Basket cases

Most feel that deregulation is both necessary and imminent, but as Jon Robins reports, the idea of supermarkets and banks offering law advice doesn't sit well with traditionalists

The Law Society came up with a striking vision of the future last month. One day, happy shoppers will nip down to their local Sainsbury&#39s for their weekly provisions, park up their trolleys… and sort out their wills or even initiate divorce proceedings.
According to a consultation document doing the rounds at Chancery Lane, a relaxation of the restrictions on businesses selling legal services directly to the public could envisage big businesses – “such as Virgin or Abbey National” – competing with law firms. Next month, the Law Society council will debate whether such liberalisation should be allowed.
It is the kind of positive image that Chancery Lane loves to promote – first and foremost, it shows the profession to be taking the initiative, consumer-friendly and being one step ahead of the politicians. But just where would supermarket law firms leave the traditional high street firm? “Anyone remember the corner shop?” quips one jaundiced critic.
Law Society chief executive Janet Paraskeva clearly sees deregulation as the way forward for the profession. “What we're saying to the profession is not to see this as a threat, but as an opportunity,” she says. “An opportunity to offer the services of a solicitor on the open market in a more dynamic way, in a more customer-friendly way and in a way that might mean that it's easier for services to reach people.”
But it is hard to see how the traditional solicitor will be cheering the arrival of 'Virgin Law' on the high street. Edward Nally, the solicitor who chairs the regulation review working party and one of the authors of the recent report, notes that there is a “distinct possibility” of many firms feeling “threatened”. But Nally, a high street solicitor himself at Bolton practice Fieldings Porter, is taking an unsentimental view and points out that “professional self-interest” alone is not reason enough for a rule to remain in the solicitors' rulebook.
“All rules have to be made and maintained in the public interest,” he argues. “The mere enactment of a rule to preserve the interests of the profession would, of itself, not be a sound reason for making a rule.” But he points out that, just because a rule works to the profession's advantage, that does not automatically disqualify it from also being in the public interest.
Next month's council debate goes to the heart of what many solicitors regard as the essence of their practice. The liberalisation of what is known as 'Rule 4' of the solicitors' code of conduct, which covers employed solicitors, has already been dubbed the profession's equivalent of the Labour Party's 'Clause 4'. It is reform that must be introduced to save the profession, but one that will change things forever – and not necessarily for the better.

“What if a supermarket started to offer criminal law advice and their first batch of potential clients were shoplifters?”
Edward Nally, Fieldings Porter

