Professional Documents
Culture Documents
THE
REGULATION
OF
LEGAL
SERVICES:
WHAT
IS
THE
CASE
FOR
RESERVATION?
STRATEGIC
DISCUSSION
PAPER
July
2011
THE
REGULATION
OF
LEGAL
SERVICES:
WHAT
IS
THE
CASE
FOR
RESERVATION?
July
2011
Introduction
and
summary
This
is
the
second
of
two
papers.
In
the
first1,
we
traced
the
origins
of
the
six
reserved
legal
activities
found
in
section
12(1)
of
the
Legal
Services
Act
2007.
We
sought
to
understand
the
history
and
the
reasons
behind
the
selection
of
each
of
various
legal
activities
for
reservation.
We
concluded
that
the
history
of
the
currently
reserved
activities
would
not
provide
a
sound
basis
for
identifying
suitable
criteria
for
the
addition
or
removal
of
reserved
activities
in
the
future.
In
this
second
paper,
therefore,
we
explore
the
broader
basis
for
the
regulation
of
legal
services
and
in
particular
a
contemporary
approach
to
reservation
in
the
light
of
the
Legal
Services
Board’s
powers
under
the
Act
to
recommend
the
addition
or
removal
of
legal
services
as
reserved
activities.
A
description
of
the
Board’s
powers
and
the
process
involved
will
be
found
in
Appendix
1.
The
Act
provides
for
the
extension
or
removal
of
reserved
activities
by
order
of
the
Lord
Chancellor
(rather
than
by
primary
legislation,
and
only
on
the
recommendation
of
the
LSB).
However,
it
seems
to
us
that,
for
the
Board
to
make
any
recommendation
to
add
a
reserved
legal
activity
to
the
list,
it
must
be
clear
in
articulating
the
policy
reasons
and
criteria
for
doing
so.
Only
in
this
way
will
it
be
possible
to
test
the
recommendation,
not
just
in
relation
to
the
recommended
activity
itself
but
also
in
relation
to
other
legal
activities
that
appear
to
satisfy
the
same
policy
reasons
and
criteria.
Further,
to
the
extent
that
one
(or
more)
of
the
currently
reserved
activities
does
not
appear
to
meet
those
same
policy
reasons
and
criteria,
it
should
follow
that
the
Board
ought
to
recommend
that
it
(or
they)
should
be
the
subject
of
a
recommendation
for
removal.
The
creation
of
reserved
legal
activities
(as
a
form
of
exclusivity
granted
by
the
State
to
those
deemed
to
be
appropriately
qualified)
is
only
one
approach
to
regulation.
Parliamentary
intervention
has
also
led
to
some
services
that
would
fall
within
the
definition
of
‘legal
activity’
in
section
12(3)(b)
of
the
Legal
Services
Act
2007
being
regulated
by
statute,
but
not
as
reserved
legal
1
LSI
(2010a)
Reserved
Legal
Activities:
History
and
Rationale,
available
at
http://www.stephenmayson.com
activities.
Examples
include
immigration
advice,
claims
management
services,
and
insolvency
work.
This
adds
a
degree
of
complexity
to
the
regulatory
terrain.
In
a
final
twist,
some
legal
activities
are
neither
reserved
under
the
Legal
Services
Act
2007
nor
regulated
by
any
other
statute.
However,
where
the
person
carrying
them
out
is
qualified
and
regulated
(such
as
a
barrister,
solicitor
and
licensed
conveyancer),
the
activities
they
undertake
can
become
regulated
as
a
consequence
of
the
person
being
regulated.
The
outcome
is
that
non-‐
reserved
legal
activities
carried
out
by
unregulated
persons
can
be
undertaken
without
any
regulatory
oversight.
This
leads
to
a
‘regulatory
gap’,
where
clients
who
procure
activities
which
are
not
reserved
or
regulated,
from
providers
who
are
not
regulated
as
qualified
or
licensed
practitioners,
are
left
without
any
protection.
Activities
that
currently
fall
into
this
gap
include
some
that
could
potentially
seriously
affect
the
lives
of
the
people
involved
and
of
others
around
them
(such
as
the
preparation
of
wills,
or
advice
about
mental
health).
As
things
currently
stand,
therefore,
the
regulation
of
legal
activities
is
somewhat
confusing
(and
surprising)
for
consumers.
It
would
seem
illogical
to
consider
the
creation
or
removal
of
reserved
activities
merely
in
the
context
of
the
powers
to
reserve
or
liberate
without
reviewing
the
broader
approach
to
the
regulation
of
activities,
individuals
and
entities.
As
a
result
of
our
first
paper,
we
are
not
convinced
that
there
is
yet
a
coherent
public
interest
argument
that
applies
to
the
current
reservations,
or
even
a
cogent
set
of
arguments
that
forms
a
reasoned
basis
for
their
continuation.
At
the
end
of
our
first
paper,
we
posed
three
questions:
1. On
what
public
interest
basis
should
any
legal
activity
be
regulated?
2. If
there
is
a
case
for
regulation,
should
it
be
one
for
reservation
or
some
other
form
of
regulation
(and
what
should
be
the
difference
in
effect
between
regulated
and
reserved
activities)?
3. If
there
is
a
case
for
regulation,
should
it
be
of
the
activity,
of
the
individual
who
provides
the
service,
or
of
the
entity
within
which
an
individual
is
engaged?
This
paper
seeks
to
address
those
questions,
and
in
doing
so
explores
the
potential
public
interest
rationale
for
the
regulation
of
title
and
person,
and
reservation
of
legal
activities,
in
order
to
suggest
a
contemporary
approach
to
reservation.
It
is,
accordingly,
fundamentally
a
paper
about
the
reservation
of
legal
activities
rather
than
a
broader
attempt
to
revisit
the
totality
of
regulation
relating
to
legal
services.
There
is,
nevertheless,
a
necessary
observation:
the
essence
of
the
current
regulatory
approach
to
legal
services
derives
from
an
era
when
there
was
much
less
general
consumer
protection
–
either
in
legislation
or
in
commercial
ethos.
It
must
therefore
be
right
to
question
whether
all
aspects
of
that
traditional
regulatory
approach
continue
to
be
justified
in
a
different
time
and
circumstance.
We
take
as
a
given
the
fundamental
framework
of
the
Legal
Services
Act
2007,
namely
the
regulatory
objectives,
reserved
legal
activities
and
authorised
persons.
However,
if
the
reserved
legal
activities
are
anachronistic
or
presently
lacking
an
articulated
public
interest
justification
(which
we
believe
they
are),
there
is
a
significant
risk
that
the
Legal
Services
Act
will
have
promoted
(and
the
LSB
will
be
overseeing)
an
increasingly
irrelevant
regulatory
infrastructure.
We
do
not
believe
that
this
failure
of
legislature
intention
would
be
in
the
public
interest.
The
regulatory
gap
that
we
refer
to
above
could
result
in
a
considerable
proportion
of
non-‐reserved
activities
being
carried
out
by
providers
other
than
authorised
persons.
There
is
some
risk
that
consumers
might
not
be
adequately
–
or
even
competently
–
advised
or
represented
on
issues
that
are
fundamental
to
their
physical,
mental,
personal,
social,
and
economic
well-‐being2.
We
do
not
regard
this
as
being
in
the
public
interest
either.
Our
rather
ambitious
objective
in
this
paper
is
to
draw
conclusions
and
suggest
proposals
for
the
future
regulation
of
legal
services
on
issues
that
Sir
David
Clementi
and
the
introduction
of
the
Legal
2
To
be
clear,
we
are
not
suggesting
that
this
risk
is
either
inevitable
or,
in
itself,
sufficient
justification
for
regulation.
Services
Act
sidestepped.
The
focus
of
this
paper,
like
the
first,
remains
the
reserved
legal
activities;
but
this
time
the
emphasis
is
not
on
what
they
are
and
how
they
came
to
be
reserved,
but
rather
on
what
they
should
be
(and
why)
and
how
reservation
sits
alongside
other
approaches
to
regulation.
We
are
aware
that
the
LSB
commissioned
the
Regulatory
Policy
Institute
to
prepare
a
paper
outlining
the
economic
rationale
for
regulation
in
the
legal
services
market3.
We
do
not
seek
to
replicate
that
work,
although
there
is
some
inevitable
overlap.
Our
own
review
of
the
underlying
theory
is
in
Appendix
2,
to
which
we
shall
refer
as
appropriate.
We
strongly
support
the
principle
of
risk-‐based
and
evidence-‐based
regulation.
We
also
agree
that
risk
will
often
be
demonstrated
by
evidence.
It
is
therefore
difficult
to
disagree
with
the
objective
of
evidence-‐based
policy.
To
express
a
somewhat
cynical
view,
however,
we
think
there
is
also
a
recent
trend
in
many
areas
of
public
debate
(within
and
beyond
the
world
of
legal
services)
of
policy-‐
based
evidence
–
that
is,
the
selective
seeking
or
use
of
available
evidence
or
commissioned
research
to
provide
empirical
support
for
a
desired
policy
outcome.
There
are
obvious
dangers
and
shortcomings
in
such
an
approach.
Further,
we
think
that
it
is
legitimate
to
anticipate
risk
(that
is,
to
foresee
circumstances
where
risk
might
arise
in
the
future)
in
the
absence
of
any
current
evidence
that
such
a
risk
has
yet
materialised.
Indeed,
we
think
that
this
is
one
of
the
major
responsibilities
of
policy-‐makers
and
regulators.
This
will
require
policy-‐based
regulation.
Our
preference,
therefore,
is
to
seek
policy
and
regulation
founded
on
sound
principles,
supported
where
possible
by
available
evidence
but
not
reticent
about
drawing
conclusions
in
the
absence
of
evidence
where
public
policy
or
the
public
interest
suggests
that
regulation
would
avoid
or
reduce
a
significant
degree
of
risk.
This
paper
will
first
consider
how
reservation
might
contribute
to
achieving
each
of
the
regulatory
objectives
in
the
Legal
Services
Act.
It
will
then
address
regulation
by
title,
person
and
activity,
and
suggest
generic
public
interest
justifications
for
reservation
(the
public
good,
and
consumer
protection).
Finally,
it
will
apply
these
public
interest
justifications
to
the
currently
reserved
legal
activities
–
to
assess
whether,
and
to
what
extent,
the
existing
reservations
can
still
be
supported
–
as
well
as
exploring
the
circumstances
in
which
a
case
could
be
made
to
consider
other
legal
activities
for
reservation.
In
summary:
(1) we
offer
a
definition
of
‘the
public
interest’;
(2) we
believe
that,
in
meeting
the
regulatory
objectives
in
the
Legal
Services
Act,
those
objectives
could
be
divided
into
primary
and
subordinate
objectives,
where
the
primary
objectives
directly
support
the
public
interest
and
in
any
conflict
among
the
objectives
the
primary
objectives
would
prevail
over
the
subordinate;
(3) reservation
can
be
justified
on
the
basis
of
the
public
interest
in
securing
public
good
(as
a
matter
of
principle
and
without
further
evidence)
and
consumer
protection
(where
sufficient
evidence
exists
to
support
it);
(4) the
current
reservations
for
rights
of
audience,
the
conduct
of
litigation,
court-‐
related
reserved
instrument
activities,
the
administration
of
oaths,
and
notarial
activities
can
be
justified
in
the
public
interest;
(5) a
strong
public
good
case
could
be
made
for
the
current
property-‐related
reserved
instrument
reservation
to
be
broadened
to
include
all
conveyancing
services;
(6) a
strong
public
good
case
could
be
made
for
immigration
advice
and
services
to
become
reserved
legal
activities;
3
See
Regulatory
Policy
Institute
(2010)
Understanding
the
economic
rationale
for
legal
services
regulation:
available
at
http://www.legalservicesboard.org.uk/news_publications/latest_news/pdf/economic_rationale_for_Legal_Services_R
egulation_Final.pdf.
(7) a
strong
consumer
protection
case
could
be
made
for
the
preparation
of
wills
and
powers
of
attorney
to
become
reserved
legal
activities;
(8) the
current
probate
activities
reservation
is
too
narrow;
a
strong
consumer
protection
case
can
be
made
to
replace
it
with
a
broader
reservation
applying
to
the
administration
of
estates;
(9) there
is
no
or
insufficient
justification
for
adding
either
insolvency
practice
or
claims
management
services
to
the
list
of
reserved
legal
activities;
(10) where
reservation
is
justified,
authority
to
practise
a
reserved
legal
activity
should
not
be
confined
to
those
who
hold
a
professional
title
and,
for
those
who
do,
should
be
conferred
separately
by
way
of
accreditation
or
endorsement
to
a
practising
certificate;
and
(11) if
the
work
for
any
client
involves
a
reserved
activity,
the
provider
should
be
obliged
to
inform
the
client
that
this
is
the
case
and
name
the
authorised
person(s)
who
will
be
responsible
to
the
client
for
that
work.
We
are
grateful
for
the
many
responses,
and
expressions
of
agreement
and
support,
that
we
received
as
a
result
of
our
earlier
interim
paper.
We
particularly
welcomed
the
helpful
responses
of
The
Law
Society4
and
the
Institute
of
Chartered
Accountants
in
England
&
Wales.
We
have
also
drawn
on
the
discussion
and
comments
made
at
a
seminar
jointly
hosted
by
the
Institute
and
the
Legal
Services
Board.
Finally,
we
welcome
the
LSB’s
consideration
of
its
approach
to
the
scope
of
regulation,
and
hope
that
this
paper
will
inform
the
Board’s
thinking
and
approach
on
this
important
issue.
4
See
http://www.lawsociety.org.uk/influencinglaw/policyinresponse/view=article.law?DOCUMENTID=439138.
5
Legal
Services
Act
2007,
s.
3.
6
Legal
Services
Act
2007,
s.
28.
7
LSI
(2010a),
para
5.7.
8
Hunt
(2009),
p.
32.
9
Legal
Services
Board
(2010)
The
regulatory
objectives,
p.
3.
10
See
Mayson
(2011),
para
5.
On
this
view,
the
public
interest
has
two
principal
dimensions:
the
fabric
of
society
itself;
and
the
participation
of
citizens
in
society.
The
fabric
of
society
is
maintained
by
fundamental
issues
such
as
national
defence
and
security;
public
order,
the
rule
of
law,
and
the
administration
of
justice;
protection
of
the
natural
environment;
effective
government;
and
a
sound
economy
(including
the
free
movement
of
people
and
capital).
Participation
is
then
secured
and
encouraged
by
public
health,
education,
and
welfare;
access
to
justice
and
the
protection
of
human
rights
and
equality;
and
reliable
personal,
public
and
commercial
relationships.
The
view
taken
by
citizens
of
what
is
regarded
by
them
as
essential
will
change
over
time;
and
of
course
whether
something
is
for
the
collective
benefit
or
good
of
society
is
itself
a
matter
of
judgement.
But
governments,
judges
and
regulators
are,
arguably,
elected
or
appointed
as
the
transitory
arbiters
of
that
judgement.
For
reasons
we
shall
advance
later
(see
paragraphs
1.10
and
2.4.1.1
below),
our
view
is
that
the
public
interest
should
be
the
dominant
objective
of
regulation
and
should
accordingly
shape
both
content
and
method.
1.3
Support
the
constitutional
principle
of
the
rule
of
law
We
have
already
seen
(in
paragraph
1.2
above)
that
the
LSB
regards
the
rule
of
law
as
part
of
the
public
interest.
This
‘nesting’
of
the
regulatory
objectives
will
be
a
recurring
theme
which
makes
it
impossible
to
consider
the
achievement
of
one
in
isolation
from
the
others.
The
most
basic
definition
of
the
rule
of
law
is
generally
agreed
to
be
that
no
one
is
above
the
law11.
Sir
David
Clementi,
in
his
final
report,
wrote
(2004:
15):
The
rule
of
law
embodies
the
basic
principles
of
equal
treatment
of
all
people
before
the
law,
fairness,
and
a
guarantee
of
basic
human
rights.
A
predictable
and
proportionate
legal
system
with
fair,
transparent,
and
effective
judicial
institutions
is
essential
to
the
protection
of
both
citizens
and
commerce
against
any
arbitrary
use
of
state
authority
and
unlawful
acts
of
both
organisations
and
individuals.
The
reference
to
public
administration
of
laws
in
the
courts
is
an
interesting
one.
Genn
refers
(2010:
32)
to
“a
modern
paradox
in
which
there
is
a
proliferation
of
laws
and
regulation,
accompanied
by
a
reduction
in
adjudication”.
The
increasing
use
of
mediation
and
some
tribunals
for
adjudication
(together
with
a
lack
of
publication
of
their
determinations)
removes
much
of
the
fabric
of
transparency,
certainty,
consistency
and
dissemination
of
public
decision-‐making
in
the
application
of
legal
rights.
There
has
certainly
been
a
sustained
assault
on
the
principle
of
justice
‘being
seen
to
be
done’.
Lord
Bingham
then
elaborated
on
the
meaning
of
the
rule
of
law
by
outlining
eight
sub-‐rules12,
which
provide
a
useful
basis
for
this
analysis:
1. The
law
must
be
accessible,
intelligible,
clear
and
predictable.
2. Questions
of
legal
right
and
liability
should
ordinarily
be
resolved
by
application
of
the
law
and
not
the
exercise
of
discretion.
11
Legal
Services
Board
(2010)
The
Regulatory
Objectives,
p.
4.
12
He
initially
did
this
in
a
lecture
(Bingham
2006)
and
subsequently
in
his
book
(Bingham
2010).
3. The
laws
of
the
land
should
apply
equally
to
all,
save
to
the
extent
that
objective
differences
justify
differentiation.
4. The
law
must
afford
adequate
protection
of
fundamental
human
rights.
5. Means
must
be
provided
for
resolving,
without
prohibitive
cost
or
inordinate
delay,
bona
fide
civil
disputes
which
the
parties
themselves
are
unable
to
resolve.
6. Ministers
and
public
officers
at
all
levels
must
exercise
the
powers
conferred
on
them
reasonably,
in
good
faith,
for
the
purpose
for
which
the
powers
were
conferred
and
without
exceeding
the
limits
of
such
powers.
7. Adjudicative
procedures
provided
by
the
state
should
be
fair.
8. The
state
must
comply
with
its
obligations
in
international
law,
the
law
which
whether
deriving
from
treaty
or
international
custom
and
practice
governs
the
conduct
of
nations.
Clearly
a
number
of
these
are
not
particularly
germane
when
contemplating
the
level
of
regulation
required
in
the
legal
services
market
of
England
and
Wales,
such
as
those
concerned
with
international
law
and
human
rights.
Nevertheless,
the
rule
of
law
is
underpinned
by
an
independent
and
effective
legal
system,
which
itself
requires
law
and
regulation.
Lord
Bingham’s
first
sub-‐rule
makes
the
initial
point
that
the
law
must
be
accessible,
intelligible
and
clear.
Barendrecht
argues
that
monopolies
within
the
legal
system
maintain
the
impenetrability
of
the
law
because
of
the
complicated
language
used
by
lawyers13:
“Why
can
it
not
be
conducted
in
normal
language?”.
From
this
point
of
view,
if
the
practice
of
the
reserved
legal
activities
was
opened
up
to
a
wider
group
of
providers,
at
least
some
amongst
those
would
be
likely
to
conduct
their
business
in
terms
more
easy
to
understand
for
their
lay
clients.
However,
an
alternative
view
could
be
that
the
more
experienced
the
lawyer,
the
more
able
they
should
be
at
explaining
the
law
to
their
clients.
At
the
root
of
this
point,
though,
it
seems
that
the
general
public
should
not
expect
to
be
able
to
understand
the
law
they
are
bound
by
without
the
assistance
of
a
lawyer,
and
indeed
that
it
would
be
unusual
for
them
to
be
able
to
do
so.
Although
it
may
sound
reasonable
for
a
person
to
want
to
know
what
the
law
is
without
having
to
engage
an
intermediary,
this
information
deficiency
or
asymmetry
is
unavoidable
and
inherent
in
the
legal
services
market
(cf.
Appendix
2,
paragraph
2.2.1).
The
situation
is
similar
with
many
other
liberal
professions.
To
educate
each
consumer
to
the
level
where
legal
advice
and
representation
were
no
longer
needed
would
be
too
costly,
and
impractical14.
The
final
part
of
the
first
sub-‐rule
is
that
the
law
should
be
predictable.
Bishop
has
suggested
that,
in
a
trial
situation,
qualified
professionals
could
produce
more
valuable
precedent
through
better-‐
argued
cases15.
On
this
basis,
reserving
rights
of
audience
only
to
appropriately
qualified
individuals
might
increase
the
level
of
consistency
in
the
law,
as
stronger
precedent
is
more
easily
relied
on.
The
fifth
sub-‐rule
requires
that
ways
must
be
provided
to
allow
parties
to
resolve
disputes
without
excessive
cost
or
delay.
The
current
system
of
reservation
of
certain
legal
activities
might
act
either
for
or
against
this
rule,
depending
on
one’s
viewpoint.
According
to
theory
(cf.
Appendix
2,
paragraph
2.4.2),
monopoly
rights
enjoyed
by
legal
practitioners
will
cause
consumer
welfare
losses
because
of
higher
prices
charged
to
clients
and
the
likelihood
that
those
extra
costs
will
result
in
fewer
smaller
claims
being
pursued
(OECD
2007:
33).
Higher
prices
charged
by
monopolists
do
not
easily
contribute
to
the
imperative
of
resolving
disputes
without
excessive
cost.
In
addition
to
this,
the
market
entry
restrictions
imposed
by
reservation
and
qualification
could
limit
the
number
of
practitioners,
which
might
artificially
increase
prices
and
the
demand
for
existing
lawyers.
Further,
13
Barendrecht
(2004),
as
noted
by
SEO
(2008:
77).
14
This
has
further
implications
for
another
of
the
regulatory
objectives
–
increasing
public
understanding
of
the
citizen’s
rights
and
duties:
see
paragraph
1.8
below.
15
Bishop
(1989),
as
noted
by
OECD
(2007:
24).
limited
availability
of
existing
lawyers
could
result
in
delays
before
a
case
can
be
dealt
with,
again
working
against
the
intent
of
this
sub-‐rule.
On
the
other
hand,
proponents
of
regulation
and
reservation
would
argue
that
qualified
lawyers
provide
a
higher-‐quality
service
than
non-‐lawyers16.
From
this
standpoint,
it
could
be
argued
that
regulation
in
fact
minimises
the
delays
and
costs
associated
with
litigation:
if
only
those
who
are
suitably
experienced
are
allowed
to
conduct
litigation
or
appear
in
court,
it
is
reasonable
to
assert
that
a
dispute
is
more
likely
to
be
clearly
and
definitively
decided
first
time
round.
By
comparison,
a
non-‐expert
might
make
mistakes
that
could
result
in
delays,
further
litigation,
mounting
costs
and
possibly
an
unjust
outcome.
Supporting
the
rule
of
law
therefore
requires
the
effective
and
efficient
administration
and
maintenance
of
the
justice
system:
reservation
of
activities
can
contribute
to
strength,
independence
and
effectiveness,
but
might
bring
potentially
anti-‐competitive
behaviour
as
part
of
the
cost.
We
address
later
this
apparent
conflict
of
objectives
(see
paragraph
1.10
below).
Genn
suggests
that
access
to
justice,
at
its
most
basic
(2010:
115),
is
about
access
to
procedures
for
making
rights
effective
through
state-‐sponsored
public
and
fair
dispute
resolution
processes.
It
implies
equal
access
to
authoritative
enforceable
rulings
and
outcomes
that
reflect
the
merits
of
the
case
in
light
of
relevant
legal
principles.
In
its
comprehensive
study
of
this
area,
the
Australian
Government
(2009:
62-‐63)
identified
five
principles
fundamental
to
access
to
justice:
• Accessibility:
any
initiatives
should
reduce
the
complexity
of
the
justice
system.
• Appropriateness:
users
should
be
incentivised
to
resolve
their
disputes
at
the
most
appropriate
level,
and
the
justice
system
should
be
able
to
direct
attention
to
the
real
causes
of
problems
that
manifest
as
legal
issues.
• Equity:
the
justice
system
should
be
fair
and
accessible
for
all,
including
those
facing
financial
or
other
disadvantage.
• Efficiency:
outcomes
should
be
delivered
as
efficiently
as
possible,
recognising
that
this
may
include
informal
dispute
resolution
and
prevention
of
disputes.
The
costs
of
dispute
resolution
should
be
proportional
to
the
issues
in
dispute.
• Effectiveness:
different
elements
of
the
justice
system
should
interact
to
deliver
the
best
possible
outcome.
All
elements
should
work
towards
delivering
fair
and
appropriate
outcomes,
preventing
and
resolving
disputes,
and
supporting
the
rule
of
law.
These
principles
also
resonate
with
Lord
Bingham’s
sub-‐rules
and
reinforce
the
strong
and
necessary
connection
between
the
rule
of
law
and
access
to
justice.
Further,
enabling
citizens
to
resolve
their
dispute
at
the
level
most
appropriate
for
them
can
be
greatly
helped
by
public
legal
education,
which
is
discussed
in
more
detail
in
paragraph
1.8
below.
16
This
raises
questions
of
what
exactly
we
mean
by
‘quality’:
this
is
explored
in
Mayson
(2010).
17
An
in-‐depth
consideration
of
access
to
justice
is
beyond
the
scope
of
this
paper.
It
will
be
addressed
in
a
new
paper
produced
by
the
Legal
Services
Institute,
due
later
in
2011.
The
correct
role
of
regulatory
influence
on
access
to
justice
often
polarises
around
the
issues
raised
in
relation
to
Lord
Bingham’s
fifth
sub-‐rule
–
namely,
whether
reservation
promotes
or
restricts
access.
We
do
not
believe
that
there
is
yet
an
evidence
base
to
suggest
a
conclusion
one
way
or
the
other:
we
simply
note,
without
further
comment,
the
Parliamentary
intention
to
encourage
greater
access
to
justice
by
liberating
the
legal
services
market
from
some
perceived
restrictive
practices
and
structures.
We
further
note,
however,
that
in
our
view,
the
issue
of
reservation
is
neutral
on
whether
those
who
provide
legal
services
can
be
sufficiently
free
to
innovate
delivery
and
so
improve
access
to
justice:
the
structures
and
methods
through
which
legal
activities
are
provided
do
not,
in
principle,
vary
with
reservation
or
non-‐reservation
of
the
activity
but
rather
attach
to
the
entrepreneurial
and
professional
awareness
of
the
provider.
