History of the reforms
The Legal Services Act 2007 – and the creation of the Legal Services Board marked the culmination of almost a decade of work.
Background to reform
In March 2001 the OFT produced a report, ‘Competition in Professions’, which recommended that unjustified restriction on competition should be removed. The government responded with a consultation paper and report into competition and regulation in the legal services market.
The Government’s report concluded that "the current framework is out-dated, inflexible, over-complex and insufficiently accountable or transparent... Government has therefore decided that a thorough and independent investigation without reservation is needed".
Regulatory review of legal services
In July 2003, Sir David Clementi was appointed to carry out an independent review of the regulatory framework for legal services in England and Wales. The terms of reference were:
- To consider what regulatory framework would best promote competition, innovation and the public and consumer interest in an efficient, effective and independent legal sector; and
- To recommend a framework which will be independent in representing the public and consumer interest, comprehensive, accountable, consistent, flexible, transparent, and no more restrictive or burdensome than is clearly justified.
In December 2004, Sir David published ‘Review of the Regulatory Framework for Legal Services in England and Wales’. His recommendations included:
- Setting up a Legal Services Board - a new legal services regulator to provide consistent oversight regulation of front-line bodies such as the Law Society and the Bar Council.
- Statutory objectives for the Legal Services Board, including promotion of the public and consumer interest.
- Regulatory powers to be vested in the Legal Services Board, with powers to devolve regulatory functions to front-line bodies, now called Approved Regulators, subject to their competence and governance arrangements.
- Front-line bodies to be required to make governance arrangements to separate their regulatory and representative functions.
- The Office for Legal Complaints - a single independent body to handle consumer complaints in respect of all members of front-line bodies, subject to oversight by the Legal Services Board.
- The establishment of alternative business structures that could see different types of lawyers and non-lawyers managing and owning legal practises.
The reform programme
The Government broadly accepted Sir David’s report, and in October 2005 it issued a White Paper, ‘The Future of Legal Services: Putting Consumers First’. In that document, the Government announced its intention to publish a draft Legal Services Bill which would include proposals to implement the key Clementi recommendations. The three planks upon which reforms were to be built were the new, independent and robust oversight regulator, the Legal Services Board; the single complaints-handling and consumer redress body, the Office for Legal Complaints; and the facilitation of the innovative Alternative Business Structures, helping the legal sector to become more responsive to consumer needs.
In May 2006, the draft Bill was published. It underwent Pre Legislative Scrutiny before a Joint Committee of MPs and Peers. That Joint Committee was chaired by Lord Hunt of Wirral, and it published a report in July 2006, making several recommendations about improvements that could be made by the Government but accepting the broad thrust of the reform package.
In that spirit of broad consensus, the Government introduced the full Legal Services Bill to Parliament in October 2006. Parliamentary passage was lengthy and scrutiny was thorough, with the Bill receiving Royal Assent over a year later, on 30 October 2007.