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Legal Services Board questions need for restrictions on in-house lawyers

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The Legal Services Board has publicly questioned the extent to which regulatory restrictions in practising rules for in-house lawyers – including those working in local government – are justified.

In a discussion paper the ‘super-regulator’ noted how the front line regulators took contrasting approaches:

  • The Costs Lawyer Standards Board and the Master of the Faculties did not need to have such arrangements due to transitional protections in the Legal Services Act 2007.
  • Three regulators did not make specific provisions for those working in-house: the Council for Licensed Conveyancers, ILEx Professional Standards and the Institute for Chartered Accountants in England and Wales.
  • The remaining three regulators had specific rules in place: the Bar Standards Board, the Intellectual Property Regulation Board and the Solicitors Regulation Authority. “While there are similarities between the arrangements established by these three regulators, there are also some differences. Our initial analysis shows that these rules appear to go broader than the minimum restrictions required to give effect to the Act.”

The LSB said: “Where a regulator places restrictions on in-house practice over and above the minimum required by the Act, we expect it to be able to demonstrate this is necessary with compelling evidence in terms of risk to the regulatory objectives.

“We also expect that the absence of specific restrictions on in-house lawyers should be an active decision taken in light of an appropriate risk assessment.”

The Board noted that the SRA had said in its 2014/15 Business Plan that its approach required re-examination and amendment "to remain relevant”. The LSB confirmed its support for such a re-examination.

The paper meanwhile revealed how concerns had been expressed about in-house practising restrictions limiting innovation in the market by employers and restricting choice for consumers. "For example, in 2013 when the LSB considered the Solicitors Regulation Authority (SRA) rule change for solicitors working for local authorities, we were given examples of how its in-house rules may be stifling innovation by local authority legal teams. Removing unjustified burdens is therefore consistent with the regulatory objectives, including the objective aimed at enhancing the strength, diversity and effectiveness of the legal profession."

The LSB asked for comments on its findings, the impact of current arrangements, and on possible areas for improvement. It set five specific questions, three for regulators and two for interested parties.

The discussion paper can be viewed here. The closing date for receipt of views is 24 April 2015. These will be used to inform the LSB’s final report and, if appropriate, any recommendations for future action.

Richard Moriarty, the Legal Services Board’s chief executive, said: "Some in-house lawyers are thinking about innovating and expanding their reach. The Legal Services Board is concerned that unnecessary restrictions on their ability to do so may have the potential to impose costs and red tape, frustrate choice and adversely affect access to justice. With over 25,000 in-house lawyers in England and Wales it is important that any restrictions on their practice be clearly justified."

Geoff Wild, Director of Law and Governance at Kent County Council, said: “The problem is that the LSB is not a front line regulator and it has no direct control over the regulations applicable to in-house lawyers. It is to be welcomed that they support the lifting of out-dated and prejudicial restrictions on in-house lawyers, but it has made plenty of sympathetic noises in the past (witness their exchange with the SRA during the last ill-fated Red Tape review) without any meaningful change occurring as a result."

Wild, who raised the issue of innovation with the LSB in 2013, added: “The more fundamental question is ‘why are there separate rules for in-house lawyers at all?’ You don’t find accountants employed in local government referring to themselves as ‘in-house’ accountants, and the professional bodies representing them do not differentiate on that basis either. Why should the legal profession persist in doing so?”