Thoughts about self-regulation in the public interest

It is no secret that that self-regulation can be compromised by the tension between the public interest and the interest of the regulated profession[i]. This tension leads some to say that self-regulation is inherently flawed and should come to an end.

In this column, I suggest that:

  • it may be useful to recognize that conflicting professional interests are more in tension in some areas than in others and accordingly to look for ways to mitigate that tension where it is potentially problematic
  • there may be limited measures that can be used to mitigate such tension without having to take more transformative measure that may or may not end up achieving what is sought to be achieved and to avoid the costs that come with transformations.

Where the public interest and the interests of the profession mostly align

As is generally understood, Canadian Law Societies have the responsibility of determining:

  • what is required to obtain a license to practice law and to license lawyers
  • what professional conduct and competence is required from lawyers and taking steps to encourage and ensure compliance
  • whether a lawyer has breached their professional obligations and, if so, the consequences for that breach
  • whether a lawyer lacks required capacity to practice and, if so, what ought to be done
  • appropriate public protection for errors and omissions and for fraudulent or dishonest conduct[ii]

Law Societies have other responsibilities as well[iii] but the above are some of the main regulatory responsibilities.

The Law Society of Ontario is responsible for paralegals as well as for lawyers. The responsibilities set out above apply just as well to paralegal regulation as to lawyer regulation. For example, the Law Society of Ontario determines what is required to become a licensed paralegal. While there are of course different requirements for lawyers and paralegals, the Law Society of Ontario determines and applies licensing requirements for both professions.

Indeed, the list of responsibilities set out above is a pretty standard list for professional regulation. For lawyers, paralegals, doctors, nurses, engineers, architects, real estate brokers, and others, the professional regulator is responsible for entry into the profession, conduct, competence and capacity in practice and, often, public protection against negligence and dishonesty.

In these areas, the public interest and the interest of the profession are substantially aligned. Generally speaking, practicing professionals support requirements ensuring professional competence (at licensing and in practice), professional conduct and capacity[iv]. Most Canadian lawyers appear to support mandatory errors and omissions insurance and there are cogent arguments that mandatory insurance is both in the interest of clients and professionals. It is arguable that protecting clients against dishonest professionals through a compensation fund is not so clearly in the interest of the honest professionals who end up paying for the dishonesty of a small minority. But such compensation has generally not been controversial.

Where the public interest and the interests of the profession align less well, if at all

Professional regulators have other responsibilities where the public interest and the interests of regulated professionals are less well aligned. Scope of practice is an area of particular tension where there is more than one profession that may be suited in the public interest to perform a function.

Medicine, nursing, midwifery and dentistry provide an example outside of the legal context. Physicians and surgeons have long argued against expansion of the scope of authorized practice of nurses, midwives and dentists. And nurses, midwives and dentists of course argue that they should be allowed to do certain work that has been reserved to physicians and surgeons. In Ontario, the same is true for lawyers and paralegals. Paralegals argue for and lawyers argue against increased scope of paralegal practice. If and when new types of licensed legal service providers are proposed, there will likely be tensions between the public interest and the existing professions.

Establishing appropriate scopes of professional practice in the public interest is no easy matter and that the views of the professions provide important input. But it is clear that self-interest plays an important part in the positions that are taken even if the arguments made are framed and genuinely thought to be made in the public interest.

There is a clearly tension between the public interest and the interest of professions where two or more professions would compete for work if permitted to do so.

A very similar area of tension between the public interest and the interest of the profession arises where the regulator has the authority to determine whether unlicensed persons can provide services or whether all providers must be licensed.

There are other areas where the public interest and professional interests also may not be well aligned as in the areas of competence, conduct and capacity. Advertising is one such area. Since the Supreme Court of Canada decided Rocket v. Royal College of Dental Surgeons of Ontario[v], professional regulators have been required to take into account and balance competing principles.

The Supreme Court made clear that “promoting professionalism and preventing irresponsible and misleading advertising on matters not susceptible of verification” are proper regulatory objectives. On the other hand, “[t]he public has an interest in obtaining information as to [the professional’s] office hours, the languages they speak, and other objective facts relevant to their practice”.

What is not necessarily obvious is that there are divided interests within the professions on issues such as advertising. Some professionals have well established reputations. Some do not. Some have the financial resources to purchase significant advertising. Some do not. Many professionals see advertising as involving escalating competition, sort of an advertising arms race. Some professionals see advantage in advertising. Some see disadvantage.

Where the professional regulator addresses competition for work, the public interest, the interest of the profession and interests within the profession may not be well aligned.

The common thread is the threat of competition between professions, within professions, from alternate service providers and from others. The appropriate nature and extent of competition that is in the public interest is a challenging policy question. The interests of those who would face increased competition are not necessarily well aligned with the public interest.

