Legal Services Bill [HL]

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Legal Services Bill [HL]

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
32

56
Enforcement of notices under section 55
(1)
Where an approved regulator is unable to comply with a notice given to it
under section 55(1), it must give the Board a notice to that effect stating the
reasons why it cannot comply.
(2)
If an approved regulator refuses, or otherwise fails, to comply with a notice
5
under section 55(1), the Board may apply to the High Court for an order
requiring the approved regulator to comply with the notice or with such
directions for the like purpose as may be contained in the order.
(3)
This section applies in relation to a person to whom a notice is given under
section 55(3) as it applies in relation to an approved regulator to whom a notice
10
is given under section 55(1).
Competition
57
Reports by the OFT
(1)
If the OFT is of the opinion that the regulatory arrangements of an approved
regulator (or any part of them) prevent, restrict or distort competition within
15
the market for reserved legal services to any significant extent, or are likely to
do so, the OFT may prepare a report to that effect.
(2)
A report under subsection (1)—
(a)
must state what, in the OFT’s opinion, is the effect, or likely effect, on
competition of the regulatory arrangements or part of them to which
20
the report relates, and
(b)
may contain recommendations as to the action which the Board should
take for the purpose of ensuring that the regulatory arrangements of
the approved regulator do not prevent, restrict or distort competition.
(3)
Where the OFT makes a report under subsection (1), it must—
25
(a)
give a copy of the report to the Board, the Consumer Panel and the
approved regulator, and
(b)
publish the report.
(4)
Before publishing a report under subsection (3)(b), the OFT must, so far as
practicable, exclude any matter which relates to the private affairs of a
30
particular individual the publication of which, in the opinion of the OFT,
would or might seriously and prejudicially affect the interests of that
individual.
(5)
The OFT may exercise any of the powers conferred on it by section 174(3) to (5)
of the Enterprise Act 2002 (c. 40) (investigation powers) for the purpose of
35
assisting it in exercising its functions under this section.
(6)
For the purposes of the law of defamation, absolute privilege attaches to any
report of the OFT under this section.
58
The Board’s response to OFT report
(1)
This section applies where a report is made by the OFT under section 57 in
40
respect of an approved regulator.
(2)
The Board must allow the approved regulator a period of 28 days beginning
with the day on which the copy of the report is given to the approved regulator

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
33

under section 57, or such longer period as the Board may specify in a particular
case, to make representations to the Board about the OFT’s report.
(3)
The Consumer Panel may give the Board such advice as the Consumer Panel
thinks fit regarding the OFT’s report.
(4)
Having considered any representations made under subsection (2) and any
5
advice given under subsection (3), the Board must notify the OFT of the action
(if any) it proposes to take in response to the report.
59
Referral of report by the Lord Chancellor to the Competition Commission
(1)
This section applies where the OFT is satisfied that the Board has failed to give
full and proper consideration to a report made by the OFT, in respect of an
10
approved regulator, under section 57.
(2)
The OFT may give a copy of its report to the Lord Chancellor.
(3)
The OFT must notify the Board and the approved regulator if it gives a copy of
its report to the Lord Chancellor.
(4)
On receiving a report under subsection (2), the Lord Chancellor must—
15
(a)
give the Competition Commission a copy of the report, and
(b)
seek its advice on what action (if any) should be taken by the Lord
Chancellor under section 61.
60
Duties of the Competition Commission
(1)
Where the Lord Chancellor seeks the advice of the Competition Commission
20
under section 59, the Commission must investigate the matter.
(2)
The Commission must then make its own report on the matter unless it
considers that, as a result of any change of circumstances, no useful purpose
would be served by a report.
(3)
If the Commission decides in accordance with subsection (2) not to make a
25
report, it must make a statement setting out the change of circumstances which
resulted in that decision.
(4)
The Commission must comply with subsection (2) or (3) within the period of 3
months beginning with the day on which it receives a copy of the OFT’s report
under section 59(4)(a).
30
(5)
A report made under this section must state the Commission’s conclusion as to
whether any of the matters which is the subject of the report has or is likely to
have the effect of preventing, restricting or distorting competition within the
market for reserved legal services to a significant extent.
(6)
A report under this section stating the Commission’s conclusion that there is,
35
or is likely to be, such an effect must also—
(a)
state whether or not the Commission considers that that effect is
justified, and
(b)
if it states that the Commission considers that it is not justified, state its
conclusion as to what action, if any, ought to be taken by the Board.
40
(7)
When determining under subsection (6)(b) any action to be taken by the Board,
the Commission must ensure—
(a)
that the action stated is action which the Board has power to take, and

