Legal Services Act 2007 (Approved Regulator) (No. 2) Order 2014

Thursday 23rd October 2014 Grand Committee

Motion to Consider

15:07

Moved by

[Lord Ashton of Hyde]

That the Grand Committee do consider the Legal Services Act 2007 (Approved Regulator) (No. 2) Order 2014.

Relevant documents: 4th Report from the Joint Committee on Statutory Instruments

[Lord Ashton of Hyde (Con)]

My Lords, the purpose of the order is to designate the Chartered Institute of Legal Executives—CILEx—as an approved regulator under the Legal Services Act 2007 for the reserved legal activities of reserved instrument activities and probate activities. This will allow its members to conduct these activities without the supervision of solicitors and, once appropriate regulatory arrangements are in place, to establish its own practices to conduct these services.

By way of background and to give a complete picture, the Legal Services Board, which is the oversight regulator for approved regulators and licensing authorities under the 2007 Act, made a recommendation to the Lord Chancellor on 19 September this year that he make an order under Section 69 of that Act to modify the functions of CILEx. If the order is made it will provide CILEx with powers to allow it to make rules to provide for a compensation fund and also give it intervention powers via seeking an order of the High Court to intervene in a regulated entity.

The Lord Chancellor accepted the recommendation on 7 October and the Section 69 order was laid on 13 October, with the intention of it being commenced by the end of the year. If granted, it will allow CILEx, through ILEX Professional Standards, CILEx’s independent regulatory arm, to regulate entities as well as individuals. If both these orders come into force they will enable increased competition and innovation in the legal services market.

The Legal Services Act 2007 governs the regulation of legal services in England and Wales and established a new regulatory framework for legal services. The intention of the 2007 Act was to put the consumer at the heart of legal services and deliver a more effective and competitive market. It established a number of regulatory objectives that the Legal Services Board and approved regulators must promote, including the requirement to protect and promote the public interest and the interests of consumers, encouraging an independent, strong, diverse and effective legal profession and promoting competition in the provision of legal services by authorised persons.

The 2007 Act enabled the widening of the legal services market to allow for different regulators to regulate legal services and for different types of legal businesses to provide those services. Under the 2007 Act, only a person who is authorised by an approved regulator or licensing authority may carry on a reserved legal activity, unless they are covered by one of the limited exceptions. Approved regulators are responsible for ensuring that the persons authorised by them act in a way that is consistent with the regulatory objectives set out in the Act.

The Chartered Institute of Legal Executives offers one of the most flexible routes into the legal profession, allowing people from a variety of backgrounds to enter the legal profession, a fact that is reflected in its diverse membership. CILEx is already an approved regulator under the Act and has been able to authorise chartered legal executives to administer oaths and exercise rights of audience since the commencement of the Act. CILEx was also designated as an approved regulator for the conduct of litigation in May 2011 and is a designated qualifying regulator for immigration advice and services.

CILEx applied to the Legal Services Board in March 2013 to be designated as an approved regulator for reserved instrument activities and probate activities. The LSB then tested CILEx’s proposals against the criteria set out in the 2007 Act and they assessed that CILEx has both the capacity and the capability to undertake an extended regulatory role in the legal services sector. The LSB took advice from the mandatory consultees, as required by the Act: the Lord Chief Justice, the Legal Services Consumer Panel and the Office of Fair Trading.

The LSB is satisfied that CILEx has met the requirements of the Legal Services Act in that it has appropriate internal governance procedures in place so that regulatory decisions will be taken independently of representative ones; that CILEx will be competent and have sufficient resources to perform the role; and that CILEx’s regulatory arrangements make appropriate provision for the regulation of those it wishes to authorise and that provision has been made to prevent regulatory conflicts. Furthermore, the LSB is satisfied that appropriate complaints procedures will be in place, including mandatory co-operation with the Legal Ombudsman, and that CILEx will promote the regulatory objectives set out in Section 1 of the Act.

The LSB is satisfied that there will be no lowering of standards or lessening of consumer protection. It is satisfied that ILEX Professional Standards will be a capable and effective regulator in the legal services market. Its expansion in this field will help to contribute to the growth of the legal services market and bring further innovations, leading to benefits to the consumers of legal services. Following its consideration, the LSB made a recommendation to the Lord Chancellor on 9 December 2013, and earlier this year my honourable friend Shailesh Vara MP agreed in principle to make the present order designating CILEx as an approved regulator for the reserved legal activities of reserved instrument activities and probate activities under the 2007 Act.

Following the draft order being laid on 23 June of this year, the order was debated in the House of Commons on 8 September and gained committee approval. The order has been brought before this House at the earliest opportunity. This order will provide a greater choice of regulator for properly qualified and trained practitioners to carry on the reserved legal activities of reserved instrument activities and probate activities. It will pave the way for the continuing widening of the legal services market. I therefore commend the order to the Committee and beg to move.

