Prior to the passage of the Legal Services Act 2007, non-lawyers were not allowed to own businesses providing legal services. This prevented investment and contributions from non-lawyers and could be said to have had had an anti-competitive effect through limiting participation in the market. The Legal Services Act 2007 aimed to open up the market through the removal of these restrictions.
This should increase choice, whilst allowing providers more flexibility for providers to tailor their offers for consumers. New entrants, generating greater competitive pressures, will be likely to increase value-for-money and create better incentives for high-quality practice.
Common suggestions on the kind of new structures this might bring about include:
- The attraction of external capital into law firms
- Consumers will be able to access packages of legal services alongside other professional services – for example, accountancy, tax or insurance advice
- Legal franchises
These new types of legal business have been called ‘Alternative Business Structures’ (or ‘ABS’). The first tranche of ABS will open their doors to consumers during October 2011, subject to the Parliamentary timetable.
In August 2011 the LSB published a research report setting out its latest thinking on the likely impact of ABS on the market.
To coincide with the emergence of the first ABS in the legal services market, the LSB, CLC and SRA have issued this joint briefing.
Work to date
Building the licensing framework
The LSB has the power to permit approved regulators to become Licensing Authorities, each holding the power to grant licences to these new business models. To ensure standards we have built a licensing regime which aims to ensure consumer protection and good governance. The first designations as Licensing Authorities will take place during summer 2011. The LSB has also made provision to become a direct licensor of last resort in the absence of other competent bodies.
Alongside this, work has taken place towards designating a single body to hear all appeals against decisions made by Licensing Authorities.
This process has gone hand-in-hand with the development of outcomes-focused regulation – a more pragmatic approach to consumer protection that puts compliance with the spirit of the rules above process. In this way, risk in the market will be tackled on a more sophisticated level, whilst not holding back genuine competition and innovation.
ABS Implementation Group
In July 2009 we established an ABS Implementation Group which meets regularly and brings together representatives from the approved regulators and officials from the Ministry of Justice. The group’s minutes give a sense of work carried out to date on ensuring that the licensing framework upholds consumer protections.
Open Forum consultations
In addition to formal consultation, direct consultation has taken place with interested individuals and organisations across the country through our series of Open Forum events. Each of these has included a major focus on progress towards licensing ABS.
- Fact Sheet 1: Background to ABS: Reforming and modernising the legal services market
- Fact Sheet 2: Ownership and management of alternative business structures
- Fact Sheet 3: Consumer protection
- Fact Sheet 4: Learning from entities already in the market
- Fact Sheet 5: Alternative Business Structures and legal aid
- Ministry of Justice: Alternative Business Structures
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For more information please contact Regulatory Project Manager Chris Baas, who can be reached on 020 7271 0093.