Canada and U.S. Launch Regulatory Sandboxes to Improve Access to Justice

Two of Canada’s largest provinces are testing new ways to deliver legal services, joining a growing push in the U.S. to experiment with approaches such as letting non-lawyers own law firms, Bloomberg Law reported.

According to Bloomberg, Ontario and British Columbia are following the template of Utah, which collects data on operations including Rocket Lawyer, which helps people draft wills, leases, and other documents through an online platform. Utah’s test also includes companies that assist with medical debt and offer AI-enabled contract drafting tools.

Canada’s move adds momentum to the notion that a broader range of legal service delivery models will address an access-to-justice crisis in both countries and hasten the development of legal technology as a tool in helping bridge the gap, Bloomberg Law stated.

The British Columbia program includes a half-dozen paralegals with enhanced authority to provide a range of legal services. One, for instance, will operate an online digital platform to help residents create wills and powers of attorney, and another will provide an online lawyer referral service.

The Utah Supreme Court in August 2020 approved the state’s program that includes more than two dozen entities, ranging from small consumer financial and family law operations to Rocket Lawyer, with more than 250 employees.

The first Canadian province to follow Utah’s lead was British Columbia, which launched its own experiment, or “sandbox,” last December, Bloomberg reported. The province made two separate regulatory changes that allow the participation of individuals, companies, and law firms that want to explore new technologies and business structures.

Canadian regulations, like those in the U.S., limit the ability of nonlawyers to co-own legal operations, so legal reformers sought a sandbox as a way to convince traditionalists that new delivery models would protect the public.

According to Bloomberg, the sandboxes let law societies—Canadian provincial groups that have roughly the same regulatory authority as state bar groups in the U.S.—”loosen regulations to try something new in a controlled environment,” said Amy Salyzyn, a law professor with the University of Ottawa, in a written statement.

Ontario approved a five-year sandbox in April and will begin accepting applications later this year.

The officials were “in pretty constant communication” with people in Utah to compare notes, said Jacqueline Horvat, chair of the Law Society of Ontario’s Technology Task Force, to Bloomberg Law.

Ontario boasts the most lawyers of any Canadian province as well as the most robust legal technology sector, including startup companies in and around Toronto, Bloomberg reported.

An advantage of the experiment be that officials ensure technology works properly before unleashing it on legal consumers, Horvat said to Bloomberg.

Momentum for sandbox programs in the U.S. has been building for several years. According to Bloomberg, New York, Illinois, Connecticut, North Carolina, and Florida are in the beginning stages of considering legal system rules changes that could give companies more opportunities to compete with law firms through sandboxes or similar structures. Washington State is the newest to be added to that list.

Arizona took a somewhat different course a year ago, when its Supreme Court eliminated state ethics rule 5.4., which had barred non-lawyers from having economic interests in law firms. Yet most states considering changes are more likely to go the sandbox route, allowing them to move more incrementally while keeping consumer protection at the forefront.

A California State Bar working group appears to be the furthest along toward a new sandbox, Bloomberg wrote. Its next step would be to pass along a proposal to the Bar’s Board of Trustees.

Whether in the U.S. or Canada, a proliferation of sandboxes could have several positive unintended consequences, said Jordan Furlong, a Canada-based legal sector analyst, to Bloomberg. For example, sandbox administrators may wish to broaden their mandates so they can work with legal tech startups as “incubators” to proactively help develop their tools, he said.