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
34

(b)
so far as reasonably possible, that the action stated is compatible with
the functions conferred, and obligations imposed, on the Board by or
under this Act.
(8)
A report under this section must contain such an account of the Commission’s
reasons for its conclusions as is expedient, in the opinion of the Commission,
5
for facilitating proper understanding of them.
(9)
Sections 109 to 115 of the Enterprise Act 2002 (c. 40) (investigation powers)
apply in relation to an investigation under this section as they apply in relation
to an investigation made on a reference made to the Commission under Part 3
of that Act (mergers), but as if—
10
(a)
in section 110(4) of that Act, the reference to the publication of the
report of the Commission on the reference concerned were a reference
to the Commission making a report under subsection (2) or a statement
under subsection (3), and
(b)
in section 111(5)(b)(ii) of that Act the day referred to were the day on
15
which the Commission makes that report or statement.
(10)
If the Commission makes a report or a statement under this section it must—
(a)
give a copy to the Lord Chancellor, the Board, the Consumer Panel and
the approved regulator to which the OFT’s report relates, and
(b)
publish the report or statement.
20
61
Lord Chancellor’s power to give directions
(1)
The Lord Chancellor may direct the Board to take such action as the Lord
Chancellor considers appropriate in connection with any matter raised in a
report made by the OFT under section 57.
(2)
Before giving a direction under subsection (1), the Lord Chancellor must
25
consider any report from the Competition Commission under section 60 on
that matter.
(3)
When exercising the power to give a direction under subsection (1), the Lord
Chancellor must ensure—
(a)
that the action stated is action which the Board has power to take, and
30
(b)
so far as reasonably possible, that the action stated in any direction is
compatible with the functions conferred, and obligations imposed, on
the Board by or under this Act.
(4)
The Lord Chancellor must publish a direction given under this section.
The Board as approved regulator
35
62
The Board as an approved regulator
(1)
The Lord Chancellor may by order—
(a)
designate the Board as an approved regulator in relation to one or more
reserved legal activities;
(b)
modify the functions of the Board, and make such other provision
40
relating to those functions as the Lord Chancellor considers necessary
or expedient, with a view to enabling the Board to discharge its
functions as an approved regulator effectively and efficiently;

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
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(c)
cancel the Board’s designation as an approved regulator in relation to
one or more reserved legal activities.
(2)
But the Lord Chancellor may make an order under subsection (1) only if—
(a)
the Board has made a recommendation in accordance with section 66,
and
5
(b)
the order is in the same form as, or in a form which is not materially
different from, the draft order annexed to that recommendation.
(3)
If the Lord Chancellor decides not to make an order pursuant to a
recommendation made under section 66, the Lord Chancellor must—
(a)
give the Board a notice stating the reasons for that decision, and
10
(b)
publish the notice.
(4)
In discharging its functions as an approved regulator the Board must take such
steps as are necessary to ensure an appropriate financial and organisational
separation between the activities of the Board that relate to the carrying out of
those functions and the other activities of the Board.
15
(5)
An order under this section may make such modifications of provision made
by or under any enactment (including this Act or any Act passed after this Act)
as the Lord Chancellor considers necessary or expedient.
63
The Board’s designation under section 62(1)(a)
(1)
This section applies in relation to an order under section 62(1)(a) (an order
20
designating the Board as an approved regulator).
(2)
Subject to subsection (3), the order may designate the Board as an approved
regulator in relation to a reserved legal activity only where—
(a)
a body’s designation as an approved regulator in relation to the activity
is cancelled under section 45, or
25
(b)
the activity becomes a reserved legal activity by virtue of an order
under section 24.
(3)
Subsection (2) does not prevent the order having effect in advance of an event
within paragraph (a) or (b) of that subsection for the purpose of enabling the
Board to authorise persons to carry on activities which constitute the reserved
30
legal activity in question with effect from the occurrence of the event.
(4)
The order must ensure that the Board, acting as an approved regulator, may
make regulatory arrangements or modify its regulatory arrangements only
with the approval of the Board (acting otherwise than in its capacity as an
approved regulator or as a licensing authority under Part 5).
35
64
Modification of the Board’s functions under section 62(1)(b)
(1)
This section applies in relation to an order under section 62(1)(b) (an order
modifying the functions of the Board).
(2)
The order may include (among other things) provision conferring on the Board
powers to do any of the following—
40
(a)
to authorise (otherwise than by the grant of a licence under Part 5)
persons or any category of persons (whether corporate or
unincorporate) to carry on one or more activities which are reserved

