Regulation and free markets

first_imgIn Europe, hardly a day goes by without news of further regulation of the financial services sector in the wake of the economic crisis. It is a commonplace that the Thatcher-Reagan period of ‘big bangs’, deregulation and liberalisation is over. That leads me to think about our place as solicitors in the historic cycle, in terms of our own regulation. A few weeks back, I wrote about the impact of the economic crisis on lawyers and law firms. Now I want to reflect on its impact on our regulation, particularly in the week in which a substantial rise was announced in the practising certificate fee in order to pay for the new system of regulation. My reading of our recent history is as follows. Although Mrs Thatcher tried to liberalise and deregulate the solicitors’ profession with the break-up of the conveyancing monopoly in the late 1980s, it did not lead to a change in the way we were regulated. It was left to her political heir, Tony Blair, to bring about our ‘big bang’ through the Legal Services Act 2007, the consequences of which are slowly unfolding before our eyes as the Legal Services Board gets down to business. Why did it take so long for our own big bang to come? I put it down to the rule of law being much more important as a propaganda tool to Western societies until the fall of the Soviet Empire. Once the Wall had gone, and market forces were the only game in town, it was just a matter of time before market forces were applied to the justice sector too. But we are living in a different era now. For the first time since the fall of the Wall, market forces are being checked and questioned, just a couple of years after the Legal Services Act 2007 was passed. Of course, it is notoriously difficult to predict the direction of history at the time it is being lived. The Communists thought that they were historically inevitable. But that does not mean we should not try to see where we are, and where we might be going, even if we turn out to be wrong. My instinct, shared by many, is that there is no longer a taste for letting market forces be the judge. The anxious days of 2008, with collapsing banks and giant government handouts, will inevitably (am I using that word?) lead to a general agreement on more regulation and more caution. Yet you only have to read the recent consultation paper by the Legal Services Board on alternative business structures to see that, for the board, the days of the market being the decision-maker are not over. There is a section in the consultation paper on ‘The benefits of opening the market’, but there is no section on ‘The disadvantages of opening the market’. There is a section on ‘Managing the risks of opening the market’, but the title tells you everything: it can all be managed – don’t worry. As a result, our own history as solicitors, following maybe the last major push of the full-on market forces era, is leading in the opposite direction to where many feel that the rest of society is heading. I don’t blame the Legal Services Board; its job is to introduce alternative business structures. The government has set the agenda in concrete, before recent economic and historical events made concrete seem like not the best idea. An Act of Parliament has taken the unfolding of our own history out of our hands. But that does not mean that nothing can be done. Obviously, we can all give our views to the Legal Services Board before its consultation ends on 14 August. And the Legal Services Board itself, to the extent that it is allowed by the Act, can allow enough elastic in the direction it takes to be sure that the regulation of solicitors does not come to resemble a beached whale, when the tide of ‘The market as decision-maker’ has gone out. Jonathan Goldsmith is the Secretary General of the Council of Bars and Law Societies of Europe (CCBE), which represents over 700,000 European lawyers through its member bars and law societies.last_img read more

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Code of Conduct – several important areas in need of greater clarity

first_imgThough the new Code of Conduct has been updated, it is still unclear in its wording and could lead unwary solicitors into allegations of practising while uncertificated. In previous Gazette articles I drew attention to the problems posed for in-house and local government lawyers by the application of the Solicitors Practice Rules (SPR) and rule 20.01 of the Code of Conduct 2007. One only needed a practising certificate if held out as a solicitor or if undertaking the reserved activities (such as conducting litigation or obtaining grants of probate). The Law Society’s enforcement philosophy, however, took a much wider view, and this led to many unfair regulatory investigations under the SPR. This philosophy was codified and expanded with the introduction of the 2007 code and the requirement to hold a practising certificate if undertaking ‘business services’. The 2007 code drew much criticism from, among others, the Commerce & Industry (C&I) Group, which tirelessly pursued negotiations with the Solicitors Regulation Authority to bring the code into line with primary legislation. My firm was involved with those negotiations for the C&I Group, and that lobbying led to important amendments being achieved in the 2009 revisions (the 2009 code, in force from 31 March 2009). Tony Guise is a partner at Guise and a member of the Solicitors Assistance Scheme and the duty solicitor rota at the Solicitors Disciplinary Tribunal Undefined servicesIn particular, the introduction of a new guidance note (number 55) set out the requirements of primary legislation. Unfortunately, the 2009 code (in rule 20.02) remains at odds with primary legislation. The SRA has gone further in that the phrase ‘business services’, which gave rise to so much uncertainty in the 2007 code, has been replaced by the equally enigmatic term ‘other services’ in the 2009 code. Like ‘business services’, the term ‘other services’ remains undefined in the glossary. Rule 20.02, of course, takes precedence over the helpful guidance in note 55. When the use of the phrase ‘other services’ was first mooted with me as a possible solution on a visit to the SRA’s Redditch office in November 2008, I expressed concern that this phrase did not assist in arriving at a clear understanding of when a solicitor would, or would not, require a practising certificate. The officers explained that ‘other services’ included the kind of services that people of business affairs would provide, but this, it seems to me, only serves to confuse the issue further. During the course of the next 12-24 months the code must be amended again to facilitate alternative business structures, and I hope the SRA takes the opportunity to sort out the mess on that occasion. The representative Law Society would perform a great service to in-house and local government lawyers by making appropriate representations to the SRA about this matter. The problems that the present drafting create may lead many in-house and local government lawyers to become unnecessarily subject to protracted and expensive regulatory investigation. This begins when, for whatever reason, someone on the roll of solicitors but not holding a practising certificate applies for a certificate. This usually requires an explanation to be given in form RFs12 of how the solicitor has spent his or her time and whether they have been undertaking the reserved activities or have been held out. The introduction of the SRA Practising Regulations 2009 has brought a new form (REG3) to be completed. This omits the questions in section 6 of RFs12 that tended to lead to self-incrimination. In form REG3, section 6 simply asks: ‘Have you practised or been held out as a solicitor/REL since you last held a practising certificate or had registration? If “yes” please provide details on a separate sheet.’ This is an exercise that calls for great care lest an applicant leave himself or herself open to allegations of practising while uncertificated or being other than frank with the regulator, potentially a breach of the core principles in rule 1. So despite the improvements secured by the C&I Group, there still remains much to sort out.last_img read more

