Removing restrictions on reserved legal activities could undermine the UK’s international competitiveness, the Law Society has warned, telling the competition watchdog that England and Wales could lose its standing as a natural jurisdiction of choice.
Answering additional questions on reserved work from the Competition and Markets Authority, which has been studying the legal services sector, Chancery Lane said the popularity of English and Welsh law is an important contributor to the UK’s strong position as the most international market globally for legal services.
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‘The legal services market contributes £3.6bn in net exports and thus aids in reducing the balance of payments. Given our international reputation, careful thought must be afforded to altering the regulatory framework in a manner that could impact this standing,’ the Society said in its response.
The fact that certain legal activities can only be carried out by authorised providers inspires confidence in the legal system and quality of advice, it added.
‘Our direct competitors all have highly regulated legal services markets which are trusted internationally.
‘Any removal of restrictions on the reserved legal activities would undermine our international competitiveness, could negatively impact on England and Wales as a jurisdiction of choice in cross-border transactions in circumstances where there are disputes involving a choice of governing law, and could reduce inward investment.’
Only providers authorised by approved regulators can carry out reserved work, which consists of the exercise of a right of audience, the conduct of litigation, reserved instrument, probate and notarial activities, and the administration of oaths.
Chancery Lane pointed out that the limited nature of reserved work means it does not hamper competition in the relevant markets, nor does it create a monopoly. Licensed conveyancers, for instance, have an estimated 5-10% of the residential conveyancing market.
Although reserved activities protect consumers, the Society said those authorised to undertake them have wider duties, including the duty to uphold the rule of law and duties that result from being an officer of the court.
Reserved activities are also usually connected with key events in consumers’ lives, such as buying a house or the death of a loved one.
‘We know that many consumers assume that providers are trained, regulated and that they will be protected if anything goes wrong,’ the Society said. ‘There is therefore a strong consumer interest in the existence of these reserved activities.’
Although there is limited information on unregulated legal services providers, the Society is aware of some business models that seek to ‘circumvent’ the restrictions around reserved work, such as in the area of estate administrations work.
Unregulated entities may feel incentivised to circumvent restrictions should proposed Solicitors Regulation Authority reforms enable solicitors to provide unreserved work through those entities, it said.
Any review of the reserved activities would necessitate a ‘root and branch’ reform of the entire regulatory regime, Chancery Lane warned.
This would come ‘at a time when there are already a range of consultations on regulatory changes which are creating significant market uncertainty for legal services providers, investors and consumers alike’.
Society: lifting reserved activity restrictions could threaten UK competitiveness
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