The Legal Services Act allows businesses other than law firms to provide legal services. This may mean that consumers will find themselves getting legal advice from banks or supermarkets, hence the Act’s nickname Tesco Law.
It is intended to encourage more competition, produce more consumer-focused legal firms and to provide a new route for consumer complaints and will bring all legal service providers under one regulatory body.
What are the Act’s key measures?
- It creates a single supervisory body, the Legal Services Board (LSB), to oversee the approved regulators such as the Law Society and the Bar Council.
- It creates a single point of entry for consumer complaints about Legal Services. This is the Office for Legal Complaints, which will deal with the work of all lawyers and deal with redress, not with regulation.
- It creates alternative business structures (ABSs), allowing lawyers to form partnerships with non-lawyers, and accept outside investment or operate under external ownership.
- It requires professional bodies to separate their regulatory and representative functions.
- It creates statutory objectives and duties for all regulatory bodies.
The Legal Services Board
The LSB will oversee the whole regulatory framework in England and Wales and all the approved regulators. It is an overseer, with the primary responsibility for regulation remaining with approved regulators, such as the Law Society. The LSB’s statutory powers and duties include:
- authorising bodies to be approved regulators of legal services;
- authorising bodies to licence ABSs;
- directing approved regulators to take a particular action, and applying sanctions if they do not;
- commissioning, monitoring and investigating research into the legal services market; and
- recommending to the Lord Chancellor which services should be ‘reserved services’ and therefore compulsorily regulated.
Alternative business structures
ABSs have been created to enable the skills of a variety of professionals to be combined, such as lawyers and non-law businesses such as banking, insurance and financial services.
Through the use of ABSs, the Government are encouraging the creation and development of businesses or ‘one stop shops’ which deliver packages of legal services and other services that better meet the needs of consumers and will provide greater convenience for them. The Act also includes measures to ensure that there is no improper influence by non-lawyers in ABSs.
Implications of the Act
These changes mean that the level of competition within the legal services industry will increase and will result in wider access to justice. With new entrants to the market, the changes will also provide wider access to a commercial environment that is more accustomed to developing cost-effective legal services for consumers: companies such as Tesco and The Co-operative.
However, by allowing new powerful entrants to the market, smaller high-street law firms will be exposed to competition that is already well established with greater capabilities and existing retail presence. It seems that outdated and outmoded business practices will be squeezed out by the entry of new providers and so traditional providers may use the Act as a catalyst for change.