Reforming solicitors’ CPD

At its meeting on 21 May the Solicitors Regulation Authority (SRA) Board approved the move by the SRA to implement a new system of ‘continuing competence’ to replace the current, and largely discredited, input-led CPD scheme for solicitors in England and Wales. The decision remains subject to approval by the Legal Services Board, but if approved (as seems likely) the new ‘scheme’ will be phased in from Spring 2015, for early adopters, coming fully into force in November 2016.

The changes follow-on from a consultation document published in February which spelt out three optionsfor CPD:

 Option 1, the SRA’s preferred option, which would  revoke the current CPD scheme and rely instead on existing conduct of business regulation, requiring a proper standard of legal work and of training and supervision. Option one would be supported by non-mandatory guidance;

Option 2, would replace the current CPD scheme with a new cyclical/outputs based framework, imposing a requirement to reflect on practice and implement a development plan without a mandatory hours requirement; and

Option 3, would retain the current requirement to do a minimum number of CPD hours, and would require the training to relate to current or anticipated legal practice and recognise a wider range of development activity.

The consultation on these options received 64 responses in total – unsurprising, perhaps, but still depressingly low given the scale and significance of the changes being proposed. Understandably the SRA did not therefore attach a great deal of weight to the numbers in its response to the consultation, instead addressing the responses more qualitatively. Nonetheless it is interesting, if somewhat unsurprising (again) that the majority, 33, including the Law Society,  opted for Option 3 (13 expressed no preference for any of the options). This was, of course, the most familiar and conservative alternative given, and the one least consistent with best practice highlighted by the LETR Report! The SRA has nonetheless opted for its original preference, Option 1, on the basis that it focuses on the effectiveness of training, gives individuals—and firms—more flexibility and choice in selecting appropriate training, and reduces the burden of regulation. The changes will also mean that training providers will no longer require authorisation from the SRA.

 So has the SRA got it right? If it was to drag CPD into the 21st century, it had to choose Option 1 or 2, and to that extent should be applauded. Option 3 in that sense always struck me as a hostage to fortune for the SRA, unless it was going to ignore both what came out of the LETR Report (see paras 2.147-2.166, 6.72-6.95) and the LSB’s statutory guidance.

But equally there are significant risks with Option 1, given the extent to which it deregulates CPD. In this regard it comes close to the system developed in Alberta, Canada, and it is notable that, for all its strengths, that scheme has run into some challenges in making  individuals properly accountable for completing their CPD. Option 1, more than Option 2, begs the question always begged by heavy reliance on what is essentially principles-based regulation, namely: how do you enforce a culture change where there are no clear rules? The SRA in its response has recognised that there will need to be a significant culture change, and has therefore proposed a substantial transition period from Feb 2015 to Nov. 2016 to facilitate that. But this still means that the SRA is relying predominantly on the guidance it will produce, and that of course will be, by definition, non-mandatory, so the question still remains. Moreover, if the SRA is to rely ultimately on the broad obligations to deliver an acceptable quality of work/training, as the Legal Services Consumer Panel’s response noted, it will be interesting to see how it plans to go about identifying a lack of quality such as to trigger monitoring or enforcement action. The link between quality and CPD is not straightforward; if the SRA gets this wrong it may well increase rather than reduce the likelihood that some system of professional re-accreditation will be required sooner rather than later.

More generally, given the statutory responsibilities on the SRA, I also think it is unfortunate that there has been so little analysis of how the proposed changes achieve the Legal Services Act regulatory objectives. For example, how differently does each option support the public and consumer interests? The risk that regulatory intervention relating to CPD may not go far enough in protecting the public interest has already been highlighted, but it could as easily go further than required. How does it contribute to the development of a strong, independent, effective and diverse profession?  In the latter context in particular, the LETR Report highlighted needs for continuing ethics, management skills and diversity training (Rec. 9) – do these become non-mandatory under Option 1. If so is that consistent with the objective? How much Option 1 relative to Option 2 reduces the regulatory burden for firms, rather than for the SRA, may also be moot.

Ultimately, though, the key question is, will it make a significant difference to the kind of learning that takes place, and to the extent to which practitioners are enabled to catch their breath and actually reflect on what they are doing? For the answer to that we must wait with baited breath (or maybe not…); the evidence certainly suggests the potential is there, though option 1 again raises the stakes by placing a premium on firm culture in a way that few systems have attempted to date.

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Plus ca change

In the week that the “iconoclastic” (according to Legal Business ) Professor Nigel Savage announces his pending retirement as President of the University of Law, it is interesting to reflect on the words of another senior vocational provider, commenting on the need to develop a more effective system of blended learning between the classroom and the office for the training of would-be solicitors:

…. a reform in this direction will eventually be forced upon the profession by the growing complexity of the law and the absurdity of spending many thousands a year on an official system of legal education which is debarred by out-of-date restrictions from giving of its best.

