Can legal executives scrap their regulator? I was only half-serious when I suggested last month that a festering dispute about regulating lawyers might end up in the courts. But that now looks like more of a possibility.
Those unfamiliar with the background should start with my earlier piece. The crucial thing to understand is that representative bodies such as the Law Society, the Bar Council and the Chartered Institute of Legal Executives — CILEX for short — are “approved regulators” under the Legal Services Act. But they must delegate their regulatory powers to arms-length bodies — front-line regulators like Solicitors Regulation Authority and the Bar Standards Board.
There is also a super-regulator, or oversight regulator, called the Legal Services Board. The board makes internal governance rules to ensure that an approved regulator’s regulatory functions are exercised independently of its representative functions.
The Solicitors Regulation Authority announced on 1 July that it would be willing to regulate CILEX members — as legal executives are now called. If CILEX decides to go ahead, the solicitors’ regulator said, there would be public interest benefits. And solicitors would not have to pay anything towards the restructuring.
But it remains for CILEX to decide. And any decision to redelegate — to change regulator — would need approval from the Legal Services Board.
CILEx Regulation Ltd
At present, legal executives are regulated by a company called CILEx Regulation Ltd. Not surprisingly, they don’t want to be put out of business. More to the point, they say the lawyers they regulate would be breaking the law if they switched to another regulator.
John Barwick, chief executive of CILEx Regulation, told me this week:
CILEx Regulation Ltd remains of the view that the CILEX proposal to redelegate the regulation of authorised and unauthorised CILEX members is unlawful. This is a view informed by the opinion of two KCs.
The Legal Services Act 2007 set out a careful balance between the historic role of representative bodies (like the Law Society, Bar Council and CILEX) and the need for strong independent regulation.
CILEx Regulation Ltd believes it was not parliament’s intention when drafting the Legal Services Act to enable approved regulators, like CILEX, to redelegate regulatory responsibility in the manner proposed. To do so could have a chilling effect on the independence of regulators which in turn undermines the stable and efficient regulation put in place by the 2007 act.
Might all this end up in court?
“With regards the timing of any potential legal action by CILEx Regulation Ltd,” Barwick added, “we understand that the CILEX board is due to consider the Solicitors Regulation Authority regulatory proposals at a board meeting later this month. The CILEx Regulation Ltd board will consider the outcome before deciding the next steps it may wish to take.”
CILEX
Over to CILEX. It said:
Having received confirmation of the Solicitors Regulation Authority’s decision that it is willing to apply to take on the regulation of CILEX members, CILEX will hold a board meeting on 16 July to review the Solicitors Regulation Authority’s updated proposals following its most recent consultation exercises, together with stakeholder feedback and updated impact assessments.
The CILEX board will consider whether any further activity is required before a final decision is made later this year on whether to proceed with making an application to the Legal Services Board.
What about its regulator’s view that redelegation would be unlawful?
Legal Services Board
CILEX relies on a report by the oversight regulator published in April. According to the Legal Services Board, “an approved regulator retains the power, in principle, to revoke its delegation to a regulatory body and redelegate its regulatory functions elsewhere”.
Explaining the reasons for its conclusions, the Legal Services Board said:
the ordinary position in public law is that a delegation of powers may be revoked or set aside.
that principle can be revoked by statute but there is nothing in the Legal Services Act to prevent redelegation.
the approved regulator retains a residual role, suggesting that the delegation of functions is not total and irrevocable.
Law Society
All this is about much more than a change of regulator. The Law Society, representing solicitors, says it would bring no benefits to legal executives and increased risks to consumers.
A change of regulator was not something that solicitors wanted, their representatives said, and there was not much evidence that CILEX members were calling for it either. I understand the Law Society has also not ruled out the possibility of a legal challenge.
As defined by the CILEX chair, “a chartered legal executive is a specialist lawyer; a solicitor qualifies as a generalist lawyer.” Professor Chris Bones complained last year that legal executives were still looked down on by solicitors.
But solicitors say that if CILEX members start marketing themselves simply as lawyers, they will soon have clients with multiple problems seeking advice about areas that individual CILEX members may not be qualified to handle. Clients instructing a “lawyer regulated by the Solicitors Regulation Authority” might believe, not unreasonably, that their lawyer was a solicitor with a generalist qualification.
Ian Jeffery, the Law Society’s chief executive, told me this week:
We are deeply concerned by the Solicitors Regulation Authority board’s decision to regulate CILEX members.
This change is despite its own regulated community, and CILEX’s members, objecting to the idea of regulatory change. The Legal Services Consumer Panel has also stated that the consumer case has not been made.
We have repeatedly opposed this change, expressing concern that it would have a negative impact on consumers, the wider public interest and the regulatory objectives.
The Solicitors Regulation Authority has a tough job. It is coping with the aftermath of the collapses of Axiom Ince and SSB Group, as well as the outcome of the Post Office Horizon IT Inquiry. The Solicitors Regulation Authority should not be distracted by an unnecessary major change programme when it must concentrate on its core business.
The next steps are CILEX’s and, if the proposals proceed, they will have to be assessed by the Legal Services Board. However, it remains unclear to the Law Society at which point Solicitors Regulation Authority Limited intends to seek the required approval from the council of the Law Society as its sole member.
That last point is a new and striking one. Solicitors Regulation Authority Limited is a company limited by guarantee. It has a number of officers but the Law Society has sole control of it. Might the solicitors’ representatives prevent it from regulating CILEX members in the last resort? And what would the Legal Services Board make of that?
See you in court, perhaps.
Update 17 July: CILEX has decided to press ahead.
It said:
At its meeting on 16 July, the CILEX board considered the letter received from the Solicitors Regulation Authority confirming its willingness to regulate CILEX members, together with updated proposal documents, stakeholder and consumer feedback and the impact assessments arising from the Solicitors Regulation Authority’s most recent consultation exercises.
The CILEX board remains satisfied that its case for change is valid and that a change of regulatory delegation is in the public interest.
CILEX will now work with the Solicitors Regulation Authority to finalise the full details needed for an application to the Legal Services Board to revise its delegation to regulate all CILEX members from CILEx Regulation to the Solicitors Regulation Authority. This includes further work to ensure the identified benefits for consumers can be fully realised and demonstrated.
We expect the CILEX board to make a final decision whether to proceed to an application to transfer its regulatory delegation to the Solicitors Regulation Authority in public session at its board meeting in October 2024.