The point being made is that the interests of the profession and of professionals are most likely not to be fully aligned with the public interest where competition is affected by professional regulation[vi].

Areas where competition is mostly directly affected are with respect to scope of practice, if any, of competing professions, decisions determining what activities are reserved to licensed professionals and decisions which affect the extent of competition within a profession. These areas could be described as determining scope of practice, determining the scope of reservation[vii] and regulating of business activities.

Approaches to regulation in the public interest

There are, broadly speaking, four common approaches to regulation of the legal profession namely self-regulation, co-regulation, “independent” regulation and judicial regulation.

The Canadian approach to professional regulation is mostly self-regulation[viii]. Authority is given by legislation to a professional regulator whose directors are mostly elected by members of the regulated profession. Some professional self-regulators regulate more than one profession and accordingly a number of directors are elected from each profession[ix]. Self-regulation in Canada is not pure self-regulation. To greater and lesser extents, some directors are appointed by government[x].

In some jurisdictions, there is co-regulation of lawyers by government agencies in some respects and by the profession, through its representatives, in others. Australian provides an example of co-regulation[xi].

In most of the United States and, to some extent, the judiciary is responsible for regulation of lawyers. In what appears to be tacit co-regulation, the American Bar Association (a representative organization) develops the Model Rules of Professional Conduct which are adopted by the judiciary in most states.

England & Wales provides an example of what is intended to be independent regulation. There are “front-line” legal regulators for solicitors, barristers, legal executives, licensed conveyancers, patent and trade-mark attorneys, costs lawyers, notaries and accountants (in respect of probate activities). These “front line” regulators are themselves under the authority of the Legal Services Board which is described as an oversight regulator.

The “front line” regulator for English solicitors is the Solicitors Regulation Authority (the SRA). The board of directors of the SRA consists of 13 members, six solicitors and seven lay people (one of whom chairs the Board). Board appointments are made by an appointment panels based on merit and established criteria taking into account required skills/experiences and the principle that the board should broadly reflect the regulated community and consumers of regulated services. One of the members of the appointment panel is from the representative of the profession. Another is an existing member of the board who is not eligible for reappointment. A chair is of the panel is selected who is independent of and external to both the representative of the profession and the SRA.

In Québec, the regulation of lawyers and notaries may be thought of as being a form of co-regulation. Lawyers are regulated by the Barreau du Québec. Notaries are regulated by the Chambre des notaires du Québec. The majority of the council of the Barreau is elected by lawyers but one-quarter of the Council are public representatives nominated by l’Office des professions. The l’Office des professions supervises 46 “professional orders” including the Barreau.

Reasons for change in regulatory approach

The approaches taken to regulation of lawyers in Australia and in England & Wales have changed significantly.

In England, significant change came with the adoption of the Legal Services Act 2007 which sought to establish independent legal regulation. Significantly, prescribed regulatory objectives included “protecting and promoting the interests of consumers of legal services” and “promoting competition in the provision of legal services”.

The Legal Services Act 2007 followed from the review by Sir David Clementi of the regulatory framework for legal services in England and Wales on behalf of the government. The Clementi Report was delivered in December 2004. Notably, Clementi’s terms of reference focused on considering “what regulatory framework would best promote competition, innovation and the public and consumer interest in an efficient, effective and independent legal sector”.

The appointment of David Clementi has broadly been understood have arisen from two main issues. The first was the perceived anti-competitive aspects of self-regulation. The second was the perceived failure of the self-regulator to sufficiently address professional misconduct.

In Australia, regulatory changes came earlier but for similar reasons. As described by Chief Justice Spigelman of the Supreme Court of New South Wales[xii], Australian reforms starting in the 1990s were driven by “application of competition principles to the legal profession”.

In Australia and in England & Wales, concerns about protectionism and anti-competitive activity led to the end of self-regulation.

Thoughts about self-regulation and professional self-interest

There is no perfect approach to professional regulation. Professional self-regulation has advantages. It is a challenge without professional expertise to truly address the fundamental aspects of professional regulation; namely professional competence and conduct. It is good to have regulation of lawyers be independent of government both in criminal law defence and generally. In the early days of the Trump administration, lawyers gathered at airports seeking to defend the interests of those seeking to enter the United States. It is not difficult to imagine that regulation of lawyers by the US government might have cast a pall. Whether a government is on the right or the left, independence from government is desirable. We know that autocratic countries around the world use state “tools” to silence lawyers.

In my view, it is particularly important that the question of what is required to become a lawyer and requisite professional conduct and competence of lawyers be independently regulated. Self-regulation is one approach to independent regulation. A difficulty with other approaches to independent regulation is that true independence from the state is both hard to achieve and hard to maintain.

