Let's level the playing field
27 May 1997
13 January 2014
14 April 2014
23 May 2014
Five interesting things you might not have spotted about Case C-351/12, OSA (aka the ‘Czech Spa’ case)
19 March 2014
17 December 2013
Northern Ireland (population 1.5 million) is similar to a very large, rural English county with one medium-sized centre (Belfast, population 350,000). And the problems facing its legal practitioners are similar to those faced by their provincial English counterparts with much premium legal work going to London and a proliferation of small high street firms (75 per cent have either one or two partners). The threat posed by the accountants' in-house legal firms and the Hambros conveyancing initiative is as real in Northern Ireland as it is in England.
For those of us who hope to enjoy rewarding and fulfilling careers over the next 20 years, and are not looking to retire just yet, peering over the apparent precipice and working out a route down is important.
The only effective way to compete as a profession is to encourage us to compete individually; to allow us to each make our own small corner better. Restrictions on our ability to compete leave us increasingly vulnerable to outside competition. Regulation is a tremendous mutual benefit in areas such as practice audit and quality control; it sounds the death knell for us in practice development.
Whereas we have enjoyed three monopolies (litigation, probate, conveyancing), accountants have only ever had one - company audit. There is as much competition on audit work as there is in conveyancing; that is why accountants have based their businesses on other income sources.
In Northern Ireland accountants have allowed non-qualified persons to make up 25 per cent of the partners in their firms, subject to each becoming associate members of and agreeing to be regulated by their institute. Yet their published accounts show 60 to 75 per cent of their income derives from non-audit work.
The Law Society of Northern Ireland must encourage firms to attract tax, financial services, accountancy, estate agency, personnel, marketing and other specialists if it is commercially attractive to do so.
There are plenty of these professionals who would welcome the opportunity of trading within the context of a law firm. The argument that standards would drop is as arrogant as it is false; increasing expertise, specialisation and development in different markets would bolster competence and credibility.
The profession's failure to take advantage of the current massive privatisation of tax work by the Inland Revenue - promoted under the guise of simplification - is one more lost opportunity.
It is symptomatic of how the ban on multidisciplinary partnerships has blinkered our outlook. We, not the accountants, have the high-profile street-level offices but as a profession we are not even trying to compete for this vast area of work.
Yet many solicitors over the years have very successfully developed business interests outside their firms. The initiative and entrepreneurial skills exist; the straitjacket must be removed to allow solicitors to develop their practices.
In Northern Ireland, the Coopers & Lybrand legal team is taking fees away from the profession in the area of mergers and acquisitions. It has its tax and financial planning teams; will writing and estate administration may be next.
The issue is not whether multidisciplinary partnerships should be allowed. They are here. They already exist and they are winning the battle for business. The issue is whether we should continue to sit and watch or whether we, as a profession, should allow ourselves to compete on our own terms.
Unfortunately, the amendment of Article 28 of the Solicitor (NI) Order 1976 would be needed for us to emulate the accountants in bringing unqualified persons in as partners. There are, however, significant immediate steps that could be taken by the Law Society's council to make it easier for us to compete.
The ban on Scottish-style property centres should be abolished and new property-selling regulations introduced. Firms should be allowed to join together in operating property centres without being deemed to be in partnership and thus triggering all the conflict of interest restrictions.
A mechanism (limited companies, for example) should be devised to allow co-operatively owned property centres and individual firms selling property to sell financial services directly to purchasers to enable such centres and firms to compete on a level playing field with estate agents.
We should relax the regulations concerning separate entrances for other businesses in our premises. Rather than the present ban, firms should be an encouraged to trade other ancillary businesses out of their premises, relating to new types of work outside the monopoly areas, by the use of limited companies owned by the partners. This would enable profit sharing with non-qualified persons to take place without breaching Article 28 of the 1976 Order.
Such companies could trade on the name and credibility of the practice, while making it clear that such entities were separate and distinct in a legal sense. The society could permit such companies to trade in law firms' premises, providing such companies had indemnity insurance, their liabilities were personally guaranteed by the partners of the relevant firm and their accounts were available for inspection.
While there would be no compensation fund access if any of these companies failed, the Law Society's recent record in this area is exemplary. Its proactive approach of has resulted in no significant defalcations for 15 years. If the society's roving accountant was able to monitor such companies, he would hopefully have as much success here as with traditional firms.
The small residual risk in this area is a price well worth paying for the benefits of broadening our areas of work. The argument that this would provoke all sorts of regulatory hassle abuse is not a valid excuse to do nothing.
If nothing is done, the profession's worst nightmare could become a reality within a couple of years. An employed solicitor/partner in a large one-stop estate agency chains will manage in-house computerised conveyancing services run by unqualified clerks that we are currently training for them.
Specialist claims-settling companies will have one employed solicitor/partner managing teams of unqualified claims negotiators/court clerks and will aggressively promote themselves with no-win no-fee marketing.
Insurance companies will offer employment policies to indemnify our commercial clients against industrial tribunal claims - they will use specialist employment claims companies to negotiate settlements to avoid legal fees.
Specialist tax shops will have one employed solicitor/partner supervising a computerised will writing, estate administration and financial services team. The Big Six accountancy firms will have their solicitor partner supervising a legal team providing any commercial property or corporate service their clients might need. Our local law society is unlikely to be involved in any regulation of these competitors.
Scaremongering nonsense? Maybe, but maybe not; remember that the Labour Government is in favour of multidisciplinary partnerships. We should not fear the inevitable; it should be welcomed - but only if we allow ourselves to compete on a level playing field.