Reforming Legal Services?

David Johnston

David Johnston

The UK's authority on mapping governance, risk, compliance, regulation and legal services markets.

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The undoubtedly conscientious work from Professor Mayson and UCL’s Legal Services Regulation Report remains problematic on several levels.

It claims an honourable antecedence from Clementi through the CMA and MoJ reviews, but finds itself now answering questions that no one is asking any longer. Some 16 years after Clementi’s Report, and over 20 since the heady days of Blair’s reviews of financial and legal services kicked off, it is easy to lose sight of the rationale behind this whole process.

Professor Mayson is at least candid about his ‘mission’ to bring a ‘public interest’ perspective into legal services. Fine. The first point to note is that this may be a ‘term of art’ well understood in academia, it is far less obvious what it actually means in practice. In an increasingly polarised and culturally divided nation, who decides what is interesting and to which public? There is no explanation of this central part of the thesis, no doubt due in part to a reluctance to touch on the difficulties of following the paths of, say, Arthur Pigou or Milton Friedman. Explicitly opening the can of worms that is ‘critical theory’ is side-stepped, but these issues have become pivotal in the years post-Blair, post-Clementi, under the Covid19 cloud, and now with US culture wars spreading fast.

Confidence in the Blair reforms was mortally wounded when the Financial Services Authority singularly failed to manage any of the intense relaxations, with tragic fiscal results. The Supreme Court’s decision to unilaterally extend its powers to law-making during the Brexit hiatus polarised views on that institution dangerously too; it was the pinnacle of the bonfire of constitutional norms indulged in from ’16-‘19. The FCA may have resolved one process, but there is a deafening silence on the other which fundamentally undermines this current Report. There is, for example, no mention of whether the UK Supreme Court should follow it’s US template and render explicit the political allegiances of its members. A contentious issue, no doubt, but one much more to the front of mind currently than arcane tidying up of regulation for notaries public. Ditto, no mention of the LASPO and legal aid crises which the MoJ is addressing even during Covid19. Structural reform of the prison system? Silence. A proliferation of regulators and regulatory costs in legal services while legal aid is halved? Silence. The vast and growing gulf between the commercial legal practices and their small, often High St, generalist practices? Silence. Is the Law Society even relevant to the Magic and Silver Circle firms any more, let alone representative of in-house counsel interests? Silence. Anything on the quality of ACAS advice or quango regulator efficiency? Silence. Anything on the supply and demand issues of constrained entry into the professions, despite rising numbers of law graduates and demand from law firms? Silence. Secretive family court proceedings? Silence. Overcrowded prisons and court waiting lists? Silence. Oddly the Report does drop immigration services like a hot rock with no logical or regulatory rationale behind such a move in a field central to many core issues in access to justice.

What we are left with are the views of a sector of the legal services market which feels it is losing out; losing out due to the fact that consumers have a nasty habit of preferring alternative suppliers when they are offered. Their solution is to demand the right to regulate those who are beating them at parts of their own game. Would it be in the public interest for the consumers who specifically choose a non-legal service to be forced to accept that lawyers then regulate it, increase the costs of supplying it, and prescribe remedies that are largely irrelevant to them? Where is the public interest in foxes being legislated into chicken coops? The MoJ and CMA approaches, all spawned by Clementi, have been focused on improving competition. This Report is all about protectionism.

What is not addressed here is much more important than what the Report purports to address. That the Report fails to establish or even reassess its rationale on philosophical first principals is its major failing. That it unilaterally adopts some fashionable academic trends is not surprising, especially given the steady creep of Critical Theory into every discipline. But this is the Rule of Law we are dealing with here. Inalienable rights, liberty, equality and justice. It demands more than an assumptive close on its foundational principals. So while the findings repeatedly follow Professor Mayson’s passion for ‘public interest’, this simply raises many more questions than it solves.

The core issue?

