Jonathan Gulliford: Flying in the face of Clementi

Following the publication of the report of the joint committee on the draft Legal Services Bill, much has been made in the press of the way the report 'hits out' at the Government because of the way in which the Bill diverts from the original recommendations of Sir David Clementi in the Regulatory Review of Legal Services.

What has not, thus far, been commented on is the way in which the committee report also flies in the face of much of what Clementi recommended. This is most apparent in chapter five of the report - Alternative Business Structures.

In his report, Clementi unambiguously concluded: "Outside ownership of [Legal Disciplinary Practices (LDPs)] should be permitted. Such ownership should be subject to a 'fit to own' test; but the main focus of the regulatory authorities should be upon the identity of the management team, in particular the head of legal practice and head of finance and administration, and the management systems that they employ, in short on who manages the practice and how.

"Within England and Wales, outside ownership is already permitted in respect of certain types of legal practices which provide conveyancing services; it is proposed that subject to proper safeguards to be set by the [Legal Services Board (LSB)], it should now be permitted in other areas of the legal services market."

Given such a clear endorsement of external ownership of LDPs, why has the joint committee seen fit in paragraph 291 of its report to recommend to the Government that it needs to "use less haste and more care"?

They go on to say: "We recommend that the draft Bill be amended to ensure that the LSB takes a step-by-step approach to licensing [Alternative Business Structures]."

But at what point does this step-by-step approach envisage external ownership? At stage four of four - after the creation of multi-disciplinary practices. How the committee can believe that this timetable is in line with Clementi's recommendations is beyond me.

One thinks they must have uncovered some new evidence that was not available to the regulatory review team. The stated reason for advising caution and slow progress is set out in paragraphs 279-281: "In our opinion, LDPs... with outside ownership may create an undesirable conflict between shareholders and lawyers and the benefits of outside ownership would need to be weighed against the merits."

This is not a new issue. Clementi expressly addressed it in his report and set out how regulation would deal with it. The notion that somehow lawyers who work in private practice are devoid from commercial pressure is ludicrous.

Indeed, the owner/manager partners in private practice will be under far more pressure to keep a healthy cashflow and profit coming into a business than a non-lawyer-owned LDP. As Clementi highlighted in his report, this issue is addressed through regulation - the very regulation that is proposed.

Who is the potential loser from this report by the joint committee? Once again, it is the most important person in the legal services chain - the consumer.

Clementi quoted from a number of pieces of research which confirm the view expressed to Co-operative Legal Services by its members - that lawyers are not perceived as being customer-focused, approachable or easy to comprehend.

The end users of legal services want the opportunity to turn to a company they know and trust when they need to consult a lawyer. The Government must not be sidetracked by the self-interest of the profession to the detriment of the interest of those who instruct us.

Jonathan Gulliford is operations director at Co-operative Legal Services.