Canadian legal regulators have required that delivery of legal services to the public occur through entities owned and operated by lawyers. They have also placed limits on the extent to which legal and non-legal services can be provided together, and on sharing of profits between lawyers and non-lawyers.
Should that change? Proposals for alternative business structures (ABS) suggest it should. They argue that reducing restrictions on the structures for delivering legal services will increase access to justice, foster innovation and serve the public interest. Others disagree. They argue that while current rules may have their limitations, they provide necessary protection to clients and the public, ensuring the ethical integrity of legal services. They also suggest that the purported benefits of ABS are overstated, particularly with respect to access to justice. The Law Society of Upper Canada’s website includes submissions from proponents and opponents, although there are many other contributors to the debate across the common law world.
As with many public policy issues, the debate over alternative business structures generates more heat than light. One column on SLAW by Mitch Kowalski, Anti-ABS Arguments Continue to be Based on Emotion – Not Fact. generated 96 comments but, as far as one can tell, largely more argument and emotion, not more agreement, and only a few more facts. But also like many questions of public policy, the ABS question forces an answer: either we do nothing or we do something. Either is a choice, and either will have consequences, good or bad (or both). So then the question becomes, how do people who care about the issues that underlie the ABS debate take a position on which answer is the right one? We know an answer is inevitable. What stand should we take?
The September 2015 submission to Convocation of the Law Society of Upper Canada’s Working Group on Alternative Business Structures – “Next Steps” – provides a helpful framework for considering this question (available as part of the Professional Regulation Committee Report). It also, though, reveals some deep regulatory challenges that the profession faces, ones that create risks of failure whatever option is chosen.
In terms of the framework, the Working Group submission I think accurately identifies the criteria against which ABS need to be assessed. Those include access to justice, responsiveness to the public, maintenance of professionalism (including avoidance of conflicts, protection of confidentiality, competence, integrity and service to the administration of justice), protection of solicitor-client privilege, promotion of innovation, orderly transition, and efficient and proportionate regulation.
It also provides a balanced and informed assessment against those criteria of the most dramatic ABS proposal, permitting majority non-lawyer ownership. The submission argues that evidence from Australia and England/Wales shows that this form of ABS has fostered modest innovation. It has also facilitated some increase in access to justice. It has not been shown to create significant risks to lawyer professionalism. There has been some positive involvement from the non-profit sector in ABS, which has been associated with increased access to justice. In general, though, the adoption of this form of ABS has not resulted in either revolutionary innovation or significant increases in access to justice. Greater innovation has occurred outside the regulatory governance of the legal profession, through initiatives such as LegalZoom, Axiom and Neota Logic. Further, the shift to ABS has required significant regulatory change, and the evidence against risks to professionalism is not yet sufficient to be sure that such risks could not materialize.
Based on this analysis, the Working Group submission reaches the conclusion that the costs of permitting majority non-lawyer ownership outweigh the possible benefits. It suggests that more modest and incremental change be considered, with a focus on minority non-lawyer ownership; permitting multi-disciplinary services; permitting a franchise model; allowing non-lawyer ownership from charities, non-profits and unions; and, possibly allowing new legal service providers.
This conclusion appears sensible and moderate. It reflects a conservative approach to regulation, focused on avoiding unnecessary risk in pursuit of uncertain advantages.
As earlier noted, however, it also demonstrates the fundamental regulatory challenge faced by regulators of legal services.
Innovation and change exist. And, as the Working Group notes, they largely exist outside the ambit of traditional regulatory governance. Further, access to justice remains a significant and unsolved social problem – lawyers do not appear able or willing to fulfill the legal needs of the many. It is hard to argue with the perception that change is desperately needed and, with technological opportunity, will inevitably arrive, whether we “permit” it or not. Which may argue in favour of an innovative regulatory response. Otherwise change may come in a way that simply does not include traditional legal service providers. And which, as a consequence, places at risk the role we have played in serving and protecting the rule of law.
It may be that avoiding undue regulatory risk is rational. It’s hard to argue in favour of pursuing uncertain risks while incurring certain costs. And the Working Group is certainly right that undoing bad regulatory change is impossible (I’d look at electricity deregulation in Alberta as an example; others would have different perspectives and their own examples). But it may also be that being unwilling to explore real change ensures our mutual destruction. The way forward is unclear.
Alice Woolley is a professor of law and Associate Dean (Academic) at the Faculty of Law, University of Calgary. She is the author of Understanding Lawyers' Ethics in Canada and is co-author of Lawyers' Ethics and Professional Regulation, 2nd edition.