Newsletter – October 2021

Spotlight on… innovation in legal services

In July, the government announced new plans to put the UK at the forefront of the global innovation race. The government’s Innovation Strategy sets out its long-term vision to ensure innovation is at the heart of “building back better”. The strategy aims to create the right conditions for all businesses to innovate so they have the confidence to do so.

It’s easy to see how this vision applies to certain parts of our economy. In the current climate, organisations like pharmaceutical companies and tech giants immediately come to mind as leaders in innovation. But what about lawyers? Is innovation for us? And if so, what does that look like?

The short answer is that innovation is for us – it must be – for nothing changes if nothing changes, as they say. In 2021, we are seeing the creation and use of innovative technologies in the legal sector in numerous ways. A new study by the University of Oxford on Technology and Innovation in Legal Services found that almost 90% of firms were now using day-to-day technologies such as video conferencing and around 5% of firms are using artificial intelligence (AI) to provide services to clients.

Closer to home, the CLSB has joined with fellow regulators like the Financial Conduct Authority, Information Commissioner’s Office and Solicitors Regulation Authority to form a Regulatory Response Unit for the next Lawtech Sandbox. A sandbox provides a safe space for start-ups to work collaboratively with others to test their ideas, without the risk of breaching regulatory rules. The Lawtech Sandbox is designed to fast track transformative ideas, products and services that address the legal needs of businesses and society through innovation.

However, new studies are emerging that highlight the importance of breaking down potential barriers to innovation. One such potential barrier is poor regulation. What do we mean by poor regulation? We mean regulation that stifles, disincentivises or prohibits innovation – so that the potential benefits to society are lost – or regulation that fails to adequately identify, target and mitigate the risks that come with innovation. The question for regulators is: are we striking the right balance?

To answer this question in the world of costs, this September the CLSB launched a research project aimed at exploring whether, if regulation or legislation were different, Costs Lawyers could bring about downward pressure on the cost of legal services through innovative products and services.

The current legal regulatory framework in the UK is based on professional titles and reserved activities, as you know. The Competition and Markets Authority has found that this has the potential to restrict competition unnecessarily or leave regulatory gaps. We want to know whether that is inhibiting innovation in costs law services.

We intend to carry out research based on the types of services that advisors (regulated or unregulated) specialising in costs might be involved in, such as:

  • finding the right price for legal services before buying;
  • resolving disputes about the price of legal services after buying;
  • obtaining the best advice on controlling costs when that advice is bought via another lawyer.

The main questions we are exploring in each of these areas is:

  1. How might advisors specialising in costs drive services in a way that exerts a downward pressure on the price of legal services?
  2. Would any regulatory or legislative change relevant to Costs Lawyers remove barriers to capturing this benefit or capture greater benefits?

The project has been made possible by a grant from the £3.7 million Regulators’ Pioneer Fund backed by The Department for Business, Energy and Industrial Strategy (BEIS). The fund enables UK regulators and local authorities to help create a UK regulatory environment that unleashes innovation and makes the UK the best place to start and grow a business. We’ll keep you updated on our findings on our project webpage.

Rt Hon David Heath CBE, Chair of the CLSB

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