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Super-regulator tells SRA to review "quickly" restriction on charging charities

The Legal Services Board has called on the Solicitors Regulation Authority to review "quickly" whether to remove the geographical restriction it placed on local government solicitors’ ability to charge charities.

The super-regulator said the review was particularly needed because of the context of the Localism Act 2011.

It also separately called on the SRA to publish a timescale and the scope for its wider review of in-house rules, when the authority was expected to revisit the geographical restriction.

As part of its Red Tape Initiative, the SRA proposed an amendment to Rule 4.15(e) of the Practice Framework Rules to allow local government solicitors to charge charities.

However, its decision to restrict this ability to where the objects of the charity concerned were related “wholly or partly” to the employer council’s area was strongly criticised by local authority lawyers.

In its decision notice, the Legal Services Board said it welcomed the Red Tape Initiative and the SRA‘s commitment to the removal of unnecessary processes and restrictions.

It praised the SRA for showing “imagination and thoroughness in identifying a raft of deregulatory measures which should improve access to justice by empowering not for profit bodies and others to reach a wider range of clients and give them greater flexibility by enabling a wider range of staff to fulfil key functions”.

However, in the decision notice the Board expressed concerns about the amendment to Rule 4.15 and revealed that it had sought clarification from the SRA about a number of issues concerning whether it was appropriate for the ‘employer’s area’ restriction to remain.

The SRA argued that removing this restriction on local authorities providing legal services beyond its area, while enabling “local authorities to provide legal services to a much wider range of consumers” would do so “without the protection of such services being provided through a regulated entity”.

The authority said it therefore needed to examine the issue in more detail as part of its review of in-house rules. However, the LSB said the SRA could not confirm when that review would end or what its outputs would be.

In its decision notice, the Board said: “The LSB‘s view is that the SRA‘s response does not take into account that no local authority will be an SRA-regulated entity. So, for example, if Local Authority A can act for charities and voluntary organisations that are situated in Area A without Local Authority A being an SRA-regulated entity, we do not understand why the lack of regulation at entity level is a factor if Local Authority A acts for charities and voluntary organisations in Local Authority B‘s area.

“We do not consider it adequate for the SRA to say that it will consider this issue in the future but not to give any indication of a timescale and outputs for such a review.”

The LSB cited the SRA’s contention that removing the ‘employer‘s area’ restriction could “result in an undesirable position having regard to the fact that the further the client is geographically from the local authority, the less likely the client will have a nexus to the local authority and could be considered a member of the public which potentially raises issues under [the Legal Services Act] as well as public protection issues”.

The decision notice said: “The LSB‘s view on this aspect is that if a charity or voluntary organisation is not a member of the public at one address, it seems unlikely that it would become a member of the public because it moved to a different local authority area. In any event, provisions within the Act would allow the SRA to look at a particular case, decide whether the charity or voluntary organisation was a member of the public and invite the local authority to become authorised.”

The Board acknowledged that while it did not agree with the position of the SRA on maintaining the ‘employer’s area’ restriction, it did not have the power to substitute an alternative form of wording into an approved regulator‘s proposed rule changes.

It added that given that the existing Rule 4.15(e) of the SRA Practice Framework Rules 2011 pre-dated the coming into force of the Localism Act 2011, the LSB did not consider that there were grounds to refuse the proposed change on the basis that it would be contrary to any provision made by any other enactment. Accordingly, it granted the SRA’s application for approval of the rule changes. 

“Nevertheless, we expect the SRA to review quickly, particularly given the context of the Localism Act 2011, whether it should remove this additional element of red tape and, separately, to publish a timescale and the scope for its review of in-house rules,” the Board said.

“If the SRA decides in principle to remove the employer‘s area restriction but considers that changes can only be made in the context of the wider review, the LSB suggests that it makes a statement on its position and waivers this provision in the intervening period.”

A copy of the decision notice can be viewed here. The seventh version of the SRA's Handbook came into force on 1 April.

Responding to the LSB's comments, SRA Director of Policy Agnieszka Scott said: “Extensive work is currently being carried out with the in-house sector and in particular the not for profit sector to see what changes need to be made to the regulatory framework to accommodate changes brought about by the Legal Services Act 2007. We are also carrying out research with local government groups into the Localism Act 2011 and consideration is being given to whether this should be prioritised in view of the concerns raised. 

“Until we have made further progress with this work, we will not be in a position to set out timescales for the in-house review.” 

Geoff Wild, Director of Governance and Law at Kent County Council, had previously urged the LSB to correct the SRA's "error" in imposing a geographical restriction.