As for all legal professionals, including the Bar, the Act represents both uncertainty and opportunity. The BSB is working hard to clarify the uncertainty and permit the potential to be realised. Further, the BSB has recently issued a second consultation paper, seeking views on what it considers to be the implications of the Act, in order that future regulation is informed, as far as is possible, by the realities of practice in the future and in the interests of the consumer and the public generally.
So what do we know?
The Act facilitates the establishment of alternative business structures (ABSs) and legal disciplinary practices (LDPs) in which lawyers and non-lawyers will be able to offer legal services (and in the case of ABSs other services) through the same business entity. This will clearly have important implications for barristers. At present, there are restrictions on the type of business structures through which legal services may be provided by barristers. For example, the Code of Conduct forbids self-employed barristers from working through any body such as a partnership. Permitting barristers to work in LDPs or ABSs therefore requires a fundamental regulatory re-think. In particular:
a. How will the cab-rank rule apply in the future?
b. Should barristers be able to become managers of LDPs?
c. How should barristers be allowed to practice in LDPs?
d. Should the BSB be a regulator of individuals in LDPs/ABSs or of LDPs/ABSs as entities?
e. Should barristers be permitted to practise in barrister-only partnerships, and if so how should the individuals be regulated?
f. Should work currently prohibited under the Code of Conduct now be permitted, eg the conduct of lay clients’ affairs?
Addressing the issues
The responses received to the first consultation paper were notable for their divergence of views, even on fundamental questions. It is clear to the BSB that there will not be a clear majority view on many of the questions raised. The Act comes into force incrementally and, in line with that chronology, the BSB has issued a second consultation paper, the deadline for responses to which is 1 March 2009. In particular, this paper seeks views on the regulatory policy relating to barristers becoming managers of LDPs and the development of barrister-only partnerships.
Legal disciplinary practices
Before the full ABS regime is implemented (2011 or 2012), the Act establishes an interim regime by conferring on the Solicitors Regulation Authority (SRA) the power to regulate LDPs that include up to 25% non-lawyer managers, provided that they have at least one solicitor or registered European lawyer manager. The SRA hopes to be able to commence regulation of LDPs from March 2009. The Council for Licensed Conveyancers has also been granted transitional powers under the Act to regulate LDPs and is understood to be developing a regulatory regime along similar lines to the SRA.
The second consultation paper presents the arguments for and against permitting barristers to become managers of LDPs, and the BSB has taken competition law advice on whether maintaining the existing prohibition would appreciably limit competition. The advice can be found on www.barstandardsboard.org.uk. In summary, it states that a continuation of the current restriction would be a breach of our obligations under European law and would also be a failure on the part of the BSB to promote the regulatory objectives of the Act.
In the light of that advice and other considerations, the second consultation is framed on the basis that barristers should be permitted to become managers of SRA-regulated LDPs.
Barristers working in LDPs will be regulated both as part of the business entity and as individuals. Regulation of LDP business entities will be carried out by the SRA, and will essentially deal with the services that the firm provides. This will necessarily involve a substantial degree of regulation of the individuals, including barristers, providing services on behalf of the entity. So misconduct by barristers in the LDP will be likely to result in disciplinary action against them and/or the entity by the SRA. The exact setting of the regulatory boundaries between the SRA as entity regulator and the BSB as the regulator of individual barristers within them is still the subject of on-going dialogue between both bodies. Critical to that discussion will be the need to ensure that the fundamental standards and duties of barristers which currently apply to all practising barristers continue to apply to barristers who are managers of, or employed by, SRA-regulated LDPs. There cannot be different classes of barristers owing substantially different duties to the client and to the court.
To that end, all the approved regulators under the Act meet regularly to ensure that the rules they create do not conflict with each other. This aims to ensure that, as far as possible, they remain consistent and do not create confusion for the consumer.
Although the SRA LDP rules are anticipated to be in force in March, the amendments to the Code of Conduct necessary to enable barristers to practise as managers of LDPs are subject to the outcome of the consultation. Following consideration of the responses, they will be finalised and submitted to the Ministry of Justice (MoJ) for approval in June 2009. Barristers will not be able to join an LDP as a manager before then, and possibly not until the rule changes have been MoJ-approved. However, a barrister could in the meantime become an employee of an LDP under, and subject to, the existing provisions of the Code (Part V) that apply to employed barristers generally.
The consultation paper also asks whether barristers should be allowed to practise in barrister-only partnerships (BOPs). If BOPs are permitted, they would be regulated through the individual barristers rather than through the entity as a whole, and as
a result would be entirely regulated by the BSB. In terms of the scope of regulation, the BSB has been advised by leading counsel that neither it nor the Bar Council currently has power to regulate any body of persons, only individual barristers. To obtain such power in relation to LDPs, the Bar Council would need to seek approval for appropriate amendments to its constitution. In the absence of powers to regulate entities, the BSB could not itself take on the role of regulating LDPs. This also has implications in relation to barristers working within the ABS regime.
Alternative business structures
The ABS regime is not expected to be in operation before the end of 2011. An ABS is defined as a body in which one or more of the owners or managers is entitled to provide legal services and one or more of the others is not. So even when the full ABS regime is in force, a firm of solicitors, barristers and licensed conveyancers only cannot be an ABS, but an LDP with one non-lawyer manager will then become an ABS. ABSs will have to be licensed by a licensing authority approved by the LSB. The Law Society, through the Solicitors Regulation Authority (SRA), intends to seek to become a licensing authority. It would be open to the Bar Council, through the BSB also to seek to become one.
Many of the issues that are being discussed and settled in relation to the LDP regime are likely to have consequences for the ABS regime. This is inevitable given that many LDPs will become ABSs at that time. The BSB is aware of the need to set out a clear and robust regulatory framework in the public interest to facilitate those individuals and entities intending to change and to stimulate the external investment envisaged by the Act. Whether or not the Bar Council should become a licensing authority for ABSs is an important question. Otherwise, as with LDPs, barristers will only be able to be managers or employees of ABSs regulated by the SRA and other licensing authorities.
Engaging with the profession
This may be a period of uncertainty, but it is also one of opportunity and the BSB wishes to engage with all those with relevant views and experience.
Simon Garrod is Head of Professional Practice at the Bar Standards Board.