Face to Face with Paul Philip, Chief Executive, Solicitors Regulation Authority (UK)

While Mr. Philip has a first degree and masters in law and was called to the Bar at Lincoln’s Inn, he is not a practising lawyer. Rather, for most of the past 25 years he has primarily held management positions in or around lawyers.

Currently, Mr. Philip is the Chief Executive of the SRA, a role to which he has brought a wealth of experience in public interest regulation relating to the provision of professional services.

Prior to this appointment, Mr. Philip was the Deputy Chief Executive and Chief Operating Officer at the General Medical Council (“GMC”) in the UK. He has also held senior roles in both the Legal Services Commission and the UK’s National Health Service (“NHS”).

Given the opportunities and current challenges the SRA faces, Mr. Philip’s experience and ability to leverage it as the Chief Executive is a boon for the organisation as it moves into its next stage of development.

A Fairly Easy Step

Mr. Philip said that accepting his appointment at SRA was an “obvious evolution” from his previous role at the GMC.

As the Deputy Chief Executive of the GMC, Mr.Philip was responsible for leading all corporate work programmes, as well as delivering all of the organisation’s core regulatory work, including regulating 250,000 doctors, setting professional standards and prosecuting all infringements of the rules.

Making the move from regulating doctors to regulating lawyers was a “fairly easy step” for Mr. Philip, as he has found that there are many parallels between the work and the challenges that both professions face. “Each offers professional services in increasingly challenging environments. Professional standards, such as integrity, confidentiality, independence and providing a proper standard of professional service are common in both fields.”

Life as the Chief Executive

Mr. Philip said he hasn’t really noticed what it feels like to be the Chief Executive – outside of being very busy – but indicated that this role has given him the opportunity to work on very interesting and challenging issues in a fast-paced setting.

Of the issues he has faced during his tenure, he said the most challenging has been “building a relationship with the profession; developing a dialogue that will allow [the SRA] to properly understand the market and how it should be regulated in order to get the balance right between protecting the public and allowing legal businesses to grow, unhindered by red tape and regulatory bureaucracy.”

Developing this dialogue is vital for the SRA to devise a workable approach to regulating lawyers across different specialties. “Although we talk about the [legal] profession as being one profession, it really is made up of lawyers working in many markets, with very different challenges,” Mr. Philip explained. “International lawyers doing M&A work have a very different job and face very different challenges to colleagues doing publically funded work, or those doing criminal or family work. And that is a factor we are increasingly taking into account in the way that we regulate lawyers. A one-size-fits-all approach is simply no longer good enough given the differences in the practice areas of lawyers.”

Mr. Philip also noted that the internationalisation of the practice of law has raised many challenges for the SRA, as it has for other regulators around the world. From the increased inflow of overseas law firms and practitioners into England to English firms setting up in ever increasing numbers in a growing number of jurisdictions, there has been a stronger push for the SRA to understand the regulatory models of other jurisdictions and obtain the information they need to verify qualifications. “There is a challenge for all legal regulators in communicating and learning from each other. This is why we are promoting the development of an international network of legal regulators, which the Hong Kong Law Society is actively engaged in,” Mr. Philip said.

As for issues that have piqued Mr.Philip’s interest, he said watching how legal businesses are reconfiguring their ownership structures has been fascinating. He also thinks it has been interesting to watch the market open up, with three of the big four accountancy firms now regulated as law firms. “I suspect this will drive some fairly fundamental changes in how legal services are delivered in the future.”

Innovation in the Legal Sector

Innovation is driving growth in the legal sector, as in any other sector, and a wider range of services in a competitive market can only be good news for the public. However, Mr. Philip noted that changes in the market have raised a host of regulatory issues which must be examined and addressed.

For instance, “significant questions remain about which elements of the current regulatory framework most significantly impede innovation,” Mr.Philip said. “Or, indeed, whether some elements of regulation may actually be encouraging or stimulating innovation as some research on other sectors suggests.”

Mr. Philip pointed to three main issues related to innovation where better understanding is needed:

  • to understand what innovation means in the context of the legal services sector;
  • to explore what is driving innovation in the legal services sector, including the impact of competition in driving organisations to try new approaches; and
  • to understand the barriers and enablers of innovation.

