Association also calls for controls on use of AI to draft bills amid data concerns
A full review of the Legal Services Act 2007 is required to bring it up to date, including clarification of whether bills of costs and points of dispute are reserved legal activities, the ACL has said.
The Association also called for controls on the use of artificial intelligence (AI) to draft bills, given the data risks.
The ACL was responding to a consultation on the Legal Services Board’s (LSB) draft business plan and budget for 2026/27.
A “full review” of the Act should be commissioned “to ensure that the wording is up to date and reflects the intention of the rules, to avoid a repeat of the consequences resulting from Mazur, and to bolster consumer protection”.
The response explained: “Regardless of the outcome of the appeal… there remain many anachronisms within the Act that require correction.”
There needed to be for “further clarity” on the exemptions for unauthorised persons undertaking reserved legal activities; and specifically whether bills of costs, points of dispute and replies constituted an ‘instrument relating to court proceedings’ that, under clause 5(1)(c) of schedule 2, were reserved activities.
It went on: “The phrase ‘in chambers’ in the context of rights of audience is also not clearly defined. The Act still refers ‘law costs draftsmen’ as authorised persons, when in actuality authorised persons are known as Costs Lawyers. Unauthorised individuals often refer to themselves as costs draftsmen, increasing the risk of consumer confusion.”
Also on Mazur, the ACL highlighted the LSB’s interim report last month that showed some of the information provided to lawyers over the years about the conduct of litigation was not clear enough and that the different regulators and representative bodies in the profession did not work together on the issue.
The ACL said: “In our view, it would be helpful going forward if any guidance issued on reserved legal activities by the individual regulators/regulatory bodies is reviewed, checked and consolidated by the LSB, in their capacity as the independent oversight regulator.
“This should ensure consistency and minimise detrimental outcomes for practitioners and consumers.”
The response welcomed the LSB’s proposed creation of a professional ethics network to achieve the “cultural step-change” required to improve standards among lawyers.
“We consider it would be prudent to elect legal representatives from across the sector to the PEN (i.e a Costs Lawyer, solicitor, barrister etc) who will establish a committee within their own practice area and provide any feedback to the LSB.”
The ACL agreed with the oversight regulator that the widespread use of AI required careful monitoring.
“In our practice area, we are particularly concerned about the growing use of AI for the drafting of bills of costs; there is a very real GDPR risk to consumers, noting the sensitive data that will be recorded in attendance and other file notes.
“Currently there is a lack of regulation or security in circumstances where the use of AI breaches any existing rules and regulations. This risk is exacerbated by consumer confusion as to the distinction between costs draftsmen/draftspersons, who are unregulated, and regulated Costs Lawyers – who are required to hold professional indemnity insurance and maintain professional standards in line with regulatory rules.
“Bills of costs are formal court documents, and arguably the drafting of the same could constitute a reserved instrument activity under the Act. If bills of costs are not compliant with the rules or are not accurate, contrary to the signed statement of truth, they can be struck out.
“Therefore, until consumer confusion is addressed and the risk of exposure to consumers is diminished, the use of AI in costs-related matters should be more tightly regulated/restricted.”
The ACL agreed with the LSB that litigation funding should be regulated by the Financial Conduct Authority and suggested, as a further safeguard to avoid collapses like SSB Group, requiring annual or bi-annual audits as part of the permitted use of litigation funding. “These could be conducted by regulated Costs Lawyers.”
The response noted the rising number of complaints going to the Legal Ombudsman, and expressed concern “that there is a clear gap in monitoring of complaints against individuals that are not regulated, and a lack of consumer clarity with regard to the extent of work falling under the reserved legal activities under the Act”.