Accountancy Body to Hand Designated Legal Regulatory Powers to CILEx

The Association of Chartered Accountants (ACCA) in England and Wales is to withdraw from legal services regulation in a UK first. The legal activities that are exercised by its members will now be regulated in a new partnership by CILEx Regulation (CRL), the regulatory body for Chartered Legal Executives. Under the Legal Services Act 2007 (LSA), probate was listed as a reserved legal activity, meaning that regulators who administered the right to provide probate services could be approved as legal service regulators, by the overarching regulator, the Legal Service Board.

The ACCA was approved to regulate probate in 2009, but only began actively regulating in 2018. Under the LSA, there has always been the option for any of the regulatory bodies to regulate multiple different professions, however, the transfer to regulation by CRL, which will take place over the coming months, marks the first time this will have happened in practice. This transfer will allow the 52 ACCA accredited firms to continue to practice, however, it will not affect the 300 firms regulated by the ICAEW.

The move came in the light of new governance rules that have been put in place by the LSB, as well as the fact that the ACCA was not licensed to regulate alternative business structures, and obtaining the licence would ultimately prove too costly. They, therefore, stated that “Against that backdrop and that the provision of legal services sits as an adjunct to general practice, we believe partnering with another legal services regulator provides a pragmatic and cost-effective way to support practitioners to diversify their service offerings”.

Carilyn Burman, chief executive of CILEx Regulation, said she was confident that it could offer “a number of benefits, including an opportunity for ACCA probate practitioners to join forces with other legal and non-legal professionals as ABSs, which will further encourage competition and diversity within the legal services market”.

Dr Helen Phillips, chair of the LSB, has said: “Enhancing regulatory independence has been a long-term strategic priority for the LSB and I am pleased the regulators are now able to confirm they have the appropriate separations in place between regulatory and representative functions. This is a significant achievement and means consumers can have increased certainty that decisions made by regulators are independent.”

Read more about the decision or see more about the regulatory structure in England and Wales

 

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Utah to be First US State to Trial Non-Lawyer Ownership

Utah has become the first state in the US to allow non-lawyer ownership of legal services providers. This month the State Supreme Court unanimously voted in favour of approving a 2-year sandbox programme which would licence new forms of legal services ownership.

The move has come about in the face of continued concerns over access to justice, particularly in the face of the ongoing COVID-19 pandemic. The courts have cited the reasoning that regulation should focus primarily on serving the consumer, and acting in their best interests, with Utah Supreme Court Justice Deno Himonas saying “changes will enable individuals and entities to explore creative ways to safely allow lawyers and non-lawyers to practise law and to reduce constraints on how lawyers market and promote services. New forms of providers could include partnerships, corporations and companies and non-profit organisations partnering with other entities to offer legal services.”

Whilst the Utah profession is comparatively small, with 26 lawyers per 10,000 residents compared with 92 in New York and 43 in California, the result of the sandbox will be closely watched by other state bars, particularly in the light of similar moves being discussed in California, and calls by the ABA for other states to follow suit.

Read more about the decision or view the standing order.

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California Bar moves towards regulatory sandbox

The Board of Trustees of the State Bar of California took a 9-2 decision on the 14th May 2020 to form a working group to look into forming a regulatory sandbox in which innovative legal service providers would be subject to fewer regulations. This could include limiting unauthorised practice of law rules, as well as removing limits on fee sharing and partnership between lawyers and non-lawyers.

The decision is a major step forward in a potential move towards innovative business structures in California, following a vote to delay the decision by the Board in March, with board members saying they needed more time to consider the proposals.

Following the board meeting, which was held over Zoom, Chairman Alan Steinbrecher (who as Chairman did not vote) said: “This is a significant step and I think it will lead to an exciting future,”.

For more information see:

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CMA releases report and recommendations on Scottish legal services

On the 24th March, the Competition and Markets Authority (CMA) released its review and recommendations on the legal services market in Scotland.

One of the key recommendations put forward in the report is that an independent body should be set up to regulate the profession, separating representative and regulatory functions. The CMA has suggested that  “Separating regulation from representation will increase trust in this sector and result in better regulation.”

The report also included recommendations that the Law Society of Scotland should carry out a review of price and service transparency guidance, with possible mandatory rules in order to increase public confidence in pricing and to implement rules to allow ABSs to establish, following legislation allowing them a decade ago.

Andrea Coscelli, the CMA’s CEO said:

“It is important that people in Scotland have access to high-quality and good value legal services. In addition to increasing transparency of information, our recommendations are intended to introduce greater liberalisation that could foster growth and innovation in the delivery of legal services which would help the sector grow.”

The full report is available here.

The recommendations are available here.

The Law Society of Scotland’s response is available here.

 

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Arizona set to become first state to allow ABSs

Arizona has become the first state in the US to formally file for the introduction of Alternative Business Structures (ABSs) in the US. The Arizona task force on the delivery of legal services has filed a petition with the Arizona Supreme Court which suggests eliminating rules which prevent fee sharing with non-lawyers and entering into a partnership with non-lawyers.

