UK: Solicitors PI: Counting The Cost of Improved Legal Regulation

Last Updated: 27 July 2010
Article by Joe Bryant

The regulatory infrastructure that underpins the legal profession is undergoing unprecedented change and the idea that the profession is capable of regulating itself has been irretrievably abandoned.  Now that the new, wholly independent, governing bodies are in place, attention is focused on the way in which the new order will go about its day-to-day business. 

Whilst the proposed changes are undoubtedly a step in the right direction, questions are starting to be asked about who will pay the significant costs involved, both in creating the new regime and in running it. In this article we consider the implications of the changes, both for the legal profession and for the public at large.

To view the article in full, please see below:



Full Article

The legal landscape is shifting. The regulatory infrastructure that underpins the legal profession is undergoing unprecedented change; the idea that the profession is capable of regulating itself has been irretrievably abandoned. And, now that the new, wholly independent, governing bodies are in place, attention is focused on the way in which the new order will go about its day-to-day business.

Whilst the proposed changes are undoubtedly a step in the right direction, questions are starting to be asked about who will pay the significant costs involved, both in creating the new regime and in running it. And what other costs and liabilities are likely to come out of the changes, both for the legal profession and for the public at large?

Brave New World

The reforms enshrined in the Legal Services Act focus on the organisational change that is needed to move away from self-regulation towards a more independent structure. These are huge – and costly - reforms. The new and independent Legal Services Board has been created to be the 'oversight regulator' for the entire legal profession, with a mandate to raise public awareness of the professional standards against which practitioners are assessed (and the grievance procedures that are available if required). Expensive TV adverts and consumer campaigns will, very soon, begin to shout the message from the rooftops.

The SRA will continue to be the primary front-line regulator of solicitors' conduct, subject to the jurisdiction of the LSB. In preparation for the brave new world, it has undergone a sea-change in its outlook and focus, a discussion of which would go far beyond the scope of an article such as this. However, one need only mention phrases such as 'outcomes-focused regulation' to see that the days of tick-box rule compliance are now over; whilst the FSA may be going, the SRA seem to be keen to ensure that its underlying principles live on.

And, when the 'outcomes' upon which we will all be focusing do not match up with the client's expectations, complaints regarding service will now be passed to the newly-constituted Office for Legal Complaints (OLC). This body (which will replace the Legal Complaints Service) is likely to be the legal profession's equivalent of the Financial Ombudsman Service and, as such, will dovetail nicely with the new-look SRA in its consumer-focused approach.

Cost of Change

The operation of the LSB, OLC and 'new and improved' SRA will be funded in large part by the legal profession. The costs are and will continue to be considerable.

There has been much disquiet surrounding the recent increases in the practising certificate levy; however, when one looks at the indirect costs associated with the regulatory changes, increased levies may be the tip of an iceberg.

(1) Cost of compliance

Solicitors will undoubtedly have to work very hard to comply with the new regime. The bedrock of the new system is self-governance; firms (and individuals) will have to demonstrate not only that the services they provide are up to a certain standard but also that the way in which the firm manages itself is robust and watertight. This is a marked shift away from the previous system and firms will need to invest heavily in changing and moulding their procedures in order to satisfy the increasingly proactive regulator.

(2) Cost of complaints

Dealing with the anticipated deluge of complaints will also be very expensive for firms. The OLC is not bound to adhere to any legal principles when considering complaints, it will deal with most complaints on paper without any hearings and it can award up to £30,000 in compensation. As a pro-consumer organisation, it is intended to be an informal non-legalistic alternative to the Courts and, as such, it will not charge consumers to use it; to do so would fundamentally undermine the LSB's desire for it to be readily accessible.

The OLC's authority seems likely to increase to £100,000 in due course (a further nod in the direction of the Financial Ombudsman Service). When allied with the LSB's profile-raising campaign, such a move will result in a further (and probably even more dramatic) increase in the frequency and cost of complaints.

Improved visibility of - and accessibility to - the legal profession's disciplinary process appears to have been one of the major factors behind the decision by solicitors' PII insurers to withdraw cover for costs of disciplinary proceedings as of October this year; insurers are already making significant losses on solicitors' PII, so the prospect of seeing further costs and losses through the proposed regulatory changes (and uncertainties) must have been deeply unappealing.

This obviously means, however, that the profession will have to bear the brunt of these additional costs, either by self-funding or by paying for additional insurance cover to meet the exposure.

Impact on firms

Firms that invest now and prepare themselves for the inevitable onslaught – by tightening up their complaints procedures significantly - will undoubtedly reap the rewards when the new regime kicks into action; resolving complaints 'in-house' (and thereby preventing the OLC from becoming involved) must be the way forward.

However, many firms will doubtless go by the wayside as the costs of continuing to operate in this new environment simply become untenable.

Comment

Last year, Lord Hunt produced his report into how the new regime should run. At the end of his report, he suggests "...what ultimately matters is outcomes, not processes, but the latter in so many cases shape the former". Whilst this must be correct, those seeking to implement the current reforms must be careful to balance the need to protect consumers against the need to maintain an active and healthy market for legal services.

The costs of increased regulation – whether by virtue of practising certificate levies, PI premiums, uninsured costs of the disciplinary process or decreased competition in the marketplace - are ultimately passed on to clients in increased fees. As such, there must be doubts as to whether this costly regulatory regime and all of its likely implications can be said to be truly in the public interest.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 26/07/2010.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.