Legal Services Board annual regulatory performance review pushes improvements in performance and governance

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. 

UK Competition and Markets Authority review of legal services market

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.

RegTech and Predictive Lawmaking: Closing the RegLag between Prospective Regulated Activity and Regulation

Abstract

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.

Law Society of British Columbia to Widen Access to Legal Services

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.

Recommendations include:

  • 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). 

Law Society of Saskatchewan Makes COVID-19 Rule Changes Permanent

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.

Arizona to Allow Non-Lawyer Ownership

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. 

Lawyer Regulation in Kiribati

Abstract

The Kiribati legal profession developed slowly from 1980 to 1997 and grew rapidly following the establishment of the University of the South Pacific (USP) School of Law. The legal profession in Kiribati may be described as a nascent or proto-profession. While it demonstrates some features of a profession, such as maintaining a monopoly over specialised knowledge and being governed by a system of qualification and licensing, it does not yet exhibit other features of professionalism, such as systems for self-education, effective self-regulation and social responsibility. The entry into force of the KLS Act in 2007 heralded a new era for regulation of lawyers in Kiribati, but progress towards developing strong professional and regulatory institutions has stagnated in recent years due to a range of endogenous and extraneous factors. Lawyers, judges and other stakeholders of the legal profession in Kiribati agree the current regulatory system does not adequately protect clients, provides little ethical support to lawyers, and does not ensure lawyers have access to continuing legal education resources and professional development opportunities.

The Kiribati Law Society Act 2006 (KLS Act) is appropriate and well-adapted to the local practise environment. However, it has several key failings, significant among which is its failure to ensure any funding for professional regulation. Because of its failings, locally, there is little confidence in the existing formal system to ensure lawyer competence and adherence to rules of professional conduct. The Lawyers Admission (Amendment) Rules (No 2) 1992 (Admission Rules) are functional, but are out-dated and contain features that limit effective regulation. The Professional Conduct and Practice (Kiribati Lawyers) Rules 2011 (Code of Ethics) are not enforced and there is a lack of consensus within the profession on what rules of professional ethics are or should be. In the short-term, establishing a Professional Conduct Committee (PCC) to adjudicate outstanding serious complaints will improve compliance. However, only a comprehensive review of the KLS Act, Admission Rules and the Code of Ethics can provide a means of ensuring the protection of clients, continuing professional development for lawyers and an effective complaints and discipline system.

To bring about beneficial change, a review of the statutory scheme for lawyer regulation and the Code of Ethics should be conducted with the objective of developing a system that can be both locally relevant and effective at ensuring Professional Standards in Kiribati.

Naylor, David, Lawyer Regulation in Kiribati (July 31, 2020). Available at SSRN: https://ssrn.com/abstract=3664408

The Place of Non-Advocate Lawyers in Legal Practice in Kenya

Abstract

This study observes that Kenya has for a while witnessed an incessant surge in the number of unqualified legal practitioners. The study attributed the same to non-advocate lawyers masquerading as competent advocates. In assessing this, the study determines what legal practice entails and whether rendering legal advice constitutes legal practice. The study then outlines the significance of the jealously monopolistic regulation of the legal profession by the Law Society of Kenya.

Ominde, Daniel and Nyariki, Peterson Omandi, The Place of Non-Advocate Lawyers in Legal Practice in Kenya (July 30, 2020). Available at SSRN: https://ssrn.com/abstract=3664114 or http://dx.doi.org/10.2139/ssrn.3664114

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.

Regulatory Suspensions in Times of Crisis: The Challenges of Covid-19 and Thoughts for the Future

Abstract

The Covid-19 crisis in 2020 severely impacted the corporate and in turn, the financial sectors of the UK, entailing responses from financial regulators to implement unprecedented regulatory suspensions that affect both the financial sector and the real economy. We argue that regulatory suspensions are a unique crisis management tool and give rise to certain concerns and implications. We offer two case studies in regulatory suspension that show how inherently flexible laws and regulations became an anchor for unexpected suspensions or adjustments in other regulatory provisions and laws. These create implications for rebalancing of regulatory objectives and distributive effects and also for incentivizing certain behaviours amongst affected constituents. These institutional implications may be temporary or have a longer-term effect, and we argue that there is a need for a robust and rational regulatory decision-making framework in relation to regulatory suspensions, as part of crisis management. We sketch the contours of such a framework which includes rational balancing of the cost and benefits of regulatory objective trade-offs, distributive effects and institutional implications. We advocate a broad and deep ‘humanizing’ approach to balancing cost and benefit in regulatory suspensions, drawing upon Sunstein’s work. We also advocate a coordinated and inclusive procedural approach to crisis management, including regulatory suspension decisions, that would enhance regulators’ preparedness and intuitive skill in this area.

Citation
Chiu, Iris H-Y and Kokkinis, Andreas and Miglionico, Andrea, Regulatory Suspensions in Times of Crisis: The Challenges of Covid-19 and Thoughts for the Future (May 19, 2020). European Corporate Governance Institute – Law Working Paper No. 517/2020.

Available from the SSRN site.