First Large-Scale Study on Innovation in the Legal Sector

To explore these issues, the SRA and the Legal Services Board enlisted the help of the Enterprise Research Centre (“ERC”) at Warwick Business School to conduct a study on innovation in the legal sector, whereby ERC reviewed the findings of a series of qualitative case studies and quantitative surveys of 1,500 organisations delivering legal services in England and Wales.

“Findings from the study suggest that legal professionals, including solicitors and barristers, are becoming more innovative in the organisation and management of their businesses,” Mr.Philip said. “The research shows that law firms and solicitors are capitalising on how the market is opening up by developing new ways to do business and offer more services.”

Mr. Philip noted that the study also found:

  • alternative business structures (“ABS”) are 13–15 percent more likely to introduce new legal services than other types of regulated solicitor firms;
  • over a quarter of all providers have introduced a new service in the last three years;
  • 80 percent of legal organisations feel that they have a culture and leadership which is open to new ideas;
  • 40 percent of organisations have put in place organisational procedures to support innovation and the development of new ideas;
  • innovation extends service range, improves quality and attracts new clients; and
  • a majority of providers see regulation as broadly neutral to positive for innovation but there are some key areas where providers believe regulation has a negative impact on innovation, such as client accounts and client complaints.

“A market which is welcoming of innovation is attractive to investors and potential new entrants, and encourages existing businesses to differentiate and to compete. This report suggests that legal professionals are innovative but it also indicates that more can be done to meet the significant unmet legal needs that continue to exist,” he explained.

This is the SRA’s first large scale study on this topic. Mr.Philip said the findings have helped the regulator better understand the new and different approaches law firms and others are taking.

“We think we are doing all the right things – opening up the market and reducing red tape – which gives firms room to grow and innovate.”

Levelling the Playing Field

With all the change afoot, the SRA has made it a priority to ensure a level playing field for all types of legal service providers to encourage innovation and growth, while ensuring appropriate consumer protection. These reforms, Mr. Philip noted, follow-on from changes the SRA made last year to open up the market to different business models and one-stop shop services (eg, multi-disciplinary practices created through ABSs).

By way of background, Mr. Philip explained that since 2011, non-lawyers have, for the first time, been allowed to own, manage or invest in a law firm in the UK. “This was enabled by the Legal Services Act (2007), which opened up the legal services market by providing for the introduction of legal services through ABS. This has sometimes been referred to as the ‘Tesco Law’, indicating that supermarkets, amongst others, could provide legal services as ABSs.”

“Although we have authorised 369 ABSs, certain businesses have been notable by their absence, particularly firms offering a range of professional services (multi-disciplinary practices) such as accountancy, surveying or financial services that were also regulated elsewhere. We therefore changed the rules in October 2014 to make it easier for multi-disciplinary practices to offer SRA regulated legal services by removing elements of ‘double regulation’.”

“Changes to the Separate Business Rule (“SBR”) – which mean that solicitors can own or be connected to separate businesses providing non-reserved legal services – were agreed by the SRA Board at its meeting on 3 June 2015. The original purpose of the SBR was to prevent solicitors from having links to separate businesses outside the remit of regulation.”

“The opening up of the legal market already allows other types of businesses to own law firms and deliver innovative services.”

“As part of the same package of reforms, the rules on what activities can be undertaken within solicitors firms have been relaxed, making it easier for those firms to create ‘one-stop shops’ for professional services.”

“By changing the SBR, law firms can own separate businesses, allowing them to compete on a level playing field with multi-disciplinary practices created through ABSs; the changes provide the opportunity for firms to take advantage and deliver innovative services. We have no reason to think there will be any consumer detriment, but we will be monitoring this.”

Additional Reforms on the Horizon

Mr. Philip said that the SRA is now looking into what more it should do to give solicitors even more flexibility in the future. “For example, the SBR amendments free up the restrictions on solicitors owning, being owned by and managing separate businesses that carry out non-reserved legal activities but they do not remove the restrictions preventing solicitors in those businesses from delivering services to the public. Later this year we will issue a paper that sets out the next phase of our regulatory reform programme and this will include our plans to review the restrictions on solicitors practising in non-authorised businesses.”

