Florida makes moves towards ABS licencing

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.

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Deregulation and the Lawyers’ Cartel

Abstract

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,
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Top jurists call for regulatory change to increase access to justice

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.

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New ‘Senior Counsel’ title approved for use in Ireland

A total of 37 legal practitioners in Ireland will be permitted to use the title ‘Senior Counsel’ following the Government’s approval of recommendations from the Advisory Committee on the grant of Patents of Precedence. Approval was granted on the 15th June 2021, with the group made up of 25 barristers and 17 solicitors, who will be allowed to use the title.

Granting a Patent of Precedence, to a barrister, entitles them to be called to the Inner Bar and to use the title of Senior Counsel. In relation to a solicitor, it entitles them to use the title of Senior Counsel.

The Advisory Committee was established in April 2020 under the Legal Services Regulation Act 2015 and is chaired by the Chief Justice. The 2015 Act allowed solicitors for the first time to apply to be granted Patents of Precedence. The Legal Services Regulatory Authority of Ireland provides administrative and secretarial support to the independent Advisory Committee on the Patents of Precedence.

Read more about the decision here. 

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Legal Services Board of England and Wales consultation on new processes for changing regulatory arrangements

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.

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Auckland High Court consultation on reform of civil dispute resolution

The New Zealand Law Society has called on its members to respond to the Rules Committee’s ongoing consultation into reform in the civil dispute resolution system. The consultation is in response to new proposals put forward following concerns raised about an initial consultation paper in 2020. With concerned bodies including the Law Society.

Responders shared the Committee’s concern at what the Law Society termed in its submission the “justice gap” that has been “slow-burning” for at least a generation.  A number of causes for that ever-widening gap were identified by submitters.  One of these, particularly relevant to the Committee’s remit, is the high cost of lawyers and the significant costs associated with complying with procedural requirements.

The Committee’s draft proposals look to combat both of these barriers to civil justice, improving access to justice and public welfare.  Overall, the proposals are aimed at creating a range of fora for the resolution of civil disputes. With the goal of reducing the expense associated with complying with the procedural requirements, and bringing them into line with the value of the dispute being heard.

Within each forum, the Committee’s goal is for the particular procedures adopted in each individual case to match the importance to the parties of that dispute, in both theory and practice.  The more valuable and important the dispute, the more onerous the procedures that will apply, so as to avoid error and ensure “justice” is done. The Committee’s detailed proposals seeking to give effect to this vision are detailed in the consultation paper.

An overview of the proposals includes:

  • Recommending that the government enact legislation increasing the jurisdiction of the Disputes Tribunal and enhancing the Tribunal’s role in the civil justice system, positioning it as New Zealand’s primary civil trial court for disputes of up to at-least $50,000 in value.
  • Reforming the District Court to improve its structural ability to deal with civil claims, including by appointing part-time Judges, so as to allow that Court to make effective use of the existing potential for flexibility and tailored procedure found within its current rules.
  • Streamlining the presumptive model of procedure in the High Court. The existing extensive procedural rules will only apply to more complex cases, which truly warrant them. In other cases the new, less elaborate, approach will apply.  This will include replacing discovery with disclosure obligations, an early issues conference featuring substantive engagement by Judges, interlocutories dealt with on the papers, and a streamlined trial process placing much greater weight on the documentary record. Parties will have to justify the need for adopting more onerous obligations in a given case.

Read more about the proposals and consultation here, or view the Law Society’s first response here.

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Legal Services Board calls for consumers to be put at the heart of regulation

On the 29th of March the Legal Services Board (LSB) launched a consumer-focused strategy for legal services in England and Wales, which included a call for all regulators in England and Wales to collaborate to reshape legal services to better meet society’s needs. It called for action from all regulators from its position as the oversight regulator, having been formed by the Legal Services Act 2007.

The ten-year strategy reflects that there are a number of challenges facing the legal services sector, and that many of these require a coordinated effort by different people and organisations in the sector, pursuing a common agenda. The strategy has identified nine challenges within the sector. These include closing gaps in consumer protection, empowering consumer choice and achieving fairer outcomes.

The LSB has also identified other priorities in the strategy, such as a statutory review of the reserved legal activities, a review of professional indemnity insurance, and work on simple legal products, but it has deferred these until resources permit.

