This past April, the Law Society of Ontario voted to approve a five-year regulatory sandbox pilot designed to allow the delivery of legal services through innovative technology. The move is reflective of new needs and opportunities that have arisen in particular in the wake of the COVID-19 pandemic, and as a result of recent digital innovations in fields such as artificial intelligence. Importantly, it addresses the grey area in which legal technology companies have been operating.
WHAT IS A REGULATORY SANDBOX?
The purpose of a regulatory sandbox is to allow tech companies to “conduct
live experiments in a controlled testing environment under a regulator’s
supervision”. The concept was borrowed from the financial sector, which
has used the sandbox model to allow for experimentation with financial
technology or “fintech”. It grants tech companies space to innovate without
worrying about illegal practice, gives the regulator time and space to test
regulations and ensure their effectiveness before formalising them, and
offers consumers new options.
HOW WILL ONTARIO’S PILOT WORK?
Starting in Q4 of 2021, interested parties will apply to the Law Society for inclusion in the sandbox. Applications will be reviewed by an external panel of experts, and ultimately the sandbox manager will decide whether the application will be approved. According to the Law Society, “eligibility at the initial stage will be open to the widest possible range of [innovative technological legal services]” (“ITLS”), although some applicants, such as those focused on improving access to justice, will be given preferential treatment.1
The participants will be allowed to operate their ITLS tool for a period of approximately two years. They will need to provide various metrics – “individually tailored” based on the product or service2 – regularly to the sandbox team. This data, in turn, will inform not only decisions regarding the ITLS tool, but will also help the Law Society better understand the place of technology in the delivery of legal services, enabling it to draft general regulations and policies.
Once a participant has completed the pilot, the Law Society will determine whether the company can continue to operate in Ontario. It can then issue a permit, contingent on any conditions it sees fit.3 Ultimately, the data collected throughout this pilot could lead to more permanent changes in the Law Society’s regulations that would allow certain ITLS to continue operating at the end of the pilot.
BENEFITS OF ONTARIO’S LEGAL TECH SANDBOX
With over 80% of the public not seeking professional legal advice, legal tech companies address a serious access to justice concern. ITLS can fill an important gap in the provision of legal services, offering a cheaper and more convenient way to access them.4 At the same time, the public is protected since inclusion in the sandbox requires that ITLS consumers “have the same type of safeguards available to clients of licensees”.5
Another advantage of the sandbox is its potential to inform both licensees and the Law Society about public interest in legal services offered via technology and the types of customers it will attract. Lawyers and paralegals will have a better understanding of the public’s needs and will therefore be able to adapt their practice accordingly or develop new tools to reach out to another type of customer.6 The Law Society will also acquire a better understanding of the market for these types of tools, including risks and benefits, allowing them to make more informed decisions for future regulation.7
Finally, the regulatory sandbox should enhance innovation. Proper guidelines significantly reduce the risk of accidental illegal operation and consequently the threat of having to cease operations. Companies will be more inclined to develop innovative platforms offering new services and targeting new consumers in areas of unmet needs8, further growing the legal tech market.
RISK AND CONCERNS
Protection of the public is the largest concern associated to allowing an unlicensed person to perform tasks normally restricted to professionals. The Law Society – whose primary purpose is to protect the public and who has been delegated responsibility for regulating the profession – must be cautious when creating exemptions that allow unlicensed persons to provide legal services.
However, some tasks lawyers do are repetitive and can be automated. For instance, lawyers rarely draft contracts or procedures from scratch, instead relying on and updating precedents. If lawyers are increasingly turning to technology to automate these tasks, why should the public – particularly people who cannot afford to hire legal representation – not be able to benefit from similar technology? Further, any risks relating to the quality of the technology can be better dealt with within the limited context of a regulatory sandbox, as opposed to in the open market.9
In addition, there are also risks to the Law Society, including: (1) an insufficient number of applicants for the sandbox; (2) insufficient evidence to support any decision-making regarding future regulation; (3) a risk to its reputation should approved tools fail to provide quality legal services. Each of these risks are addressed by the Law Society in their Report on Regulatory Sandbox for Innovative Technological Legal Services; ultimately, the risks of not launching the sandbox are seen as more important than accepting the status quo.
In adopting the regulatory sandbox pilot, Ontario follows the BC Law Society, which in September 2020 approved a similar plan. It also follows Utah, the sandbox leader in the United States. Last year, Utah created a two-year regulatory sandbox aimed at increasing access to justice; it is expected that California will soon follow suit. In the United Kingdom, the Solicitors Regulation Authority launched its own sandbox, SRA Innovate, following the success of its Legal Access Challenge in 2019, which saw innovative legal tech companies compete for additional funding of their access to justice solution.
IMPLICATIONS FOR QUEBEC
For such a program to apply in Quebec, regulations regarding unauthorized practice would need to be amended, as they were in Ontario. Specifically, legal technology companies would need to be included in the list of exempted persons able to provide at least some of the services listed under section 128 of the Act respecting the Barreau du Québec, which seems unlikely for the foreseeable future.
Over the years, the Barreau du Québec has maintained a stranglehold on the provision of legal services in the province, and this, despite access to justice concerns. Compare, for instance, what legal services paralegals and law students are entitled to perform in Quebec versus in other Canadian jurisdictions. In Ontario, paralegals can represent members of the public in small claims court, for provincial offences under the Provincial Offences Act, in various tribunals, and even on certain summary conviction criminal charges. Law students, for their part, are permitted to represent clients – provided they are under the direct supervision of a licensed lawyer – in every province in Canada except Quebec. Bill 75, which was recently passed in Quebec, “proposes” that Quebec law students be able to provide legal advice and consultations. However, the provision permitting students to provide these services only comes into effect once the Barreau’s Board of Directors passes a by-law clarifying standards that will be applicable to students. So not only are the services law students in Quebec entitled to give more restricted than in other provinces, but they are also still hypothetical.
Given how slow Quebec has been to catch up to other provinces when it comes to allowing these other groups to provide legal services to the public, it seems unlikely that we will see a similar regulatory sandbox project in Quebec for legal innovation. That being said, the growth of Quebec’s legal tech start-up community and artificial intelligence hub may put enough pressure on the Barreau to act in this area and lead the way in promoting greater access to justice.
- “Technology Task Force Report on Regulatory Sandbox for Innovative Technological Legal Services” (22 April 2021) at 17, online (pdf): Law Society of Ontario <lawsocietyontario.azureedge.net/media/lso/media/about/convocation/2021/convocation-april-2021-technology-task-force-report.pdf>.
- Ibid at 20.
- Ibid at 21.
- Ibid at 8.
- Ibid at 9.
- Ibid at 10.
- Ibid at 8.
- Ibid at 10.