“The proposed reform of our handbook is the next step in our wider programme of reform in how we regulate legal services,” Mr. Philip continued. “We know that there are some significant issues with the current handbook. For example, it is hundreds of pages long and very complex in places. It has evolved piecemeal over time, which has led to some inconsistencies that can be difficult for solicitors to interpret. It is essential that the SRA’s Handbook reflects the way we want to regulate. Our work on the Handbook falls squarely within our aims of increased competition, innovation and growth to serve consumers of legal services better.”

“Business structures are not important to consumers,” Mr. Philip added, “what is important is accessibility, price and quality of services. We have therefore been moving away from an approach that is restrictive as to the structures firms choose to adopt. Our goal is to ensure that there is clarity around who regulation applies to, how it applies to different business models and what our requirements are.”

Ethical Considerations

While the benefits of opening up the legal market are many – for both legal service providers and the public – non-lawyer involvement presents a number of challenges for the regulator.

Some significant ethical concerns Mr.Philip identified include:

  • a lack of regulatory history held by the SRA on non-lawyers to determine past behaviour;
  • a lack of understanding by non-lawyers of how a regulatory regime such as the SRA’s works; and
  • concerns that in a predominantly non-lawyer owned/managed ABS, the ethical balance provided by the lawyer manager / Compliance Officer for Legal Practice (“COLP”) may not be sufficient to override higher considerations of non-lawyers (eg, commercial factors).

But Mr. Philip explained that there are a number of ways to address these challenges, such as:

  • financial and criminal checks;
  • getting information from any other regulators they may have (eg, the Institute of Chartered Accountants in England and Wales (“ICAEW”) or the Financial Conduct Authority (“FCA”));
  • ensuring robust procedures within firms to give sufficient control to lawyer manager / COLP to fulfil their regulatory duties; and
  • emphasising to non-lawyers the need to familiarise themselves with and understand the SRA Handbook as it applies to them and their firm.

“Up until November 2014, this was a potentially significant problem as the SRA regulated all legal work in the business, whether reserved or not, which could conflict with, for example, FCA or ICAEW regulation of non-reserved legal activities. Since November 2014, we have introduced a multi-disciplinary practice (“MDP”) framework which allows us to limit our regulation to exclude work suitably regulated by another regulator so the risk for conflicts and overlaps is significantly reduced. Gaps are not an issue as the MDP licences we issue specify only the work that falls out of our regulation (as covered by the other regulator) as opposed to trying to list all work that might come within it so, for example, we may say SRA regulated work will be all reserved legal activity and all non-reserved legal activity that is not covered by ICAEW regulation. As a result, all legal work would be regulated by one or other of the regulators.”

Regulatory Overhaul Has Been Worthwhile

As the Hong Kong Law Society has been carefully studying the pros and cons of the ABS model and considering UK-style ABS reforms, Mr. Philip concluded the interview by explaining why he believes the regulatory overhaul in the UK has been worthwhile.

“We believe that the regulatory changes such as allowing firms to offer a one-stop-shop for clients, without worrying about duplicate regulation, will enable new firms to flourish and consumers to access services in new ways, whilst at the same time protecting consumers and keeping costs as low as possible. As part of our wider package of regulatory reform, this is about making regulation simpler, not being restrictive on business models and making business easier.”

“We have been authorising ABSs for some years now and it has brought new businesses and new thinking in our legal services market. It seems to be working for us and we think that the steps we have taken to make sure traditional businesses can compete on a level playing field will build on that success,” Mr. Philip concluded.

Mr. Paul Philip
Chief Executive, Solicitors Regulation Authority (UK)

Mr. Philip took up his post as Chief Executive of the SRA on 1 February 2014. He was previously the Deputy Chief Executive and Chief Operating Officer of the General Medical Council (“GMC”), where he was responsible for leading all corporate work programmes, as well as delivering all the organisation’s core regulatory work.

Prior to becoming the Chief Operating Officer at the GMC, Mr. Philip led the GMC’s medical ethics and disciplinary functions, reforming fundamentally the way in which the organisation conducts its business in these areas.

Mr. Philip has previously held senior roles in both the Legal Services Commission and the NHS.

Editor, Hong Kong Lawyer
Legal Media Group
Thomson Reuters