Regulatory structure for legal services "will struggle to meet demands placed on it": independent report

September 17, 2019

The current regulatory structure provides an incomplete and limited framework for legal services regulation that will struggle in the near-term and beyond to meet the demands and expectations placed on it, an independent review has claimed.

The review was undertaken by the Centre for Ethics and Law in the UCL Faculty of Laws and led by Honorary Professor Stephen Mayson.

“Whatever the criticisms and concerns expressed in this report about the reforms introduced by the Legal Services Act 2007, I continue to welcome and support them,” Professor Mayson said.

“The Act heralded a more modern and liberal approach to the regulation of legal services in England & Wales.”

In the executive summary of his interim report Professor Mayson sets out his main findings and identifies some issues to be addressed. He then sets out a number of propositions.

Findings

These are:

There is a discrepancy between consumer expectations of regulatory scope and protection, and the current (and imminent) reality of scope and protection.
The justification for the reservation of the current legal activities is stronger in some cases (such as rights of audience and the conduct of litigation) than it is in others (such as the narrowly defined probate activity or the administration of oaths). While there might remain a need for before-the-event authorisation of providers in respect of certain public interest or high-risk legal activities, the continuing need for the concept of ‘reserved’ legal activities in the regulatory framework is debateable.
There is merit in considering legal services being assessed for risk to the public interest, with a ‘differentiated’ approach to regulation under which an appropriate mix of before-, during-, and after-the-event regulation could be applied.
The link between the reserved activities and authorisation through professional titles creates inflexibility and constraints in the current regulatory framework. However, a shift from title-based regulation to activity-based regulation is not as straightforward as it might appear.
The current regulatory framework is insufficiently flexible to apply targeted, proportionate, risk-based and consistent regulation to reflect differences across legal services areas and across time.
The nature of the separation and independence of regulatory functions from representative functions remains unsatisfactory. The current approach and requirements of regulation and the internal governance rules make the desirable cooperation and collaboration between regulatory and representative functions problematic to achieve.
In principle, regulators are the natural (and arguably better) guardians of consumers’ interests, by determining and enforcing the minimum or basic requirements for legal services. Equally, the professional bodies are the natural (and arguably better) custodians of the higher standards and aspirations associated with a professional calling and vocation.
There is sufficient known or potential detriment to the interests of consumers and providers of legal services, and to society at large, arising from the shortcomings in the current regulatory framework to justify further reform.
(and conclusion) The current regulatory structure provides an incomplete and limited framework for legal services regulation that will struggle in the near-term and beyond to meet the demands and expectations placed on it.

Summary of issues to be addressed

Arising from these findings, a number of issues require addressing in any consideration of future reform, Professor Mayson said. “This Review identifies and confirms a number of significant shortcomings and challenges arising from the present structure for the regulation of legal services and those who provide them.”

These are:

inflexibility arising from statutory prescription;
competing and possibly inappropriate regulatory objectives;
a pivotal set of reserved legal activities that are anachronistic and do not necessarily include all activities that ought to be regulated;
title-based authorisation that leads to additional burden and cost in relation to some activities being regulated that do not need to be(resulting in higher prices to consumers);
the unsatisfactory nature of the separation of regulation and representation;
the existence of unregulated providers who cannot be brought within the current regulatory framework (with an expectation that their numbers will increase);
the prospect of LawTech,that will be capable of offering legal advice and services independently of any human or legally qualified interface or interaction, beyond the reach of the current framework; (For the purposes of the review, ‘LawTech’ is understood as technology that provides self-service direct access to legal services for consumers.)
a regulatory gap that exposes consumers to potential harm when some activities are not regulated when they ought to be, and puts legally qualified practitioners at a competitive disadvantage;
seemingly ever-increasing prices of private practice lawyers, reducing further the availability and affordability of legal services for many; this encourages either greater self-lawyering and litigants-in-person, or nudges increasing numbers of citizens into the world of unregulated providers or LawTech;
consumer confusion, caused by the existence of both regulated and unregulated providers, and a profusion of differently regulated professional titles;
inadequate or incomplete consumer protection, that is not consistent with a widespread consumer expectation that all legal services and those who provide them are subject to some form of regulation and protection; and
as a result of all of these issues, the risk of low public confidence in legal services and their regulation.

Summary of propositions

Professor Mayson sets out a number of propositions that are explored as potential solutions or improvements to address the findings and issues identified. "These are offered in the context and expectation of longer-term reform of the regulatory framework for legal services."

They are:

Promoting and protecting the public interest should be the primary objective for the regulation of legal services.
Consumer expectations and regulatory reality should be aligned by at least allowing access to the Legal Ombudsman for all consumers of legal services offered to the public.
All legal services should be capable of falling within the regulatory framework, irrespective of who provides them.
There should be an alternative or additional form of entry into regulation for those who do not hold a legal professional title.
A future regulatory framework should allow the differential application of before-, during-and after-the-event regulation to reflect the importance or risk of any particular activity or circumstance.
Professional title should no longer be the only route to personal authorisation, even in respect of those important or highest-risk activities for which before-the-event authorisation would continue to be required.
The appropriate regulator should determine what qualification or assurance of (continuing) competence, experience and integrity would need to be demonstrated by any provider for particular legal services on a before-the-event basis, and the additional requirements that would be applied on a during-the-event or after-the-event basis to the relevant providers.
The application of regulatory requirements could be supported by the existence of a public register of who is regulated and for what. Accordingly, voluntary registration and after-the-event regulation should be available to all providers of low-risk legal services; and before-the-event and during-the-event regulation and mandatory registration should apply to providers of higher-risk legal services.
The current list of reserved activities should be reviewed. This process should identify clearly the public interest basis of the need for before-the-event authorisation. This need should be established by reference to public good or consumer protection and should be explicitly articulated, to confirm that the current reservation can continue to be justified. Other activities should also be reviewed against these same criteria to see whether prior authorisation should in the future be extended to them.
The future primary focus of regulation should be the ‘provider’ of legal services, whether an individual, entity, title-holder, or technology.
For the purposes of a future single register of providers of legal services, the registration should be in the name of the entity, partnership or individual subject to regulatory requirements or with which a client has terms of engagement; but before-the-event authorisation should only be granted to individuals.

Professor Mayson then sets out some of the potential benefits of these propositions.

The report puts forward further questions for consultation. The deadline for responses is 29 November 2019.

Matthew Hill, the Legal Services Board’s Chief Executive, said: “We welcome the publication of the interim report of Professor Mayson’s Independent Review of Legal Services Regulation.

“Stephen’s report is a thorough and thoughtful analysis of a complex set of issues. It touches on a number of key areas that are of interest to us, and on which we look forward to engaging further in due course.”