This
does
not
imply,
of
course,
that
the
effects
will
be
neutral
or
evenly
distributed:
a
review
of
developments
in
the
market
for
the
services
and
products
of
optometrists
demonstrates
how
uneven
the
effects
might
be.
Nevertheless,
the
opportunities
were
equally
available
but
differently
taken.
The
line
between
quality
and
price
is
one
that
the
LSB
is
currently
required
to
walk.
One
of
the
main
arguments
used
to
justify
the
reservation
of
certain
legal
activities
is
that
it
ensures
the
quality
of
service
provided
to
consumers;
on
the
other
hand,
the
anti-‐competitive
effects
of
such
monopolies
will
drive
up
prices
(cf.
Appendix
2,
paragraph
2.4.2).
In
deciding
whether
to
preserve
the
list
of
reserved
legal
activities
as
it
is,
or
add
to
or
subtract
from
that
list,
the
comparative
effects
on
price
and
quality
should
be
primary
concerns.
From
the
point
of
view
expressed
in
the
above
quotation
from
the
Clementi
Review,
one
of
the
most
important
things
a
regulator
could
do
to
further
the
consumer
interest
is
to
secure
better
information
for
consumers
about
the
choices
open
to
them:
indeed,
Sir
David
Clementi
referred
to
the
asymmetry
of
information
between
provider
and
consumer18
and
said
that
because
of
this
the
regulator
“has
a
duty
both
to
protect
and
further
the
interests
of
the
consumer”
(2004:
16).
This
also
raises
issues
of
where
that
burden
should
fall
–
not
only
in
relation
to
enlightening
a
particular
enquirer
or
client
but
also
into
the
much
broader
arena
of
public
legal
education
(discussed
in
more
detail
in
paragraph
1.8
below).
Indeed,
given
that
the
regulatory
powers
only
bite
on
authorised
persons,
any
regulatory
compulsion
to
improve
consumer
understanding
will
have
to
be
driven
from
among
the
regulated
community
(either
by
reserved
activity
or
regulated
person).
In
any
event,
it
is
worth
observing
(and
accepting)
that
the
vast
majority
of
consumers
will
never
be
fully
informed
about
the
legal
services
market.
Information
asymmetries
between
consumers
and
suppliers
are
and
will
remain
characteristic
of
legal
services:
the
point
was
made
in
paragraph
1.3
above
that
to
inform
consumers
fully
would
be
so
costly
as
to
be
impractical.
Further,
providing
more
and
better
information
will
add
to
the
‘search
costs’
of
consumers
(cf.
Appendix
2,
paragraph
2.1)
who
will
often
be
time-‐poor,
irregular
and
inexperienced
buyers
of
legal
services
who
could
be
18
Cf.
Appendix
2,
para
2.2.1
below.
overwhelmed
by
the
volume
of
information
available
to
them:
such
high
search
costs
could
paradoxically
become
a
barrier
to
reducing
the
information
asymmetry
between
supplier
and
consumer.
This
is
another
reason
why
the
collective
benefit
arising
from
focused,
informed
and
experienced
regulators
is
a
welcome
addition
to
the
consumer
protection
armoury
(cf.
paragraph
2.4.1.3
below).
In
addition
to
better
information
for
consumers,
therefore,
the
Clementi
Review
ascribed
a
second
duty
to
the
legal
services
regulator:
that
when
consumers
are
not
sufficiently
informed,
a
regulator
should
(2004:
16)
“have
powers
to
act
in
the
market,
for
example,
to
prohibit
oppressive
marketing
practices,
raise
or
set
standards,
develop
information/awareness
programmes,
resolve
disputes
and
protect
vulnerable
groups”.
Given
that
the
most
potent
regulatory
powers
and
consumer
benefits
are
achieved
through
or
as
a
consequence
of
reservation
(see
the
discussion
in
paragraph
2.4.1.3
below),
there
is
an
argument
that
reservation
would
play
a
significant
part
in
protecting
and
promoting
the
consumer
interest.
However,
reservation
is
not
a
guarantee
of
quality
(the
complaints
profile
of
the
regulated
community
will
attest
to
this),
and
will
come
at
some
additional
cost.
Historically
(as
Sir
David
Clementi’s
review
showed),
it
has
also
led
to
structures
and
cultures
that
have
inhibited
or
discouraged
innovation
and
the
competitive
quest
for
greater
value
for
money
for
clients.
Reservation
and
its
effect
on
the
consumer
interest
is
therefore
a
balancing
act:
is
greater
assurance
of
quality
worth
the
extra
costs?
To
the
extent
that
reservation
and
the
associated
costs
will
bring
additional
protections
(as
discussed
in
paragraph
2.4.1.3
below),
there
is
not
a
simple
trade-‐off
between
quality
and
cost.
Further,
as
we
say
on
a
number
of
occasions
in
this
paper,
where
reservation
is
justified,
it
does
not
follow
that
only
lawyers
(even
without
the
historically
restrictive
professional
rules
and
attitudes)
should
be
the
only
ones
authorised
to
offer
the
reserved
activity.
Thus,
regulation
may
be
seen
as
a
way
of
creating
and
sustaining
consumer
confidence
within
a
market.
Any
loss
of
confidence
could
result
in
consumers
either
not
buying
at
all,
or
only
buying
from
a
limited
number
of
suppliers
with
whom
they
are
already
familiar;
neither
would
provide
scope
for
promoting
competition.
The
LSB
itself
is
in
favour
of
competition
in
the
legal
services
market,
having
stated
that
(2010:
9):
“Individual
providers
of
legal
services
should
compete
for
capital
and
consumers,
so
as
to
drive
better
performance
for
both
sides”.
In
the
context
of
reserved
legal
activities,
the
very
creation
of
a
reservation
leads
to
a
barrier
to
entry
(the
need
for
appropriate
qualification
or
licensing)
and
therefore
in
some
way
inhibits
free
competition19.
However,
assuming
that
the
reservation
is
justified
in
the
public
interest20,
once
the
threshold
level
for
market
entry
has
been
achieved,
there
is
no
necessary
incompatibility
in
then
promoting
competition
among
those
who
have
been
permitted
to
enter
the
market.
Arguably,
this
is
one
of
the
principal
objectives
of
alternative
business
structures
and
the
new
licensing
framework.
Perhaps
the
best
way
of
assessing
this
regulatory
objective
is
to
consider
balancing
two
public
interest
goals
(reservation
and
competition)
through
the
lens
of
competition
law.
Regulation
(through
reservation)
would
therefore
be
justified
to
protect
consumers
from
unavoidable
but
sub-‐
optimal
market
features
(say,
information
asymmetry
between
provider
and
client).
But
where
regulation
is
justified,
it
should
be
applied
in
the
proportional
manner
advocated
by
the
European
Court
of
Justice21.
Using
this
approach,
a
regulatory
tool
must
achieve
its
stated
aims
in
the
manner
least
restrictive
of
competition.
Creating
a
threshold
level
for
market
entry
through
reservation
could
be
argued
to
meet
this
test
if,
once
beyond
the
threshold,
providers
face
the
normal
forces
of
competition
(subject,
of
course,
to
the
other
requirements
of
competition
law
that
apply
to
the
behaviour
of
market
incumbents,
such
as
reviews
of
monopolies,
cartels
and
other
anti-‐competitive
practices).
1.7
Encourage
an
independent,
strong,
diverse,
and
effective
legal
profession
Although
this
is
expressed
as
a
single
regulatory
objective,
the
different
ideas
within
it
could
be
affected
in
varying
ways
by
regulation.
It
consequently
lends
itself
to
being
considered
in
four
separate
parts22.
The
LSB
has
offered
its
own
interpretation
of
each
of
the
four
elements.
In
relation
to
independence,
it
says
(2010:
11):
Independent
primarily
means
independent
from
government
and
other
unwarranted
influence....
An
independent
profession
serves
to
promote
the
principle
that
legal
service
providers
should
be
free
from
inappropriate
influence
(financial
or
institutional)
to
act
as
an
agent
of
the
client,
in
their
best
interests.
Ensuring
the
independence
of
the
legal
professions
is
an
oft-‐cited
reason
for
providing
regulatory
protection.
For
example,
if
rights
of
audience
were
not
reserved
to
authorised
persons
appropriately
qualified,
they
would
face
competition
from
providers
who
might
not
adhere
to
similar
standards
of
independence
and
competence.
Similarly,
when
the
Administration
of
Justice
Act
1985
raised
the
possibility
of
lending
institutions
being
able
to
offer
conveyancing
services
to
their
customers,
concerns
about
conflicts
of
interest
were
voiced.
In
comparison
to
the
relative
independence
of
solicitors,
it
was
thought
that
banks
and
building
societies
might
not
act
in
their
customers’
best
interests
if
they
provided
both
mortgage
and
conveyancing
services
for
the
same
transaction.
Regulation
has
so
far
prevented
this
happening
(although
arguably
it
is
also
more
economic
for
banks
to
refer
the
conveyancing
work
to
independent
solicitors).
Thus,
regulation
potentially
has
a
role
to
play
in
preserving
the
independence
of
legal
services
providers,
as
competition
alone
would
be
less
likely
to
do
so.
19
Or,
as
we
would
prefer,
fair
competition:
see
Appendix
2,
para
2.1
below.
20
Sir
David
Clementi
accepted
that
competition
cannot
be
allowed
to
override
other
relevant
factors
when
he
wrote
that
the
regulator
should
“encourage
competition
in
the
provision
of
legal
services
and
the
promotion
of
choice
in
both
the
number
and
type
of
providers,
subject
to
the
proper
safeguard
of
consumers’
interests”
(2004:
17,
emphasis
supplied).
21
Case
C-‐309/99
Wouters
et
al
v
Algemene
Raad
van
de
Nederlandse
Orde
van
Advocaten
[2002]
ECR
I-‐1577.
22
Interestingly,
Sir
David
Clementi’s
formulation
was
“a
confident,
strong
and
effective
legal
profession”
(2004:
17).
It
is
also
interesting
to
note
that,
given
that
one
of
the
Act’s
principal
intentions
is
to
bring
new
providers
into
the
market
through
ABSs,
this
objective
is
framed
in
terms
of
the
legal
profession
rather
than
of
all
authorised
providers.
The
LSB
considers
a
strong
legal
profession
to
be
(2010:
12)
“able
to
speak
authoritatively
on
matters
of
relevance
and
is
fully
informed
of
consumer
need
and
how
to
meet
it.
Its
voice
on
law
reform
and
the
wider
justice
system
should
not
be
weakened
through
regulation”.
Strength
is
therefore
tied
in
with
independence,
because
legal
practitioners
should
be
able
to
speak
out
without
hindrance
on
issues
they
feel
are
important.
Regulation
might
then
play
a
key
role
in
keeping
the
legal
profession
strong.
Concentration
of
expertise
and
experience
within
a
limited
group
should
increase
their
understanding
of
client
issues
and
need,
and
so
place
them
in
a
strong
position
to
speak
authoritatively
to
government
and
regulators
about
the
effects
of
law
and
regulation,
and
new
proposals.
The
reserved
legal
activities
give
a
monopoly
to
various
authorised
persons,
and
restrict
competition
to
being
just
among
those
providers.
When
only
a
limited
group
of
people
can
provide
services
that
nearly
the
entire
population
will
at
some
point
need,
it
is
not
surprising
that
the
profession
has
historically
proven
itself
resilient.
However,
such
monopoly
rights
might
also
mean
that
lawyers
have
less
incentive
to
maintain
their
levels
of
efficiency
and
innovation,
because
they
face
such
limited
(and
often
homogenous)
competition.
This,
if
anything,
has
proved
the
Achilles
heel
that
led
to
the
Clementi
Review,
the
Legal
Services
Act,
and
now
the
very
real
prospect
of
the
market
being
opened
up
to
a
wider
group
of
authorised
persons.
The
connection
between
reservation
and
strength
will
not
inevitably
be
diluted,
but
lawyers
might
have
some
rapid
catching
up
to
do
to
enable
them
to
maintain
their
competitive
position
as
against
any
new
entrants.
Indeed,
if
members
of
the
legal
profession
positioned
themselves
better
to
address
issues
of
efficiency
and
innovation,
they
might
well
find
that
they
move
closer
to
their
clients
and
the
issues
they
face,
and
are
therefore
able
to
speak
with
even
greater
authority
and
strength.
A
diverse
legal
profession
is
“one
that
reflects
and
is
representative
of
the
full
spectrum
of
the
population
it
serves
so
as
to
harness
the
broadest
possible
range
of
talent
in
the
meeting
of
the
regulatory
objectives”
(Legal
Services
Board
2010:
12).
This
is
currently
a
pertinent
issue
following
the
Milburn
report
on
fair
access
to
the
professions
which
concluded
that
(2009:
24)
“law
remains
one
of
the
most
socially
exclusive
professions”.
Qualitative
entry
restrictions
in
the
form
of
minimum
educational
requirements
could
exclude
market
entrants
from
less
privileged
backgrounds
(Panel
on
Fair
Access
to
the
Professions
2009:
22).
The
existence
of
reserved
legal
activities
could
also
be
excluding
certain
sections
of
society
from
participation.
Regulation
will
therefore
affect
the
extent
of
diversity
within
the
legal
profession.
Where
regulation
(such
as
reservation)
is
intended
to
achieve
public
interest
objectives
(say,
supporting
the
rule
of
law
and
the
independence
and
strength
of
the
legal
profession),
but
contributes
to
a
less-‐than-‐optimal
outcome
in
another
(diversity),
the
resolution
of
that
tension
is
a
balancing
act,
and
will
require
the
regulator
to
reach
a
judgement
about
the
relative
importance
of
one
regulatory
objective
in
relation
to
another:
we
offer
a
view
on
this
in
paragraph
1.10
below.
Finally,
the
LSB
suggests
that
an
effective
legal
profession
will
be
(2010:
12):
able
to
meet
the
changing
needs
of
consumers
and
contribute
to
the
meeting
of
the
regulatory
objectives.
The
profession’s
effectiveness
is
as
much
defined
by
consumers’
expectations
in
it
as
it
is
by
the
professions
and
covers
quality,
access
and
value.
The
Board
also
suggests
that
quality
comes
from
(2010:
12)
“appropriate
education,
training
and
quality
assurance
mechanisms
as
well
as
a
consumer
driven,
competitive
market”.
Quality
can
in
part
be
assured
by
setting
minimum
training
and
market
entry
requirements;
but
these
–
by
the
very
nature
of
the
entry
barriers
and
potential
for
reduced
or
weak
competition
that
they
create
–
can
also
compromise
access
and
value.
But
as
the
LSB’s
formulation
implies,
simply
meeting
requirements
to
enter
a
market
is
no
guarantee
of
continuing
competence
and
quality.
The
adoption
by
regulators
of
effective
and
relevant
quality
assurance,
accreditation
and
monitoring
schemes
can
also
play
a
role
in
securing
the
effectiveness
of
providers.
Quality,
access
and
value
will
require
a
balance
of
minimum
entry
requirements
and
continuing
assurance
mechanisms,
acknowledging
that
these
will
inevitably
create
some
barriers
to
entry.
It
is
therefore
important
that,
in
keeping
with
the
objective
of
promoting
competition
(cf.
paragraph
1.6
above),
competition
is
encouraged
among
those
who
reach
the
minimum
entry
standards
and
are
then
shown
to
maintain
or
perform
beyond
them.
An
effective
profession
is
not
one
that
uses
its
privileged
position
to
resist
improvements
and
innovation
in
quality,
access
and
value.
Reservation
might
therefore
contribute
to
an
effective
legal
profession,
but
effective
competition
among
those
within
the
restricted
market
will
still
also
be
needed
in
order
to
assure
quality,
access
and
value
to
consumers.
1.8
Increase
public
understanding
of
the
citizen’s
legal
rights
and
duties
Lack
of
information
for
consumers,
and
uneven
distribution
of
information
(or
asymmetry)
as
between
provider
and
client,
offer
particular
challenges
to
the
legal
services
market
and
approaches
to
regulation
(see
further
Appendix
2,
paragraph
2.2).
They
also
present
difficulties
in
improving
access
to
justice
(see
paragraph
1.4
above)
as
well
as
protecting
and
promoting
the
consumer
interest
(see
paragraph
1.5
above).
If
citizens
are
aware
of
their
legal
rights
and
duties,
and
of
how
to
find,
instruct
and
use
providers
of
legal
advice
and
services,
there
is
likely
to
be
greater
consumer
confidence
in
accessing
legal
services,
and
fewer
conflicts
and
complaints
arising
between
clients
and
providers;
this
should
also
encourage
suppliers
to
provide
higher
quality,
and
improved
access
and
value
(Legal
Services
Board
2010:
13).
However,
there
is
a
mountain
to
climb.
Research
has
shown
that
one-‐third
of
the
British
population
has
experienced
a
civil
justice
problem,
but
many
of
those
people
take
no
action
towards
a
resolution.
It
has
also
been
estimated
that
approximately
one
million
such
issues
go
unresolved
each
year,
resulting
in
widespread
legal
exclusion
amongst
those
affected.
Such
exclusion
results
from
uninformed
members
of
the
public
not
knowing
where
to
turn
for
help,
or
thinking
that
nothing
can
be
done
about
their
situation
(PLEAS
2007:
7).
The
fulfilment
of
this
regulatory
objective
therefore
largely
hangs
on
effective
public
legal
education
(PLE),
which
has
been
defined
as
follows
(PLEAS
2007:
9):
PLE
provides
people
with
awareness,
knowledge
and
understanding
of
rights
and
legal
issues,
together
with
the
confidence
and
skills
they
need
to
deal
with
disputes
and
gain
access
to
justice.
Equally
important,
it
helps
people
recognise
when
they
may
need
support,
what
sort
of
advice
is
available,
and
how
to
go
about
getting
it.
PLE
has
a
further
key
role
in
helping
citizens
to
better
understand
everyday
life
issues,
making
better
decisions
and
anticipating
and
avoiding
problems.
PLE
focuses
on
the
early
stages
of
a
legal
issue.
Ideally,
the
public
will
be
helped
to
avoid
legal
problems,
but
if
issues
do
arise
PLE
will
also
aid
more
timely
and
effective
responses23.
It
is
important
to
note
that
PLE
does
not
aim
to
teach
people
everything
they
might
ever
need
to
know
regarding
the
law.
The
Public
Legal
Education
Network
explains
that
in
addition
to
a
basic
knowledge
about
rights
and
responsibilities
in
everyday
situations,
a
vital
part
of
PLE
is
informing
people
about
where
to
go
to
find
more
information
and
to
seek
further
help
(PLENet
2009:
4).
It
seems
to
us
that
tackling
this
regulatory
objective
will
have
to
be
a
multi-‐faceted
approach,
which
could
start
in
secondary
education,
and
extend
to
public
campaigns
mounted
and
funded
by
regulators
as
well
as
to
local
and
personal
‘education’
carried
out
by
providers
in
their
everyday
23
See
http://www.plenet.org.uk/what-‐is-‐public-‐legal-‐education/.
interactions
with
actual
and
potential
clients.
The
LSB,
through
its
oversight
role
and
dealings
with
approved
regulators
and
licensing
authorities,
could
encourage
or
impose
requirements
to
carry
out
activities
which
contribute
to
greater
public
understanding.
However,
in
the
context
of
this
paper,
the
role
of
reservation
in
securing
this
regulatory
objective
seems
to
us
to
be
quite
specific.
The
question
is
whether,
as
part
of
the
regulation
of
authorised
persons
(that
is,
those
who
provide
reserved
legal
activities),
there
should
be
any
mandatory
requirement
on
those
persons
to
undertake
any
activities
which
fulfil
the
objective.
In
our
view,
there
should
not.
The
general
professional
duty
to
act
in
the
client’s
best
interests
(cf.
paragraph
1.9
below)
should
not
be
extended
to
include
a
general
obligation
on
providers
to
enlighten
each
client
about
broader
legal
rights
and
duties
beyond
those
relevant
to
the
current
matter
on
which
they
are
instructed.
Further,
although
there
might
be
some
competitive
advantage
to
be
derived
by
providers
who
undertake
a
broader
‘educational’
role
in
the
pursuit
of
new
business
or
as
part
of
their
contribution
to
the
local
community,
to
require
providers
to
do
so
would
be
to
add
costs
to
the
supply
of
legal
advice
and
representation
that
would
create
new
(and
in
our
view
unjustifiable)
barriers
to
entry.
Providers
should
be
allowed
to
make
this
judgement
for
themselves
in
the
context
of
their
own
marketplace
and
of
their
own
business
and
competitive
interests.
24
We
note
with
interest
that
there
is
no
explicit
professional
principle
requiring
authorised
persons
to
act
in
the
public
interest,
either
in
the
Act
or,
for
example,
in
the
SRA
Code
of
Conduct
(in
contrast
to
the
Code
of
Ethics
issued
by
the
international
Federation
of
Accountants
which
states
that
“A
distinguishing
mark
of
the
accountancy
profession
is
its
acceptance
of
the
responsibility
to
act
in
the
public
interest”).
25
Available
at
http://www.sra.org.uk/solicitors/code-‐of-‐conduct.page.
26
Available
at
http://www.barstandardsboard.org.uk/assets/documents/8th%20Edition%20of%20the%20Code%20of%20Conduct%2
0-‐%206%20October%202010.pdf.
27
Available
at
http://www.ipreg.org.uk/information/code_conduct.php
.
28
Available
at
http://www.ilex.org.uk/pdf/IPS%20Code%20of%20Conduct%20May%2010%20final.pdf.
29
Available
at
http://www.facultyoffice.org.uk/Notaries4.30.html.
30
Available
at
http://www.conveyancer.org.uk/Rules.asp.
31
Available
at
http://www.alcd.org.uk/sites/default/files/CODE%20OF%20CONDUCT_0.pdf.
Authorised
persons
therefore
have
a
dual
obligation:
a
legal
requirement
to
comply
with
the
Act’s
professional
principles
as
well
as
those
set
by
their
professional
regulator.
The
Legal
Services
Act
places
a
duty
(in
section
176)
on
authorised
persons
to
comply
with
their
regulator’s
arrangements,
and
prohibits
(by
section
90)
any
non-‐authorised
persons
connected
to
a
licensed
body
(that
is,
an
ABS
licensed
to
deliver
one
or
more
of
the
reserved
activities)
from
interfering
with
such
compliance
by
either
that
licensed
body
or
an
authorised
person.
Failure
to
adhere
to
the
professional
principles
will
be
dealt
with
by
an
approved
regulator
or
by
the
Legal
Ombudsman.
Complaints
about
inadequate
service,
such
as
unreasonable
delays,
breaches
of
confidentiality,
and
failing
to
keep
the
client
informed
or
respond
to
telephone
calls
and
e-‐mails,
will
be
considered
by
the
Legal
Ombudsman:
some
of
these
will
reflect
the
absence
of
proper
standards
of
work
or
failure
to
act
in
the
client’s
best
interests.
The
Ombudsman’s
jurisdiction
only
extends
to
authorised
persons
(though
it
can
include
complaints
about
their
actions
in
relation
to
non-‐reserved
activities).
Instances
of
professional
misconduct,
such
as
conflicts
of
interest,
or
improper
handling
of
client
money,
are
matters
for
the
relevant
regulatory
body32.
Eventual
penalties
depend
on
the
gravity
of
the
misdemeanour
and
range
from
a
reprimand,
through
intervention
in
a
practice,
to
being
struck
off
the
relevant
register
of
authorised
practitioners
or
firms,
either
temporarily
or
permanently.
These
procedures
extend
to
all
the
rules
within
each
code
of
conduct,
not
just
those
based
on
the
Act’s
professional
principles.
Nevertheless,
it
is
clear
that
the
regulators
will
take
the
necessary
action
if
one
of
those
principles
is
contravened,
and
so
play
a
vital
role
in
ensuring
observance
of
this
regulatory
objective.
The
professional
principles
(and
jurisdiction
over
any
failure
to
adhere
to
them)
only
apply
where
there
is
an
authorised
person,
that
is,
an
individual
or
an
ABS
authorised
in
respect
of
one
or
more
reserved
activity.
The
notion
of
reservation
is
therefore
critical
to
the
achievement
of
this
regulatory
objective.
The
list
and
extent
of
the
reserved
legal
activities
at
any
given
time
is
consequently
of
more
than
passing
interest.
32
See
http://www.legalservicesboard.org.uk/about_us/office_for_legal_complaints.
33
See
Hansard
Official
Report,
HL
Deb
9
January
2007
c.
129,
Baroness
Ashton
of
Upholland:
“The
Joint
Committee
recommended
that
the
Explanatory
Notes
should
make
it
explicit
that
the
objectives
were
not
listed
in
order
of
importance.
We
agreed
with
that,
and
the
Explanatory
Notes
reflect
it.”
Paragraph
28
of
the
Explanatory
Notes
states:
“The
Act
does
not
rank
these
objectives
and
principles
in
order
of
importance.
The
Legal
Services
Board,
the
Office
for
Legal
Complaints
and
the
approved
regulators
will
be
best
placed
to
consider
how
competing
objectives
are
to
be
balanced
in
a
particular
instance.”
34
LSI
(2010a),
para
5.7.
We
would
therefore
now
advance
the
view
that
the
regulatory
objectives
could
–
despite
the
Minister’s
statement
to
the
contrary
–
and,
furthermore,
should
as
an
expression
of
policy,
be
divided
into
primary
and
subordinate
objectives.
In
our
judgement,
the
primary
objectives
are:
protecting
and
promoting
the
public
interest,
supporting
the
constitutional
principle
of
the
rule
of
law,
improving
access
to
justice,
and
encouraging
independent,
strong
and
effective
legal
advice
and
representation35.
Although
not
explicitly
stated
as
a
regulatory
objective,
we
believe
that
it
is
implicit
in
the
public
interest,
and
in
access
to
justice,
that
the
effective
administration
of
justice
should
also
be
promoted
and
protected.
In
our
view,
all
of
these
elements
are
in
truth
manifestations
of
the
public
interest
as
defined
in
paragraph
1.2
above,
hence
our
view
that
section
1(1)(a)
should
be
the
overriding
primary
regulatory
objective.
The
rule
of
law
is
key
to
the
security
and
well-‐being
of
society,
and
access
to
justice
is
a
necessary
platform
to
being
able
to
assert
one’s
rights
in
accordance
with
the
rule
of
law.
