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Law meets its maker

1 March 04

Interview with Lord Falconer, the Lord Chancellor, on the future regulation of the legal profession

by Peter Nicholson

The Clementi terms of reference are not limited by jurisdiction, and there is a view that because the review involves competition issues, it is not a devolved matter. To what extent is the review intended to apply to Scotland?

The review will primarily focus on England and Wales but there are obviously things that we can learn from what’s going on in Scotland and I can’t believe that there won’t be some cross-fertilisation of ideas in relation to what happens. What Clementi is tasked to do in effect is to look at the structure of regulation both in relation to how it affects competition but also how it affects complaints and things like that, and I think obviously both jurisdictions have got things to offer in relation to that.

And it won’t be possible to make fundamental changes affecting regulation of the profession in England without there being a significant impact in Scotland, and the rest of the UK?

That’s right, and that’s why the jurisdictional bit you’ve just referred to is in the terms of reference. But obviously it’s a different legal regime in both countries.

Is it the case that much of the pressure for reform derives from the recent poor performance of the Law Society of England and Wales in handling client complaints?

There has been a real concern about that, and as a result I appointed a Legal Services Complaints Commissioner pursuant to the powers that I’ve got under the Access to Justice Act 1999, but the Clementi review was provoked by much much more than just the handling of complaints. It’s also about trying to ensure that the public consistent with proper regulation of the profession has as much access to legal services as is possible.

Clementi’s terms of reference presuppose the continuance of an independent legal sector. What do you see as the hallmarks of that independence if the market is to be opened up for example to MDPs and commercial employers?

Independent in the sense of independent training, regulation independent of government, not necessarily (though I don’t want to express a view one way or the other on this until Sir David Clementi has reported) the continuation of self-regulation.

Will there not inevitably be some compromise to the principles of independence, i.e. the avoidance of conflict of interest between client and employer, which have underpinned the solicitors’ profession so far?

I don’t think that independence necessarily implies that you mustn’t deal with consumer protection as well, so the issues of conflict of interest have got to be dealt with satisfactorily before you can deal with for example multi-disciplinary partnerships or ownership of legal firms other than by the people who are actually working in them.

I don’t see an inconsistency between preserving the independence of the profession on the one hand but also ensuring consumer protection on the other. Your questions are counterpointing independence and self-regulation, are they not: if it’s not self-regulation, you’re saying it’s not an independent profession, is that the implication?

Not only the self-regulation aspect, the control and the direction of the legal adviser – who gives the directions, if it’s a commercial employer? Is the legal adviser still independent in the sense that that’s understood at present?

Again, those issues are all issues about the extent to which the legal adviser, if employed by somebody other than a lawyer, can give advice to the public. Now I think that subject to proper consumer protection we should be looking to see that that should be possible. If that did become possible I wouldn’t regard that as contrary to the idea of an independent legal profession.

But that possibility is still an open question?

It is still an open question but in relation to England and Wales you know that the Law Society of England and Wales have been keen to explore how that might occur.

How will standards be set for providers of legal services post-Clementi? Do you envisage that as part of the function of the new regulatory regime, or will there be standards prescribed in legislation that legal services providers will be measured against?

That is one of the issues that Clementi’s got to express a view on. There’s plainly a role for the profession to set some of the standards. Should they set all the standards? How else should they be set? That is about the overall regulatory framework and that’s precisely what Clementi’s been asked to produce a report on.

Is the debate not being dominated by the big City firms and other major commercial concerns who have their own agendas? How is the voice of the ordinary member of the public or high street client to be heard?

I very much hope it is not being dominated by the large firms. They have a voice, they have a legitimate point of view, but the purpose of the review is primarily to see how best to provide legal services to the public. The issue must be determined, I believe, on the quality of service provided to the public, so the public’s voice must be heard, and so must the whole range of legal service providers from the biggest firm to the sole practitioner.

The EU Commission report has taken the view that “in all scrutiny of professional regulation a proportionality test should be applied”. Is it implicit in Clementi’s terms of reference to apply that test?

I don’t want to get bogged down in a particular definition, but plainly one of the things he’s got to do is determine what is proportionate regulation, proportionate to ensuring a thriving profession but also ensuring proper consumer and public protection. It’s difficult to see how it could be effective if it was disproportionate!

So you believe that there will still be something we can recognise and define as the legal profession, whatever restrictions may be removed in the wake of Clementi?

Of course, yes, I’m sure there will be.

And one that will continue to uphold the ideals of accountability to the client and avoiding conflicts of interest?

Of course, yes.  

And how do you expect any future regulatory structure to be funded?

Well, most regulatory structures are funded by the particular profession that is being regulated. Again that is something that Sir David can advise us on.