The petition is quoted as saying “Eliminating the rule would mean, for example, that a professional nonlawyer administrator in a law firm could have an ownership interest or that a Fortune 500 company could be a passive investor. It also could mean that a law firm could attract nonlawyer talent… by providing equity in the firm”.

The petition has also suggested introducing limited license legal practitioners to the state, filling a gap for lower-cost legal services and helping to bridge the justice gap in the state.

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Norwegian Ministry of Justice and Public Security publishes analysis of changes in lawyer regulation

Following the March 2015 report submitted by the Advokatlovutvalget (the Lawyer Commission), which suggested changes to the regulation of lawyers in Norway (Report in Norwegian available here), the Norwegian Ministry of Justice and Public Security has decided to further evaluate the recommendations.

The Ministry has commissioned research consultancy Copenhagen Economics to provide further analysis on two of the proposed changes: 1) the regulation of the right to provide legal services, and 2) the ownership regulation for law firms.

The report has suggested that the current competitive climate for legal services in Norway is relatively good, with no signs of a decline in competition and good competition between smaller firms and larger firms, especially for less complex cases. The report also suggested that increased liberalisation of legal activities, particularly non-court based activities would prevent a monopoly forming around legal services, and would allow new entrants to enter the market. The report also recommended that ownership regulations should not be tightened. Currently, anyone in Norway can hold a stake in a law firm, provided they spend a “significant part” of their professional activity in the firm’s service. The Lawyer Commission had proposed only allowing lawyer ownership of firms. The report has suggested that this is not appropriate as it stifles innovation and capital investment, and therefore competition.

Copenhagen Economics English language summary of the report is available here.

The full report in Norwegian is available here.

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ABA approves resolution to expand access to justice

On February 17th, during its annual midyear meeting, the American Bar Association (ABA) House of Delegates approved resolution 115, encouraging State Bars to consider innovative approaches to expanding access to justice, particularly focused around improving the affordability and quality of civil legal services.

The resolution initially proposed by the ABA Center for Innovation and supported by several standing committees of the ABA Center for Professional Responsibility, calls on state regulators and Bars to consider regulatory innovations that would improve accessibility, affordability and quality of civil legal services. The resolution initially faced strong opposition from several Bar Associations. However, the resolution received overwhelming support from 596 member house following the addition of a provision stating: “Nothing in this resolution should be construed as recommending any changes to any of the ABA Model Rules of Professional Conduct, including Rule 5.4, as they relate to non-lawyer ownership of law firms, the unauthorized practice of law or any other subject.” Rule 5.4 limits sharing of legal fees with non-lawyers as well as bars non-lawyer equity in law firms.

Further details about the meeting and the resolution are available here.

The proposed resolution and report are available here, with the final resolution available here.

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Practising As a Lawyer in a Partnership and Multidisciplinary Practice in Québec: Progress and Prospects

Abstract

The regulatory framework relating to the legal professions in Québec reached a turning point in the 2000s, following the adoption of the Règlement sur l’exercice de la profession d’avocat en société et en multidisciplinarité. More than a decade later, this article examines the negotiation surrounding the drafting of the Règlement, and the various arguments put forward by the Barreau du Québec and other professional corporations to justify its adoption. Data from the registre des entreprises are then used to examine the extent to which Quebec law firms have taken advantage of the diverse legal options at their disposal to organize their activities.

Citation
Paquin, Julie, Practising As a Lawyer in a Partnership and Multidisciplinary Practice in Québec: Progress and Prospects (L’exercice de la profession d’avocat en société et en multidisciplinarité au Québec : bilan et perspectives) (september 1, 2017). Les Cahiers de droit, Vol. 58 (3), 2017, 383-607 .

Available from the SSRN site.

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Lawyer regulation reforms in the US

We recently reported on the work of the California State Bar and their proposals for regulatory reform put forward by the Task Force on Access Through Innovation of Legal Services as well as the work being done by the National Conference of Bar Examiners (NCBE) Testing Task Force.

In her article, ‘Re-regulating Lawyers for the 21st Century’, Jayne Reardon, Executive Director of the Illinois Supreme Court Commission on Professionalism highlights the work of a number of US State Bars, regulators and national bodies who are currently reviewing lawyer regulation issues and reflects upon how any advancements in lawyer regulation could lead to a fundamental re-structuring of the legal market.  Read the full article on the Illinois Supreme Court Commission on Professionalism’s website.

 

 

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LSB report: ABS have had a positive impact on legal services market

The Legal Services Board’s (LSB) annual report asserts that alternative business structures (ABS) continue to have a “direct and positive impact” on the legal market.  They have provided an effective structure for firms who wish to take a different approach to meeting legal need.  There are now more than 1000 ABS in England and Wales.  Research conducted by the LSB in 2018 shows that ABS are significantly more likely to use new technology and are more innovative than other types of law firm.

Read the full report here

 

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