Response to the "Clementi" Review of the Regulatory Framework for Legal Services

June 2004

Thompsons is the most experienced trade union and personal injury firm in the UK. It has a network of offices across the UK, including the separate legal jurisdictions of Scotland and Northern Ireland.

Thompsons only acts for the victims of injury, never for employers or insurance companies. The vast majority of personal injury cases pursued by Thompsons relate to injury claims on behalf of trade union members. At any one time the firm will be running 70,000 claims.

The firm provides a number of other legal services on behalf of trade unions, including free legal advice lines, wills and conveyancing.

The firm participates regularly in government consultations on legislation. It is not our intention in this response to deal with every question in the consultation document but rather to address those areas that we believe will inform the debate and of which we have particular expertise.

Thompsons Solicitors
4 June 2004

Chapter A
Chapter B
Chapter C
Chapter D
Chapter E
Chapter F

Chapter A

Question A1. There are a number of important possible objectives for a regulatory system covering the provision of legal services. What objectives do you believe should form the cornerstone of a regulatory system for legal services?

One of the key objectives of any regulatory system of legal services must be to safeguard and enhance the principle of access to justice. To this end the system must act as a gateway to legal services and be the guardian of quality. Thompsons believes that by providing free access to high quality legal services trade unions provide a model system. 

Question A2. What aspects of professional ethics, or legal precepts, do you feel are essential to a properly functioning legal services industry and in what way should they be reflected in the regulatory system?

Trade union legal services already ensure that their legal services adhere to and maintain the professional ethics expected by their members and this should be the basis of any properly functioning legal services industry. In essence, it is providing quality, specialist legal services which are free at the point of access and do not seek to maximise profit for the providers at the expense of the claimant’s compensation.

It is well known that unregulated compensation claims firms purport to provide a no win no fee service, whilst in reality levying heavy charges through such things as poor quality insurance products and loan agreements.

All too often Thompsons is approached by injured people who have ended up with bills from such firms that are larger than their compensation. Recently, a union member who we represented in a workplace accident case told of how he had ended up owing The Accident Group over £1,500 after they handled an unrelated RTA claim for him. 

Another client who we have advised in relation to the likely success of an RSI case was advised by solicitors to whom she was sent by a claims management firm that while her case had a low chance of success they would “give it a go” if she paid a substantial amount “up front”.

Trade unions ensure that there are no hidden charges in the legal services they provide. The deal is transparent and understood by the member from the start. It includes:

Chapter B

Question B1. What do you see as the broad advantages and disadvantages of Model A in comparison with Model B? In particular, what do you see as the strengths and weaknesses of (i) combination and (ii) separation of regulatory from representative functions?

Model A describes a single regulatory body for the providers of legal services, much like the FSA. Model B allows for continuing regulation by professional bodies but is subject to being overseen by a single regulator. This would see the regulator acting as a gateway to the Law Society and the Bar Council.

The third alternative (B+) requires a professional body to separate their regulatory and representative functions.

We are concerned that none of these models appears to provide a regulatory system for claims management firms. It is important that any change in the regulation of legal services imposes the same rules, regulations and constraints on such firms as on any firm of solicitors.

The threat posed by the claims firms to people’s view of the legal profession – with whom we would suggest they are inextricably linked in people’s minds – is considerable. People are being encouraged to go to unregulated organisations who have no indemnity insurance and have limited liability if limitation is passed before they sell on the case. We have particular experience of this in relation to Chronic Bronchitis and Emphysema and Vibration White Finger cases, where we know, anecdotally, of a number of cases where limitation has been passed before the claims management firm was able to “sell them on”.

Thompsons believes that separation is important, not least because it reflects the way we operate with our union clients. Union members always have the opportunity to speak to someone who is independent of us should they be unhappy with the service we are providing, the way a case is being handled or the way a complaint is being investigated. The union client is in effect an additional lay regulatory body overseeing our service.

Our very limited complaints record to the now Consumer Complaints Service (at 0.004% of our caseload) is some indication of the effectiveness of the trade unions’ regulatory role.

Model B does not provide that separation. Under the B+ model complaints could be dealt with by the Legal Services Board while discipline stays with the professional body.

It is important to note that, much like the not for profit sector, barristers and solicitors work alongside each other for the unions and are regulated all the while by their own professional bodies. This arrangement works well and it is difficult to see an argument for changing it.

While B+ is the most attractive of the three models suggested, it is difficult to determine absolutely where the different responsibilities lie. It is also unclear as to what degrees of power the three models would have and we are concerned that the result will be either a system that is overly complex or one that lacks teeth through being too streamlined.

Question B2. Which model best meets the criteria of the terms of reference?

The criteria of the terms of reference are largely about making legal services more responsive. Models A or B+ fit best with this.

