LSB: Regulators must play role in unleashing potential of lawtech

Hill: We have started to see what is possible

There is a long way to go to unlock the potential of technology to transform legal services and regulators have an important role in this, the chief executive of the Legal Services Board (LSB) has said.

Matthew Hill said regulators should work towards removing perceived barriers to innovation, building consumer trust and confidence, and managing risks.

Speaking to mark the publication of an LSB paper on how regulation could foster responsible technological innovation, he said the pandemic had “accelerated the pace and scale” of change and many providers had used technology to deliver services in new ways.

As a result of the pandemic, “we have started to see what is possible, but there is a long way to go to unlock the full potential”.

The LSB has been investigating technology since 2019 through a series of activities and the report said the “overarching lesson” was that it could widen access to legal services, but the associated risks needed to be “considered and managed”.

For example, artificial intelligence, machine learning and other algorithmic-based tools pose were not always easily understood, “and as these technologies become more common, legal professionals and consumers need to understand how they are being used”.

This would help to ensure that “they are used in ways that the public, and professionals, can trust”.

There were also ethical issues around accountability, client confidentiality and legal professional privilege, especially where services were provided directly to consumers by artificial intelligence.

The LSB went on: “The approach of the legal services sector to technology and innovation to date has largely been one of ‘wait and see’.”

This was compounded by factors such as the difficulty innovators faced in understanding what was regulated, how “the traditional partnership model can inhibit investment in digital skills and infrastructure”, and a lack of good-quality, open data.

However, regulators could “help unlock access to legal services” for the public and improve the ability of lawyers to deliver them.

The oversight regulator said it had heard how the current regulatory framework might be inhibiting innovation.

“The current list of reserved legal activities does not necessarily align with the greatest risks to consumers.

“Similarly, the title-based approach to regulation may result in differing regulatory approaches. This can lead to a regulatory environment that is difficult to navigate and with gaps in consumer protection.”

Its research suggested that unregulated providers were more innovative and cheaper than traditional providers, but there was also evidence that consumer satisfaction with unregulated providers was lower than for regulated firms.

“There are questions on whether the implications of technology can be effectively managed within the current regulatory framework, and we plan to consider this further as part of our work on the scope of regulation in 2021-22.”

The LSB concluded that both itself and frontline regulatory bodies had “a great deal of work to do to develop their own, and the sector’s, approaches to legal technology regulation”.

Its research had “highlighted the complexity of the issues and challenges that legal regulators face, particularly in striking the balance between supporting technological innovation that could bring real benefits while protecting consumers and the overall legal system from potential harm”.

The LSB said many of the issues it had highlighted were “not ones that can be tackled individually, or even as a sector”, such as the ownership and use of data, which was governed by general laws and regulations.

“Cross-sector guidance may help innovators to understand which regulatory body they should engage with, and what the limits of the current regulatory framework are.”

The LSB said striking the balance would “involve legal regulators working together and with others in a structured and coordinated way”.

Possible tactics included regulators creating advisory panels, using regulatory sandboxes and other practical approaches to enable the testing of technological solutions with regulatory support, and working with technology developers to build regulatory principles and safeguards into their products.

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