“Regulation beyond the echo chambers”: who is listening?

9 July 2020

Professor Stephen Mayson’s ‘Reforming Legal Services: Regulation beyond the echo chambers’ report has now been submitted to the Lord Chancellor as the final product of a two-year independent review into the regulation of legal services in England and Wales.  As part of this process, almost 350 interested parties were consulted including regulators, professional bodies, consumer groups, judges, in-house lawyers, academics and parliamentarians.
 

Professor Mayson also sought advice and insight from a range of individuals on a purposefully established Advisory Panel, including our colleague Iain Miller. In the Acknowledgements section of the report, Mayson states that this allowed him to “consider aspects of legal services regulation, and the experiences of consumers, practitioners and regulators, in a much more considered way than would have been possible otherwise.”

In summarising his views about the current regulatory framework, Professor Mayson has referred to it as “incomplete” and “limited” and as “not able in the near-term and beyond to meet the demands and expectations placed on it, particularly with the emergence and rapid development of alternative providers and lawtech”. The report sets out 46 long-term recommendations which Mayson states are seeking to “create a level playing field for legal services and enhance consumer protection, through targeted and proportionate regulation”.  These are made within the context and expectation of longer-term reform of the overall regulatory framework for legal services and are not in any way to be regarded as quick fixes.  However, Mayson did cite four further short-term recommendations as possible solutions or improvements to address the most pressing issues he uncovered.

While we would encourage you to set aside time to read the Mayson report in full, we consider the following to be the headline points to take away in terms of his recommendations:

  • The primary objective for the regulation of legal services should be “promoting and protecting the public interest”.
  • All ‘providers’ of legal services, whether qualified or not, should be subject to registration and regulation. This includes those who are currently unregulated, as well as providers of technology-based legal services. While there would be some exemptions or exclusions in relation to providing legal services to family and friends, information-only services, public officers and self-representation, these should be limited.
  • The current regulatory structure of ten frontline regulators plus an oversight regulator should be replaced by a single, independent regulator of legal services (known as the “Legal Services Regulation Authority” (LSRA)) to ensure a common and consistent approach across the legal sector. The LSRA should be established as an arm’s length regulatory agency.
  • There will be no continuing need for the concept of an ‘approved regulator’ as under the current Legal Services Act 2007 (LSA), and the role of professional bodies in the regulation of legal services should be brought to an end.
  • All legal services regulation needs to be targeted and proportionate, and should take account of risk, burden and cost. Accordingly, the current “reserved legal activities” should be reviewed and replaced with legal services that require prior authorisation, based upon the “public interest” objective and those posing a high risk to consumers. This would be known as the “before the event” element to regulation. Where this is required for public good services (principally the exercise of rights of audience or the conduct of litigation), there would be a dedicated regulatory body as part of the single regulator.
  • The LSRA should maintain a public register of legal services providers which sets out who is regulated and for what. For those on the register, regulatory requirements and enforcement action would correspond to the importance of particular legal services, the level of risk associated with them or the relative vulnerability of the clients concerned. Accordingly, defined low-risk services would only require registration, whereas higher-risk services would carry certain additional regulatory conditions. Essentially, the revised framework would enable the LSRA to apply a risk-based approach to the imposition of regulatory requirements.  The differential application of before-, during- and after-the event regulation would reflect the importance or risk of any particular activity or circumstance. 
  • Minimum protections afforded to consumers would include standards of expected performance, indemnity insurance, and access to a revised and more extensive legal services ombudsman.  This would act as a single point of entry for investigation and redress for complaints which had been made by individual consumers or small businesses.
  • Given that lawtech is rapidly emerging in the current legal market, this should fall within any future definition of “legal services” and an appropriate person should be registered as the “provider” of that service.
  • To encourage innovation, the LSRA should have powers to grant waivers and to establish and maintain a regulatory sandbox to allow regulated and supervised exploration of suitable initiatives beyond the strict scope of the regulatory framework. Such permissions should be subject to appropriate and published criteria, decision making and authorisation processes, registration and disclosure requirements (consistent with the need to protect proprietary and confidential information), and time limits.
  • All legal professional titles should have the benefit of statutory protection. It should be an offence for someone who is not on the LSRA’s register or a title-holder to pretend or imply that they are, or to use any description that suggests so.
  • Flowing from this, the LSRA should have the power to approve the requirements for registration, regulation and the award and removal of professional titles. However, professional bodies should continue to have the ability to require higher standards of their members than those imposed by regulation, where it is deemed proportionate and necessary to do so.
  • Given the public policy objectives for legal professional privilege, and parity for clients, legal professional privilege should be extended to those providers who are registered within the legal services framework and subject to before-the-event authorisation or during-the-event accreditation.
  • A single tribunal should be established to adjudicate on the conduct and discipline of regulated providers of legal services.

Mayson anticipates that in order to achieve some of his recommendations the LSA would need, at the very least, to be amended, if not entirely ripped up and replaced with other enabling legislation. It may come as no surprise then that this and the recommendation to introduce a single regulator have received a less than warm welcome from some of the existing bodies tasked with discharging the regulatory functions of the approved regulators.

