MoJ consultation response- 30 August 2013

Legal Services Review - Post Point 4.41

Ministry of Justice - 102 Petty France, London - SW1H 9AH

By email: [email protected] - 30 August 2013

Dear Sir/Madam,

Review of Legal Services Regulation

Thank you for your invitation to respond to the above consultation. This is our submission.

Contents

1. About the IOP
2. Defining paralegals and the unregulated legal sector
3. Notes about this submission
4. Problems with the current regulatory framework
5. Conclusions
6. Recommendations

1. About the IOP

The Institute of Paralegals is the largest professional body in the United Kingdom representing unregulated legal practitioners.

Our raison d’être is to assist with the development of the unregulated legal sector. To that end we issue competency standards and guidance on professional conduct; we provide careers advice to unregulated practitioners and those seeking to begin an “alternative” career in the law; we offer legal training ourselves and we encourage the development of a broader range of legal training than currently exists; and we advise those wishing to set up an unregulated law firm.

We are arguably the most experienced organisation in the UK in respect of the unregulated legal sector. As such, we have advised bodies as diverse as the Judicial Appointments Commission, the MoJ, the Bar Council, legal insurance companies, various police forces, legal recruitment companies, the press, university law schools, local authorities, HM Prisons, Trading Standards, The Master of the Rolls and the Information Commissioner’s Office. We also deal with numerous enquiries from members of the public and legal practitioners generally who have questions about the unregulated legal sector.

We are a government-recognised Institute and are registered as a not-for-profit entity. Our Patron is Baroness Buscombe, formerly Shadow Spokesperson in the Lords on legal matters.

Although purely a representative body at present, we would be prepared to operate in a regulatory role as the unregulated sector matures, if thought appropriate.

The Institute is part of the Instructus group. Instructus is a registered charity and its subsidiaries are either charities or not-for-profit organisations.

Through one of its subsidiaries, Skills CfA, Instructus is responsible for creating and maintaining national occupational standards for all generic/transferable skills business and administration sectors and for initiating apprenticeship frameworks for those sectors which account for 30% of the UK workforce by occupation. It therefore has the largest footprint in terms of vocational education, in the UK.

Defining paralegals and the unregulated legal sector

There is no legal definition of a paralegal; nor is there a single commonly accepted definition. However the term is generally used in respect of any legal practitioner who is not an overseas foreign lawyer or one of the lawyers regulated under the Legal Services Act 2007 (i.e. solicitors, barristers, licensed conveyancers, trademark agents, chartered legal executives, notaries, costs lawyers and patent agents).

The term “paralegal” is therefore used as a default, catch-all term for unregulated legal practitioners.

Obviously many paralegals – such as those working in a solicitors’ firm – work in regulated environments. However they are generally regarded as support staff and thus not really considered to be regulated (responsibility being for the most part borne by the regulated lawyer supposedly supervising them). The majority of paralegals however do not work in a regulated environment.

Being a default term, it has fluidity - because new types of unregulated legal service are being introduced all the time to meet the demands of an ever-changing economy/wider society.

Such persistent and timely innovation (along with lower prices for consumers) is perhaps the most striking benefit of having an unregulated sector.

That fluidity means that job labels (solicitor, barrister, solicitors’ clerk etc.) are an increasingly ineffective way of identifying, categorising and regulating legal practitioners.

Today we have an unregulated legal sector where it is what you actually do that defines who you are as a legal practitioner, not your job title.

This is increasingly true in the regulated sector too. Paralegals are replacing solicitors - in even senior positions; the Bar is taking on the work of solicitors and vice-versa and regulated businesses are run by non-lawyers as Alternative Business Structures and some of the largest legal advice providers in the country (e.g. Citizens Advice) are staffed predominately by paralegals etc.

Because the dissemination of legal advice has ceased to be a specialist activity and (like administration and IT) has become embedded in all elements of the economy/society at large, it also means that unregulated practitioners are appearing in areas not previously noted for employing any sort of legal practitioner (e.g. a nation-wide chain of builders’ merchants who maintain a team of six paralegal advocates to bring claims for them in County Courts across the country. Each team member has a minimum of 100 court hearings as advocate under his/her belt).

