Buying legal services is about to become as easy as buying baked beans. But with 5,000 organisations potentially entering the market, professional standards could slip.
On 6 October this year the Legal Services Act 2007 will come into force and alternative business structures will be born. This means that, subject to licence and having at least one qualified lawyer employed, any business will be able to offer a full range of legal services. The act followed a campaign by the consumer lobby to let non-lawyers provide legal services – culminating in a fatuous comment by Bridget Prentice, a junior justice minister in the last government, that obtaining legal advice should be as easy as buying a can of baked beans. People should be careful what they wish for.
The rising cost of professional indemnity insurance premiums and practising certificate fees, as well as legal aid cuts, have already forced hundreds of law firms out of business. The deeper cuts to legal aid expected this year will take a further toll.
Forced to compete with all comers, law firms are now considering whether to switch to being an alternative business structure, or ABS. But a significant number, including my own company, are asking the question: “Why be regulated at all?” Legal services are divided into reserved and unreserved activities. For most law firms, more than 80% of work is unreserved, which means that anyone may do it. Wills, employment tribunal and other tribunal work, pre-issue litigation and all general legal advice that does not involve appearing in court or preparing a deed for gain fall into this category.
It is simplicity itself to become entirely deregulated and instruct an ABS or counsel on the rare occasions thought necessary. No more professional indemnity insurance, practising certificate fees, inadequate professional service penalties or disciplinary tribunals. If legal advice really is a baked beans job, then why have this expensive and time-consuming regulatory regime? Why not be a minicab rather than black cab? It is true that we could all do this already: the Legal Services Act does not alter the position. What does change is the fact that a new range of unqualified entrants, perhaps as many as 5,000 organisations, will be entering the fray in the next couple of years. These could include claims management companies, universities and local authorities.
Entrepreneurs are realising that this vast sector is already largely deregulated. For a member of the public, having a former solicitor dealing with their case may be no bad thing. But what about someone with no legal background at all?
The Legal Services Consumer Panel (an independent arm of the Legal Services Board) has said that law firms and ABSs should not be allowed to dodge regulation by establishing separate businesses to handle unreserved work. So what? “Minicab law” will not be regulated by them or anyone else. The Co-operative, expected to be an ABS, called for freedom in how these organisations choose to provide unreserved work. Ironically, the more consumer groups seek to regulate ABSs the more businesses will choose to operate in the entirely unregulated sector. Few law firms have the money to compete with the marketing budgets of supermarkets, banks and insurance companies, so it is their names that consumers will see, not those of qualified, insured and disciplined lawyers. Will the big players even bother to become ABSs?
The government has learned nothing from pension and endowment mis-selling, let alone from Claims Direct and the Accident Group in the legal sector. Of course, the rich and powerful will continue instruct lawyers, as they always have. Those without lawyers will be the poor, the vulnerable, the weak and oppressed. Hardly a victory for the consumer.
Kerry Underwood is a solicitor and chairman of Law Abroad - First posted at www.guardian.co.uk on Wednesday 26 January 2011.