Maintaining
the
rule
of
law
also
means
that
there
should
be
an
effective
system
of
administration
of
justice,
and
that
strong
and
independent
legal
advice
and
representation
should
exist
to
hold
an
over-‐bearing
State,
or
other
powerful
agents,
accountable
within
the
law.
The
remaining
regulatory
objectives
are
unquestionably
important.
We
believe
that
they
contribute
to
the
effectiveness
of
the
primary
objectives.
In
this
sense,
we
might
say
that
it
is
in
the
public
interest
that
they
are
promoted
but
that
they
are
not,
in
themselves,
manifestations
of
the
public
interest
in
the
way
that
the
primary
objectives
are.
From
this
standpoint,
we
would
then
suggest
that
some
apparent
conflicts
between
different
regulatory
objectives
could
be
resolved
by
principle.
For
instance,
we
would
suggest
that
where
there
is
a
conflict
between
promoting
the
public
interest
and
promoting
the
interests
of
consumers,
the
former
as
a
primary
objective
should
take
precedence
over
the
latter
as
a
subordinate
objective.
Similarly,
promoting
competition
in
the
provision
of
legal
services
(as
a
secondary
objective)
should
not
compromise
the
public
interest
primary
objectives.
Perhaps
more
contentiously,
we
regard
‘encouraging
...
[a]
...
diverse
...
legal
profession’
as
a
desirable
secondary
objective36
not
to
be
engineered
at
the
expense
of
independent,
strong
and
effective
(and
non-‐discriminatory37)
provision
of
legal
services
as
a
primary
objective.
This
conclusion
allows
the
balancing
act
referred
to
in
the
Explanatory
Notes
(cf.
footnote
33)
to
be
carried
out
on
a
principled
basis.
It
is
this
analysis
which
we
would
suggest
supports
our
conclusions
in
paragraphs
1.6
and
1.7
above
that
reservation
is
justified
to
achieve
the
primary
regulatory
objectives,
and
that
this
outweighs
arguments
in
favour
of
an
absence
of
regulation
which
is
intended
to
achieve
the
secondary
objective
of
competition.
It
is
also
why
we
suggest
in
paragraph
1.7
above
that
(in
our
view)
diversity
in
the
legal
profession,
as
a
secondary
objective,
should
not
be
sought
at
the
expense
of
reservation
to
secure
the
primary
objectives
of
independence,
strength
and
effectiveness
in
the
profession.
35
This
last
part
of
the
sentence
is
deliberately
not
expressed
in
the
language
of
the
Act:
we
have
omitted
diversity
(see
later
in
the
discussion
of
subordinate
objectives).
Further,
we
do
not
confine
the
public
interest
in
this
objective
to
the
legal
profession
but
rather
attach
it
to
the
broader
provision
of
legal
services
by
those
appropriately
qualified
or
licensed,
whether
members
of
the
legal
professions
or
not.
Clementi
also
thought
that
“a
strong
and
effective
legal
profession
…
would
help
to
ensure
access
to
justice,
the
maintenance
of
a
healthy
supplier
base
for
publicly
funded
work
and
continued
support
for
pro
bono
initiatives,
thereby
serving
the
public
interest”
(2004:
17,
emphasis
supplied).
36
Without
wishing
to
read
too
much
into
the
point,
we
reiterate
that
diversity
was
not
part
of
Sir
David
Clementi’s
original
conception
of
this
regulatory
objective:
cf.
footnote
22
above.
37
Those
who
provide
legal
services
are
still
bound
by
the
general
laws
of
non-‐discrimination.
To
our
way
of
thinking,
positive
discrimination
to
achieve
diversity
is
still
discrimination.
38
The
‘matrix’
of
approved
regulators
and
the
reserved
legal
activities
that
they
are
authorised
to
regulate
can
be
found
in
the
Appendix
to
our
first
report
(LSI
2010a).
39
Even
then,
additional
accreditation
might
be
required
–
as,
say,
in
the
case
of
higher
rights
of
audience.
40
At
least
in
the
absence
of
adopting
a
much
wider
approach
such
as
that
in
the
United
States
where
the
prohibition
of
those
who
are
not
suitably
qualified
from
engaging
in
the
‘unauthorised
practice
of
law’
effectively
produces
the
overlap
of
legal
advice
and
representation
with
those
who
are
legally
qualified.
However,
given
that
the
holders
of
other
titles
have
equivalent
rights
to
conduct
reserved
legal
activities,
we
consider
that
there
is
no
justification
for
confining
these
‘holding
out’
offences
to
barristers
and
solicitors.
If
there
is
a
potential
public
or
consumer
harm
arising
from
the
pretence
to
be
qualified
when
one
is
not,
it
should
logically
apply
to
all
who
might
claim
to
be
authorised
to
carry
out
certain
activities
when
they
are
not.
We
note
that
section
17(1)
already
makes
it
an
offence
“wilfully
to
pretend
to
be
entitled
to
carry
on
…
a
reserved
legal
activity
when
…
not
so
entitled”
and
“to
take
or
use
any
name,
title
or
description”
with
the
intention
of
falsely
implying
that
one
is
entitled
to
carry
out
a
reserved
legal
activity41.
However,
the
current
offence
of
pretending
to
be
a
barrister
or
solicitor
is
not
confined
to
reserved
activities,
and
we
believe
that
the
same
should
hold
for
all
individuals
who
are
authorised
persons
and
for
regulated
entities42.
In
summary,
therefore,
these
provisions
will
play
some
part
in
protecting
titles
and
status
by
deterring
those
who
wish
to
take
advantage
of
the
regulatory
gap
as
a
non-‐authorised
person
offering
non-‐reserved
activities
to
the
public
from
falsely
claiming
any
professional
status
in
their
bid
to
attract
custom.
It
may
be
that
prosecutions
for
these
offences
are
rare,
perhaps
questioning
their
utility;
however,
the
deterrent
effect
of
the
existence
of
such
offences
(which
are
consistent
with
other
regulated
approaches
to
consumer
protection)
should
not
be
underestimated.
The
protected
title
may
also
usually
be
legitimately
used
as
part
of
the
name
of
the
firm.
In
some
firms,
there
might
be
only
one
authorised
person
as
principal
supervising
a
great
number
of
employees.
The
reserved
legal
activities
are
supervised
by
a
solicitor
who
is
suitably
qualified,
but
the
work
is
actually
undertaken
by
employees
who
are
not
authorised
persons
43.
However,
such
a
firm
is
allowed
to
describe
itself
as
‘[Principal]
&
Co,
Solicitors’,
implying
that
the
firm
is
in
some
way
larger
than
in
fact
it
is,
and
that
there
is
more
than
one
solicitor
when
there
is
not.
This
does
not
seem
consistent
with
more
general
approaches
to
the
use
of
misleading
advertising
or
descriptions.
With
the
advent
of
entity
regulation
and
ABS
licences,
the
use
of
a
professional
title
as
part
of
a
business
name
would
seem
to
warrant
some
review.
41
We
wonder
whether
it
might
be
argued
that
the
use
of
the
description
‘lawyer’,
while
not
a
protected
title,
if
used
by
someone
who
holds
no
legal
qualification
or
authorisation
to
practise
a
reserved
activity
would
be
caught
by
s.
17.
42
Interestingly,
s.
74
of
the
Legal
Services
(Scotland)
Act
2010
specifically
makes
it
an
offence
to
pretend
to
be
a
licensed
legal
services
provider
(the
Scottish
equivalent
of
an
ABS):
there
is
no
offence
under
the
2007
Act
of
pretending
to
be
a
licensed
body
(ABS),
or
otherwise
in
respect
of
recognised
bodies.
43
The
provisions
of
s.
15
of
the
Act
apply
to
employees,
from
which
it
would
seem
that,
where
reserved
legal
activities
are
provided
to
the
public
or
a
section
of
the
public
(whether
for
profit
or
not),
both
the
principal
or
firm
and
the
employee
need
to
be
authorised
to
“carry
out”
the
activities:
where
work
is
done
by
employees
under
supervision,
presumably
for
the
purposes
of
the
Act
it
is
carried
out
in
the
name
and
with
the
authority
of
the
principal
or
firm.
44
Cf.
footnote
38
above.
between
reserved
and
non-‐reserved
legal
activities
might
dilute
this
deterrent
power.
An
individual
or
entity
that
is
no
longer
allowed
(and
therefore
no
longer
regulated)
to
deliver
a
reserved
activity
(and
any
non-‐reserved
activities
that
are
consequentially
regulated
as
part
of
the
professional
or
licensed
status)
can
still,
of
course,
set
up
a
new
business
delivering
only
non-‐reserved
legal
activities
outside
the
framework
of
regulation.
Unless,
therefore,
the
reserved
legal
activities
cover
the
most
important
life-‐events
of
consumers,
and
therefore
bring
them
within
the
protection
of
regulation,
the
effects
of
this
regulatory
gap
could
still
be
acute
in
terms
of
potentially
exposing
consumers
to
advice
from
those
who
were
not
considered
fit
to
practise
in
other
areas
of
regulated
legal
activity.
2.3.1
Individuals
Where
an
individual
or
an
entity
carries
out
reserved
legal
activities,
the
effect
of
the
Legal
Services
Act
is
to
apply
regulation
to
them
in
both
their
individual
and
entity
capacities.
Individuals
who
are
authorised
to
conduct
a
reserved
activity
are
subject
to
the
obligation
in
section
176(1)
to
comply
with
their
authorising
body’s
regulatory
arrangements45.
This
will
include
the
appropriate
codes
of
conduct
(cf.
paragraph
1.9
above).
Intriguingly,
the
Act
imposes
no
universal
duty
on
authorised
persons
to
comply
with
the
professional
principles
in
section
1(3),
although
it
does
impose
such
a
general
duty
if
they
are
managers
or
employees
of
an
ABS
(Schedule
11,
paragraph
17(2)(b)).
Individuals
who
are
not
themselves
authorised
persons,
but
who
are
managers
or
employees
of
an
ABS,
or
have
an
interest
(including
an
indirect
or
material
interest)
in
it,
are
also
subject
to
regulation
as
individuals.
By
section
90,
they
must
not
do
anything
which
causes
or
substantially
contributes
to
a
breach
by
either
the
ABS
itself,
or
any
authorised
person
who
is
a
manager
or
employee
of
it,
of
the
duties
imposed
by
section
176
on
the
entity
or
those
authorised
individuals.
These
regulatory
obligations
on
individuals
arise
by
virtue
of
a
reserved
legal
activity
being
carried
out.
Beyond
this,
individuals
who
carry
out
a
non-‐reserved
activity
may
become
subject
to
regulation:
(a) as
a
consequence
of
becoming
regulated
as
an
authorised
person,
that
is,
by
their
own
authorising
body
imposing
requirements
on
them
in
relation
to
all
activities
carried
out
by
them;
(b) by
submitting
to
an
additional
process
of
accreditation
that
requires
certain
conditions
to
be
met
or
maintained
in
order
to
attain
or
retain
accredited
status;
or
(c) by
becoming
a
member
of
an
organisation
(such
as
the
Society
of
Will
Writers
or
the
Institute
of
Paralegals)
that
establishes
and
enforces
its
own
self-‐regulatory
framework
but
that
presently
has
no
regulatory
standing
and
therefore
no
binding
powers
to
sanction
its
members,
other
than
by
withdrawing
rights
of
membership46.
Any
of
these
circumstances
will
add
to
consumer
protection,
but
is
not
required
by
statute
or
the
current
regulatory
framework
(although
where
they
are
imposed
by
approved
regulators,
the
requirements
in
(a)
or
(b)
will,
of
course,
be
elements
of
its
package
of
regulatory
arrangements
that
have
been
approved
as
part
of
its
designation
as
an
approved
regulator).
45
Regulatory
arrangements
are
defined
in
s.
21
to
include
qualification,
authorisation,
practice,
conduct,
discipline,
indemnity
and
compensation.
46
As
with
professional
self-‐regulation
before
the
Legal
Services
Act,
and
the
separation
of
regulatory
and
representative
functions,
there
is
also
no
guarantee
that
such
voluntary
schemes
of
self-‐regulation
will
not
be
directed
at
serving
the
interests
of
members
rather
than
those
of
consumers,
and
will
not
contain
rules
which
restrict
the
ability
of
members
and
their
firms
to
structure
and
access
capital
as
they
might
wish
or
pursue
innovation
in
the
delivery
of
their
services.
Approval
of
voluntary
rules
by
the
Office
of
Fair
Trading
might
go
some
way
to
reducing
this
risk;
but
the
fundamental
absence
of
regulatory
force
and
binding
and
meaningful
sanctions
leaves
these
rules
some
way
behind
formal
regulation.
2.3.2
Entities
Entity
regulation
is
a
new
feature
of
the
regulatory
landscape
following
the
Legal
Services
Act.
Of
particular
interest
is
the
process
of
bringing
new
providers
as
entities
into
regulation
through
the
issue
of
an
ABS
licence.
Thus,
the
Heads
of
Legal
Practice
(HoLP)
and
of
Finance
&
Administration
(HoFA)
of
an
ABS47
are
required
to
ensure
that
the
licensed
body
complies
with
the
terms
of
its
licence
and
to
report
to
the
licensing
authority
any
failure
by
the
ABS
to
do
so
(sections
91(1)
and
92);
the
ABS
must
also
have
suitable
arrangements
in
place
to
ensure
that
it
complies
with
the
duty
on
regulated
persons
to
comply
with
their
authorising
body’s
regulatory
arrangements48,
and
that
it
maintains
the
professional
principles
in
section
1(3)
(paragraph
17(2)
of
Schedule
11).
It
must
also
ensure
that
it
has
suitable
arrangements
in
place
to
ensure
that
its
managers
and
employees
who
are
authorised
persons
comply
with
their
individual
duty
to
maintain
the
professional
principles
as
well
as
their
duty
under
section
176
to
follow
their
own
regulator’s
rules,
and
that
its
non-‐authorised
persons
comply
with
their
individual
duty
under
section
90
not
to
cause
or
substantially
contribute
to
a
breach
of
the
section
176
duties
on
authorised
persons
in
the
ABS
(paragraph
17(2)
and
(4)49).
In
addition
to
the
statutory
licensing
framework,
entity
regulation
by,
say,
the
Solicitors
Regulation
Authority
(SRA)
or
the
Council
for
Licensed
Conveyancers
of
‘recognised
bodies’
is
also
in
place.
As
with
individuals,
this
brings
within
the
approved
regulators’
reach
all
of
the
activities
of
these
bodies,
whether
reserved
or
not
(which
the
SRA
maintains
through
the
separate
businesses
rule,
and
intends
to
apply
to
ABSs
–
with
some
recent
support
from
the
Legal
Services
Consumer
Panel50).
We
have
considered
the
proposition
that
regulation
through
entities
alone
might
be
a
preferable
approach
in
some
circumstances.
However,
given
that
entities
can
only
act
through
the
agency
of
human
beings,
the
status
of
those
individuals
will
always
remain
critical.
Even
where
an
ABS
as
a
licensed
body
has
been
authorised
in
respect
of
one
or
more
reserved
legal
activities,
the
Act
nevertheless
requires
those
activities
to
be
carried
on
only
through
someone
who
is
appropriately
entitled
(Schedule
11,
paragraph
16).
It
seems
to
us
that
regulation
will
always
be
achieved
through
a
mixture
at
both
individual
and
entity
levels.
47
The
extension
of
these
positions
to
all
entities
regulated
by
the
Solicitors
Regulation
Authority
in
the
form
of
the
Compliance
Officer
for
Legal
Practice
and
the
Compliance
Officer
for
Finance
&
Administration
is
to
be
welcomed,
though
this
choice
of
titles
signals
in
our
view
a
significant
–
and
regrettable
–
dilution
of
the
importance
and
status
of
the
role.
48
Cf.
footnote
45
above.
49
See
also
Rule
8
of
the
Draft
SRA
Authorisation
Rules
for
Legal
services
Bodies
and
Licensable
Bodies.
50
See
Consultation
response:
SRA:
Architecture
of
change
Part
2
–
the
new
SRA
handbook,
paras
11
and
12.
51
Sadly,
not
all,
otherwise
disciplinary
action,
sanctions
and
striking
off
would
never
happen.
encourage
the
behaviour
that
was
formerly
prohibited,
given
the
deep-‐seated
attitudes,
beliefs
and
behaviours
that
accrue
over
time
and
within
professional
contexts52.
What
begins
as
a
set
of
rules
and
code
of
conduct
to
guide
the
actions
of
individuals
within
a
formal
regulatory
framework
can
therefore
evolve
into
a
strong
sense
of
community
with
common
values
and
behaviours
that
are
regarded
as
acceptable
or
unacceptable
within
that
community.
Attitudes
and
behaviours
are
then
shaped
not
so
much
by
explicit
formal
regulation
as
by
implicit
norms.
Much
of
the
negative
reaction
of
lawyers
to
the
involvement
of
non-‐lawyers
in
the
ownership
of
law
firms
or
the
delivery
of
legal
services
could
therefore
be
interpreted
as
driven
by
the
belief
that
these
implicit
norms
will
be
missing
and
that
‘unethical’
behaviour
will
be
more
likely
and
more
prevalent
(even
though
the
explicit
requirements
of
the
Act
and
the
licensing
framework
are
structured
to
replicate
this
professional
ethos).
2.4
Regulation
of
activity
Reservation
is
but
one
form
of
regulation
by
activity.
For
example,
as
we
identified
in
our
first
paper
(LSI
2010a,
Section
3),
there
are
some
presently
regulated
but
not
reserved
activities,
such
as
immigration
advice
and
services,
claims
management
services,
and
insolvency
practice.
In
addition,
as
with
individuals
(cf.
paragraph
2.3.1
above),
there
are
circumstances
where
otherwise
non-‐
regulated
activities
become
subject
to
regulation
because
individuals
or
entities
comply
with
the
requirements
of
a
regulatory
organisation
or
accreditation
process.
This
would
include
the
regulation
of
non-‐reserved
activities
by
an
approved
regulator
or
a
licensing
authority,
as
well
as
by
voluntary
self-‐regulating
bodies.
There
are
also
other
sources
of
regulation
that
apply
to
the
activities
of
legal
services
providers.
These
are
often
part
of
the
general
law
which
apply
to
a
number
of
businesses
(such
as
competition
law,
‘cooling-‐off’
periods
in
respect
of
pressure
(door-‐step)
selling,
misleading
advertising,
and
unfair
contract
terms).
Our
focus
in
this
paragraph
is
primarily
on
reserved
legal
activities
rather
than
these
other
forms
of
activity
regulation.
We
consider
in
Section
3
below
the
specific
legal
activities
that
we
suggest
should,
in
the
public
interest,
be
reserved
to
authorised
persons.
This
paragraph
is
concerned
with
the
more
generic
issues
and
consequences
of
reservation.
We
must
also
emphasise
that,
in
our
view,
where
reservation
can
be
justified,
it
does
not
follow
that
authorisation
should
only
be
granted
to
those
who
are
legally
qualified.
Clearly,
if
the
activity
is
sufficiently
important
to
warrant
reservation,
authorisation
should
only
be
granted
to
those
who
are
appropriately
trained
and
accredited.
But
just
as
authorisation
has
recently
been
granted
to
some
accountants
to
carry
out
probate
activities
(cf.
LSI
2010a,
paragraphs
2.5.6
and
2.5.7),
so
narrow
authorisation
could
in
the
future
be
granted
to
those
who
are
not
necessarily
more
generally
qualified
as
lawyers.
Indeed,
it
is
a
premise
of
the
ABS
licensing
framework
that
these
entities,
not
owned
by
lawyers,
might
in
the
future
be
licensed
to
provide
one
or
more
reserved
activities.
Thus,
whereas
historically
there
might
have
been
a
factual
correlation
between
lawyers
and
legal
services
(and
reserved
legal
activities
in
particular),
that
is
no
longer
the
case.
52
The
nature
of
this
pervasive,
and
sometimes
distorting,
‘normative
environment’
is
considered
in
detail
in
Mayson
(2007),
ch.5.
The
‘mix’
of
an
authorised
person
with
a
reserved
activity
that
we
have
referred
to
earlier
means
that
the
appropriate
consideration
in
relation
to
reserved
legal
activities
is
not
whether
they
should
be
reserved
to
lawyers,
but
rather
who
should
be
authorised
to
carry
them
out.
From
this
perspective,
the
expression
‘authorised
person’
is
both
apposite
and
correct,
and
the
shorthand
use
of
‘lawyer’
for
this
might
well
be
wrong.
We
now
consider
each
of
the
three
foundation
issues
identified
at
the
beginning
of
this
paragraph.
53
Lord
Hunt
of
Wirral,
in
his
final
report,
quoted
with
approval
a
similar
formulation
from
the
Institute’s
submission
(LSI
2009:
2-‐3)
to
his
review:
see
Hunt
(2009),
pages
25-‐26.
54
In
our
view,
the
effective
administration
of
justice
is
necessary
to
maintaining
the
rule
of
law
and
securing
access
to
justice.
It
is
therefore
a
public
good
in
its
own
right,
and
is
separate
from
what
might
be
regarded
as
a
broader
consumer
interest
in
cost-‐efficient
administration.
Efficiency
(as
represented
by
good
quality
and
value
for
money)
is
certainly
necessary
for
effectiveness,
and
can
be
achieved
by
providers
other
than
lawyers;
but
effectiveness
is
not
simply
a
consumer
interest
or
consumer
protection
issue.
Genn
makes
the
point
(2010:
16-‐24)
that
civil
justice
is
a
public
good.
representation.
These
are
specifically
‘legal’
outcomes
of
the
regulatory
objectives.
They
are
founded
on
a
view
of
the
law
as
an
abstract
set
of
rules
and
a
system
for
upholding
them.
However,
beyond
this,
society
also
needs
to
encourage
reliability
and
stability
in
social
relationships
(which
are
central
to
good
social
order
and
commerce).
We
would
therefore
go
further
than
legal
outcomes,
and
suggest
that
this
first
goal
should
also
extend
to
promoting
and
protecting
the
UK
and
its
justice
system
as
a
legal
forum,
as
well
as
to
advancing
the
commercial
interests
of
‘UK
plc’.
There
is
much
evidence
that,
in
a
global
marketplace,
the
UK
is
regarded
as
a
‘safe’
place
to
do
business,
and
English
law
is
often
the
governing
law
of
choice
in
multinational
commercial
transactions
(see
further
Mayson,
2013).
Genn
expressed
this
point
very
well
in
the
following
paragraph
(2010:
3-‐4):
the
machinery
of
civil
justice
sustains
social
stability
and
economic
growth
by
providing
public
processes
for
peacefully
resolving
civil
disputes,
for
enforcing
legal
rights
and
for
protecting
private
and
personal
rights.
The
civil
justice
system
provides
the
legal
architecture
for
the
economy
to
operate
effectively,
for
agreements
to
be
honoured
and
for
the
power
of
government
to
be
scrutinised
and
limited.
The
civil
law
maps
out
the
boundaries
of
social
and
economic
behaviour,
while
the
civil
courts
resolve
disputes
when
they
arise.
In
this
way,
the
civil
courts
publicly
reaffirm
norms
and
behavioural
standards
for
private
citizens,
businesses
and
public
bodies.
Bargains
between
strangers
are
possible
because
rights
and
responsibilities
are
determined
by
a
settled
legal
framework
and
are
enforceable
by
the
courts
if
promises
are
not
kept.
Confidence
in
the
English
legal
system
is
therefore
critical
to
our
continuing
social
stability,
global
competitiveness,
economic
success
and
tax
revenues.
In
part,
this
confidence
stems
from
the
UK’s
adherence
to
the
rule
of
law,
as
well
as
from
its
reputation
for
an
independent
and
impartial
judiciary
and
the
standing
of
the
professional
qualifications
of
its
lawyers.
In
part,
it
is
why
we
need
free
movement
of
and
access
to
financial
and
human
capital
(itself
a
public
interest
issue:
see
paragraph
1.2
above)
rather
than
professional
regulations
and
norms
that
prevent
or
discourage
such
movement55.
In
relation
to
the
second
goal,
we
do
not
advance
consumer
protection
as
a
generic
justification
for
reservation.
In
our
view,
reservation
is
in
the
public
and
consumer
interest
in
circumstances
where,
as
a
result
of
legal
advice
or
representation,
detriment
to
the
consumer’s
(a)
liberty,
(b)
physical,
mental,
emotional
or
social
well-‐being56,
or
(c)
property,
could
arise,
and
for
which
compensation
after
the
event
would
not
represent
an
adequate
or
reasonable
remedy.
These
matters
are
fundamental
to
someone’s
ability
to
participate
fully
in
society
as
an
equal
citizen
(cf.
paragraph
1.2
above).
The
issue
for
both
goals,
in
essence,
becomes
for
us
one
of
a
distinction
between
‘assurance’
and
‘insurance’.
Although
compensation
for
imprisonment
following
a
wrongful
conviction
is
available,
if
that
conviction
is
a
consequence
of
the
incompetence
or
poor
service
of
the
client’s
advocate,
after-‐
the-‐event
compensation
is
poor
recompense
for
a
situation
that
could
have
been
avoided
by
more
competent
or
better
representation
from
the
client’s
lawyer.
Monetary
compensation
cannot
make
good
the
damage
done
to
a
person’s
well-‐being,
reputation
and
personal
life
by
time
spent
unnecessarily
imprisoned.
In
this
and
other
circumstances,
regulating
to
‘assure’
competence
before
the
event
is
to
us
preferable
to
regulating
only
for
complaint
or
compensation
after
it.
55
In
our
view,
the
‘confusion’
of
ownership
and
management
of
law
firms
(along
with
delivery
of
legal
services)
in
the
hands
of
lawyers
has
historically
inhibited
client
choice,
innovation
and
efficiency.
56
Our
reference
to
the
physical,
mental,
emotional
or
social
well-‐being
of
the
consumer
is
intended
to
capture
circumstances
in
which
the
consumer
is
subject
to
actual
or
threatened
physical
violence,
or
suffers
from
mental
illness
or
disability,
or
is
going
through
some
disturbing
or
traumatic
event,
and
these
conditions
are
the
subject
of
the
advice
or
representation.
We
do
not
intend
to
refer
to
consumers’
physical,
mental
or
emotional
well-‐being
as
a
consequence
of
their
reactions
to
the
actions
or
decisions
of
their
legal
advisers!
This
is
a
particular
dimension
of
‘credence’
goods
and
services,
where
the
consumer
is
rarely
in
a
position
to
assess
quality
or
utility
until
after
consumption
(see
further,
Appendix
2,
paragraph
2.2.2
below).