Solicitors, barristers and judges are understandably dismayed when they discover that access to justice does not necessarily mean access to a lawyer. Professor Mayson transmutes this from a stark fact, to a massive land grab by the entrenched interests. The simple claim here is for all lawyerly work to come under one overarching regulator (LRSA). Trust them then; they’re nice people and they’ll take it from there. The definition of a ‘legal issue’ is massively broad, and seems to boil down to anyone dealing with a form, contract or process which has any legal implications. In this new world order, all such transactions would be delineated by and regulated by the LRSA.

Dressed up in the language of Before, During and After the event lawyers, what is meant here is:

(i)                 ‘Before’ specialists being litigators (the bar and judiciary in particular);

(ii)               ‘During’ being solicitors in the main, transactional and litigation lawyers properly so called; and

(iii)              ‘After’ being the great unwashed of assorted non-specific ‘lawyers’ or legal services providers, from technologists to family friends and all points in between.

It is a cumbersome reclassification at best with terminology inaccurately purloined from the insurance industry. The ‘event’ is not specified and seems to refer to the proximity to the court process. Fine, but the vast majority of non-law firm or judicial legal work is actually all about the complete avoidance of courts, and it is typically very successful at it. It is not clear that the general counsel of a nuclear power generator is somehow dealing with much lower risks than the recorder or stipendiary trudging through drunken weekend detritus. But that distinction is enshrined again here. The two biggest horses pulling a large coach through this approach to classification are in fact legal technology and in-house counsel, neither of which are dealt with in any sense coherently or thoroughly. Seeking to regulate both processes that are misunderstood and professionalisms that are beyond their ken is a lamentable and untenable position to start from.

Somehow under this new nomenclature, it is in the public interest for lawyers to regulate everyone who touches a legal document. They define ‘legal’, ‘legal services’, legal document’ and can, in fact, designate pretty much anything as ‘legal’ in this new world. That is such a wide conception of the issue at hand that it really should have some demonstrable demands behind it. Other than the disquiet of some lawyers, there is none.

Demand?

What is clear from the example cited by the Review is that consumers annoyingly seek often anyone but a lawyer to help them deal with legalistic issues. Unmet legal need is easy to identify when the reality is that legal help starts at £225 per hour and the first few hours are taken up with learning what the client is, does or has in play. Of the Review’s quoted sample of 30k people, 6k got no help at all and only half of those who were helped (9k) got help from a lawyer. This data points both ways.

Once again, is the law centre unqualified advocate more risky than the fixed fee conveyancer when the former is dealing with matrimonial violence day-in-day-out and the other is administrating land registry templates? The Before/During/After issue here is again more window dressing than clarity or consistency.

What is clear is that when, for example, building societies were able to offer conveyancing, the public embraced these competitive offerings with alacrity. We’ve seen the same with regulatory consultancies helping SMEs manage employment law and HR formalities. All too often, when consumers find alternatives to dealing with the traditional lawyer business model, they jump at it.

While it is completely understandable that lawyers feel they are missing out, it is far from clear that the consumer feels aggrieved. Research from the SRA and LSB has often been narrowly focused and contestable. The simple economics of open competition in legal services markets shows time and again that consumers are better at designing the service they want than regulators are. The number of companies deploying in-house counsel has multiplied enormously in recent decades. When your consumer is also a lawyer, regulating both brings into conflict, a conflict which Clementi’s consumer interest approach avoids, but which Public Interest complicates.

What is increasingly clear here too is that access to justice is simply not the same things as access to a lawyer’s regulator. This is a concomitant step this Report is incapable of taking.

Inherent contradictions

There are some good points, it has to be said. First among these is the issue of a single regulator. Whether such a thing can be achieved now, given the damage done to public confidence in the highest levels of the judiciary, is a moot point. The elimination of 10 separate bodies for the Bar, solicitors, legal executives, immigration, insolvency practitioner, etc is long overdue. The Report does, however, propose a fudge, with some aspects reporting at arm’s length to the Ministry of Justice and others conferring rights of oversight or appointment to senior judiciary. And there’s the rub. Is the judiciary a special case to be separated from the other administration of justice roles entirely? Should the MoJ role be larger or smaller? Precisely who polices these police goes to the heart of perceptions of public interest. The proposal is to hide behind the typical quangocracy approach of a Board (lay majority) with 2, arguably 3 masters. Any competent CxO will be delighted with the opportunities this offers, while in equal measure public confidence in it will be irredeemably at rock bottom. While much would have seemed settled by constitutional conventions Clementi worked under in 1993, that is far from the case now.

