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Local government lawyers urge SRA to change conduct rule on charging charities for legal advice

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Local government lawyers are urging the Solicitors Regulation Authority to remove a professional conduct rule that they say is causing councils major problems when it comes to carrying out their statutory duties and delivering the government’s Big Society agenda.

In a letter to the SRA Maria Memoli, one of two Law Society Council Members for Local Government, said the Code of Conduct should be changed to reflect the forthcoming general power of competence contained in the Localism Bill and the enlarged powers local authorities will enjoy as a result.

At the heart of the issue is rule 13.08(e). This provision sets out that solicitors employed by local authorities may act “for a charity or voluntary organisation whose objects relate wholly or partly to the employer's area, provided that there is no charge to the charity or voluntary organisation in non-contentious matters, and in contentious matters the employer indemnifies the charity or voluntary organisation in relation to your costs insofar as they are not recoverable from any other source”.

In the letter, which followed a recent meeting with the SRA’s Director of Standards Richard Collins, Memoli highlighted the crucial importance of local authorities carrying out ‘public administration’ for the benefit of their communities and stakeholders. She said the government’s reforms would see local authorities given wider powers to provide services with other organisations, specifically with voluntary groups and charities.

The Law Society Council Member added: “For local authorities to fully embrace their public duties under statute it cannot be right for a local (non-statutory) Code of Conduct to specifically prohibit local authorities from carrying out their statutory duties – namely: ‘objects relating wholly or partly to the employer’s area’ and there should be ‘no charge to the charity or voluntary organisation’.”

Memoli said she disagreed with the SRA’s interpretation of the competition aspects of the rule (the watchdog is understood to argue that it protects the private sector from unfair competition). “Indeed, as the rules of conduct currently stand, I would argue they are discriminatory against local authorities,” she said.

Relaxation of the rule would put councils on an equal footing to the private sector, Memoli suggested. In her letter, she cited a number of specific examples of where local authorities were encountering problems.

The move towards schools becoming academies is one. Memoli pointed out that local authorities were already able to provide legal advice and representation to schools under the Local Authority (Goods and Services) Act 1970 and the Local Authorities (Goods and Services) Public Bodies Order 1975. The 1970 Act enables local authority lawyers to agree with schools the arrangements for payment for work done. However, academies are charities and so local authority lawyers could fall foul of the Code of Conduct.

“It is completely unfair that a private practice firm can offer to do this work and charge for it, but local authorities cannot,” the letter said.

Memoli added that there was no clear policy reason for the restriction on local authority lawyers charging for work done for local charities.

The Law Society Council Member also commented that it was of some concern that the current waivers issued by the SRA to local authorities were seeking to limit the ways in which local authorities can make arrangements with academies.

Other areas of concern include where a local authority legal team advises a housing association that has been created out of the council’s original housing department under a Large-Scale Voluntary Transfer scheme. Local authorities have also historically acted for further education colleagues, which typically enjoy charitable status.

“The new Solicitors Code of Conduct impacts on the ability of local authorities to continue with this work…. this will have a detrimental effect, not just to the local authorities’ budget but also to the external bodies whom they advise,” Memoli said.

The Law Society Council Member also pointed to difficulties faced by local authorities that wanted to provide legal services to small third sector organisations in their area on a not-for-profit basis. She added that councils should be able to charge for advice given to community libraries and youth centre management groups, which might or might not be established as charities when they are set up.

Local Government Lawyer understands that rule 13.08(e) will not change when the new SRA Handbook is introduced later this year.

Memoli called on the SRA to seriously consider changing the rules “to reflect the modern society in which we live, to embrace the Government’s clear objectives of local authorities carrying out more and more delegated functions from central government and being able to charge for their work in competition with the private sector in line with the new ways local authorities will be expected to work, particularly following the Localism Bill.”

An SRA spokesman said: “There are a number of issues facing in-house lawyers and in particular local government in-house solicitors, which the SRA intends to review in light of the statutory framework. The SRA is currently engaging with local government in-house lawyers to see if a solution can be found.”

The letter was prepared with the help of Rob Hann, legal director of Local Partnerships, and Allan Wells of Surrey County Council's legal services department.

Philip Hoult