A third of solicitors working in local government consider that the regulatory restriction on charging for legal services provided to external clients poses a substantial or very large constraint on their activities, the Solicitors Regulation Authority has found.
The finding arose out of research carried out to provide the SRA with a map of the supply of, and demand for, legal services by in-house solicitors. Some 473 solicitors working in local government and more than 2,000 in-house solicitors in total responded to its survey.
A further third of the local government solicitors polled reported that the regulatory restriction acted as “some constraint”. The remainder said it was only either a limited constraint or served as no constraint.
Local government solicitors were more likely than other in-house lawyers to view the regulatory restriction on charging external clients for legal services as a very large or substantial constraint on their activities.
The SRA also asked local government respondents whether their organisations would change were the restriction to be lifted.
More than 45% said they expected there would be some change in their organisations. A similar percentage (40%) said they did not know how their organisation would respond, while around 15% suggested that there would be no change.
Of those who expected a change in their organisations, 35% said it would lead to expansion in the types of legal services provided. Another third said it would mean their organisations would provide legal services on a commercial basis, while almost one in four predicted that it would lead to an expansion in the size of their legal team.
Under rule 4 of the Solicitors Practice Framework Rules an in-house solicitor, employed by a local government body, can act for organisations for which the employer is statutorily empowered to provide legal services; other specifically defined related bodies; and current and former members of the local authority (in this case subject to certain restrictions, including that no fee is charged). Under rule 4.15, charging restrictions also generally apply when providing work to charities.
The SRA said the results of its survey would help it “understand emerging regulatory risks and the challenges that in-house solicitors face”.
Richard Collins, SRA Executive Director, said: "The in-house sector continues to thrive, grow and develop and it is important to ensure that regulation in this sector remains relevant, effective and proportionate.
"Not least among these challenges is the indication that in-house solicitors are experiencing conflicts between their organisation's decisions and their own professional obligations. Many in-house solicitors are in a role that also involves providing advice to third parties outside of their organisation, and potentially linked to that, it would seem that there is an appetite among some organisations to convert to an ABS."
Collins added: “The research also confirms the need, if we are to deliver relevant, effective and proportionate regulation, not to treat the in-house sector as a single, undifferentiated, cohort to which we apply a single regulatory approach.”