The definition of public interest seems to be based on a neo-Brandesian (Louis Brandeis) approach, and if a sufficient supply of such independent minds is guaranteed, we can all sleep easy in our beds. The Report is again silent, and when calm heads were needed in 2016-19, they were in very short supply indeed. A much more likely undercurrent comes from Critical Theory, however, especially in it’s reliance on a core concept of ‘vulnerability’. Bringing mid 20th century deconstructivism into the mix is both unwarranted and unhelpful. If this is the driver, it should be made explicit (and it is not). If the alternative is relying on the inherently unbiased, professional and even-handed approach that all senior lawyers, and especially senior judiciary confer upon themselves, then it has to be said, few believe it now in an age where deference has died. When the issue is the use of the costs of lawyers as a major determinant of whether justice is to be even approached versus industries (like IT, TIC or regulatory consultancies) which can avoid the need for recourse to lawyers at all, who determines ‘vulnerability’? Legislating it to those who’s costs deny justice is an odd approach to recommend.

Compounding this with an insistence that the issues must be broadly conceived and not overspecified is a nod to Civil Code practice, not Common Law, and at odds with how regulation here of all places ought to be conducted. Giving star chamber powers to a body with unproven and sceptical probity is ill-advised.

The Report repeats the old chestnut of unregulated services bringing significant risk to the unwary. These are the estimates of solicitors and barristers as to what they would advise that an HR manager, a laboratory certifier, an ACAS or CAB adviser could not. It is never said by lawyers that nuts should always be hit with sledgehammers, but that is precisely what these aspirations for wide-ranging regulation assume. The legal profession has no direct role currently in managing the testing, inspection and certification markets globally or in the UK, for example. Under this approach, they could become their regulator (and that market is already up to its ears in several). These markets are currently 3-4 times the size of the UK’s commercial legal profession, and they have been managing supply chains and commercial terms and conditions in bulk for centuries. The scope of the ambition here is simply breathtaking. The firms in these adjacent legal markets are now typically mature enough to be able to handle another tier of regulation readily. They would do so with a heavy sigh and a real sense of ennui as they need to invest in tech right now, not form filling. They should not be so hampered in competing globally, however, just to salve some professional parochial hubris here.

Not all bad.

Many of the best solicitors and barristers have not only embraced the new approaches favoured by clients but delivered them better than their rivals from outside the professions. The supply chain certification specialist, Achilles was set up by oil and gas industry GCs using technology to make the supply chain both quicker and legally safer. They lead in a £40bn UK market with global reach. Solicitors set up Citation and Ellis Whittam and have helped build a regulatory consulting industry worth over £1.4bn pa in the UK providing legal and safety solutions to small and medium-sized companies in the main. The whole product certification industry eliminates the need for much contentious legal work completely (as it should), as does laboratory testing, inspection and other sectors, global markets worth $200bn or more. They have survived and thrived without the need for additional legal regulatory oversight, and they have provided an environment where legal leadership can flourish, ably funded and encouraged by commerce and industry. These entrepreneurial lawyers are diametrically opposed to the assumption that some vulnerable unserved communities are losing out. They are also very successful at driving legal services expansion in practical ways consumers can and do afford. Good lawyers have nothing to fear from this future, but this is ignored in this Report.

There are 13 ‘findings’ many of which have merit. Reserved legal activities are a protectionist irrelevance these days. Professional qualifications can be (protectionist and) inflexible. Representative bodies cannot be their regulators (does this still need repeating?). There are quality issues in wills, crime, youth and immigration services (and you can add family and care to that list too).