As for ensuring professional conduct, it seems to me that the Canadian approach works well. The reality is that investigation of possible misconduct, determination of appropriate regulatory responses and prosecution of alleged misconduct is the responsibility of Law Society management. Other than authorizing prosecutions[xiii], these core regulatory functions are exercised independently from elected and appointed benchers but in accordance with established conduct rules and policies. While those unfamiliar with Law Society processes sometimes think otherwise, the reality is that this aspect of regulation is not compromised by conflicting professional interests. This is not to say that things always work as well as they should. There is room for improvement as is true for all human institutions.

Practice by “non-lawyers”

It seems to me that the tension is greatest for self-regulation of lawyers in determining the permitted scope of licensed non-lawyer practice, determining the scope of reservation to licensees (i.e. what is unauthorized practice) and regulating of business activities.

This tension was seen in the debate in British Columbia about licensing paralegals to provide family law legal services. At the December 2018 LSBC Annual General Meeting, over 1,000 lawyers attended. 861 lawyers voted in favour of an anti-paralegal resolutions, 297 voted against and 62 abstained, despite the BC Attorney General pushing through legislative changes to permit licensed paralegals. It would be naïve to think that lawyers running for election as benchers in BC will not understand that a significant number of electors are against paralegal practice.

The same tension can be seen in Ontario. In the last bencher election, some lawyer organizations sought commitments from candidates against paralegal scope of practice before providing their endorsements. Some lawyers campaigned for lawyer votes on anti-paralegal platforms. And paralegals campaigned for election on the basis of increased scope of paralegal practice. When the Law Society of Ontario has addressed paralegal scope, many lawyers and lawyer organizations have argued for reduced paralegal scope and against expanded scope. Not surprisingly, paralegals and their organizations express support for broader scope and oppose reduced scope. Every organization asserts that their position is in the public interest. And each acknowledges that its role is to advocate in the interests of its members.

In Ontario, there is a degree of protection put in place by the Law Society Act in light of the larger number of lawyer benchers (40 lawyers) as compared to the smaller number of paralegal benchers (5 paralegals). The Paralegal Standing Committee is comprised by statute with five paralegals, five lawyers and three government appointed benchers. Neither profession controls the Paralegal Standing Committee. But on most matters, Convocation is the ultimate decision-maker with paralegals being only 5 of 53. So far, in my view, Convocation has acted responsibility to make joint self-regulation work properly. As compared to BC, the presence of paralegals in Convocation and the existence of unregulated paralegals in Ontario prior to paralegal regulation in 2017 has likely assisted by forcing the two professions to deal with each other. While there are tensions, so far so good. But that could change.

Scope of reservation

In my view, there is a greater problem in Ontario with the scope of reservation (i.e. unauthorized provision of legal services). The definition of legal services under the Law Society Act is exceedingly broad. The Law Society is authorized to determine which legal services must be provided by licensees (and the classes of authorized licensees) and which legal services may be provided by unlicensed persons. Currently, lawyers may provide any legal services. Paralegals may act as advocates in tribunals and, in some respects, in the courts[xiv].

It is not well recognized that (i) the Law Society has authority to permit non-licensees to practice law or provide legal services to the extent thought appropriate[xv] and (ii) the Law Society has authority to establish new classes of license beyond lawyers and paralegals[xvi].

Where there is a tension between two professions about scope of practice, there is pressure for change. Such is the case in Ontario between lawyers and paralegals.

But where no one other than a lawyer is permitted to provide legal services, there is rarely anyone to advocate for change. Outside of dispute resolution, there are legal needs in Ontario that are unserved or underserved but where there is no one pushing for new licensed or unlicensed providers. To the extent that lawyers do not serve legal needs, a self-regulator has difficulty perceiving needs that are not being well served.

Several years ago, I said that[xvii] “It seems to me inevitable and proper that new ways of providing legal services will be allowed in unserved and underserved areas. Whether Canadian law societies are up to the challenge of allowing this is unclear. But if they don’t, someone else will.” I’m now less sanguine about this as there is limited pressure and incentive for a legal services self-regulator to open up areas where lawyers and paralegals don’t practice.

Regulating of business activities

I won’t comment further about issues such as permitted business structures, advertising, contingent fees, referral fees and the like other than to observe that these areas raise both important public interest issues and the economic interests of the professions, in terms of competition within and between the professions and in terms of profitability within the professions.

So what?

There is talk of the end of self-regulation in Canada. Experts in professional regulation argue that there is growing governmental and public impatience with self-regulation and that self-regulation is inherently fundamentally flawed given conflicting interests.