Of
course,
before-‐the-‐event
‘assurance’
will
never
eliminate
all
poor
service
or
incompetence,
and
so
both
‘assurance’
and
‘insurance’
might
be
required.
Our
concern
here
is
to
identify
circumstances
in
which
reliance
on
after-‐the-‐event
‘insurance’
should
not
be
the
only
or
principal
response
of
a
‘decent’
society.
Where
reservation
is
justified
in
the
public
interest,
we
would
not
restrict
approved
regulators
or
reserved
legal
activities
to
regulate
only
those
who
hold
broader
legal
qualifications.
We
see
no
reason
in
principle
why,
as
now,
the
LSB
should
not
approve
a
new
regulator
with
powers
only
in
respect
of
one
reserved
legal
activity.
The
issue
of
whether
a
broader
legal
understanding
or
experience
is
necessary57
in
the
context
of
that
activity
is
one
to
be
weighed
in
the
Board’s
assessment
of
whether
to
recommend
approval
of
the
new
regulator
(cf.
paragraph
13
of
Schedule
4).
Nor
would
we
simply
attach
the
authority
to
conduct
a
reserved
legal
activity
to
a
professional
qualification.
We
would
suggest
that
the
specific
right
to
practise
such
an
activity
is
granted
as
a
separate
authority
in
relation
to
each
activity
(say,
by
way
of
one
or
more
endorsements
to
a
practising
certificate)
when
an
approved
regulator
is
satisfied
that
the
practitioner’s
competence
has
been
suitably
demonstrated
and
is
manifestly
current58.
Further,
we
would
suggest
that,
where
the
public
interest
justifies
reservation,
any
issue
taken
to
an
adviser
by
a
client
that
involves
an
activity
that
is
reserved
to
an
authorised
person,
should
require
that
the
adviser’s
terms
of
business
or
letter
of
retainer
state
that
this
element
of
the
client’s
instructions
must
be
performed
by
an
authorised
person
and
give
the
name
and
accreditation
of
the
authorised
person(s)
who
will
be
responsible
to
the
client
for
that
element
of
the
work
(in
many
firms,
this
could
fall
to
the
person
who
designated
as
the
client
partner
or
matter
partner59).
57
This
must
be
necessary,
rather
than
desirable:
one
could
always
argue
that
it
is
desirable
and
sensible
(and
even
rational)
for
a
consumer
to
seek
advice
from
a
practitioner
with
the
broadest
possible
knowledge
and
experience.
But
that
desirability
is
not
a
matter
for
regulation:
the
necessity
to
regulate
arises
from
a
proper
application
of
the
need
to
avoid
consumer
detriment
as
described
rather
than
a
broader
disadvantage
arising
from
consumers’
foolishness,
short-‐
sightedness
or
penny-‐pinching.
58
This
view
is
consistent
with
the
approach
we
have
advocated
in
relation
to
the
education
and
training
of
solicitors:
see
LSI
(2010b)
for
further
elaboration.
59
The
designated
person
would
not
necessarily
be
the
Head
of
(or
Compliance
Officer
for)
Legal
Practice,
since
this
individual
need
only
be
authorised
in
relation
to
only
one
of
the
firm’s
reserved
activities
(for
HoLPs,
see
Legal
Services
Act
2007,
s.
111(1)
and
Sch.
11,
para
11(3)(b);
for
CoLPs,
see
Rule
8.5(g)(ii)(B)
of
the
Draft
SRA
Authorisation
Rules
for
Legal
Services
Bodies
and
Licensable
Bodies);
for
any
given
client,
the
individual’s
authorisation
might
not
be
the
one
for
which
notification
is
required.
The
second
response
would
be
other
approaches
to
regulation
(such
as
voluntary
codes
of
conduct).
As
with
the
general
law,
too
often
these
are
focused
on
consumer
protection
issues
and,
in
the
absence
of
true
regulatory
enforceability,
provide
only
after-‐the-‐event
responses.
In
some
circumstances,
however,
these
responses
lose
their
force.
For
example,
there
might
be
situations
where
there
is
a
mandatory
alternative.
Some
legal
activities
which
are
not
reserved
are
provided
by
regulated
individuals
or
entities
other
than
authorised
persons
under
the
Act.
Tax
advice
provided
by
chartered
accountants
would
be
an
example.
Under
the
regulatory
framework
applying
to
accountants,
there
will
be
mandatory
obligations
that
certainly
offer
an
acceptable
alternative
to
the
reservation
of
those
activities.
However,
to
the
extent
that
these
obligations
only
apply
to
non-‐reserved
activities,
the
provision
of
those
same
activities
by
other
providers
who
are
not
bound
by
the
same
obligations
means
that
reservation
still
presents
a
uniform
protection
across
the
market
rather
than
a
patchwork
of
mandatory
and
voluntary
approaches
that
are
dependent
on
the
consumer’s
choice
of
adviser.
In
other
words,
the
protection
does
not
arise
for
all
consumers
because
of
regulation
attaching
to
the
activity
but
rather
from
the
choice
of
adviser
by
the
consumer.
Our
concern
here
is
not
that
the
regulatory
effectiveness
of
obligations
attaching
to,
say,
chartered
accountants,
is
any
lower
than
that
attaching
to
authorised
persons
–
far
from
it,
since
we
do
not
believe
that
this
is
the
case.
Our
concern
is
that,
if
the
activity
in
question
is
sufficiently
important
to
the
public
interest
or
to
consumers
to
warrant
regulation,
the
nature
or
scope
of
that
regulation
(and
therefore
the
degree
of
protection
offered)
ought
not
to
rest
on
the
serendipitous
choice
by
the
consumer
of
an
adviser
who
might
be
an
authorised
person,
a
regulated
but
not
authorised
person
subject
to
mandatory
duties,
an
unregulated
person
subject
to
voluntary
and
minimally
enforceable
obligations,
or
an
unregulated
person
subject
to
no
obligations
at
all
beyond
the
general
law.
We
accept
that
reservation
will
create
barriers
to
entry
and
so
possibly
limit
competition,
and
will
probably
increase
the
costs
of
providers
entering
and
remaining
in
the
legal
services
market
(and
that
those
costs
will
in
all
likelihood
be
passed
on
to
consumers).
However,
our
view
is
that
the
public
interest
justification
that
underpins
reservation
outweighs
these
effects.
We
believe
in,
and
support,
competition
in
the
provision
of
legal
services
–
but
not
at
the
expense
of
securing
the
public
good
or
the
achievement
of
what
we
have
identified
as
the
primary
regulatory
objectives.
We
also
believe
that,
again,
consistent
with
the
general
approach
that
any
form
of
regulatory
intervention
should
be
proportionate
to
the
identified
mischief
and
least
restrictive
of
competition
(cf.
paragraph
1.6
above),
the
public
interest
justification
for
reservation
should
ensure
that
this
form
of
intervention
will
secure
public
good
or
consumer
protection,
without
necessarily
or
inevitably
inhibiting
competition
or
innovation
among
those
who
are
authorised
to
deliver
the
reserved
activity.
This
might
present
a
particular
challenge
in
relation
to
the
regulation
of
multidisciplinary
practices
(MDPs),
where
the
entity
in
question
is
also
regulated
in
respect
of
some
or
all
of
its
non-‐reserved
activities
by
a
body
other
than
its
licensing
authority.
Finally,
we
observe
that
this
second
fundamental
issue
is
conceived
by
us
as
one
part
of
an
either-‐or
formulation
so
that
it
might
be
possible
to
show
that
other
forms
of
regulation
(or
indeed
reliance
on
the
general
law)
might
be
just
as
effective
in
dealing
with
the
identified
mischief
or
detriment
but
that
the
third
–
the
additional
protection
that
arises
from
reservation
–
succeeds
in
giving
it
the
edge.
The
additional
protection
offered
will
apply
to
non-‐reserved
activities
as
well
as
to
reserved
ones.
However,
this
protection
is
not
available
at
all
until
a
service
is
provided
by
a
person
authorised
in
respect
of
one
of
the
reserved
legal
activities.
It
is
therefore
the
existence
of
reservation
that
brings
these
protections
into
being.
Although
there
is
some
additional
cost
in
funding
these
protections
(such
as
the
costs
of
training
and
authorisation,
maintaining
an
internal
complaints
process,
contributions
to
regulatory
structures
and
compensation
funds,
and
indemnity
insurance
premiums),
we
believe
that
the
public
benefits
and
before-‐the-‐event
consumer
assurance
derived
from
reservation
outweigh
and
justify
these
additional
costs
(even
where
they
are
passed
on
to
consumers
in
whole
or
part).
It
remains
important,
however,
that
the
secondary
objective
of
encouraging
competition
and
innovation
in
the
delivery
of
legal
services
is
then
enabled
by
disallowing
or
removing
other
regulatory
restrictions
(such
as
those
on
permissible
business
structures
and
access
to
capital)
that
might
drive
up
costs
further
or
inhibit
their
reduction
through
scale-‐efficiencies
or
different
ways
of
working.
Where
a
consumer
lacks
knowledge,
experience
or
power
in
pursuing
a
complaint
against
a
professional
adviser,
there
is
a
collective
benefit
to
all
clients
in
having
a
regulator
impose
and
enforce
codes
of
practice,
and
complaint
and
disciplinary
procedures
which
individual
consumers
could
not
hope
to
match.
This
can
include
the
‘specialisation’
and
deeper
knowledge
of
the
regulator
in
understanding
when,
and
to
what
extent,
any
transgression
or
poor
service
has
occurred;
it
will
also
include
the
structure
and
staffing
of
the
regulator
that
has
the
knowledge
and
resources
to
take
action
against
a
practitioner;
and
it
will
also
include
the
implicit
power
of
the
regulator
to
impose
sanctions
(including
ultimately
the
removal
of
the
right
to
practise)
where
the
issue
is
serious
and
the
complaint
is
not
addressed
promptly
and
properly60.
2.4.2
The
nature
and
consequences
of
reservation
The
right
to
carry
out
a
reserved
legal
activity
can
only
be
given
by
an
approved
regulator.
The
existence
of
an
approved
regulator
will
then
ensure
that
clients
have
the
benefit
of
the
range
of
regulatory
arrangements
relating
to
qualification,
authorisation,
practice,
conduct,
discipline,
indemnity
and
compensation
(cf.
section
21
of
the
Legal
Services
Act).
As
we
indicated
in
paragraph
2.4
above,
although
reservation
will
mean
that
the
relevant
legal
activity
can
only
be
carried
out
by
an
‘authorised
person’,
it
does
not
follow
that
the
authorisation
should
only
be
given
to
someone
who
is
legally
qualified.
However,
it
will
be
important
that
the
appropriate
approved
regulators
set
suitable
entry
requirements
by
way
of
relevant
training
and
fitness
to
practise,
and
that
they
assure
consumers
that
the
necessary
expertise
and
experience
is
maintained
by
continuing
professional
development
and
quality
assurance
requirements.
Once
reservation
is
granted,
and
an
approved
person
is
entitled
to
deliver
a
reserved
activity,
a
range
of
obligations
on
the
practitioner
and
benefits
for
the
client
come
into
play.
The
consequential
benefits
for
clients
of
the
practitioner’s
non-‐reserved
activities
also
being
subject
to
regulatory
scrutiny
and
remedy
should
represent
powerful
incentives
to
an
informed
consumer.
Further,
the
possibility
that,
for
example,
everything
done
by
solicitors
or
barristers
could
(ultimately)
be
examined
by
a
disciplinary
tribunal
or
a
court
means
that
everything
is
more
likely
to
be
done
to
the
same
high
standard
rather
than
simply
those
elements
that
are
reserved.
There
is
also,
accordingly,
a
powerful
incentive
for
the
practitioner
to
perform
–
supported
by
the
peer
pressure
of
expectation
and
norms
(cf.
paragraph
2.3.3.
above)
and
the
reputational
risk
arising
from
poor
performance.
60
In
the
language
of
economic
theory,
this
represents
a
‘positive
externality’:
see
further,
Appendix
2,
para
2.4.
Reservation,
then,
becomes
an
element
–
albeit
arguably
the
most
important
element
(if
only
as
a
point
of
entry)
–
in
a
richer
tapestry
of
regulatory
obligations
and
influences,
all
of
which
can
become
mutually
reinforcing
and
beneficial
to
the
public
good
and
to
consumers.
2.5
Conclusion
Regulation
by
title,
person
or
activity
can
each
secure
some
element
of
the
public
interest,
and
there
is
a
degree
of
inevitability
in
more
than
one
form
working
in
tandem
with
another.
Our
contention
is
that
the
public
interest
can
justify
reservation
of
activity
to
authorised
persons
(though
not
necessarily
always
to
lawyers)
where:
(1) this
is
required
to
secure
a
public
good
or
protect
the
consumer
(or
both);
and
(2) either
other
responses
are
less
effective;
or
reservation
provides
additional
protection
that
supports
(1).
Reservation
is
one
available
response
to
a
perceived
justification
for
regulation,
along
with
other
general
legal
requirements
and
other
law-‐specific
regulation.
The
question
for
regulators
is
which
response
best
serves
the
public
interest.
In
any
event,
formal
and
explicit
regulation
will
be
implemented
within
a
broader
social
and
cultural
environment
with
sets
of
expectations
and
norms,
and
with
the
additional
impetus
of
providers
wishing
to
avoid
reputational
risk.
These
extra-‐
regulatory
influences
can
work
both
to
support
and
to
frustrate
formal
regulation.
Nevertheless,
in
our
view,
the
binding
nature
of
formal
regulation
(and
its
superiority
to
voluntary
self-‐regulation)
suggests
that
reservation
should
be
pursued
for
the
public
interest
reasons
we
have
proposed,
and
that
regulators
should
not
be
reticent
about
extending
the
regulatory
net
in
this
way.
We
now
move
on
to
consider
in
Section
3
specific
legal
activities
where
we
believe
these
public
interest
requirements
can
met.
3.2.1
Activities
connected
to
the
administration
of
justice
and
due
process
Our
contention
is
that
reserving
to
secure
the
public
interest
objectives
and
public
good
outcomes
relating
to
the
rule
of
law,
the
administration
of
justice,
access
to
justice,
and
independent,
strong
and
effective
legal
representation
justifies
the
continuing
reservation
to
authorised
persons
of:
(1) rights
of
audience;
(2) rights
to
conduct
litigation
(with
associated
legal
professional
privilege61);
and
(3) court-‐related
reserved
instrument
activities
(these
are
preparing
an
instrument
relating
to
court
proceedings
in
England
and
Wales:
see
Legal
Services
Act,
Schedule
2,
paragraph
5(1)(c)
and
(2)).
For
this
purpose,
‘court’
includes
the
first-‐tier
and
upper
tribunal
(section
207(1)
of
the
Legal
Services
Act).
The
conclusion
that
these
activities
should
remain
reserved
is
consistent
with
the
view
in
the
final
report
of
the
Royal
Commission
on
Legal
Services62
which
suggested
that
the
need
for
effective
administration
of
justice
is
validation
for
the
reservation
of
rights
of
audience
(Chapter
18,
with
a
particular
emphasis
on
the
skills
required
and
independence)
and
the
conduct
of
litigation
(paragraph
19.17,
which
emphasises
the
knowledge
and
integrity
of
officers
of
the
court),
in
that
the
proper
discharge
of
these
responsibilities
assists
in
the
smooth
functioning
of
the
court
system.
The
continuation
of
these
current
reservations
will,
we
believe,
secure
the
public
interest
objectives
and
public
good
outcomes
relating
to
the
rule
of
law,
the
administration
of
justice,
access
to
justice,
and
independent,
strong
and
effective
legal
representation,
as
well
as
promoting
and
protecting
the
interests
of
the
UK
in
general
both
commercially
and
as
a
leading
global
legal
forum.
The
credibility
and
reliability
of
precedent
in
a
common
law
system
are
vital
to
the
underlying
credibility
of
the
legal
system
as
a
whole63
(which
is
important
to
achieving
the
regulatory
objective
of
supporting
the
rule
of
law64).
We
hold
the
strong
view
that
removing
or
diluting
the
requirement
for
these
activities
to
be
carried
out
by
authorised
persons
would
result
in
higher
levels
of
self-‐representation
and
litigants-‐in-‐person,
as
well
as
–
perhaps
more
disturbingly
–
by
many
paid
but
incompetent
or
inexperienced
advocates.
This,
in
turn,
would
create
greater
inefficiencies
in
the
justice
system
as
courts
and
judges
were
forced
to
deal
with,
and
assist,
those
with
little
or
no
experience
or
competence65.
Such
inefficiencies
could
greatly
reduce
the
efficacy
as
well
as
the
cost-‐efficiency
of
the
justice
system,
and
potentially
result
in
less
credible
and
reliable
justice
and
dispute
resolution
and
in
much
poorer
value
for
money
to
the
public
purse.
While
we
support
the
right
of
individuals
to
represent
themselves,
we
also
support
the
exclusion
of
non-‐authorised
persons
(especially
where
they
act
for
reward,
but
also
where
they
do
not66).
For
these
reasons,
we
would
not
restrict
this
reservation
only
to
criminal
proceedings
or
where
the
liberty
of
the
subject
is
at
risk:
the
public
interest
in
confidence
in
the
effectiveness
of
the
justice
61
We
recognise
the
additional
regulatory
challenges
connected
with
legal
professional
privilege,
but
do
not
seek
to
deal
with
them
in
this
paper.
62
(1979)
Cmnd.
7648
(London,
HM
Stationery
Office).
63
See
further
the
quotation
from
Copenhagen
Economics
(2006:
9)
in
Appendix
2,
para
2.4.1
below.
64
Cf.
paragraph
1.3
above
and
footnote
15.
65
Over
time,
as
self-‐representation
and
other
challenges
to
the
smooth
running
of
judicial
lists
increase,
we
might
also
expect
that
the
number
and
quality
of
applications
for
judicial
office
could
also
decline.
Work
in
Canada
which
looks
to
support
‘self-‐helpers’
as
they
navigate
their
way
around
the
courts
system
might
point
to
ways
in
which
the
overall
efficiency
(and
cost-‐efficiency)
of
the
system
can
be
promoted.
66
There
are
(rightly,
in
our
view)
no
exemptions
for
rights
of
audience
or
rights
to
conduct
litigation
being
carried
out
otherwise
than
for
or
in
expectation
of
any
fee,
gain
or
reward;
indeed,
we
would
remove
the
exemption
that
currently
applies
under
Sch.
3,
para
3(10)
for
court-‐related
reserved
instrument
activities.
system
is
much
more
extensive.
The
extra
cost
that
would
be
borne
by
an
individual
consumer
as
a
result
of
engaging
authorised
legal
representation
(as
opposed
to
being
a
litigant-‐in-‐person
or
being
allowed
to
instruct
a
non-‐authorised
advocate)
will
be
far
outweighed
by
gains
in
a
number
of
areas:
• the
personal
benefit
to
the
individual
consumer
of
being
represented
in
court
by
someone
trained
to
do
so;
• the
gains
made
by
all
other
consumers
within
the
justice
system
in
having
that
structure
operating
as
effectively
as
possible
and
delivering
reliable
outcomes;
• securing
equality
of
citizenship
and
participation
(cf.
paragraph
1.2
above);
• reduced
costs
to
public
finances
through
having
a
justice
system
that
operates
efficiently;
and
• the
additional
revenues
brought
into
the
UK
that
such
a
system
would
attract.
These
reservations
would
also
achieve
an
additional
customer
protection
benefit
(cf.
paragraph
3.3
below)
in
the
purchase
of
‘credence’
services
(cf.
paragraph
2.4.1.1
above
and
Appendix
2,
paragraph
2.2.2
below).
Incompetence
or
poor
service
in
the
delivery
of
these
reserved
activities
could
result
in
irreparable
detriment
to
the
client
–
such
as
incarceration,
fines,
a
criminal
record,
loss
of
assets
or
access
to
children,
and
so
on.
These
consequences
might
arise,
for
instance,
from
failing
to
obtain
evidence
or
call
witnesses,
not
calling
expert
evidence,
failing
to
object
to
evidence,
conducting
a
cross-‐examination
that
is
not
in
accordance
with
instructions,
asking
questions
that
allow
the
introduction
of
otherwise
inadmissible
evidence,
missing
relevant
deadlines,
or
problems
with
disclosure.
Nor
is
proven
incompetence
in
the
exercise
of
rights
of
audience
necessarily
sufficient
to
overturn
a
judicial
result.
As
Buxton
L.J.
explained
in
R.
v.
Day
[2003]
EWCA
Civ
1060
at
paragraph
15:
While
incompetent
representation
is
always
to
be
deplored;
is
an
understandable
source
of
justified
complaint
by
litigants
and
their
families;
and
may
expose
the
lawyers
concerned
to
professional
sanctions;
it
cannot
in
itself
form
a
ground
of
appeal
or
a
reason
why
a
conviction
should
be
found
67
unsafe.
We
accept
that,
following
the
decision
of
this
court
in
Thakrar
[2001]
EWCA
Crim
1096 ,
the
test
is
indeed
the
single
test
of
safety,
and
that
the
court
no
longer
has
to
concern
itself
with
intermediate
questions
such
as
whether
the
advocacy
has
been
flagrantly
incompetent.
But
in
order
to
establish
lack
of
safety
in
an
incompetence
case
the
appellant
has
to
go
beyond
the
incompetence
and
show
that
the
incompetence
led
to
identifiable
errors
or
irregularities
in
the
trial,
which
themselves
rendered
the
process
unfair
or
unsafe.
Lord
Hoffman
addressed
the
same
point
in
relation
to
the
conduct
of
litigation
in
the
Arthur
Hall
case68
[2000]
UKHL
38
at
paragraph
34:
If
a
client
could
sue
his
lawyer
for
negligence
in
conducting
his
litigation,
he
would
have
to
prove
not
only
that
the
lawyer
had
been
negligent
but
also
that
his
negligence
had
an
adverse
effect
upon
the
outcome.
This
would
usually
mean
proving
that
he
would
have
won
a
case
which
he
lost.
After-‐the-‐event
restitution
or
compensation
might
be
available,
but
in
many
of
these
circumstances
does
not,
in
our
view,
represent
a
justification
for
failing
to
assure
before-‐the-‐event
competence.
In
addition,
it
can
prove
challenging
to
establish
negligence69,
and
this
might
deter
otherwise
worthy
claimants
from
taking
any
action
–
especially
where
the
consequences
are
not
as
dire
as
those
suggested
earlier.
Further,
for
a
consumer
to
rectify
any
harm
caused
by
the
negligent
exercise
of
a
reserved
right,
he
or
she
will
have
to
engage
another
lawyer
to
bring
a
claim.
From
the
point
of
view
67
The
Court
of
Appeal
in
R.
v.
Joshil
Thakrar
[2001]
EWCA
Crim
1096
developed
the
‘safety
of
the
conviction’
test,
to
be
considered
alongside
a
person’s
right
to
a
fair
trial
under
Article
6
of
the
European
Convention
on
Human
Rights.
Irrespective
of
the
need
to
comply
with
the
Convention,
the
public
good
of
securing
fair
trials
should
be
an
important
consideration
in
assuring
the
competence
of
those
who
represent
both
the
prosecuting
authority
and
the
accused.
68
See
Arthur
J.S
Hall
and
Co.
v.
Simons,
and
Barratt
v.
Ansell
and
Others
(trading
as
Woolf
Seddon
(a
firm)),
and
Harris
v.
Scholfield
Roberts
and
Hill
(conjoined
appeals)
[2000]
UKHL
38.
69
See,
for
example,
the
cases
cited
in
footnote
68
above.
of
the
wronged
consumer,
this
potentially
raises
the
(off-‐putting)
appearance
of
a
conflict
of
interest
–
even
if
no
such
conflict
in
fact
exists.
Finally
under
this
sub-‐heading,
we
believe
that
there
should
be
continuing
reservation
for:
(4) the
administration
of
oaths.
The
reliance
that
can
be
placed
on
oaths
duly
administered
has
many
public
good
benefits
in
securing
confidence
and
efficiency
in
the
administration
of
justice
(in
relation,
say,
to
affidavits),
as
well
as
in
transactions
and
appointments
(such
as
a
change
of
name
or
power
of
attorney).
This
potentially
avoids
the
costs
and
uncertainty
of
establishing
or
contesting
what
would
be
otherwise
arguable
statements.
The
possible
consequences
of
an
oath
being
improperly
administered
are
as
varied
as
the
situations
in
which
they
are
required,
from
a
doctor
embarking
on
his
or
her
career
to
a
witness
giving
evidence
in
court.
In
some
situations
rectification
may
be
possible
simply
by
the
client
involved
swearing
a
valid
oath70;
in
others,
irreparable
harm
may
have
occurred.
A
significant
part
of
the
reliability
of
an
oath
and
the
credence
which
may
be
attached
to
it
is
a
consequence
of
the
standing
of
the
commissioner
for
oaths
who
administered
it.
For
this
reason,
there
are
criminal
penalties
attaching
to
forging
or
fraudulently
altering
a
commissioner’s
seal
or
signature,
or
knowingly
tendering
or
using
an
affidavit
having
such
a
forged
or
fraudulently
altered
seal
or
signature71.
While
this
may
serve
to
punish
the
perpetrator
involved,
it
will
do
little
to
rectify
any
harm
caused
to
an
innocent
client
or
third
party
relying
on
or
affected
by
the
relevant
document.
Again,
therefore,
we
support
the
continuation
of
this
reserved
legal
activity
to
achieve
the
public
good
identified
(as
well
as
some
incidental
before-‐the-‐event
consumer
protection).
There
are,
of
course,
many
documents
which
are
of
public
importance
that
do
not
need
to
be
sworn
(such
as
a
passport
application
or
a
will);
these
documents
are
not
currently
subject
to
any
form
of
reserved
legal
activity.
Documents
that
are
notarised
(cf.
paragraph
3.2.2
below)
are
also
regulated
separately.
It
seems
to
us
that
the
special
status
of
the
administration
of
oaths
should
derive
from
the
status
of
the
person
administering
the
oath
being
in
some
way
an
officer
of
the
court
or
other
public
official.
We
are
therefore
not
convinced
that
the
authorisation
should
be
extended
(as
now)
to
essentially
all
authorised
persons.
The
training
to
discharge
this
reserved
function
seems
to
be
superficial
(at
best),
and
the
activity
is
often
carried
out
with
little
regard
for
its
solemnity
and
by
those
who
often
take
the
fee
as
a
personal
reward
(even
where
they
are
employed
by
a
firm).
