What does liberalisation of the legal market mean for the UK law industry?

The UK legal market has always been a bastion of robust regulation and oversight, but things are about to change drastically.

Earlier in 2018, the SRA submitted plans to the Legal Services Board (LSB) aimed at liberalising the legal sector.  In part, the aim of the recommendations was to allow self-employed solicitors to become freelancers – effectively meaning they would practise law outside of the control of the SRA.  On the face of it, this may seem an odd recommendation for the SRA themselves to make, after all, oversight and regulation of the profession is their core function and raison d’etre.  In this article we will delve deeper into the rationale for this change, and what it really means for the industry.

The background to these changes

In 2017, the SRA issued proposals which in part focused on helping more people access legal services.  In their initial consultation, they made the case that too many people and small business struggle to access What does liberalisation of the legal market mean for the UK law industry?legal services.  They reasoned, “Some of our rules restrict how and where solicitors can work.  They make it difficult for law firms to work in different ways to respond to the needs of the public, or for solicitors to work in businesses outside law firms. This could contribute to the problem that many people do not benefit from the high standards and expertise solicitors offer”.

Having consulted far and wide, the SRA concluded they would seek to allow solicitors to provide “’reserved legal activities’, in certain circumstances”, so long as they don’t hold client money or employ people, and they maintain the necessary levels of indemnity insurance.  They also decided to permit solicitors to provide ‘non-reserved’ law services including “general legal or employment advice, beyond a law firm. This means they could work in a business that is not regulated by the SRA or other legal services regulator”.

It is these changes that have been permitted by the LSB and will understandably cause concern within the UK legal sector and for consumers of legal services, even if such practitioners will be expected to be insured and follow the SRA’s Code of Conduct.

The LSB’s rationale for agreeing to the change

In agreeing to the SRA’s proposals, the LSB took the view that modernisation of regulatory arrangements is positive if it makes legal services more accessible while admitting at the same time that it “presents some potential risks”.  Whether this is just a contradiction in terms, or a reasoned compromise work taking for greater access for justice will be for others to decide.  One of the rationales for allowing the shift in policy was that because some people already use entirely unregulated law practitioners, this new arrangement would mean those people would at least receive legal expertise with a greater level of consumer protection (i.e. indemnity insurance).

The industry reaction to the changes approved by the LSB

The Law Society President Christina Blacklaws has not minced her words on this matter, calling the changes a “serious error”, and stating, “the regulators have sacrificed the best interests of the public they exist to protect,” citing “unprecedented levels of opposition from consumer bodies, legal experts and the extensive evidence of the risks of deregulation of this kind in this market”.

One of the key questions being asked is, are the caveats on allowing freelance legal practice enough to enable effective regulation of the law sector?  The Law Society takes the view that by offering a service with reduced consumer protection, practitioners will be able to cut the cost of their services, consumers are likely to become confused (especially the most vulnerable), and confidence will be lost in the system.

Echoing the viewpoints of the Law Society, the Legal Services Consumer Panel warned the SRA the changes might lead to an increase in overall complexity within the legal market, leading to different tiers of regulation and protection.  The panel stated: “We do not believe that the SRA has struck the right balance between flexibility and the need for consumer protection in a number of these areas. When taken together these proposals are unlikely to assist consumers, especially vulnerable ones, in choosing services at times of distress”.

In conclusion

It is fair to say that some solicitors already operate outside the purview of the SRA by allowing individual waivers, under the ‘safe space’ approach (this allows firms with ‘novel’ ideas that may push the boundaries of the current rules to test them in a controlled way), but this in itself is a new concept.  By heralding the latest wave of changes for freelancers to practise law outside the protective confines of the SRA, it could be argued the industry is moving at a pace towards ‘innovation’ and ‘flexibility’ that is too rapid to ensure consumer protection and assurance.  For example, what will be the impact of poor or inadequate service for those not regulated by the SRA?  Will this lead to greater unfairness in the legal profession with those regulated by the SRA being held to higher standards, and freelancers being allowed to operate in a less vigorous environment?  Such an outcome would be adverse to the interests of both the profession and the public.

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