76. Subject to the changes described in paragraphs 77 & 78 below, the scope of the CLS fund will initially mirror the current scope of civil legal aid; but it may be changed over time. In particular:

• as conditional fees, legal expenses insurance and other forms of funding develop more widely, it may be possible to exclude further categories which can generally be funded privately; but on the other hand

• as resources become available through the greater value for money and control of spending provided by the new scheme and the development of private alternatives, it may be possible to extend the scope of the fund to cover services that are excluded now because, although they would command some priority, they are unaffordable.

77. The following changes to the scope of the current legal aid scheme will take effect immediately. In future, subject to any exceptions that the Lord Chancellor may make, only general information will be available about the following issues.

• Allegations of damage to property or the person (i.e. personal injury) caused by negligence, apart from those about clinical negligence. These cases are generally considered suitable for conditional fees.

• Allegations of malicious falsehood. Legal aid is not currently available for representation in defamation cases, but it is sometimes possible to get legal aid by categorising the case as one of malicious falsehood. The Government's view is that these cases do not command sufficient priority to justify public funding; and, in any event, they may often be suitable for a conditional fee.

• The law about companies and partnerships and other matters arising in the course of business. Legal aid is not available for firms and companies, but a sole trader can currently get legal aid to pursue a business dispute. Businessmen have the option of insuring against the possibility of having to take or defend legal action. The Government does not believe that the taxpayer should meet the legal costs of sole traders who fail to do so.

• Boundary disputes and the law relating to trusts. The Government does not consider that these command sufficient priority to justify public funding.

78. In addition, funding for advocacy before the Lands Tribunal or Commons Commissioners will no longer be available. Other services, including assistance with preparing a case, will continue to be available.

79. Section 7: Individuals for whom services may be funded. This section allows the Lord Chancellor to set financial eligibility limits for people to receive services funded by the CLS fund. It allows him to set different limits, or no limit at all, in different circumstances or for different types of service case.

80. In essence, the section re-enacts provisions in the 1988 Act about financial eligibility: sections 9 (advice and assistance), 13B (family mediation), and 15 (civil legal aid). There are no immediate plans to make any substantive changes to the present financial eligibility limits (apart from any upratings to reflect inflation). In due course, the Government hopes to extend eligibility for advice and assistance to those who can afford to pay contributions (see Annex A to these Notes).

81. Section 8: Code about provision of funded services. This section provides for the Legal Services Commission to prepare a code setting out the criteria for determining whether services funded by the CLS fund should be provided in a particular case, and if so what services it is appropriate to provide. The code will also set out the procedures for making applications.

82. The funding assessment under the code will replace the merits test for civil legal aid (set out in sections 15(2) & (3) of the Legal Aid Act 1988, and supplemented by Notes for Guidance published annually by the Legal Aid Board). The new assessment is intended to be more flexible than the existing merits test. It will be possible to apply different criteria in different categories according to their priority. It will also be possible to take account of new factors, such as the wider public interest.

83. Section 8(2) lists factors that the Commission must consider when preparing the code. The criteria for funding various types of service in different categories of case will be defined in terms of these factors. The code will set out which factors are relevant in a given category, how they should be taken into account, and what weight should be given to them.

84. Section 8(3) requires the code to reflect the principle that in many family disputes mediation is more appropriate than court proceedings. This is intended to reinforce the development, under the Family Law Act 1996, of mediation as a means of resolving private law family disputes in a way that promotes as good a continuing relationship between the parties concerned as is possible in the circumstances. The Government believes that mediation is more constructive than adversarial court proceedings, and that litigation in these cases usually serves only to reinforce already entrenched positions and further damage the relationship between the parties. In addition, the cost of court proceedings is higher than that of mediation, and additional costs have to borne by the property of the family, reducing the amount available to the parties and their children in future.

85. Section 8(9) empowers the Lord Chancellor to give orders to the Commission about the contents and operation of the code. Section 25(9) makes such orders subject to Parliamentary approval under the affirmative resolution procedure.

86. Section 9: Procedure relating to funding code. This section provides for the Lord Chancellor and Parliament to approve the funding code before it takes effect. The original code and any revisions to it must be approved by the Lord Chancellor and laid before Parliament. The original code and any revisions which affect the criteria for funding cases (as opposed to those parts of the code dealing with procedures and guidance) must also be approved by an affirmative resolution in both Houses of Parliament.