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Zurich to cut new PII business ‘significantly’

first_imgOne of the top three solicitors’ professional indemnity insurers will ‘significantly’ cut the number of new law firms it takes on this year, the Gazette can reveal. Zurich, which had a 13% share of the solicitors’ professional indemnity insurance (PII) market last year, said that it has decided to ‘significantly reduce capacity for new business’ this year because it needs to control its exposure to the assigned risks pool (ARP). The news will come as a blow to more than 3,000 law firms and sole practitioners who may need to find alternative cover during the coming renewals season because of the expected departure of Quinn from the market, and an announcement by Hiscox that it is pulling out of solicitors’ PII altogether. Zurich covers the full range of the profession, from sole practitioners to international firms. Market sources indicated that there are no new insurers presently seeking to enter the solicitors’ PII market. Zurich legal professions manager Jenny Screech said: ‘We have a significantly reduced capacity for new business because we need to control our exposure to the ARP. We have been engaged with actuaries for a number of weeks, trying to work out what our involvement will be this year. We need to very carefully control our capacity, and we will have a much reduced capacity.’ The reduced capacity relates to new business rather than renewals for existing customers. Screech declined to comment directly on which types of firm are most likely to be affected by Zurich’s decision, but said: ‘The difficulty for the profession is going to be the one- two- and three-partner firms. It’s unfortunate that there isn’t a market solution for the problems this year. If we had been able to achieve some change this year, the profession would have been looking at a very different scenario now.’ Meanwhile, the Solicitors Regulation Authority has announced a tough new enforcement ­programme aimed at firms in the ARP that have not paid their premiums. It said these firms will face regulatory sanctions, court action, and/or an intervention, and those that have not paid their ARP premium by October will be closed down. The Law Society welcomed the action. President Linda Lee said it ‘should reduce the costs of the ARP, which are ultimately borne by the profession, help to create a more affordable solicitors’ PII market and improve protection for the public’. She added: ‘The Society has been calling for a more rigorous management of the ARP for sometime and we will be providing extra funding to enable the SRA to implement the new measures effectively.’ The ARP is the insurer of last resort for firms that cannot obtain insurance on the open market. It charges punitively high premiums, which many ARP firms fail to pay. As at 14 June, £4.5m of ARP premium was due for the 2008/09 indemnity year, and only £2m had been paid. Claims against ARP firms in that year are estimated at £41m. The shortfall in premiums and the cost of claims is paid for by insurers in proportion to their share of the solicitors’ PII market.last_img read more

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SRA appoints former Linklaters partner as chief City adviser