We
therefore
suggest
that
thought
should
be
given
to
confining
the
authorisation
to
administer
oaths
to
those
authorised
persons
who
are
separately
trained
and
accredited
(for
instance,
by
way
of
an
endorsement
to
a
practising
certificate);
and
that
the
training
for
these
primary
reserved
rights
should
include
appropriate
training
for
the
administration
of
oaths.
We
support
the
absence
of
the
exemption
for
services
provided
without
reward
(the
nature
of
the
oath
and
the
value
that
must
be
attached
to
it
suggest
to
us
that
oaths
administered
by
unauthorised
persons
for
free
cannot
be
considered
to
carry
the
required
degree
of
credibility
or
veracity).
For
the
same
reason,
self-‐administered
oaths
would
be
a
nonsense.
70
Every
commissioner
for
oaths
should
state
when
and
where
each
oath
is
taken
(Commissioners
for
Oaths
Act
1889,
s.
5).
Failing
to
make
such
a
statement
would
therefore
render
an
oath
invalid,
as
would
swearing
an
oath
before
a
person
who
was
not
a
commissioner
for
oaths
or
who
was
representing
a
party
in
legal
proceedings
in
which
the
person
swearing
the
oath
was
involved.
71
Commissioners
for
Oaths
Act
1889,
s.
8.
This
quotation
emphasises
the
public
function
of
notarial
activities,
and
in
our
view
supports
the
proposition
that
they
achieve
a
public
good.
The
role
of
notarial
activities
assists
international
commerce,
although
private
individuals
may
also
make
use
of
a
notary’s
services.
Notaries
verify
the
capacity
of
their
clients
to
enter
a
transaction,
confirm
the
identity
of
clients,
and
record
of
all
this
information;
they
maintain
detailed
records,
including
copies
of
all
documents
certified
with
copies
of
the
relevant
clients’
identity
attached.
This
record-‐keeping
forms
a
paper
trail
from
each
document
verified
through
the
notary
to
the
client.
Not
only
does
this
provide
a
certain
level
of
reassurance
for
the
other
parties
in
a
transaction,
but
it
also
serves
a
wider
purpose
in
helping
to
combat
international
fraud.
Due
to
the
nature
of
the
work
of
notaries,
any
error
made
is
likely
to
be
discovered
after
the
fact.
If
a
wrongfully
certified
document
is
accepted
for
use
in
a
foreign
transaction,
problems
may
only
arise
in
the
future,
after
decisions
have
already
been
made
based
on
the
accuracy
of
that
document.
Similarly,
if
for
some
reason
a
notary’s
records
are
needed
to
trace
someone
through
a
past
document,
that
will
be
the
time
when
any
gaps
in
those
records
will
appear.
It
is
this
status
of
notarial
activities
as
‘credence’
services
that
may
provide
some
additional
justification
for
their
reservation
(cf.
paragraph
2.4.1.1
above
and
Appendix
2,
paragraph
2.2.2
below).
The
reliance
that
parties
to
(particularly)
commercial
–
and
often
international
–
transactions
can
place
on
notarised
documentation
allows
trade,
and
the
resolution
of
disputes,
to
be
undertaken
with
greater
confidence.
Without
regulatory
force,
confidence
in
the
activities
and
promises
of
English
participants
in
international
trade
could
be
compromised,
to
the
detriment
of
the
nation’s
economic
well-‐being.
Given
the
nature
and
importance
of
notarial
activities,
and
the
credence
that
must
be
placed
on
the
notary’s
verification
(and
professional
regulation
and
standing
to
back
it
up),
we
are
surprised
by
the
exemption
in
Schedule
3,
paragraph
5(4)
for
individuals
carrying
out
notarial
activities
otherwise
than
for
or
in
expectation
of
a
fee,
gain
or
reward,
and
consider
that
this
exemption
cannot
be
justified
on
public
interest
grounds.
There
seems
to
us
to
be
a
stronger
case
in
relation
to
notarial
activities
than
there
is
for
the
administration
of
oaths
(which
has
no
such
exemption).
We
also
struggle
to
see
that
72
We
think
it
is
unfortunate
that
such
an
obvious
public
good
as
the
administration
of
justice
should
be
regarded
by
economists
as
merely
a
‘positive
externality’:
cf.
Appendix
2,
paras
2.4
and
3
below.
an
individual
could
credibly
provide
notarial
services
for
themselves:
the
whole
rationale
of
notarial
services
is
independent
verification.
3.2.3
Property-‐related
reserved
instrument
activities
In
our
view,
it
has
become
quite
difficult
to
discern
the
‘mischief’
that
the
property-‐related
reservation
is
intended
to
address.
Under
the
Legal
Services
Act,
the
concept
of
‘reserved
instrument
activities’
means
preparing
any
instrument
of
transfer
or
charge
for
the
purposes
of
the
Land
Registration
Act
2002,
or
making
an
application
or
lodging
a
document
for
registration
under
that
Act.
For
this
purpose,
an
‘instrument’
includes
a
contract
for
the
sale
or
other
disposition
of
land
(except
a
contract
to
grant
a
short
lease
within
the
meaning
of
s.
54(2)
of
the
Law
of
Property
Act
1925),
but
excludes
wills
and
other
testamentary
instruments,
agreements
not
intended
to
be
executed
as
deeds
(other
than
the
contracts
already
mentioned),
letters
or
powers
of
attorney,
and
transfers
of
stock
that
contain
no
trust
or
limitation
(Schedule
2,
paragraph
5(3)
and
(4)).
The
reservation
also
extends
to
preparing
any
other
instrument
relating
to
real
or
personal
estate
for
the
purposes
of
the
law
of
England
and
Wales
(Schedule
2,
paragraph
5(1)).
There
are
exemptions
in
respect
of:
(a) farm
business
tenancies
where
the
activity
is
carried
out
by
a
Fellow
of
the
Central
Association
of
Agricultural
Valuers,
or
a
Member
or
Fellow
of
the
Royal
Institution
of
Chartered
Surveyors
(Schedule
3,
paragraph
3(5)
and
(6));
(b) a
person
employed
merely
to
engross
the
instrument
or
application
(Schedule
3,
paragraph
3(9));
and
(c) an
individual
who
carries
on
the
activity
otherwise
than
for,
or
in
expectation
of,
and
fee,
gain
or
reward
(Schedule
3,
paragraph
3(10)).
Before
land
registration
(or
for
first
registration
of
title73),
there
would
have
been
a
strong
public
interest
argument
for
suggesting
that
those
who
verified
title
(and
thereby
ensured
the
buyer
of
good
title
to
the
property
acquired)
should
be
appropriately
qualified
and
experienced.
However,
as
we
showed
in
our
first
paper
(LSI
2010a:
paragraph
2.4.2),
the
background
to
this
reservation
was
rooted
in
the
professional
self-‐interest
of
avoiding
tax
rises
rather
than
in
any
public
interest.
In
fact,
assurance
could
reasonably
be
sought
both
by
the
State
(to
provide
substance
to
the
State-‐
backed
guarantee
inherent
in
land
registration)
and
by
the
buyer
(to
provide
greater
certainty
and
security
to
the
purchase).
There
are,
therefore,
public
interest
justifications
(both
public
good
and
consumer
protection)
for
the
registration
of
title.
They
are
expressed
by
the
Land
Registry
in
this
way74:
• State-‐backed
registration
gives
security
of
title,
providing
you
better
protection
against
claims
of
adverse
possession.
• Registration
gives
you
greater
certainty
and
security
about
what
you
own.
• Once
registered,
you're
in
an
ideal
position
if
you
decide
to
sell
all
or
some
of
your
property.
Potential
buyers
increasingly
expect
land
to
be
registered
before
buying.
• It
simplifies
conveyancing,
making
transactions
easier
and
potentially
less
costly
for
all
involved.
These
considerations
are
only
relevant,
of
course,
to
registered
title.
However,
if
appropriate
expertise
would
be
justified
in
relation
to
first
registration
because
of
the
requirement
to
investigate
hitherto
unregistered
land,
logically
it
should
also
apply
to
any
other
transactions
and
transfers
relating
to
unregistered
land.
The
potential
complexity
and
uncertainty
of
unregistered
title
strongly
73
In
fact,
about
25%
of
land
in
England
&
Wales
is
still
unregistered:
www.landregistry.gov.uk.
74
See
www.landregistry.gov.uk
(register
your
land).
suggests
that
appropriate
expertise
should
be
applied
in
transactions
involving
transfers
and
other
dealings
in
unregistered
real
estate.
This
would
offer
consumers
confidence
in
the
competence
of
the
practitioner
as
well
as
a
degree
of
protection
in
an
otherwise
potentially
uncertain
and
complex
process.
For
these
reasons
(and
to
fulfil
public
good
objectives
in
relation
to
registered
land,
and
consumer
protection
objectives
in
relation
to
unregistered
land),
we
can
see
a
case
for
continuing
the
reserved
instrument
reservation
in
respect
of
(a)
preparing
any
instrument
for
the
purposes
of
first
registration
under
the
Land
Registration
Act
2002;
(b)
making
an
application
or
lodging
a
document
relating
to
first
registration
under
that
Act;
and
(c)
preparing
any
other
instrument
relating
to
unregistered
real
estate
in
England
and
Wales.
We
also
accept
that,
in
these
circumstances,
the
reservation
should
logically
extend
to
the
preparation
of
the
contract
for
the
sale
or
other
disposition
of
the
land
in
question.
However,
even
in
relation
to
registered
land,
there
are
further
–
and
broader
–
justifications
that
merit
exploration.
First,
despite
the
Land
Registry’s
reference
to
the
State-‐backed
guarantee
of
title,
there
are
still
overriding
interests,
local
land
charges,
and
possibly
other
obligations
or
restrictions
which
could
affect
the
value
of
the
property
or
the
ability
to
use
it.
There
are,
therefore,
potential
(and
avoidable)
risks
to
the
client
that
are
not
covered
simply
by
registration
of
title,
and
the
involvement
of
appropriately
qualified
and
experienced
advice
would
reduce
the
risk
of
consumer
detriment
arising
from
ill-‐advised
transactions
or
inadequate
representation.
Second,
in
the
quotation
earlier,
the
Land
Registry
suggested
confidence
and
efficiency
of
process
as
benefits
of
title
registration.
We
agree
in
principle
with
that
view,
subject
to
the
caveats
in
the
preceding
paragraph.
But
there
is
a
further
dimension
to
confidence
and
efficiency
of
process
that
arises
from
the
involvement
of
authorised
persons
(solicitors
and
licensed
conveyancers).
At
the
point
of
completion,
there
will
often
be
a
mortgage
to
be
discharged
on
the
property
being
sold.
The
buyer
will
need
to
know
that
title
to
the
land
will
pass
without
being
subject
to
that
financial
charge.
There
is
a
timing
issue:
until
sellers
receive
the
buyers’
funds
from
the
sale,
they
are
not
in
a
position
to
discharge
their
secured
loans,
and
therefore
could
not
give
the
assurance
of
unencumbered
title.
This
conundrum
is
usefully
solved
by
the
seller’s
conveyancer
giving
an
undertaking
to
the
buyer
that
the
funds
received
will
indeed
be
used
to
discharge
the
mortgage.
On
the
basis
of
that
undertaking,
the
buyer
should
have
the
confidence
to
complete
even
though
at
the
moment
of
completion
the
property
has
not
yet
been
released
from
the
mortgage.
Further,
both
the
buyer
and
seller
can
have
confidence
that
their
money
in
the
hands
of
their
respective
authorised
conveyancers
is
protected
by
the
approved
regulators’
arrangements
for
the
protection
and
repayment
of
client
money
if
the
conveyancer
absconds
with
it.
If
there
was
any
danger
that
the
‘chain’
of
simultaneous
conveyancing
transactions
might
break
down,
the
efficiency
of
the
conveyancing
process
and
transfer
of
title
to
real
estate
could
be
compromised
to
the
detriment
of
society
at
large.
Confidence
in
the
conveyancing
market,
and
its
efficiency,
is
therefore
underpinned
by
the
undertakings
of
conveyancers.
The
standing
of
the
practitioners
as
authorised
persons
(whether
solicitors
or
licensed
conveyancers,
or
others
in
the
future)
is
crucial.
Their
undertakings
are
binding
as
a
professional
obligation75,
and
are
backed
up
by
professional
indemnity
cover
and
compensation
75
See
the
SRA
Code
of
Conduct,
rule
10.05
(and
the
draft
OFR
Code
of
Conduct,
ch.
11),
and
the
Licensed
Conveyancers’
Conduct
Rules
2009,
rule
4.4.7
(and
Guidance
Note
2).
In
addition,
the
court
will
normally
require
a
solicitor
(and,
presumably,
a
licensed
conveyancer)
to
perform
an
undertaking
(though
it
does
have
power
to
order
instead
that
the
solicitor
make
good
any
loss
arising
from
a
failure
to
perform):
Clark
v.
Lucas
Solicitors
LLP
[2009]
EWHC
952.
Conveyancers
need
to
be
very
careful
in
offering
undertakings:
if
the
conveyancer
has
undertaken
to
discharge
the
outstanding
mortgage
in
full
then,
subject
to
the
discretion
of
the
court,
the
undertaking
must
still
be
fulfilled
even
if
the
proceeds
of
sale
are
insufficient
to
meet
the
debt
or
the
conveyancer
has
not
received
the
proceeds
of
sale.
fund
arrangements.
The
Solicitors
Code
of
Conduct
2007,
in
rule
2476,
defines
an
undertaking
as
“a
statement
made
by
you
or
your
firm
to
someone
who
reasonably
relies
upon
it,
that
you
or
your
firm
will
do
something
or
cause
something
to
be
done,
or
refrain
from
doing
something.
The
undertaking
can
be
given
orally
or
in
writing
and
need
not
include
the
words
‘undertake’
or
‘undertaking’”.
The
conveyancing
‘chain’
simply
could
not
work
if
every
party
had
to
be
physically
at
the
same
place
at
the
same
time,
simultaneously
exchanging
bankers’
drafts.
The
public
good
of
an
efficient
and
reliable
property
market
therefore
depends
on
the
credibility
and
enforceability
of
conveyancers’
undertakings.
We
do
not
believe
that
this
should
arise
merely
as
an
incidental
(or
coincidental)
benefit
of
the
conveyancer
being
an
authorised
person
in
respect
of
a
different
reserved
legal
activity.
The
public
interest
suggests
to
us
that
the
assurance
should
arise
as
a
direct
result
of
a
relevant
reservation.
We
are
therefore
of
the
view
that
the
current
reservation
is
too
narrowly
drawn:
(a) In
relation
to
registered
land,
we
are
now
convinced
by
a
justification
founded
on
consumer
protection.
The
‘guarantee’
of
title
registration
is
incomplete
with
risks
to
the
quality
of
the
title
and
the
enjoyment
of
the
property
potentially
compromised
by
inadequate
investigation
or
representation.
There
is
also
risk
of
fraud
and
practitioners
absconding
with
purchase
money
or
proceeds
of
sale.
Regulation
offers
either
or
both
of
an
assurance
of
competence
or
additional
protections
of
the
type
outlined
in
paragraph
2.4.1.3
above.
(b) On
even
stronger
ground,
however,
in
our
view,
is
the
public
good
in
the
effective
and
efficient
operation
of
the
housing
market,
in
confidence
in
land
registration,
and
in
some
protection
to
consumers
engaged
in
transactions
involving
unregistered
land.
The
purpose
of
reservation
here
is
not
directly
the
validity
of
the
contract,
or
completing
the
land
registration
process;
it
is
to
protect
the
public
(economic
and
social)
interest
in
the
credibility
and
reliability
of
the
property
market
(including
the
significant
contribution
to
this
of
conveyancers’
undertakings,
as
discussed
above77).
Accordingly,
if
reservation
is
to
secure
the
public
good
objective
in
(b)
(as
well
as
offering
consequential
protection
to
the
client,
based
on
the
importance
of
the
transaction,
the
asymmetry
of
information
between
adviser
and
client,
and
the
consequences
of
poor
advice
or
dishonesty,
referred
to
in
(a)
above),
then
the
reservation
needs
to
be
drawn
differently
and
more
broadly
than
at
present.
It
may
well
be
that
the
public
interest
in
public
good
benefits
and
consumer
protection
coincide
on
this
issue:
much
will
depend
on
the
rules
of
conduct
and
discipline
that
apply
to
the
authorised
conveyancers
and
enforce
their
undertakings,
as
well
as
the
existence
of
indemnity
and
compensation
arrangements
that
are
sufficient
to
cover
the
value
of
the
property
concerned78.
To
be
effective,
all
of
these
provisions
rely
on
enforcement
powers
(rather
than
voluntary
self-‐
regulation,
from
which
rogues
could
easily
exclude
themselves),
and
this
tips
the
balance
in
favour
of
reservation79.
76
The
new
OFR
Code
of
Conduct
includes
an
almost
identical
definition
(the
differences
are
in
style,
not
content).
The
Licensed
Conveyancers’
Conduct
Rules
are
also
similar
(see
Guidance
Note
2,
para
1).
77
It
must
follow
that
all
authorised
persons
for
the
purposes
of
this
reservation
–
including,
in
the
future,
entities
holding
ABS
licences
–
should
be
able
to
offer
similar
confidence
in
their
undertakings
through
professional
obligations,
indemnity
insurance
and
compensation
fund
arrangements,
and
the
LSB
and
licensing
authorities
would
need
to
assure
themselves
that
is
the
case.
78
Unlike
bank
deposits,
where
consumers
are
able
to
split
their
cash
among
a
number
of
banks
to
gain
the
advantage
from
each
of
the
€100,000
protection,
conveyancing
transactions
cannot
be
split.
The
dependence
of
each
client
on
the
scope
and
enforceability
of
their
conveyancers’
compensation
arrangements
is
therefore
key
to
consumer
confidence.
79
More
accurately,
perhaps,
the
balance
is
tipped
in
favour
of
regulation
(of
some
kind)
rather
than
reservation
(in
particular):
there
are
other
regulatory
schemes
which
require
parallel
protections
to
those
found
for
lawyers
(see
the
Compensation
Act
2006,
for
example)
that
could
be
applied
to
the
regulation
in
this
area.
However,
given
that
In
our
view,
(b)
above
is
the
better
foundation
for
reservation.
To
achieve
these
broader
objectives,
one
approach
would
be
to
extend
the
reservation
to:
property-‐related
reserved
instrument
activities
are
already
reserved
activities,
and
we
are
proposing
an
extension
of
that
reservation,
we
believe
that
reservation
can
be
justified.
We
reported
in
our
first
paper
(LSI
2010a,
paragraph
3.2)
that
the
suggestion
in
the
Legal
Services
white
paper
that
these
activities
should
become
reserved80
was
not
pursued
for
policy
and
pragmatic
reasons.
However,
we
are
of
the
view
that
there
is
now
a
strong
case
for
change.
First,
the
public
interest
must
be
defined
by
reference
to
a
State
or
territory81,
and
the
right
of
individuals
to
participate
in
society
is
an
integral
part
of
whose
public
interest
is
at
stake
and
by
reference
to
which
conception
of
‘the
public’
it
is
framed.
It
is
therefore
in
the
public
interest
that
advice
and
representation
in
relation
to
a
citizen’s
status
should
be
given
only
by
those
appropriately
qualified.
This
will
help
secure
the
public
interest
in
ensuring
that
only
those
entitled
to
the
benefits
of
citizenship
have
the
rights
attached
to
it,
but
also
that
those
who
are
entitled
are
able
to
participate
fully
and
equally
(cf.
paragraph
1.2
above).
Second,
the
implementation
of
the
Legal
Services
Act
has
seen
the
Law
Society,
the
Bar
Council
and
the
Institute
of
Legal
Executives
become
qualifying
regulators
under
the
Immigration
and
Asylum
Act
1999
and,
subject
to
each
regulator’s
rules,
solicitors,
barristers
and
legal
executives
continue
to
be
authorised
to
provide
immigration
advice
and
services
(see
paragraph
2
and
Part
3
of
Schedule
18
to
the
Legal
Services
Act).
The
LSB
has
become82
the
authorising
body
to
designate
other
approved
regulators
under
the
Legal
Services
Act
as
qualifying
regulators
under
the
1999
Act
(see
paragraph
3
of
Schedule
18);
it
has
also
assumed
the
oversight
regulation
of
qualifying
regulators
from
the
Immigration
Services
Commissioner.
Thus,
the
regulation
of
those
who
are
authorised
to
provide
immigration
advice
and
services
in
England
and
Wales
is
now
the
responsibility
of
the
LSB.
To
have
a
parallel
but
largely
identical
regulatory
framework
applied
by
the
same
regulator
is
confusing
to
consumers
(and
possibly
even
to
members
of
the
regulated
community).
We
posit
that
the
public
good
suggests
that
only
those
who
are
legitimately
entitled
to
settle
in
our
society83
should
expect
the
public
interest
to
further
their
interests
as
part
of
the
collective.
The
question
of
establishing
who
is
or
is
not
so
entitled
should
accordingly
be
founded
on
the
advice
and
representation
of
those
who
are
suitably
authorised
to
provide
it.
We
therefore
suggest
that
a
strong
case
can
be
made
(as
originally
indicated
in
the
legal
services
white
paper)
that
80
Cf.
Department
for
Constitutional
Affairs
(2005)
The
Future
of
Legal
Services:
Putting
Consumers
First,
Cm.
6679,
Appendix
B.
81
This
is
explicit
in
Lord
Hunt’s
formulation
of
the
public
interest,
and
is
implicit
in
‘citizens’
and
‘society’
in
ours
(see
para
1.2
above).
82
See
the
Legal
Services
Act
2007
(Commencement
No.
10)
Order
2011
SI
No.
720,
effective
from
1
April
2011.
83
For
the
purposes
of
this
paper
and
reservation,
we
would
confine
this
to
England
and
Wales.
not
be
allowed.
However,
we
do
not
believe
that
there
should
be
any
exemption
for
those
who
are
not
authorised
choosing
to
act
without
reward.
84
See
Legal
Services
Consumer
Panel
(2011).
including
solicitors,
will
writers,
paralegals
and
banks,
each
put
forward
their
sides
of
the
argument.
Possibly
more
impartial
responses
were
also
received
from
consumer
groups,
Citizens
Advice
and
the
National
Consumer
Federation.
The
Institute
of
Paralegals
voiced
its
concern
that
regulation
should
only
be
implemented
where
there
is
evidence
that
it
will
solve
the
problem
under
consideration
(2010:
paragraph
1),
making
the
point
that
“the
solicitors
profession
has
shown
that
even
with
heavy
and
prolonged
regulation,
the
rump
of
problem
practitioners
at
the
tail
end
of
the
Bell
curve
do
not
go
away”
(2010:
paragraph
7).
The
Institute
of
Paralegals
considered
that
the
majority
of
consumer
trouble
arises
in
relation
to
commission-‐based
selling
of
wills,
and
that
attention
should
be
focused
on
that
problem
(2010:
paragraph
5).
They
further
suggested
that
if
regulation
is
found
to
be
justified,
it
should
attach
to
the
activity
and
not
the
practitioners
involved
(2010:
paragraph
3).
The
Institute
of
Professional
Willwriters
argued
that
there
is
as
much
evidence
of
poorly
written
wills
from
solicitors
as
there
is
from
will
writers85.
They
explained
(2010:
9-‐10):
The
IPW
believes
this
is
because
there
is
no
mandatory
requirement
to
study
the
subject
of
Wills
to
become
a
solicitor
or
to
remain
as
a
solicitor.
A
consumer
is
just
as
likely
to
be
advised
by
a
solicitor
who
is
untrained
in
Wills
as
he
is
by
a
Willwriter
who
is
untrained
in
Wills.
We
are
delighted
that
this
point
has
been
recognised
by
the
Legal
Services
Board
Consumer
Panel
in
its
report
Quality
in
Legal
Services
and
will
no
doubt
be
an
issue
that
is
considered
in
the
sector-‐wide
review
of
education
and
training
requirements
which
is
being
supported
by
the
Legal
Services
Board.
There
seems
(perhaps
unsurprisingly)
to
be
a
defensive
trend
running
through
the
responses
from
bodies
representing
will
writers,
as
if
they
consider
reservation
to
mean
that
only
solicitors
will
be
able
to
draft
wills.
However,
it
seems
reasonable
to
assume
that,
if
will
writing
were
to
become
a
reserved
activity,
a
representative
body
for
will
writers
would
apply
to
become
an
approved
regulator
under
the
Legal
Services
Act
2007,
which
(if
the
LSB
approved
the
application)
would
allow
its
members
to
be
granted
rights
to
continue
their
work.
The
Law
Society
conducted
its
own
survey
into
consumer
knowledge
of
the
will-‐writing
market
(2010:
Annex
A).
It
found
that
61%
of
respondents
thought
that
will
drafting
was
always
subject
to
regulation,
and
93%
thought
it
was
important
for
will
writing
to
be
properly
regulated
(2010:
15).
When
asked
which
was
the
most
important
quality
for
a
will
writer
(from
a
choice
of
appropriate
regulation,
maintenance
of
high
professional
standards,
and
low
cost),
55%
of
respondents
chose
regulation,
whilst
only
11%
picked
low
cost
(2010:
16).
The
Society
of
Trust
and
Estate
Practitioners
(STEP)
also
undertook
its
own
survey
in
August
2010.
It
expressed
the
view
that
better
protection
was
needed
for
consumers
after
finding
that
75%
of
its
members
had
come
across
instances
of
“incompetence
or
dishonesty
in
the
will-‐writing
market
in
the
last
12
months”86.
In
its
submission
to
the
Consumer
Panel,
the
British
Bankers’
Association
disputed
that
there
was
‘substantial
evidence’
of
any
harm
to
consumers
resulting
from
the
will-‐writing
services
offered
by
banks
(BBA
2010:
paragraphs
1-‐2).
It
also
argued
against
being
grouped
together
with
unregulated
85
For
some
commentators,
this
fact
(that
providers
who
are
authorised
persons
in
respect
of
some
other
reserved
activity,
but
still
fail
to
act
competently
or
decently
in
relation
to
will
writing)
is
sufficient
to
argue
that
regulation
is
not
proved
to
be
effective
and
should
therefore
not
be
extended
to
will
writing.