[Baroness Buscombe (Con)]

My Lords, I very much welcome this order granting the Chartered Institute of Legal Executives, through the regulator, ILEX Professional Standards, the power to authorise individual practitioners to provide probate and conveyancing activities under the Legal Services Act 2007. As we have heard from the Minister, there are many reasons to support this order. What will it change? It will cut red tape and enable suitably qualified and competent CILEx members to be authorised to provide probate and conveyancing services. This will mean that businesses employing CILEx practitioners can be more efficient and flexible and can cut the unnecessary bureaucracies in place to sign off their work.

IPS currently regulates individual CILEx members. The order will enable them to regulate entities as well, meaning that CILEx members will be able to set up their own businesses and provide legal services to the public across the full range of reserved and regulated activities.

15:15

The benefits are numerous. First, the cutting of bureaucracy that prevents CILEx’s specialist lawyers from competing on an equal footing with other practitioners will enable existing firms to operate more effectively and less bureaucratically by freeing up their workforce. Specialist CILEx lawyers who are considering applying for these rights are already well experienced in these areas. Many of them have trained and qualified in these areas from the outset.

Perhaps more important is the consumer interest. Consumers will have greater choice over legal service providers. Consumers will be able to provide direct feedback to IPS on the quality of service that CILEx lawyers provide through the IPS’s consumer-focused website. All CILEx practitioners will be rigorously assessed against the challenging qualification and practice criteria set up for their specialism by IPS.

We heard from the Minister on the issue of diversity and social mobility. CILEx has been facilitating a flexible and adaptable route into law for 50 years. Its diverse members will be able to practise independently at more senior levels, running their own businesses if they wish. This cannot but increase diversity in the legal sector. In addition, I emphasise the greater choice over legal service providers and for many, I hope, a reduction in costs.

The two issues of probate and conveyancing that this raises are extremely important to the consumer. First, I will deal with probate. This challenge comes into people’s lives always at a very difficult and upsetting time and has to be dealt with at a very emotional time. Frankly, they get precious little sympathy from the Inland Revenue, which tends to make most of us feel that we are in the wrong before we even begin the process. The process of obtaining probate and understanding it is difficult, complex and bureaucratic in itself. There are too many consumers out there who are afraid of picking up the phone to get qualified help for fear of the costs involved. So I welcome this measure because it will make a difference to that, and it will provide more competition in the marketplace.

In relation to conveyancing, exactly the same applies. Frankly, this has not come soon enough. I have very current experience of conveyancing, in what you might call the old-fashioned way, which is proving very frustrating, slow and expensive. In the purchase of a flat without encumbrances, a purchase that in theory could be quick and straightforward, unfortunately the vendor has retained a solicitor, probably a very expensive one, from one of the inner circle firms, who has been extraordinarily slow to produce elementary information and has proved inaccessible and out of reach, using the old excuse that lawyers use—I say this as a member of the Bar—that they are “busy in court all day”, when we know that courts tend to sit between 10 am and 4 pm. Amazingly, the same solicitor calls himself a conveyancing solicitor but does not even do e-mail. It is ironic that the same firm—which is not far from your Lordships’ House—was enormously helpful to me when as a shadow Minister I took the Land Registration Act 2002 through your Lordships’ House. In particular, the firm assisted in shaping the framework for e-conveyancing.

So it is good that we are moving on. I welcome more competition among service providers, including the many very able, skilled legal executives who will be able to operate without a solicitor’s oversight. I have one question for the Minister relating to paralegals, and I speak as the founder patron of the Institute of Paralegals: is their position also being considered in relation to these rights?

[Lord Phillips of Sudbury (LD)]

My Lords, I declare an interest as an honorary vice-president of CILEx and as someone who started working with what used to be called managing clerks as long ago as 1957. I think I learnt most of my law from managing clerks of the old variety, who learnt on the job and did not have a CILEx qualification because there were not any then. I am strongly in favour of this statutory instrument for all the reasons that the Minister has set out.

I have a slight divergence of view from CILEx—although I suspect one could sort it out if it was here—over the idea that competition in these matters is always in the public interest. It certainly is not. Some of us are fearful that the changes in the legal services market in the past decade will prove to deliver some disastrous consequences in the next. I have no hesitation on that score relating to this statutory instrument, though, because the Legal Services Board is a proper, well staffed body that has made a thorough investigation of the fitness of CILEx and its subsidiary company to undertake the task allowed them by this change in the law. For those reasons, I am entirely in favour of the order. The Lord Chief Justice was absolutely right to raise the impact on standards of the competition that will be unleashed by this change in the law but, as I say, a very proper investigation has been undertaken. I strongly hope that it will be in the public interest.

I will mention a point that has not yet been mentioned. Reserved instrument activities, which form the subject of paragraph 2(a) of the order, are defined in paragraph 5 of Schedule 2 to the 2007 Act as:

“preparing any instrument of transfer or charge for the purposes of the Land Registration Act 2002”.

There is then some detail relating to that. This is not a massive breach in the status quo but still a very important one, for the reasons just mentioned. I have no doubt that many frustrated buyers and sellers of property in this land will be greatly helped by what is happening today, because I have no doubt that legal executives will set up their own firms to do just this sort of work. They will do it well, swiftly and at a very fair price, and they will be overseen by CILEx, which is an excellent body with high standards. It is driven not by the profit motive but by public interest concerns. That is all I wish to say.