Paraskeva is amused by the analogy, but quickly points out that the profession's demographics are changing; indeed, a job with the likes of Tesco or Abbey National might seem attractive to a new generation of lawyers. “I think many of the younger members of the profession are seeing employment as a more secure base than private practice,” she says, adding that the number of solicitors in employed practice has doubled in the last 10 years.
Paraskeva continues: “I think there'll be a future for the high street practice, but perhaps in slightly different ways to now – in niche practices, for example, or in specialist areas or rural parts of the country.”
The consultation document also argues that deregulation could lead to a huge reinvestment in the high street and is an answer to the problems of under-resourcing. “Increasingly, high street firms express concern that they are unable to operate profitably or make a proper investment,” it notes.
Nally explains that there are three fundamental issues at stake. First, there is a major redrafting of the 'Guide to Professional Conduct of Solicitors' taking place that will reduce the guide from an unreadable 897 pages to less than 100. Beyond that, Nally points out that the council will revisit two specific restrictions – on fee-sharing with non-solicitor parties and payment for the introduction of referrals. But the mood is definitely for liberalisation, and as Nally puts it, the “spirit of deregulation” is at large in Chancery Lane.
No doubt, the Government snapping at the heels of the Law Society will concentrate the minds of the policymakers. Last year's Office of Fair Trading (OFT) report into competition in the professions was a shot across the bows. Speaking at the time, the OFT director of competition policy Margaret Bloom told The Lawyer that the demands for liberalisation – in particular, multidisciplinary partnerships (MDPs) – were coming from the smaller, traditional firms as much as from the City. “It's in the high street where they need to deliver something to respond to the needs of the consumers,” she said, citing the example of property services, where solicitors could team up with surveyors and estate agents.
Outside the legal profession, there has been much enthusiasm for the plans. Indeed, the supermarkets and banks – including the likes of Tesco, Marks & Spencer, Sainsbury's and Abbey National – all went on the record to say that they would be keen to provide legal advice. A spokesperson for Abbey National says that it will be looking at the introduction of legal services “to create added convenience and choice for customers”, should the Law Society give the green light to the proposals. “The plan's at a conceptual stage at the moment, but we would aim to provide services such as conveyancing, wills, executorships and trust services, given that these areas dovetail with our existing services,” added the spokesperson.
By contrast, the response from the high street has been predictably negative. Ian Lithman, chairman of the Solicitors Sole Practioners Group, reckons that the Law Society is being lent upon by the consumer groups. “As far as they're concerned, we're like any other salesmen or shopkeeper and we should act accordingly and have no rules and no regulations,” he says. “We should just provide the cheapest service at the cheapest price.”
Lithman also believes that the society is completely out of step with the profession and hopes that such reforms will get squarely kicked into touch when they go before the council. He believes that deregulation on the scale proposed would be the beginning of the end. “You might as well pack the profession up, disband all the rules, get rid of the compensation fund and let the public take their chances in the same way as the other commercial enterprises do,” he says.
“I don't think that any of us ever thought that, without any pressure from anyone, the Law Society would just donate the profession to Tesco, but that's effectively what they're doing,” claims Kerry Underwood, senior partner at Underwoods and a leading commentator on litigation funding issues. Underwood fears that big business would not just target the more easily commoditised areas such as conveyancing and probate, but it would also move into litigation services. If the Law Society was to relax the rules, he predicts that the likes of Tesco would be “running PI [personal injury]” by Christmas.
He believes that the public would suffer because this conveyor belt approach to the law would not cater for cases that did not lend themselves to being processed easily. “Who's going to be left to do the difficult cases – the clinical negligence, the stress, the DVT [deep vein thrombosis] cases and the tobacco litigation?” he asks.
Underwood complains that the Law Society is on a “deregulation kick” because it is the “fashionable, trendy thing” to do. He believes the debate to be spectacularly bad timing, given the concern about the role of accountancy firm Andersen in the Enron saga. “The idea that a profession not being regulated is somehow a good thing is simply mad,” he says. “Most things in life should not be regulated, but surely the definition of a profession is that it is regulated, and for good reason.”
It is, of course, an old debate, and the lines between the pro-regulation and liberalisation lobbies are demarcated clearly. For example, Quentin Poole, managing partner of Wragge & Co, is very much in favour of relaxing the rules to allow different ways of working for solicitors, such as MDPs. His view is that “one should liberalise and open up, and not have unduly restrictive practices operating perfectly competent people competing in marketplaces”.
Poole approves of the concept of law firm supermarkets. Lawyers have “a great tendency and a great liking for making all subjects sound immensely complex”, he argues, but a very significant proportion of work done by lawyers “isn't exactly rocket science. When you want a complex international bond deal done, then you need [the equivalent of] a brain surgeon,” he continues. “But when you want a debt collected or a will draft, then it's like buying aspirin. You don't need complex advice, but a process that has been finely tuned, sorted out and laid out on a production line.”
Clearly, the Law Society is making a case for deregulation, but equally Nally and the policymakers at Chancery Lane seem very aware of the dangers of going too far. As he says, there is a perception of “an artificial distinction” drawn between those rules serving the professional self-interest and those that are in the public interest. “There are various public interest considerations as to why employed solicitors shouldn't offer advice to the general public, and they are just as sustainable today as they were on the day they were enacted,” he says.
Nally cites, for example, the conflict of interest rules. “What if the particular supermarket started to offer criminal law advice and their first batch of potential clients were shoplifters?” he asks. Nally also points out that, so far, the debate has focused around the effect that the big retailers might have on the profession. However, he is far more concerned about the impact of unregulated small limited companies and is mindful of the relatively new industry of claims handlers in PI cases.
His main fear is that such an enterprise would cherry-pick the commercially-viable areas while leaving behind the less lucrative but crucial areas of work, such as family, crime, welfare and immigration.
So would Nally welcome the arrival of Virgin Law in Bolton? “I am concerned – but I don't rule it out as a possibility,” he replies.

Law Society chief executive Janet Paraskeva says…

“What the profession's trying to do is get a little bit ahead of the game and recognise the different role the consumer has these days,” says Law Society chief executive Janet Paraskeva. She is talking about next month's Law Society Council debate on the possible relaxation of restrictions on employed solicitors. “It's the year of the consumer,” she proclaims.
But how should solicitors view the prospect of Tesco Law opening up on the high street? The Law Society's 'message' is that the possibility of reform is an opportunity and not a threat. “[It is] an opportunity to offer the services of a solicitor on the open market in a more dynamic way, in a more customer-friendly way and in a way that might mean it's easier for services to reach people,” she says.
According to Paraskeva, council members will debate “the degree to which they want employed solicitors to provide legal services to the public”, and under what conditions, “because there really needs to be adequate safeguards for the public and the profession”. They will also look at the “separated but related issue” of the extent to which solicitors can share fees with third parties. A paper will then go out to the profession recommending a particular course of action.
Is there much support for such a change from those traditional firms that have the most to lose? “I think the profession is realistic and wants to make sure that it continues to add value,” she says, adding that there is concern, but there are more encouraging voices than there are those resisting change.
Paraskeva is aware that deregulation could lead to a fundamental change in the profession. “I think there'll be a future for the high street practice, but perhaps in slightly different ways to now,” she says. “In niche practices, for example, or in specialist areas or rural areas.”
Whatever the changes, Paraskeva maintains that the society wants to ensure that the essential identity of solicitors remains intact, whatever the reforms.
“We'd want to uphold and promote the core values of the profession – the independence, the confidentiality the profession gives to its client and the safeguard of conflict of interest,” she concludes.