The OFT report: the legal

The OFT is launching an attack on legal professional privilege following the publication of its long-awaited report into the professions.

The report, looking at competitiveness among lawyers, accountants and architects, called on both the Law Society and the Bar Council to make faster progress on increasing competition. Trade & Industry secretary Stephen Byers backed the report’s finding that lawyers and accountants should not be exempt from the Competition Act.

In a far-reaching report, the new Director General of Fair Trading John Vickers recommends the introduction of multidisciplinary partnerships and the abolition of QCs, alongside calls to tackle professional privilege.

He says in the report: “As, for example, in the provision of tax advice, where lawyers are in competition for work with non-lawyers, legal professional privilege can distort competition.

“There are clearly fundamental arguments for protecting the exchanges between clients and their legal advisers. However, in such cases, there is an argument for reviewing the scope of privilege to remove the distortion in competition that favours the lawyer.”

Solicitors have reacted angrily to any suggestion that their privilege should be reduced, although there was a more positive reaction to privilege being extended to other professionals. Currently, accounants are bound by duty to disclose, whereas solicitor-client confidentiality can be upheld in court.

Bill Knight, senior partner at City firm Simmons & Simmons, says: “I think anything that means a client can’t speak in complete freedom to their lawyer on any subject, once you move out of areas of obvious criminality, is something I wouldn’t want. I’m sorry if that distorts competition, but it protects the public and is extremely important.”

Daniel Fitz, general counsel at Cable & Wireless, adds: “There is a reason for having professional privilege, and if there’s as good a reason for the accountants to have it then fair enough. Private practice tax lawyers enjoy having that privileged position at the moment.”

But while he agrees with an extension, he says any reduction of privilege for lawyers would be a bad thing. “Often the client is coming to their lawyer because they don’t know what the legal ramifications of the facts are, and as a lawyer you need to know all the facts.”

On MDPs, the OFT called not only for action to be taken to remove regulations restricting them, but also for that action to take effect next year. In his conclusion, Vickers says: “[Our approach] allows a period of one year for this action to be progressed. This would avoid the need for intervention, provided real progress is made. We will take action after this grace period if necessary, or earlier if there is no evidence of willingness to make changes.”

Lawyers in the accountancy-tied law firms say the report was not surprising. Christopher Tite, managing partner at Ernst & Young firm Tite & Lewis, says: “The content of the report was pretty much what we were expecting. I think it will add to the pressure to get on and do something to the rules, and of course The Law Society is already trying to do that. The big issue now is not if, but when.”

Nick Holt, managing partner at KPMG’s firm KLegal, says: “We are more than encouraged by the Director General’s report, and look forward to working with the various authorities to see how the rules can be changed. I see this as a very positive report coming at a crucial time in the debate.”

Simon Johnston, senior partner at Nabarro Nathanson, says the call for MDPs is not threatening. “We’re not particularly concerned about MDPs,” he says. “Along with the US firms, we obviously see them as more competition, and we’ve been reacting to that and focusing on our own business. I think we’re competing with them already.”

Some of the most surprising comments were levelled at the bar. The OFT asked ministers to consider the distinction between QCs and junior barristers because of the significant effects on competition and asked whether the sole practitioner restriction on barristers was necessary, or whether they should be allowed to form partnerships. It also recommended direct access for barristers to clients.

On top of that it suggested that barristers should be allowed to conduct the litigation process.

On the issue of barristers forming partnerships, Andrew Arden QC, head of Arden Chambers, says: “The OFT is only saying what I’ve said before in The Lawyer, and there is yet to be a reasoned response from the Bar Council as to why partnerships between barristers should not be permitted where barristers want to do it.”

One silk at a leading public law and commercial set says that the proposal to abolish the QC system is unnecessary. “The thing about a QC is that it’s like the Kitemark – it shows someone has been around for a long time and that they’re experienced and highly regarded. The appointment system is very important, and if its looks transparent and fair then it should survive.”