Body blows

As Sir David Clementi’s rolling review of regulation shifted up a gear towards the end of last year, there were signs of friction between the two sides of the profession. “Law Society attacks Bar Council”, ran the headline in the Financial Times last month.

So what was the nature of the spat? Janet Paraskeva, Chancery Lane’s chief executive, squared up to the new Bar Council chair Stephen Irwin QC and suggested that barristers had a – wait for it – less than “contemporary” take on the fraught subject of multidisciplinary partnerships (MDPs).

Heaven forbid that anyone accuse the bar of being anything other than bang up to date. Nevertheless, this apparent disagreement arose when the new bar chief dismissed those new-fangled arrangements, MDPs, as “nothing more than a marketing tool”. He went on to demonstrate just how au fait he was with the latest trends by saying that mixing lawyers (with their ethical duties) and other professionals was “bad karma”.

So should the bar just get with the times? “It’s not a question of being contemporary or fashionable – regulation is just too important,” Irwin maintains. “If you place a lawyer in a position where he or she has financial interests in common with people who don’t have ethical obligations, you’re creating a recipe for trouble.”

So why are MDPs ‘bad karma’? “You have to have everything in tune and for my money they don’t do that. They destroy organisations that have good ethics,” argues Irwin.

Irwin is keen for the debate to “keep calm” and resists any point-scoring between the two sides of the profession. However, he notes: “There are more solicitors around who are critical of MDPs and in favour of the silk system than Law Society official policy would imply. I’m not criticising the Law Society, but I think that’s where the balance of feeling is.”

One imagines that the Law Society’s hackles were raised not just over Irwin’s comments on MDPs (hardly the most urgent issue at Chancery Lane post-Enron), but also because of his stance on self-regulation. Basically, the bar’s line is that if the Law Society loses its self-regulatory powers because of its complaints-handling record, it does not necessarily follow that the bar has to lose its powers as well “for other people’s mistakes”. “One size doesn’t fit all,” states Irwin.

As Clementi travels the country consulting on his reforms, it must be unhelpful that the two sides of the profession do not see eye to eye on such fundamental elements of reform. “There are many, many things that we agree on and some that we don’t,” acknowledges Paraskeva. She insists that the Law Society was not “attacking” the Bar Council, no matter how the exchange was characterised in the press. “We just have a different perspective, and that’s because the sole practitioner and firm are different economic models, and the one thing driving the reform is competition,” says Paraskeva. “Some 50 per cent of our members are in big firms and global, international practices, and what they need is a regulator that can respond to their needs and that’s quite different from the sole practice, which each member of the independent bar employs themselves in.”

One should not expect ‘2004: the year of Clementi’ to be a leisurely stroll around some fairly well-worn issues. Certainly, that was the Christmas message delivered by Lord Falconer directly to the Law Society Council. It was the first time that a lord chancellor had spoken directly to the solicitors’ ruling body. “There can be no sacred cows in seeking to deliver the high standards of services that customers want,” he said. “But we must not let the welcome fact of the work of the Clementi Review put a stop to all progress in the meantime. We need to work together to examine areas where change for the consumer’s benefit can be delivered in the short and medium terms.”

In particular, Lord Falconer flagged up three discrete areas – MDPs, the role of employed solicitors and the liberalisation of the probate market – which solicitors could look at “quickly and imaginatively” without the need to wait for the Prudential chairman’s report. Paraskeva points out that Chancery Lane has been supportive of MDPs since 1999 and, as for employed solicitors, the Law Society is waiting for the parliamentary time it believes is needed to pass the primary legislation to regulate incorporated practices.

Even so, Chancery Lane was quick off the mark. Almost immediately after the Lord Chancellor’s visit, the Law Society Council voted to lift the ban on referral fees. To put that into context, scrapping that restriction has been on the agenda for the best part of 10 years. For a long time the ban has been more honoured in the breach than the observance. For a large section of the profession, referral fees have long been a reality of modern commercial practice (such as those personal injury lawyers who pay claims management companies for work. If they did not make them, many would simply go out of business). However, others swear blind that any relaxations would impact on the independence and reputation of the profession and, of course, they would have to pay up themselves. In particular, conveyancing solicitors complain that they would have to pay fees to estate agents.

Given that Chancery Lane had ceded ground on other arguably more important aspects of deregulation (such as the prohibition on employed solicitors offering legal advice directly to the public and fee-sharing), it seems odd that referral fees should become such a point of principle.

When the council voted against lifting the ban in June, a clearly irked Andrew Holroyd, chairman of the Law Society Standards Board, voiced his frustration with the traditionalist lobby. “It’s inconsistent with our stance on every other issue, whereby we want to open the market to enterprising solicitors so they’re able to provide services in any way that’s compatible with retaining our core values of independence and integrity,” he told The Lawyer (LawZone Newswire, Issue 243, 13 January). “If lawyers wish to remain their own rulemakers, we’re going to have to show we can make sensible rules in the public interest – and consistent ones at that.”

The sweeping spirit of deregulation through Chancery Lane has left many smaller practitioners feeling increasingly disenfranchised in its wake. Clive Sutton, chairman of the Sole Practitioners Group, is admiring of the bar’s more strident position, as articulated by Irwin. “The bar is the last repository of fairness and conscience in this country,” he says. “You feel that barristers will say anything which is impartial and correct, whereas solicitors, because they have their own agenda and are possibly looking to be bought out by the big organisations, don’t.”

So what does Sutton think is at risk from those that are pushing for the Tesco Law vision? “They’re effectively doing away with high street practice and the high street solicitor,” he says. “Large organisations will come in with these big factories of lawyers and paralegals and they’ll effectively take away the decent work from the high street.”

