Column

Legal Regulatory Reform in Britain and the US: Will History Repeat?

A reporter called me the other day with a perfectly simple question about the potentially enormous changes to legal regulation on the way in California, Utah, and Arizona.

Specifically, she noted that England & Wales brought about significant changes to its legal regulatory system eight years ago, yet not much has changed in those jurisdictions. Why do I think that these possible US reforms would yield a different outcome, especially with regard to access to justice and innovation?

As other reporters have learned to their chagrin, I’m incapable of giving a nice concise answer to perfectly simple questions, and I replied with a lengthy discourse on the subject. After some further discussion, I sent her a much shorter summary that she could actually use in her story.

But she also graciously agreed that I could inflict the longer response on you fine people here at Slaw. With some edits and modifications, here it is.

It’s wise to be skeptical that these regulatory reforms would automatically trigger a wave of change to legal regulation in the United States. After all, the introduction of the Legal Services Act 2007 was hailed by many people, myself included, as a watershed moment in the history of the legal profession, a trigger for what would surely be cascading reform and liberalization of legal systems everywhere.

Well, of course, the sky did not in fact fall, Pandora’s Box did not spring open, and an access-to-justice paradise did not unfold in England & Wales following the authorization of alternative business structures.

So the question is whether what happened in Britain can be relied upon as a blueprint for what likely will happen in these three American states this year and next. To my mind, anyway, there are enough differences to suggest that events might follow a different path in the US.

Let’s start by noting that the reforms introduced by the Legal Services Act 2007 were mostly focused on restructuring the sclerotic regulatory framework for legal services there. But reform efforts were also premised on this objective: To “promote competition, innovation and the public and consumer interest in an efficient, effective and independent legal sector.” It was felt at the time that lawyers were insufficiently incentivized to be fully responsive to their clients — basically, that they were complacent and often indifferent to client service.

The resulting ABS reform — allowing law firms to bring in non-lawyers as equity owners or sell shares in the firm on the stock exchange — was aimed at encouraging competition for and innovation among lawyers and law firms.

Looking back now, that might seem like an odd way to go about it. But keep in mind that this all took place in the mid-2000s, at the height of the financial services bubble that was, among other things, transforming London into a global financial colossus. These were also the latter days of Tony Blair’s government, which while ostensibly a Labour administration, was nonetheless very free-market in its philosophy.

So these reforms were not really geared towards expanding access to legal services for the poor or middle-class. This was about bringing “financialization,” for lack of a better term, to the English and Welsh legal profession. Because it was clearly working so well in every other sector.…

Now, in the result, many innovative new businesses did launch and take advantage of reformed ownership rules. The Legal Services Act was at the very least a modest success, in many ways. But a common criticism of these changes today is that they have done almost nothing to improve access to justice in England & Wales.

But I would submit that they were never really meant to. The law firm ownership reforms contained in the LSA were intended as a market mechanism to jolt lawyers out of their complacency and make them more competitive, innovative, and responsive. The A2J situation in Great Britain in the mid-2000s was not great — indeed, it wasn’t great anywhere. But it was not widely regarded as an out-of-control crisis.

Fast-forward 10 to 15 years, and a full-blown A2J crisis is exactly what we have. And while it’s easy to overlook now, it’s important to appreciate just how fast and how completely accessibility to the justice system has collapsed during that time.

When I first started giving presentations in the early 2010s, I warned audiences that the ratio of represented-to-self-represented litigants, which traditionally was, I don’t know, maybe 8 to 1 or higher, was fast approaching 50-50. If we reached or passed that threshold, I said, we’d have an actual paradigm shift: not being represented in court would become the default norm, while being represented would become the exception. And where are we today? In family law and individual/consumer litigation in the US and Canada, that ratio is now probably closer to 1-to-8.

So the world that Sir David Clementi saw in 2004 and the world the California State Bar sees in 2019 are very different.

  • There are about 250,000 lawyers in California, as opposed to 140,000 solicitors in all of England and Wales. The size of that market alone gives it a much shorter onramp to achieving critical mass and momentum.
  • There is an unbelievable amount of money roaming around the United States, especially Silicon Valley, looking for investments — this is the state that gave us the Juicero, after all. Modern entrepreneurialism makes its home here, for better and worse.
  • Technology can deliver legal services today in ways that no one in England & Wales seriously thought possible in 2007. Just some of the companies founded after that date are Neota Logic, LogikCull, Ravel Law, Premonition, ROSS Intel, Diligen, and Kira.
  • The public mood is very different: populist, anti-authoritarian, distrustful of institutions, and resentful of elites. All three regulators in the American West are squarely focused on the crisis in the ability of ordinary people to get the legal services they need.

There are also different obstacles to reform, of course. The British legal profession didn’t love the prospect of ABS, as I recall, but there was no organized swell of outraged protest at the suggestion that non-lawyers might deliver legal services.

There might not be one in the US, either, but the odds are much more heavily in favour. The American bar is huge, rich, litigious, and highly protectionist. Judges, all former lawyers, are likelier to be sympathetic to the bar’s outrage and to use their judicial and regulatory functions to block or slow reforms. Lawyers make up a much higher percentage of legislators in the US than elsewhere. If the organized bar really decides to defeat these reform efforts, I wouldn’t bet against it.

But as I say, the public mood is different. In the current political climate, it would not be unnoticed or welcomed if the legal profession were to lead a charge against the wide availability of cheap online legal assistance. Lawyers are heavy contributors to election campaigns, it’s true; but Silicon Valley, banks, insurance companies, and other entities that would like a piece of a $300M legal market — they contribute more.

And if there’s one final factor to consider, it’s this: What is present in the US in 2019, which wasn’t present in England and Wales in 2004, is an entire generation of over-indebted, under-employed young lawyers who have no reason to defend a legal profession and legal job market that has failed them.

Maybe the Boomers can launch one last desperate attempt to keep the legal market the way they like it and the way it’s always been, and maybe they’ll succeed. But they’ll succeed only in winning the battle. They will not win the war.

So, long story short (too late): It’s smart to be skeptical, and I agree that change won’t happen overnight or as quickly as some of us might like. But times, and places, are different. History rhymes, to unwind the old saying, but it never repeats.

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