16 January 2012
The Irish Legal Services Regulation Bill has caused ructions over the future of the profession
Those trying to push through change tend to face resistance, but seldom is it as strong as that faced by Irish justice minister Alan Shatter at the moment.
On 4 October 2011 Shatter announced that government approval had been secured for the publication of the Legal Services Regulation Bill. The bill’s arrival had been expected for some time, but despite the profession expecting elements such as the establishment of an independent regulator, it was not greeted warmly.
The legislation has been drawn up in response to a commitment made when Ireland accepted its EU and International Monetary Fund bailout. It also follows a 2006 Competition Authority report that recomm-ended separating the representative and regulatory functions of legal professional bodies.
A&L Goodbody EU and competition head Vincent Power describes the 132-page bill as a “monster” that the profession is still working its way through. The bill’s main effect will be the establishment of a Legal Services Regulatory Authority (LSRA). Presently, the Law Society and Bar Council of Ireland carry out both regulatory and representative functions, but the bill proposes to split these in two. The LSRA would regulate solicitors and barristers in Ireland.
“I don’t think an independent regulator for the legal profession is a bad thing,” says McCann Fitzgerald chairman John Cronin. “We should get over that particular point, but there’s a legitimate concern about any powers the minister has.”
The concept of an independent regulator has received a mixed reception, but the element that has really caused an outcry is the proposal that the justice minister would have the power to appoint the 11 members of the authority. The Law Society and Bar Council will be able to nominate two members each for appointment, but not make the final decision, and of the seven other lay members one will be ’an officer of the minister’.
It is this perceived loss of independence that is driving responses to the bill. This element has also attracted criticism from international bar associations, with the American Bar Association, the International Bar Association and the Council of Bars and Law Societies of Europe all speaking out against it at a recent conference in Dublin.
While many other countries now have independent regulators for the legal profession, including the UK, lawyers see the extra level of government involvement as unacceptable.
“Part of the legislation appears to be driven by the minister’s own agenda,” says Mason Hayes & Curran head of litigation Declan Black. “Its reach is beyond any system for regulation of the profession that exists in a Western democracy.”
“If independent regulation comes in we’d like to see a model that’s consistent with the best international standards,” says Arthur Cox managing partner Brian O’Gorman. “We’d be more comfortable if amendments were made to bring it into line with best practice.”
Lawyers are also concerned that the regulatory system as proposed would be unwieldy and costly. In addition to the 11 LSRA members, there will be a disciplinary tribunal with 16 members - again appointed by the justice minister - and, presumably, staff to support both operations.
How the new structure will be funded is unclear; the bill suggests the government will fund the LSRA, but practitioners are concerned that costs will be passed down to a profession already under economic pressure.
“We’re looking at a multimillion-euro operation,” notes Power.
“One issue members are focused on is the fact that at the moment a lot of what the Law Society does, it does with the input of solicitors on basically a cost-free basis,” says Arthur Cox partner Michael Meghen. “There’s concern that the new system, funded by a levy on the profession, will be a lot more expensive.”
The sheer speed with which the bill has been published is also a concern. It appeared just months after Shatter became justice minister. Many feel the legislation is being driven more by economic considerations than a need for reform, as well as a perception that Ireland’s legal costs are substantially higher than the European average.
“The question is fundamentally, will the Irish profession be better regulated?” Power asks. “How will clients look on it? How will compliance costs be dealt with, and how will the international legal community look at it?”
“This isn’t a lawyer’s issue, this is a citizen’s issue, and it’s also a business issue,” Black points out.
However, Cronin calls for the profession to step back and look at the substance of the legislation rather than reacting emotionally.
“Some of the initial reaction may have focused on people’s hostility to Shatter,” he says. “We need to take the politics out of it. As lawyers we should be looking at what it says. I welcome a healthy debate, but not a political debate.”
Power counters by pointing out that the speed at which the bill was put together has already led to the publication of errata.
