UCL review of legal services regulation

In 2018, University College London (UCL) launched an independent review of legal services regulation in England and Wales led by Professor Stephen Mayson.

The three-stage review focused on the issues raised by the 2016 Competition and Markets Authority’s (CMA) Legal Services market study which found that:

  • competition in legal services for individual consumers and small businesses is not working well
  • there’s not enough information available on price, quality and service to help people who need legal support choose the best option

In June 2020, Professor Stephen Mayson published his final report Reforming Legal Services: Regulation beyond the echo chambers, following the two-year review.

The report concludes that the legislative framework under the Legal Services Act 2007 (LSA) is outdated and not sustainable in the long-term.

Professor Mayson proposes long-term recommendations for reform, as well as short-term solutions that could be considered under the current framework.

He argues that the recent coronavirus (COVID-19) crisis, rapid development of technology and lawtech, and Brexit will accelerate the need for changes to the legal services framework.

In response to the growing demand for legal services as the result of the COVID-19 crisis and the prospect of increased use of unregulated providers, Professor Mayson calls for more immediate short-term solutions, alongside longer-term reform of legal services regulation.

The proposals

Professor Mayson raised the following key arguments in support of the reform:

  • inflexibility arising from statutory prescription
  • competing and possibly inappropriate regulatory objectives
  • reserved legal activities perceived as anachronistic and not necessarily covering all activities that ought to be regulated, leaving unregulated providers outside the current regulatory framework
  • 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 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 and activities will increase)
  • the emergence and rapid development of lawtech that is capable of offering legal advice and services independently of any human or legally qualified interface or interaction, at scale, and is beyond the reach of the current framework
  • 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
  • increasing costs of legal advice and representation, 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 for the same legal activities, and a profusion of differently regulated professional titles
  • concerns about variability in the competence and quality of legal services, particularly in relation to will-writing, immigration advice and services, and criminal and youth court advocacy and representation
  • concerns about the competence and quality of responses made by front-line regulators and the Legal Ombudsman (LeO) in relation to consumer complaints

Professor Mayson made the following long-term recommendations for reform.

  • Only one regulatory objective: the promotion and protection of public interest
  • An independent, single, sector-wide regulator of legal services (the Legal Services Regulation Authority) to replace the Legal Services Board, approved regulators and regulatory bodies
  • Full separation between the regulator and representative bodies
  • Title no longer the only route for entry into legal services regulation and delivery of high-risk legal services (currently reserved activities)
  • All individual providers of ‘legal services’ regulated to different levels depending on the risk to the public as determined by the regulator (before the event, during the event and after the event authorisation)
  • Reserved activities reviewed and replaced with a requirement for prior authorisation open to all individuals meeting authorisation conditions, beyond the current title holders, and scaled down to possibly only advocacy and litigation
  • The Legal Ombudsman Service to expand to all legal service providers authorised by the regulator
  • The single regulator would establish the conditions for the award and removal of titles, but the professional bodies would confer or remove title
  • Professional bodies could play a role in education and training (for example, accreditation) and would be able to set voluntarily higher professional standards (subject to some constrains from the regulator)
  • All professional titles should have the benefit of statutory protection
  • Professional privilege should be extended to those providers who are subject to before-the-event authorisation or during-the-event authorisation

Professor Mayson proposed the following short-term solutions to address the most pressing issues prior to the wholesale reform.

  • The LSB should be empowered to create a public register of unregulated providers delivering paid non-reserved activities. The LSB should also decide if any regulatory arrangements (under section 21 of the LSA) should attach to those who are registered
  • The jurisdiction of LeO should be extended to complaints against unregulated providers on the LSB register on the same basis as authorised providers
  • The registration scheme should exclude immigration advice and services, since all non-regulated immigration practitioners under the LAS 2007 are already regulated by the Immigration Services Commissioner
  • Paid McKenzie Friends should be subject to the registration scheme. The question of whether they should be given permission to address a court on behalf of a litigant should remain subject to judicial discretion and oversight

Our view

Stability and certainty

While the report is an interesting contribution to the debate about how to most effectively regulate the legal services sector, in such turbulent times, regulatory stability is needed to allow sector recovery.

Instead of contemplating a major reform, we think that the immediate focus of policy makers should be on:

  • aiding recovery of the legal sector post-COVID-19 crisis
  • proper investment in the legal aid and justice systems
  • greater public legal education to help people to recognise legal issues and know when to seek help

Flexibility of the current framework

The regulatory framework, while not perfect, currently serves its purpose.

There'ss scope under the current framework to address areas where there’s evidence of risks to consumers and the public.

For example, the current list of reserved activities could be extended to other high-risk areas currently non-reserved, such as will writing, estate administration and lasting powers of attorney.

Regulatory objectives

The eight regulatory objectives cover the right areas, but need to be applied in a balanced way, in particular in cases where there’s a tension between the objectives.

There’s a risk of replacing them with one broad overarching objective that the regulator would interpret as it wishes, increasing uncertainty and posing risks to the public.

Reserved activities

There’s a public interest in maintaining reserved activities in areas of significant risk and detriment to society at large, which only authorised persons can perform.

In addition, the safeguards associated with reservation of activities to titles give the public confidence in seeking advice and protection in practice.

Such activities must attract a higher regulatory threshold.

Professional titles

Strong and distinct professional titles are a distinct feature of our jurisdiction and enable us to trade our legal services abroad.

They also give meaningful choice to consumers and help to make sure that regulatory standards are maintained.

Lawtech

Lawtech encompasses a broad swathe of technologies that support traditional legal services, such as:

  • case management software
  • contract review tools
  • platforms for electronic signatures

The current system enables use of lawtech through structures that require accountability and professional standards.

Regulators need to apply the current regulatory regime and make sure that legal tech providers planning to enter the market of reserved services are properly regulated at the same level as other businesses providing reserved activities, in order to maintain continued protection of the public.

Before any regulatory interventions are considered, we strongly recommend a far greater understanding of the emerging technologies, trends and products, to ensure a suitable regulatory approach.

Independence of regulation

The current structure serves its purpose, ensures the independence of the legal profession from the state, and does not impede front-line regulators’ ability to regulate.

What this means for solicitors

The final report was submitted to the Ministry of Justice in June 2020.

We’ll update you on any outcomes.

Timeline of the review

Professor Mayson published his final report Reforming Legal Services: Regulation beyond the echo chambers, which was submitted to the lord chancellor.

We expressed our concerns at his findings and made suggestions as to how the current regulatory framework could be used more effectively.

The consultation period for the third and final stage of the review closed.

The final stage of the review began and Professor Mayson published his interim report (PDF 1.1 MB).

The report includes findings about:

  • the regulatory framework
  • propositions for reform
  • his consultation questions

We engaged with our members to consider the options presented.

We responded to the second stage of UCL’s review and expressed our concern that the regulatory models mentioned in Professor Mayson's working papers may:

  • cause more regulatory uncertainty
  • undermine the rule of law, the administration of justice and the UK’s attractiveness as a world-leading jurisdiction

We also noted that certain features from the current framework which support the rule of law should be kept, such as:

  • reserved activities
  • professional titles
  • independence of the legal profession

The review moved to the second stage and Professor Mayson published two working papers:

We responded to the first stage of UCL’s review and stated our belief that improvements should be made to the current framework and we should not introduce further legislative reform.

UCL began the first stage of the review.