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SRA consults on exercising global responsibilities

How does a single regulator fulfil its principal duty of consumer protection without constraining a competitive and highly sophisticated international sector? The Solicitors Regulation Authority (SRA) has launched a consultation amongst stakeholders to test proposals.

The consultation follows hard on the heels of the SRA's 6 October launch of outcomes-focused regulation (OFR) and the new Handbook.OFR moves away from a prescriptive 'tick-box' regulatory regime to one which is risk-based, and where the onus is on the individual or the firm to comply. And with the arrival of alternative business structures (ABS), which allow participation by a larger proportion of individual non-lawyers in a firm than is currently permitted, the legal services market is opening up, not just in England and Wales, but further afield.

The consultation document - 'The Regulation of International Practice' sets out the SRA's proposals on how it might regulate the international practice of firms that have headquarters in England or Wales. The introduction of global entity regulation as proposed in the consultation paper will support international firms wishing to develop single, global businesses—but will work equally well for small and medium enterprises (SME) and niche businesses.

Proposals cut through at least some of the regulatory maze facing international firms, supporting them in the development of single global businesses. If the proposals are accepted, firms will have greater flexibility to operate in any form that is allowed in other countries and bring into their partnerships anyone who is recognised as a lawyer in their home country.

Such firms would also benefit from a significant reduction in paperwork and welcome cost savings. Around 160 branches of law firms that currently have to register and comply separately with SRA regulations even when overseas would instead come under a single international firm 'passport to practice', a more appropriate regulatory oversight regime.

A foreign law firm that wanted to have the SRA as its lead regulator outside of England and Wales would be able to take this option where it had an operation in England and Wales. This would provide an attractive incentive for firms to be headquartered in London. SRA recognition would provide the hallmark representing high professional standards and compliance, and this could be attractive to clients and other parties such as insurers.

Chief Executive Antony Townsend said: "The SRA recognises the role of English law as analogous to a reserve currency—it is used by lawyers and clients around the world even where there are no English parties involved. We need to regulate in ways that maintain high standards and support the health and competitiveness of this sector of the legal market.

"Our proposals will help support the further development England and Wales as a hub for global legal services. Foreign law firms with offices in England and Wales—mostly large US ones—would find their regulatory burdens reduced where they have branch offices or partners in other countries that are linked by a corporate structure to their headquarters in this jurisdiction."

Under the proposals the SRA is suggesting partnership in English law firms for lawyers in key emerging markets who have not previously been permitted to become partners in solicitors' firms here. Last year the SRA paved the way by opening up a new requalification track in English law for foreign lawyers—the Qualified Lawyers Transfer Scheme (QLTS).

The SRA is also seeking views on whether to allow European law firms more flexibility to choose whether to be regulated as foreign law firms or as English firms, depending on the services they wish to offer.

The consultation will be launched today (Tuesday 8 November) and closes on Wednesday 15 February, 2012.

 
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