In 2016, the Competition & Markets Authority completed its market study and concluded that the legal services sector is not working well for individual consumers and small businesses, and that the current regulatory framework under the Legal Services Act 2007 is not sustainable in the long run. One of its recommendations was that the government should undertake a review of the current regulatory framework.
In light of Brexit, the Ministry understandably did not feel able at the time to commit to a formal review. In July 2018, I therefore volunteered to undertake the Independent Review on a pro bono basis under the auspices of the Centre for Ethics & Law, in the Faculty of Laws at University College London.
The report sets out my findings, conclusions and recommendations. It reflects meetings with more than 340 interested parties. These were with current and former regulators in the legal sector and beyond, and professional bodies (including some from outside England & Wales), but also included consumers and consumer bodies, unregulated providers and their representative bodies, senior judges, practitioners and in-house lawyers, academics, and Parliamentarians.
Like the CMA, I am sure that the necessary long-term change cannot be achieved within the framework of the Legal Services Act 2007. During the process of conducting the Review, I remained open-minded on the question of the timing of reform. However, as I approached the end of that process, I became increasingly convinced that some change is needed sooner rather than later.
In the end, therefore, I have not confined the report to longer-term reform, but have also included some recommendations for the immediate future.
What’s the problem?
The current framework for the regulation of legal services in England & Wales has its origins in the self-regulation of the legal professions. As a result, it is superbly (and rightly) designed to preserve and protect those legal services that are critical to the rule of law and the administration of justice, and the integrity of the practitioners who provide them.
The weakness is that this regulatory approach is then applied to all other legal services and all other providers. In practice, lawyers have consistently estimated that on average only about 20% of their work falls into the category of services that are ‘reserved’ exclusively to them – though it will be higher for most barristers.
A YouGov survey of the legal needs of almost 30,000 adults was published earlier this year. It reported that about one-third of them who had faced a legal issue in the past four years did not receive any help. Of the two-thirds who did receive help, just under half of them received it from a regulated lawyer.
On this basis, less than 10% of all work done for those who receive help, and about 6% of all legal issues faced by our fellow citizens, needs the type of regulation for which the current system is designed. A principal conclusion of this Review is that the regulatory framework should better reflect the legitimate needs and expectations of the more than 90% of the population who face a legal issue and for whom it is not currently designed.
The present arrangement of ten front-line regulators, plus an oversight regulator, is cumbersome. Nor does it enable consumers or society to benefit from the full range of provision and protection they deserve. This arises from the ‘all or nothing’ effect of the reserved activities, and the cost of legally-qualified practitioners being regulated for everything they might conceivably do. Otherwise capable, but ‘unregulated’, providers are excluded.
The long-term proposals
With this in mind, this report proposes that we should in future allow the registration and regulation of all providers of legal services, whether legally qualified or not. Registration and regulation should be the responsibility of a single, sector-wide, regulator to ensure a common, consistent and cost-effective approach, subject to a statutory duty to apply only the minimum necessary regulation.
The nature of the regulation applied to registered providers would be founded on the public interest of furthering the rule of law and administration of justice. It would also focus on protecting consumers from harm or detriment caused by poor or inappropriate provision of legal services.
Regulation would also proceed from an assessment of the risk to the public interest or to consumers (particularly those who are vulnerable) in the services provided. This would allow it to be targeted on the risks of what practitioners actually do, and to be proportionate in burden and cost to that risk. Higher-risk activities would attract additional regulatory requirements and attention.
These risks should be broadly conceived and not over-specified. In this way, regulation could reflect the circumstances, vulnerability and challenges inherent in the life-events of consumers seeking legal advice and assistance.
It could also recognise the reality of the bundling of related services by law firms and other providers as they respond to clients who, for example, are going through a family break-up, moving house, dealing with the death of a loved one, losing their job or home, or starting a business. Such an approach would allow regulation to align better with the way in which clients and consumers approach a legal issue.
The proposals would, however, see the ‘ownership’ and award professional titles remaining with the established professions and professional bodies, though subject to requirements set by the single regulator and no ability to impose regulatory requirements of their own. This would not prevent professions from maintaining and promoting higher professional standards than those required by the regulatory minimum where they believe that it is in their best interests to do so.
A more inclusive approach to regulation would also offer the prospect of investigation and redress for all individual consumers and small businesses who have unresolved complaints or concerns about their provider of legal services. Interestingly, many people already assume that all providers of legal services are in some way regulated and that relevant protection is available. Unfortunately, they are mistaken.
For the short term
Finally, while the principal focus of the report is on longer-term reform of the regulatory framework, recent events have in my view accelerated the need for change. Covid-19 has transformed the way we live, work, relate to each other, and travel. Its effects have been immediate and profound, but will also be with us for some time.
This has led to changes in legal needs. We have seen an increase in writing wills, the unfortunate and unexpected need to administer the estates of those whose lives have been lost to the disease, an increase in relationship issues and domestic abuse for those forced to live in lockdown, the loss of jobs and businesses, and so on.
Even before the pandemic, consumers were turning to online providers of legal advice and help. They also used other providers who can lawfully provide legal services that are not ‘reserved’ to lawyers but who cannot currently be regulated for them. This use is likely to increase, and presents significant risks for the unwary.
At a time of such change, the legal market itself has had to adapt rapidly and face emerging risks. Principally, it has had to shift to remote and virtual working with greater reliance on technology (for which many law firms and practitioners were not fully prepared), and face a fall-off in available work or its postponement leading to financial challenges.
The prospect of increased use of the ‘unregulated’ at a time of unprecedented personal, social and economic instability in the lives and circumstances of both consumers and regulated providers suggests a need for short-term reform to regulation.
The report therefore also recommends a new ‘parallel’ structure. This would leave the currently regulated untouched, but bring ‘the unregulated’ (including those who provide online services) within a short-term version of registration and access to ombudsman investigation and redress.
It has been a privilege to undertake the Review, and I readily acknowledge the personal help that I have received from a distinguished Advisory Panel, as well as the considerable and willing engagement of so many stakeholders. However, the report’s conclusions and recommendations are mine alone.
I believe that its proposals would support and protect both consumers and providers as they recover and rebuild from the effects of the pandemic, strengthen our commitment to the rule of law and the administration of justice, and encourage more active and regulated competition and innovation in the legal services sector.