Question B3. If it were felt appropriate to separate regulatory and representative functions within professional bodies as is envisaged under Model B+, how might it best be achieved?

If there is to be a separation then it must be a clear one, along the lines of the BMA/GMC split.

Question B4. What powers would you wish to see delegated from the Government to the Regulator?

The government’s effectiveness as a regulator (other than perhaps in the guise of the National Audit Office) is limited. There should be an effective regulator who, while avoiding being seen as a “jobs-worth” or just another level of bureaucracy, takes the burden fully from government but reports publicly to the government.

Question B5. What powers to instruct the Regulator would you wish to see Government retain? See above

Question B6. What international considerations should influence the design of appropriate regulatory arrangement of legal services within England and Wales?

Our union clients are clear that they want a single legal service applied across the different legal jurisdictions of the UK. It is not appropriate for them to be offering members different services according to which legal jurisdiction they live in. Monitoring and regulating the quality of services becomes more difficult for any UK-wide service if there are different arrangements in different jurisdictions.

Chapter C

Question C1. Should service complaints (which are consumer centred) be operationally split from professional conduct and disciplinary issues (which are centred around the practitioners and their professional bodies)?

Separation is undoubtedly a good thing. This is how complaints are handled in union legal services. Union members can go first to their union to raise issues, rather than to the lawyer’s professional body, and we as a union law firm are comfortable with that. We too will raise complaints received from members about our service with the union branch or regional office and, where complaints are particularly serious, with the union's head office.

Question C2. In connection with complaints, what are the advantages and disadvantages of a) having a uniform complaints organisation, independent of the bodies, similar to the FOS or b) each body remaining responsible for its own complaints? Is the New South Wales example a useful model?

The advantage is simplicity for the consumer but unless it is given teeth then the advantage is minimal. It is difficult to see how the New South Wales model would work in a much larger jurisdiction.

Question C4. How do you think that disciplinary arrangements should relate to the underlying practitioner bodies? Is there a case for one single uniform disciplinary body for all lawyers?

While this might be a more simple and tidy approach to discipline we would query whether there is a need or a drive for it. Inevitably there would be  issues over the different professional standards for solicitors and barristers, for example.

Question C5. What should be the mechanism for funding the handling of complaints?

The legal profession must pay.

Chapter D

Question D1. Should the Regulator be a board or an individual?

We would favour a board, for reasons of accountability and representation.

Question D2. What sort of Board should the Regulator have and how should it be constituted? What would be an appropriate split between practitioner involvement and lay content in the Board? As regards the practitioner content, would you favour the inclusion of individuals on their merits, or formal representatives from different parts of the industry?

The board should be representative of the users of legal services. It should therefore have a strong lay content, including from trade unions. Indeed, as the largest providers of legal services, there should be a key role for the unions.

Question D3. Who should appoint the leadership of the Regulator? With whom should that person consult? How should the appointments of the other directors of the Board be made?

Thompsons believes that if there is to be confidence in the Regulator then it must be independent of government. Without this independence, confidence in the principle of access to justice will be undermined. Whilst we believe that the appointment should be the responsibility of the Department of Constitutional Affairs, it must be done by consultation with bodies including the Law Society, consumer groups, trade unions etc. Likewise the directors of the Board. Without this accountability the Regulator and the Board will not be seen to be independent of government.

Question D4. What period should the appointments be for? In what circumstances and by whom could directors be removed?

Removal rather than length of term of appointment is key. Directors should be removed by the DCA on the same basis as above.

Question D5. Having regard to the need for independence both from Government and providers of legal services, what qualities and background would you wish the leadership of the Regulator to possess? Is there anything you believe it would be important for the leadership of the Regulator not to be?

The key must be independence and that they are seen as champions of the rights of consumers, committed to the widening of access to justice. They are unlikely to be closely associated with the business community, for example.

Question D7. What consultation arrangements would you wish to see the Regulator follow before exercising its powers?

The Regulator must consult with the appropriate provider of the service. In the case of union legal services it must be the union or unions.

Question D8. To where should the right of appeal against decisions made by the Regulator lie? On what matters should appeal be permitted?

The right of appeal should lie with a solicitors’ complaints panel. However,  the right of appeal to it should be limited. Firms and individual lawyers cannot be allowed to appeal against every decision made against them. If a lawyer has got the law wrong then their right of appeal must be turned down. It should be permitted only if there is evidence that the Regulator got the facts wrong or there is new evidence to back the decision the lawyer made in the case.

Chapter E

Question E1. Should the Government have power to determine which legal services should be included in, or removed from, the regulatory framework? What consultation with the Regulator, with the providers of legal services, and with public interest groups, should there be in reaching these decisions?

Only in full consultation with the providers including the trade unions. See E2 below.

Question E2. What are the main factors one should consider in determining whether a service requires regulation?

