Solicitor and the Bar regulation grow ever closer

In recent months there have been reports in the legal press which give the impression that the traditional separation between solicitors and the Bar is eroding at a fairly rapid rate. But are these simply changes at the margins, or an indication of a more fundamental shift within the legal profession?

Recent developments include:

Regulation of solicitors by the BSB

Over recent years concerns have been expressed about the way the SRA discharges its role as solicitors’ regulator.  For many smaller firms the BSB may be seen as a more attractive alternative. LMD Law is a recent example of a small firm run by a solicitor which opted for BSB entity regulation despite not hiring any barristers.  However, the movement is not all one way – ARP Legal is a barrister led entity (founded by members of 5 St Andrew’s Hill) regulated by the SRA.

Entity Regulation

These developments of course go hand in hand with the recent introduction of entity regulation by the BSB, soon to be consolidated by the ability of the BSB to regulate ABSs.  In the context of SRA entity regulation, its Chief Executive recently commented that ABSs had not worked – and that this was because of the SRA and its regulation, focusing particularly on the “separate business rule” and other regulations which had frustrated the ability of solicitors to “get together” with other professionals. He predicted a more rapid change in the market now that those rules had been relaxed.

Innovation

In recent years the Bar has strived to provide a more competitive and flexible regulatory environment, and one which does not see those it regulates as wedded to practising through Chambers or in employment. Some elements of this innovation have perhaps been more successful than others. ProcureCo, for example, was launched in 2010 but failed to significantly capture the imagination of the Bar and, as far as one can tell anecdotally, take up was very limited. There are tellingly few references to the scheme on the Bar Council website.

In contrast, the introduction of the BARCO scheme – the Bar’s own escrow account – has proved more durable and has enabled barristers to offer a form of substitute for their inability to hold client money and compete more directly with solicitors. Indeed, an SRA regulated law firm, The Legal Director, was recently granted a waiver by the SRA to allow it to participate in the BARCO scheme.

Public Access

Direct access work is undoubtedly not without its challenges. A recent report by Pye Tait Consulting on behalf of the LSB and the BSB highlighted some of these issues, including a lack of public perception of the scheme and the different approach required when dealing with non-professional clients. The report suggested that over 54% of barristers registered for the direct access scheme carried out five or less direct access instructions per year. However, the same report also noted an overwhelming consensus that work from this source was likely to increase in the future.

Taking all of the above into account, it is fair to say the last year or two have seen changes which suggest the traditional paradigms are no longer immutable. Certainly, the idea of solicitors and the Bar practising, and being regulated, largely in isolation from each other seem to be a thing of the past.

But how fundamental are these changes? It would perhaps be going too far to see them as steps in an irreversible progression towards a fused profession.

Whilst the BSB has been keen to embrace the idea of entity regulation and encourage competition and innovation, it does not seem to have any aspirations to occupy the same wide-reaching regulatory space as the SRA.  Certainly initially, the BSB is looking to restrict its ABS approvals to what are perceived as low-risk ABSs who carry out activities broadly similar to self-employed barristers. For the time being the BSB, by its own admission, considers itself a “niche regulator”.

And while there are several instances of solicitor led firms being regulated by the BSB (and vice versa), the numbers are not particularly large, and to date have tended to be smaller practices where there is perceived to be a cost advantage and lower administrative burden to being regulated by the Bar.  We are a long way from a position where the BSB have the appetite and capacity to regulate large solicitors’ practices.

Indeed, there is a wider question – notwithstanding the vast legislative and regulatory changes which have taken place over the last decade – as to how much genuine appetite within the professions there is to practice through ABSs and similar entities. Recently I wrote about the lower than anticipated take up of entity regulation through the BSB, and currently the BSB is only expecting to license around 20 ABSs per year in the early stages of its role as an ABS regulator.

As noted above, the SRA itself recently commented on the fact that ABSs do not seem to have worked to date. To an extent that may be because of regulatory concerns, but there are also real practical and commercial challenges in trying to adapt professional structures which have been in place for very considerable lengths of time into new, more corporate vehicles.

Whilst it would be wrong to brand entity regulation and innovation in the legal services market as a failure, certainly there are sufficient practical examples of the dangers involved for practitioners to be wary.

For the moment therefore it seems as though change in the legal professions is very much a case of gradual evolution, rather than sudden evolution. Whether changes will develop at a quicker pace if some high profile early adopters are successful is of course an open question. But, for now at least, the idea of a fused legal profession seems a long way off.

David Webster is a partner in the Corporate & Commercial Team at Russell-Cooke


 

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