Local authority legal practice is lean, mean, creative, innovative and diverse. Legal departments can range from modest operations supporting a small authority through the now widespread shared services model (with one local government legal practice serving two or more authorities), to alternative business structures. ABSs (introduced by the Legal Services Act 2007 and subject to regulatory approval) enable a non-lawyer (for example, a local authority) to manage or have an ownership interest in a law practice.

ABS examples include Buckinghamshire Law Plus; Buckinghamshire County Council and Buckinghamshire & Milton Keynes Fire Authority having some 50 lawyers advising (among others) schools and academies, major public sector organisations and parish councils. There is also HB Public Law (London boroughs of Harrow and Barnet), where around 70 lawyers work with ‘local authorities, schools, academies, housing organisations and others in the public and not-for-profit sectors’.

Local authority ABSs have the advantage of being free (under both local authority law and professional regulatory requirements) to act for any client through the requisite corporate structure. However, downsides include exposure to commercial market forces, a spectrum of overhead costs, professional liability, practice management and marketing demands, and compliance with regulatory requirements. Internal local authority legal practices are substantially sheltered from all these downsides.

Those local government operations wishing to expand their service offering within the local authority structure find themselves restricted by rule 4.15 of the Solicitors Regulation Authority Handbook. For while this allows local authority lawyers to act ‘for another organisation or person to which or to whom the employer is statutorily empowered to provide legal services’ (potentially broad following the general power of competence in the Localism Act 2011), it is nevertheless subject to various conditions including rule 4.15(e). This allows local authority lawyers to act for a charity or voluntary organisation. However, it is limited to those ‘whose objects relate wholly or partly to the employer’s area’.

Many local government lawyers regard this limitation as unduly restrictive. For example, in 2013 Geoff Wild, Kent County Council’s director of governance and law, described it as ‘outdated and unfair’. He saw ‘absolutely no logical, rational, legal, ethical or other reason why a local government lawyer should be limited to working only for charity or voluntary organisations whose objects relate to their area’. Wild pointed out that ‘this would prevent us from working for academies in other local authority areas, which amounts to an unjustified restraint on our ability to exercise our statutory powers to charge and trade where our services are already in much demand’.

These views were echoed in the conclusions of a February 2014 report – The role of in-house solicitors, prepared for the SRA by Oxera Consulting Ltd. This found (among other things) that ‘30%-35% of local government respondents consider the SRA’s restriction on charging for legal services provided to external clients… poses a substantial or very large constraint on their activities’.

In the circumstances, local authority lawyers are likely to be interested in a consultation on in-house lawyers currently being carried out by the Legal Services Board. This covers the scope of regulatory restrictions imposed by the SRA and other legal profession regulators concerning the conduct by in-house lawyers of ‘reserved legal activities’ (that is, those which under the 2007 act can be carried out only by persons authorised under that act). They include litigation, legal advice and assistance, and probate.

Section 15 of the 2007 act deals with the conduct of reserved legal activities in the context of employers and employees. The LSB indicates its view that legal profession regulators (including the SRA) ‘go beyond the requirements of section 15(4) of the act in particular’. That provision indicates that an employer (P) does not conduct a reserved legal activity by virtue of an employee of P carrying it out in that capacity ‘unless the provision of relevant services to the public or a section of the public (with or without a view to profit) is part of P’s business’.

The LSB points out that since the SRA (and the Bar Standards Board) have outlined intentions ‘to review their regulatory arrangements for in-house lawyers in an effort to ensure that they better reflect section 15(4) of the act’, it considers that a statement of policy (under section 49 of the 2007 act) is the most useful and appropriate action to take at this stage. This statement will be considered by the LSB in exercising or deciding to exercise any of its functions and highlights some key principles, including in particular:

l An evidence-based approach. The LSB ‘will expect an approved regulator which chooses to apply regulatory restrictions that are additional to those required by the act, to justify its approach with a sound evidence base’.

l Assessment of consumer impact. ‘This will involve, for example, assessing the extent to which regulators have balanced access to justice with mitigating risks around potential consumer detriment.’

Many local government lawyers will find these helpful since they see no objective justification for the current restriction on relevant local government commercial practice. Indeed many feel that such restrictions seem to be motivated by a narrow sense of protectionism which unfortunately seems to ignore the public interest. The argument runs that local authority legal enterprise not only eases the budgetary burden on host authorities and fills a gap in consumer market supply (thereby promoting access to justice), it also enhances efficiency, effectiveness and economy of local public services by the provision of cost-effective and knowledgeable legal support to other relevant public bodies.

So in the view of many local authority lawyers the onus is on the SRA objectively to justify any continuing restriction of local government entrepreneurial activity along these lines. Local government lawyers will therefore wish to respond to the consultation, which closes at 5pm on 18 November. The consultation paper can be found on the LSB website (www.legalservicesboard.org.uk).

The SRA is also apparently intending to issue a consultation on the regulation of in-house lawyers early in 2016. Local authority lawyers will clearly welcome this opportunity to make their views known both through their representative body (Lawyers in Local Government) and otherwise.

In the meantime, however, those councils wishing to trade with other authorities and public bodies without having to use a corporate structure (under either the Local Government Act 2003, or the Localism Act 2011) can always use the Local Authorities (Goods and Services) Act 1970. This (among other things) enables a local authority to provide administrative, professional or technical services, for a fee, to specified or designated public bodies. A large variety and number of public bodies have been designated by ministerial order (under section 1(5) of the 1970 act). These include government departments as well as health, housing, leisure and many other public bodies. However, there are some notable limitations – for example, education academies.

So to save authorities having to trawl through the myriad statutory instruments which designate relevant 1970 act public bodies, it would be helpful if the act’s public body definition could be made generic. This could be done quite easily by, for example, adopting the definition of ‘contracting authorities’ in section 2 of the Public Contracts Regulations 2015 (SI 2015 No. 102). At a stroke of the parliamentary pen, this would reduce bureaucracy and increase public service efficiency and effectiveness across the board.

Nicholas Dobson, Freeths

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