A response to the Scottish Government’s consultation on legal services regulation

Written by Pauline and Laurence in December 2021, for submission to the Scottish Government’s Consultation on legal services regulation reform.

Written submission from Dr. Pauline McBride¹ and Dr. Laurence Diver.²

This submission is made in a personal capacity and not on behalf of any of the organisations with which we are affiliated.

We are pleased to have an opportunity to the make a written submission to the Scottish Government Consultation on Legal Services Regulation Reform in Scotland. Our submission is structured as follows: in Section 1 we highlight the importance of the independence of the legal profession for the rule of law; in Section 2 we express concerns about the assumptions and limitations of the consultation document and the Roberton report on which it is based; in Section 3 we flag concerns about funding for the Roberton and Market Regulator models; finally, in Section 4, we highlight the need for more careful consideration of the specific characteristics of legal tech and what these mean in terms of appropriate regulation.

Section 1 – Independence of the legal profession

Independence of the legal profession is crucial. It is “a fundamental principle recognised by the international community” and essential to “ensuring that the rule of law is upheld”.³ That means that the profession must be free from government interference, whether in shaping the practice of law or the business of law. That must be so even (and especially) where government, existing regulators, or commercial organisations see an opportunity to enhance economic growth in the ‘market’ for legal services by defining (or re-defining) their scope and the boundary between reserved and unreserved legal services.

The independence of the legal profession is not well-served by vesting regulatory powers in an organisation which sits outside the profession. For this reason, both the Roberton model and the Market Regulator model (Options 1 and 2) threaten the independence of the profession. We draw attention to the economic considerations at play in the specification of the powers for these regulators – notably, the power to monitor the supply of legal services and the power to act as an economic regulator.

Section 2 – Assumptions and limitations

The consultation document makes repeated reference to the rule of law. However, little consideration is given to the substantive requirements of the rule of law. There is no acknowledgement that the establishment of a regulatory body which is separate from the legal profession threatens the autonomy of the profession and so the rule of law. No attempt is made to explain how this dilemma may be resolved. We do not think it can be resolved. Primacy must be given to the rule of law and therefore to the independence of the legal profession.

We note that there appear to be three separate motivations for the consultation and the proposed reform. First, the Roberton report identifies various failures in the current regulatory regime, noting, for example, the complexity of the complaints system, a lack of clarity about when a practising certificate is required, and issues about pricing transparency. It does not explain why these issues might not be sufficiently tackled within the context of the current regulatory framework.

The second relates to the perceived need for a demarcation between the roles of the Law Society of Scotland as representative body on the one hand, and as regulator on the other. Such demarcation has already been achieved through the establishment of a separate Regulatory Committee of the Law Society of Scotland.

The third, and it seems to us, the main motivation for reform is economic. The consultation document refers to a ‘legal services market’ and the potential for ‘market failure’. It suggests the appointment of a ‘Market Regulator’. It appears primarily to be focused on competition and liberalisation.

Economic considerations such as opening up new markets, preserving market ‘share’, facilitating new business models or enhancing competition should not take priority over preservation of the rule of law. The latter is a fundamental value, underpinning all others in a democratic society. Indeed, it is our view that the rule and theory of law necessarily come prior to any consideration of markets. A narrative that, in effect, prioritises market considerations plays into an instrumental, neoliberal conception of law that puts money before social values, profit before professionalism.⁴ It is a narrative that favours the powerful: the big law firm, the global legal publisher, the provider of legal tech. This is not a neutral narrative, nor does it reflect the impetus behind the rule of law in terms of facilitating the holding of power to account.

The consultation document points to examples of regulatory changes effected in England and Wales, Australia and the state of California. It is important to put these developments into context, in terms of the legal and political cultures to which they pertain. For example, Sommerled and Hammerslev note that while the “common law world was the vanguard in embracing globalisation and neoliberal policies”, Scotland has on the other hand “successfully resisted the extremes of liberalisation adopted in England and Wales”.⁵ The consultation document outlines the nature of the current regulatory regime in England and Wales. It makes no attempt to evaluate the impact of that regime, much less to justify its appropriateness for the Scottish legal system.

Relatedly, the consultation document appears to assume that the legal services market is broadly comparable to other market sectors. It is not. Precisely because of the significance of the rule of law for democracy, for rights, and for the goal of justice, it is not possible or desirable to transpose regulatory models suited to other economic sectors into the legal services market. While other sectors may have moved towards a risk-based regulatory approach, it is not apparent that such an approach is appropriate for the legal profession, and the consultation document does not demonstrate otherwise. More fundamentally, insofar as there is a legal services market, it exists to facilitate justice and the rule of law, and thus it must reflect an underlying normative commitment that is not present in other sectors.