“What’s essential is that this bill is well thought through,” he says. “Better than the heavy regulation that’s presented would be risk-appropriate regulation. If it leads to higher compliance costs without better and more targeted regulation it won’t have achieved its aim.”
However, there are elements of the legislation that Ireland’s commercial firms, at least, do welcome. Top of the list is the proposal to remove the monopoly on the training of solicitors from the Law Society, potentially opening professional education up to new providers.
O’Gorman says the removal of the monopoly would be a positive, particularly for corporate firms. He thinks it would enable providers to train solicitors for commercial and corporate law more effectively.
Cronin agrees. “The Law Society will be aware that a number of firms have had valid concerns for years about a number of aspects of legal training,” he says.
Another possibility raised by the legislation is the introduction of multi-disciplinary practices (MDPs). The legislation currently states that “no professional code” will be able to prevent MDPs, but a consultation will be needed to work out what changes need to be made to permit them in practice. Along with MDPs, there is a strong chance that Ireland will at last allow lawyers to set up LLPs.
Both proposals are welcomed by lawyers, although with caution.
“Clearly, it’s something we’ll watch closely,” says Meghen. “As it’s nothing more than an agenda item in the bill it’s something that’s difficult to have a view on.”
Some feel that because Ireland does not allow MDPs or LLPs it puts them at a disadvantage compared with their international peers -
a key point, due to the fact that international work is helping to keep big firms afloat at the moment.
“Our competitors aren’t just in Ireland,” explains A&L Goodbody managing partner Julian Yarr. “We want a relatively level playing field.”
“Not having LLPs places Irish firms at a competitive disadvantage,” agrees Black.
Cronin takes a more neutral stance on the issue, saying he does not think McCann Fitzgerald has lost or won work because of its structure.
“I don’t think that from a competition perspective we can oppose it,” he argues. “Competition is a good thing in broad terms. All day every day we compete for work, all day every day we compete for trainees,and all day every day we compete for solicitors.”
But he adds that McCann Fitzgerald does not put the need for LLP status at the top of its agenda.
“We’ll look at it if it comes in - if people are concerned about liability they can do it in the standard terms and conditions,” Cronin points out
Time at the bar
Despite their reservations about the politics involved in the bill Ireland’s big firms do not think their business will be too badly affected. The
bar is most likely to be impacted, as the legislation will mean sweeping changes that will take it from being a profession of self-employed individuals to one more like the English bar. Small firms could also be affected, particularly if practising certificate fees do, as predicted, rise.
Nevertheless, the profession is set for a period of lobbying and advocating to minimise what it sees as harmful provisions. The Law Society has set up two task forces to address issues arising from the legislation and there is also resistance from opposition party Fianna Fáil.
O’Gorman believes Shatter’s aim to get the bill passed within months is “optimistic”.
“I believe we’re in a wait-and-see phase,” he adds. “We’re looking at it closely, but we’re waiting to see how things develop in the next few months.” He predicts a “reasonable amount of change” between the published legislation and the final form of the bill.
Lawyers predict the bill will go through, however, in some shape or form.
“There’s a lot of resistance but the minister’s very determined,” Black concludes.
Following in the footsteps of its larger neighbour across the Irish Sea, the Irish legal community is set for a shake-up following legislative proposals. But the Legal Services Regulation Bill has proved less popular than its UK counterpart, and will be heavily lobbied against.
2011 in review
Last year was an odd one in several ways for the Irish legal market. While at the bottom end of the profession smaller firms continued to struggle with limited amounts of work, particularly in the property sector, and a difficult professional indemnity insurance renewal period, larger firms continued to benefit from the restructuring of Ireland’s financial services sector.
Arthur Cox managing partner Brian O’Gorman says the firm was kept busy advising the state on restructuring issues until the end of July, the deadline for getting the bulk of the issues dealt with.
However, since then, O’Gorman reports activity levels similar to 2010, despite a slump in corporate work.
“We’re pleasantly surprised that we’re managing to keep our teams busy,” he says.
A similar story can be found at other large commercial firms.