87. Section 9(7) & (8) provides for an exceptional procedure so that urgent changes can take effect without delay. The Lord Chancellor can certify a change as urgent. That change then would take effect immediately, but fall after 120 days if not confirmed by affirmative resolution.

88. Section 10: Terms of provision of funded services. This section enables the Lord Chancellor to set financial conditions to apply to people receiving services funded by the CLS fund. Subject to two additions, the effect of section 10 is generally to replicate the provisions of the 1988 Act.

89. As now, it will be possible to make regulations requiring people to contribute towards the cost of the services they receive by way of flat rate fees, contributions related to disposable income and capital, and from any property recovered or preserved as a result of the help given. In general, the intention is to replicate the existing regulations. But the Government also intends to consult about a number of possible changes to the financial conditions. These are described in Annex A to these Notes.

90. Section 10 extends the potential scope of financial conditions in two ways (although there are no immediate plans to use either of these wider powers).

• Section 10(2)(b) is the power to set contributions. Unlike the current Act, this power does not preclude contributions from income payable after the end of the case. This would make it possible to provide services in some categories of case in the form of a loan scheme, with contributions continuing until the full cost had been repaid. Section 10(4)(b) would allow for interest to be added to the outstanding cost that the former assisted person remained liable to repay.

• Under section 10(2)(c), it will be possible to make the provision of services in some types of cases subject to the assisted person agreeing to repay an amount in excess of the cost of the services provided in the event that his or her case is successful. This might make it possible to fund certain types of case on a self-financing basis, with the additional payments from successful litigants applied to meet the cost of unsuccessful cases. It would also be possible to provide public funding to supplement a private conditional fee arrangement. This might be appropriate, for example, where a case could not be taken under a wholly private arrangement, because the solicitors' firm was not large enough to bear the risk of the very high costs likely to be involved.

91. Section 10(6)(b) provides for regulations about determining the cost of services for the purpose of applying regulations about contributions and the charge on property recovered or preserved. This is necessary to allow for the possibility of block contracts which do not define the costs of individual cases, or which are based on an average price for a set number of cases. Some cases require less work, and some more; and such contracts would remunerate the service provider on a 'swings and roundabouts' basis. However, it would often be inequitable to make every assisted person liable to contribute or repay the same amount (i.e. the average price under a contract covering many cases).

92. Section 11: Costs in funded cases. This section contains provisions about determining the award of legal costs between the parties in cases involving persons supported by the Community Legal Service fund. In effect, it section brings together provisions which are presently contained in sections 12, 13, 17, 18 and 34(2)(b) of the Legal Aid Act 1988. Subject to the changes described in Annex A, it is intended to replicate the position that currently applies under the legal aid scheme.

93. Section 11 limits the costs that can be awarded against a person receiving funded services to an amount that is reasonable given the financial resources of both parties and their conduct during the case.

94. This protection may be disapplied by regulations subject to the affirmative resolution procedure (by virtue of section 25(9)). This might be appropriate where funding was provided (under section 6(3)(e)) in the form of a grant or loan made directly to the assisted person, in order to allow them to purchase legal services themselves as a private litigant. It would also be necessary to use this power if public funding was used to supplement a conditional fee agreement (see paragraph 90 above). It would not be appropriate to prevent opponents in such cases, who would be liable for a success fee if they lost, from recovering their full costs if they won.

95. Section 11 also provides that regulations may, among other things, specify the principles that are to be applied in determining the amount of any costs awarded for or against the party receiving funded services; limit the circumstances in which a costs order may be enforced against the person receiving funded services; and provide for circumstances in which the court can require the Commission to meet any costs incurred by the opponent of the party receiving funded services.

96. Regulations which limit the circumstances in which costs may be enforced against a person receiving funded services, or which define the liability of the Commission to meet the costs of the opponent of a person receiving funded services, are made subject to Parliamentary approval under the affirmative resolution procedure by section 25(9). Making these provisions subject to affirmative procedure regulations, rather than in primary legislation as at present, is intended to provide greater flexibility. This is necessary to allow for the greater range of ways in which services may be provided under the Act.

The Criminal Defence Service

97. Section 12: The Criminal Defence Service. This section requires the Legal Services Commission to establish, maintain and develop a Criminal Defence Service, for the purpose of securing that individuals involved in criminal investigations or criminal proceedings have access to such advice, assistance and representation as the interests of justice require. The Criminal Defence Service will consist of the advice, assistance and representation provided under sections 13 and 14.

