The green mile
19 August 2002
2 May 2013
6 June 2013
9 July 2013
23 April 2013
22 July 2013
"The competition agenda for the next government can be summed up in three words: the legal profession." This was the view of one commentator on the "self-perpetuating anticompetitive practices" that abound in the Irish legal profession, as voiced in The Irish Times recently.
The occasion for this damning claim is the Irish Competition Authority's ongoing study of competition in the professions. While the courts of Ireland empty for the summer break, specialist economic consultants instructed by the authority are going through the legal profession's responses - two boxes worth from the Law Society and one lever-arch file from the Bar Council - working out whether lawyers have a case to be answered.
The competition-busters might have their work cut out. Barrister Kieron Wood recounts his own experience when he applied to join the Competition Authority team in late 2000, only to be told that members of the Bar could not apply for the job. He was told that the Bar Council would not allow barristers to be briefed by other barristers, only by solicitors. "It wasn't a great start," Wood wryly observes. "The spokesman admitted that the ruling was anticompetitive, but said that the Competition Authority was reluctant to take on the Bar."
It will be interesting to compare the Competition Authority's findings with those of the Office of Fair Trading (OFT) in the highly controversial 'Competition in the Professions' report published last year. Only last month our own Lord Chancellor, in his response to that process, observed that the regulation of legal services had become a "maze", with some aspects "simply not meeting the needs of today, let alone the future".
The Irish profession appears unfazed by its critics at home and the experience on this side of the Irish Sea. "I'm confident that our system would stand up to scrutiny," claims Ken Murphy, director-general of the Law Society of Ireland. "I'm a great believer in competition law and it's perfectly right that the legal profession should generally be reviewed in accordance with its principles, and that the inevitable tension between regulation and free and fair competition is properly maintained."
Where restrictions on competition exist, it is necessary that they are "both necessary and proportionate", adds Murphy. His opposite number at the Bar takes a similar line. "We feel that we haven't anything to fear and we're positive about its outcome," comments Conor Maguire SC, Bar Council chairman.
In its remit, the Irish review is a more ambitious project than the OFT exercise. "Ours is different in scope in the respect that we're biting off a lot more as regards to the number of professions we're looking at," explains Declan Purcell, director of the Competition Authority's competition policy division. The review team will be looking at competition in eight professions, from doctors and dentists through to architects and engineers.
The initial OFT inquiry controversially sidestepped a consideration of whether a restricted practice was in the public interest, and looked at the profession in pure competition law terms. As a result, the Bar Council curtly dismissed the report as "glib" and "dogged in its ignorance of how the interests of justice plays a role".
By contrast, Purcell will be considering both sides of the argument. "The OFT stopped short of going into the justification of any of the restrictions that might have existed," he comments. "It was the pure establishment of the facts without going to the next step." It was the next step that was addressed last month by the Lord Chancellor in his consultation paper 'In the Public Interest?'.
The Irish profession has been accused of restrictive practices before. In 1984, lawyers attracted the attention of the Competition Authority's predecessor, the Fair Trade Commission, which concluded some six years later with a call for more competition. "Unless customers were satisfied that high standards of service were provided, the long-term survival and prosperity of lawyers will not be assured," it argued.
More recently a report last year from the Organization for Economic Cooperation and Development (OECD) called for the removal of the "remaining impediments on competition amongst solicitors, or indeed between solicitors and barristers". According to Murphy, "just about everything" that was recommended in the Fair Trade Commission investigation has been introduced.
Nevertheless the Competition Authority review continues. It sent out a list of 74 'generic' questions to representatives of the professions involved; presently, a firm of consultants, Indecon, is wading through the responses. The questionnaire was confidential, but Purcell breaks down the areas for review in three ways: 'access to the profession', 'behavioural and conduct' and 'structural' issues. Broadly, the Irish review occupies the same territory as the concerns flagged up last month by the Lord Chancellor's Department (LCD), which covered the opening up of the conveyancing and probate markets, new business structure (including multidisciplinary partnerships (MDPs)) and reforms of legal professional privilege on competition between lawyers and other providers of legal advice.
Many commentators would expect the Bar to bear the brunt of any reforms, as it did when the OFT published its report last year. "Essentially, if the Irish Bar was forced to take the same line as the Bar in England and Wales has been forced to do, it would mark a substantial change in the rules of the Bar Council and life for barristers here," comments Wood, who as well as being a member of the Bar is the senior assistant editor of The Sunday Business Post. Wood argues that the Bar has done little to address the concerns of the Bar Council over the last 17 years since the Fair Trade Commission inquiry. The three main areas of reform he would welcome are: the lifting of restrictions on advertising; the limitation on the work barristers can do outside the Bar; and the ban on 'touting', which prohibits direct access.
He also believes that the Law Library structure - in which each barrister has, in theory, a seat and desk space in the building at Four Courts in Dublin - is a barrier to many people entering into the profession as 'devils' (first year barristers). "It means that a junior who goes into the Bar and doesn't have good links or a master who feeds him work, may well find after some time that they can't afford to stay at the Bar any more," he says. "So they have to have either an understanding bank manager or a rich mummy or daddy." A junior barrister, Michael Waters, recently narrowly failed to be elected to the Bar Council on a 'Fair Play for Junior Bar' platform calling for a minimum wage and the abolition of the initial membership fee for devils.
