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The British Invasion: Legal Services Regulation Edition

Bringing British things across the pond is a hot Canadian trend. Prince Harry and Megan Markle are now our most famous immigrants. A Canada-U.K. free trade deal has apparently become a post-Brexit priority. And the Downton Abbey movie has raked in hundreds of millions of dollars from my parents and their friends.

While we’re at it, we should copy at least three aspects of legal services regulation as practiced in our erstwhile mother country. The U.K. has swept away many of the outdated and unnecessary restrictions on legal services that we still cling to. The payoff is better access to justice, without any apparent diminution in quality or ethics.

1. Licensure In its Place

Throughout Canada, it is generally illegal for anyone not licensed by a law society to provide legal services of any kind. (The very narrow exceptions almost all pertain to circumstances in which fees are not being charged). If you lack a license, even offering the simplest legal advice in exchange for a fee can earn you a prosecution for the “unauthorized practice of law.” Whether there was any deficiency whatsoever in the advice you gave is legally irrelevant.

In England & Wales, only services specifically enumerated by the Legal Services Act are reserved to licensees. Reserved activities include appearing in court, issuing legal proceedings, and the administration of oaths. However everything else – including giving legal advice and representing people in negotiations and mediations – is not subject to licensure. That does not mean that these activities are unregulated: clients are protected by various consumer protection statutes, as well as common law remedies in negligence and contract.

Of all the different ways to regulate services, licensure is the most restrictive. It requires people to surmount a lengthy and expensive series of hurdles before they can help others. Licensure guarantees quality, but at a very high cost: it restricts competition, drives up prices, and suppresses innovation in the market. The English approach represents a more rational balancing of licensure’s costs and benefits.

2. Lowering the Hurdles

It remains true that the large majority of legal services in England & Wales are provided by licensed lawyers. However the path to licensure is significantly less onerous than it is in Canada. On this side of the Atlantic, becoming a lawyer usually requires 7 years of post-secondary education, and $100,000 or more in tuition. We have very few law school spots per capita, so it’s also very difficult to get into law school. (It’s an even harder road for those who study abroad, and must spend many years taking NCA exams in order to be qualified here).

In England & Wales, qualifying as a solicitor requires only one three or four year undergraduate degree, within which two years must be dedicated to legal studies. Law programs are generally no more difficult to get into than other undergraduate programs.

Fewer mandatory years of education means that people with lower family incomes can become lawyers. It also means that those who do qualify carry less debt – because they have paid less tuition and foregone fewer years of income. They are therefore able to charge lower fees.

In theory, the advantage of our system is that, because our new lawyers have spent longer in university — even studying topics that have little or nothing to do with law — they are somehow better lawyers. The problem with this theory is that there is no evidence whatsoever supporting it. It is time to undertake a thorough, empirical scrutiny of all of the barriers to entry that stand between (i) the numerous Canadians with unmet legal needs, and (ii) the numerous people who would like to help them, but cannot make it through what is among the world’s most difficult set of hurdles to entry to the legal profession.

3. Freedom to Collaborate

Throughout Canada, firms offering legal services must be completely owned by and controlled by lawyers. You can offer legal services to the public through a corporation, but lawyers must own all of the shares. In some parts of the country you can technically form a “multi-disciplinary partnership” (MDP) with non-lawyers. However the rules governing these ventures are so restrictive that MDPs are very rare in the wild.

In England & Wales, lawyers are allowed to practice in a wide variety of business forms, including closely-held corporations with non-lawyer ownership, publicly-traded corporations, and true multi-disciplinary partnerships. Our intolerance of these alternative business structure (ABS) firms is based on the idea that lawyers’ pristine and altruistic ethics will be corrupted if they are exposed to rapacious businesspeople from lesser callings. This might have been remotely plausible before 15 years of experience in UK and Australia has shown that properly regulated ABS firms pose no greater risk to the public than normal firms do. This experience has also shown that many accessible, innovative ways of practicing law are unlocked if lawyers are allowed to collaborate outside the guild.

Regulation can be very difficult, when new issues arise and decisions must be made quickly without much guidance. However in other cases, other countries very similar to our own have blazed a clear path forward. We don’t need to speculate about the consequences of liberalizing legal services regulation; we need only glance back across the pond to see a better future.

Comments

  1. Hi Noel,
    Sorry but things are not quite as you state in England. If you get the Law Society Gazette of England and Wales, it carries practically every week stories about the happening of the many problems that the sensible anti-ABS and anti-overbearing government regulation people easily predicted and warned against. The changes in England will be regarded by historians as the worst blunder England, and anyone else doing the same, ever made concerning the delivery and regulation of legal services.

    There is a huge amount of consolidation going on there which will lead, inevitably Noel, to less competition and higher prices. How do you lower prices when you add previously non-existent returns to investors to the pre-existing office overheads and lawyer take-home pays? A third major area of overhead where only two existed before? And no, it is not the bulk of the profession doing this. Remember, average lawyers, especially those in private practice, will not retire in the same security as average government workers. Increasingly, the new wealthy lawyers are the ones greedily selling out the independence of the legal profession egged on by a bureaucracy that would dealy love to weaken the independence of the one profession skilled enough to stand up to government.

    Whenever an English firm lists on the exchange or swallows up another firm, the interviewees at the firms blather on about how much money the deal made for their partners and how the influx of cash will allow them to continue the frenzy of consolidation. Never ever do the interviewees talk about lower prices to the public. Never. But then lower prices to the public was never the real focus of ABS. That was just a smokescreen for anti-public interest greed.

    Further, regulation of legal services in England and Wales is now top heavy with layers and bureaucrats, very few of whom have come up through the ranks of private practice. Thus, they know precious little about the realities of practice and thus regulate lost in a cocoon of ignorance, beholden to governments when regulation of legal services should be as independent from government as humanly possible.

