Introduction

1.These explanatory notes relate to the Legal Services Act which received Royal Assent on 30th October 2007. They have been prepared by the Ministry of Justice in order to assist the reader in understanding the Act. They do not form part of the Act and have not been endorsed by Parliament.

2.The notes need to be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of the Act. So where a section or part of a section does not seem to require any explanation or comment, none is given.

Overview of the Act

3.This Act has 214 sections and 24 Schedules. The explanatory notes are divided into nine Parts, reflecting the structure of the Act.

4.An overview of the Act is set out below. A detailed description of each Part is contained in the commentary. Terms used are defined in the text where they first appear, and Schedule 24 contains an index of defined expressions. An explanation to accompany each Schedule is contained within the section that introduces the Schedule.

Territorial Extent

5.This Act extends only to England and Wales, except for the provisions of sections 195 and 196(1) and Schedule 20 which extend to Scotland, and any amendments or repeals of legislation which extends to Scotland or Northern Ireland, which have the same extent as the enactment (or relevant part of the enactment) to which the amendment or repeal relates.

6.There is no effect on the National Assembly and no other effect specifically in relation to Wales.

Summary

7.Part 1: The Regulatory Objectives sets out the eight regulatory objectives, which guide the Legal Services Board (the Board), the approved regulators, and the Office for Legal Complaints (OLC) in exercising their functions.

8.Part 2: The Legal Services Board sets out the structure and functions of the Board, including its duty to act compatibly with the regulatory objectives, to assist in the maintenance and development of standards in regulation, education and training and to establish a Consumer Panel. It also sets out the requirements for both appointment to, and membership of, the Board and the powers that the Lord Chancellor has in relation to these processes.

9.Part 3: Reserved Legal Activities lists and defines the reserved legal activities. It explains who is entitled to carry out these activities, and the penalties for those who carry out, or pretend to be entitled to carry out, these activities where they are not entitled. It provides for transitional arrangements for those currently allowed to carry on reserved legal activities. It also explains the process for altering the scope of the reserved legal activities. Approved regulators are the bodies that authorise and regulate persons to carry on reserved legal activities. This Part of the Act explains what an approved regulator is, lists those bodies designated by the Act as approved regulators, and explains how other bodies can become an approved regulator in the future.

10.Part 4: Regulation of Approved Regulators prescribes the general duties of approved regulators, and the powers that the Board has to ensure that these are being properly carried out. It details how the Board can intervene when there is a problem, the procedures that it must follow, and the persons that it must consult. The Board’s powers include target-setting, censure, financial penalties, direct intervention in the approved regulator’s regulation of its members, and, ultimately, the power to recommend to the Lord Chancellor that an order be made cancelling the approved regulator’s designation.

11.Part 5: Alternative Business Structures (ABS) makes provision for the licensing of new business structures in legal services. These will allow lawyers and non-lawyers to work together to deliver legal and other services. This Part of the Act sets out the arrangements for authorisation, by the Board, of licensing authorities and how, in the absence of an appropriate licensing authority, the Board can license ABS firms directly. It makes provision for the regulation of ABS.

12.Part 6: Legal Complaints establishes an independent OLC, which is responsible for administering an ombudsman scheme, under which all complaints will be dealt with by a Chief Ombudsman, assistant ombudsmen, and staff appointed by the OLC. Part 6 removes the ability of approved regulators to provide redress to complainants, and grants this power to the ombudsman scheme. The OLC will draw up scheme rules setting out the detail of the ombudsman scheme. This Part makes provision for the appointment process and terms of office for members of the OLC Board and the Chief Ombudsman and the assistant ombudsmen. It also makes provision for the accountability of the OLC to the Board, the framework of rules by which the OLC will establish its operating procedures, and changes to the regulatory arrangements of approved regulators.

13.Part 7: Further Provisions Relating to the Board and the OLC makes provision as to the guidance that the Board may give. It also requires the Board to make rules providing for the payment by approved regulators of a levy, to recoup the expenditure of the Board and OLC. The rules may include provision as to the rate and times at which the levy is payable, and circumstances in which the levy may be waived. This section also makes provision for the Board to enter into voluntary arrangements with any person, for example to promote best regulatory practice.

14.Part 8: Miscellaneous Provisions about Lawyers makes provision for the following matters:

• the requirement for alteration of the rules of the Solicitors Disciplinary Tribunal to be approved by the Board, and empowering the Board to give a limited range of directions to the Tribunal;

• the maintenance of the register of trade mark attorneys and the register of patent attorneys;

• the application of legal professional privilege in relation to authorised persons who are not barristers or solicitors;

• amendment of the Immigration and Asylum Act 1999 (which regulates the provision of immigration advice services) and the Compensation Act 2006 (which makes provision in relation to claims management services), in consequence of the new regime established by the Act;

• the making of costs orders in relation to pro bono legal representation; and

• conferring competence on the Scottish Legal Complaints Commission in respect of certain reserved matters.

15.Part 9: General makes provision regarding offences committed by bodies corporate and unincorporated bodies. It provides that certain functions conferred on the Lord Chancellor by the Act may not be transferred to another Minister by a transfer of functions order. It states how notices issued pursuant to provision made in the Act are to be given and makes provision governing the procedure for making orders and regulations under powers in the Act. It allows for minor and consequential amendments to be made by order, and makes provision regarding the extent, commencement and short title of the Act.

16.The Legal Services Act establishes a new framework for the regulation of legal services in England and Wales.

17.The Act makes provision for:

• A new regulatory framework that replaces the existing framework which comprises a number of oversight regulators with overlapping responsibilities.

• The establishment of the Legal Services Board: a single oversight body, independent both from Government and from the “front-line” approved regulators such as the Law Society and Bar Council. The Board has a duty to promote the regulatory objectives set out in Part 1.

• The establishment of an independent Office for Legal Complaints: a body with statutory power to establish a scheme for handling complaints about services provided by persons subject to oversight regulation by the Board, and to award redress in appropriate circumstances.

• Alternative Business Structures to enable lawyers and non-lawyers to work together to deliver legal and other services. New business structures are expected to give legal providers greater flexibility to respond to market demands, within the UK and overseas. Licences will be conferred by licensing authorities, with various safeguards in place.

• It is for the Board to advise the Government on any areas where it identifies problems within the legal services market, or “regulatory gaps”.