98. Section 12(2) defines "criminal proceedings". These include criminal trials (subsection (2)(a)), appeals and sentencing hearings ((b)), extradition hearings ((c)), binding over proceedings ((d)), appeals on behalf of a convicted person who has died ((e)), and proceedings for contempt in the face of any court ((f)). Subsection (2)(g) allows the Lord Chancellor to add further categories by regulation. This power will be used, for example, to prescribe Parole Board reviews of discretionary life sentences.

99. Section 12(3)-(5) empowers the Commission to accredit providers of criminal defence services, and to charge for that service. This mirrors the provisions of section 4(7)-(9) for the Community Legal Service.

100. Section 13: Advice and assistance. This section requires the Legal Services Commission to provide such advice and assistance as it considers appropriate in the interests of justice for individuals who are arrested and held in custody, and in other circumstances to be prescribed by the Lord Chancellor in regulations.

101. Initially, it is intended that regulations will provide for advice and assistance in broadly the categories for which it is currently available to people subject to criminal investigations or proceedings. These categories include advice and assistance provided by duty solicitors at a magistrates' court, at a solicitor's office, to a "volunteer" at a police station or to someone being interviewed in connection with a serious service offence.

A serious service offence is an offence under any of the Army Act 1955, the Air Force Act 1955 or the Naval Discipline Act 1957 which cannot be dealt with summarily or which appears to an interviewing service policeman to be serious.

102. Section 13(2) enables the Commission to comply with its duty to secure advice and assistance by making contracts with, or payments or grants to, providers (i.e. solicitors' firms, barristers or law centres); by employing people to provide advice and assistance; by establishing and maintaining separate bodies to provide it; and by making grants to individuals to allow them to purchase it directly. Subsection (4) enables the Commission to secure the provision of advice and assistance by different means in different areas in England and Wales and in relation to different descriptions of cases.

103. The aim of section 13 is to provide the Commission with a range of options for securing advice and assistance in criminal matters. Contracting with quality assured suppliers should produce better value for money and give greater control over expenditure and quality of service. The power to provide services through lawyers employed by Commission (or by separate bodies it establishes for the purpose) offers additional flexibility if, for example, there is limited coverage by private lawyers in rural areas. Using employed lawyers should also provide the Commission with better information about the real costs of providing these services.

104. Section 14: Representation. This section requires the Legal Services Commission to fund representation for individuals granted a right to representation in accordance with Schedule 3. It enables the Commission to comply with this duty in the same ways as section 13 does for advice and assistance. The power to make direct case-by-case payments to representatives (subsection (2)(b)) will allow the Commission to continue to pay non-contracted lawyers to provide representation during the transitional period while contracting develops; and possibly after that where this proves to be the best means of securing the necessary services.

105. Section 14(3)(a) requires the Lord Chancellor to make remuneration orders to set rates for such direct payments. Section 14(5) provides for reviews of, or appeals against, determinations of fees required for the purposes of a remuneration order.

106. Section 14(1) gives effect to Schedule 3 (Criminal Defence Service: right to representation) which deals with the grant of rights to representation. Paragraph 1 provides that a right may be granted to individuals involved in criminal proceedings as defined in section 12(2) (see paragraph 98 above). Paragraph 1(2) provides that a right may also be granted to private prosecutors to resist appeals to the Crown Court by people they had prosecuted in a magistrates' court. (This mirrors section 21(1) of the Legal Aid Act 1988).

107. Paragraph 2 provides that a right may be granted by the court hearing the proceedings and by other courts prescribed in regulations. In most cases, a right will be granted by a magistrates' court and will also cover the case if it goes on to the Crown Court. (This is currently the position under section 20(4) of the 1988 Act.)

108. Paragraph 2(5) provides for regulations about when a court must consider withdrawing a right to representation. The prescribed circumstances are likely to include where the charges are reduced so that imprisonment is no longer likely, and where the defendant has refused to co-operate with an inquiry into his or her means (see paragraph 119 below).

109. Paragraph 5 provides that a right should be granted where the interests of justice require it, and sets out the factors to be considered in assessing the interests of justice. The factors mirror those in section 22(2) of the 1988 Act. Paragraph 5(3) allows the Lord Chancellor to make an order amending the criteria, and paragraph 4 provides for regulations about appeals. Section 25(9) makes both these powers subject to Parliamentary approval under the affirmative resolution procedure; the equivalent powers in the 1988 Act, sections 22(3) & 21(10) respectively, are subject to the negative procedure. Paragraph 5(4) allows for cases in which a right must always be granted. This power will be used to mirror section 21(3) of the current Act.

