The urgent need to think of a new regulatory future

It is a miracle of timing that the collapse of the PM Law group has coincided with the review announced last week of the Legal Services Board. The collapse of the PM Law Group is horrible and heartbreaking, given the suffering and loss for clients and staff. But it is lucky that we are now able to give our views on the LSB.  

Solicitors are in the bizarre position of paying for their own regulation – both the Solicitors Regulation Authority and LSB – and also paying for the mistakes of those regulators, while having little or no say over the regulators’ day-to-day work. Until recently, we were in the position of being their whipping boy. Of course the balance has now shifted a bit, after a series of law firm disasters over which our regulators have seemingly had no control.

It is not quite the case of taxation without representation, since there is a handful of solicitors on the boards of both the SRA and the LSB, doubtless all excellent people. But, despite this, both boards are in the position of having little direct incentive to avoid mistakes. The cost of correcting mistakes does not come out of the boards’ own pockets, but out of the pockets of the wider profession. The boards are always spending someone else’s money. Surely we have learned enough after centuries of studying government and human behaviour to know that direct accountability is the best recipe for wise public decisions. Yet the chair of the SRA not only doesn’t have to pay for the recent consequences of her tenure; she is actually still in in control of the body.

I try to read widely about developments in other countries. I might be wrong, and am happy to be corrected, but I am not aware of any other developed (or other) country which is in our position, with a succession of failure after failure of regulated law firms, causing such widespread damage. What is it uniquely about our regulatory position that has caused this to come about? Is it the regulatory framework, or the content of the regulations themselves, or a mixture of both?

It is beyond time that we think about these things. The structure proposed by the Legal Services Act 2007 is clearly not working. One way of testing that is to ask: is PM Law the last of the collapses? We don’t know. There appears to be a regulatory weakness around accumulator law firms, or at least some of them. But where are the solutions from our regulators to reassure us that the problem is now fixed?

The questions posed in the consultation over the functioning of the LSB do not include one which asks whether the LSB should continue at all. Wouldn’t it have been wiser of the government to ask at least one question as to whether we think that a different regulatory arrangement would work better, and if so, what it is?

There are questions like whether the LSB’s statutory objectives reflect current needs and priorities; whether the LSB is sufficiently engaging with its stakeholders; and whether it holds frontline regulators properly to account. I suppose it is only in answer to questions 9 and 10 (out of 14 substantive questions) that some of the issues raised above can be aired:

• What evidence is there that the LSB’s oversight has had a positive impact on the sector, or improved outcomes for consumers of legal services?
• To what extent do you feel the LSB demonstrates that its oversight delivers positive outcomes and provides value for money?

Personally – and this is a personal view, and (for the avoidance of doubt) not the view of the Law Society – I favour new thinking. I welcome discussion about what a new structure might look like.

I can see, whether I agree with it or not, that the days of the profession regulating itself will not return, at least not yet.

Given that our jurisdiction’s legal profession is so fragmented (barristers, solicitors, legal executives, and so on), I can also see some merit in there being a structure over the current front-line regulators, to provide a horizontal and long-term view across all of legal services.

Maybe, to avoid the current fragmentation, the answer is to abolish the current front-line regulators, and replace them with a single regulator for all legal services, with a brief to regulate also legal services provided by AI on the same basis as it regulates people – and no super-regulator on top?

Or maybe, if fragmentation continues, the answer is to bring together representatives of the front-line regulators under a judge as chair – even a solicitor judge! – with suitable experts included, such as on the regulation of AI?

There are doubtless other possible and better solutions. But, in my view, it is unacceptable to continue expecting solicitors to pay for a model with such a record of failure, and over which they have no control.

Jonathan Goldsmith is Law Society Council member for EU & International, chair of the Law Society’s Policy & Regulatory Affairs Committee and a member of its board. All views expressed are personal and are not made in his capacity as a Law Society Council member, nor on behalf of the Law Society