Legal Services Act

What is the Legal Services Act?

The Legal Services Act 2007 is a statute which aimed to regulate the legal profession, as well as produce more competition within it. This was as a result of the of the Clementi Review (2004), which raised concerns about the outdated regulatory methods of the legal profession, as well as law firms overcharging due to the lack of competition available. The Review stated that those who most needed a solicitor were being overcharged, which was restricting access to justice.

This statute aimed to promote market competition within the legal profession, as well as increase access to justice by driving down prices.

What did the Legal Services Act 2007 do?

There were two significant aspects of the Act:

Alternative Business Structures. The main change that the Legal Services Act 2007 brought to the legal profession was the introduction of alternative business structures (ABS). This allows non-lawyers to take a financial stake in, and become partners of, established law firms. Equally, new legal businesses could be founded under a shared ownership model between lawyers and non-legally trained managers.

Essentially, the Legal Services Act allowed law firms to become part of multinational companies, and multinational companies to have their own law firms if they so wish. Such an introduction was known as “Tesco law”, as the first Alternative Business Structure to be granted a licence was Tesco.

The Legal Services Board. To help improve regulation of the legal profession, the Legal Services Board (LSB) was established to provide oversight over eight regulatory bodies of the legal profession.

These are:

  • Solicitors Regulation Authority

  • Bar Standards Board

  • Cilex Regulation

  • Costs Lawyers Standards Board

  • Council for Licensed Conveyancers

  • Institute of Chartered Accountants

  • Master of the Faculties

  • Intellectual Property Regulation Board

Legal Services Act 2007

Concerns about the Legal Services Act 2007

Many feared that the introduction of Alternative Business Structures would diminish the quality and value of the legal services provided, due to the high amount of paralegals and non-law professionals entering the profession. This would in turn lead to low ethical standards and change the legal profession for the worse. The Bar Council argued that such business structures would be dominated by accountancy firms disregarding ethics in favour of financial gain.

Furthermore, small high street law practices feared that they would be forced out, due to the competitive rates that would be introduced by Alternative Business Structures. This would in turn reduce the amount of positions available within the legal profession.

In addition, with the creation of the Legal Services Board many feared that there would be heavy regulation on the larger City firms due to the shaky relationship that the legal profession has with the City, especially with the Law Society. They feared that heavy regulation would result in reduced profits and therefore decline the legal profession even further.

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