Regulation reform: A cross-Canada checkup

Darrel Pink, Executive Director, NSBS

Our work on legal services regulation in Nova Scotia continues to be reflected in work that is taking place right across Canada.

In British Columbia, the law society’s focus is on law firm regulation. Its Law Firm Regulation Task Force has a mandate to develop for the Benchers a framework for the regulation of law firms. As a starting point for its discussions, it has stated that such a framework must be responsive to the realities of legal practice in firms of various sizes, geographical locations and practice areas. Before any final decisions are made, the Task Force plans to consult the profession to help devise an appropriate and practical framework for regulation of law firms. 

The work in the Prairie provinces began with a focus on alternative business structures (ABS). Looking at what was happening around the world, and at the actual changes in the way legal services are delivered, led to the conclusion that limitations regulators currently impose on lawyers are likely outdated. In particular, given the pressures lawyers face to run their practices as businesses, regulatory restrictions around fee sharing and referral fees and other limitations may no longer be appropriate. Further, a move towards allowing ABSs has the potential to open the door to innovations, which may assist in addressing unmet legal needs.

These factors, along with others, led to an initial focus on ABS. However, as discussions evolved, it became clear that it was largely impractical to look at ABS alone and ‘entity regulation’ needs to be considered. Entity regulation would represent a move from largely regulating only individual lawyers to also regulating the organizations in which they work.

A possible mechanism for entity regulation is compliance-based regulation, which would set out a series of objectives and require lawyers and their organizations to demonstrate how they are meeting those objectives within their organizations. ABSs would be a type of entity regulated through a compliance-based regime. There are many possible forms of ABS but they might include provisions for non-lawyer investment in law firms, multidisciplinary practices or a variety of other arrangements.

In Ontario, the Law Society has established a Task Force on Compliance-Based Entity Regulation, which is exploring a proactive, outcomes-focused approach where the regulator sets out expected outcomes and provides flexibility as to how they are achieved. It would be most effectively implemented if the Law Society had the authority to regulate entities, or law firms. Compliance-based entity regulation has been found to significantly reduce complaints and improve ethical conduct. The Law Society plans to continue to study the issue and expects to engage with the profession on the topic in the coming year.

In addition, we remain connected to ongoing developments in Australia, where a uniform approach to legal regulation is unfolding across several states and embodying the long-standing commitment there to Proactive Management Based Regulation. In England, an evolution continues at the Solicitors Regulation Authority and the Bar Standards Board (the main regulators) as they gain experience with and fine tune their regulatory models.

In Nova Scotia by staying in contact with all of these organizations that regulate lawyers, we are committed to both learning from and with them, and developing the best approach we can for Nova Scotia.

Darrel Pink, Executive Director