LSB welcomes new ILEX Code of Conduct

The Legal Services Board (LSB) has welcomed the new ILEX Code of Conduct as 'a positive step towards outcomes-based regulation – fitting with the better regulation principles'.

Issuing its decision to approve the new principles-based code – which is published in full on page 24 – the LSB also highlighted areas where ILEX Professional Standards (IPS) will have to develop as the new regulatory environment unfolds.

The LSB accepted that IPS's current regulatory infrastructure was capable of identifying providers who are most at risk of failing to achieve the outcomes and take strong action if they fail.

IPS had told the LSB that it considered the current infrastructure and capacity (which relies on complaints being made about ILEX members) to be sufficient to monitor and enforce compliance with the new Code. The LSB noted: 'In addition, IPS considers that given the low levels of failure to observe and maintain standards by members, there is no evidence to suggest that increased monitoring of compliance would be proportionate or necessary.

'As IPS has advised that the 7,200 or so ILEX Fellows that undertake reserved legal activities are also subject to further regulation by the Solicitors Regulation Authority or the Council for Licensed Conveyancers, we consider the risks associated with IPS not having such regulatory infrastructure, at this time, to be low.'

During its consideration of the Code, the board also asked IPS how it would apply the Code going forward in a regulatory environment where there will be entity regulation – rather than just regulation of individual lawyers – and where legal executives may be able to undertake additional reserved legal activities that would be regulated by another approved regulator.

In reply IPS assured the LSB that in submitting any future applications to extend its range of reserved legal activities and possibly to become a licensing authority for alternative business structures, it would include conduct and practice rules applicable to those areas of work and management of legal practices.

As part of this, IPS said it would undertake proactive monitoring and inspection of practices to mitigate and address risks associated with providing additional reserved legal activities. The decision notice said: 'The LSB expects that any future applications of this nature will demonstrate how IPS will develop its regulatory infrastructure (including complaint-handling procedures) sufficiently to manage the change in its approach to regulation required by such expansion.'

The LSB said such applications should also resolve the question of regulatory conflict – that is, where ILEX members are also regulated by another organisation. Currently IPS deals with such conflicts on a case-by-case basis which, though 'adequate' at the moment, will not be sufficient in the future, the LSB said. IPS acknowledged that it may have to agree with other relevant regulatory organisations to harmonise their regulatory arrangements in the future and the LSB said it 'would expect IPS to fully resolve this matter' when submitting further applications.

Writing in this month's Journal, IPS chairman Alan Kershaw explained the move to principles rather than detailed rules. 'The most important reason, to me, is that the ability to understand principles and apply them to daily life and work, is one of the things that marks out a professional,' he said. 'But experience in other places has shown that increasing the number of words in the regulator's guidance rarely produces better results, not least in the ability to bring offenders promptly to book.'

• Djanogly: ABSs are the future

The Coalition government has scotched rumours that it is to scrap alternative business structures (ABSs).

It is also believed that both ABSs and the Office for Legal Complaints (OLC) are likely to get the green light from the Cabinet committee set up last month to review all regulation in the pipeline for implementation which had been inherited from the last government.

Speaking to reporters for the first time since being appointed legal services minister, Jonathan Djanogly said he was 'very pleased' to have the opportunity 'to set the record straight' after reports that he was opposed to ABSs.

'I think it's important that the legal profession engages with the concept of ABSs to look to see how they're going to apply them to their own situations, because that is the way that law in our country is moving,' he said.

While the plan for ABSs to come into being on 6 October 2011 is still in place, Mr Djanogly said he was prepared to listen to any Law Society and Bar Council arguments that they should be delayed so as to ensure they are introduced properly and maintain access to justice.

Mr Djanogly also expressed strong support for the OLC, also known as the Legal Ombudsman, which is due to open this October. A Ministry of Justice (MoJ) spokesman confirmed that the OLC 'remains on schedule to open for business in October 2010 as planned. Offices have been secured, senior posts have been filled and recruitment of more than 200 staff is underway'.

It is thought that both ABSs and OLC are likely to be approved by the Cabinet's reducing regulation committee, headed by business secretary Vince Cable. The fact that the cost of the new regulatory regime is met by the profession means that scrapping them would not generate any cost savings for the government.

The MoJ spokesman said the OLC 'will streamline the legal complaints procedure and fits with the government's commitment to reduce regulatory burdens'.

The minister predicted that ABSs would generate savings to the legal aid fund over the medium to long term through the greater efficiencies that they would promote.