Dr Helen Phillips, Chair of the Legal Services Board, said:

“While there have been many achievements over the last ten years of independent regulation, there continue to be significant levels unmet legal need. We must seize this moment to drive forward a strategy that promotes the public interest, supports competition and growth, and encourages diversity and inclusion. The LSB cannot do this alone – everyone in the sector must work together to pursue our shared interests. We are greatly encouraged by the commitment to collaboration that characterised so many responses to our consultation. Only by working together can the sector emerge strongly from the Covid-19 pandemic and successfully tackle the challenges it faces.If we all work together, we will improve diversity, and the sector will look more like the society it serves. The system will better support innovation and be equipped to respond to the changing market. Consumers will be able to shop around and reward firms that offer high-quality, transparent, and affordable services. The strategy is necessarily ambitious, and if we all play our part, we can achieve our vision. Through collaboration, we will reshape services to create a strong and resilient sector that better meets society’s needs.”

Read the full strategy here, or more from the LSB here.

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Law Society of Ontario approves new regulatory sandbox

On April 22, 2021, the Convocation of the Law Society of Ontario approved the Technology Task Force’s “Regulatory Sandbox for Innovative Technological Legal Services” Report.  As a result, a five-year pilot project will be launched in Q4 of 2021. In the pilot approved participants will be granted express permission by the Law Society to serve consumers using innovative technological legal services (ITLS). The participants will be required to comply with specialised requirements for risk-based monitoring and reporting.

The Technology Task Force is composed of lawyer, paralegal and publicly-appointed lay benchers, and has the mandate to consider the role of technology in the delivery of legal services, as well as to examine the role of the Law Society as a regulator in a changing, tech-enabled environment, and explore how the Law Society can encourage innovation.

The sandbox project has been designed to help fulfil these responsibilities by:

  • Facilitating access to justice: eliminating regulatory uncertainty around ITLS, and removing barriers to the development of ITLS, allowing products to be developed that can address unmet legal need.
  • Protecting the public: The pilot project provides a mechanism to ensure ITLS consumers receive competent and ethical services and have access to recourse, as well as the information to make informed choices about the providers of the services.
  • Informing future regulatory development: The pilot project will provide evidence to inform longer-term decision-making about ITLS regulation.

Read the full report about the pilot here, or read more on the Law Society’s website.

 

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First Alternative Business Structures approved in USA

The first two fully licenced alternative business structures (ABSs) have been approved by the state of Arizona. On the 17th March 2021, two businesses, Trajan Estate LLC and Gilbert and Payne Huebsch PLC received their ABS license after the State Supreme Court approved their bids. Trajan Estate is a legal service provider focused on estate planning while Payne Huebsch provides transactional legal services paired with tax and accounting advice.

Last year Arizona became the first state to fully allow alternative business structures and non-lawyer ownership in law firms,  revoking state professional conduct rule 5.4 which barred nonlawyers from fee-sharing and holding an interest in law firms. The change came into effect in January 2021, allowing business to begin the approval process.

The licenses follow the approval of the first non-lawyer owned law firm in Utah, as part of the state’s two-year regulatory sandbox. Law on Call opened at the beginning of March 2021, allowing consumers unlimited over the phone access to lawyers, in a business entirely owned by non-lawyers. The business will however be subject to license reviews, as per the conditions of the sandbox.

Read more about the Arizona licences here, or the Utah licences here.

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Law Society of Scotland publishes a new strategy to improve regulatory process and enhance competition in the legal sector

The Law Society of Scotland’s Regulatory Committee has revealed a new two-year strategy, which is focused on improving regulatory processes, enhancing competition in Scotland’s legal sector and ensuring robust consumer protections. The Regulatory Committee is independent from the Law Society’s Council (the governing body of the Society), and is responsible for overseeing a number of sub-committees, as well as setting its own strategy, with the remit of regulating practice. The committee is made up of an equal numbers of solicitor and non-solicitor members and is led by a non-solicitor convener.

The new strategy sets out five overarching objectives. The first,  ‘protect’, is focused on protecting consumer and public interest, and protecting the rule of law. The second, ‘scrutinise’, is focused on examining the work of the subcommittee and other delegates of the committee to ensure their value and productivity. The remaining three are ‘enhance’, ‘align’, and ‘develop’. ‘Enhance’ is focused on raising public awareness of the society’s work, as well as developing a proportionate and principals focused regulatory structure that will enhance the competitiveness of the Scottish legal sector. ‘Align’ is focused on making sure that the regulatory committee’s work aligns with other groups in the society, whilst ‘develop’ is a process of internal self-reflection and development.

Craig Cathcart, Convener of the Law Society of Scotland Regulatory Committee said: “The legal profession has a key role in our society. Solicitors help people at pivotal points in their lives whether they are buying a new home, planning for the future of their family, building a successful business or upholding their rights in court. Anyone who seeks the advice of a solicitor must feel confident that they are in good hands. Having a robust and fair regulatory system which sets high standards for entry to Scotland’s solicitor profession and throughout a solicitor’s years in practice, along with clear consumer protections, provides that assurance.”

Read the full strategy here. 

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