David Hunt: Reforms could ruin profession

The Lord Chancellor, Lord Falconer, has never sought to disguise his views on regulation of the legal profession. Three years ago, the Department for Constitutional Affairs (DCA) described the system as "outdated, over-complex and insufficiently accountable or transparent", and Charlie Falconer appointed Sir David Clementi to propose some reforms - which he did, to general acclaim, in December 2004.

Now the DCA has published a draft Legal Services Bill. The Bill is based on Clementi, but does differ from his report in some important respects.

I chaired a cross-party committee of MPs and peers charged with reading, digesting and commenting on that highly complex, 334-page draft Bill - all within the space of just two months. It was a tight timescale, but we did manage to produce a report which was agreed unanimously, by Labour and non-Labour, lawyer and non-lawyer alike.

Given the ridiculous timescale imposed, I think it is a reasonably good piece of work. I have to admit, however, that this was a very frustrating experience - the report could have been more comprehensive if only we had had the time we needed to do the job properly.

The committee was profoundly concerned about the threat the draft Bill poses to the independence of the legal profession, but we were also dismayed by plans to allow law firms to crack on with developing alternative business structures (ABSs). Clementi advocated caution on this, principally because of the potential conflicts of interest that could be created between shareholders and clients, preferring a step-by-step approach.

He said: "The first steps must be to find a way in which lawyers from different front-line bodies can work together in one consistent regulatory framework." In other words, a reformed system should kick off by having solicitors and barristers working together, possibly with non-lawyers as managers; then allow some outside investment into firms (with a 'fit to own' test); and only if that has all bedded down nicely should further liberalisation and the creation of multi-disciplinary partnerships be considered.

The Government has flung that caution to the wind. It seems ministers implicitly believe this is essentially a market like any other. The regulator will be there to stamp down on malpractice, but otherwise it can be more or less a free-for-all. All this is done, supposedly, in the 'consumer interest' (the committee noted, with some disapproval, that the significant broader concept of the 'public interest' has been dropped from the proposed list of regulatory objectives). This implies a catastrophic misunderstanding of the nature of the market for legal services.

First, this is not a homogenous market and it cannot be treated like one. Law firms are not like food shops. Most individuals have, at most, brief and occasional dealings with them. The big, commercial buyers of legal services wield disproportionate power.

Second, the Government has adduced no evidence for its assertion that ABSs will improve the market or serve the public interest, beyond the lame sophistry of last autumn's White Paper, which merely set out a series of bold assertions about 'choice', 'service', 'flexibility', 'convenience' and 'confidence', but never offered up any substance. This condescending approach is doctrinaire, fatuous and wholly unacceptable.

No one would claim the legal services market, as it currently operates, is perfect. But the last thing we need is to engage in a process of rapid, radical, uncontrollable change which could cause us to lose sight of the founding professional principles that must lie at the heart of our legal system - independence and integrity. The Government needs to think again.

David Hunt (Lord Hunt of Wirral) is a partner at Beachcroft.