To
us,
this
rather
misses
the
point
that,
at
least
with
authorised
persons
whose
reserved
and
non-‐reserved
services
are
subject
to
some
regulatory
oversight,
there
is
some
prospect
of
competence,
intervention,
disciplinary
action
and
recompense;
where
will
writing
is
carried
out
by
those
who
are
not
subject
to
any
regulatory
framework
at
all,
there
can
be
no
such
prospect
–
except
by
voluntary
submission
to
membership
of
a
self-‐regulating
body
(such
as
the
Society
of
Will
Writers
or
the
Institute
of
Professional
Willwriters),
where
the
ultimate
sanction
is
merely
removal
from
membership,
rather
than
removal
from
the
market
by
withdrawal
of
the
right
to
practise
or
offer
a
regulated
activity.
86
See
http://www.step.org/default.aspx?page=1645.
will
writers
because
of
the
banks’
status
as
regulated
bodies,
as
well
as
the
availability
of
the
Financial
Services
Ombudsman
for
complaints
made
against
them.
The
BBA
addressed
the
particular
concern
of
the
LSB
regarding
the
bundling
together
of
will
writing
and
estate
administration
services
by
arguing
that
consumers
make
a
free
choice
to
appoint
a
bank
as
their
executor:
“there
are
many
other
providers
in
the
market”;
they
also
stated
that
all
costs
are
made
clear
before
any
obligations
are
entered
into
(BBA
2010:
paragraph
3).
The
BBA
contended
that
in
simpler
cases
it
is
not
always
necessary
to
use
a
qualified
professional
to
prepare
a
will.
However,
they
did
concede
that
will-‐writing
staff
should
at
least
be
supervised
by
someone
with
a
qualification
similar
to
that
provided
by
STEP87.
The
only
body
that
considered
whether
a
person
should
be
able
to
prepare
their
own
will
was
the
National
Consumer
Confederation,
which
stated
that
the
right
to
act
for
oneself
must
be
maintained
if
will
writing
is
made
a
reserved
legal
activity
(2010:
3).
This
would
be
in
line
with
the
other
reserved
activities
that
can
be
performed
on
their
own
behalf
by
the
consumer88.
One
of
the
main
arguments
against
regulation
of
will
writing
is
that
consumers
will
have
to
bear
the
extra
costs
of
regulation
incurred
by
providers.
In
its
response,
Citizens
Advice
addressed
this
point
by
stating
(2010:
10):
We
have
no
evidence
to
suggest
that
unforeseen
consequences
of
regulation
would
be
disproportionate
when
weighed
against
the
danger
of
failing
to
regulate.
Citizens
Advice
also
suggested
that,
rather
than
being
a
reserved
legal
activity
in
itself,
will
writing
could
be
added
on
to
the
probate
activities
reservation
(2010:
9).
However,
the
current
reservation
of
the
application
for
the
grant
of
probate
or
letters
of
administration
is
in
our
view
the
most
contentious
reservation
(see
paragraph
3.2.2
below)
and
so
the
most
difficult
to
justify.
We
therefore
could
not
support
simply
adding
will
writing
to
the
reservation
of
probate
activities
as
it
currently
stands.
Neither
Citizens
Advice
nor
Co-‐operative
Legal
Services
(2010:
2)
saw
any
difference
between
the
level
of
problems
experienced
with
wills
written
by
solicitors
and
those
prepared
by
will
writers.
In
a
survey
of
over
50
charities
conducted
by
Remember
a
Charity,
of
those
respondents
who
had
seen
a
will
that
they
would
classify
as
poorly
drafted
(as
opposed
to
being
contentious),
49%
said
these
wills
originated
with
will
writers
whereas
31%
had
seen
a
poor
will
that
was
drafted
by
a
solicitor
(Remember
a
Charity
2010:
1).
However,
100%
of
respondents
to
Remember
a
Charity’s
survey
supported
regulation
of
the
will-‐writing
sector
(2010:
1).
In
its
response,
Co-‐operative
Legal
Services
(2010:
3)
employed
a
line
of
reasoning
that
is
in
line
with
our
own
thinking:
As
indicated
above
these
issues
are
not
restricted
to
solicitors
or
to
un-‐regulated
will
writers.
That
said
however,
CLS
is
in
favour
of
the
regulation
of
will
writing.
This
is
because
of
the
importance
of
a
will
and
the
potential
consequences
of
getting
it
wrong.
Under
the
current
system,
if
a
solicitor
“gets
it
wrong”
the
client
or
those
administering
an
estate
have
a
clear
course
of
redress
and
the
security
of
knowing
that
the
provider
is
covered
by
professional
indemnity
insurance.
These
vital
protections
do
not
necessarily
exist
in
the
unregulated
sector.
Some
providers
might
have
insurance,
some
may
not.
With
recent
reports
indicating
that
the
number
of
contested
wills
has
risen
by
38%
in
the
past
year
alone,
it
is
even
more
important
that
wills
and
testamentary
documents
are
drafted
correctly
and
to
the
highest
standard.
The CLS concluded by voicing a preference for will writing to become a reserved activity (2010: 3).
87
In
2011,
the
first
diploma-‐level
STEP
Certificates
in
Will
Preparation
will
be
awarded.
For
further
information,
see
http://www.step.org/default.aspx?page=1613.
88
Cf.
para
3.1
above.
Having
considered
the
submissions
made
to
it,
and
the
results
of
shadow
shopping,
the
Consumer
Panel’s
report
is
clear
in
its
findings
and
recommendations:
there
is
evidence
of
consumer
detriment,
poor
quality
wills
are
being
prepared
by
those
who
are
currently
authorised
persons
and
those
who
are
not,
and
that
reservation
of
will
writing
is
their
preferred
approach.
3.3.1.2
The
case
for
reservation
We
agree
with
the
Consumer
Panel’s
conclusions
and
recommendations
and
believe
that
a
strong
case
can
be
made
that
reservation
to
authorised
persons
should
be
extended
to:
(8) the
preparation
of
a
will
or
other
testamentary
instrument;
and
89
In
this
context,
we
would
not
regard
as
“preparation”
for
the
purposes
of
this
reservation
any
off-‐the-‐shelf
will
templates
(whether
paper-‐based
or
online)
that
are
completed
wholly
by
the
testator
with
no
interaction
or
advice
(other
than
any
offered
by
individuals
without
reward).
acting
otherwise
than
for
or
in
expectation
of
a
fee,
gain
or
reward90.
As
a
reservation
for
consumer
protection,
consumers
should
be
allowed
to
make
a
free
choice
whether
or
not
to
gain
the
benefit
of
protection
by
instructing
an
authorised
person.
3.3.2
Probate
and
the
administration
of
estates
The
current
reservation
of
the
preparation
of
papers
for
the
grant
of
probate
or
letters
of
administration
is
in
our
view
the
most
contentious
of
the
current
reservations
and
so
more
difficult
to
justify.
As
with
reserved
instrument
activities
in
relation
to
the
transfer
of
real
estate,
we
believe
that
the
current
reservation
is
inappropriately
drawn.
We
can
see
no
reason
based
on
public
good
for
reserving
simply
the
preparation
of
probate
papers.
Under
the
current
reservation,
the
only
part
of
the
entire
process
of
dealing
with
an
estate
that
is
reserved
to
authorised
persons
is
preparing
papers
on
which
to
found
or
oppose
a
grant
of
probate
or
of
letters
of
administration91.
But
there
are
numerous
tasks
and
processes
that
must
be
completed
during
the
administration
of
an
estate.
Amongst
these
are
activities
that
appear
more
obviously
open
to
abuse
than
that
which
is
reserved,
such
as
collecting
the
assets
due
to
the
estate,
releasing
monies
to
pay
any
debts,
or
preparing
the
estate
accounts.
From
a
consumer
protection
viewpoint,
it
is
difficult
to
account
for
these
steps
in
the
probate
process
not
being
reserved
to
authorised
persons,
while
the
preparation
of
papers
to
apply
for
a
grant
of
representation
is.
Although
problems
might
arise
in
relation
to
contentious
probate,
or
estates
involving
foreign
assets,
we
are
not
convinced
that
these,
by
themselves,
represent
a
strong
enough
argument
to
support
reservation.
In
these
circumstances,
a
sensible
executor
or
administrator
would
probably
seek
professional
advice.
The
strongest
reason
for
any
probate
reservation
lies,
in
our
view,
in
the
protection
of
the
estate’s
assets
from
maladministration
or
misappropriation
by
someone
carrying
out
estate
administration
for
reward.
It
is
a
consumer
protection
justification.
We
note
with
interest
that
the
‘administration’
of
an
insolvent
company’s
‘estate’
is
a
regulated
(though
not
currently
reserved)
activity
(cf.
paragraph
3.3.3
below):
to
regulate
this
while
not
regulating
the
administration
of
a
deceased
person’s
estate
seems
illogical.
The
risks
to
the
assets
in
the
hands
of
those
who
are
not
suitably
qualified
or
regulated
are
arguably
no
different.
The
equivalence
of
processes,
as
well
as
the
public
interest
in
the
efficiency
of
these
State-‐authorised
collections
and
dispositions
of
property,
coupled
with
consumer
protection
for
creditors
and
beneficiaries,
could
provide
a
strong
base
for
comparable
regulation
in
both
cases.
Interestingly,
if
part
of
the
rationale
for
reservation
is
the
benefit
of
compensation
fund
arrangements
that
arise
from
being
an
authorised
person,
this
might
inhibit
the
authorisation
of
chartered
accountants,
for
whom
there
are
no
such
arrangements
(even
though
the
ICAEW
is
the
largest
licensing
authority
of
insolvency
practitioners,
who
also
collect
assets).
As
with
reserved
instrument
activities,
therefore,
our
view
is
that
the
current
reservation
is
too
narrow.
On
this
basis,
we
think
that
a
strong
case
can
be
made
for
the
extension
of
probate
activities,
and
that,
in
the
public
interest
of
consumer
protection,
the
broader
process
of
(10) the
administration
of
an
estate
following
a
grant
of
probate
or
letters
of
administration
90
We
would
not
wish
to
see
this
exemption
being
available
to
those
who
offered
free
will
writing
in
expectation
of
being
appointed
as
executor:
such
bundling
seems
to
us
to
imply
that
the
will
is
written
clearly
in
some
expectation
of
future
reward.
91
We
note
that
the
equivalent
Scottish
process
of
‘confirmation
services’
is
similarly
narrowly
drawn:
cf.
Legal
Services
(Scotland)
Act,
s.
90(2).
should
be
included
within
the
reserved
legal
activity
(a
conclusion
that
would
be
supported
by
Lord
Hunt
of
Wirral92).
Arguably,
this
case
is
weakened
by
insolvency
practice
being
regulated
rather
than
reserved;
but
this
does
not
weaken
the
case
for
regulation,
only
the
choice
of
regulatory
approach.
We
suggest
that
the
public
interest
requires
relative
parity
of
regulation
and
protection,
even
if
the
choice
of
approach
is
not
identical.
As
with
will
writing
(cf.
paragraph
3.3.1.2
above),
we
do
not
suggest
that
authorisation
for
the
administration
of
estates
should
only
be
given
to
lawyers.
Further,
in
the
case
of
simple
estates,
administration
by
authorised
persons
will
often
not
be
required.
We
would
therefore
continue
to
allow
executors
and
administrators
to
carry
out
the
relevant
activities,
and
would
support
an
exemption
for
individuals
administering
estates
otherwise
than
for
or
in
expectation
of
a
fee,
gain
or
reward.
3.3.3
Insolvency
practice
Insolvency
practice
is
currently
a
regulated,
but
not
a
reserved,
activity.
It
is
an
offence
to
act
as
an
insolvency
office-‐holder
without
being
authorised
as
an
insolvency
practitioner.
Acting
as
an
insolvency
office-‐holder
includes
acting
as
a
liquidator,
administrator
or
administrative
receiver,
trustee
of
a
partnership,
trustee
in
bankruptcy
or
under
a
deed
of
arrangement
or
in
a
sequestration,
administrator
of
a
deceased
insolvent
estate,
or
as
a
nominee
or
supervisor
of
voluntary
arrangement.
At
one
level,
it
is
difficult
to
see
why
the
distribution
of
assets
of
a
‘deceased’
company
or
business,
or
of
an
individual
in
financial
distress,
should
be
regulated
when
the
estate
of
a
deceased
human
being
is
not
(unless
the
deceased
was
insolvent).
We
suspect
that
the
potential
mischief
that
could
give
rise
to
reservation
of
the
administration
of
estates,
and
the
benefits
to
be
derived
from
reservation,
could
apply
with
equal
force
to
insolvency
practice.
There
are
assets
to
be
collected
and
distributed,
the
value
of
the
‘estate’
to
be
preserved,
the
risk
of
assets
being
misappropriated,
and
the
potential
claims
of
the
‘beneficiaries’
to
be
met93.
The
strong
case
for
reservation
of
insolvency
practice
arises
from
its
current
regulation
and
similarity
to
other
reserved
activities.
However,
while
perhaps
a
logical
extension,
we
also
suspect
that
it
would
be
resisted.
In
one
sense,
the
extension
is
not
necessary
to
achieve
the
benefits
of
regulation
since
insolvency
practice
is
already
regulated.
Further,
the
professional
obligations
that
apply
to
those
authorised
by
the
approved
regulators
are
also
imposed
on
those
who
practise
as
insolvency
practitioners,
either
by
the
same
regulators
acting
as
recognised
professional
bodies
or
by
other
such
bodies
using
very
similar
regulatory
arrangements.
92
See
Hunt
(2009),
p.
81.
93
One
principal
difference
could
be
that
executors
and
administrators
of
estates
collect
the
deceased’s
assets
and
distribute
them
to
beneficiaries
in
accordance
with
a
will
or
the
rules
of
intestacy;
insolvency
practitioners
not
only
collect
and
distribute
assets,
but
also
have
to
apportion
them
among
creditor
‘beneficiaries’
when
there
is
not
enough
available
for
distribution
to
satisfy
their
legitimate
claims.
The
case
for
reservation
of
insolvency
practice
does
not
appear
to
us
to
be
strong
enough
(even
assuming
that
reservation
in
England
&
Wales
and
separate
regulatory
oversight
by
the
LSB
did
not
in
any
way
conflict
with
or
create
inconsistencies
when
compared
with
the
regulatory
oversight
of
other
recognised
professional
bodies
by
the
Insolvency
Service).
3.3.4
Claims
management
services
Although
the
previous
Government
expressed
an
intention
to
add
claims
management
to
the
list
of
reserved
activities94,
this
addition
was
not
included
in
the
Legal
Services
Act
2007.
Claims
management
services
can
only
be
provided
by
those
who
are
authorised
under
the
Compensation
Act
2006
or
who
are
exempt.
There
are
exemptions,
for
example,
for
lawyers,
those
subject
to
FSA
regulation,
charities
and
not-‐for-‐profit
advice
agencies,
unions,
and
individuals
who
are
not
acting
for
reward.
The
range
of
claims
covered
by
the
Compensation
Act
2006
is
broad
and
includes
claims
for:
personal
and
criminal
injuries;
industrial
injuries
disablement
benefits;
employment-‐related
payments,
wrongful
or
unfair
dismissal,
redundancy,
discrimination
and
harassment;
housing
disrepair;
and
in
relation
to
financial
products
or
services
(paragraph
4(3)
of
the
Compensation
(Regulated
Claims
Management
Services)
Order
2006
SI
No.
3319).
In
section
4(2)
of
the
Compensation
Act
2006,
‘claims
management
services’
are
defined
as
“advice
or
other
services
in
relation
to
the
making
of
a
claim”
for
compensation,
restitution,
repayment
of
other
remedy
or
relief,
whether
the
claim
can
be
made
in
legal
proceedings
or
under
a
compulsory
or
voluntary
scheme.
This
is
elaborated
in
paragraph
4(2)
of
the
Compensation
(Regulated
Claims
Management
Services)
Order
2006
to
mean
advertising
for
or
otherwise
seeking
out
claimants,
advising
claimants
or
potential
claimants,
making
referrals,
investigating
claims,
and
representing
claimants.
This
will
mean
that
some
claims
management
services
would
qualify
as
‘legal
activities’
under
the
Legal
Services
Act
(cf.
paragraph
2.4.1
above)
and
some
would
not.
Given
that
reservation
can
only
be
extended
to
activities
that
are
legal
activities,
claims
management
services
would
not
present
a
straightforward
case.
However,
we
feel
somewhat
uneasy
that
those
elements
that
are
definitely
legal
activities
(namely,
“advising
a
claimant
or
potential
claimant
in
relation
to
his
claim
or
cause
of
action”
and
“representation
of
a
claimant
(whether
in
writing
or
orally,
and
regardless
of
the
tribunal,
body
or
person
to
or
before
which
or
whom
the
representation
is
made)”:
paragraphs
4(2)(b)
and
(e)
respectively
of
the
2006
Order)
should
be
regulated
but
not
reserved.
There
seems
to
have
been
a
Parliamentary
wish
to
regulate
claims
management
activities
–
and
particularly
(and
rightly)
the
claims-‐farming,
referral
and
investigation
elements
where
there
was
previous
evidence
of
malpractice
by
unregulated
businesses
–
which
has,
in
the
process,
also
been
extended
to
incorporate
the
provision
of
legal
advice
and
representation.
As
a
result,
authorised
persons
under
the
Compensation
Act
(who
need
not
be
lawyers
but
who
are
nevertheless
subject
to
satisfying
the
regulator
that
they
are
competent
and
suitable
to
provide
regulated
claims
management
services)
are
able
to
provide
legal
advice
and
representation
under
a
parallel
regulatory
framework.
The
purpose
behind
the
Act
would
clearly
satisfy
a
consumer
protection
rationale
for
public
interest
reservation.
As
the
Parliamentary
Under
Secretary
of
State
for
Constitutional
Affairs
(Baroness
94
Department
for
Constitutional
Affairs,
The
Future
of
Legal
Services:
Putting
Consumers
First
(2005),
Cm.
6679,
Appendix
B,
Section
7.
Ashton
of
Upholland)
said
in
a
written
ministerial
statement
when
the
Bill
was
introduced95,
the
purpose
of
the
legislation
is:
to
provide
effective
protection
for
consumers
and
to
tackle
the
bad
practices
that
have
been
a
common
feature
of
the
claims
management
sector.
Regulation
will
be
applied
to
initially
to
areas
where
consumers
are
most
at
risk
–
personal
injury,
criminal
injuries
compensation,
employment,
housing
disrepair
and
claims
for
redress
in
relation
to
the
mis-‐selling
of
financial
products
such
as
endowment
policies.
The
Bill
will
provide
for
regulation
that
is
effective,
proportionate
to
the
risk
involved,
and
creates
the
minimum
burden
necessary.
The
Bill
will
deliver
a
level
playing
field
of
consumer
protection
so
that
whomever
a
consumer
seeks
advice
and
assistance
from
they
can
expect
a
quality
service
and
proper
mechanism
for
redress
if
a
problem
arises.
However,
although
a
good
case
for
reservation
might
be
made,
a
regulatory
framework
under
the
Compensation
Act
2006
already
exists
to
protect
consumers
in
relation
to
claims
management
services.
We
take
the
view
that
the
totality
of
claims
management
services
as
defined
under
the
2006
Act
do
not
qualify
as
‘legal
activities’
under
the
Legal
Services
Act,
and
could
not
therefore
simply
become
reserved
as
a
package
of
advice
and
services.
Further,
if
some
claims
management
activities
remained
subject
to
the
regulatory
regime
of
the
Compensation
Act,
while
the
legal
activities
elements
became
reserved
under
the
Legal
Services
Act,
there
would
potentially
be
a
need
for
some
businesses
to
apply
to
different
regulators
in
order
to
continue
providing
the
same
range
of
services
as
now.
Where
the
provider
of
claims
management
services
is
already
subject
to
regulation
by
an
approved
regulator
under
the
Legal
Services
Act,
it
might
be
possible
to
regulate
all
of
their
claims
management
services
as
a
by-‐product
of
reservation.
While
we
are
persuaded
that
there
is
potential
consumer
detriment
or
other
mischief
arising
from
the
delivery
of
legal
advice
and
representation
by
other
providers
authorised
only
under
the
Compensation
Act,
the
case
for
reservation
still
appears
to
be
difficult
to
sustain.
Given
that
the
range
of
claims
management
services
as
defined
are
subject
to
regulation,
the
response
to
potential
or
actual
consumer
detriment
arising
from
the
legal
activities
element
of
them
would
seem
to
lie
in
more
effective
regulation
and
action
by
the
regulator
under
the
Compensation
Act.
Only
if
this
is
seen
to
be
failing
systematically
could
there
be
said
to
be
a
clear
justification
for
removing
the
legal
activities
element
of
claims
management
services
from
that
regulatory
framework
and
making
them
separately
subject
to
reservation
and
regulation
under
the
authority
of
the
LSB.
With
the
mischief
identified
by
Parliament
addressed
by
the
Compensation
Act,
pursuing
a
potentially
complex
‘tidying
up’
to
add
some
claims
management
services
to
the
list
of
reserved
legal
activities
would
not
on
the
face
of
things
seem
to
satisfy
any
public
interest
(that
is
not
already
being
met)
or
a
cost-‐benefit
test.
95
See
http://www.dca.gov.uk/legist/compensation_wms_lords.pdf.
4.
Conclusions
As
we
noted
in
our
first
paper,
the
origins
of
many
of
the
reservations
of
legal
activities
are
remarkably
obscure.
We
expressed
the
view
that
the
often
non-‐existent,
and
sometimes
limited,
evidence
of
Parliamentary
consideration
and
debate
at
the
time
the
reservations
were
created
or
confirmed
provides
little
basis
for
suggesting
a
common
policy
rationale
that
justifies
their
existence.
Instead,
what
we
most
often
found
was
statutory
confirmation
of
then
current
practice
without
any
exploration
of
continuing
justifications
for
reservation.
Occasionally,
there
is
evidence
of
a
consultation
or
review
leading
to
recommendations
that
are
adopted
by
Parliament
(such
as
the
Royal
Commission’s
suggestion
that
the
conveyancing
reservation
should
be
extended
to
the
contract).
What
we
tend
to
hear,
therefore,
are
after-‐the-‐event
rationalisations
and
justifications
for
reservation,
based
on
the
proponents’
or
opponents’
views
of
what
should
happen.
In
our
view,
this
does
not
provide
a
sound
basis
for
the
LSB
to
propose
adding
legal
services
to
the
list
of
reserved
activities
or
removing
current
activities
from
the
list.
Further,
we
believe
that
it
would
be
unwise
to
consider
any
particular
legal
activity
for
inclusion
or
exclusion
in
the
absence
of
a
broader
set
of
criteria
that
could
be
generally
applied.
In
this
second
paper,
we
have
therefore
reviewed
the
public
interest
basis
on
which
the
reservation
of
legal
activities
to
authorised
persons
might
be
justified.
We
have
concluded
that:
(1) the
meaning
of
‘the
public
interest’
should
be
broadly
interpreted;
(2) in
meeting
the
regulatory
objectives
in
the
Legal
Services
Act,
those
objectives
could
be
divided
into
primary
and
subordinate
objectives,
where
the
primary
objectives
directly
support
the
public
interest
and
in
any
conflict
among
the
objectives
the
primary
objectives
would
prevail
over
the
subordinate;
(3) reservation
can
be
justified
on
the
basis
of
the
public
interest
in
securing
public
good
(as
a
matter
of
principle
and
without
further
evidence)
and
consumer
protection
(where
sufficient
evidence
exists
to
support
it);
(4) the
current
reservations
for
rights
of
audience,
the
conduct
of
litigation,
court-‐
related
reserved
instrument
activities,
the
administration
of
oaths,
and
notarial
activities
can
be
justified
in
the
public
interest;
(5) a
strong
public
good
case
could
be
made
for
the
current
property-‐related
reserved
instrument
reservation
to
be
broadened
to
include
all
conveyancing
services;
(6) a
strong
public
good
case
could
be
made
for
immigration
advice
and
services
to
become
reserved
legal
activities;
(7) a
strong
consumer
protection
case
could
be
made
for
the
preparation
of
wills
and
powers
of
attorney
to
become
reserved
legal
activities;
(8) the
current
probate
activities
reservation
is
too
narrow;
a
strong
consumer
protection
case
can
be
made
to
replace
it
with
a
broader
reservation
applying
to
the
administration
of
estates;
(9) there
is
no
or
insufficient
justification
for
adding
either
insolvency
practice
or
claims
management
services
to
the
list
of
reserved
legal
activities;
(10) where
reservation
is
justified,
authority
to
practise
a
reserved
legal
activity
should
not
be
confined
to
those
who
hold
a
professional
title
and,
for
those
who
do,
it
should
be
conferred
separately
by
way
of
accreditation
or
endorsement
to
a
practising
certificate;
and
(11) if
the
work
for
any
client
involves
a
reserved
activity,
the
provider
should
be
obliged
to
inform
the
client
that
this
is
the
case
and
name
the
authorised
person(s)
who
will
be
responsible
to
the
client
for
that
work.
Appendix 1: The LSB’s powers to amend the reserved activities
1.
Introduction
The
idea
of
reserved
legal
activities
is
pivotal
to
the
regulatory
regime
laid
down
by
the
Legal
Services
Act
2007.
The
notion
is
central
to
the
definitions
of
authorised
persons,
exempt
persons,
approved
regulators,
and
alternative
business
structures
(ABSs).
The
powers
bestowed
on
the
Legal
Services
Board
by
the
Act
to
add
to
or
remove
from
the
list
of
reserved
activities
are
therefore
far-‐
reaching.
For
example,
if
an
ABS
provides
just
one
reserved
activity
to
the
public
and
that
activity
is
removed
from
the
reserved
list
the
body
will
no
longer
need
to
be
licensed
as
an
ABS.
The
following
paragraphs
set
out
the
method
through
which
alterations
may
be
made
to
the
list
of
reserved
legal
activities,
and
the
various
processes
that
the
parties
named
must
adhere
to.
2.2
Activities
ceasing
to
be
reserved
legal
activities
The
LSB
also
has
the
power
to
recommend
that
an
activity
should
cease
to
be
reserved,
in
line
with
the
procedures
set
out
in
Schedule
6
(section
26(1)).
The
Lord
Chancellor
must
consider
any
such
recommendation,
but
is
not
authorised
to
give
effect
to
it
by
the
Act
(section
26(3)).
Because
no
procedure
exists
within
the
Act
to
implement
a
recommendation
that
an
activity
should
cease
to
be
reserved,
the
Lord
Chancellor
would
have
to
pursue
this
by
other
means,
such
as
through
primary
legislation
or
a
regulatory
reform
order98.