While Thompsons is concerned that those who seek to provide legal representation for profit, such as claims management firms and the employment law advisers who trawl employment tribunal lists for potential clients, come under the regulatory framework along with solicitors and barristers, it is important not to draw up such a wide range of factors that anyone who gives legal advice or representation is subject to regulation.

Union legal services are by no means entirely about the financial arrangements between a law firm and a union made for the provision of  legal services to members. Few trade unions will call in the lawyers at the first indication that a member is accusing their employer of sex discrimination, or is to be disciplined over poor performance. Outsourcing all legal advice in this way would be practically and financially impossible and would undermine the very existence of the trade union movement.

Trade union structures means that union officials, right down to shop steward level, can provide legal advice and representation to members to tribunal stage. UNISON, for example, the largest trade union, has thousands of shop stewards who do this. It is the fundamental right of working people to join and be represented at work by a trade union. Union officials do not give advice and representation as part of a business arrangement.

However, while the nature of the business arrangement is key if trade unions and the not for profit sector are to be able to continue to provide this type of advice and representation, it is important that this level of legal service is not seen as somehow second class simply because it is not regulated. To have union members believe that the advice they get from their union official is inferior to that of a lawyer or an employment law adviser would be to undermine all the employment rights legislation implemented since 1997, as well as the union movement.

It would also overburden the courts and overstretch the lawyers.

And while many lawyers, commentators and policy makers still appear to view access to justice as being about legal aid, they overlook the fact that trade unions are a major element in the delivery of access to justice. This must be taken into account in any proposals.

Question E3. What characteristics of the regulatory framework would facilitate the inclusion of new services within the regulatory net, or the exclusion of a service presently included?

Anything which would effect public confidence in or the delivery of effective access to justice. This means any new service, from wills to online legal advice should be included. Whilst there must be the flexibility to identify and explore emerging trends, this cannot go unregulated. The emergence of the compensation claims firms was not predicted and as such has gone unregulated.

Chapter F

Question F1. Is there potential demand, from users and providers, for Legal Disciplinary Practices (LDPs)?

We believe that there is. All firms have professionals from other disciplines within them or that they have to use. Their inclusion in an LDP can only serve to make the practice more aware of issues outside of a narrow legal field ie management, finance, marketing and HR and this makes for an altogether better run and more effective organisation. Thompsons has benefited from its move to a corporate structure which has seen non-lawyers taking seats on the management board.

Question F2. How do you see the advantages and disadvantages of LDPs? Can the current restrictions (by professional bodies) preventing the development of these practices still be justified?

As much as Thompsons believes in the inclusion of non-lawyers into an LDP for the reasons stated above, we do not believe it is possible to uphold the integrity of the legal services provided unless a significant majority of those who manage and run them are lawyers.

There is nothing untouchable about lawyers, and they do need other professionals, but there must be a quality benchmark for firms in order to retain public confidence. Clients might well wonder what sort of legal advice and representation it is they are getting from a firm with only a couple of lawyers in the practice and the rest as bankers, accountants and management professionals with different professional duties. Who in such a firm would answer to the Law Society or its equivalent?

Without a significant presence of lawyers there is a danger that those lawyers that there are will have shell powers in an unrepresentative and unregulated body which is more concerned with selling insurance products, or funeral plans to go with Wills for example, than quality legal advice and representation.

Question F3. What restrictions, if any, would you wish to see imposed on LDPs in the area of management? What restrictions, if any, would you wish to see imposed on LDPs in the area of ownership?

Ownership restrictions are important for the reasons stated above ie maintaining the integrity of the firm as a law firm, but also in preventing a new breed of low quality 'jack of all trades' firms in much the same way as the compensation claims firms have grown. There is a need to prevent those with a solely non-legal business interest, or known for the provision of services far removed from, say personal injury and employment rights, from setting up a firm, installing lawyers to be the managers and running it on the same lines as a claims firm, using it to sell insurance products rather than providing high quality legal services. The losers are the vulnerable individuals who will inevitably be persuaded to use such a firm, as well as the reputation of legal services generally.

We would have similar concerns in relation to the ability of individuals with vested interests being able to buy into existing law firms (and take their money away again). We therefore recommend that restrictions apply to the ability of non-lawyers to hold capital in a firm. Say, two-thirds of capital must be lawyer capital.

Question F4. Is there any reason why the regulatory system should distinguish between practices in the commercial and the not-for-profit sector?

We refer to our responses in Q E2. A trade union is not a law firm or a LDP just because it has thousands of officials able to give legal advice. Those officials do not advise and represent members as part of a business arrangement. The regulatory system must make that distinction.  But equally that distinction must make it plain that the services provided by the trade unions and not for profit sectors are not seen as second rate to the commercial sector.

For further information:
Jennie Walsh
Head of Media
Thompsons Solicitors
Congress House
Great Russell Street
London WC1B 3LW
020 7290 0000