110. Section 15: Selection of representative. This section provides that defendants granted a right of representation can choose their representative, restricted only as provided in regulations under section 15(2). It is intended that regulations (under subsection (2)(d)) will, in due course, provide in particular that a defendant's choice of representatives is limited to those holding contracts with the Legal Services Commission. In time, the Commission will provide all, or nearly all, representation through contracted representatives.

111. It is also expected that contracts with solicitors' firms will cover both initial advice and assistance (at a police station or elsewhere) and any subsequent representation at court. Section 15(2)(b) provides that in prescribed circumstances a defendant may be deemed to have chosen as representative the person who had previously advised him or her. It is important to ensure continuity of representation wherever possible in order to minimise delay and avoid the extra cost of instructing a different representative. This power only applies where a suspect chose the duty solicitor or another firm to advise him or her. Suspects advised by a duty solicitor because their chosen adviser was not available at the time will be allowed to use their original choice as representative in court. Regulations under section 15(4) will provide that suspects who do not express any preference will be deemed to have chosen the duty solicitor. Regulations under subsection (2)(f) will prescribe that defendants may not subsequently change their representative without good reason.

112. In certain types of complex case - such as serious fraud trials - defendants' choice may be limited to representatives from panels of firms and advocates specialising in such cases. Membership of a panel will depend on meeting pre-determined criteria. In this way, the Commission will be able to ensure that defendants in these exceptional cases are represented by those with the necessary expertise, experience and resources to do so effectively.

113. Section 15(5) provides for regulations prescribing when the Commission may stop funding a defendant's chosen representative - in effect, requiring that defendant to make a fresh choice. This might be necessary, for example, in cases that turned out to be more complex than originally expected, making it appropriate to require the defendant to change to a panel member.

114. Section 15(2)(a) enables the Lord Chancellor to make regulations defining circumstances where a defendant will not have a right to choose a representative, but will instead have a representative assigned to them. This power might be used, for example, to assign an advocate to an otherwise unrepresented defendant charged with a serious sexual offence against a child. (Defendants charged with certain violent or sexual offences may not cross-examine child witnesses directly.)

115. Regulations under subsections (5) and (2)(a) will be subject to Parliamentary approval under the affirmative resolution procedure (by virtue of section 25(9)).

116. Section 15(3) secures that regulations under section 15(2) may not provide for defendants' choice of representative to be restricted to employees of the Commission or any bodies it establishes to employ salaried defenders. The intention is that in most cases there should be a choice between several contracted firms and possibly a salaried defender. In some circumstances, for example when a representative is assigned under subsection (2)(a), it may be that the only person available at the time is an employee of the Commission. Section 15(3) would not prevent that employee providing representation; but it would preclude regulations saying that the representative in such circumstances must always or whenever possible be an employee.

117. Section 16: Code of conduct. This section provides that salaried defenders employed by the Legal Services Commission, or by any bodies established by the Commission to provide criminal defence services, should be subject to a code of conduct. The code is to include duties to avoid discrimination; to protect the interests of the individuals for whom services are provided; to the court; to avoid conflicts of interest; of confidentiality; and to act in accordance with professional rules. Before preparing or revising the code, the Commission is required to consult. The code must be approved by a resolution of each House of Parliament, and published.

118. Section 17: Terms of provision of funded services. This section provides that suspects and defendants do not have to pay towards the cost of services provided as part of the Criminal Defence Service, except where the court orders them to pay some or all of the cost of their representation. Section 17(2) provides that magistrates' courts do not have the power to make such orders. This means that only defendants in the more expensive cases that go to the higher courts may be ordered to repay their defence costs, but such an order could include the cost of any representation before a magistrates' court.

119. Section 17(3) empowers the Lord Chancellor to make regulations about how this new power should be used. It will generally only apply to convicted defendants able to make a substantial repayment. Defendants may be required to provide information about their means to inform a decision, and it will be possible to freeze their assets while their means are being investigated (subsection (3)(d) and (e)).

