UK: The Draft Legal Services Bill

Last Updated: 28 June 2006
Article by Sarah Clover and Lydia Hassall

The proposed reform of legal services has already had a long history, culminating in the recent publication of the draft Legal Services Bill. In this article we give a brief overview of the Bill and assess the early reaction to it.


Following publication of Sir David Clementi’s Report in December 2004 and the government White Paper in October 2005, the draft Legal Services Bill was published on 24 May 2006. For the first time, the draft Bill provides the detail of how the reforms set out in the White Paper will be implemented.

The reforms

The draft Bill establishes a new framework for the regulation of legal services in England and Wales which seeks to address the three main areas in which Sir David recommended reform: the regulatory framework; the complaints system; and the restrictive nature of current business structures. To quote Lord Falconer, the reforms represent "a real watershed".


The current regulatory maze will be brought to an end by the creation of the Legal Services Board ("the Board") which will oversee regulation of the whole legal services market.

The Board will have a duty to promote seven regulatory objectives, one of which is the protection and promotion of consumer interests. This reflects the Government’s agenda to be seen to be putting consumers first and will be achieved by the establishment of a Consumer Panel whose representations the Board must consider. Perhaps in response to concerns expressed by the City of London Law Society ("the CLLS") that the White Paper focused too much on the needs of individual consumers and did not adequately address the position of City firms and their sophisticated business clients, membership of the Consumer Panel must fairly reflect those using legal services in a business and nonbusiness manner. Further, the definition of "consumer" in the draft Bill is wide enough to include sophisticated business clients.

In its oversight role, the Board will authorise approved regulators (including the Law Society and Bar Council) to carry out day to day regulation, but will retain power to take steps to remedy any failings which are identified. These will include issuing performance targets, specific directions, public censure, financial penalties and, only if these fail, an intervention direction under which the Board will exercise one or more of the approved regulator’s regulatory functions. Ultimately, the regulator’s approval may be cancelled.


The draft Bill removes the ability of approved regulators to provide redress to complainants and grants this to the Office of Legal Complaints (the "OLC"), creating a single independent complaints handling service designed to foster greater consumer confidence and provide quick and fair redress when things go wrong.

Accountable to the Board, the OLC will have clearly-defined powers to deal with all consumer complaints about those who carry out legal activities, provided the complainant has followed the firm’s in-house complaints procedure. Complaints will be investigated by caseworkers who, if attempts at conciliation fail, will prepare a report explaining how they consider the case should be resolved.

If one party is unhappy with the report, the complaint will be referred to a new ombudsman scheme headed by the Chief Ombudsman, a lay person appointed by the OLC. The Ombudsman will have powers to determine the complaint according to what is fair and reasonable in all the circumstances of the case. This may include requiring an apology or ordering a payment for loss, inconvenience or distress.

The new complaints procedure removes the need to differentiate between complaints of inadequate professional service, professional misconduct and negligence, which have traditionally been dealt with through different processes by each professional body. However, the White Paper acknowledged the need to strike a balance between the consumer who is rarely concerned by such a distinction and the practitioner’s rights under the Human Rights legislation. If the OLC could make an award of an unlimited or very high monetary sum, it could have implications for indemnity insurance and lead to increased costs for the consumer. Therefore, in line with the figure proposed in the White Paper, the draft Bill limits the total value of any directions given by the OLC to £20,000. This limit (which may be altered by the Secretary of State after consultation) includes not only any award of compensation, but also the cost of taking any steps required and the return of any fees.

Perhaps controversially, there will be no external appeal process. If the Ombudsman’s determination is accepted by the complainant, it is binding on both parties (whether or not the professional agrees) and no further legal proceedings can be pursued relating to the subject matter of the dispute. The Government believes that provided the OLC’s procedures are structured properly and fairly, an external appeal process will not add sufficient value to the consumer to justify risking the objective of quick and fair redress. However, this ignores the fate of the professional potentially facing an award of up to £20,000 and a damaged reputation, whose only recourse will be judicial review. Equally, it does not prevent a professional who has been cleared by the ombudsman from facing a further challenge by way of legal proceedings by a dissatisfied, and possibly unreasonable, complainant.

