Peer calls for regulation overhaul as CMA plans review

Hill: Wholesale reform not vital but it would help

A solicitor peer has urged the Ministry of Justice (MoJ) to act now and simplify the legal regulatory regime, saying nothing will change if it is left to the profession.

The call by Lord Gold, former senior partner of City law firm giant Herbert Smith Freehills, came as the Competition and Markets Authority (CMA) confirmed it would this year return to review the progress made since its report on the legal market in December 2016.

Chairing a session at a Westminster Legal Policy Forum event in London on the future of regulation, the Conservative peer said there needed to be a simpler regulatory regime, especially given the speed with which technology was advancing and the challenge facing regulators in responding to it.

“If you leave it to the brilliant lawyers we have in this country, they will obfuscate and delay and it will never happen,” Lord Gold said. “Now is the time for the MoJ to rip this [up] and decide what exact regulatory regime we need for the future.”

At the time the CMA published its report, it pledged to return to check up on progress after about three years, and Chris Jenkins, economics director at the CMA, told the event that the authority was planning to carry out the review in the second half of 2020.

“We want to use it as an opportunity to test first whether our recommendations have been implemented [and] what impact they’ve had to the extent possible in the time available, and we also want to revisit the broader recommendations around regulatory reform.”

The CMA report said regulators needed to deliver a “step change in standards of transparency” so that clients could both understand the price and service they would receive, and compare providers.

The watchdog also called on the government to review the whole regulatory regime and recommended a move away from regulation by title to a regime based on activity, as well as full independence for legal regulators – recommendations that are likely to be mirrored in Professor Stephen Mayson’s final report of his independent review of legal services regulation, which should be published in the next three months.

Mr Jenkins said there has been “good progress” on the regulators implementing the CMA’s recommendations on transparency, but less so in relation to consumer protection, with the issue of redress for clients of unregulated providers “still to be resolved”.

He added: “We’re still waiting for the government to set out its position on regulatory reform; however, we very much welcome the efforts of Professor Stephen Mayson’s review, which makes an important contribution setting out what a more consumer-focused regulatory framework could look like in practice.”

We revealed earlier this month that the Legal Services Board (LSB) is considering whether law firms, chambers and other legal services providers should have to sign up to comparison websites as part of its preparations for the CMA review.

In his speech, which we will report on more extensively in a separate article, Professor Mayson said he had already concluded that the regulators needed to be fully independent of their representative bodies.

He continued that his overall vision of regulation could not be achieved within the framework of the 2007 Act.

“This begs the inevitable question of how much longer reform can wait. I said earlier that I have so far been open-minded on the question of timing. However, as I enter the concluding phase of the review, I am increasingly convinced that some change is needed sooner rather than later.”

In his contribution, LSB chief executive Matthew Hill highlighted that unmet legal need was still a major problem and that the legal market was not working “for a significant proportion of people and businesses”.

This would be the likely focus of the board’s reform agenda; he said there was “a lot that can be sweated out of the current regime before wholesale reform, but wholesale reform would undoubtedly help”.

He explained: “The existing system is undoubtedly complex. It’s built around professions and not consumers. For example, reserved legal activities and title-focused regulators make sense to regulators and sectors, but not necessarily to the public.”

Sustaining what he called “manufactured” independence of regulators like the Solicitors Regulation Authority was “arguably costly”, he continued.

He described the system of regulation as being like a chair with two legs: “You can sit on it perfectly comfortably provided a lot of people spend a lot of time holding it steady for you. We do spend a lot of time making independence work by investing time and effort in it.”

Being openly provocative, Mr Hill also questioned whether “smaller regulators” – he did not name any in particular – may “lack the scale that is necessary to deliver public outcomes”.

Calls for more funding and public legal education as ways to reduce unmet legal need and increase access to justice wrongly implied that these problems were consumers’ fault – that either they could not afford or understand legal services.

Rather, Mr Hill said, the onus should be on changing the way legal services were provided so they met the needs of consumers.

Improving the public’s capability to engage in legal services was important, he continued, and “there’s a whole lot of really amazing stuff being done in the field of public legal education”.

However, he added: “By itself it hasn’t moved the dial very much and it probably won’t move it very much further, but it’s worthwhile.”

Closing the conference, Lord Falconer – who as Lord Chancellor was the architect of the Legal Services Act 2007 – it was “apparent that the legal services market is not servicing the whole market properly and that market forces will not solve that problem”.

The solution has ultimately to come from a combination of the regulators and public money, he said. “The problems of unmet need are never going to [solved] if there is nobody willing to pay.”

The Labour peer said he recognised the points about the complexity of the regulatory regime and growing role of technology.

“I am sure that there are things that could be done to improve the structure, but I believe that the structure is sufficiently flexible for the regulatory issues to be met.

“I am not that persuaded that a fundamental shift in the legislative structure is a good idea… but I do think one of the big problems is the failure of the state to provide sufficient legal aid and other forms of funding for advice that the market would not otherwise provide.”

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