The Law Society of Upper Canada has launched its call for the input stage on compliance-based entity regulation.
Calling it a potential paradigm shift in how the profession regulates itself in Ontario, Ross Earnshaw, chairman of the LSUC compliance-based entity regulation task force, says his group is on pace to have a report to Convocation by June.
Compliance-based entity regulation represents a significant change from a reactive approach to disciplinary and ethical issues to a more proactive approach of addressing problems before they happen, he says.
“[The Law Society] will not be just a stern disciplinarian, but it will provide assistance, guidance, examples, [and] work with entities to help in the transition to entity-based regulation and particularly so if it should apply to sole practitioners,” Earnshaw says.
Seeing the proactive approach as a great positive, lawyer Janice Wright of Wright Temelini LLP says she has concerns that the smaller firms and sole practitioners may take the hardest financial brunt in establishing systems to comply with regulations.
She began her career with a major firm and now runs a two-person practice.
She says that when it comes to managing certain aspects of the regulation proposal, those smaller firms could have a difficult time navigating implementation.
“On the one hand, it’s a very important initiative, a noble goal that I don’t think anyone would quibble at, but the devil’s in the details,” Wright says.
“If you’re going to provide procedural guidelines, you have to ensure degrees of flexibility that don’t make this so burdensome as to be frankly unhelpful and something that becomes so burdensome it increases legal costs.”
The LSUC became aware of the concept of compliance-based entity regulation several years ago, based on practices in Australia, where the regulation policy has been in place for more than a decade.
It’s also now in use in the United Kingdom and in the initial stages of implementation or consideration in other Canadian provinces such as Nova Scotia and British Columbia.
Earnshaw says the LSUC sees the potential policy change as a positive step in addressing problems before they happen. The LSUC established the task force in June 2015 and it has been studying the issue internationally and nationally since.
Earnshaw says the current regulatory scheme at the law society is primarily reactive, with the regulator addressing public or client concerns against a lawyer or paralegal after a complaint is made. He says the key concept behind compliance-based entity regulation is that it’s proactive and establishes a conduct and ethical framework for individuals and firms to act by to avoid complaints in the first place.
He says the call for input will help establish what those regulations and boundaries will be, but the eventual policy, if accepted by Convocation, will include practice management principles, establish goals and expectations for lawyers and paralegals, and provide tools to ensure compliance.
“It gets out in front of the potential for complaints and will reduce complaints as a result,” Earnshaw says.
He says it’s difficult to compare successes in the U.K. with compliance-based entity regulation to the potential impacts in Ontario as the British system is more proscriptive. But he adds that Australia’s system is more similar.
“We do find the Australian model to be more indicative of where we think this might go if the model is adopted by Convocation,” Earnshaw says, adding that in Australia there has been a substantial drop in complaints reported.
Earnshaw says that besides a potential reduction in complaints, a compliance-based entity regulation policy will improve practice management through the promotion of ethical best practices for firms and individuals.
Earnshaw says it would provide flexibility and autonomy for practitioners and firms to develop their own internal systems and processes to ensure compliance while reflecting the scope and scale of their operations.
“One of the big advantages the task force sees is that, although principles are prescribed by the regulator, the method of achieving those principles by the entities that are regulated is not specified,” Earnshaw explains. “So there’s tremendous flexibility, there’s greater autonomy. Firms can adapt to those principles having regard to their size, their practice area, their work environment, and so on.”
Having that flexibility is important, says Shane Katz, a personal injury lawyer from Singer Kwinter. He says it will be vital for the LSUC to ensure implementation of the new policy framework will not be too onerous on smaller firms and sole-practitioner practices.
“Large firms have different resources, and to require firms that practise in the same industry but are of much smaller scale to comply with the exact same guidelines and principles might not be fair,” he says.
Wright says sections of the proposal that touch on managing client expectations cause her some concern for the smaller firm as well and how that could ultimately affect access to justice.
“Management of client expectations is a hugely important thing that lawyers do, so the question becomes how do you regulate that; we need to be very cautious about adding burdensome regulations that are formulaic in nature because managing client expectations can happen in any number of ways,” she says. “You may cause the cost of legal services to go up and unknowingly and unintentionally create larger access to justice issues.”
Earnshaw says that while the task force sees some great advantages to such a policy, he is hoping for a strong outpouring of comment, one way or the other, from the profession in determining if and how such a regulation should proceed, the size of operations it should govern, and how it should be monitored. For the first time in the LSUC’s history, commentary can be provided through an online form and submissions will also be accepted by e-mail and traditional paper mail until the deadline of March 31.
“If they understand the different legal industries and use that to create guidelines, policies, and procedures, it could be very helpful for the profession,” Katz adds.
“The drawback could be that if those guidelines and policies are onerous in terms of the costs involved or the expectations, the smaller firms won’t be able to do the compliancy work and that could really hurt a business that’s barely surviving.”
The Law Society is offering a free informational webcast in English and French on Feb. 8 from 5 to 7 p.m. to provide lawyers and paralegals with an opportunity to learn more about compliance-based entity regulation and to ask questions of task force members. People are asked to register for the webcast by Feb. 3 through the LSUC web site. The webcast will also account for two substantive CPD hours.