Welcome to this sixth edition of LSB news and my first as Chief Executive since my arrival in February.

Legal services represent a vital part of the economy. In the last year, the sector grew to an annual turnover of just over £29bn, up 15 per cent in six years. But it is a sector undergoing profound change in terms of consumer requirements, market developments and government policy.

Given these changes, I’m keen the LSB works with others to make the sector work more effectively for consumers, citizens, and authorised legal practitioners.

This newsletter updates you on some of our recent major initiatives. It covers the headlines from our 2015-18 strategic plan, a preview of the first part of our unique research on reducing the cost of regulation, and our work with other legal services regulators on deregulation.

I would also like to use the opportunity to update you on our recent decision on the Solicitors Regulation Authority application to make changes to Professional Indemnity Insurance (PII) cover required by all solicitors to practice. Finally, I’d like to clarify an issue related to our position on the Cab Rank rule.

Please get in touch if you would like discuss any aspect of our work.

Richard Moriarty, Chief Executive

The LSB is currently finalising its 2015-18 strategic plan (and 2015/16 business plan) around three inter-related themes unique to our role. All three themes are important if we are to encourage a modern and effective legal services sector that meets the needs of consumers, citizens, and practitioners.

• Overseeing the performance of the eleven legal services regulators and ensuring that they are effective and independent
  By doing this we enhance the public’s confidence in the legal services sector.
• Identifying and enabling consumers' need for legal services to be met more effectively
  By doing this we enhance consumers’ confidence in the legal services sector.
• Breaking down regulatory barriers to competition, innovation and growth
  By doing this we enhance economic confidence in the legal services sector.

In July 2014, Ministers called a summit of legal services regulators, at which they laid down a challenge to the regulators to seek further deregulation in the sector. As a result of this summit, the LSB has facilitated cross-regulator collaboration on initiatives designed to:

• Highlight progress on deregulation to date
• Share knowledge and learning between the regulators on practical steps towards further deregulation (for example, exploring alternatives to handling of client money by practitioners), and
• Build consensus between the regulators on legislative reform – both within the current framework of the Legal Services Act and beyond - to create a more efficient, more effective and better targeted regulatory regime.

We are keen to reduce the cost of regulation where we can. To help us do this, we launched a project in October 2014 to gather evidence on the real-world cost of regulation to individual practitioners and firms.

The first part of this project was a wide-ranging survey to gather legal services providers’ views on the costs that regulation imposes on them and their businesses. Nearly 1,000 providers of legal services completed the survey by the time it closed on 28 November.

The second part of the project, which is now underway, explores the cost of the approved regulators (for example, the Solicitors Regulation Authority, Bar Standards Board and the Council for Licensed Conveyancers) and of the LSB itself, given that we are also ultimately funded by legal practitioners and firms.

Taken together, the results should give the LSB, and the sector more widely, a better understanding of regulatory costs in legal services provision, and - more significantly - a better evidence base for the impact of those costs, helping to ensure that regulation is proportionate, targeted and effective.

We intend to publish our report on the first part of this project before 30 March.

Further information can be found here.

On 25 February the LSB published Regulatory standards 2014/15 – An update report on the performance of legal services regulators.

This report reviewed the progress that legal service regulators have made in developing and improving their regulatory standards (outcomes focused regulation, effective risk assessment, proportionate supervision, and appropriate enforcement strategy) since a first self-assessment exercise was undertaken in late 2012.

Based on the findings of this review, the LSB expects all regulators to focus on improving standards in certain priority areas that are common across the regulators as well as priority areas particular to each regulator.

Launching the report the Chairman of the Legal Services Board, Sir Michael Pitt said that “taken as a whole, the regulators have made good progress. They have improved their understanding of, and accountability for, their performance levels. They have improved their ability to identify and assess risks. They know more about their role and their impact, and they have better information about those they regulate“.

However, he added that “a common shortcoming across all the regulators is that none of them have got a firm grip on understanding the users of the legal services they regulate”.

The full report and background information can be found here.

The LSB launched a discussion on the regulation of in-house lawyers on 26 February with the publication of its report: Are regulatory restrictions in practising rules for in-house lawyers justified? With over 25,000 in-house lawyers, it is important that any restrictions on their ability to innovate and grow are clearly justified.

The report focuses on how regulatory arrangements for in-house practice vary across the regulators and with the minimum required by legislation, and invites comment on these findings, the impact of current arrangements, and on possible areas for improvement.

The full report and background information can be found here.