Similarly one of our corporate members (a will writing firm) has written over 20,000 wills (and had fewer than 10 complaints in total).

So, in summary, although paralegals are commonplace in the regulated legal sector, they effectively constitute the unregulated sector.

2. Notes About this Submission

You wrote: “The review will consider what could be done to simplify the regulatory framework and reduce unnecessary burdens on the legal sector while ensuring there is still appropriate oversight…”

We believe that many of the problems in the current regulatory framework arise because the framework is built upon a perception of the legal sector that was already becoming outdated when the Legal Services Act 2007 was enacted.

Today the disconnect between the regulatory system and the market it seeks to regulate is wider than ever. We believe that significant problems will continue to manifest even if your review results in measures to alleviate the problems currently being experienced.

Accordingly, we believe the best way to not only deal with current problems but to blunt future problems is to take the opportunity presented by your review to address some major questions relating to the scope and purpose of legal regulation, rather than merely tinkering with the current system.

Therefore our submission addresses those systemic issues. We are, of course, happy to discuss more detailed reforms if that is what is deemed appropriate.

3. Problems with the Current Regulatory Framework

We believe there to be six systemic problems with the current regulatory framework:

• It is based upon an outdated perception of the legal sector
• It lacks consistency
• It prioritizes protection of the status quo even when detrimental
• It restricts the usefulness, accessibility and affordability of legal education
• It has become a walled-garden where regulators only engage with other regulators
• It has failed to adequately address the issue of diversity

Taking each in turn:

4.1.   The current regulatory framework is based upon an outdated perception of the legal sector

There have been many seismic shifts in the legal sector over the past century. Perhaps the main shift has been in the use of law itself.

It has moved from being a small, distinct, rarefied discipline, where an ordinary law-abiding citizen might encounter “the law” only two or three times in his/her life (buying a house, making a will etc.) to a situation where the law is embedded everywhere and encountered on an almost daily basis (during employment, incurring parking fines or speeding tickets, health & safety issues, issues with landlords,consumers abused by big business). The growth in legal interaction for commercial and other enterprises is, of course, far more intense.

The regulated sector has responded to a varying degree. A small number have done so successfully, but most have failed to address the huge growth in the need for new legal services delivered in a variety of ways. Because the regulated sector has responded so unenthusiastically, an enormous unregulated sector has come into being to fill the vacuum.

As a result, we now have a legal sector of two distinct halves: the regulated and the unregulated. Although one sector, they are so dramatically different (because of regulatory pressure) that the misalignment is the cause of numerous problems and an almost universal confusion.

Obviously, by definition, the current regulatory framework has focused on the regulated half of the legal sector. However, what the framework has signally failed to do is adequately monitor or engage with the unregulated sector, or (ultimately more important) failed to see that the phenomenal success of the unregulated sector gives rise to fundamental questions about the focus/direction of travel of the current regulated framework.

It is this latter point which is of relevance here. The regulatory half of the legal sector is based upon traditional job demarcation by virtue of job title. What job title you have (solicitor, licensed conveyancer etc.) largely determines what you can do and how you can go about doing it.

In the unregulated half of the legal sector, job titles are no indicator of work undertaken, seniority, experience, competence or training received (indeed, it is a core function of the Institute to help consumers and other legal stakeholders to understand with whom they are dealing by a having various membership grades/professional designations with consistent grounds for grant).

It is our contention that the market’s direction of travel is towards the unregulated sector position. This is borne out by the desire of many of the regulated practitioners to get permission to move into new areas of regulated practice – i.e. regulated practitioners increasingly see their job title as limiting (e.g. the Bar now wanting to conduct litigation and solicitors seeking enhanced rights of audience).

We believe that in the modern world, the provision of legal services is now so broad that framing an entire regulatory system around job titles is badly outdated; will continue to be a major drag on innovation and will perpetrate consumer confusion. It will continue to encourage legal practitioners to put consideration of their profession/monopolies/lucrative niches before the good of consumers and society at large. It will continue to stifle innovation and cause massive conflicts of interest.

Too many of the issues raised by regulators and the resulting discussions (let alone the decisions arrived at) are distorted by an old-world focus on practitioners (and their needs/desires) first and everything else often a distant second.