[Lord Clement-Jones (LD)]

My Lords, both my noble friends have been extremely eloquent in their support for the order. I will be extremely brief because I agree with every word that they have said, with some qualification regarding my noble friend Lord Phillips’ comments. I declare an interest as a member of the Law Society and as a partner in a major law firm. I have never been an advocate or supporter of a closed solicitors’ shop. I very much favour diversity and competition, particularly in the case of chartered legal executives. I welcome their ability to carry out a wider degree of work, as envisaged by the order. This is very consistent with the continued opening up of the legal market that I have generally supported. I did not hear the words “alternative business structures” in what my noble friend had to say at the outset, but I assume that this is consistent with the alternative business structures, which, again, I have always supported since their introduction because I believe that they are for the benefit of both business and consumers. I think, and my noble friend Lady Buscombe made this point extremely well, that in terms of both probate and conveyancing this will make a major difference to the competitiveness of that market.

[Lord Kennedy of Southwark (Lab)]

My Lords, I do not intend to detain the Grand Committee for very long. I agree with many of the comments that noble Lords have made so far in the debate. The Opposition fully support the proposal and endorse the reasons outlined by the Minister why it is necessary and welcome.

The Chartered Institute of Legal Executives provided me with a very helpful briefing that makes clear the benefits of the proposal, and I am grateful to them for that. I agree with the comments by the noble Lord, Lord Phillips of Sudbury, about what a good organisation CILEx is. It has done excellent work on a variety of areas, particularly on broadening the diversity of the legal profession, and I pay tribute to it for that.

Allowing CILEx to become a regulatory body in the areas of conveyancing and probate is welcome. It will help to cut bureaucracy and red tape and help to make things simple for everyone. However, it would help if the Minister could comment on the remarks made by the former Lord Chief Justice, the noble and learned Lord, Lord Judge, as referred to by the noble Lord, Lord Phillips. He expressed concern that regulatory competition would have a detrimental effect on standards, that the variation in standards between regulators was inappropriate in principle and that a variation on standards may bring about a drive to the bottom.

I also noted that the former Lord Chief Justice had one matter of concern across the board—parity of standards when one has a proliferation of regulators—and he had further concerns as to whether the instrument deals with contentious or non-contentious probate. It would be helpful if the Minister could give us his views on those points as well. Having said that, this measure helps to encourage an independent, strong, diverse and effective legal profession, and consumers will have much greater choice. That is very welcome and I am very happy to agree the order.

[Lord Ashton of Hyde]

My Lords, I thank all noble Lords who have spoken in this brief debate. It has been helpful to identify concerns and I hope that I will address them—although there did not actually seem to be that many, as far as I could understand it. I have been able to set on record why the Government have decided to designate CILEx as an approved regulator, and I am pleased to hear what I think was the universal approval of CILEx as a suitable regulator for the reserved instrument activities and probate activities.

A number of questions and points were raised. My noble friend Lady Buscombe asked about paralegals. I am not 100% sure what the definition of a paralegal is so I will write to her to ensure that I have all the details. There are currently no proposals to extend the regulation to paralegals as a group, but obviously if a paralegal wanted to undertake a reserved activity, they would need to seek authorisation from one of the approved regulators, such as CILEx, and would have to undertake the correct test to ensure that the regulator could approve them.

My noble friend Lord Phillips of Sudbury talked about the issues surrounding the Legal Services Act in the context of competition. The Act has been passed by this House. Whether or not competition will be improved—I think that most people, and certainly the Government, feel that it will—in terms of this order, which appoints CILEx as an approved regulator, I think he was happy to agree that it is a satisfactory regulator for these two extra activities.

15:30

My noble friend Lord Clement-Jones said that I had not mentioned alternative business structures. One of the reasons I mentioned the background to the extra order that is going to be laid in the next few months was to explain that, under Section 69 of the Act, when that is laid before the House, and if it is agreed, CILEx would be able to authorise entities as well. This would be an example of where authorised business structures could come into effect. Both orders need to be laid. The two go together, which is why I brought that in.

In his supportive speech, the noble Lord, Lord Kennedy, asked about the comments of the former Lord Chief Justice, who was one of the mandatory consultees on this. The LSB is fully aware of the specific concerns that the former Lord Chief Justice had and had them in view when considering applications. Parliament legislated clearly in the Legal Services Act 2007 about the objectives of the Act, which include, among other things, encouraging an independent, strong, diverse and effective legal profession and promoting competition in the provision of services provided by authorised persons under the Act. The 2007 Act therefore aims, among other things, to achieve a more effective and competitive market. Having CILEx extend its regulatory powers will help this.

This order will allow CILEx to regulate its members to conduct those activities as authorised persons in their own right. In addition, once further regulatory arrangements are in place, which I mentioned, CILEx members will be able to establish their own practices to conduct these services. This order, combined with the forthcoming Section 69 order, will facilitate the widening of the legal services market, thereby increasing competition and innovation in the legal services market while maintaining high standards. Consumers will receive greater choice, higher standards and competitive prices.

Motion agreed.