“We probably haven’t see the same kind of drop as in the UK at the back end of the summer,” says A&L Goodbody managing partner Julian Yarr, adding that the firm had a “solid year”.
McCann Fitzgerald chair John Cronin believes 2011 was a good year for the firm, thanks to its resilient client base. He says international work has kept flowing in, with pledges by the Irish government ensuring that inward investment remains strong.
Alan Shatter TD,
Minister for Justice, Equality and Defence
Architect of the Legal Services Bill is Irish justice minister Alan Shatter, a career politician, having sat in the Irish parliament, or Dáil, from 1981 to 2002 and, more recently, since 2007 as a member of Fine Gael representing Dublin South. He is also a family solicitor and joined Gallagher Shatter Solicitors in 1976. Between 2002 and 2007 Shatter returned to the firm as a consultant.
He was appointed as justice minister in March 2011. Shatter previously acted as Fine Gael spokesperson for justice, among other front bench roles.
While in opposition he published more private members’ bills than any other deputy in Irish history, with legislation proposed on topics as varied as social reform, criminal law, international law, the environment and sport.
Reaction to the Legal Services Regulation Bill
Bar Council of Ireland: Has concerns over the structure of the regulatory authority and the potential effect of rising costs.
Also opposes multi-disciplinary partnerships.
“If partnerships are to be introduced, this will dramatically contract the available numbers of barristers and greatly restrict access to justice for those who cannot afford legal representation’” said Bar Council chair Paul O’Higgins SC. “[…] Prices will be driven upwards as partners, especially in niche areas of the law, can set their price to meet market demand, which will increase as access lessens.”
Law Society of Ireland: “The bill threatens every citizen’s right to receive advice from a legal profession that is free of improper interference and the direct control of government,” incoming president Donald Binchy told the Irish Law Society Gazette in its December 2011 issue. “It proposes a model of regulation of the profession that is unknown in any free democratic society.”
While warning that the bill threatens the independence of the profession, the Law Society of Ireland did welcome the provisions on costs. It has set up two task forces, the LSRB Task Force and the Future of the Law Society Task Force, to address the Law Society’s response to the bill.
Council of Bars and Law Societies of Europe (CCBE): The CCBE’s first vice-president Marcella Prunbauer-Glaser, speaking at a Law Society conference last December, expressed the association’s concerns about the bill. Criticism centered on the potential loss of independence.
“We are concerned that yet again initiatives are being taken based on a purely economic approach, and that legislative proposals have been hammered out within a few weeks without taking account of the purpose and justification of professional regulation, and without analysing the impact of such proposals on the administration of justice,” Prunbauer-Glaser said. “We are worried that this will lead to an erosion of the administration of justice. This will not only affect the structure of the legal profession and the lawyer’s role in society, but will be to the detriment of all people who are in need of a lawyer.”
International Bar Association (IBA): IBA executive director Mark Ellis has said that the association’s main concern is the level of control the bill would give the government over the legal profession.
“If the bill is passed you’re looking at a scenario where the legal profession will lose its independence and the government will obtain significant control over it,” he said. “That result would be inconsistent not only with the IBA’s principles but would also be a violation of UN principles and certainly a violation of EU regulation as well.”
He said the level of government interference would put Ireland’s regulation of the legal profession on a par with that in many developing countries. “I don’t understand how the government feels this regulation will be viewed as positive in the international community,” he added.
Where to eat in Dublin
L’Ecrivain is best for business, with good food - one Michelin star - and professional service: they’ll either engage or be discreet depending on how they read you.
A nice room with no risk of being overheard.
The Ely is a great, warm, wine bar with good bistro food. Perfect to entice a new partner to bed - literally or metaphorically.
Declan Black, Mason Hayes & Curran
Chapter One is a beautiful Michelin-starred restaurant. It is generally fully booked most evenings as it is close to the Gate Theatre. Ideal when you want to create a good impression with a client.
Dax is a popular restaurant with corporates, with a formal restaurant and cafe. Excellent service and a good location for financial services.
Julian Yarr, A&L Goodbody