Mayson: Looking for the right level of regulation
An alternative regulatory regime that sees all legal services regulated, but providers subject to different requirements depending on the work they do, has today been mooted by the Independent Review of Legal Services Regulation.
The interim report of the review [1], headed by Professor Stephen Mayson, said that, among other benefits, this would enable the regulation of lawtech.
He suggested that such a system may be better run by a single regulator, or at least a smaller number of regulators than now, to improve the consistency of approach.
But there would be a continuing role for professional bodies, the academic stressed, saying that the role of regulation was to set and enforce the minimum or basic requirements for legal services, while the professional bodies “are the natural (and arguably better) custodians of the higher standards and aspirations associated with a professional calling and vocation”.
The IRLSR, which began in July 2018, is being run out of University College London [2] and Professor Mayson is supported by an eminent advisory panel [3] whose members include former Supreme Court president Lord Neuberger and former Attorney General Dominic Grieve QC MP.
Professor Mayson described the system created by the Legal Services Act 2007 as “insufficiently flexible to apply targeted, proportionate, risk-based and consistent regulation to reflect differences across legal services areas and across time”.
Problems included “competing and possibly inappropriate regulatory objectives”, a pivotal set of reserved legal activities that were “anachronistic and do not necessarily include all activities that ought to be regulated”, the “unsatisfactory nature” of the separation of regulation and representation, and the existence of unregulated providers that could not be brought within the current regulatory framework.
Professor Mayson wrote: “Through the review, I have been made aware of potential new providers who are being put off entering the market or investing in technological or other developments that could benefit consumers.
“At present, they are faced with an almost binary choice of having to operate with the full burden of the regulatory framework, or completely outside it.”
While all legal services were currently within the scope of regulation if provided by someone already legally qualified and authorised to practise, consumers were unaware that the same services – where not in the narrow list of reserved activities – could be provided by unregulated providers, leaving them with little or no protection.
But regulating all legal services, rather than just those who provide them, meant “regulation – and its costs and burdens – could be targeted and distributed more appropriately to the risks of the activities actually undertaken by providers.
“In other words, while scope could be broader (to protect consumers), the focus of regulation could be targeted (to place only proportionate regulatory burdens on providers).”
Under the model put out for comment, promoting and protecting the public interest would be the primary objective for the regulation of legal services.
All legal services would be considered low risk and subject to certain after-the-event (ATE) protections – such as access to the Legal Ombudsman, transparency obligations and adherence to a code of conduct – unless there were features that made them intermediate or high risk, in which case there would be additional layers of regulatory obligation.
These could be during-the-event protections like specialist accreditation and indemnity insurance, or before-the-event (BTE) protections such as a qualification for the highest-risk activities.
It could also mean that, for example, even if rights of audience were in principle to remain subject to BTE regulation, not all rights of audience needed to be, depending on the risk.
Professor Mayson’s approach would mean that legal services requiring BTE regulation would still only be carried on by individuals who were personally authorised and registered.
“Organisations could also be registered as providers of regulated legal services, but would not be given separate authorisation for BTE-regulated services.”
The report added: “The ability to treat lawtech as offered by a ‘provider of legal services’ could bring all forms of legal technology into the regulatory framework, whether or not it is provided by an individual or entity already subject to regulation.”
A professional qualification would still be a route into providing regulated services – if no longer the only one – but the report said it should not be as all-encompassing as now, meaning further qualifications may be required to undertake certain activities, for example.
Though the report said there was a case for maintaining voluntary regulation for low-risk services – despite the risk of continuing consumer confusion – it said there would be a public register that would make it easy to check whether a particular legal services provider was registered or not.
Professor Mayson observed that his ideas may seem to go against the grain of liberalisation and policies of deregulation.
“However, for me, the goal should not necessarily be one of deregulation or liberalisation, or even of competition, innovation or consumerism. Instead… the goal should be ‘right’ regulation to achieve the appropriate public interest objectives.
“If this suggests that more legal services should fall within the scope of regulation, then so be it…
“I am acutely aware of the link between regulatory scope, activity and cost. I fully accept that even appropriate and proportionate regulation will have a cost, ultimately borne by consumers.
“Nevertheless, it might also be necessary to accept that ‘right’ regulation properly imposes that cost.”
The report went on to seek views on some of the consequential issues that would flow from this model, including the enduring question of a single regulator.
“A more focused role for regulation… arguably offers an opportunity for rationalisation in the number and functions of current regulators.”
It said that greater flexibility in the regulatory framework would almost certainly create a need for “consistency in decision-making, coherence in the cumulative effect of those decisions, and coordination across the sector”, leading to the question of whether this would lead to “a single, or at least a continuing oversight, regulator”.
The report also proposed shorter-term fixes to the 2007 Act to address two of the big problems identified. One would allow a reconfigured Legal Services Board to regulate providers who did not hold a professional title or qualification.
“This could lead, for example, to currently unregulated will-writers, paralegals or professional McKenzie Friends gaining authorisation (on qualification terms to be decided by the board) and so enter the regulated sector.”
The other would allow the Legal Ombudsman to gain jurisdiction in respect of complaints made against any provider of a legal activity as defined in the Act, including those who did not offer reserved activities.
Consultation on the interim report closes on 29 November and a final report will be published next year. A consultation event is being held on 9 October. See the review website [4] for all the details and background reports.