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LEGAL SERVICES ACT 2007
The Legal Services Act 2007, which received Royal Assent on 30 October 2007,
reforms the way in which legal services are regulated in England & Wales. The Act
will establish an oversight regulator, the Legal Services Board (LSB) and the Office
for Legal Complaints (OLC), which will administer an ombudsman scheme that will
be empowered to deal with all complaints about lawyers. It will also allow for
alternative business structures (ABS), which will enable firms to explore new ways
of organising their business to be more cost-effective, including permitting different
kinds of lawyers and non-lawyers to work together, and to allow for external
investment.
Background:

Legal services reforms were introduced in England and Wales because there
was agreement that the current regulatory framework for the legal sector was
over-complex and confusing for consumers and ill-suited to a dynamic, modern
profession. The Government also took seriously concerns raised over
complaints handling in the legal sector and the work by the Office of Fair Trading
in 2001, which found that a number of legal professional rules were potentially
unduly restrictive.

In 2003 the UK Government commissioned a review by Sir David Clementi,
which identified a number of areas for reform. The recommendations in that
Review underpinned the Legal Services Act 2007.
Summary of the Act:
Part 1 sets out the regulatory objectives and principles to be adhered to by all
partners in the regulatory regime (LSB, OLC and Approved Regulators (e.g. the Law
Society and Bar Council). The statutory objectives replace a number of overlapping
responsibilities and objectives in the existing regulatory framework.
Objectives of the regulatory framework. The regulatory objectives recognise both
the consumer and public interest, whilst preserving important principles such as the
constitutional principle of the rule of law, and maintaining standards in the provision
of legal services via the professional principles.
Regulatory Objectives:
 protecting and promoting the public interest;
 supporting the constitutional principle of the rule of law;
 improving access to justice;
 protecting and promoting the interests of consumers;
 promoting competition in the provision of legal services;
 encouraging an independent, strong, diverse and effective legal
profession;
 increasing public understanding of the citizen’s legal rights and duties;
and
 promoting and maintaining adherence to the professional principles.
Professional Principles:
 that authorised persons should act with independence and integrity,
 that authorised persons should maintain proper standards of work,



that authorised persons should act in the best interests of their clients,
that persons who exercise before any court a right of audience, or
conduct litigation in relation to proceedings in any court, by virtue of
being authorised persons should comply with their duty to the court to
act with independence in the interests of justice; and
that the affairs of clients should be kept confidential.
Part 2 makes provision for the new oversight regulator, the Legal Services Board–
to provide proportionate, independent oversight whilst approved regulators have
responsibility for day to day regulation:




all members of the LSB will be appointed on merit in accordance with the
rules of the Commissioner for Public Appointments, and that all chairmen
must be lay. The Board must also have a lay majority;
the Lord Chancellor may dismiss the Chair and members of the LSB but only
in the limited circumstances prescribed by the Act (ensures the Lord Chief
Justice is consulted before the power to appoint or remove members is
exercised);
a statutory requirement for the LSB to publish an annual report to be laid
before Parliament; and
a statutory requirement for the LSB to consult formally with the LCJ, the OFT
and a Consumer Panel before taking important regulatory decisions.
It also provides for the establishment of a consumer panel to advise the LSB,
including arrangements for the panel to establish committees and to provide advice
to the LSB including the carrying out of research.
Part 3 deals with activities described as “reserved legal activities”, such as rights of
audience, rights to conduct litigation, conveyancing, which are some of the activities
that will come under the regulatory control of the LSB.
A mechanism to protect consumers if new problems occur: The LSB will
have the power to advise the Government on any areas where it identifies
unregulated gaps within the legal services market. The Government may, by
secondary legislation, bring unregulated legal activities within the regulatory
remit of the LSB. Similarly, the LSB will also be able to advise the
Government on deregulating a reserved legal activity.
Part 4 sets out the arrangements under which the LSB will regulate approved
regulators. The LSB will have a range of powers to ensure approved regulators
carry out their functions appropriately. For example, the LSB will be able to issue a
direction, a penalty or de-authorise an approved regulator.
The LSB will need to be satisfied that approved regulators have provided for
appropriate separation of their regulatory and representative functions in accordance
with the rules.
Part 5 provides for the licensing of Alternative Business Structures.

Alternative Business Structures are bodies that have both lawyer and non-lawyer
management and/or ownership, and that may carry out solely legal services or
legal services in combination with other non-legal services. All non-lawyers with
a material ownership interest in the body are subject to approval requirements,
which may include a fitness to own test.

These developments will enable “one stop shops” for consumers, and
encourage more effective competition and wider opportunities for better quality,
greater choice and cheaper services for consumers.

There are robust safeguards to protect consumers. For example, nominated
Heads of Legal Practice and of Finance and Administration will have specific
duties, for example, to ensure the maintenance of appropriate ethical and
financial accounting standards within firms.
Part 5 is purely facilitative and there is no obligation on a firm to take on external
management or ownership or for an approved regulator to adopt the regime.

In advance of Part 5, Legal Disciplinary Practices (LDPs) will be allowed to
emerge, with up to 25% non-lawyer management. They will only be able to
provide solicitor or other legal services. In order to allow these bodies to emerge,
the relevant regulatory bodies (for example the Solicitors’ Regulation Authority)
will have to modify their rules and regulations to ensure they are in a position to
regulate them.
Part 6 provides for the establishment of the Office for Legal Complaints (OLC)
which will administer a new and independent complaint handling scheme.
 The “ombudsman scheme” will deal with complaints about the services provided
by persons authorised under the terms of the Act, and their employees. It will be
headed up by a Chief Ombudsman, who must be lay.
Part 7 deals with further provisions relating to the LSB and the OLC. In particular,
the levy provisions in which the LSB and OLC receive their funding.
 Approved regulators will be levied to meet the cost of regulation (including
complaints handling). The LSB must be satisfied that the apportionment of the
levy is in accordance with fair principles. It will then be for the approved
regulators to decide how to allocate these costs amongst their members.
Implementation
The programme for implementing the Act is in progress, and implementation of the
LSB and the OLC is expected to take close to three years from Royal Assent, with
the LSB being fully established by early 2010 and the OLC fully established by late
2010. The immediate focus of implementation is recruitment of the Chair and other
board members for both the LSB and the OLC. These posts need to be appointed
well in advance of the 'go live' dates, to ensure that they are involved in setting the
strategic direction of the two organisations as early as possible.
The recruitment for the LSB has been carried out in line with the guidance of the
Office of Commissioner for Public Appointments (OCPA). The LSB Chair, David
Edmonds, takes up post on 1 May and the OLC Chair is expected to be in post by
Autumn 2008. Once the new boards have been established, responsibility for
managing the implementation process will be handed over to them.
Updated 23 April 2008