On the 28th of June 2021, the Florida State Supreme Court’s Special Committee to Improve the Delivery of Legal Services (formulated by the Bar Board of Governors in November 2019), released their final report on changes in the legal sector. The report is calling for further study on allowing some nonlawyers to have an ownership interest in law firms and fee-splitting with non-lawyer entities, as well as calling for the creation of a legal “lab” to allow testing of innovative ways of providing legal services.
Former Bar President John Stewart, chair of the special committee, said the report is a recognition that the legal marketplace is changing and an attempt to allow the legal profession to help design and control those changes, which it now is largely unable to do. Saying: “This committee and this report is part of the profession and the Bar being the architect of the changes that are happening in the legal profession and the legal services marketplace, before outside forces dictate changes we may not want. We don’t think change should happen for the sake of change or because people think there should be change. We think change should happen because of data.”
The committees work focused on the risk of the development of an unregulated market where bad actors can take advantage of the public. This led to calls for the creation of a sandbox, whereby services can be tested to better understand public protection goals. Members of the committee also discussed the impact of reforms on low-income consumers, suggesting that regulatory reform could improve access to justice within the state.
The only firm recommendation of the report was the formulation of the legal lab sandbox project, the lab, titled the Law Practice Innovation Lab Program, under the committee’s conceptual outline would be overseen by a Supreme Court commission and would run for at least three years. It would be based on a similar program in Utah. Ontario, British Columbia, and the United Kingdom.
The report included calls for further study into a range of regulatory reforms including lawyer advertising; referral fees; fee-splitting; entity regulation; regulation of online service providers; and regulation of nonlawyer providers of limited legal services including paralegals and other limited licence professionals.
Read more about the report and access the full report here.
At one time, the legal profession largely regulated itself. However, based on the economic notion that increased competition would benefit consumers, jurisdictions have deregulated their legal markets by easing rules relating to attorney advertising, fees, and, most recently, nonlawyer ownership of law firms. Yet, despite reformers’ high expectations, legal markets today resemble those of previous decades, and most legal services continue to be delivered by traditional law firms. How to account for this seeming inertia?
We argue that the competition paradigm is theoretically flawed because it fails to fully account for market failures relating to asymmetric information, imperfect information, and negative externalities. In addition, the regulatory costs imposed on sophisticated consumers such as corporate purchasers of legal services differ radically from those imposed on ordinary consumers who use legal services infrequently. Merely increasing the number and types of legal services providers cannot make legal markets more efficient. We illustrate our theoretical account with evidence from the United Kingdom, Europe, and Asia.
For legal markets to better serve the public, regulators must tailor solutions by segment. Regulators should seek to minimize negative externalities associated with the delivery of legal services to the corporate segment and confront information asymmetries that lead to the maldistribution of legal services in the consumer segment. Deregulation alone is insufficient and may in fact exacerbate existing market failures.
Garoupa, Nuno and Markovic, Milan, Deregulation and the Lawyers’ Cartel (June 23, 2021). University of Pennsylvania Journal of International Law, Forthcoming, Texas A&M University School of Law Legal Studies Research Paper Forthcoming, George Mason Law & Economics Research Paper No. 21-16,
During the 9th June ABA discussion on regulatory change, Vice Chief Justice Ann A. Scott Timmer of the Arizona Supreme Court stated that despite decades of efforts to encourage practising lawyers to perform a minimum of 50 pro bono hours annually to increase access to justice, minimal results have been achieved.
Timmer is part of a growing list of top jurists calling for regulatory change to expand access to justice. Instead of relying on pro bono work to increase legal access, for instance, regulatory changes could lead to nonlawyers handling some routine legal matters. She and chief justices from Utah, Michigan and Texas discussed some of these changes in the inaugural Redesigning Legal Speaker Series, which is intended to provide a forum to explore the legal profession’s regulatory changes underway and the challenges they face. Three ABA entities — the Center for Innovation, the Center for Professional Responsibility and the Standing Committee on the Delivery of Legal Services — have teamed up with the Institute for the Advancement of the American Legal System at the University of Denver and Legal Hackers to organize what is planned as a quarterly series.
The debut program, Redesigning Legal: Leading from the Bench — Expanding Access through Regulatory Innovation, also featured Chief Justice Bridget McCormack of Michigan, Chief Justice Nathan Hecht of Texas and Chief Justice Matthew Durrant of Utah, and showcased how supreme courts in Utah and Arizona have ushered in regulatory change to expand access to justice.
In Arizona, legal paraprofessionals can now practice in four distinct areas. The state Supreme Court also eliminated model rules that prohibit the sharing of legal fees with nonlawyers.
In Utah, 23 pilot programs have been approved in the state’s seven-year “sandbox” approach, Durrant said. They range from a solo practitioner giving his sole paralegal 10% ownership in the firm to law students at Brigham Young University providing counsel to domestic violence victims.
Hecht, who is also chair of the Conference of Chief Justices, said courts are rethinking their roles because jurists realize pro bono efforts are not sufficient to provide access to the courts for many Americans. McCormack added, “We are going to forge forward in Michigan because this is now the time in the process to try. And the big winner could be the public.”