Sounds familiar? But the rub is the quote’s not from one of Nigel’s competitors at Kaplan or BPP, or any other current LPC provider, it was said by Dr G.R.Y. (Geoffrey) Radcliffe, Principal of the Law Society’s School of Law and Fellow of New College, Oxford in July 1939 during his Presidential address to the Society of Public Teachers of Law. Moreover, it referred to an even earlier proposal of the Cardiff Law Society that the (then) five year period of articles should be organised on what we might today call a sandwich model, layering sequential ten month blocks at law school, with 15 month blocks in the office. No disrespect to much that Nigel Savage has achieved, but given that 75 years on we are still engaged in variations of the same debate, how do we define iconoclasm in legal education? And when we’ve worked that out, could someone please tell the journos at Legal Business?

Regulators behaving badly?

Warning: approx. 2500 word post!

Following the BBC Scotland Lawyers behaving badly programme I thought I would have a look at what the Scottish disciplinary tribunal, the SSDT, had actually been deciding in its dishonesty cases. These are an important group of cases. Dishonesty is at the top of the misconduct pyramid, so robust handling of dishonesty matters both for public protection, and to protect the reputation of the profession. Before looking at the cases its worth making a couple of preliminary points. As we saw in the last post, straightforward dishonesty will normally merit the highest sanction of striking off – removal from the Roll of solicitors, but dishonesty can cover a fairly broad spectrum of acts, including embezzlement, forging signatures on documents (whether for financial gain or to cover up administrative mistakes or incompetence), misleading clients, and misleading the court, another lawyer or a non-client, whether at the behest of your client or otherwise. There may be degrees of culpability and specific circumstances may offer an element of mitigation. Dishonesty will also often be mixed up with other disciplinary failures, such as technical breaches of accounting rules. In short there may be a range of factors to take into account in assessing the appropriate outcome, and the tribunal has an element of discretion. We would not expect a 100% strike off rate, even for dishonesty.

The reported decisions are also, of course, only part of the story. These are the cases that are prosecuted successfully. We don’t know how many prosecutions are dismissed and on what grounds because those decision are not reported. We don’t know much about how regulators exercise their discretion to prosecute. There are various ways of dealing with possible dishonesty. Even if there is putative evidence of dishonesty, a case may not, eg, for evidential or public interest reasons, be pursued as one of dishonesty. By taking the case out of the dishonesty category, this effectively (though sometimes only marginally) reduces the seriousness of the misconduct, and opens up a greater range of disposal options to the tribunal. Something like this appears to have happened in O’Donnell (2009), where a taking of money without the client’s consent was characterised as “borrowing”. This in our view saved the respondent from a likely suspension (at the very least). I have not surveyed the entire SSDT database to look for cases where the conduct disclosed possible dishonesty in fact, but the case was not disposed of as a dishonesty case.

A final warning: the relative brevity with which the tribunal’s reasoning is often reported makes interpreting and applying these decisions more of an art than a science. This may add to the scope for reasonable disagreement.

The two cases on which the BBC focused were O’Donnell and Murray – neither is a straightforward dishonesty case, and this is part of what makes them both interesting and problematic. Each involved multiple hearings dealing with a range of misconduct.The first hearing in O’Donnell in 2008 clearly did not involve dishonesty, and culpability was reduced by what the tribunal accepted to be clear evidence of clinical depression. In the 2010 hearing the ‘borrowing’ of £60,000 from a client was, as noted, not treated as dishonesty, and the tribunal regarded the lack of complaint from the client, the fact that there was ultimately no financial loss to the client and the respondent’s continuing ill health as mitigation. Murray is factually quite tangled. Nonetheless, there appear to be two clear findings that Murray misled clients. This is dishonesty, which in my opinion would have merited striking off, or a suspension if he was lucky, in the first proceedings in 2004/05. The decisions to censure on this occasion, and subsequently to suspend rather than strike off for a further act of deception are thus somewhat surprising. But are they out of line with SSDT practice? This is where the cases analysis comes in.