The Roberton report and the consultation document draw support from a study which the former describes as a “small qualitative Consumer Study on Scottish Users of Legal Services (2018)”. This study, carried out by the Scottish Government’s User Research Team, was based on interviews with 12 participants. This is a tiny sample size relative to the adult population of Scotland, most of whom will, at some stage, have reason to seek legal advice. We acknowledge that insights may be drawn from the research but it cannot be considered representative of the experiences of ‘consumers’ of legal services in Scotland.

Section 3 – Funding of Options 1 and 2

The consultation document states that under each of Options 1 and 2 the new body would be funded through a levy on the legal profession and that the cost to the profession would be “intended to be no more than the current system.”

Option 1 anticipates that the legal profession will fund both a regulator and a professional representative body. It supposes that the latter should play a significant role in consulting with the regulator, and would have a role in “providing CPD (approved by the regulator), provide professional services and guidance, issue publications, and be able to seek to influence law reform.” This tends to suggest that overall the costs to the profession will increase.

In relation to Option 2, it is difficult to know why, in principle, the cost of the levy should not be significantly less, since the remit of the proposed new regulator is narrower than that of current regulators. In practice, we anticipate that the setting up of a new regulatory body will result in increased costs for the profession.

Section 4 – Legal Tech

We are particularly concerned about this section of the consultation. Like the Roberton report, it warns against the “creation of barriers to new legal services founded on legal tech through over specification of regulation in legislation.” It appears to favour a light touch approach to regulation and to favour the use of regulatory sandboxes. Here again we see a market-oriented approach.

The consultation document, like the Roberton report has little to say about the range and diversity of legal tech that is either presently available or under development. For example, neither makes any reference to technologies that employ machine learning, natural language processing or statistical analysis (‘data-driven’ legal tech). Neither conveys any sense of the various legal domains in which these technologies are or might be employed, and how. There are no references to systems that offer to prepare first drafts of documents, carry out contract analysis and reviews, secure compliance with regulatory instruments such as the GDPR, or predict the outcome of court cases through analysis of case law, judicial behaviour, or past practitioner performance. The consultation document appears to take it for granted that legal technologies present only opportunities for the development of legal services; there is no recognition that use of these technologies to carry out (or assist in carrying out) ‘law jobs’ may present subtle but profound threats to the rule of law. In terms of how such technologies are likely to impact real-world practice, the well-known risk of automation bias must be considered. The possibility that lawyers become deskilled through use of such technologies, or fail to appreciate the assumptions of these systems and the design choices on which they are based, is less well recognised. For example, some of these technologies presuppose and play into a formalist conception of law as a set of rules to be applied mechanistically without regard for the particular case, the individuals involved, and the overarching claims of justice. Others embed in their designs the assumption that these essential aspects of the law can be represented and found in data, and that legal practice requires nothing ‘extra’.

Whatever the merits or demerits of these assumptions, it is essential that the design of legal tech systems be open to scrutiny. This is to ensure that any adoption of legal tech is in accordance with the values and commitments of the Scottish legal system and profession. We therefore consider that technologies that carry out or assist in carrying out ‘law jobs’ should be employed with great care and, in some cases, should not be employed at all. We are particularly concerned about the use of data-driven technologies which rely on past data to predict (or dictate) the outcome of cases. The use of such technologies for determination of case outcomes, for example, would inevitably restrict the inherent flexibility of law to adapt to its social and historical context. Such impacts might not be immediately apparent, particularly in light of the automation bias mentioned above.

We consider that legal technologies should be regulated,⁶ but do not consider they should be regulated as legal services.⁷ The regulators (at present, the Law Society of Scotland, Faculty of Advocates and the Association of Commercial Attorneys) should, however, develop guidance about the use of these technologies by their members. Such guidance must take into account the implications of different legal technologies for the rule of law, both in terms of equality before the law (its common interpretation) and in terms of ensuring that the underlying ethos of the law is protected. The latter requires that due process, contestability, and access to justice be reflected in both the designs of legal tech applications and in the specific ways and contexts within which they are employed. This is a significant but fundamentally important challenge that the market alone cannot resolve.

Furthermore, we strongly oppose the use of regulatory sandboxes. The regulatory sandbox approach threatens the independence of the regulator. It is designed to favour the interests of developers rather than those of citizens, or the public interest more broadly. Moreover, considering the diversity of legal technologies both at present and currently under development, we suspect that regulatory bodies will not be well-equipped to assess those technologies, whether for compliance with fundamental rights or for conformity with the principles of the rule of law.⁸ Any assessment of the acceptability of legal tech must be carried out with a full awareness both of the assumptions and design choices underpinning the technologies and of the normative commitments of the (Scottish) legal system that are potentially impacted by them.