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Legal services regulation dubbed inflexible in interim report

17 September 2019

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The current regulatory structure of legal services will struggle to meet the demands placed on it, according to the interim report of the independent review of legal services regulation.

In the report released today, University College London Centre for Ethics and Law Professor Stephen Mayson said there is a discrepancy between consumer expectations of regulatory scope and protection, and the current, and imminent, reality of scope and protection.

Mayson, who heads up the review, said: “The current regulatory framework is insufficiently flexible to apply targeted, proportionate, risk-based and consistent regulation to reflect differences across legal services areas and across time.”

Although in principle, he said, regulators are the natural guardians of consumers’ interests, and professional bodies are the natural custodians of the higher standards and aspirations associated with a professional calling, the separation and independence of regulatory functions from representative functions remains unsatisfactory.

“The current approach and requirements of regulation and the internal governance rules make the desirable cooperation and collaboration between regulatory and representative functions problematic to achieve,” he said.

He added that there is merit in legal services being assessed for risk to the public interest, with a ‘differentiated’ approach to regulation under which an appropriate mix of before-, during-, and after-the-event regulation could be applied.

He also criticised the link between the reserved activities and authorisation through professional titles which “creates inflexibility and constraints in the current regulatory framework”. He conceded, however, that a shift from title-based regulation to activity-based regulation is not as straightforward as it might appear.

He said: “The justification for the reservation of the current legal activities is stronger in some cases, such as rights of audience and the conduct of litigation, than it is in others, such as probate activity or the administration of oaths. While there might remain a need for before-the-event authorisation of providers in respect of certain public interest or high-risk legal activities, the continuing need for the concept of ‘reserved’ legal activities in the regulatory framework is debateable.”

He added: “There is sufficient known or potential detriment to the interests of consumers and providers of legal services, and to society at large, arising from the shortcomings in the current regulatory framework to justify further reform.”

He said his review identifies a number of significant shortcomings and challenges arising from the present structure for the regulation of legal services and those who provide them.

These include “inflexibility arising from statutory prescription; competing and possibly inappropriate regulatory objectives; a pivotal set of reserved legal activities that are anachronistic and do not necessarily include all activities that ought to be regulated and title-based authorisation that leads to additional burden and cost in relation to some activities being regulated that do not need to be (resulting in higher prices to consumers)”.

The separation of regulation and representation is also of an unsatisfactory nature, he said, as is the existence of unregulated providers who cannot be brought within the current regulatory framework – whose numbers are only likely to increase.

He put forward a number of propositions in this latest review including making the promotion and protection of the public interest the primary objective for the regulation of legal services.

Consumer expectations and regulatory reality should be aligned by at least allowing access to the Legal Ombudsman for all consumers of legal services offered to the public, he said, and all legal services should be capable of falling within the regulatory framework, irrespective of who provides them.

He continued: “There should be an alternative or additional form of entry into regulation for those who do not hold a legal professional title, a future regulatory framework should allow the differential application of before-, during- and after-the-event regulation to reflect the importance or risk of any particular activity or circumstance and a professional title should no longer be the only route to personal authorisation, even in respect of those important or highest-risk activities for which before the-event authorisation would continue to be required.”

He said the regulator should determine what qualification or assurance of competence, experience and integrity would need to be demonstrated by any provider for legal services and the application of regulatory requirements could be supported by the existence of a public register of who is regulated and for what.

“Voluntary registration and after-the-event regulation should be available to all providers of low-risk legal services; and before-the-event and during-the-event regulation and mandatory registration should apply to providers of higher-risk legal services.”

The current list of reserved activities should be reviewed, he said, with the process clearly identifying the public interest basis of the need for before-the-event authorisation. “This need should be established by reference to public good or consumer protection and should be explicitly articulated, to confirm that the current reservation can continue to be justified.”

Legal Services Board chief executive Matthew Hill said: “Stephen’s report is a thorough and thoughtful analysis of a complex set of issues. It touches on a number of key areas that are of interest to us, and on which we look forward to engaging further in due course.”

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