So what do the proponents of Tesco Law make of the Law Society’s progress so far? “They’re making strides towards opening up the profession,” says Jonathan Gulliford, director of legal services at motoring group the RAC, which has been pushing hard for liberalisation. “It’s been a long time coming and obviously they aren’t going at the pace I’d like.” The RAC’s “10-year goal” is for its 105-strong department to become “the biggest private client legal firm in the country”, offering much more than just motoring-related legal services. Gulliford wants to run “a solicitor’s practice which to the client is exactly like any other private practice firm”, with the “only difference” being that the owner is the RAC and the name is linked to the RAC brand. Can anything stop Tesco Law? “My only fear about deregulation is the general election,” Gulliford says.

The profession’s woeful track record on complaints handling in the past poses a more intractable problem for Chancery Lane. According to Emma Harrison, who has been following the Clementi Review for the Consumers’ Association, the Law Society has made “good inroads into dealing with complaints handling” under Paraskeva. She does not take the view that external regulation necessarily keeps the professionals on their toes. “We often think that professionals are more robust in their dealings with their members – the Bar Council is an example of how complaints can be dealt with well,” she says. “Professionals are often tougher on their own than outsiders could be.” But she reckons that unless the Law Society can turn around complaints, the Department of Constitutional Affairs will have “no option other than to remove the powers from the Law Society”.

Paraskeva believes that the Office for the Supervision of Solicitors’ worst problems are now in the past and only hopes that it has the time to demonstrate that. “We’ve had six months now where we’ve been closing more cases than we’ve been receiving, and that’s not just a blip,” she says. It remains to be seen whether there is enough time for the Law Society to argue its way out of the “Last Chance Saloon”, which is, as the last lord chancellor Lord Irvine put it, where they have been drinking for the last five years.

How does Paraskeva answer her critics, who claim that Chancery Lane is selling traditional law firm practice down the river?

At first glance Tesco Law might look like another threat, but Paraskeva promises that is not the case. “Many solicitors on the high street have been hard-pressed to make a decent living and there are pressures coming at them from every angle,” she says. “The message is to get bigger in some way so that overheads are less and so that there’s more investment coming in. The MDP will bring in investment from other areas of the professional world.” It is a message that she believes the younger generation of solicitors are far more receptive to. The chances of making it to partner are becoming less as the profession grows, she continues, and the opportunities offered by employed practice, with “regular wage, regular working hours and a pension”, are increasingly attractive.

Paraskeva says: “Solicitors on the high street say they have been forced into running small businesses to make ends meet, whereas younger solicitors are saying that they want to be involved in practices where they can actually do what they were trained to do – practise law.”

The Clementi Review: Law Society v Bar Council
Stephen Irwin QC, Bar Council

On the future of self-regulation: “Our principal objective is to come out of this with an extremely efficient, effective and cheap self-regulation system intact. We understand any profession can expect oversight and audit, and I can live with oversight and audit, but we don’t want a bureaucratic solution which takes the effect of regulation – whether complaints handling or drafting of regulations – away from us… The key thing is that [the regulatory regime] doesn’t turn into some bureaucratic and expensive ‘one size fits all’ solution. There is an alternative, and the bar, on any view, regulates itself very well and should continue to do so.”

On MDPs: “It’s not a question of being contemporary or fashionable – regulation is just too important. If you place a lawyer in a position where he or she has financial interests in common with people who don’t have ethical obligations, you’re creating a recipe for trouble.”

On QCs: “We think we’ve won the argument. There are a number of key points. There is effectiveness of QCs as a spur to competition, achievement and high standards and the effectiveness of the QC brand, particularly abroad. It would be a terrible knock to the legal profession for it to be taken away. It would be as though the Government was disapproving of the profession. It is also a very useful route by which ethnic minority QCs are role models. They feel very strongly about that and now it’s being taken away just as they’re beginning to break through.”

On solicitors and the review: “There are more solicitors around who are critical of MDPs and in favour of the silk system than Law Society official policy would imply. I’m not criticising the Law Society, but I think that’s where the balance of feeling is.”

Law Society, Janet Paraskeva

On the future of self-regulation: “Self-regulation does work for solicitors. The mistake is that people think complaints handling is what self-regulation is all about. It’s an important part, but only one part. Self-regulation works very effectively for solicitors. We register 110,000 solicitors every year without mistake, we run quality panels so members of the public can find a specially qualified solicitor in an area, and we accredit the education and training. We also write and rewrite the professional rules, and there’s a practice standards unit that inspects practices, investigates and intervenes, and prosecutes before the Solicitors Disciplinary Tribunal. All of that is self-regulation, and there’s a bit at the back end [complaints handling], which is where the consumer hasn’t been happy. That is the bit that always gets the press and people confuse it
with self-regulation.”

On MDPs: “Many solicitors on the high street have been hard-pressed to make a decent living and there are pressures coming at them from every angle. The message is to get bigger in some way so that overheads are less and so that there’s more investment coming in. The MDP will bring in investment from other areas of the professional world.”

On complaints: “We’ve had six months now where we’ve been closing more cases than we’ve been receiving, and that’s not just a blip… It’s only the evidence of our improvements which mean that the message will be believed, frankly.”

On the bar: “We aren’t attacking the Bar Council, we just have a different view. We have a different perspective and that’s because the sole practitioner and the solicitor’s firm are just different economic models, and one thing driving the reform is competition. Some 50 per cent of our members are in big firms and global, international practices, and what they need is a regulator that can respond to their needs in international business, and that’s quite different from the sole practice which each member of the independent bar employs themselves in.”