For example, in response to the suggestion of one “super regulator”, Legal Futures reported that a spokesman for the Bar Standards Board said: “The work of barristers is central to the operation of the justice system and the rule of law. As such, the public interest requires that barristers continue to be regulated robustly by a regulator with the necessary specialist expertise”.

These bodies may be reassured by the fact that recommendations requiring a substantial overhaul of the existing legislation are unlikely to become a reality any time soon.  Even before Covid-19, reform of the LSA was not something on the Government’s agenda.  Clearly any review of this primary legislation is now firmly on the backburner.

So, are there alternatives?

The Legal Services Board (LSB) recently announced that it is developing a new strategy for legal services regulation which it intends to pursue irrespective of legislative reform.  The LSB’s Chief Executive, Matthew Hill, indicated that this strategy “…could include considering alternative regulatory models.  Central to our thinking is a commitment to a strategic reshaping of legal services to better meet the needs of consumers and benefit everyone in society…”

So, what exactly is the LSB proposing?  Earlier this month the LSB’s Board considered a proposal submitted by the LSB Executive to conduct a review of the “reserved legal activities” set out in the LSA. 

The legal activities, which are reserved and therefore must only be carried out by an authorised or exempt person, are:

  • The exercise of a right of audience;
  • The conduct of litigation;
  • Reserved instrument activities;
  • Probate activities;
  • Notarial activities; and
  • The administration of oaths. 

The distinction between what is a reserved legal activity and what is not is of fundamental importance.  Whilst it is a criminal offence to carry on a reserved legal activity when you are not entitled to do so, anyone can carry on a legal activity which is not reserved. This means that, contrary to consumer expectations, not all providers of legal services are regulated.  And this is one of the main reasons – consumer confusion - that Professor Mayson cites as the need for change.

Unfortunately, the boundary between reserved legal activities and all other legal activities is blurred and hard to draw.  This is because the history of the reserved legal activities is obscure and, in some cases, dates back many centuries and is the result of simply confirming the then current practice or a political influence.  Equally, the boundaries of the reserved legal activities have rarely been tested in a court of law.

This lack of clear, logical distinction between what is a reserved legal activity and what is not causes confusion for those seeking to access legal services and also enables individuals to find creative ways of avoiding regulation. 

The LSB Executive has recognised that “Over time, the regulatory system is falling ever further out-of-step with the evolution of the market. It is important that the regulatory framework is as fit for purpose as it can be to support the sector to recover from the Covid-19 pandemic, maintain its international competitiveness following EU exit and deliver wider consumer and public interest outcomes.”

 

What might a review entail?

The proposal which the LSB Board considered this month suggested that any review of the reserved legal activities should be “…approached as part of a broader vision of change that can be achieved within the parameters of the [Legal Services] Act… The Act provides scope for regulators to authorise providers holding other professional titles or operating in the unregulated market, raising issues around the future institutional landscape. There is scope to set up voluntary arrangements relating to both regulatory standards and consumer redress. Therefore, alongside any alterations to the reserved activities, we would wish to explore parallel reforms to the regulatory arrangements of existing regulatory bodies”. (Our emphasis added)   

To undertake such a comprehensive review would, however, be no mean feat.  Sensibly, the LSB has recognised this and has committed to revisiting the issue once it has more information.  The LSB Board concluded that “…most people expect the legal professionals they engage to be regulated, but it should not necessarily follow that all legal activities should be regulated. However, the Board agreed that it would be an undesirable outcome if a review led to more regulators, so it was keen to explore how the existing regulators could adapt. In our aim to promote public trust and confidence in the legal services system we will revisit this topic later in the year, when we can analyse different models, risks and opportunities in more detail.”

 

Concluding remarks

The LSB clearly recognises the need for change, but is keen to get it right rather than to rush to make quick fixes, which then do not stand the test of time.  It therefore seems to be a case of “watch this space”. Given the uncertainty of the current situation we find ourselves living within, where so many other items trump this on the political agenda, perhaps this is the slightly dampened message we can take away. While the Mayson report sets out how the legal services framework could look if you were to start with a blank canvass (which to be fair to him was the brief), it seems that we are (now, even more so) a very long way from being afforded that opportunity.  So in the meantime, perhaps we remain in limbo, more in a type of “make do” situation, where change is most likely to be brought about by small steps and achievable measures, as opposed to what can only be regarded as a step change.  So in that sense, while the LSB’s proposals might seem ambitious, they are clearly achievable and given the absolute need for change, long term, perhaps this is the desired route that the LSB should be taking and one that it should be encouraging the frontline regulators to support. 

 

About the authors

Jessica Clay is a Senior Associate in the Regulatory department and specialises in legal services regulation, with a focus on regulatory compliance, legal ethics, investigations and public law matters. 

Lucy Williams is Legal Counsel in the Regulatory Department with a particular specialism in legal, healthcare and financial regulation.  In her defence practice Lucy represents regulated professionals and organisations facing professional disciplinary proceedings, including law firms, solicitors, barristers, doctors, nurses, psychotherapists and teachers.

 

A shortened version of this blog appeared in New Law Journal on 9 July 2020

 

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility