Canadian reformers take the stage

The Law Society of Ontario has just launched proposals for a regulatory sandbox. The sandbox will allow approved providers of direct-to-consumer legal tech tools and services to operate in Ontario, subject to conditions and ongoing regulatory supervision. Many of these kinds of services are currently subject to regulatory uncertainty or prohibition. Sandbox participants will receive permission to offer their services to the public for an agreed period of time, during which they will comply with certain operating conditions and report data about their services to the Law Society. At the end of a participant's operating period in the sandbox, the Law Society will evaluate their performance and potentially issue a permit to continue providing the services on an ongoing basis. The sandbox is also intended to help the Law Society of Ontario identify broader opportunities to modernise its regulatory framework in order to facilitate the safe and effective provision of these kinds of 

services.

The Law Society of Ontario follows the Law Society of British Columbia who introduced its regulatory sandbox in the autumn of 2020 and The Nova Scotia Barristers’ Society that approved multi-disciplinary practices at the end of January. The Nova Scotia model allows lawyers and other professionals to form single entity practices that truly integrate law and other disciplines to better serve the public. It follows models for MDPs in British Columbia and Ontario – with Ontario reducing some of the regulatory burdens on MDPs earlier this year.

If the experience of England & Wales tells us anything it is that clients of all sorts from individual consumers, through small businesses and on to corporate and global clients, choose multi-disciplinary practices when they are on offer and value digital services. Multi-disciplinary practice isn’t really about the big four – though they could use the model to deliver more efficiently what they already deliver in Nova Scotia. This is about allowing local lawyers to collaborate and integrate with architects, land agents, financial advisers, burial and cremation services, counselling, parenting and many other professionals. In rural, poor and dispersed populations where law firms are often less sustainable, the opportunity to go past survive, and start to thrive by offering a wider range of services at lower costs can be the difference between access to justice and nothing. Partnering with non lawyers can be as important as using technology in meeting more needs.

The focus on sandboxes is understandable. It is a gentler way into reform – collecting evidence, testing before giving permanence and easier to limit the scope so that fewer traditional law firms are impacted. And modern regulators that already have liberal regimes – financial and legal regulators in the UK for example, do use sandboxes to support innovation and test new products and services. In fact I introduced the Solicitors Regulation Authority's sandbox, SRA Innovate, back in 2015. 

However, we need to be careful not to think that a sandbox solves everything. The reality is that much of what is being tested in sandboxes offered within illiberal regulatory regimes is far from innovative. Digital or online delivery of services is not an innovation: in most markets it is standard fare. In a hamstrung legal market most of the 20th century looks innovative. But Ontario is proposing a step forward and it would be churlish not to welcome it.

Encouraging the use of technology in meeting the legal needs of poor and excluded people, and even middle class citizens, is a good idea. But does it really need testing before it is allowed? Hasn't the pandemic taught us that almost everything can be done remotely? And hasn't the deployment of technology over recent decades taught us that while technology occasionally removes the need for people it more often enhances people led services, drives efficiency and allows lawyers to focus on the most difficult aspects of their work. An artificial boundary between technology services and people services is itself a new barrier. But the Ontario announcement does hint at some realpolitik that I hope its Benchers understand: that is that digital services are coming and regulators do not get to choose if they exist - their choice is simply if they want to regulate them. 

I hope that the limits and boundaries around the sandbox will help get it through lawyer led regulation in Ontario. One of those parameters is the focus of so many sandboxes on access to justice. That is important - the numbers of people not served by the existing legal market are stark across the world and there is no doubt that technology will be part of the solution. 

But while it is easier to sell reforms that focus on access to justice, we must not fall into the trap of thinking that legal services for better off people and corporate clients are in any way fully meeting the needs of those clients. Being able to afford expensive lawyers is not the same as having your needs met. If we look at the growth of alternative providers over the last 25 years it becomes clear that the traditional model law firm is not meeting all of the needs of corporate clients. Why then exclude these services from sandboxes? I can only think that lawyer-led regulators want to protect lawyer profits. That might be good for lawyers, but it is not good for the public. And realpolitik would be good with this issue too. Legal regulators from Ontario to California, Florida to Scotland, do not get to decide if alternative providers will exist. They already do and have done for over 20 years, including the big four employing hundreds of lawyers. The only real question for State Bars and Law Societies, is if they want to  regulate these business or leave them with a competitive advantage beyond their reach.

But today let us welcome what Ontario is doing as a step forward. And let’s ask what these Canadian shifts tell us about the regulatory reform agenda that is being debated across much of the legal world?

First, that the momentum is with reformers. With almost ten years of non-lawyer ownership behind it, England & Wales has a body of evidence that makes clear that non-lawyer owners do not produce greater risk than lawyer owners of law firms. The risks are different, but not that different. The greatest risks in all structures appear to remain misappropriation of funds and misusing power to undermine the rule of law – neither of which are new to those regulating lawyers. Canada is alongside the United States, following Australia and catching up with England & Wales in making change happen. That so many jurisdictions are now taking steps towards reform tells us that the debate is won – it is now about implementing change.

I can hear the cry of those that don’t want change that they are not yet convinced – well the news is that you don’t have to be. The vice like grip that a few protectionist and illiberal lawyers have had on their profession is weakening. The growth of in-house lawyers, lawyers in alternative businesses and lawyers that don’t see partnership as the only measure of success tells us that the monolithic model of lawyer practice is evolving and gradually regulators are listening.

Second, the international dialogue that is taking place among regulators, supported by judges, academics and forward-thinking lawyers that are leading wide-ranging debates, is overcoming local and inward-looking resistance. Increasingly I see that enterprise legal businesses – those that have grown up at the intersection of law and business over more than 20 years – are becoming more confident about using their voice to call out protectionism for what it is: putting lawyers’ profits before the consumer and public interest. And increasingly they are navigating regulatory systems to deliver what their clients want beyond the reach of those that seek to protect traditional law firms.

Third, the strict control over State Bars, Law Societies and regulators by local lawyers and attorneys means that change is still too slow and conservative. The Law Society of Ontario is taking a real and tangible step forward with these proposals, but they are building in serious risks of failure if they do not open up the sandbox to wider innovations from broader groups of lawyers, firms and entrepreneurs. Over the next ten years I expect to see more Law Societies and State Bars openly embrace their public interest obligations - not to represent lawyers interests but to regulate in the public interest. That will speed up reform. 

It is time for those in leadership positions of public interest regulators to ensure that the reforms do not put non-lawyer owners to higher proof of innovation, benefitting the public, and maintaining standards than lawyers are put when they open a law firm. And in considering reform the requirement for evidence should be applied to the current restrictions – if there is no real and tangible evidence of harm, then those restrictions should be removed. If that does not happen then sandboxes are just a place to distract those you won't offer full attention.

I applaud those in Ontario that have led the debate and made these changes happen. But we should not be satisfied with what is on offer. Citizens, small businesses and corporate entities deserve the same breadth of choice and innovation as the partners of law firms get when choosing the products and services that they spend their hard-earned money on. Ontario's convocation that will consider these proposals should make clear that this is only the start and demand more, faster.