I don’t say that there aren’t problems to address. But there is a serious “baby and bathwater problem” to consider. In my view, it is difficult to realistically see long-term true independence from the state absent self-regulation or judicial regulation. “Independent” regulation through self-perpetuation[xviii] risks leading to regulatory capture by someone or something. But there is in any event an accountability problem inherent in independence by self-perpetuation. I accept that there may be collections of institutional actors[xix] who might reduce the risk of regulatory capture but the accountability issue remains.

Perhaps the better choice is evolutionary rather than transformative. Approaches in other jurisdictions always look better than our own and better than they are. And transformative change is difficult to effect and to manage. Results of transformative change are inherently unpredictable.

It may be useful to focus on where there is the greatest issue with self-regulation which, in my view, is in determining scope of practice for non-lawyer licensees, determining the scope of reservation to licensees and regulating of business activities.

An alternative that appeals to me comes in part from the Legal Services Board in England & Wales where a Consumer Panel has been established to advocate for consumer interests and in part from the existence of government appointed benchers in Canadian Law Societies.

Perhaps government appointed benchers could act as a formal sounding board for Law Society benchers and taken on something of the role of the English Consumer Panel in advocating for the public interest in areas of tension.

A more directive approach might follow the approach taken under the Law Society Act (Ontario) to the establishment of a tri-partite Paralegal Standing Committee. A tripartite panel or a panel of non-licensee benchers could be used to establish a check on Convocation within the Law Society on issues where the interests of the professions and the public interest are in tension.

Something to think about.

____________________

[i] See Conflicted Regulation in the Public Interest

[ii] In other words, mandatory insurance and compensation funds

[iii] In Ontario, dealing with unclaimed trust funds is an example

[iv] Regulatory scholars say that professionals tend to seek higher standards than justified in the public interest as a barrier to entry and thereby to the ability to charge higher fees

[v] Rocket v. Royal College of Dental Surgeons of Ontario, [1990] 2 SCR 232

[vi] This would be starkly true if professional regulation included regulation of the numbers entering professional practice. There is some risk of competitive issues arising in establishing the criteria for entry to practice. Where required profession competence ends and barriers to entry begin is always worth consideration.

[vii] In England and Wales, the legal activities which require a license from one of the legal regulators are described as “reserved activities”. An unreserved activity can be undertaken by an unlicensed provider.

[viii] Tracey L. Adams, Regulating Professions: The Emergence of Professional Self-Regulation in Four Canadian Provinces, 2018, University of Toronto Press

[ix] The obvious example in the legal context is the Law Society of Ontario which regulates lawyers and paralegals. Lawyers elect 40 benchers and paralegals elect 5 benchers.

Similarly, the Council of the College of Nurses of Ontario includes 14 elected registered nurses and 7 elected practical nurses.

[x] In Ontario, 8 of 53 Law Society benchers are government appointees who are not lawyers or paralegals. In contrast, the Council of the College of Nurses is comprised of 21 nurses and between 14 and 18 government appointees who are not nurses, regulated health professionals or councillors of another health college.

[xi] For example, the Law Council, develops the Australian Solicitors’ Conduct Rules. The Law Council is the national representative body of the Australian legal profession. In New South Wales, the Office of the Legal Services Commissioner deals with complaints about lawyers and prosecutes disciplinary proceedings before the Disciplinary Tribunal.

[xii] Spigelman, James J., Are Lawyers Lemons? Competition Principles and Professional Regulation (October 29, 2002). Australian Law Journal, Vol. 77, p. 44, 2003

[xiii] In Ontario through the Proceedings Authorization Committee

[xiv] As a practical matter, most issues regarding paralegal scope of practice are about advocacy work rather than advisory or transactional work

[xv] Law Society Act, s. 26.1(5) – A person who is not a licensee may practise law or provide legal services in Ontario if and to the extent permitted by the by-laws.

Section 28 of LSO By-Law 4 provides that Aboriginal Court Workers, persons acting in the normal course of carrying on their profession or occupation (other than representing persons before adjudicative bodies) and persons participating before committees of adjustment are deemed not to provide legal services or to practice law.

[xvi] Law Society Act, s. 27(1) – The classes of licence that may be issued under this Act, the scope of activities authorized under each class of licence and any terms, conditions, limitations or restrictions imposed on each class of licence shall be as set out in the by-laws.

[xvii] www.slaw.ca/2016/07/13/unmet-legal-needs-the-challenge-to-legal-practice-and-to-self-regulation/

[xviii] By self-perpetuation, I mean that the regulator uses an appointment committee to fill vacancies over time on the basis of a skills matrix. The SRA provides, an example as discussed above, with a three person appointment committee including an independent chair (somehow appointed), an exiting board member and a representative of the profession.

[xix] For example, representatives of government, the judiciary, the legal professions, the legal academy and legal services consumers could act as a nominating committee.

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