All change for in-house?

The Solicitors Regulation Authority (SRA) has set out its plans for a wide-ranging programme of work to improve the regulation of solicitors and firms. In its policy statement, “Approach to Regulation and its Reforms”, the SRA declares its intention to:

  1. remove unnecessary regulatory barriers and restrictions to enable increased competition, innovation and growth to better serve the consumers of legal services;
  2. reduce unnecessary regulatory burdens and cost on regulated firms; and
  3. ensure that regulation is properly targeted and proportionate for all solicitors and regulated businesses, particularly small businesses.

What is the SRA proposing?

In short, the changes are intended to reduce red tape to improve external competition and internal efficiency in setting up and running ABS businesses. This includes proposing a series of fundamental revisions to the methods/systems for educating, training and developing solicitors through the Training for Tomorrow programme; seeking to revise the regulatory framework and their approach to enable increased entry of multi-disciplinary ABSs to the market; measures intended to reduce “unnecessary regulatory barriers and restrictions” so that there is “increased competition, innovation and growth”; and an aim to reduce “unnecessary regulatory burdens and cost on regulated firms” and make the burden proportionate to the size of the business.

Overall the changes are well-intentioned, but there is a real scepticism among the in-house legal community over whether these changes alone will create conditions for change or whether they will achieve their intended aims.

What are the current problems for in-house lawyers?

A murky, confusing and inconsistent interpretation of the current Code of Conduct has led to a great deal of uncertainty and lack of clarity for those working in-house.

There is also a legacy of focusing on being an “expert” or being “service-oriented”. This can detract from being more of a “peer” and business advisor, which is how those who are most highly valued by their employer organisations operate. The change to the regulations opens up external competition in theory, but doesn’t address the challenges faced by those in-house specifically.

What should in-house lawyers be doing to prepare for the changes?

It is vital that in-house lawyers make themselves aware of the potential changes to the nature of those who may enter the market to offer services. Multidisciplinary organisations provide an exciting set of possibilities as well as risks. The key is not looking at the proposed changes to judge them and find flaws, but rather to explore the potential outcomes that will arise from these and (as well as having a view) start to look for signs of how these are changing the external market and what this means for the in-house community. Otherwise change will pass them by.

Secondly, be aware that the likelihood is that over the next ten years, those providing external services are going to become ever more business savvy. They won’t just be talking about cost but about value. And if the in-house community don’t change their language and approach they will start to get bypassed. We’ve seen this before in the IT and HR services world. Legal are likely to be next. It’d be a surprise if Accenture, EY, Capgemini and others weren’t running scenario and strategy meetings right now looking at how they can provide more business-focused legal services than the in-house party can provide.

Rather than examine the details of the regulations, therefore, it is important to discuss what the changes could mean and look at similar functions and how this form of deregulation has affected them.

What are the trends in this area of law?

The key trend is “change”. Lawyers of all hues have a natural status in all global cultures that has protected them for many years, as well as a very high barrier to entry on their services. That’s changing. These regulatory changes alone won’t lead to a “Big Bang”, but they are another click towards a greater degree of competition to the in-house world from the external. That’s not a bad thing, as long as you are one step ahead.

Paul Hughes, executive development director at Cranfield University School of Management (Interviewed by Jane Crinnion).

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

First published on Lexis®PSL.

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