Tucked in as item 45 there is the hubristic call for a power to designate equivalent providers of regulation as meeting the standards of the new body. This may just be the usual overseas lawyer recognition issue beloved of global commercial law firms. It may also be a nod to the fact that consumers will be much happier with a UKAS accredited, Nebosh trained, technologically empowered, certified supply chain specialist dealing with their issue than a lawyer who saw an environmental law book once upon a time. Regulators cannot lead here. There is a touching belief that regulators as a force for good can deliver. Sadly they can only prune, they can’t germinate.

Recommendations.

There are 13 findings, 7 recommendations and 46 issues posited by the Review. When all’s said and done, they fall at the first hurdle. Why is elevating ‘the public interest’ as the determining factor here either relevant or trustworthy? Clementi took a much simpler view of ‘the consumer interest’ and defined this largely in terms of informational imbalances. So who decides what’s in the public interest? Why should it be a lawyer at all? Who decides what a legal issue (or document) is? Why should that confer the ability to increase cost, confusion and regulatory impediments to commerce unilaterally? Why should the administration of justice and regulation of the legal services industry be taken down a route which is contentious, divisive and philosophically discredited? And why now when recent events have shown that it actually has bigger issues right on its doorstep that need sorting much more urgently?

Yet another recommendation that has Orwellian overtones comes with the concession that (point 17) regulatory ‘sandbox’ waivers would be granted to those developing legal technology solutions. First, this assumes all technology falls into the same definitional trap as with other ‘documents’ etc. Potentially every piece of software can be designated ‘legal’ in an age when clicking ‘accept all’ is an almost daily occurrence for smartphone users. Secondly, it assumes development of new tech is in some sense licensed by the legal regulator. In the old USSR, maybe, but this simply does not understand the nature of entrepreneurial development. When dating apps migrate into Facebook and tools in Word transform remote document preparation, this approach is simply unreal.

There is a real sense of regulatory mission creep here, and perhaps the Review should be seen in this light. It is an eloquent, if misguided and unsubstantiated call for a refreshed legal ombudsman to tackle all things lawyerly. A ‘SuperLeo’ would (showing it’s critical theory driver) be able to act unilaterally on gossip and investigate on its own initiative, just at the time when costs awards against regulators are being confirmed as sacrosanct. They can investigate on a whim without any repercussions on their part whatsoever. We’re back in star chamber territory once again just when tabloids are railing at pictures of the Supreme court judges; it’s a sad but very important disconnect.

The case for action in this form is simply not made. The Review nods to Covid19 and Brexit without integrating their constitutional or public confidence implications. The time has passed for such expansionism in regulation when the real issues in access to justice are being exposed ruthlessly daily.

Going forward

There has undoubtedly been a lot of work put into this Review by Professor Mayson and the UCL team. Ultimately it’s conclusions are unproven and based on very shaky ground. The regulatory mimicking of US trends was unhelpful in financial services, polemicising constitutional upheaval too, and this now seeks to replicate some of the most unhelpful and divisive aspects of US trends at precisely the wrong time.

Adopting a public interest motivation on a concocted consumer victimisation approach will solve nothing. It will exacerbate divisions and ultimately fail even in it’s simplest purpose.

The rise of technologically driven and in-house counsel legal services will continue to transform the alternatives which consumers will continue to prefer to the traditional law firm model where it works for them. But do not despair, for the vast majority of solicitors and barristers there is a bright future. Ever more transactions and ever more brand threatening issues are ever more likely. It’s just that the rest of the legal services world is typically better at defining what mass legal services looks like and extending them to mass markets.

The problem areas are, however, well known and largely of the legal professions’ own making. Access to justice, especially at legal aid levels is parlous. Why a £33bn industry cannot manage the legal aid budget through, say, an equivalent of the insurance premium tax, is an issue that no-one wants to raise. It would be a much simpler solution to public disquiet concerning access to justice. It would restore the credibility of both lawyers and their regulators in the eyes of the public when they see millionaires bewailing legal aid funding as a tad incongruous. It would simultaneously free HMG to increase prison (and especially mental health) spending upwards by 50%.

Let’s hope sanity prevails, and the regulatory issue is parked while fundamental constitutional issues settle down, and in the meantime, the real access to justice issues are properly funded.

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