The SSDT website identifies 44 decisions since 1995 in which dishonesty was proven or admitted. In 33 of those cases the respondent solicitor was struck off, leaving 11 instances (25%) in which lesser penalties were imposed, ranging from censure and fining to suspension. 25% seems a rather high level of exceptional cases, so it is worth looking at those in more detail. In four of them lengthy suspensions, of five years or more, were imposed. Suspension of such duration certainly suggests the tribunal treated the misconduct in these cases as very serious; in practice, lengthy periods of suspension may kill a solicitor’s career as effectively as a strike off. This leaves seven cases where more minor penalties were applied: Cohen (2009), Hay (2009), Donald (2008), Sheppard (2008), Kirk (2007), Malcolm (2005), and Young (2002).[i]  In two of these, Sheppard and Kirk, the solicitors’ names had already been removed from the Roll, thereby limiting the penalties available to the tribunal. Consequently there were only five cases across a 12 year period in which dishonesty was proven and strike off or suspension was clearly considered excessive by the tribunal. Four of these involved misrepresentations in which there was no element of theft or other financial impropriety by the respondent, though one, Malcolm (2005), did involve substantially misleading the client. This case, and the last, Cohen (2009) (which involved an attempted expropriation by the respondent of around £3,000 in unclaimed tenants’ deposits which had been sitting in various trust accounts for about 20 years) are, on my reading, both cases where the respondent may have been lucky to escape a period of suspension. So, aside from Murray and O’Donnell, neither of which formed part of the SSDT’s dishonesty dataset, there are two out of 44 cases where (in my judgment, FWIW) the penalty seems on the lenient side relative to current norms.

This doesn’t of course mean that everything is necessarily hunky dory in the world of professional discipline. A growing body of academic work on lawyer deviance has highlighted a number of common concerns across a range of jurisdictions.

Firstly, traditional discipline systems seem to create disincentives to complain/inflict relatively high rates of attrition on client complaints. There is some evidence that separating responsibility for complaints from the representative body has generally increased both the number of initial client complaints, and the number that make it to disciplinary tribunals (see the data summarised by Rick Abel, Lawyers in the Dock, Oxford, 2008, 503-5). The creation in 2008 of the Scottish Legal Complaints Commission (SLCC) as a single gateway for complainants has certainly given the Scottish system an element of independence. Complaints about unsatisfactory service are dealt with by the SLCC separately from the Law Society of Scotland, but that still leaves the Law Society responsible for professional misconduct investigations, whereas in England and Wales that function is now undertaken by the SRA. To that extent, then, there is a greater degree of formal independence in England and Wales. How much difference that actually makes is moot, and we are not going to find the answer by looking at tribunal decisions: we would need to know much more about how investigations are conducted and the ways in which decisions to prosecute are made.

Secondly, there is some concern that prosecutors tend to focus on what are called ‘high reward/low risk’ cases for the regulator, ie, cases that involve demonstrable reputational harm – dishonesty, deceit, mishandling of client accounts – or a history of disciplinary infringements/lack of governability (eg failures to communicate with or cooperate with the regulators). The lack of risk in pursuing such cases may be increased by a tendency also to target lower status or marginal practitioners – particularly solo and small firm practitioners. Cases involving powerful actors or more morally ambiguous behaviour appear correspondingly less likely to be prosecuted (see, eg, Leslie Levin, ‘The ethical world of solo and small firm practitioners’ (2004) 41 Houston Law Review 309; Alice Woolley, ‘Regulation in practice: The ‘ethical economy’ of lawyer regulation in Canada and a case study in lawyer deviance’ (2012) 15 Legal Ethics 241. Note also the ongoing independent case review being undertaken for the SRA by Professor Gus John to examine evidence of disproportionality and discrimination in the disciplinary process – http://www.sra.org.uk/sra/equality-diversity/reports/independent-comparative-case-review.page). The Scottish dishonesty cases certainly fit that pattern with a preponderance of small firm and sole practitioners among the ranks of those prosecuted.[ii] That said, arguments about disproportionality should not detract from the fact that, as Rick Abel pithily concludes: “the harms… of solo and small firm practitioners are real – and the victims are even more disadvantaged and vulnerable than the perpetrators” (Lawyers in the Dock, p.506).  At the same time, who complains and why, and who is prosecuted and why, remain interesting, and potentially morally loaded questions that have been under-researched.

Thirdly, comparative work also points to a tendency among tribunals to hand out relatively light ‘symbolic’ sanctions, particularly for first offences.This may be seen by the tribunals as justifiable because the majority of lawyers do not actually re-offend. O’Donnell (2008) might be looked at as just such a case of symbolic sanctioning; there was no dishonesty involved; there was evidence of ill health in mitigation, and the respondent had taken steps to address his problems, though even so, by English standards, a fine of £500 would be exceptionally low. The continuing leniency in the second hearing (2010) seems harder to justify. It has been argued that a more aggressive approach than has been the norm may be needed in dealing with repeat and recalcitrant offenders if the public protection objectives of the discipline system are to be properly met (Leslie Levin, ‘Misbehaving lawyers: Cross-country comparisons’ (2012) 15 Legal Ethics 357).