120. Section 18: Funding. This section requires the Lord Chancellor to provide the necessary funding of criminal defence services secured by the Commission in accordance with sections 13 and 14. As a result, like legal aid but unlike the Community Legal Service fund (see paragraph 68 above), the Criminal Defence Service will be a demand-led scheme. The section also enables the Lord Chancellor to determine the timing and way in which this money should be paid to the Commission, and requires the Commission to seek to secure the best possible value for money in funding the Criminal Defence Service.

Supplementary

121. Section 19: Foreign law. This section limits the Community Legal Service and Criminal Defence Service to providing information, advice and other services only in relation to the law of England and Wales (except where foreign law is relevant to proceedings in England and Wales). The Lord Chancellor is given a power to order further exceptions where this is necessary to fulfil the United Kingdom's international obligations. This restriction is the same as that currently existing.

122. Section 20: Restriction of disclosure of information. This section provides for the protection of information given to the Commission, the court or any other person or body authorised to undertake functions conferred by the Act.

123. Section 20 largely repeats the provisions presently found in section 38 of the Legal Aid Act 1988. But it allows information to be disclosed, subject to any regulations to the contrary, for the purposes of the investigation or prosecution of any offence or suspected offence. At present, information can only be disclosed for the purpose of prosecuting offences under the 1988 Act itself. This prevents information which indicates that other offences may have been committed from being made available to the appropriate authority for investigation or prosecution. For example, information provided to allow the Commission to assess the means of a claimant might show or suggest that a fraud was being perpetrated in relation to the receipt of social security benefits. This could not be disclosed under the 1988 Act, but it could be disclosed under section 20. Section 20(3)(b) makes clear that information may be disclosed about the value of payments made by the Commission to particular firms or lawyers. This reflects current practice.

124. Disclosure of information in contravention of this section will be an offence punishable by a fine not exceeding level 4 on the scale (currently £2,500). This mirrors the provisions of section 38(4) of the 1988 Act. No prosecution may be brought without the written approval of the Director of Public Prosecutions.

125. Section 21: Misrepresentation etc. This section provides criminal penalties for people who give false information about their finances, or otherwise make false statements, in applying for publicly-funded help under the Act. The section largely replicates the equivalent provisions in section 39 of the Legal Aid Act 1988, but extends beyond the person receiving help to anyone who furnishes information. It sets out the proceedings and penalties where those seeking help fail to furnish information required of them under the Act, or make false statements or representations in doing so. It also enables the Legal Services Commission to take proceedings in the county courts for recovering any losses caused by these acts.

126. Section 22: Position of service providers and other parties etc. Section 22(1) & (4) provides that, unless regulations say otherwise, the fact that services are funded as part of Community Legal Service or Criminal Defence Service shall not affect lawyer-client privilege or the rights of any third party. This mirrors section 31(1) of the 1988 Act.

127. Section 22(2) makes clear that service providers under either scheme may not seek additional remuneration to that funded by the Legal services Commission from their clients. Section 22(3) makes clear that a person chosen to represent a defendant with a right to representation is entitled to be paid if the right is later withdrawn. These provisions mirror sections 31(3) and 31(4) of the 1988 Act respectively. Section 22(5) provides for regulations about court procedures in cases involving funding under the two schemes. This mirrors section 34(2)(b) of the current Act.

128. Section 23: Guidance. This section enables the Lord Chancellor to give guidance to the Commission about the discharge its functions. He is required to publish any guidance. However, the Lord Chancellor may not give guidance about the handling of individual cases. The Commission is required to consider any guidance given by the Lord Chancellor.

129. Sections 24-26 and Schedule 4 make consequential amendments and provisions about orders, regulations and directions under Part I and its interpretation.

130. Section 25(2)-(4) provides for remuneration orders, under sections 6(4), 13(3) and 14(3), about the payments which the Legal Services Commission may make to providers. Before making a remuneration order affecting payments to lawyers, the Lord Chancellor is required to consult the General Council of the Bar and the Law Society. This mirrors provisions in the 1988 Act about regulations dealing with remuneration. Section 25(3) sets out factors which the Lord Chancellor is required to consider before making a remuneration order. These are the need to secure a sufficient number of competent providers; the costs to public funds; and the need to secure value for money. This differs in several respects from the current list of factors in section 34(9) of the 1988 Act.

131. Section 25(9) lists the orders and regulations under Part I of the Act which require Parliamentary approval under the affirmative resolution procedure (see paragraphs 58, 74, 85, 96, 109 & 115 above). All other orders and regulations under this part are subject to the negative resolution procedure - that is they take effect without debate unless there is a successful motion to annul them.