According to Maguire at the Bar Council, the problems associated with admission to the profession are a result of the way in which the Bar's numbers have exploded over recent years. He points to recent accommodation opened at Church Street and the new Distillery Building as efforts by the profession to deal with the problem. "Within the small politics of the Bar, the problems relating to entry into the profession have always been an irritant; but I don't think that impinges on the competitive nature of the organisation," he comments.
In fact, the silk argues that the structure of the Irish Bar will actually stand them in better stead in competition terms than barristers in the UK. He might be right. Murphy notes that the Irish Bar might be a competition regulator's dream. "This is competition red in tooth and claw," he comments. "It's a Darwinian system with a high attrition rate - but it's essentially a meritocracy."
The unique feature of the Irish debate is the political momentum for change generated by the deep unease concerning the spiralling costs of insurance premiums and the degree to which exorbitant lawyers' fees are driving it. This was the evidence - or indeed "the cast iron case", as The Irish Times put it - of the anticompetitive practices that prompted the newspaper to conclude that lawyers were going to top the government's competition agenda.
A recent report by a government body - the Motor Insurance Advisory Board - found that the cost of insurance claims was 12 times higher than UK claims, and much of that money was going into the pockets of lawyers. It was revealed that 40 per cent of compensation payments in third-party motor claims went to lawyers, 46 per cent of employer liability claims and more than half of public liability claims.
Lawyers complain that they are unfairly taking the rap for the failings of the insurance industry. According to Murphy, it is a sector that can be characterised "by an extremely small number of players in the market, extremely high premiums and - in our view and in most people's - a distinct lack of competition". He refutes the notion that the report was evidence of restrictive practices in the legal profession.
"It's a great opportunity to blame lawyers and take the spotlight off the insurance industry and the delays inherent in the justice system in general," comments John Schutte, a personal injury (PI) specialist and a member of the Pan-European Organisation of Personal Injury Lawyers (PEOPIL). He points to the irony of politicians complaining about legal costs when there has never been legal aid for such work. But he also adds: "If the government is so concerned about the high level of legal fees, they could dock 21 per cent off it by abolishing VAT from PI claims." There are moves for a Personal Injury Settlement Board to take cases out of the court system.
Schutte, who worked for the EU in Brussels as a competition lawyer prior to setting up in PI law in Dublin, is concerned that the Competition Authority will act on what he believes to be ill-founded consumer concerns about 'ambulance chasers'. Purcell at the Competition Authority acknowledges that it is on the agenda. The lawyer believes that the Law Society should drop its restrictions on advertising that ban solicitors from publicising prices and funding arrangements such as no win, no fee. But he fears that such a concession will not be possible in the current climate.
Schutte believes that the government has "reacted badly" to high-profile litigation such as the asbestosis and sex abuse class actions. "The state wants to drive a wedge between professions such as lawyers and their clients and to take away power from ordinary people to challenge the state," he claims.
For UK lawyers in the commercial firms, the main - and possibly the sole - interest in the OFT report was the degree to which it might provide an impetus to the rise of the multidisciplinary practice. The Law Society of Ireland has for a long time been an MDP sceptic and has been alarmed at the enthusiasm of its Chancery Lane counterparts.
Certainly, Murphy hopes that the Competition Authority study is not taken as an opportunity to make the case for such structures. He points to the European Court of Justice's (ECJ) decision with regard to the Netherlands Bar earlier in the year, in which the court upheld the ban on MDPs between accountants and lawyers in the Netherlands. In that case, the ECJ stated that it was reasonable for the Netherlands "to impose binding measures, despite the effects entailed which are restrictive of competition, because those measures are necessary for the proper practice of the legal profession", about which Murphy says: "We welcome as a vindication of our position the decision of the ECJ."
On legal professional privilege, he takes a similar position. "There is a tendency for some people who haven't thought about this to view this and other core values of the profession as protections for lawyers; but they are in fact protections for the public," he comments.
According to Helen Kelly, head of European Community and competition law at top five firm Matheson Ormsby Prentice, much of the enthusiasm for MDPs has died in the post-Enron world. "MDPs are viewed, at best, with less excitement than they might have been previously," she comments. "Since their implosion, I'm not sure people felt the same degree of comfort as they did in the past."
In fact, she believes that the Competition Authority review has to little to offer or worry firms such as hers. "I certainly don't think that the largest firms who bid for work and tender for work all the time and have competitive rates have much to fear from the investigation," she adds. These are sentiments shared by Ronan Molony, chairman of McCann FitzGerald. "It's not an issue for our firms and the market we're in - it's competitive enough as it is already. I'm not conscious of any part of our market that is particularly sheltered from competition," he says.
It remains to be seen who will be in the firing line. But as the consultants are due to report back next month, there is not long to wait.