    Further, there as here, the bar most under attack by the regulators is the conveyancing bar whose fees are among the lowest of any legal services being offered, and paid by people who, on average, are forking over half a million pounds to buy an asset.

    Noel, you and I have had these back-and-forths for years now and you are immovable. I do not mean this to be derogatory as I consider you to be a thoughtful and bright person, but your thinking is informed by the pond you swim in. In that, you are a perfectly normal person and understood as such. But I am afraid you will never understand where I am coming from until you leave the cushion of guaranteed government money showing up in your bank account every second Thursday and open your own small firm in a modest office and become responsible for someone else’s salary and other overhead with no idea what you are going to earn from one month to the next, ie, the real, not theoretical, world. Sorry to say.

  2. P.S. Every advantage touted for ABS is achievable with selling out our independence. And the harms of ABS take time to become ever more apparent, but they are apparent and will worsen. The laws of economics and self-interest guarantee that.

  3. Noel, just to take some of your statements apart:

    You say “Licensure guarantees quality, but at a very high cost: it restricts competition, drives up prices, and suppresses innovation in the market. The English approach represents a more rational balancing of licensure’s costs and benefits.”

    With the poor quality of Canadian legal education (it teaches next to nothing needed in private practice – the destination of a large majority of the students, the virtually non-existent failure rate, and mark creep, Canadian licensure is no guarantee at all of quality, but it is better than not having it all. It should be vastly improved though.

    Lawyers are ferocious competitors with each other. In real estate law alone, in Ontario there are over 8,000 competitors including ones that advertise heavily, try to practice all over the Province, and deliver poor services that better lawyers have to compete with. Most real estate lawyers deliver high-quality services at very affordable fees leading to shaky retirements. Thanks to those very numerous competitors, real estate fees have not risen against inflation in over 40 years. That level of competition disappears within six months (the consistent US experience) of ABS and other colossal stupidities being allowed to pretend to compete with (where ‘pretend to compete’ actually means ‘destroy’) the real estate bar.

    You say “2. Lowering the Hurdles”. What you really mean is Lowering the Standards even more than they have sunk in the last 25 years.

    You say “We have very few law school spots per capita, so it’s also very difficult to get into law school. (It’s an even harder road for those who study abroad, and must spend many years taking NCA exams in order to be qualified here).”

    Actually, we have a gigantic number of lawyers per capita. In Ontario, it is nearly identical to the American miasma of public misery caused by far too many lawyers per capita – a phenomenon that almost exactly parallels the rise in self-represented litigants, ie, more and more lawyers and fewer and fewer affordable barrister services. The twin phenomena are inextricably related but but few analysts take the trouble to find out why.

    Law School is not hard to get into in Canada (and, once in, it is dead easy to graduate from). Far from it. In the words of John Grisham, law school has become, too often, the great babysitter for directionless post-grads. When 38% of all undergraduates are getting A averages, an A average is nearly worthless as a predictor of future capability even as it allows entry into standard-lowering law schools.

    As for the bulk of Canadian students who go abroad for law school, they are the ones who, unless they got a scholarship to Yale or somewhere, could not even meet the low standards of Canadian law schools. U of Leicester Law School takes Canadians (who make up 40% of their student body) with B averages (now below average undergraduate marks) and no LSATs, ie, no demonstrated affinity for the kind of thinking that will be useful in a law career. There is no way I am ever going to hire a graduate from the U of Leicester Law School because the admission pool consisted of substandard students (for law; they may be great at many other things). The odds of hiring a dud are too great. Sorry to say. Btw, Leicester is not admitting substandard students out of the goodness of its heart. It’s all about money for Leicester. Full stop.

    You say “It is time to undertake a thorough, empirical scrutiny of all of the barriers to entry that stand between (i) the numerous Canadians with unmet legal needs” [and having those needs met].

    It is not barriers to entry that are causing many legal needs to be unmet. First, there is no A2J barrier on the small-firm solicitor side of the bar. Second, virtually all unmet legal needs are on the dispute resolution side – a side that has been insane for 800 years and counting. Fix the Ruinous Time and Cost of Litigation and you will eliminate 99% of all A2J issues. The fix is not difficult to envision. All that is lacking is political will.

    If you want to bring down the cost of law school tuition, the first and best way is to reduce the remuneration packages of the career professors, and reduce the number of career professors. Hire more local lawyers to teach more practical courses. The local lawyers come far cheaper than the career professors and they more useful things without the all-too-prevalent sickly gloss of left-wing fantasy-world lunacies. The second way is to force the central admin offices of the universities with law schools to stop using law schools as cash cows to fund other areas of the university. Those two steps would lower tuition considerably.

    You say “3. Freedom to Collaborate”. You really mean “Freedom to be, increasingly over time, taken over and dictated to by the venture capitalists and the government bureaucrats while causing the cost of legal services to rise to account for the heretofore non-existent very expensive third level of overhead (the returns to the investors)”.

    You say, “other countries very similar to our own have blazed a clear path forward. We don’t need to speculate about the consequences of liberalizing legal services regulation; we need only glance back across the pond to see a better future.”

    They have not blazed a clear path; they have created a mess with a bloated up bureaucratic structure. Both the mess and the bloat are badly hurting the entire system and will worsen over time. It is impossible that the situation will not worsen. Maybe if you “glance back” you will see a “better future”, but you should not advocate the worst idea to hit the legal profession in 1,000 years on the basis of a shallow glance. What is needed is a very in-depth analysis founded on deep understandings of human nature, the power of money, basic economics (a mystery subject to almost all people deriving their remunerations from governments), history, and so on.

    Cheers.

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