Dishonesty cases tend not to fit that pattern because of their perceived seriousness. A dishonesty offence is still most likely to receive a suspension or strike off, even if it is a first offence. A number of the Scottish dishonesty cases nevertheless appear to raise interesting questions in this light about prosecution policy and the ways in which the Law Society of Scotland has assessed risk in the past (with the caveat that this analysis is based purely on the reported disciplinary tribunal findings which tend not, of course, give a full picture of the circumstances behind each). In a number of these cases there are early and continuing warning signs, often of poor accounting and case/risk management practices which can be a signifier of more serious trouble ahead, especially for smaller firms. In Kay (2013) an inspection of his practice reported that there had been no proper accounts for at least the previous three years. He had also consistently failed to respond to Law Society correspondence and statutory notices between 2007 and 2009; had not responded to correspondence to Master Policy insurers, and failed to pay his insurance excess on a professional negligence claim that had been brought against him. In Ruark (2012) the respondent had been subjected to frequent inspections between 2004-07 which highlighted continuing failures to complete and record property transactions and their financing in the proper form. Ruark and Kay were ultimately struck off, but there were signs of significant problems as early as 2004; in addition to other failures already noted, Kay also had two findings of inadequate professional services made against him in 2008 and 2009 and, it appears, had not paid the compensation ordered on each occasion. These cases may be outliers, but why did it take the Law Society so long to initiate the final and decisive intervention?[iii]

The extent to which and robustness with which a prosecutor can appeal seemingly lenient tribunal decisions can act as an important corrective to outlier decisions, and may also provide the tribunal with judicial guidance on the exercise of its powers. One question worth speculating on is whether an independent regulator might be more robust in its role as prosecutor when it comes to appealing lenient outcomes. There is certainly some feeling in England and Wales in the wake of the Spence (2012, unreported) and  SRA v Davidson [2012] appeals that the SRA has become more willing to challenge SDT ‘failures’ to strike off through the courts.

Finally, there are also debates about the extent to which regulatory systems should continue to separate discipline from redress and rehabilitation. Even though tribunals see their jurisdiction at least partly in terms of public protection, this does not always extend to awarding compensation or restitution to clients for inconvenience, financial loss or other harm suffered, or to requiring lawyers to undertake rehabilitation through appropriate retraining or (eg) compulsory drug/alcohol programmes. Training or other rehabilitative orders are not an option under either the Scottish or English legislation. Similarly the tribunal In England and Wales cannot order compensation, however, in Scotland it now can, though the financial limit is relatively low (£5000 maximum). It is notable that the use of compensatory powers in the larger Australian jurisdictions has become widespread (see Linda Haller, ‘Professional discipline for incompetent lawyers? Developments in the UK and Australia’ (2010) 17 International Journal of the Legal Profession 83). It will be interesting to see how the practice develops through the SSDT in Scotland,

So what’s my conclusion? From this somewhat cursory analysis the Scottish discipline system, in its treatment of dishonesty cases, seems to share many of the strengths and weaknesses seen across other systems in the Common Law world. It does not appear that outcomes in dishonesty cases are radically out of line, though there are certainly some decisions that raise questions of principle. The number of arguably ‘lenient’ decisions, proportionately, does not seem excessive to me (I’d be interested in other’s views on that) but the time taken to initiate disciplinary proceedings in a number of cases ought, from a public protection perspective, be a matter of some concern. Does that mean the Scottish regulatory system can disregard calls for a more independent regulatory structure? If I was a serious critic of this (or any other) system, I wouldn’t make my argument by looking (just) at alleged failings at the most serious end of the continuum. The regulator’s robustness in prosecuting and appealing decisions; the resource it commits to investigation and risk management, and how the system deals with more ‘routine’ misconduct may provide far more telling indicators of its actual independence than its approach to what should be the most egregious of cases.


[i] I have excluded Miller and Morrison (2005) from this subset as Morrison was censured for her inadequate supervision of Miller, not for dishonesty. Miller, an assistant solicitor, was struck off.

[ii] The respondents in the Scottish dishonesty cases also fit the pattern seen in other studies of lawyer deviance in that they tend to be older practitioners and disproportionately male (only 4 out of the 45 respondents are female).

[iii] Though in Ruark’s case the disciplinary process would have been somewhat delayed while criminal proceedings were under consideration.

Lawyers behaving badly

Lawyers Behaving Badly, BBC Scotland’s investigation into the disciplining of Scottish solicitors undoubtedly caused a stir when it was transmitted last week, but not entirely for the right reasons. Arguments about the quality and standards of journalism have tended to deflect attention away from the underlying question of whether there is a fundamental problem with the Scottish lawyer discipline system, and, in particular, whether a move to English-style ‘independent’ regulation would make a difference.

