2023 is likely to be a year of more uncertainty for UK law firms. Having come out of the other side of Brexit and, more recently, COVID-19, law firms are now grappling with the “war for talent”, making hybrid working permanent, and surging professional indemnity insurance premiums, among many other challenges. In this article, we will take a look at some of the regulatory developments that law firms can expect in 2023.
SRA Will Continue To Exercise Its New Fining Powers
In July 2022, the SRA’s fining powers were increased from £2,000 to £25,000. As a result, in 2023, it is expected that the SRA will continue exercising their new fining powers and refer fewer cases to the SDT. As the Law Gazette points out, fewer cases being referred to the SDT may come as welcome relief as they have to relocate their offices after a costly landlord dispute.
2023 may also see the SRA receiving additional powers under Suella Braverman’s Economic Crime and Corporate Transparency Bill.
Push For Transparency And Ongoing Competence From The Frontline Regulators
On 12th January 2023, the Legal Services Board (LSB) published its annual assessment of the performance of eight legal services regulators. The report highlighted areas for improvement in a number of areas, including, amongst other things, transparency, capacity and capability, and enforcement. On transparency, the LSB report stated, “there is a need for some regulatory bodies to increase transparency, particularly in respect of their decision-making processes. We have found that some regulatory bodies have policies that should enable them to provide sufficient transparency, but they either do not publish enough information in practice or do not do so in a clear enough manner to provide meaningful transparency”.
Hybrid Working Placing Pressure On Regulatory Compliance In 2023
Since the COVID-19 pandemic, hybrid working has been adopted across the legal sector, but not with equal success. The implementation of hybrid working has been slow and minimal in some firms, whereas others have fully embraced this way of working. In 2023, it is expected that law firms will try to get to grips with their hybrid working practices. Qualified legal practitioners are currently in short supply, and, therefore, law firms need to provide fringe benefits such as hybrid working that match their expectations.
Where law firms have not implemented permanent and robust policies which ensure regulatory compliance, they will most likely need to do so in 2023. Law firms implementing permanent hybrid working policies will need to balance the time spent in the office and time spent at home and also ensure that regulatory compliance is maintained.
SRA Getting Involved In Technology-Enabled Dispute Resolution
On 1st December 2022, the SRA announced that it had been given a grant of £119,691 from the latest round of the Regulators’ Pioneer Fund. The announcement explained, “The money will fund a project to explore ways to increase the use of technology-enabled dispute resolution to help individuals and businesses resolve legal issues, without the need to go to court”.
The project, which will start in September 2023, will see the SRA working with the Access to Justice Foundation and the Law Society and aims to encourage the development of technological solutions, which will promote and expand the use of dispute resolution across England and Wales. The award made to the SRA is one of 24 Regulators’ Pioneer Fund grants totalling £12 million announced by the Department for Business, Energy and Industrial Strategy (BEIS). The grants are being awarded as a way to “drive forward innovation, remove regulatory red tape and establish the UK as a world leader in technologies of the future”.
SRA Continues To Consult On Changes To Its Standards And Regulations
In December 2022, the SRA announced it was consulting on changes to its Standards and Regulations based on feedback from stakeholders. The proposed amendments relate to the removal or amending of “impractical or unduly time-consuming requirements”, including in the areas of:
- firms reclaiming costs paid out on behalf of the client
- firms managing bank accounts run on behalf of clients
- allowing solicitors to more easily do pro bono work, or administer oaths or statutory declarations outside of their employment
- when indemnity insurance requirements apply for solicitors working in non-regulated bodies
The consultation closes on 8th March 2023.
SRA May Take Action Relating To Post Office Horizon IT Scandal
And finally, the SRA will be ‘closely following’ the Post Office Horizon IT scandal Inquiry. Between May and July 2023, phases four and five of the Post Office scandal Inquiry are expected to hear evidence on civil and criminal proceedings, knowledge of and responsibility for failures in investigation and disclosure, and conduct of the group litigation.
On 14th October 2022, the SRA published a statement confirming that it was closely following issues relating to the scandal, which saw sub-postmasters and mistresses (SPMs) prosecuted between 2000 – 2013 for alleged offences using evidence provided by the ‘Horizon’ electronic accounting system. Many of the convictions have now been quashed, however, the SRA is looking closer at individuals and law firms that they regulate who worked for the Post Office/Royal Mail Group. The announcement stated, “We are considering the judicial findings in the group civil litigation. In respect of the criminal prosecutions, we are assessing whether individuals we regulate fulfilled their duties and ensured the prosecutions were carried out fairly and information and documents were disclosed when required”.
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