6 June 2004 – LAWFUEL – Clifford Chance is supporting proposals whic…

6 June 2004 – LAWFUEL – Clifford Chance is supporting proposals which would require existing legal regulatory bodies such as the Law Society and the Bar Council to separate their regulatory and representative functions and to submit to the authority of a new Legal Services Board (LSB).

In its response to Sir David Clementi’s consultation paper, issued as part of his review of the regulatory framework for legal services in England and Wales, the firm argues that this compromise solution offers the best opportunity in the short to medium term of achieving the review’s objectives.

The firm rejects the idea of a Legal Services Authority with full regulatory powers over all legal practitioners, similar to the Financial Services Authority, saying that it could be “overly bureaucratic, inefficient and costly.” It argues that this proposal also “fails to recognise the need for strong self-regulation by the profession.”

Suggestions that the existing regulatory bodies should continue unchanged, but with the addition of a purely supervisory LSB, are also dismissed. The firm says that this would not deal with the fundamental problems of the current legal framework – that it is “structurally unsound” and “untenable.”

Clifford Chance Senior Partner Stuart Popham conceded that the proposal, known as Model B+, had the potential itself to be both costly and complex, but he felt that its success would depend on the approach taken by the LSB.

“The Board will need to be robust in its insistence that proposals from the existing regulatory bodies on how they plan to run separate regulatory and representative functions should be transparent and cost-effective, and should promote vigorous competition between service providers. ” he said. “There will be many observers who will see this as a stepping stone to a full scale Legal Services Authority, but we believe that with appropriate leadership and authority a Legal Services Board can restore public confidence in legal services regulation. It should certainly be allowed to try.”

The Board will be helped in its task, the firm says, if the objectives of legal regulation are clearly set out in statute, as they are for example, for the Financial Services Authority. These objectives should include maintaining the rule of law, promoting access to justice, protecting the interests of consumers, ensuring competition and removing any unjustified restrictions or barriers, such as the inability of barristers to practise in partnership.

They should also enshrine a “risk-based” approach to regulation. This would require regulators to recognise the differences between high street practitioners serving the public, and major global legal services businesses serving sophisticated, multinational corporations.

Clifford Chance has consistently argued that efforts to export international legal expertise around the world are hampered by the current regulators’ insistence that all legal practitioners should follow the same set of rules. In many cases these rules were designed to protect high street consumers, and are entirely inappropriate for global businesses. This is a clear opportunity to bring the regime up to date, the firm says.

On proposals to allow different forms of ownership for legal services providers, Clifford Chance supports the introduction of Legal Disciplinary Practices, allowing different legal disciplines to work together as partners. But the firm is not seeing a call from its clients for Multi-Disciplinary Practices, arguing that the time is not right for lawyers to join with accountants, auditors or management consultants in the light of public concern over the blurring of boundaries between these separate functions.

“We urge Sir David to be bold in his recommendations,” said Mr. Popham, “and to ensure that the remit and authority of the LSB is sufficient to bring a new coherence to the legal regulatory framework. Otherwise, we may indeed be responding to Clementi 2 in five years’ time.”

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