Mayson Review | Cordella Bart-Stewart
What is it about – The regulation of legal services and those who provide them.
The Legal Services Act 2007 created a new framework for the regulation of legal services and those who provide them. It sets out eight regulatory objectives that regulators must promote, affirmed the six pre-existing ‘reserved legal activities’, which are legal services that can only be delivered by those who are appropriately qualified and authorised. These activities are: exercising rights of audience and rights to conduct litigation; preparing documents that relate principally to the transfer or registration of land and applications for probate; carrying out notarial functions; and administering oaths, created the Legal Services Board (LSB) as an overarching regulator, required the independence of the regulation of professionals from the representation of them, leading to the creation of the Solicitors Regulation Authority (SRA) as the separate regulatory arm of the Law Society and alternative business structures, or ABSs that can obtain a licence to carry out reserved legal activities.
Law firms were already competing strongly among themselves for work and talent but the perception remained the new framework still inhibited the ability of others to compete with law firms and difficult for law firms to compete for work and talent and raise capital.
What’s the problem?
In January 2016, the Competition and Markets Authority (CMA) launched a market study into the provision of legal services in England and Wales and reported in December 2016: Overall, they said they found that the legal services sector is not working well for individual consumers and small businesses. These consumers generally lack the experience and information they need to find their way around the legal services sector and to engage confidently with providers. Consumers find it hard to make informed choices because there is very little transparency about price, service and quality – for example, research conducted by the Legal Services Board (LSB) found that only 17% of legal services providers publish their prices online. This lack of transparency weakens competition between providers and means that some consumers do not obtain legal advice when they would benefit from it.
How do we fix it?
They set out a package of measures which challenges providers and regulators to help customers better navigate the market and get value for money. Among recommendations is a requirement on providers to display information on price, service, redress and regulatory status to help potential customers to include publishing pricing information for particular services online, facilitating the development of comparison sites and other intermediaries to allow customers to compare providers in one place by making data already collected by regulators available and that the Ministry of Justice look at whether to extend protection from existing redress schemes to customers using ‘unauthorised’ providers.
Getting there. They also considered whether legal services regulation might be dampening competition and found that the existing regulatory framework is not currently a major barrier to competition. However, their concern is the sustainability and inflexibility of the current regulatory model in the long term. The main concern is that the current, title-based model is insufficiently flexible to apply proportionate, risk-based regulation which reflects differences across legal services areas and over time.
They propose that the government launches a review of the regulatory framework with the aim of making the regulatory regime more flexible and risk-based in the long term. They also consider that regulators should be independent from government and representative bodies. The number of regulators should be a consequence of the regulatory structure; moving from a model that is primarily title-based to a risk-based model is likely to lead to a reduction in the number of regulators.
The CMA stated that its objective is to facilitate consumers who are confident, well-informed and engaged when using the sector and have effective access to redress. This, in turn, will lead to increased competitive pressure being placed on providers that will have to work harder for their customers, offering lower prices, better quality and service and fair redress when things go wrong.
The scope of regulation should focus on activities and risks to consumers, with a shift away from regulation attaching solely to professional titles. An implication would be that some activities of currently unauthorised providers may fall within the regulatory net.
Solicitors and other professionals should be less tightly regulated than they currently are for lower risk activities, reducing the costs of regulation and encouraging different approaches and business models.
The government probably far more pressing issues in late 2016 and in its response the MoJ while agreeing that a robust regulatory regime that promotes competition and innovation while protecting consumers is vital to the effective performance of this market said the time wasn’t right to consult on legislative and that there is scope to make more progress within the existing framework.
In 2018 The Centre for Ethics and Law in the UCL Faculty of Laws began a fundamental review of the current regulatory framework for legal services. This is led by Honorary Professor Stephen Mayson and referred to as “the Mayson Review”. It is independent of government and review states the intention is in part to explore the longer-term and related issues raised by the CMA study and its recommendations. It was in 3 stages, the final stage has ended with the publication of Professor Mayson’s interim report and the intention is that the final report should be published and submitted to the Ministry of Justice in March 2020.
There are 9 specific interim findings in the report and the Review identifies what they consider to be a number of significant shortcomings and challenges arising from the present structure for the regulation of legal services and those who provide them.
• 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
• 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 unsatisfactory nature of the separation of regulation and representation.
• the existence of unregulated providers who cannot be brought within the current regulatory framework (with an expectation that their numbers will increase)
• the prospect of LawTech4, that will be capable of offering legal advice and services independently of any human or legally qualified interface or interaction, beyond the reach of the current framework; LawTech’ is understood as technology that provides self-service direct access to legal services for consumers. As such, it substitutes for a lawyer’s input, and can be experienced by the consumer without the need for any human interaction in the delivery of the service.
• a regulatory gap that exposes consumers to potential harm when some activities are not regulated when they ought to be and puts legally qualified practitioners at a competitive disadvantage
• seemingly ever-increasing prices of private practice lawyers, reducing further the availability and affordability of legal services for many; this encourages either greater self-lawyering and litigants-in-person, or nudges increasing numbers of citizens into the world of unregulated providers or LawTech
• consumer confusion, caused by the existence of both regulated and unregulated providers, and a profusion of differently regulated professional titles
• inadequate or incomplete consumer protection that is not consistent with a widespread consumer expectation that all legal services and those who provide them are subject to some form of regulation and protection; and
• as a result of all of these issues, the risk of low public confidence in legal services and their regulation.