A key argument of the programme seemed to be that a move to English-style regulation is required. Although the programme raised some interesting issues regarding regulatory co-ordination between the Scottish Legal Aid Board and the Law Society of Scotland, the evidence presented in support of that claim was rather diffuse: one case of a solicitor who had been struck off for incompetence providing unregulated legal advice, but in circumstances where there did not appear to be clear evidence that he was holding himself out as a solicitor, nor that he was routinely charging for legal advice, and two cases of what seemed to be dishonesty where the solicitors were not struck off. Would English-style regulation have made a difference in any of these cases? Short answer: not necessarily.

The first problem, of unregulated legal advice, could equally arise in England and Wales. The risk that disqualified lawyers can – so long as they don’t hold themselves out as solicitors – ‘practice’ outside the regulated sphere still exists in England and Wales, and since the alternative is to impose broad sanctions for unauthorised practice of law which create a (US-style) virtual monopoly market for regulated lawyers, I wouldn’t bank on any government in the UK agreeing to such regulations anytime soon.

Regarding the disciplinary cases, both the Scottish Solicitors Discipline Tribunal (SSDT) and the English Solicitors Disciplinary Tribunal (SDT) are statutory bodies that operate independently of the Law Society of Scotland and the SRA respectively. The English reforms have not changed the basic form and function of the SDT. So a change to independent regulation would not necessarily make a difference here either.

The unanimous opinion of the independent experts interviewed by the BBC (of whom I was one) was simply that the SSDT had taken a surprisingly lenient approach to matters of dishonesty in both of the cases used in the documentary – it was case specific. Although as English lawyers it’s fair to say we were all more familiar with the SDTs custom and practice, that judgment was made relative to the jurisprudence governing both the SDT and the SSDT. It is well established following Bolton v Law Society [1994] 1 WLR 512 that dishonesty normally merits striking off unless there are highly exceptional circumstances. As Sir Thomas Bingham M.R. said (my italics):

Any solicitor who is shown to have discharged his professional duties with anything less than complete integrity, probity and trustworthiness must expect severe sanctions to be imposed upon him by the Solicitors Disciplinary Tribunal. Lapses from the required high standard may, of course, take different forms and be of varying degrees. The most serious involves proven dishonesty, whether or not leading to criminal proceedings and criminal penalties. In such cases the tribunal has almost invariably, no matter how strong the mitigation advanced for the solicitor, ordered that he be struck off the Roll of Solicitors. Only infrequently, particularly in recent years, has it been willing to order the restoration to the Roll of a solicitor against whom serious dishonesty had been established, even after a passage of years, and even where the solicitor had made every effort to re-establish himself and redeem his reputation.

It is my understanding that equivalent principles operate in Scotland: see, eg, Robson v Council of the Law Society of Scotland [2007] CSIH 89; Re Petition of McMahon & Ors [2002] ScotCS 36; in both of these cases Bolton was cited with approval by the Scottish courts.

Disciplinary tribunals, however, are not courts of law, and their decisions in most jurisdictions are not precedents as such, though there is of course an expectation that tribunals should strive for consistency in their own decision-making. The critical question therefore would be whether the SSDTs decisions in Murray and O’Donnell – the two cases the BBC ultimately focused on, were outliers, or whether they reflect a culture of relative leniency towards dishonesty within the SSDT.  This is not an entirely straightforward question to answer but one that has interested me enough in the wake of the programme to undertake some further research which I’ll discuss in the next post.

ABA Legal Education Task Force publishes draft report

The American Bar Association’s draft report and recommendations on the Future of Legal Education was published on Friday 20 September. The full text of the report can be accessed here.

In a number of obvious ways this is no LETR report. It is not explicitly research-based (though the ABA has held hearings and invited evidence), it takes up less than 40 pages, and has taken only a year to produce. Nonetheless there are some interesting simlarities.

The report opens with a familiar story. It recognises that the US system of legal education “faces considerable pressure” over costs, student debt, declining application levels and “possibly structural” changes in the number and kinds of jobs available for law graduates. It also prefaces its recommendations with a recognition that the core problems are structural, and not amenable to quick fixes. Rather like the LETR report it too acknowledges the challenge, given the contested terrain of legal education, of presenting recommendations that would have “a reasonable chance of influencing action”, and capable of creating a framework for “continuous adaptation and improvement”.

The main problems identified by the report can be summarised very simply: US law schools are too expensive, too alike and too remote from the needs of practice. The medicine prescribed by the Task Force includes:

  • systematic reform of law school pricing and financing
  • a greater focus on defining and delivering professional competencies, both at law school and subsequently
  • the development and delivery of new systems of training and licensing those with limited practice rights, rather than focusing so much on the production of “professional generalists”
  • Greater support and incentives for innovation and experimentation in the delivery of legal education, eg, by reducing regulatory barriers to experimentation
  • the need for all stakeholders to support “an enterprise or program for the continual assessment of conditions affecting legal education and of the strengths and weaknesses of the then-current structures in legal education, and for fostering continual improvement in the system of legal education”.