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
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legal activities in relation to which the Board is designated as an
approved regulator;
(b)
to make qualification regulations;
(c)
to make provision as to the educational, training and other
requirements to be met by regulated persons who are not relevant
5
authorised persons;
(d)
to make practice rules and conduct rules;
(e)
to make disciplinary arrangements in relation to regulated persons
(including discipline rules);
(f)
to make rules requiring the payment of fees specified in or determined
10
in accordance with the rules;
(g)
to make indemnification arrangements;
(h)
to make compensation arrangements;
(i)
to make rules as to the treatment of money (including money held in
trust) which is received, held or dealt with for clients, or other persons,
15
by regulated persons, and as to the keeping by such persons of accounts
in respect of such money;
(j)
to take steps for the purpose of ascertaining whether or not the
provisions of rules or regulations made, or any code or guidance
issued, by the Board in its capacity as an approved regulator are being
20
complied with, and to make rules requiring relevant authorised
persons to produce documents and provide information for that
purpose;
(k)
to delegate any of the functions exercisable by the Board in its capacity
as an approved regulator to such persons as it considers appropriate.
25
(3)
The order may—
(a)
provide for any provision of Schedule 14 (licensing authority’s powers
of intervention)—
(i)
to apply in relation to the Board (in its capacity as an approved
regulator) and regulated persons as it applies in relation to a
30
licensing authority and licensed bodies (or managers or
employees of such bodies), or
(ii)
to so apply with such modifications as are prescribed by the
order, or
(b)
make provision, in relation to the Board (in that capacity) and regulated
35
persons, corresponding to any of the provisions made, in relation to
licensing authorities and licensed bodies (or managers or employees of
such bodies), by that Schedule.
(4)
For the purposes of giving effect to indemnification arrangements and
compensation arrangements, the order may authorise the Board to make
40
rules—
(a)
authorising or requiring the Board to establish and maintain a fund or
funds;
(b)
authorising or requiring the Board to take out and maintain insurance
with authorised insurers;
45
(c)
requiring relevant authorised persons or relevant authorised persons of
any specific description to take out and maintain insurance with
authorised insurers.
(5)
In this section—