A series of propositions are offered as potential solutions or improvements to address the findings and issues identified. These are offered in the context and expectation of longer-term reform of the regulatory framework for legal services.
- Promoting and protecting the public interest should be 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.
- All legal services should be capable of falling within the regulatory framework, irrespective of who provides them.
- 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.
- 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.
- The appropriate regulator should determine what qualification or assurance of (continuing) competence, experience and integrity would need to be demonstrated by any provider for particular legal services on a before-the-event basis, and the additional requirements that would be applied on a during-the-event or after-the-event basis to the relevant providers.
- The application of regulatory requirements could be supported by the existence of a public register of who is regulated and for what. Accordingly, 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. This process should identify clearly 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. Other activities should also be reviewed against these same criteria to see whether prior authorisation should in the future be extended to them.
- The future primary focus of regulation should be the ‘provider’ of legal services, whether an individual, entity, title-holder, or technology.
- For the purposes of a future single register of providers of legal services, the registration should be in the name of the entity, partnership or individual subject to regulatory requirements or with which a client has terms of engagement; but before-the-event authorisation should only be granted to individuals.
The potential benefits of the propositions explored in this interim report could be that: (a) It would be easier for consumers to check whether their provider or prospective provider is registered or not (including for higher-risk activities that attract further regulatory requirements and protection). This is a simpler starting point for consumers than the current complex mix of factors. (b) A differentiated, or layered, approach to regulation would allow before-, during-, and after-the-event requirements to be applied to providers based on the risks of the services that they actually offer. (c) Adopting such a risk-based approach could mean that more of the cost and burden of regulation would be self-selected and cumulative, depending on the commercial or operational choices that providers elect to make. As such, it would offer a more targeted and proportionate response to the public and consumer risks within the legal sector. (d) This approach would enable those who are currently unable to enter the regulatory structure to choose to do so, for the benefit of their consumers. This could lead to an increase in regulated access, competition and innovation in legal services. (e) This approach could also apply to those providers who are moved (or move themselves) outside the current regulatory framework, for instance by having been struck off, disbarred, or even simply retired. It would constrain their current option to set themselves up as an unregulated paid adviser in respect of non-reserved activities. (f) A framework that is constructed around ‘providers’ of ‘legal services’ could apply to the providers of substitutive LawTech in ways that the current framework cannot. An important question for this interim stage of the Review is whether such a longer-term alternative approach would sufficiently address the identified shortcomings of the current framework and whether these projected benefits would be worthwhile.
The Law Society has taken part in at all stages of the consultation including meeting Professor Mayson and the review team. A summary of the response to the interim report is below.
Having considered the strengths and weaknesses of the regulatory models outlined in the interim report, we are concerned that the proposals would lead to a less coherent alternative to the existing regime, creating a costly and complex system. This would lead to greater regulatory cost and uncertainty, undermining the UK’s attractiveness as a world leading jurisdiction.
The legal services sector is a complex, fundamental part of our society. Careful consideration must be given to competing factors that need to be finely balanced to ensure that one does not override the others in a detrimental way or bring about unintended consequences.
Any reforms would have to be carefully weighed to ensure that intended benefits substantially outweigh any potential for negative impact and would deliver measurable, positive outcomes.
In this context, key features of the current regulatory framework and landmarks of our jurisdiction, such as reserved activities, professional titles and independence of the legal profession, must be retained in any future regulatory framework for legal services in order to underpin the rule of law and provide confidence in the justice system.
There are also concerns about the timing
The Law Society welcomes the fact that you recognise that now is not the time to be advocating further reform and that the timing for a major regulatory review needs to be right. Currently the legal sector is going through a period of uncertainty driven by Brexit, and wider market changes.
Recent regulatory reforms such as the introduction of the new SRA handbook last month, the transparency rules last year, the new education and training requirements, and wider regulatory changes (new Money Laundering Directive, GDPR) will bring further change to the sector.
Any further regulatory interventions are likely to put significant and potentially harmful strain on public and business confidence in our legal system and impact on the growth of our legal market both domestically and overseas in the short and long term.
I recently attended a Westminster Legal Policy Forum keynote seminar on the future of legal services in England and Wales – regulation, consumer protection and responding to innovation. There were a large number of speakers from a range of sectors, regulated and unregulated, the LSB and regulators discussing various issues affecting the legal services market however the 2 main speakers were Prof Mayson and Chris Jenkins, Economics Director, Competition and Markets Authority. Delegates in attendance were also from a wide spectrum of the advice and legal services sector and it was noted that there were 22 delegates from the MoJ which might be seen as an indication that it may be greater pressure on the LSB to effect change in the existing framework including separation although there is no current appetite for legislative change.
There is a lot happening in the legal market which is or will directly affect all providers of legal services. Even if central government has other priorities it is likely that some change is inevitable.
Director, Black Solicitors Network