Read more here.
The Legal Services Board of England and Wales (LSB) has launched a consultation examing proposed new rules and guidance for alterations to regulatory arrangements. The LSB is considering the rule changes as part of its statutory functions in assessing applications from the nine different regulatory bodies in England and Wales to alter their regulatory arrangements. The existing process for this has not been substantially reviewed since 2010.
Following engagement with the approved regulators, which act as the representatives for each of the different legal professions in England and Wales, as well as the regulatory bodies, which regulate these professions in the public interest, the LSB has developed new rules and guidance intended to make sure the applications are explicitly and demonstrably focused on ensuring that all changes promote the regulatory objectives.
Matthew Hill, Chief Executive of the Legal Services Board has said, “In discussion with regulators, we have developed new rules and guidance to ensure changes to regulatory arrangements are focused on promoting the regulatory objectives. We have made our expectations clearer and set out the regulatory changes that require our approval and the circumstances in which we may refuse to consider an application. The changes should lead to higher quality, evidence-based applications, and more efficient use of both the LSB’s and regulatory bodies’ resources.”
Read more about the consultation here, or view the documents here, or the background to the proposals here.
The Legal Services Board (LSB) has published annual reports on the performance of the eight legal services regulatory bodies. Each one of the eight providers regulates a different type of lawyer in England and Wales, and has control over its day to day operations. However under the Legal Services Act 2007 (the Act), they have the same obligations and are assessed against the same 27 outcomes across five standards. The standards are: regulatory approach, authorisation, supervision, enforcement, and well-led: governance and leadership.
The report has found that the performance of most of the regulatory bodies has improved since the last assessment in November 2019. Notably, the Council of Licensed Conveyancers (CLC) and the Solicitors Regulation Authority (SRA) have met all the outcomes required across all standards. However, the report also found that although regulatory bodies are generally performing well against the authorisation, supervision and enforcement standards, there is a lower level of achievement in meeting the standard required for outcomes under the regulatory approach and well-led standards.
The LSB is therefore considering further actions including:
- Undertaking a thematic review around regulatory approach in the coming year, depending on regulatory bodies’ progress in meeting the standard required.
- Several of the not met ratings are associated with the quality and clarity of applications for statutory approval of changes to regulatory arrangements and practising certificate fees. Whilst some regulators appear to be experiencing little difficulty in meeting these standards, the LSB recently started a review of its rules and guidance in this area.
In last year’s report, the LSB raised concerns over some regulatory bodies not fully embedding the regulatory performance framework into their governance arrangements. The LSB has subsequently launched targeted reviews of the Bar Standard Board (BSB) and Faculty Office (FO) on performance against the well-led standard. These reviews formally began in September 2020 and are scheduled to conclude in early 2021.
Matthew Hill, Chief Executive of the Legal Services Board, said:
“Independent regulation protects the public and benefits the profession, and we have seen some welcome improvement across the regulatory bodies, particularly in their enforcement of standards and increased independence. However, there continue to be areas where improvement is needed. No regulatory body that is putting the public first in its decision-making and acting transparently to promote the regulatory objectives set out in the Act should have any difficulty in meeting the standards of good regulation. We expect the regulators to take the performance assessments as indicators of where improvements are needed to ensure they have the right mechanisms in place to carry out their regulatory duties effectively and efficiently. Appropriately regulated lawyers who deliver consistently competent and ethical services will give consumers stronger confidence in the sector and help build a legal services market that better meets the needs of society.”
Read the full report here.
The UK Competition and Markets Authority has released an updated report based on its initial findings on the legal services market published in 2016. The report recognises the improvements that have been made in increasing the transparency of the price, service and quality of legal services, but said there was more to do to increase “the intensity of competition between providers”, calling for reforms particularly in the currently unregulated sector of the market.
The unregulated sector has grown significantly over the past few years, largely due to the rising use of legal technology products. The report raises concerns over the current regulatory framework and the focus on professional titles and reserved activities, as opposed to the risk profile of activities. Which it suggests could restrict competition, create unnecessary costs and leave a regulatory gap.
The CMA has recommended three actions within the existing regime which would help “deliver reform in stages”.
- First was creating a mandatory public register of unauthorised providers for certain legal services and mandating that they offer redress options to consumers.
- Second was that the Legal Services Board (LSB) should carry out a review of the reserved activities.
- Third was the independence of regulation from professional representation. The CMA noted that “significant improvements” have been made as a result of revised internal governance rules imposed on bodies like the Law Society and Bar Council by the LSB.
Andrea Coscelli, the CMA’s chief executive, said: “This is an incredibly important sector that people often turn to at a time of great need, which is why the CMA made recommendations to improve consumer outcomes, including through increasing transparency, as well as to address concerns about the way in which the sector is regulated. It is positive to see changes that have already been made, but more progress is needed. We encourage the Ministry of Justice, the Legal Services Board and other legal services regulators to continue to work towards reform and to make sure the sector works well for consumers long into the future.”
Read the full review here or the LSB’s response here.
