Last year, I joined the Costs Lawyer Standards Board (CLSB) as Director of Policy, having never worked in legal services before. I was a bit surprised by the structure of regulators in legal services, and it took a me a little bit of time to understand the history and how this structure came about.
The regulation of legal service providers in England and Wales is characterised by:
- a distinction between providers who are authorised and regulated, and those who are not;
- separate regulation of different providers within the authorised sector, for example, solicitors, barristers, costs lawyers; and
- a distinction between different types of services, those reserved to authorised providers and those that are not.
In the past, the sector was self-regulated by industry bodies but the Legal Services Act 2007 introduced major changes, including requiring the separation of regulatory and representative activities. It also created an oversight regulator in the form of the Legal Services Board (LSB). The result is the current structure of the LSB and eight legal services regulatory bodies, each regulating different types of legal professionals.
Against this backdrop, I set about considering how I should best develop regulatory policy for the CLSB, the smallest of the regulatory bodies with the smallest authorised sector within its remit. Costs Lawyers are qualified experts in legal costs. They can advise clients on issues such as litigation costs, the cost of employing a legal services professional, and legal aid costs. They have a right to appear in court on behalf of their clients on matters relating to costs.
In 2021, we were successful in securing a grant from the Regulators’ Pioneer Fund which allowed us to commission a research report looking at the very reason why authorised Costs Lawyers exist; that is, looking at how they contribute to controlling the costs of legal services. In doing this, I was trying to capture data that would let me map the benefits to end users of regulating Costs Lawyers, which is a necessary cornerstone for robust policy development.
One of the findings was that the regulated costs sector has been moving away from serving individual consumers towards serving commercial clients, and is likely to continue to do so. This raises interesting policy questions around the boundary of regulated and unregulated costs advisers. Much of the LSB’s strategy is, quite rightly, concerned with improving outcomes for individual people using legal services, yet the CLSB now needs to address the fact that these people are likely to be served by providers that fall outside of its regulation.
Another important finding was that when clients employ Costs Lawyers, they benefit both from lower costs and from more predictable costs. Clients told us, however, that it took some time for them to find out about Costs Lawyers and so, mainly, well-informed clients buying services more than once benefit from securing specialist advice about costs. This raises quite fundamental questions, in terms of the regulatory structure in legal services with the historic links to industry bodies, about the role a regulator might play in promoting the benefits to end users of a sector while maintaining appropriate separation between regulation and representation.
The work also looked for signs of emerging innovation and most often found these in larger organisations. We currently regulate individual lawyers, not entities, and so exploring whether the regulatory framework could change to better support firms of Costs Lawyers may be of benefit, both in terms of innovation and in terms of strengthening the position of Costs Lawyers as independent actors in the sector.
There are many more important findings set out in the research report, which is available on the CLSB website. It represents a rich data source that the CLSB can use to set out its work programme to review the way it regulates for the future.
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The research was funded by the Regulators’ Pioneer Fund, an initiative of the Department for Business, Energy and Industrial Strategy. The Fund aims to keep the UK at the forefront of regulatory thinking and experimentation. It sponsors projects led by regulators or local authorities which aim to help create a UK regulatory environment that encourages business innovation and investment.
