INNOVATION, ETHICS AND THE
LEGAL SERVICES ACT
AUTHORIZED REVOLUTION:
REGULATORY DISRUPTION OF THE LEGAL SERVICES MARKET
Georgetown, April 2015
Richard Moorhead,
Centre for Ethics and Law, UCL Laws, London
@richardmoorhead
http://lawyerwatch.wordpress.com
Competition
Competition + Innovation = Access to Justice
S.1(1) LSA The regulatory objectives:
• (a)protecting and promoting the public interest;
• (b)supporting the constitutional principle of the rule
•
•
•
•
•
•
of law;
(c)improving access to justice;
(d)protecting and promoting the interests of
consumers;
(e)promoting competition in the provision of
services within subsection (2);
(f)encouraging an independent, strong, diverse and
effective legal profession;
(g)increasing public understanding of the citizen's
legal rights and duties;
(h)promoting and maintaining adherence to the
professional principles.
The “professional principles” are:
(a) independence and integrity,
(b) proper standards of work,
(c) act in the best interests of their clients,
(d) comply with their duty to the court to act
with independence in the interests of
justice, and
(e) keep the affairs of clients confidential.
Ethical Challenges
*innovation* beyond incentives
values
nature of knowledge
regulation
Incentives vs Professional Exceptionalism
…legal services should not be thought of as a
product that can be bought and sold like car radios or
toothpaste, but instead a culturally embedded
practice whose practitioners must uphold and further
professional ideals and norms.
Robinson, Nick, When Lawyers Don't Get All the Profits: Non-Lawyer Ownership of
Legal Services, Access, and Professionalism
SSRN: http://ssrn.com/abstract=2487878
Lawyers are different?
• …Lawyers may not have as an altruistic identity as doctors or the
clergy, but most lawyers would acknowledge that the pursuit of
profit should not be the sole goal of those in the profession
nor making money the only, or even dominant, criteria for
determining what characterizes a “good lawyer” or a “good
law firm”. Many lawyers, and the profession more broadly, value
furthering the rule of law, pro bono assistance to the needy, acting
as a check on government or corporate power, competent
assistance, and other social values. Non-lawyer ownership in
some situations can subvert these public-spirited ideals in at
least two ways.
7
Professional complacency vs Professional commitment
Maryam Kouchaki
• M professional = 3,767
vs.
M control = 2,225
41% professionals overestimated
• 6% employees
• Professionalism and Moral Behavior: Does a Professional Self-Conception Make One More Unethical?
Culture
• Reaching the top
• Financialisation
• Business focus
• 'client first was bred into
me'.
Who drives creative compliance?
• Parker, Rosen, and Nielsen, The Two Faces of Lawyers: Professional Ethics
and Business Compliance With Regulation (2009). Georgetown Journal of
Legal Ethics, Vol. 22, 2009:http://ssrn.com/abstract=1034561
“General counsel are more likely than other
executives to justify backdating contracts in
order to meet financial targets.”
EY, 13th Global Fraud Survey Overcoming Compliance Fatigue - Reinforcing
the Commitment to Ethical Growth.
Exceptional unethicality?
With complex judgments values matter…
http://valuesandframes.org/handbook/1-whyvalues-matter/
Machine Tools Problem
You are advising your Company an engineering company
that sells machine tools. They want to hurry through
transactions which may be in breach of import/export
regulations in relation to a state subject to arms embargoes.
A large proportion of the transactions are products
unrelated to arms production, but you suspect a small
proportion relate to dual use items which have the potential
for weapons manufacture. The Company is frustrated that
import/export license process slows down legitimate
transactions.
Would you?
You advise that these transactions are highly likely to be
in breach regardless of the use to which the items are
put and if the Regulator identified any to be dual use
serious consequences are likely to arise for the
Company.
Prior to the company deciding what to do, should
you also advise the client on how to handle the
transactions so the regulator is significantly less
likely to scrutinise them?
Machine Tool Problem (GC/PP Group)
For those more likely to advise the
client how to handle the transactions
so that the regulator is less likely to
scrutinise them:
• Achievement ** and power*
(dominance) were higher
120.0%
100.0%
80.0%
yes
60.0%
no
40.0%
20.0%
0.0%
IHL
PP
What would you say the values of innovators were…?
Balance sheet problem…
77% said no
Universalism
1.5
Self-Direction
1
Benevolence
0.5
0
-0.5
Stimulation, .01
Conformity
-1
No
-1.5
Yes
Hedonism
Tradition
Achievement
Security, .1
Power
MIGHT THE INNOVATORS MINDSET
POSE A PROBLEM?
BRINGING ETHICS INTO FOCUS: HOW
REGULATORY FOCUS AND RISK
PREFERENCES INFLUENCE (UN)ETHICAL
BEHAVIOR
Gino and Margolis, Organizational Behavior and
Human Decision Processes
Volume 115, Issue 2, July 2011, Pages 145–156
Study 4
General Aspirations Frame
‘‘Statement of Research Mission & Aspiration –
This research project is being conducted to
advance the ideals and aspirations pursued by
applied social science.''
Promotion
Prevention
General Compliance Frame
“Statement of Research Code of Conduct – This
research project is being conducted with strict
adherence to the standards and obligations
required of applied social science.''
Promotion
Prevention
Results
THE DARK SIDE OF CREATIVITY:
ORIGINAL THINKERS CAN BE MORE
DISHONEST.
F Gino, D Ariely - Journal of personality and social psychology, 2012
26
Frames/values differ…
“I would say that the firm
that I work for is primarily
focused on its own
commercial interests…”
Regulation might make a difference?
IHLs
PP
Highly
Less
Highly
Less
Universalism - tolerance
7
5
4
8
*
Conformity to rules
5
9
5
12
*
Tradition
17
17
14
18
***
Power Dominance
18
15
18.00
17
*
A CHALLENGE TO LEGAL
KNOWLEDGE?
Resilient conservativsm?
What happens when Watson gets it wrong?
• System errors (Proctor v Raleys)
• Process not economics (Padden v
Bevan Ashford [2011] EWCA Civ 1616)
• Probabilistic vs Analytic Reasoning
Is innovation working?
•Machine learning
•Decision support
•Online Dispute Resolution
•Client Capture
Is regulation working?
• Which of those four falls within the regulatory
framework?
• Which are you most worried about?
• S17(4) LSA 2007 “legal activity” does not include
any activity of a judicial or quasi-judicial nature
(including acting as a mediator)
What might good system design look like?
• Stage- gating
• Intense, open and high quality
•
inclusion
• Responsiveness to legitimate
concerns
• Value sensitive design
• Reflexive culture (which
requires risk taking
leadership)
•
•
•
•
Risk: id, quantify and decide
Comply with law
Communicate nature and
purpose of innovation
Assess and review impacts
Engage with stakeholders
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Final thoughts…
• Conservative resilience vs narrowly framed evangelism
• Its not ABS vs law firms or innovation vs practice it’s:
• Business models within both sectors
• Regulatory framing
• The absence of evidence on practice
• The generation of evidence is weak, self-serving and not
transparent
• Does competition and innovation with limited transparency drive us
in a particular direction?