Alternative Business Structures

It is in this area where the White Paper, and now the draft Bill, is most radical. It paves the way for alternative business structures ("ABS"), allowing lawyers and non-lawyers to work together in providing legal services and non-lawyers to inject capital into legal services firms in ways in which, in the highly politicised language of the White Paper "suit consumers not providers".

The use by household names of the ability to set up legal services providers became known as "Tesco law". In fact, it is the Co-op which has most recently stated its intention to launch a legal services business that will be available to members initially, but offered to the public as a whole as soon as the reforms are implemented.

The Bar Council dubbed the proposal to allow external investment as "Maxwell law" suggesting that the relaxation of the rules would allow ownership of law firms to fall into less desirable hands. However, the draft Bill seeks to guard against this by imposing a licensing system under which prospective ABS firms will have to apply to become "licensed bodies". A range of safeguards aimed at protecting consumers and demanding high standards will be put in place. These include a "fitness to own" test and the appointment of a Head of Legal Practice, to ensure compliance with regulation, and a Head of Finance and Administration with responsibility for maintaining appropriate accounts and administrative systems.

Reaction to the draft Bill

It is early days, but already the draft Bill has provoked some strong reactions from interested bodies, especially on the subject of regulation. The Law Society has warned that legislation intended to create a flexible, modern and consumer-focused framework must not be undermined by unnecessary regulatory burdens on firms. It calls for the legislation to make clear that primary responsibility for regulation should rest with the independent professional bodies, with the government’s appointed Board acting only as a supervisory guardian. This is echoed by the Bar Council which has stressed that the Board must act as a lighttouch oversight regulator which should not be able to "second-guess" the legitimate decisions of approved regulators.

The CLLS has repeated its call for a lighttouch regulatory regime for City firms and their sophisticated clients, allowing firms to retain their independence, flexibility, competitiveness and international standing. The group are also concerned, as are the Law Society, that members of the Board will be appointed by the Secretary of State rather than an independent selection panel. In fact, the group feels so strongly that it has reportedly engaged a professional lobbyist to assist in putting together a hard-hitting response to the draft Bill.


The draft Bill is now subject to pre-legislative scrutiny by a Joint Committee headed by Lord Hunt of Wirral (formerly senior partner at Beachcrofts) who will report with recommendations in July. If initial reaction is anything to go by, certain aspects of the draft Bill face some strong opposition and it will be interesting to see how the concerns already expressed will be reflected in the Joint Committee’s Report.

Despite the concerns, most welcome the idea of reform and a better (but not necessarily more) regulated profession. This should have a positive impact on the professional performance of the legal profession as a whole thereby reducing the number of negligence claims. However, much will depend upon the manner and degree of regulation on the ground. Notwithstanding the detail of the draft Bill, we are still some way from being able to assess that.

The better handling of complaints by an independent body which can provide real redress to consumers may also help to reduce the number of negligence claims being pursued through the courts. However, this will not impact on claims worth more than £20,000 and there is a danger that we might see a rise in the numbers of claims worth less than £20,000 with the prospect of pursuing free redress through the ombudsman scheme.

Finally, it remains to be seen what the profession will make of the new opportunities posed by the prospect of ABS firms. Whilst the Government is keen to allow the possibility of outside investment, it is interesting that the CLLS, in its response to the White Paper, considered that there was little enthusiasm in the City for alternative business structures, save for the prospect of forming partnerships with barristers and promoting limited numbers of non-lawyer managers to partnership. Incidentally, the CLLS urged that such matters alone should not transform the firm into an ABS practice attracting greater regulation.

Undoubtedly, the reforms will bring new challenges for the profession and insurers alike, but it is hoped that they will have a positive impact upon the profession, improving standards, claims records and hopefully therefore reducing professional liability insurance premiums. Whatever view one may take of the Government’s proposals, few practitioners are likely to argue with that!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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

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

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (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

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’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.


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.


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 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.


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.


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.


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.


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

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

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

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