Utah turns US reform party into a carnival

Less than a year ago the Utah State Bar asked the State Supreme Court to charge two of the state's leading thinkers on regulatory reform to organise a working group to make recommendations about optimising the regulatory structure for legal services in 'the Age of Disruption'. The task force is jointly chaired by Supreme Court Justice Deno Himonas and John Lund (past President of the Bar). They pulled together an impressive group of public policy makers, academics and lawyers including Gillian Hadfield, Margaret Hagan, Lucy Ricca and Gordon Smith - the list goes on. With such an impressive cast list it is no surprise that the task force has produced properly radical reforms. I encourage everyone to read them.

Back in late July I wrote about California publishing its proposals to allow fee sharing, non lawyer ownership and greater use of non-lawyer and technology to deliver legal services. In that blog I ran over the emerging ideas in Utah and Arizona and some of the other drives behind reform in the US.  What is clear is that the pace of change in the US is going to be quick. I expect Arizona to make its proposals by October. And others will have no choice but to follow. It may have taken the US far too long to come to this party but it is now turning into a carnival.

The UK's Legal Services Act 2007 and subsequent redesign of regulation by the Legal Services Board and the Solicitors Regulation Authority was driven by a desire to increase competition across the legal market. The UK market was already very liberal compared to the US. There is no unauthorised practice of law provisions and just six activities are reserved to regulated lawyers. There were already regulated individuals beyond traditional solicitors and barristers; the advertising restrictions were lifted last century; and bans on most referral fees were removed 15 years ago. There has long been a thriving legal market beyond the reach of the legal regulators - writing wills, representing the poorest in social security tribunals and offering other 'access to justice' services. And at the other end of the market it is (at least until Brexit happens) easier for a UK lawyer to work across 28 EU countries than it is for a US lawyer to work across different states in the same country. This all matters when comparing US and UK regulatory reform. The UK started from a different place and most of its reforms were aimed at increasing competition across the legal market. Access to justice has been one part of that, whereas in the US, and explicitly in Utah, closing the access to justice is the single most important driver.   

The Utah task force has bought together the key research from across the US and the world regarding the justice gap. What is clear, again and again, is that the legal system as currently configured, simply fails to meet the needs of low income households and indivudals in the US. That is no surprise to anyone that has been looking at legal needs surveys over the last 15 or 20 years - they all tell the same story. But I really like the use of the research by the task force. It builds a global picture of access to justice issues and gradually narrows down to specific issues within Utah. For example it notes that "at least one party was unrepresented throughout the entirety of the suit in 93% of all civil and family law disputes disposed on in the Third District in 2018'. Pro bono, legal aid and minor regulatory reforms have not solved the problem and the report notes that in an age of technological disruption we need to think differently to close the justice gap. Instead of regulating lawyers it proposes regulating legal services. A short but radical (and in my view correct) proposal.

Two different tracks of reform are proposed. One is the loosening of restrictions of lawyers so that they can compete and innovate. They have been using design thinking (led by Margaret Hagan) to imagine these rule changes. Lawyer advertising, referral fees, non lawyer ownership and fee sharing are all in the frame for radical liberalisation. 

The second track is the creation of a new regulatory body. They have asked themselves if room should be made for people other than lawyers and law firms to provide legal services and answer that with an unambiguous 'yes'. A new regulator, focused on a risk-based analysis of legal services rather than title will bring new providers into the legal market. Lower barriers to entry, less restrictions on how they practice and how they package those services should support innovation as well as increased supply.

The new regulator will start with a regulatory sandbox. This is a space for lawyers, law firms and legal business to work with the regulator to trial or pilot new services or new ways of working that might offend the current rules but appear on the face of it to be safe. Both sides learn, through engagement and evidence gathering and data sharing, the right way to regulate new services. It is a great way to remove regulatory restrictions and overcome the persistent problem of regulators inhibiting innovation. The SRA started this in the legal sector a few years ago - almost by accident at first when it used the method to work with accountancy firms to work out how to regulate multi disciplinary practices. The SRA formalised this with SRA: innovate and has gone even further with the launch of the Legal Access Challenge.

The first track is hugely important. Lawyers and law firms have to be able to compete with each other and with the new business that are emerging and now to be encouraged. But the second track is the really radical one. It recognises the importance of rethinking regualtion so that it is proportionate and targeted. Underlying all of this is a recognition that an independent regulator will focus on protecting the public from unacceptable levels of risk and harm rather than maintaining the status quo.

These reforms could deliver everything the UK has spent years building. The LSB and SRA will need to speed up further reform if they want the UK to retain its world leading status and competitive advantage in legal services.

I am very confident that these proposals will improve access to justice, not just for the poorest, but also for the middle classes and small business. This is about much more than ABS: it is about regulating for the 21st century, regulating for the public interest, and accepting that limited access to legal services is simply not acceptable in a modern democracy.

Deno Himonas and John Lund should be applauded for their leadership and vision. How long before New York has to follow their lead?