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
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“authorised insurer” means a person within any of the following
paragraphs—
(a)
a person who has permission under Part 4 of the Financial
Services and Markets Act 2000 (c. 8) to effect or carry out
contracts of insurance of a relevant class;
5
(b)
an EEA firm (within the meaning of that Act) of the kind
mentioned in paragraph 5(d) of Schedule 3 to that Act, which
has permission under paragraph 15 of that Schedule (as a result
of qualifying for authorisation under paragraph 12 of that
Schedule) to effect or carry out contracts of a relevant class;
10
(c)
a person who does not fall within paragraph (a) or (b) and who
may lawfully effect or carry out contracts of insurance of a
relevant class in a member State other than the United
Kingdom;
“regulated person” has the meaning given by section 21;
15
“relevant authorised person” means a person authorised by the Board
(other than by the grant of a licence under Part 5) to carry on one or
more activities which are reserved legal activities.
(6)
For the purposes of this section—
(a)
a contract of insurance is of a relevant class if it insures against a risk
20
arising from accident, credit, legal expenses, general liability to third
parties, sickness, suretyship or miscellaneous financial loss, and
(b)
the definition of “authorised insurer” in subsection (5) must be read
with section 22 of the Financial Services and Markets Act 2000, and any
relevant order under that section, and with Schedule 2 to that Act.
25
65
Cancellation of the Board’s designation under section 62(1)(c)
(1)
This section applies in relation to an order under section 62(1)(c) (cancellation
of Board’s designation as an approved regulator).
(2)
Where such an order is made, section 46 (other than subsection (4)(b)) and
section 47 (transfer arrangements etc on cancellation of approved regulator’s
30
designation) apply in relation to the Board and relevant authorised persons as
they apply to an approved regulator whose designation is cancelled under
section 45 and persons authorised by that approved regulator to carry on
activities which are reserved legal activities.
(3)
In this section “relevant authorised persons” has the same meaning as in
35
section 64.
66
The Board’s power to recommend orders made under section 62
(1)
The Board may recommend to the Lord Chancellor that the Lord Chancellor
make an order under section 62 in the form of a draft order prepared by the
Board and annexed to the recommendation.
40
(2)
Before making a recommendation under this section, the Board must give each
of the persons listed in subsection (3) a notice containing—
(a)
a copy of the proposed recommendation,
(b)
a copy of the proposed draft order, and
(c)
a statement specifying a period within which representations may be
45
made about the proposals.

Legal Services Bill [HL]
Part 4 — Regulation of approved regulators
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(3)
Those persons are—
(a)
the Lord Chancellor,
(b)
the OFT,
(c)
the Consumer Panel,
(d)
the Lord Chief Justice, and
5
(e)
such other persons as the Board considers it reasonable to consult
regarding the proposals.
(4)
The Board must publish a notice given under subsection (2).
(5)
Before making the recommendation, the Board must have regard to any
representations duly made (whether by persons within subsection (3) or
10
otherwise).
(6)
If the draft order to be annexed to the recommendation differs from the draft
contained in the notice under subsection (2) in a way which is, in the opinion
of the Board, material, the Board must, before making the recommendation,
publish the draft order along with a statement detailing the changes made and
15
the reasons for those changes.
67
Effect of the Board’s designation as an approved regulator
(1)
The powers of the Board under sections 31 to 51 and 55 (regulatory powers in
respect of approved regulators) are not exercisable by it in relation to the Board
in its capacity as an approved regulator.
20
(2)
In section 53 references to an approved regulator do not include the Board in
its capacity as an approved regulator.
(3)
Sections 57 to 61 (reports by OFT etc) do not apply in relation to the Board in
its capacity as an approved regulator.
68
Regulatory conflict and the Board as approved regulator
25
(1)
An approved regulator may make a request under subsection (4) if it considers
that the regulatory arrangements of the Board (in its capacity as an approved
regulator) do not make appropriate provision to prevent a conflict between—
(a)
a requirement of those regulatory arrangements, and
(b)
a requirement of the regulatory arrangements of the approved
30
regulator.
(2)
An affected person in relation to an approved regulator may request the
approved regulator to exercise its powers under subsection (1).
(3)
An affected person in relation to the Board may make a request under
subsection (4) if the person considers that the regulatory arrangements of the
35
Board (in its capacity as an approved regulator) do not make appropriate
provision to prevent a conflict between—
(a)
a requirement of those regulatory arrangements, and
(b)
a requirement of the regulatory arrangements of an approved
regulator.
40
(4)
The request is a request made to the Board (in its capacity as an approved
regulator) that it reconsider the provision made by its regulatory arrangements
to prevent a regulatory conflict with the conflicting regulator.