The greatest disappointment to many is likely to be that the Task Force has, perhaps not surprisingly, sidestepped the issues of cost and funding, arguing that the time allotted was insufficient to the task. It has thus recommended that a further task force or commission be appointed, with the expertise to pick up this task.

Beyond this, a number of similarities to the LETR approach are quite striking. The Task Force has also focused on general principles, rather than risk getting lost in regulatory detail, and has largely come out against greater prescription. It calls for some re-regulation and de-regulation where necessary or possible, but most of its proposals are non-mandatory and rely on the use of incentives, facilitation and coordination techniques. Beyond that there are three particular common themes I think it is useful to highlight:

  • First, there is the drive to define competencies. The Task Force has possibly gone (even) further than the LETR in saying to law schools, you can build your own curriculum inside the competencies required. But this is accompanied by a very clear indication that law schools need to do much more to re-align the balance in the JD between academic law and what the Task Force calls “focused preparation for the delivery of legal services”. In both England and Wales and the US the devil here will lie in the detail of the competences chosen.
  • Secondly, the Task Force report notes the wide range of initiatives being undertaken in response to the current challenges facing law schools, but also highlights the fragmented and uncoordinated nature of responses, and the absence of “a full understanding of the tools available to effect change, mechanisms for assessment of progress, and a strategy for long-term continuous improvement”. This is also all too familiar (though it may be arguable that the sense of crisis in the US has driven innovation to an extent that we have not (yet) experienced in the UK). What I think is critical here is to recognise that the Task Force and the LETR Report have both highlighted the importance of creating a formal coordination and evaluation mechanism – LETRs Legal Education Council and (virtual) Legal Ed Lab, and the Task Force’s  call to establish a “Center or other framework” to support, assess and evaluate improvements in the legal education system. My personal concern is that this proposal is in danger of being overlooked in the deliberations that have so far followed publication of the LETR Report. If such an outcome is achieved in the US, and not in England and Wales, then a very considerable opportunity will have been lost to UK legal education.
  • Thirdly the Task Force report also acknowledges the need to enhance access to justice for lower income consumers. It therefore proposes that non-lawyers be permitted to perform “limited legal services,” and that bar admission might also be opened up to individuals who have not completed an undergraduate degree and law school. This again has significant echoes of the liberalisation measures proposed by LETR, though it is not clear whether the US report countenances a return to a full apprenticeship model such as is being developed in England and Wales.

Responses to the Task Force’s draft are invited. The report should be finalised in November and presented to the ABA’s policy-setting body, the House of Delegates, early in 2014.

Legal services regulation review: The battle lines are being drawn

The consultation period on the government’s review of legal services regulation in England and Wales, announced in June, closed on 2nd September. A small but important group of institutional respondents – the Law Society, the Solicitors Regulation Authority (SRA), the Council of Licensed Conveyancers (CLC), the Legal Services Consumer Panel and Legal Services Board (LSB) – have subsequently published their responses to the MoJ’s call for evidence. A brief survey of these responses provides an interesting insight into the range of positions being adopted and arguments being deployed by the institutional players in this particular game.

As might be expected given the ‘previous’ between these two institutions, the Law Society and the SRA are continuing their public sparring match. The Law Society’s proposals seek to wind back the clock, not entirely to a pre-Clementi position, but pretty close, arguing that :

  •  the Society should have direct responsibility for training, authorisation to practise and standard setting;
  • it is better placed to create regulatory arrangements that are flexible and take account of the realities of different types of practice, and
  • investigation and prosecution of offences should be “undertaken at arms’ length” by a body that is part of the Law Society with independent decision making powers, but reporting directly to the Society.

The Law Society also calls, unsurprisingly, for the Legal Services Board to be slimmed-down in both form and function, and seeks the complete abolition of the Legal Services Consumer Panel, arguing instead that the professions should be responsible for creating governance mechanisms that incorporate the need for the consumer voice.

The SRA takes a markedly different tack. Whilst acknowledging that the Clementi reforms are still a work in progress, the SRA asserts that the proposed review is “timely” in that it is already apparent that the complexity of the regulatory regime is hampering regulators’ ability to meet the Legal Services Act’s (LSA) regulatory objectives. The body of the SRA’s paper then focuses on five ways in which the function of the regulatory regime is said to be sub-optimal. These are summarised in para 3.2 as:

    • inflexibility and over-prescription – in a rapidly evolving legal services market, too many requirements are specified to a significant level of detail in primary legislation hampering regulators’ ability to meet the regulatory objectives and the principles of better regulation;
    • complexity of primary legislation – the SRA has to operate under three major pieces of primary legislation; the Solicitors Act 1974; the Administration of Justice Act 1985 and the LSA. The other approved regulators also work under a multiplicity of legislation.
    • inadequate and irrational foundations for regulation – the whole of legal services regulation is founded on the regulation of six “reserved” activities which have accumulated in a piecemeal fashion and have never been the subject of an objective, evidence based, review;
    • the multiplicity of regulators – largely based around the historic regulation of titles (albeit in some cases with titles relating to distinct functions – for example licensed conveyancers) – which creates fragmentation of regulation across the legal services market and the need for rules to manage the boundaries of the various regulators. Not only are there eight approved regulators, there is also a layering of regulation with the LSB sitting above all of them. These features add to both complexity and cost.
    • regulation is not fully independent – the LSA made regulation more independent from the representative functions of the professions. However, this does not amount to full independence and, for as long as regulatory bodies remain part of strong representative organisations, there will be additional cost and a lack of flexibility within the system. In terms of cost, for as long as the current arrangements remain, the presence of the LSB will be essential in order to ensure compliance with the internal governance arrangements which enable independent regulation, and to deliver some degree of co-ordination between the regulators whose fields of regulation increasingly overlap. In addition the cost burden on the market is also inflated by s.51 LSA, which enables defined but extensive representative activities of approved regulators to be funded through the compulsory levying of practice fees.

The SRA’s remedies are the creation of a single statutory framework for entity regulation across the legal services market, including the abolition of a separate statutory scheme for ABSs; the extension of regulation to all legal activities as currently defined in s.12 LSA (in other words bringing currently ‘unregulated’ services like employment advice and will-writing within the reach of regulation), and, doubtless with a particular nod to the Law Society, a call for frontline regulators to be given complete structural as well as operational independence from the representative bodies. It does stop short of calling for a single regulator for the sector, while acknowledging that the growing (LSB-supported) focus on entity regulation was making the problem of having multiple legal regulators “more acute”.

The Legal Services Consumer Panel, however, suffers from no such reticence in its preference for what Legal Futures (Sept 2) has called the “nuclear option” of a single regulator. As we have come to expect, the Panel’s evidence does not mince words when it concludes (para 9.1):

Four years of evidence of the consumer experience has demonstrated to the Panel that the existing regulatory framework does not provide a sustainable model in the long term to offer consumers the best system of consumer protection or support a competitive market place. Consumers have to find their way around a labyrinthine maze; the scope of regulation is not based on any consumer protection rationale; there are gaps and overlaps in redress; there is considerable duplication in regulatory structures that consumers ultimately pay for; regulation is not sufficiently independent of the profession; and there are serious doubts about the capacity and capability of the smaller regulators to do a good job

The Panel’s advice? In effect, it calls on the MoJ to do a proper job of gathering the evidence and exploring the costs and benefits of the options, but with a view to tearing up the LSA and starting again with a more consumer-focused approach. The Panel does not anticipate nor spell out in considerable detail what this might look like, but it does highlight a number of themes. Most of these chime, to a degree, with the issues raised by the SRA: the need to assure proper regulatory independence from the professions, to re-visit the range of legal activities subject to regulation, including mapping out and assessing risk across the unregulated sector,  and to achieve a better balance between entity and individual regulation.

In the only response to be published so far by one of the smaller regulators, the Council for Licensed Conveyancers has also picked up on a number of these themes calling, longer term, for a review of the scope of regulated legal activities, completion of the separation of representative and regulatory functions and (interestingly) reform of compensation arrangements to improve consumer protection. For the time being, however, the CLC does not want much change. It specifically rules out a single regulator model for now, arguing that there is a role for multiple regulators to continue developing a range of approaches to regulation that will support specialisation and innovation in the marketplace.

In its response, published today, the Legal Services Board has also offered its support for the longer term option of a single regulator, adding, crucially, that such should be “unrelated to any existing regulator, including the LSB.” In the short term it is also highly critical of the continuing preponderance of ‘one-size-fits-all’ regulation and calls for existing regulators to do more to develop risk-based models and otherwise re-regulate the market, removing rules which cannot be justified on a risk basis. Its response also calls for wider consumer access to the Legal Ombudsman and new powers for the Office for Legal Complaints to develop its services.

So what does this small cross-section of responses tell us? First off, there is a fair degree of unanimity about one thing: the compromises enacted in the LSA regime have left virtually no-one satisfied. The CLC’s is the only published response so far that wants to retain something close to the status quo. This is not entirely surprising. The smaller regulated occupations have arguably benefitted disproportionately from the changes, gaining a mandate for (quasi) self-regulation, and with it the opportunity to use regulation to achieve a degree of occupational closure that they would have struggled to achieve otherwise. This of course also highlights another issue: the extent to which self-interest drives these kinds of institutional responses: the SRA’s calls for structural independence and the extension of regulation to all legal activities are thus somewhat predictable for an ambitious regulatory body, though such an extension of legal activities seems to fly against the liberalising ethos of the LSA. I suspect it will not find favour with a Lord Chancellor whose instincts are fundamentally deregulatory. The LSB’s proposals may in this regard be closer to the mark. They propose making all legal activities subject to a baseline comprising access to an Ombudsman or other dispute resolution mechanism,  supported by some enhanced consumer protection laws. They would only deploy a risk based model of regulation over and above this in respect of activities for which there are substantive public /consumer interest grounds for doing so.

