will hit solicitors where it hurts
19 October 2009
31 January 2013
1 July 2013
10 June 2013
3 December 2013
22 August 2013
The legal landscape is changing. Our core regulatory system is undergoing unprecedented change, and self-regulation is a thing of the past. But with the new infrastructure largely in place, the focus is now on the way this new governance will work.
The reforms enshrined in the Legal Services Act focus on the organisational change that is needed to move away from self-regulation towards a more independent structure. These are huge and costly reforms. The new, independent Legal Services Board (LSB) has been created to be the ‘oversight regulator’ for the entire legal profession. The board has a mandate to raise public awareness of the professional standards against which practitioners are assessed, and the grievance procedures that are available if required.
The Solicitors Regulation Authority (SRA) will continue to be the primary frontline regulator of solicitors’ conduct, but any complaints regarding a firm’s service will now be passed to the new Office for Legal Complaints (OLC).
The operation of the LSB, OLC and SRA will be funded in large part by the legal profession. Although the Legal Complaints Service will go, the overall cost to solicitors of this new infrastructure is likely to be considerable. There has been much publicity surrounding the recent increases in the practising certificate levy, but this may be the tip of the iceberg.
Solicitors will have to work hard to comply with the new regime. ‘Mandatory self-regulation’ is the new phrase in town; solicitors will have to demonstrate not only that the services they provide are up to a certain standard but also that the firm governs itself in a robust and watertight manner. This is a marked shift from the previous system, and firms will need to invest heavily in their procedures to satisfy the increasingly proactive SRA.
If and when complaints do come in - and given the budget of the LSB to raise public awareness, that is highly likely - dealing with them will be very expensive. The OLC is not bound to adhere to any legal principles when considering complaints, it will deal with most complaints on paper without any hearings and can award up to £30,000 in compensation.
As a pro-consumer organisation, it is intended to be an informal non-legalistic alternative to the courts and, as such, it will not charge consumers to use it.
The OLC’s authority seems likely to increase to £100,000 in due course, in line with that of the Financial Ombudsman Service. When allied with the LSB’s profile-raising campaign, such a move will result in a dramatic increase in the frequency of complaints. Although professional indemnity insurers may be persuaded to pay OLC complaints, the costs will only be passed back to solicitors in the form of increased premiums. Firms that prepare themselves for the inevitable onslaught by tightening up their complaints procedures now will undoubtedly reap the rewards later; keeping complaints ‘in-house’ as long as possible must be the way forward as allowing the OLC to get involved will be very costly indeed.
Lord Hunt recently produced his interim report into how the new regime should run. At the end of his report, he says: “What ultimately matters is outcomes, not processes, but the latter in so many cases shape the former.”
While this must be correct, those implementing the reforms must be careful to balance the protection of consumers against the need to avoid stifling solicitors with overly burdensome administration and cost. The costs of increased regulation are ultimately passed on to clients. It cannot be in the public interest to impose so austere a regulatory cost on practitioners that clients are forced to seek their legal services from unregulated sources.