We need a regulatory framework which is primarily focused on the needs of consumers not suppliers, and one which looks at the requisite skills and competencies needed to deliver particular services. Instead we have a somewhat arbitrary parcelling out of exclusive rights to practice into fiefdoms where all too often accessibility is limited, customer service is indifferent and prices are high.

4.2.   The current regulatory framework lacks consistency

Following on from the above, in many ways the Legal Services Act 2007 merely codified existing practice wholesale. It did not question existing monopolies such as rights of audience.

Because of that wholesale adoption of the existing system, the current regulatory framework lacks coherence, logic and consistency.

Whilst acknowledging efforts by the Legal Services Board to standardise regulatory requirements and expectations across the seven regulated practitioner groups, the current framework still lacks coherence, logic or consistency.

By way of example:

Two legal practitioners sit opposite each other in a solicitors’ firm. They handle the same type of cases. Both deal direct with clients and run their own files. Consistency and logic would suggest that they both be subject to the same mandatory training, the same on-going CPD training to keep their skills up-to-date and the same level of regulatory oversight with similar sanctions should either breach their professional ethics obligations. This would be the case in a regulatory system based upon identifying the skills and competencies needed to do a particular job and requiring all practitioners doing that job to have them.

Instead, under the current regulatory scheme, all of these things are determined by job title. The first practitioner is a solicitor. He/she is (typically) obliged to have a law degree and a postgraduate certificate in law; have completed a formal and informal two-year training programme; have professional indemnity insurance and be subject to on-going CPD obligations. Further, the solicitor will labour under numerous onerous (and very real) personal professional conduct obligations. He/she will also have had to pay over £1,000 each year just for the right to handle his/her cases.

The person opposite the solicitor is a paralegal - he/she may have no legal qualifications, be virtually ignored for professional indemnity purposes, have no CPD obligations and will work largely free of any personal conduct obligations. It will also have cost him/her nothing to handle his/her cases each year. If something goes wrong then the likelihood of him/her being disciplined is significantly less than it is for the solicitor.

If the person opposite the solicitor were one of the other regulated groups of practitioners instead of a paralegal then a third set of rules, obligations, costs and risks would apply.

This misalignment of regulation, cost, risk etc. increases dramatically when the distinction is between the said cases being handled by a regulated and unregulated business.

Where does this leave the consumer? We already know from enquiries we receive that the average consumer is completely confused about the regulatory system. Not just consumers. We get quite a few enquiries from regulated legal practitioners who simply do not understand the completely arbitrary distinctions between what the regulated and unregulated can do in practice.

This problem is very wide. We regularly receive reports that show different courts adopt different attitudes regarding rights of audience for unregulated practitioners (ironically unregulated practitioners who have no formal rights of audience have a greater chance of being given permission by the court to represent their client at a hearing than regulated lawyers who do not formally have such a right, since their professional rules would normally stop them even making such an application the first place).

We have also received enquiries from HM Prisons as to whether they should give unregulated practitioners the same rights of access to prisoners as regulated practitioners. We have received an enquiry from a senior CPS prosecutor about how they should handle a prosecution where the other side is represented by an unregulated practitioner and what the implications of such representation were.

The said misalignment within regulated firms tends to be explained away by claiming that the paralegals would be supervised by a regulated lawyer (typically a solicitor).

We know from feed-back that (in solicitors’ firms at least) such regulated oversight was largely illusory as far back as a decade ago. Now that we are on the way to having more paralegal fee earners working for regulated entities than regulated lawyers, and paralegals leading teams of paralegals, the charade of genuine supervision is increasingly hard to maintain.

If paralegals in regulated firms (not to mention those working in unregulated paralegal law firms) can do the work unsupervised, then what is the point of requiring those solicitors doing such work to undertake what would appear to be large amount of unnecessary training - and be subject to unnecessary levels of regulation?

Why are members of the public paying (in one form or another) for that training and regulation if it is not necessary? If it is necessary, why are paralegals being allowed to do the work in the first place?

The same point arises with the delivery of legal services which are not subject to regulation - e.g. giving advice on contract drafting. If it is considered acceptable (if not exactly desirable) for someone with no training and no experience and little competence to offer such services, why are solicitors and other regulated lawyers who offer the same services still subject to the same burden of regulation as those who practice in areas where there is a demonstrable need for training and/or experience and/or competence and/or trustworthiness?