Regulation chronically suffers significant delay starting at the detectable initiation of a “regulable activity” and culminating at effective regulatory response. Regulator reaction is impeded by various impediments: (i) confusion in optimal level, form and choice of regulatory agency, (ii) political resistance to creating new regulatory agencies, (iii) lack of statutory authorization to address particular novel problems, (iv) jurisdictional competition among regulators, (v) Congressional disinclination to regulate given political conditions, and (vi) a lack of expertise, both substantive and procedurally, to deploy successful counter-measures. Delay is rooted in several stubborn institutions, including libertarian ideals permeating both the U.S. legal system and the polity, constitutional constraints on exercise of governmental powers, chronic resource constraints including underfunding, and agency technical incapacities. Therefore, regulatory prospecting to identify regulable activity often lags the suspicion of future regulable activity or its first discernable appearance.
This article develops the regulatory lag theory (RegLag), reviews regulatory technologies (RegTech) that show promise in narrowing the RegLag gap, and proposes programs to improve regulatory agency clairvoyance to more aggressively adapt to changing regulable activities, such as by using anticipatory approaches that show promise to narrow RegLag delays.
Bagby, John W. and Packin, Nizan Geslevich, RegTech and Predictive Lawmaking: Closing the RegLag between Prospective Regulated Activity and Regulation (August 2, 2020).
Read the full paper at SSRN.
On September the 10th the Law Society of British Columbia elected to make changes suggested by a task force on modernisation established this January.
The task force cited ongoing changes in the legal market, which have been accelerated by the ongoing COVID-19 pandemic, as well as the pace of change in other jurisdictions, as to why change was needed.
- evaluate how existing and emerging technologies can better support legal services and address regulatory impediments that exist in permitting their use
- move to amend regulatory structures to allow for innovation in legal service delivery and alternative business structures while protecting the public
- re-evaluate current regulations and restrictions on law firm ownership and investment, as well as multi-disciplinary practice and partnership structures to ensure they are not inhibiting innovation
- advance its initiative on the regulation of licensed paralegals to improve access to legal services
- regularly reach out to and develop resources to support in-house counsel and government lawyers
- continue work on Indigenous legal services by understanding where more support is needed and listen to and work with Indigenous peoples to address that need
- re-consider the accreditation process for lawyers in British Columbia, with special consideration given to how to incorporate more skills-based training into that process
The task force was set up with the following mandate: “Recognizing that significant change in the legal profession and the delivery of legal services is expected over the next five to 10 years, the Futures Task Force will identify the anticipated changes, consider and evaluate the factors and forces driving those changes, assess the impact on the delivery of legal services to the public, by the profession and on the future regulation of the legal profession in British Columbia, and make recommendations to the Benchers on the implications of the anticipated changes and how the Law Society and the profession might respond to the anticipated changes.”
And began the recommendations by saying: “Change is constant in all aspects of our lives, and this is true in the practice of law as well. Client expectations, competition among lawyers and with other professionals, technology, generational expectations, and societal norms all affect what lawyers do and how they carry out their practice in important ways. Society’s expectations of what lawyers do and how they should do it also change. How lawyers keep up with these changes is very important for the availability of efficient and affordable legal services and for the confidence that the public has in the legal profession as a whole, and equally important for the sustainability of their practices and their personal well-being. A legal profession that is incapable of achieving outcomes that resonate with what society expects is one in which the public will eventually lose confidence. ”
Read the full recommendations here (PDF).
The Law Society of Saskatechewan has announced that the Government of Saskatchewan has repealed emergency regulations surrounding remote execution and witnessing of documents electronically and replaced them with permanent rule changes, which will extend beyond the period of public emergency. The rule changes come about in the light of the increased efficiency and lower cost created by emergency regulations and the use of video witnessing, with the society saying that they are “a significant development in terms of enhancing access to justice in Saskatchewan and will serve to greatly increase the efficiency of many legal processes for lawyers and clients alike.”
The rule changes relate to the remote witnessing of Land Titles, Powers of Attorney and Wills, as well as various other documents.
Read the Law Soceity’s description of the changes, and view the new regulations.
The Arizona Supreme Court has approved rule changes allowing for non-lawyer ownership of law firms in the state. The rule change comes in the wake of the two-year sandbox announced in Utah, however, the Arizona courts went one step further, opting to make the changes permanent.
The recommendations for the rule change were first proposed by the court’s Task Force on the Delivery of Legal Services, have focused around improving public access to affordable legal services and promoting legal innovation. The changes in state’s rules are set to become effective as of January 1st 2021. The changes include the removal of ER 5.4 the rule barring nonlawyers from fee sharing and barring nonlawyers from having an economic interest in a law firm. As well as this the changes also allowed for the licensing of legal paraprofessionals, as well as changes to lawyer advertising rules.
Arizona Supreme Court Chief Justice Robert Brutinel said of the development, “The Court’s goal is to improve access to justice and to encourage innovation in the delivery of legal services. The work of the task force adopted by the Court will make it possible for more people to access affordable legal services and for more individuals and families to get legal advice and help. These new rules will promote business innovation in providing legal services at affordable prices. I thank and commend the Task Force and its chair, Vice Chief Justice Timmer for their groundbreaking work.
Read the full report from the Arizona Supreme Court.