The LSB published its decision on the Solicitors Regulation Authority’s (SRA) application to make changes to the professional indemnity insurance (PII) cover required by all solicitors to practice.

The SRA wanted to make two changes. It wanted to introduce changes to the SRA Code of Conduct 2011 relating to the assessment and purchase of an appropriate level of PII cover, and it wanted to reduce the minimum amount of PII cover for SRA regulated firms from £2 million (£3 million if a firm is incorporated) for any one claim to £500,000.

This proved to be a contentious issue with strong views on all sides and an unusually high number of direct submissions from lawyers to the LSB on the matter.

In the end the LSB approved the changes relating to the assessing and purchasing of an appropriate level of PII cover. However, we refused the change relating to the proposed reduction in the minimum level of PII cover.

Please see here for more detailed information.

The House of Lords debated the long term impact of current levels of funding of the criminal Bar on 16 January. In the course of this debate the cab rank rule* was raised and reference was made to a report commissioned in 2012 by the LSB.

The LSB’s decision to commission independent research into the cab rank rule was prompted by a rule change application to the LSB by the Bar Standards Board (BSB) which proposed putting in place a set of standard contractual terms that solicitors must agree to if the cab rank rule is invoked.

We were concerned that the cab rank rule is over four pages long with 67 sub-paragraphs, mainly exceptions and exemptions.

Our concern was whether the exceptions and exemptions diluted the rule to the extent that it might no longer best meet its stated aim of furthering access to justice. As an evidence based regulator, we therefore decided to commission research to help us, and the BSB, better understand how the rule was working in practice and the impact it was having.

The authors of the research found that the cab rank rule has value as an underpinning ethical principle. However, they concluded that as a practical rule it is complex to the extent that it was not understood by the market, is applied selectively, and is virtually unenforceable with only one recorded enforcement action, back in 2006. In short, the findings of the research showed that the rule was virtuous in intent but could be redundant in practice beyond a general desirable professional principle.

The LSB has never called for the abolition of the cab rank rule as is often misreported. When the research we had commissioned was published, we emphasised publicly that we shared the profession’s commitment to the principle that those in need of representation must be able to get it, regardless of the nature of the alleged crime or of the client. We said that it was for the BSB to review the evidence and decide whether the cab rank rule as written would secure this aim.

The LSB-commissioned cab rank rule report can be found here.

*The cab rank rule is the rule which obliges a barrister to accept any work in a field in which she/he is competent to practise, at a court at which she/he normally appears, and at her/his usual rates

Permission has been granted to appeal to the Supreme Court against the judgment of the Court of Appeal, which found the Quality Assurance Scheme for Advocates (QASA) scheme – and the LSB’s decision to approve QASA – lawful.

In doing so, however, the Supreme Court has declined permission to appeal against the Court of Appeal’s finding that the principle of independence of the advocate was not infringed by QASA.

The appeal will instead consider whether the Court of Appeal erred in law by failing to appreciate the effect of regulation 14 of the Provision of Service (POS) Regulations 2009, which implemented the 2006 Services Directive.

23 February 2015

LSB issues update on Ministerial summit 2014 follow-up work

10 February 2015

• LSB approves SRA application to change Continuing Professional Development rules
• LSB approves SRA application to change Qualified Lawyers Transfer Scheme

2 February 2015

LSB publishes an update on Council for Licensed Conveyancers section 69 proposal to modify its functions

23 January 2015

LSB approves Ilex Professional Standards application to make changes to its compensation fund contributions regulatory arrangements

16 December 2014

• Adroddiad blynyddol i Gomisiynydd y Gymraeg ar weithrediad Cynllun Iaith Gymraeg yr
• Annual report to the Welsh Language Commissioner on implementing the Welsh Language Scheme

10 December 2014

LSB launches consultation on 2015-18 strategic and 2015/16 business plans

8 December 2014

LSB update on transitional period allowed to non-commercial ‘special bodies’

2 December 2014

LSB approves BSB application to enable the regulation of entities

27 November 2014

• LSB approves BSB 2014/15 practising fees application
• LSB publishes SRA PII application decision

26 November 2014

LSB approves SRA changes to regulations covering entities owned by registered European lawyers

Want to get in touch?

Legal Services Board
One Kemble Street
London
WC2B 4AN

Web: www.legalservicesboard.org.uk
Email: info@legalservicesboard.org.uk
Tel: 020 7271 0050
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You can also get in touch with the Consumer Panel, which advises the LSB on consumer issues, here.