It seems to us that the areas which are reserved to particular monopolies (conveyancing, probate, conduct of litigation etc.) need to be examined closely to see if there is genuinely a good case today to continue such monopolies.

Finally on this point, we would just flag that the lack of coherence and consistency is so entrenched that it extends down to even basic things such as nomenclature. There is even widespread confusion about who can and cannot call themselves a lawyer, and which businesses can describe themselves as law firms.

Unlike use of the term “solicitor”, use of the terms “lawyer” and “law firm” are not regulated by statute. Nor is their use prohibited by consumer protection legislation or commercial laws relating to passing off (as is the case be use of the term “barrister”).

As a result, we see a distinct trend in paralegal practitioners deciding to call themselves lawyers and described their businesses as law firms. Their rationale is that the term “lawyer” merely describes someone whose sole or main activity is the practice of law, and that the term “law firm” accurately describes a commercial entity offering legal services. They therefore see no reason not to use these terms provided that the manner of use does not confuse people so that they believe they are retaining a solicitor.

In summary, a direct result of the current regulatory framework to acknowledge the growth of the unrelated legal sector is a widespread confusion about who can do what, when and on what basis. We see few signs of the current system being interested in tackling this issue. On the few occasions when they have addressed the issue (e.g. on the issue of will writing), they have failed to look at the matter objectively. Instead they have all seen it through the prism of trying to shoehorn the issue into the existing regulatory system. This leads us on to our next point:

4.3.   The current regulatory framework prioritizes protection of the status quo even when detrimental

As the current framework is based on and around distinct practitioner groups, it is not surprising that those groups will instinctively (and quite naturally and understandably) seek to not only survive, but grow.

We fear that many of the front-line regulators lack sufficient distance from the constituency they are regulating. As a result, we are unaware of any of the frontline regulators (Solicitors Regulation Authority; Council for Licensed Conveyancers; Bar Standards Board; etc.) ever questioning whether it would be in the interests of the sector, consumers and society at large for their fiefdom to disappear or merge with others.

Instead we see what appears to be competition amongst them often focused on winning a larger slice of the regulated pie. A good example of this relates to rights of audience in court. Traditionally right of audience was a monopoly enjoyed by the Bar. However such right is perceived as both lucrative and prestigious. Accordingly, since the Legal Services Act 2007, there has been much jockeying between regulators to secure enhanced rights of audience for their various constituencies.

Whilst no doubt great news for those regulated practitioners who were successful, we think it demonstrates a failing of the current system. The priority seems to be on dividing up the prize and not asking hard questions about whether or not such a monopoly should continue to exist at all.

We find it hard to believe that a regulatory system which had justice, access, fairness and consumers as its priority would ever allow a situation where it was deemed better that someone be completely denied the chance to take or defend a case in court rather than potentially be supported by a legal practitioner who did not meet a set of standards which, for the most part, are completely irrelevant to the presentation of a case in court.

We find perverse the argument put forward by some regulated practitioners that they are acting in the best interests of consumers by denying them access to the courts at all if they cannot afford regulated practitioner fees - for fear that they may get someone who is affordable but not quite as all-round excellent as a regulated practitioner.

We believe that such a fallacious argument (all the more remarkable given that many of the same practitioners decry the phenomenal growth in litigants-in-person) would not stand if the regulatory system were not so beholden to entrenched interests.

4.4.   The current regulatory framework restricts the usefulness, accessibility and affordability of legal education

Legal education is a very important element of the regulatory framework as it relies upon the obtaining of mandatory qualifications as a test/proof of competence/fitness to practice.

As the regulated legal sector has grown, so has the industry providing mandatory legal education. It is now an extremely large business - sufficiently large to influence the regulatory debate.

For significant regulatory change to successfully occur, there will have to be a review of legal education (we note the recent publication of the Legal Education and Training Review (LETR) – a joint project of the Solicitors Regulation Authority, the Bar Standards Board and ILEX Professional Standards. We do not consider that report to have been sufficiently independent or objective to be of much help in this matter).