96
These
are:
the
exercise
of
a
right
of
audience;
the
conduct
of
litigation;
reserved
instrument
activities;
probate
activities;
notarial
activities;
the
administration
of
oaths.
97
See
para
2.4.1
above.
98
Explanatory
Notes
to
the
Legal
Services
Act
2007,
para
120.
If
the
Lord
Chancellor
disagrees
with
the
recommendation,
he
must
publish
a
notice
stating
this
decision
and
the
reasons
behind
it
(section
26(4)).
Without
the
Lord
Chancellor’s
agreement,
therefore,
the
list
of
reserved
legal
activities
cannot
be
reduced.
rules
regarding
the
submission
of
written
and
oral
evidence
and
representations
but
must,
so
far
as
is
practical,
consider
all
submissions
made
in
line
with
those
rules
(Schedule
6,
paragraph
12).
The
LSB
may
pay
the
reasonable
costs
of
any
person
providing
oral
evidence
in
line
with
these
rules
(Schedule
6,
paragraph
18).
After
publishing
a
provisional
report,
the
LSB
should
determine
whether
to
hear
any
further
evidence.
In
particular,
it
should
exercise
its
own
rules
in
a
way
that
allows
practitioners
of
the
legal
activity
under
investigation
to
make
representations
on
the
provisional
report
(Schedule
6,
paragraph
13).
The
LSB
should
consider
this
evidence
specifically,
and
any
other
information
that
it
considers
relevant
(Schedule
6,
paragraph
15).
The
final
reporting
period
commences
on
the
date
of
publication
of
the
provisional
report
and
runs
for
three
months,
but
may
be
extended
by
the
LSB
on
notice
to
the
OFT,
the
Consumer
Panel,
and
the
Lord
Chief
Justice
up
to
a
maximum
of
five
months
(Schedule
6,
paragraph
17).
Within
that
period,
the
Board
must
publish
a
final
report,
and
provide
a
copy
to
the
Lord
Chancellor.
This
report
should
contain:
the
Board’s
decision;
reasons
behind
that
decision;
any
recommendation
to
be
made
for
the
purposes
of
sections
24
or
26
of
the
Act;
and,
if
a
recommendation
is
to
be
made,
what
the
Board
considers
should
be
the
wording
of
the
relevant
provision
or
order
(Schedule
6,
paragraph
16).
Whilst
activities
are
under
consideration
for
becoming
reserved,
the
Lord
Chancellor
may
allow,
by
order,
provisional
designation
of
approved
regulators
and
licensing
authorities
(section
25).
If,
as
suggested
above,
a
free
market
for
legal
services
would
lead
to
some
‘failures’
in
the
market,
that
would
in
turn
suggest
that
there
is
a
basis
for
some
degree
of
regulation.
It
may
also
be
the
case
that
there
might
even
be
a
consumer
demand
for
regulation,
despite
the
extra
costs
it
will
involve.
Llewellyn
(1999:
31)
has
highlighted
a
number
of
issues
that
may
cause
a
rational
consumer
demand
for
regulation,
such
as
reducing
the
‘search
costs’
of
finding
appropriate
suppliers
and
doing
business
with
them,
lack
of
information
on
the
consumer’s
part,
a
preference
for
protection
before
the
event
rather
than
action
after
it,
and
the
requirement
of
an
extra
layer
of
assurance
about
the
transaction
being
entered
into.
99
Resolution
on
Market
Regulations
and
Competition
Rules
for
the
Liberal
Professions,
16
December
2003.
Regulation
can
be
applied
either
before
or
after
the
event.
Before-‐the-‐event
(ex
ante)
regulation
dictates
rules
about
who
can
act
in
a
market,
what
they
can
do,
and
how
they
can
do
it
(Collins
2006:
paragraph
2.6).
It
thus
aims
to
set
certain
standards
before
any
transactions
are
entered
into
with
consumers.
After-‐the-‐event
(ex
post)
regulation
provides
for
remedies
against
professionals
who
have
breached
professional
rules
or
service
commitments
(Collins
2006:
paragraph
2.9),
and
so
can
only
act
after
a
problem
has
arisen.
Ex
ante
regulatory
measures
are
generally
perceived
as
being
inherently
anti-‐competitive,
because
they
form
barriers
to
entry
in
the
market
to
which
they
are
applied.
For
this
reason,
there
should
be
a
compelling
consumer
or
public
interest
need
to
warrant
such
restrictions,
such
as
the
inadequacy
of
monetary
compensation
for
harm
caused.
It
seems
logical
that
measures
to
ensure
that
a
market
functions
properly
can
only
be
justified
if
no
other
measures
are
available
that
would
have
a
similar
purpose
but
less
severe
effects
on
competition.
In
essence,
theory
suggests
that
market
failures
are
attributable
to
deficiencies
in
information,
to
inhibitors
of
perfect
competition,
and
to
‘externalities’
and
that
these
failures
warrant
some
form
of
regulatory
intervention.
The
practical
implications
of
information
asymmetries
are
that
a
consumer
may
be
led
by
his
practitioner
into
a
number
of
different
scenarios,
most
obviously
the
risk
of
unknowingly
paying
high
prices
for
low-‐quality
services.
There
is
also
the
possibility
that
a
consumer
may
receive
a
good
quality
of
service,
but
nevertheless
pay
more
for
it
than
necessary
because
the
practitioner
has
provided
a
higher
quality
than
that
required
in
the
circumstances.
For
example,
this
could
occur
when
a
solicitor
has
performed
more
routine
tasks
that
could
have
been
carried
out
more
cheaply
by
a
paralegal,
but
which
are
therefore
billed
to
the
client
at
the
solicitor’s
rate.
Alternatively,
a
consumer
may
be
provided
with
services
that
he
does
not
even
need,
such
as
being
advised
to
pursue
an
unmeritorious
claim.
These
problems
arise
because
a
lawyer
is
responsible
not
only
for
diagnosing
his
client’s
legal
problem,
but
also
then
providing
the
solution.
Without
any
regulation,
all
of
these
situations
will
result
in
the
same
outcome:
gains
made
by
the
provider
at
the
expense
of
the
consumer,
who
has
to
bear
excessive
costs.
Such
costs
for
consumers
may
then
lead
to
fewer
purchases
of
legal
services.
This
in
turn
would
create
concerns
about
access
to
justice
for
those
consumers
who
are
priced
out
of
the
market.
Improving
access
to
justice
is
one
of
the
regulatory
objectives
of
the
Legal
Services
Act100,
and
the
exclusion
of
any
members
of
society
from
the
market
for
legal
services
works
against
the
public
interest,
and
as
such
the
possibility
of
this
happening
is
grounds
for
some
regulatory
intervention.
2.2.2
The
challenge
of
assessing
quality
The
fundamental
problem
with
asymmetric
information
in
legal
services
is
the
difficulties
it
raises
for
any
consumer
trying
to
assess
the
quality
of
the
service
on
offer.
Quality
in
this
sense
should
be
interpreted
broadly
(OFT
2009:
16),
including
not
only
the
legal
information
being
immediately
provided
but
also
taking
into
account
factors
such
as
customer
service
and
a
client’s
personal
circumstances101.
When
assessing
the
quality
of
an
economic
good
or
service,
it
is
useful
to
differentiate
between
search,
credence
and
experience
quality
characteristics.
Search
goods,
such
as
an
item
of
clothing,
may
be
assessed
at
low
cost
to
the
consumer
before
purchase.
The
quality
of
experience
goods,
for
example
a
restaurant
meal,
can
be
determined
after
purchase
through
a
reasonable
period
of
use
(Llewellyn
1999:
34).
In
contrast,
credence
goods
exhibit
extreme
information
asymmetry.
Their
quality
may
only
be
ascertained
some
time
after
purchase,
if
indeed
this
ever
becomes
possible.
One
example
of
a
credence
good
is
an
annual
car
service
(LECG
2000:
10).
Another
is
a
will.
These
quality
characteristics
largely
determine
the
level
of
transaction
costs
for
the
consumer.
These
costs,
in
particular
those
known
as
search
and
information
costs,
tend
to
rise
from
search
through
experience
to
credence
goods
(Llewellyn
1999:
35).
For
a
lay
consumer
to
gain
access
to
all
the
information
required
to
make
a
fully
informed
assessment
of
a
credence
good
would
be
prohibitively
costly.
Legal
services
can
be
classified
as
having
features
of
both
experience
and
credence
goods.
Credence
characteristics
are
displayed
for
two
main
reasons.
First,
clients
often
cannot
properly
assess
the
quality
of
the
advice
they
are
given
since
it
involves
knowledge
that
they
do
not
possess.
Second,
the
quality
of
a
legal
service
may
not
always
correspond
directly
with
its
outcome.
For
example,
a
case
may
be
won
due
to
extraneous
circumstances
(such
as
the
poor
performance
of
another
party’s
witnesses),
or
lost
despite
a
diligent
lawyer’s
best
efforts,
making
it
impossible
for
the
client
to
determine
fully
his
practitioner’s
input
(Copenhagen
Economics
2006:
8).
SEO
(2008:
17)
suggests
that
‘win-‐loss’
statistics
may
act
as
an
indicator
of
quality,
by
correcting
an
imbalance
between
quality
and
market
share
(as
a
lawyer
who
loses
many
cases
might
also
tend
to
lose
market
share).
However,
this
is
not
a
hard-‐and-‐fast
rule
and
does
not
disclose
everything
about
a
lawyer’s
performance
or
the
service
provided.
The
information
asymmetry
therefore
continues
to
exist,
to
the
potential
detriment
of
the
consumer.
Information
asymmetries
affect
different
types
of
consumers
of
legal
services
to
varying
extents.
The
European
Commission
(2005:
4-‐5)
differentiates
between
the
characteristics
and
needs
of
business
users,
the
public
sector
and
households.
Corporate
clients
often
have
higher
levels
of
100
See
further,
para
1.4
above.
101
See
also
Mayson
(2010).
information
about
quality,
as
they
are
likely
to
make
repeat
purchases
and
be
able
to
monitor
the
service
they
receive
using
experienced
employees.
The
public
sector
could
be
considered
to
be
similar
in
this
respect.
Households
or
private
clients,
and
many
small
businesses,
are
likely
both
to
purchase
legal
services
infrequently
and
to
be
less
able
to
monitor
the
quality
of
service
when
it
is
received.
The
case
for
protection
through
regulation
is
therefore
stronger
in
the
latter
situation
(LECG
2000:
32-‐33).
102
In
the
area
of
legal
services
with
which
we
are
primarily
concerned,
this
raises
issues
of
access
to
justice
and
public
legal
education
(cf.
paras
1.4
and
1.8
above).
103
In
England
and
Wales,
the
newly
formed
Legal
Ombudsman
has
fulfilled
this
function
from
6
October
2010.
concern
the
practitioner
representing
a
given
client,
but
rather
they
are
comparative
to
the
lawyer
representing
the
opposing
party
(SEO
2008:
19).
Whilst
adverse
selection
is
based
on
a
consumer’s
ability
to
choose
a
certain
quality
lawyer,
and
therefore
comes
into
play
before
an
agreement
is
entered
into
between
lawyer
and
client,
the
second
agency
cost
of
moral
hazard
arises
after
that
agreement
has
been
made
(Copenhagen
2006:
23).
Moral
hazard
emerges
when
businesses
can
control
the
quality
they
provide
to
consumers.
If
consumers
cannot
determine
for
themselves
the
quality
they
are
receiving,
there
is
an
incentive
for
businesses
to
save
costs
by
providing
lower
quality
whilst
still
charging
high
prices
(OFT
2009:19).
Every
relationship
between
a
principal
and
an
agent
involves
this
risk
of
moral
hazard,
or
opportunistic
behaviour.
Since
a
client
may
require
his
lawyer
to
decide
whether,
and
if
so
what,
service
is
required,
as
well
as
providing
the
solution
to
the
client’s
problem,
there
is
real
scope
for
supplier-‐induced
demand
with
resultant
higher
prices
(SEO
2008:
18).
If
a
lawyer’s
income
is
maximised
in
a
way
that
does
not
correspond
with
his
or
her
client’s
best
interests,
or
information
asymmetries
prevent
fair
bargaining
between
the
two
parties,
moral
hazard
will
be
a
problem
(Paterson
et
al.
2003:
17).
In
the
legal
profession,
this
problem
can
arise
in
several
ways:
a
lawyer
may
pursue
cases
that
do
not
need
to
go
to
court,
advise
his
client
to
litigate
where
it
is
not
wise
to
do
so,
or
simply
not
be
sufficiently
thorough
in
performing
basic
duties
(Copenhagen
2006:
22-‐23).
The
overall
result
of
agency
costs
is
that
overall
consumer
welfare
is
reduced:
both
consumers
who
want
high-‐quality
goods
and
services,
and
sellers
of
them,
would
be
better
off
if
they
were
able
to
do
business
together,
but
the
market
for
them
to
do
so
may
no
longer
exist
as
adverse
selection
and
moral
hazard
result
in
higher
quality
providers
leaving
the
marketplace
(OFT
2009:
23).
One
function
of
regulation
should
therefore
be
to
lay
down
common
standards
that
all
firms
are
confident
will
be
equally
applied
to
their
competitors.
Llewellyn
(1999:
28)
explains:
These
standards
might
not
need
to
be
higher
than
each
firm
would
agree
to,
and
would
willingly
accept,
if
they
had
confidence
that
all
competitors
would
accept
them.
Regulation
can
have
a
positive
and
beneficial
effect
of
breaking
a
grid
lock
by
offering
a
guarantee
that
all
participants
will
behave
within
certain
standards.
In
this
respect,
regulation
does
not
necessarily
apply
standards
that
are
regarded
as
unreasonable
by
the
industry
but
serves
the
purpose
of
breaking
the
grid
lock.
disclosing
the
same
level
of
information
as
would
have
been
released
without
any
compulsion.
A
sensible
path
to
take
would
therefore
be
to
set
minimum
levels
of
mandatory
disclosure
requirements,
and
follow
this
up
with
encouragement
for
further
voluntary
disclosure.
In
an
arguably
perverse
(or
at
least
patronising)
approach,
the
historical
–
and,
in
many
jurisdictions,
still
current
–
standpoint
is
that
asymmetry
of
information
can
be
reduced
by
not
allowing
practitioners
to
tell
their
potential
market
anything
(or
very
little)
about
their
services,
by
imposing
advertising
bans
or
restrictions.
Arguments
exist
both
for
and
against
these
types
of
constraints.
Reasons
in
favour
of
at
least
some
form
of
restriction
on
advertising
include
not
encouraging
consumers
to
make
decisions
they
are
not
competent
to
make
and
preventing
‘charlatans’
from
obtaining
business
through
false
or
misleading
advertisements
(OECD
2007:
43).
In
addition,
it
has
been
suggested
that
advertising
bans
may
prevent
adverse
selection
(Van
den
Bergh
&
Montangie
2006).
If
certain
providers
advertise
low
fees
for
lower
quality,
consumers
may
be
unwilling
to
pay
higher
fees
to
higher
quality
providers
because
they
will
not
be
able
to
ascertain
the
difference
between
the
two
practitioners,
and
so
the
higher
quality
providers
will
be
forced
to
leave
the
market.
However,
a
simpler
restriction
on
fee
advertising
may
prevent
this,
rather
than
an
outright
ban.
The
same
authors
point
out
that,
as
the
quality
of
legal
services
can
only
be
assessed
in
the
long
term,
consumers
will
not
be
able
to
verify
the
truthfulness
of
quality-‐based
advertising,
thus
leading
to
some
calls
for
regulation
of
the
content
of
advertisements
(Van
den
Bergh
&
Montangie
2006:
61).
Perhaps
the
least
convincing
ground
for
advertising
restrictions
is
that
they
in
some
way
preserve
the
dignity
of
a
profession,
and
that
integrity
and
independence
would
be
undermined
by
the
outward
appearance
of
overt
competition
between
professionals
(Van
den
Bergh
&
Montangie
2006:
62).
The
opposing
case,
against
advertising
restrictions,
is
simpler
but
more
effective:
economic
theory
suggests
that
advertising
enhances
competition
by
informing
consumers
about
the
different
products
available
to
them,
and
so
enables
them
to
make
better
purchasing
decisions
(European
Commission
2004:
13-‐14).
In
terms
of
addressing
the
fundamental
asymmetry
of
knowledge
and
experience
as
between
the
practitioner
and
the
client,
advertising
restrictions
deliberately
prevent
the
client
from
gaining
access
to
the
information
needed
to
make
a
fully
informed
decision
about
which
provider
to
instruct.
The
only
conclusion
to
be
drawn
from
this
must
surely
be
that
the
client
cannot
be
trusted
to
reach
the
right
decision
with
full
information
and
that
no
clients
should
ever
be
put
into
such
an
unfortunate
position!
Another
factor
proposed
by
Stigler
(1961)
is
that,
although
consumers
could
gather
information
themselves,
advertising
can
substitute
for
a
large
amount
of
searching
efforts
by
a
large
group
of
consumers.
In
this
way,
advertising
may
lead
to
a
considerable
reduction
in
searching
costs
(OECD
2007:
43).
It
is
also
worth
noting
that
advertising
is
usually
a
key
tool
for
new
firms
attempting
to
enter
a
market,
and
for
this
reason
advertising
restrictions
can
also
act
as
a
barrier
to
entry
(European
Commission
2004:
13).
SEO
(2008:
43-‐44)
provide
a
useful
conclusion
to
the
debate:
From
a
social
perspective,
advertising
should
be
allowed
when
it
is
productive,
that
is,
if
it
conveys
important
and
relevant
information
to
consumers
concerning
the
services.
There
is
no
reason
to
suppose
that
advertising
of
legal
services
should
be
different
than
those
generally
applied
to
other
experience
and
credence
goods
services.
The
challenges
arising
from
assessing
quality
and
addressing
agency
costs
are
typically
founded
on
the
proposition
that
the
transaction
costs
of
individual
consumers
in
assuring
quality
are
too
high
(and
would
in
any
event
lead
to
potentially
wasteful
duplication
or
repetition
of
enquiries
and
judgments),
and
that
it
is
therefore
more
cost-‐effective
in
the
interests
of
overall
social
welfare
for
these
facets
of
professional
services
to
be
assured
on
a
collective
basis.
This
is
usually
achieved
by
a
regulator
setting
appropriate
qualification
and
entry
requirements
(such
as
licensing
or
certification),
and
perhaps
by
setting
and
enforcing
appropriate
quality
standards
and
price
levels.
These
are
before-‐the-‐event
assurances.
Qualitative
entry
restrictions
are
an
example
of
before-‐the-‐event
regulation
in
legal
services,
which
seek
to
ensure
a
certain
level
of
competence
amongst
providers
before
they
are
allowed
to
practise.
The
rationale
is
that,
because
consumers
of
legal
services
cannot
determine
the
quality
of
the
service
a
lawyer
is
offering,
at
the
very
least
they
should
be
assured
every
legal
practitioner
has
undergone
a
certain
minimum
level
of
education
and
training104.
The
Chairman
of
the
OFT
has
expressed
the
opinion
that
this
type
of
regulation
is
suited
to
information
deficiency
problems
(Collins
2006:
paragraph
2.6):
Ex
ante
regulation
can
solve
some
information-‐related
market
problems
inherent
in
the
professional
services
sector,
as
it
is
primarily
designed
to
alleviate
the
risk
of
parties
offering
services
they
are
not
competent
to
carry
out,
and
to
improve
the
incentives
that
members
might
otherwise
have
to
offer
poor
quality
services
or
to
induce
unnecessary
demand.
The
fact
that
poor
quality
legal
services
can
have
such
serious,
and
possibly
irreversible,
consequences
for
the
consumer
justifies
intervention
in
the
market
that
qualitative
entry
restrictions
cause.
In
addition,
regulators
might
also
choose
to
offer
after-‐the-‐event
opportunities
for
complaints
and
compensation.
The
downside
of
the
availability
of
compensation
is
the
‘free-‐rider’
problem,
which
entails
either
clients
pursuing
claims
that
have
no
merit
or
which
they
could
not
otherwise
afford
to
do,
or
firms
being
less
assiduous
in
their
business
activities
knowing
that
the
cost
of
defaults
will
be
picked
up
elsewhere.
Consumers
might
also
be
tempted
to
behave
less
prudently
in
choosing
a
practitioner
if
they
have
the
assurance
of
compensation
for
a
poor
quality
service
(Llewellyn
1999:
29).
The
use
of
before-‐the-‐event
regulation
is
problematic
in
economic
and
regulatory
theory
because
it
inevitably
creates
barriers
to
entry.
As
a
consequence,
there
might
be
fewer
entrants
to
the
market
than
would
otherwise
be
the
case,
resulting
in
local
monopolies
or
advice
deserts.
A
policy
that
knowingly
introduces
such
barriers
must
therefore
satisfy
a
stiff
public
interest
test.
Further,
the
level
of
qualification
or
quality
standards
set
might
be
higher
than
an
efficient
market
required.
This
could
lead
either
to
higher
prices
than
consumers
should
objectively
need
to
pay
for
the
services
required
(which
might
then
result
in
fewer
purchases
–
creating
an
issue
of
access
to
legal
services
or
to
justice),
or
to
higher
establishment
costs
for
providers,
thus
potentially
discouraging
providers
from
entering
the
market.
In
a
bid
to
balance
the
need
to
protect
consumers
without
imposing
too
great
an
anti-‐competitive
burden,
we
agree
with
the
EU
Commission
suggestion
that
any
entry
requirements
should
be
proportionate
to
the
complexity
of
the
work
that
needs
to
be
undertaken
by
the
professionals
in
question.
This
is
an
important
consideration
in
the
context
of
regulation
–
particularly
of
the
reserved
activities
–
because
if
the
level
of
qualification
is
higher
than
needed
for
carrying
out
those
activities,
a
number
of
possibly
unwarranted
consequences
follow105.
104
Whether
the
current
training
process
for
solicitors
actually
does
result
in
competence
to
practice
in
all
areas
is
addressed
in
LSI
(2010b).
105
Many
of
the
issues
are
explored
in
LSI
(2010b).
from
consumers
to
producers.”
To
put
it
another
way:
competition
will
tend
to
reduce
prices
within
a
market,
and
lack
of
competition
will
allow
suppliers
to
charge
higher
prices
to
their
customers.
Low
levels
of
competition
mean
that
there
will
be
little
incentive
for
firms
to
innovate
and
find
new
ways
to
operate
more
efficiently.
The
end
result
will
be
that
consumers
will
have
to
bear
higher
costs.
As
with
higher
costs
resulting
from
deficiencies
in
information,
this
may
result
in
the
public
consuming
fewer
legal
services
(and
those
who
sit
just
outside
the
threshold
for
legal
aid
will
often
be
the
worst
affected).
As
discussed
in
paragraph
2.2.1
of
this
Appendix,
this
creates
issues
regarding
access
to
justice.
It
is
important
to
observe
that
the
current
monopolies
in
the
legal
services
market
created
by
the
existence
of
reserved
legal
activities
are
the
consequence,
rather
than
the
cause,
of
regulation.
Although
lack
of
competition
is
one
of
the
three
main
‘failures’
identified
in
the
legal
services
market,
it
cannot
be
fixed
only
through
regulation
because
regulatory
intervention
is
itself
causing
the
restriction
of
competition.
As
SEO
put
it
(2008:
17):
“Without
government
regulation,
there
would
be
no
lawyers’
monopoly.”
We
noted
earlier
(see
paragraph
1.6
above)
that
regulation
can
co-‐exist
alongside,
and
be
used
to
enhance,
competition.
It
is
not
the
case
that
there
is
only
ever
space
for
just
one
or
the
other
in
a
given
market
(and
certainly
not
in
the
market
for
legal
services).
106
For
example,
quantitative
restrictions
on
pharmacists
in
an
area
of
northern
Spain
–
despite
constituting
a
restriction
on
the
freedom
of
establishment
within
the
meaning
of
Article
49
of
the
Treaty
on
the
Functioning
of
the
European
Union
(the
EU
Treaty)
–
were
held
by
the
European
Court
of
Justice
not
to
be
precluded
by
Article
49
in
joined
rulings
of
1
June
2010
in
José
Pérez,
María
Gómez
v
Consejería
de
Salud
y
Servicios
Sanitarios
(C-‐570/07)
and
Principado
de
Asturias
(C-‐571/07).
The
basis
of
the
decision
was
that
the
restrictions
were
“justified
by
the
objective
of
ensuring
that
the
provision
of
medicinal
products
to
the
public
is
reliable
and
of
good
quality”
(para
64),
were
“appropriate
to
the
aim
being
pursued”
(para
103),
and
did
not
go
beyond
what
was
necessary
to
achieve
that
aim
(para
112).
solicitors
and
barristers)
found
no
evidence
of
such
behaviour
by
the
professional
bodies
included
in
the
study107
(LECG
2000:
119).
2.3.2
Conduct
of
business
In
addition
to
entry
restrictions,
restrictions
or
requirements
on
how
business
is
to
be
conducted
within
a
market
(such
as
standard
fees
or
minimum
pricing,
prohibitions
on
advertising,
or
access
to
external
capital)
may
also
have
an
effect
on
‘free’
competition.
Restrictions
on
advertising
and
fee
setting
have
been
identified
as
the
‘least
defensible’
of
the
possible
conduct
restrictions,
because
of
the
lack
of
an
obvious
link
with
service
quality
(LECG
2000:
119).
Fixed
fees
may
take
the
form
of
either
minimum
or
maximum
prices.
Either
type
will
compromise
the
ability
of
suppliers
to
compete.
The
main
theoretical
argument
for
minimum
prices
is
that
they
aim
to
guarantee
a
certain
level
of
quality.
However,
weighing
against
this
is
the
effect
they
can
have
on
competition,
especially
as
other
less
restrictive
measures
may
perform
the
same
function
(OECD
2007:
54).
Another
basis
for
fixed
minimum
fees
is
their
use
in
assuring
the
confidence
premium
for
members
of
a
profession.
SEO
(2008:
42)
explain:
The
confidence
premium
is
closely
related
to
the
concept
of
credence
good.
For
legal
services,
the
quality
uncertainty
is
replaced
by
trust
or
confidence
in
the
professionals….
The
confidence
premium
is
the
reward
for
the
professional
not
to
cheat
on
the
client.
It
is
a
way
to
protect
the
confidence.
It
is
much
like
trademarks:
it
builds
up
goodwill.
This
notion
perhaps
seems
somewhat
outdated.