I actually suspect that Lord Chancellor Grayling’s instinctive preference would be for a greater return to self-regulation, contrary to the views of the CLC, SRA, LSB and the Consumer Panel. Although it was the Thatcher government that took the first swipe at professional self-regulation, Tory governments (which this one seems to be in almost everything but name) are ultimately not renowned for favouring consumer over business interests, but would Grayling go as far as the Law Society (and one suspects the Bar Council, though the latter is likely to be less critical of its regulatory arm) would like?

I hope not. It is difficult not to see a return to the old ways as a retrograde step. Will market innovation be enhanced with (for example) the Law Society and Bar Council in charge of licensing ABSs? I don’t know, but, as data from the LETR indicated, there appears to be a strong undercurrent of hostility to new business structures among the grassroots of the profession. How would the representative bodies deal with that to re-assure external investors? It also takes a very short memory and a generous pinch of salt to take seriously the Law Society’s claim that “there is no evidence to suggest professional bodies cannot take decisions in the public interest about standards and qualification.” That’s true so long as we overlook the whole sorry story of the OSS (which the Society seemingly wishes to re-introduce in another guise), the Training Framework Review, which took seven years to achieve very little, and the history of underfunding and neglect of effective CPD regulation. I am sure the Law Society has learned some lessons from the past, but more evidence and less hubris might have made its claims more credible.

Some might say that it also takes a particular kind of legal mind-set to argue that professional self-regulation equates to independent regulation, and to conflate independence with non-accountability, but that’s a story for another post.

Bankers: get a moral compass, not a lawyer!

The Barclay’s and Standard Chartered scandals are now starting to shine a rather unwelcome spotlight on the role of banks’ in-house counsel, highlighted in both a recent blog post by Richard Moorhead, and a piece in today’s Financial Times by USD law professor Frank Partnoy.
 
In theory we don’t expect bank lawyers to behave like bankers. General counsel are supposed to be the institutional conscience, guardians of reputation and (legal) risk managers for corporations. Like all lawyers, they are ethically bound by a principle of independence (check it out – In England and Wales its right up there with integrity in the SRA’s 10 mandatory Principles – there is no opt-out for in-house). Though this is often assumed to be primarily a principle that operates to the benefit of clients (part of what Moorhead aptly calls the ‘client first’ ethos), it is wider than that, and in cases of conflict, the public interest ‘tie-breaker’ would indicate that it should trump the duty to the client (see notes 2.2 and 2.7 to the SRA Principles). This is not to say that being an in-house counsel isn’t a tough gig sometimes. If big clients can put pressure on external law firms to provide the advice they want rather than the advice they need, the pressures in-house, where it is even harder to maintain independence, can be enormous. And dividing lines can be notoriously fine. And no in-house department wants the reputation of being the ‘business prevention unit’… and all sorts of other excuses. But what is worrying Moorhead and Partnoy and me, is the sense that this may not be about the vulnerability of poor little general counsel, it is that they may be far more actively complicit in the whole mess than we would like. Research by Robert Nelson and Laura Beth Nielsen at the start of the last decade pointed to this: they found that inside counsel in large corporations positively worked to demonstrate their commitment to corporate objectives, and tended both to defer to management views of legal risk, and to limit their gatekeeping functions accordingly (‘Cops, Counsel and Entrepreneurs: Constructing the Role of Inside Counsel in Large Corporations’ Law & Society Review, vol 34, 457-94).  In other words, asking your lawyer may not be the substitute for a personal moral compass after all. Let’s hope that one lesson to emerge for both bankers and lawyers from the bank scandals is, as Frank Partnoy observes, that banks need inside counsel with moral backbone.
 
And there’s more to it than that, for those of us interested in legal ethics the banking scandals usefully serve to highlight the extent to which in-house lawyering has tended to be the poor relation in thinking about ethics and regulation. Profesional codes of conduct are written around private practice; in-house obligations are largely cherry-picked from (or shoe-horned into) those more general principles. In-house work is, one suspects, for most of the time so far below the radar of professional regulatory and disciplinary authorities as to be virtually invisible, and in-house lawyers themselves complain that the general professional legal training provided by LPC and BPTC largely ignore in-house practice. The profession itself could do more to serve the in-house sector better.