It is our view that there is insufficient provision of affordable, accessible, relevant and helpful legal education in the UK. What there is instead is an over-supply of trade-related courses designed to meet the needs of specific groups of practitioners, and which serve to perpetuate barriers to entry.

As a result of their mandatory nature, such courses tend to be extremely expensive, inflexible, backward-looking and exclusive. We think that a more accurate name for many university law schools would be solicitor-training schools. As a result, all the other needs for gradual-level legal education training in the UK are largely ignored.

4.5.   The current regulatory framework has become a walled-garden where regulators only engage with other regulators

Perhaps inevitably, a regulatory system revolving around the needs and desires of various groups of practitioners has ended up as a walled garden where the regulators seem only interested in talking to the regulated.

The unfortunate impression given is that unregulated matters and practitioners are not just secondary (which is legitimate), but simply irrelevant. On the rare occasions where the unregulated sector has been considered by the regulators, the matter has been framed in terms of expanding the regulated sector and dividing up the new regulated business amongst existing regulators. The impression, sadly, was not than the regulators had a genuine debate about the needs of consumers and society at large.

On this point we must distinguish between the Legal Services Board and the front-line regulators. Whilst the latter can legitimately claim to be focusing on their core functions, the Board has an obligation to genuinely interact with the entire sector, not just front-line regulators. It does not appear to be doing this.

 

4.6.   The current regulatory system has failed to adequately address the issue of diversity

Despite significant focus on the issue of practitioner diversity, the unfortunate reality is that the regulated profession is nowhere near diverse enough. It is very telling that when we make presentations on paralegal career options in university law schools, all too often those attending are BME students, mature students and those from working class backgrounds.

We acknowledge that there is at least some truth in the arguments that the current educational system requiring as it does significant amounts of mandatory training (mandated that is by regulatory requirement), works to deny access to many whom otherwise have the requisite talent.

Regulated legal practice continues to be the preserve of the already affluent. Diversity is much wider in the unregulated sector.

4. Conclusions

• Many of the systemic problems in the current regulatory framework stem from the outdated focus on job titles (solicitor, barrister et cetera) - even when the marketplace shows that those distinctions are becoming ever less relevant
• There is significant consumer (and official) confusion about the different types of legal service provider, their roles, responsibilities and the consumer protection they offer
• The current regulatory system has perpetuated the “silo mentality” of different groups of regulated practitioner keen to protect their commercial position. This has inhibited innovation and pushed consumer protection to be a lower priority than it should be
• Historically, regulated lawyers were the legal sector. Now they merely constitute a part of it. Current trends indicate that they are likely to constitute a minority part of the sector very soon, if that is not already the case (at least in terms of the number of practitioners). The current regulatory system is not well equipped to deal with that sea-change. Existing conflicts of interest will only grow
• The support ecosystem that has built up around the current regulatory scheme, such as legal training also needs to be considered because it is shaped by the existing regulatory framework, to the detriment of the unregulated sector and innovation generally
• The current regulatory framework embraced the somewhat arbitrary nature of existing monopolies, regulations, traditions and precedent. This is led to inconsistencies and widespread confusion. What needs to be regulated and what needs to be looked at independently. It cannot be left to those organisations whose continued existence arguably depends upon maintenance of the status quo
• The lack of coherence and consistency means that the level of protection varies dramatically depending upon the practitioner doing the work. This focus on the supplier warps the debate. The starting point should be the work done and the needs of the consumer

5. Recommendations

• Start by independently reviewing what legal sector activities need to be regulated in today’s world and why
• Determine what specific protections/competencies need to be in place for each of those regulated activities in turn
• Allow anyone to provide those services provided that they can provide the required protections and meet the stipulated competencies
• Refocus the Legal Services Board so that it is genuinely responsible for, and interacts with, the entire legal sector, not just the regulated element
• Independently determine what the broader legal sector’s educational requirements are, and to the extent possible, encourage publicly-funded legal service providers to focus on more than just training solicitors
• Allow consumer choice, and respect consumer intelligence. Many regulations (such as the right of audience monopoly) seem to be based upon an assumption that consumers are unable to take sensible choices and so must be protected from themselves
• Acknowledge that diversity will only genuinely blossom in the legal sector when the unregulated sector is formally recognised and given a formal role in the legal sector

Yours sincerely,

David Holland - Chief Executive