There
is
also
an
obvious
flaw
–
as
SEO
continue:
The
problem
is,
however,
that
professions
may
abuse
the
fee
regulation
by
acceptance
of
the
rewards
for
their
monopoly
without
enforcing
high
standards.
Moreover,
even
in
the
absence
of
abuses,
it
seems
very
difficult
to
determine
the
appropriate
size
of
the
confidence
premium.
In
contrast,
fixed
maximum
prices
appear
much
less
restrictive
of
competition
than
their
minimum
counterparts.
They
could
act
to
reduce
the
‘double
monopoly
mark-‐up
problem’,
for
example,
by
limiting
the
fees
for
legal
services
paid
by
consumers
who
have
to
pay
separately
for
a
barrister
and
solicitor.
They
can
also
assist
in
combating
moral
hazard,
by
preventing
excessive
fees
for
lower
quality
services
(OECD
2007:
54).
But
it
is
unlikely
that
these
benefits
would
outweigh
the
major
problem
with
fixed
maximum
fees:
“they
may
have
the
effect
of
leading
to
a
leveling
of
prices
towards
the
maximum
fee
and
thus
have
an
effect
equal
to
that
of
a
fixed
price”
(Van
den
Bergh
&
Montangie
2006:
57).
Pressure
from
competition
authorities
has
resulted
in
fixed
fee
schedules
in
professional
services
worldwide
becoming
increasingly
uncommon.
In
2004,
the
European
Commission
found
that
recommended
fees
existed
only
in
a
few
professions
within
certain
Member
States,
and
the
United
Kingdom
was
not
one
of
these
(European
Commission
2004:
11-‐12).
However,
other
restrictions
are
still
in
force
within
our
jurisdiction,
with
varying
effects
on
competition
and
consumers.
An
empirical
assessment
for
the
OFT
showed
that
(LECG
2000:
28):
professional
restrictions
can
and
do
have
a
detrimental
impact
on
competition
and
on
the
prices
charged
to
consumers.
It
is
important
to
note,
however,
that
it
is
not
possible
to
generalise
about
the
impact
of
restrictions
on
competition.
Each
restriction
or
set
of
restrictions
in
each
profession
requires
separate
analysis.
107
This
was
despite
an
overall
finding
that
there
were
distortions
in
competition
across
all
the
professional
groups
included.
For
the
legal
professions,
these
were
in
areas
including
legal
professional
privilege,
third-‐party
perceptions
of
solicitor-‐advocates,
business
structures,
advertising
restrictions,
and
the
QC
system
(LECG
2000:
120-‐122).
At
this
point,
either
the
quest
for
perfect
competition
or
the
need
for
regulatory
intervention
has
to
be
justified
because
of
the
apparent
conflict
between
them.
Neither
is
inherently
right
or
wrong;
but
the
answer
certainly
depends
on
the
philosophy
or
policy
underlying
the
regulatory
decision-‐
making
process.
2.3.3
Addressing
lack
of
competition
Much
of
the
distortion
of
perfect
competition
said
to
arise
in
legal
services
could
be
argued
to
be
the
consequence
of
anti-‐competitive
regulation
imposed
on
providers.
We
have
already
suggested
that
the
imposition
of
entry
requirements
and
quality
standards
can
lead
to
consequences
that
discourage
full
competition.
In
addition,
for
example,
restrictions
on
advertising
prevent
providers
from
raising
their
profile
and
attracting
clients
in
ways
common
for
almost
all
other
forms
of
commercial
enterprise108.
Empirical
research
has
shown
the
negative
effects
for
consumers
that
can
be
caused
by
undue
regulation
of
advertising
and
licensing.
Lower
quality
and
higher
prices
have
resulted
from
over-‐regulation
of
professional
services
in
certain
cases,
and
positive
effects
have
flowed
from
the
relaxation
of
anti-‐competitive
restrictions
in
others
(European
Commission
2004:
9).
Similarly,
restrictions
on
permissible
business
structures
can
limit
access
to
capital
that
would
be
regarded
as
a
natural
business
process
for
other
ventures.
Despite
this,
all
professions
impose
some
form
of
regulations
on
their
members
in
relation
to
the
way
in
which
they
can
organise
their
business
(Van
den
Bergh
&
Montangie
2006:
66).
Further,
restrictions
on
business
structures
can
also
inhibit
cost-‐efficiency
and
innovation
(which
could
otherwise
lead
to
lower
prices,
or
to
higher
quality
at
the
same
price,
both
without
any
necessary
reduction
in
returns
by
way
of
profit).
On
the
other
hand,
such
restrictions
can
bolster
lawyers’
duties
in
respect
of,
say,
avoiding
conflicts
of
interest109,
as
well
as
reinforcing
their
independence
as
advisers
(for
instance,
by
not
allowing
non-‐lawyer
ownership
or
investment
in
law
firms)
and
their
personal
responsibility
for
advice
given
(by
not
allowing
or
restricting
limitation
of
liability
through
incorporation).
The
dearth
of
empirical
evidence
in
this
area
provides
no
basis
from
which
to
draw
any
meaningful
conclusions
(Van
den
Bergh
&
Montangie
2006:
69).
The
European
Commission
has
expressed
the
opinion
that
business
structure
restrictions
may
be
more
justifiable
in
professions
where
there
is
a
need
to
protect
practitioners’
personal
liability
or
independence.
However,
this
view
is
tempered
by
the
Commission’s
usual
proportional
approach
(2004:
17):
There
might
however
be
alternative
mechanisms
for
protecting
independence
and
ethical
standards
which
are
less
restrictive
of
competition.
In
some
markets,
stringent
ownership
restrictions
might
therefore
be
replaced
or
partially
replaced
by
less
restrictive
rules.
As
with
many
aspects
of
regulation,
what
we
are
faced
with
here
is
a
tension
between
a
public
interest
need
to
address
deficiencies
in
information
leading
to
regulation
that
might
compromise
the
public
interest
need
to
encourage
perfect
competition.
The
resolution
of
this
tension
is
inevitably
a
balancing
act.
Rather
than
being
a
problem
in
itself
that
regulators
should
aim
to
fix,
the
lack
of
competition
in
legal
services
is
a
factor
that
should
be
taken
into
consideration
when
addressing
other
issues
in
that
market.
For
example,
OECD
(2007:
53-‐54)
has
suggested
that,
rather
than
activity
reservations,
title
protection
may
act
to
preserve
the
status
attached
to
lawyers
whilst
also
allowing
competition
by
108
We
are
conscious
in
using
the
expression
‘commercial
enterprise’
that
there
are
still
many
lawyers,
some
professional
bodies
and
some
regulators
who
hold
the
view
that
the
practice
of
law
cannot
be
characterised
as
such.
This
is
not
a
view
that
we
regard
as
tenable,
if
it
is
intended
as
a
polarisation
of
the
regulatory
debate
between
law
as
a
profession
or
as
a
business.
It
is,
and
can
properly
be,
both.
109
This
is
a
significant
concern
to
many
in
the
current
debate
about
whether
self-‐employed
barristers
should
be
allowed
to
move
away
from
the
requirement
to
practise
individually
in
chambers
to
a
partnership
model.
other
providers
–
each
with
their
own
titles
protected.
They
argue
that
this
arrangement
could
also
lessen
information
asymmetries,
as
consumers
would
have
an
idea
from
a
title
what
level
of
quality
and
price
to
expect.
2.4
Externalities
2.4.1
Costs
and
benefits
to
others
Externalities
are
‘a
particular
form
of
market
failure’
(Llewellyn
1999:
9).
In
the
language
of
economists,
they
are
the
effects
of
transactions
on
those
who
are
not
parties
to
them.
Externalities
can
be
either
negative
or
positive:
negative
externalities
represent
a
cost
to
one
or
more
third
parties,
while
positive
externalities
represent
a
benefit.
For
example,
if
a
poor
service
is
provided
to
a
client
who
has
engaged
a
solicitor
to
draft
a
will,
this
could
negatively
affect
third
parties,
such
as
family
members,
who
were
intended
to
be
beneficiaries
under
that
will.
In
this
way,
overall
social
welfare
is
diminished
(Van
den
Bergh
&
Montangie
2006:
27).
Copenhagen
Economics
(2006:
9)
provide
a
useful
example
of
some
positive
and
negative
externalities
that
may
arise
from
a
trial:
lawyers
are
involved
in
uncovering
‘case
law’,
thus
creating
value
for
other[s]
…
who
will
learn
the
current
‘case
law’
without
paying
for
it.
At
the
same
time,
the
result
of
a
trial
can
have
a
pre-‐emptive
effect
for
other
businesses
and
citizens.
Thus
lawyers’
work
in
courts
creates
a
positive
value
for
others
apart
from
the
client….
If
a
client
is
subject
to
a
wrong
ruling
because
he
did
not
use
a
lawyer,
he
will
suffer
a
loss,
but
the
economic
loss
for
society
of
a
wrong
ruling
can
be
far
greater.
The
client
does
not
have
to
pay
the
losses
that
will
arise
elsewhere
in
the
economy
because
a
wrong
ruling
gives
wrong
guidance
in
other
cases.
The
consumer
of
a
legal
service
will
not
be
directly
affected
by
any
externalities
from
his
transaction.
Their
effects
will
fall
on
those
who
are
not
parties
to
the
transaction.
However,
it
is
apparent
that
positive
externalities
work
against
the
client’s
interest,
at
least
indirectly,
because
a
third
party
will
enjoy
a
benefit
that
the
client
is
paying
for.
So,
taking
the
example
of
a
lawyer
involved
in
a
trial
that
develops
the
common
law:
the
client
will
pay
all
of
the
lawyer’s
fees
even
though
some
advantage
is
gained
by
those
who
in
the
future
will
use
the
law
as
it
has
been
progressed.
In
contrast,
a
negative
externality
works
against
the
public
interest
but
in
favour
of
the
client.
A
cost
will
arise
out
of
the
transaction
between
a
lawyer
and
his
client
that
has
not
been
accounted
for
in
the
fees
agreed
between
those
two
parties.
However,
this
cost
will
be
borne
by
whoever
beyond
the
immediate
transaction
or
dispute
is
affected
and
not
by
the
client.
Negative
externalities
create
more
instantly
recognisable
difficulties.
For
example,
if
a
lawyer
negligently
drafts
a
commercial
contract
(depending
on
the
error
made),
not
only
his
client
may
suffer
but
also
the
other
party
to
the
contract
and
possibly
third
parties
on
both
sides.
The
effects
of
positive
externalities
are
harder
to
quantify.
Since
the
nature
of
a
positive
externality
is
such
that
the
client
does
not
reap
the
benefit,
he
or
she
will
not
take
that
benefit
into
consideration
when
deciding
whether
or
not
to
enter
into
a
transaction
with
a
lawyer.
The
client
may
therefore
decide
that
the
costs
of
a
legal
service
do
not
outweigh
the
benefits
to
him,
but
by
not
purchasing
that
service
possible
advantages
to
third
parties
to
the
transaction
are
lost.
Consequently,
such
externalities
are
likely
to
be
under-‐produced
(Rubenstein
2004:
14)
because
the
consumer
who
bears
the
full
cost
of
a
transaction
does
not
receive
all
the
benefits
thereof.
The
cost
of
negative
externalities
that
can
be
generated
by
poor
quality
may
therefore
justify
some
form
of
regulatory
intervention
in
the
legal
services
market
(SEO
2008:
20).
There
are
also
factors
other
than
regulation
that
will
deter
lawyers
from
delivering
poor-‐quality
service,
such
as
harm
to
their
reputation
and
liability
for
negligence
(LECG
2000:
12).
However,
liability
rules
act
only
after
the
harm
has
occurred,
whereas
regulation
of
entry
and
quality
aims
to
promote
acceptable
standards
before
the
event,
and
therefore
to
stop
incompetent
practitioners
from
entering
a
market.
It
has
been
argued
that
only
regulation
of
quality
in
combination
with
possible
liability
claims
will
assure
quality
of
standards
in
legal
services
and
therefore
solve
the
problem
of
externalities
(OECD
2007:
23).
2.4.2
Addressing
externalities
In
a
perfectly
competitive
market,
the
prices
charged
and
paid
for
a
service
will
reflect
all
positive
and
negative
effects
–
in
other
words,
the
potential
externalities
will
have
been
‘internalised’
into
the
transaction.
However,
these
side-‐effects
are
not
accounted
for,
or
internalised,
in
the
original
agreement
between
lawyer
and
client
are
therefore
detrimental
either
to
the
public
or
the
consumer
interest.
Protecting
and
promoting
both
of
these
interests
are
regulatory
objectives
of
the
Legal
Services
Act110,
and
therefore
some
form
of
regulation
can
be
justified
to
further
those
aims.
Regulation
that
is
intended
to
address
externalities
should
therefore
focus
on
avoiding
negative
effects
or
creating
positive
effects
(or
both).
If
there
were
no
regulation
of
the
providers
of
legal
services
(or,
more
accurately,
given
the
existence
of
the
‘regulatory
gap’
referred
to
in
our
first
paper
(LSI
2010a),
where
the
providers
of
legal
services
are
not
subject
to
regulation),
the
potential
negative
externalities
relate
to
costs
on
society
generally.
These
might
take
the
form
of
greater
costs
on
the
courts
system
because
of
a
greater
number
of
claims
arising
from
wrong
advice
or
inadequate
service,
or
because
of
losses
suffered
by
clients
as
a
result
of
such
advice
and
service.
There
are
two
regulatory
approaches
that
have
been
used
to
address
such
externalities.
The
first
is
the
use
of
entry
and
accreditation
requirements,
which
might
also
be
combined
with
the
use
of
quality
standards
and
compensation.
As
we
have
seen
(cf.
paragraph
2.2.5
of
this
Appendix),
these
before-‐the-‐event
and
after-‐the-‐event
approaches
are
also
designed
to
address
other
forms
of
market
failure.
These
measures
are
intended
to
assure
clients
that
those
who
provide
legal
advice
and
services
are
competent
to
do
so,
and
that
there
can
be
some
redress
if
the
advice
given
or
service
received
falls
below
the
standards
expected.
However,
within
the
structure
of
legal
services
in
England
and
Wales,
such
regulation
is
in
essence
voluntary.
Not
all
legal
activities
are
regulated,
so
that
only
those
providers
who
have
chosen
to
qualify
as
lawyers
will
be
subject
to
some
form
of
regulation
of
the
type
described
here.
Historically,
of
course,
almost
all
legal
services
delivered
to
clients
have
in
fact
been
provided
by
those
who
have
chosen
to
qualify.
This
has
resulted
in
clients
being
afforded
a
significant
degree
of
protection.
However,
the
implementation
of
the
Legal
Services
Act
2007
brings
into
sharper
relief
the
distinction
between
those
activities
that
must
be
provided
by
those
who
are
authorised
and
those
that
need
not.
An
emphasis
on
competition
and
markets
is
much
more
likely
to
encourage
those
who
are
not
legally
qualified
to
enter
the
market
and
provide
legal
services
that
are
not
required
to
be
delivered
by
authorised
persons.
This
leads,
therefore,
to
the
second
regulatory
approach
to
addressing
externalities.
This
is
to
reserve
certain
activities
to
those
who
are
appropriately
qualified
or
authorised
–
the
idea
of
‘reserved
legal
activities’.
To
those
who
seek
perfect
competition,
such
reservations
are
inherently
anti-‐competitive.
The
very
notion
of
reservation
is
the
creation
of
a
monopoly
on
provision,
and
arguably
artificially
raises
demand
for
the
services
of
those
who
carry
the
monopoly
right.
Further,
the
existence
of
reservations
imposes
a
burden
and
obligation
on
consumers:
they
are
effectively
110
Legal
Services
Act
2007,
ss.
1(a)
and
1(d)
respectively:
see
further,
paras
1.2
and
1.5
above.
told
by
a
regulator
that
their
choice
of
provider
is
limited,
and
they
must
be
sure
that
they
only
instruct
someone
who
is
appropriately
qualified111.
Many
arguments
have
been
advanced
in
favour
of
reservation.
It
may
help
to
preserve
the
provision
of
so-‐called
universal
services,
namely
those
that
are
considered
sufficiently
important
that
every
citizen
should
have
access
to
them,
but
in
certain
areas
may
prove
unprofitable
to
provide
without
some
monopoly
rights.
Further,
there
is
a
belief
that
the
reservation
of
certain
services
will
result
in
greater
specialisation
by
practitioners,
and
therefore
a
better
service
for
consumers
(Van
den
Bergh
&
Montangie
2006:
41),
or
benefits
to
society
at
large
(cf.
paragraph
3.2.2
above).
However,
from
an
economic
perspective,
the
idea
of
awarding
monopoly
rights
to
a
certain
group
of
people
with
the
aim
of
maintaining
quality
of
service
is
‘outdated’
(SEO
2008:
77).
The
main
argument
against
any
monopoly
is
that
it
causes
welfare
losses,
firstly
due
to
higher
prices
charged
by
the
monopolist,
and
secondly
because
those
extra
costs
make
it
improbable
that
smaller
claims
will
be
pursued.
This
issue
will
affect
poorer
members
of
a
society
most
acutely
(OECD
2007:
33).
Empirical
evidence
of
the
effects
of
reservations
on
either
price
or
quality
of
service
within
a
market
is
sparse.
A
small
number
of
studies
considered
conveyancing
in
England
and
Wales
after
the
Administration
of
Justice
Act
1985
paved
the
way
for
licensed
conveyancers
to
enter
the
market;
prices
did
not
simply
fall
after
their
entry,
as
may
have
been
expected.
Solicitors’
fees
were
found
to
have
fallen
before
the
extension,
as
if
in
anticipation
of
the
increased
competition112
(Farmer
et
al.
1988).
After
licensed
conveyancers
entered
the
market,
fees
were
found
to
be
lower
in
areas
where
they
were
most
active;
but
these
coincided
with
areas
where
fees
had
been
lower
originally
(Gillanders
et
al.
1992).
A
later
study
covering
the
same
areas
as
the
first
then
discovered
that,
whilst
solicitors’
fees
had
risen
in
the
intervening
period,
so
had
those
of
licensed
conveyancers.
In
areas
where
both
types
of
practitioner
operated,
the
fees
of
licensed
conveyancers
had
risen
faster
than
those
of
solicitors,
making
them
more
comparable
(Love
et
al.
1994).
Overall,
it
seems
difficult
to
draw
any
overall
conclusions,
although
the
trend
does
seem
to
be
for
lower
prices
with
greater
levels
of
competition
(OECD
2007:
37-‐38).
3.
Public
goods
We
make
the
point
in
this
paper
that
there
is
a
‘public
good’
dimension
to
legal
services.
We
also
observed
in
footnote
72
above
that
we
regard
it
as
unfortunate
that
economic
theory
usually
characterises
these
public
goods
as
‘positive
externalities’.
We
therefore
wish
to
address
this
group
of
benefits
separately.
Public
goods
are
defined
by
way
of
two
distinguishing
features:
non-‐exclusiveness
and
non-‐rivalry.
Non-‐exclusiveness
means
that
it
is
not
possible
to
prevent
anyone
from
using
the
good
or
service.
Non-‐rivalry
means
that
use
by
one
consumer
does
not
prevent
use
by
another,
and
therefore
the
marginal
costs
of
that
extra
consumer
are
zero.
SEO
(2008:
19-‐20)
provides
the
example
of
flood
defences
as
a
public
good,
and
note
that
without
regulation
nothing
or
too
little
would
be
done
to
preserve
those
defences
as
consumers
would
be
reluctant
to
contribute
financially
on
an
individual
basis.
Information
can
normally
be
classed
as
a
public
good
because
it
can
be
supplied
to
third
111
In
this
context,
the
imposition
of
bans
on
advertising
appears
even
more
bizarre:
consumers
can
only
use
those
who
are
appropriately
qualified,
but
then
those
who
are
appropriately
qualified
are
prevented
from
letting
consumers
know
the
exact
nature
of
the
advice
and
service
that
can
be
delivered!
Simply
allowing
professionals
to
appear
in
directories
or
listings
might
ensure
that
potential
clients
at
least
know
who
has
passed
the
minimum
threshold
for
delivering
a
reserved
service,
but
does
nothing
to
allow
those
clients
to
make
informed
choices
about
which
practitioner
to
instruct
in
their
own
assessment
of
their
needs
and
best
interests.
112
It
is
possible,
of
course,
that
there
are
other
explanations
for
a
fall
in
prices
–
such
as
greater
competition
among
solicitors
following
the
removal
of
the
professional
restriction
on
advertising,
or
the
adoption
of
information
technology
to
improve
staffing,
processes
and
the
cost
base
of
law
firms.
parties
without
incurring
any
further
costs.
However,
the
individual
nature
of
the
information
a
lawyer
will
provide
to
his
client
means
that
it
may
not
be
easily
applicable
to
another
client’s
situation,
and
therefore
is
not
totally
non-‐rivalrous.
In
spite
of
this,
the
importance
of
a
functioning
legal
system
within
society
means
that
there
is
a
general
consensus
that
in
so
far
as
legal
practitioners
may
influence
that
system,
their
services
contribute
public
goods
(Paterson
et
al.
2003:
16).
As
mentioned
above,
legal
professionals
can
create
positive
effects
for
both
third
parties
and
society
as
a
whole.
Although
individual
legal
services
in
themselves
are
generally
not
public
goods,
they
are
a
factor
in
the
notion
of
‘legal
security’,
which
can
be
classified
as
such.
For
example,
lawyers
play
a
vital
role
in
the
proper
administration
of
justice.
It
has
been
argued
that
qualified
advocates
reduce
the
burden
on
judges
and
produce
higher-‐quality
precedents
than
would
non-‐lawyers.
Moreover,
lawyers
make
a
significant
contribution
to
legal
certainty
in
property
rights,
through
contracts,
conveyancing
and
probate,
and
with
that
the
overall
health
of
the
economy
(OECD
2007:
24).
It
is
this
contribution
to
the
public
good
of
legal
security
that
may
provide
an
additional
foundation
for
regulation
of
the
legal
services
market.
As
the
professions
have
a
large
number
of
members,
a
cartel
amongst
them
would
be
difficult
to
organise.
Furthermore,
cartels
do
not
survive
where
there
are
no
barriers
to
entry
in
a
market.
Regulation
can
act
to
organise
professionals
and
impose
such
barriers,
thus
making
cartel-‐like
behaviour
easier
to
sustain
(OECD
2007:
25).
In
situations
where
the
public
interest
would
be
furthered
by
regulation,
regulatory
capture
becomes
more
difficult
to
detect
(OECD
2007:
26).
If
there
is
a
sound
public
interest
need
to
maintain
quality
in
a
profession
characterised
by
information
asymmetries,
it
may
be
impossible
to
determine
if
quality
levels
are
being
artificially
maintained
at
a
level
higher
than
is
socially
optimal.
SEO
(2008:
27)
note
that
rent
seeking
has
been
empirically
proven
with
regard
to
lawyers
in
the
USA
(Winston
and
Crandall
2007).
However,
the
mere
existence
of
regulation
does
not
prove
rent-‐
seeking
behaviour,
since
the
restrictions
in
place
may
simply
be
acting
to
promote
the
public
interest.
Realistically,
the
public
and
private
interest
theories
of
regulation
cannot
be
independent
of
each
other,
and
only
a
combination
of
both
will
fully
explain
the
current
regulation
of
professional
services
(OECD
2007:
26).
5.
Conclusion
The
existence
of
a
tension
between
a
desire
for
competition
and
a
recognition
of
the
need
for
some
regulation
of
professional
services
is
widely
accepted.
So,
Van
den
Bergh
&
Montangie
suggest
that
(2006:
10):
on
the
one
hand
[regulation]
is
necessary
for
the
market
of
professional
services
to
work
at
all
but,
on
the
other
hand,
it
obstructs
competition.
Establishing
a
workable
level
of
competition
requires,
in
short,
striking
a
balance
between
these
two
opposite
effects
of
regulation.
Similarly,
the
EU
Commission
refers
to
the
“potential
tension
between,
on
the
one
hand,
the
need
for
a
certain
level
of
regulation
in
[the
liberal]
professions
and,
on
the
other,
the
competition
rules
of
the
Treaty”
(2004:
5).
But
there
need
not
be
a
choice
between
competition
law
and
regulation
as
separate
ideas.
Their
different
features
should
be
used
together
as
tools
working
to
achieve
the
same
end113.
To
those
who
might
be
tempted
to
think
that
this
is
an
either-‐or
debate,
Llewellyn
suggests
(1999:
23)
that
the
“purpose
of
regulation
is
not
to
replace
competition
but
to
enhance
it
and
make
it
effective
in
the
marketplace
by
offsetting
market
imperfections
which
potentially
compromise
consumer
welfare”.
He
continues:
Regulation
and
competition
are
not
in
conflict.
Regulation
has
the
potential
to
enhance
consumer
welfare
both
by
reinforcing
the
degree
of
competition,
and
by
making
it
more
effective
in
the
market
place.
The
European
Court
of
Justice
has
developed
the
Wouters
test
to
determine
whether
a
regulatory
measure
in
a
profession
contravenes
competition
law.
The
three
stages
are:
first,
to
take
account
of
the
public
interest
goals
of
professional
regulation;
second,
to
consider
whether
the
measures
in
question
are
necessary
to
achieve
those
goals;
and
third,
to
ensure
that
the
restrictions
in
place
are
proportional114.
The
European
Commission
has
echoed
the
need
for
proportionality
on
countless
occasions
since,
and
this
is
something
that
regulators
of
the
legal
profession
should
take
heed
of.
The
thrust
of
the
‘public
interest’
theories
of
regulation
is
that
regulation
to
avoid
market
failures
is
in
the
public
interest
and
justified.
Further,
it
is
justified
in
order
to
produce
public
goods
that
are
of
value
to
society
generally.
An
ideal
market
for
legal
services
should
ensure
that
any
restrictions
on
competition
are
justified
in
the
public
interest,
and
proscribe
any
rent-‐seeking
behaviour
that
does
not
benefit
the
wider
society
(OECD
2007:
30).
113
The
idea
of
concentrating
on
a
policy
mix
rather
than
on
one
specific
type
of
enforcement
has
been
discussed,
for
example,
in
relation
to
financial
institutions
(Llewellyn
1999)
and
to
the
monitoring
of
fish
stocks
by
Department
for
Environment,
Food
and
Rural
Affairs
(Baldwin
and
Black
2007).
114
Case
C-‐309/99
Wouters
et
al
v
Algemene
Raad
van
de
Nederlandse
Orde
van
Advocaten
[2002]
ECR,
I-‐1577.
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