A report into the differing guidance provided by regulators in the wake of the Mazur case has highlighted how “insufficient cross-regulator engagement” resulted in inconsistent interpretations of the Legal Services Act and the subsequent guidance provided to regulated communities.
The Legal Services Board’s (LSB) final report into the guidance provided by regulators, Regulatory review of advice and guidance provided to the profession on the conduct of litigation by approved regulators and regulatory bodies, found that while regulators responded constructively and updated guidance following the judgments, previous advice to the profession had varied in clarity and consistency. The review also identified that in 2022, when regulators developed differing interpretations of the act, there was insufficient cross-regulator engagement to resolve that inconsistency.
Several regulators had assessed the levels of non-compliance with the act to be low or insignificant within their regulated communities, but the LSB found that these assessments may have been undermined by limited knowledge of how supervision of unauthorised individuals was operating in practice.
It noted: “The responses from some regulators to direct queries from the profession evolved over time, reflecting differing interpretations or a developing understanding of the statutory framework. This risked inconsistent outcomes”.
In January the LSB’s interim report was critical of the response of regulators to the questions raised by Mazur v Charles Russell Speechlys LLP, and the potential impact of the case on litigation work conducted by unqualified professionals. The responses of the regulated community, including the Solicitors Regulation Authority (SRA), CILEx Regulation and the Bar Standards Board, was “varied in clarity and level of detail”, said the LSB.
The LSB acknowledged the impact on professionals affected by the Mazur judgment, with firms reassigning work and individuals losing jobs, taking early retirement or facing demotion. It also acknowledged there were opportunities to identify and address some of these issues sooner, and said the response from some regulators in the aftermath of Mazur had been “encouraging”, with the Solicitors Regulation Authority (SRA), the Law Society, CILEx Regulation (CRL), the Costs Lawyer Standards Board, IPReg and ICAEW all publishing updated guidance.
To address the issues raised by Mazur the LSB said regulators and regulatory bodies should ensure guidance clearly explains what constitutes adequate supervision by an authorised person in both routine and higher risk circumstances.
Processes for sharing draft guidance on any reserved legal activity should be implemented to achieve more consistent interpretations, and mechanisms for gathering further information on the frequency and volume of reserved legal activities undertaken should be implemented to enable effective regulation. Assurance processes should be reviewed and strengthened to ensure they are sufficient and effective in identifying, assessing and addressing regulatory risks.
The LSB said it would commit to undertaking a review of guidance across other reserved legal activities to identify and address any similar inconsistencies.
Chief executive Richard Orpin said: “To ensure that consumers and the public are well protected, it is critical that guidance to legal professionals is clear, consistent, and underpinned by robust regulatory assurance. I am encouraged by how constructively regulators have engaged since the judgment and by the steps already taken. But there is more to do, and we will work alongside regulators to make sure the actions we’ve identified are delivered.”
Jennifer Coupland, CEO of CILEX, said the organisation had been “fully transparent” with the LSB and CILEX accepted the findings of the report but was disappointed with some aspects.
She explained: “The fallout from the Mazur judgment exposed longstanding regulatory confusion in a complex area of law. Arguments relating to the conduct of litigation, aired for the first time during the appeal process, demonstrated that while organisations across the sector were acting in good faith, they were working with a framework that lacked clarity and was not fit for purpose.
“While CILEX has always done its best to communicate the latest regulatory guidance available, we know that we have not always got it right. Our members are entitled to clear, consistent and aligned guidance, and we are committed to improving how this is delivered for both our members and the wider profession.
“The LSB’s findings show that there are lessons to be learned, particularly in relation to greater collaboration and alignment. As the Master of the Rolls observed during our appeal, regulators appeared to be operating ‘in their trenches’ and that needs to change. We are committed to strengthening our relationships with both CILEx Regulation and the SRA to improve coordination across the sector.
“CILEX is, however, disappointed with some aspects of the LSB report: Firstly, there is insufficient acknowledgement of the LSB’s own failings with regard to the oversight of the regulation of litigation. There were multiple opportunities for the LSB to intervene or take action to provide the clarity that the sector clearly needed.
“Secondly, it is insensitive to the reality of the position following the High Court judgment in concluding that there was no evidence of detrimental impact, without properly acknowledging the human impact on the many lawyers and firms who experienced real negative consequences and significant stress.
“Finally, it is disappointing that this first substantive LSB output since the publication of Richard Lloyd’s ‘Independent Public Bodies Review of the LSB’ report shows no substantially changed approach to the oversight of regulation going forward.
“As set out in CILEX’s five-year strategy, published earlier this month, we will be actively engaging with both the profession and government to campaign for regulatory reform, including changes to the Legal Services Act.”
