Legal regulators should not be “overly risk averse” about technology

Nichols: Transformational change is on the way

Legal regulators must not be “overly risk adverse” in supporting the use of technology, given its importance, the director of regulation and policy at the Legal Services Board (LSB) has said.

Chris Nichols said that in a future legal services market which was more “disrupted and automated”, regulators would have to “think expansively” about how to strike the right balance.

The sector was “not renowned for being at the forefront of technology and innovation”, but “things had moved on” with the pandemic, which had helped accelerate the adoption of technology.

“We haven’t yet had the truly disruptive innovation seen in other sectors, but there is a growing feeling that transformational change is on the way.”

Speaking at a Westminster Legal Policy Forum seminar on legal tech, Mr Nichols said regulation was regarded by many technology providers as a “barrier to innovation”.

The LSB believed regulators must be “active in supporting innovation” and ensure that “unnecessary barriers” were removed. They should also understand consumer needs in terms of technology.

He said joint research by the LSB and Solicitors Regulation Authority, which would be published shortly, found that the public and profession “shared concerns” about data security and cybercrime, and wanted clarity in regulatory standards.

Mr Nichols called for “more active collaboration” between lawyers, innovators, regulators and the government, saying that a collaborative approach should be the default position.

Regulatory safeguards should address risk, but “given the importance of supporting technology, I don’t think we can be overly risk averse”.

He predicted that “changes round the edges” of regulatory frameworks would not be enough in the future, and regulators would need to “think expansively” about how to strike the right balance.

Mr Nichols said everything regulators did in terms of technology needed to be “underpinned by the right mindset”, one that was open to doing things “differently and better”.

He added: “Because the status quo is not working for so many people, we cannot view change simply as a risk to be mitigated”.

Rob Hosier, executive board member of the UK Legal Technology Association, told a later panel session that he regarded commercial law firms as “reasonable providers of innovation, especially in the last five years”, with the larger firms setting up digital innovation teams.

“The big gap is in consumer areas of law, where innovation is still staggeringly slow. The products are not there.”

Mr Hosier said the managers of small firms had caseloads to service and lacked the time and resources to discuss different technology options.

However, he said technology could be used to mitigate risk and could lead to reduced professional indemnity insurance premiums.

Julia Salasky, chief executive of law firm data and operations platform Legl, said the “driving force” behind technology was not regulation, but servicing the market, and tech companies could not exist as “non-commercial” enterprises.

“One of the difficult things about the justice system is that a lot of people will not be able to access legal services if small firms go out of business.

“Where is the government support for those areas where technology is not commercially viable?”

Ms Salasky said technology should be thought about less in terms of “what can we do to transform the industry?” and more in terms of “what are the core problems that tech can solve?”

She added: “Sometimes we can solve problems that might not be spotted by those coming into the industry with a top-down approach.”

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