first_imgThe Solicitors Regulation Authority has appointed a former magic circle lawyer to advise it on the regulation of City law firms. The SRA also announced today that six firms of various sizes will take part in its pilot of outcomes-focused regulation. Nick Eastwell, a former partner at Linklaters, will become the SRA’s chief adviser on City law firms from 1 November. Eastwell, who spent 29 years at Linklaters, including 21 as a partner, will advise the SRA’s executive and board, acting as a ‘bridgehead’ between the SRA and City firms. Eastwell will ‘provide additional quality assurance on the outcomes of SRA piloting work with the City’ and ‘general expertise’ on ‘helping the SRA to understand and work with non-City firms which use complex funding approaches’, the SRA said. Eastwell was previously Linklaters’ global head of capital markets and regional managing partner for emerging Europe, the Middle East and North Africa. SRA chair Charles Plant said: ‘It is essential that we at the SRA have a full understanding of the issues which arise in all sectors of the solicitors’ profession, and that there is mutual confidence between the profession and the regulator. ‘There was a perception among the largest commercial firms that we did not fully understand the nature of their work. We have now addressed that concern in a number of ways. ‘The missing link has been the recruitment of a prominent practitioner to offer special advice to our executive team and board, and to help further enhance the confidence of clients and firms that the SRA has the appropriate skills and approach.’ Eastwell said: ‘I am very excited about the prospect of working with the SRA with its new focus on the City and City law firms, particularly in the context of the new regulatory regime and the introduction of multidisciplinary practices and alternative business structures.’ As part of the SRA’s relationship management pilot, one ‘global’ firm; two national firms with different business models; a medium-sized commercial firm; a small firm undertaking a mix of commercial and private client work; and a sole practitioner will work with the SRA to test outcomes-focused regulation ahead of its launch in October 2011. Relationship manager Suchitra Hammond said: ‘We are delighted with the number and range of responses we have received so far from firms wanting to take part. We have now selected six firms to form the first wave of the pilot. During October and November we will select two further waves of firms to join the pilot.’last_img read more

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Sir Geoffrey Bindman joins Iran protest

first_imgHigh-profile human rights solicitor Sir Geoffrey Bindman spoke in support of democracy at a protest against the Iranian government last week, organised by the People’s Mojahedin Organisation of Iran. Bindman said: ‘Change is coming in the Middle East, and that would include the liberation of Iran. ‘Great courage is required. It is a very crucial period.’ The sit-in outside the Iranian embassy began on 20 February and has also been addressed by Malcolm Fowler, member of the Law Society’s International Human Rights Committee.last_img read more

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NatWest to withdraw LPC study loan product

first_imgA decision by NatWest to cease offering preferential loans to students studying the Legal Practice Course has prompted concerns over access to the profession. NatWest, owned by Royal Bank of Scotland, is currently the only bank to offer loans under a Professional Trainee Loan scheme for College of Law and BPP students sitting the LPC, Graduate Diploma in Law (GDL) and Bar Vocational Course (BVC). The bank describes its interest rates as ‘preferential’, and students have up to 10 years to repay the loan. However, it will cease offering the product to new customers from the end of April. Junior Lawyers Division spokesman Kevin Poulter said there had already been a big decline in professional skills training loans. He said: ‘This could be the final straw. Graduates from affluent backgrounds can apply to the bank of mum and dad, but most are going to struggle.’ Law Society president Linda Lee said: ‘With so much government rhetoric about opening up access to the professions to people from disadvantaged socio-economic groups, this seems a move that will further undermine that objective from a bank with 85% public ownership.’ NatWest said other loan ­products would be available for graduates. Read Rachel Rothwell’s latest news blog on the subject.last_img read more

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Liam Fox finds his inner lawyer

first_imgPoliticians, especially when in government, find lawyers and the law make good knocking copy. As my colleague John Hyde reported in a blog from the Conservative Party Conference, MP Ben Gummer was more colloquial than most in telling solicitors to ‘get real’ and stop ‘irresponsible’ opposition to government plans on legal aid. But Gummer’s attitude was fairly typical. Any number of initiatives have aimed to remove lawyers from disputes, based on the idea that representation ‘clouds’ the real issues. The annual naming of top-earning/fat cat legal aid barristers has ‘coincided’ with announcements on changes to legal aid rates and eligibility more than once. Successive home secretaries have openly railed against the judiciary when decisions have not gone their way. So I find it interesting that, faced with revelations that could end their time in office, formerly straight-talking politicians become suddenly quite legalistic in their world-view. The defence secretary Liam Fox is the latest figure to find his inner lawyer, twisting through a series of carefully worded denials about the presence, role, access and influence of his friend Adam Werrity. Werrity’s near-omnipresence on Fox’s trips (18), and the regularity of his access to the secretary of state at the Ministry of Defence (22 visits) appear irregular, especially when set beside the defence-related interest of Werrity’s policy-focused charity. If Fox survives, it is likely to be on ‘narrow’ legal and quasi-legal findings. The argument will run that Werrity’s access was inappropriate, but that no departmental decisions were changed as a result of that access. It may be that the ministerial code, as shadow defence secretary Jim Murphy alleged, was broken, but that, again Fox didn’t change his mind on anything, and that businessmen like Harvey Boulter didn’t pay cash for access. All of which will rather misses the point on several counts. First the Ministerial Code, while noting circumstances under which a minister should offer the prime minister their resignation, is ‘designed to be a helpful guide to ministers’. It is not an extension of the criminal law, and the lack of a criminal prosecution should not be used to prove that the code was not breached. The Code is, in effect, a piece of self-regulation – as concerned with perception as actual wrong-doing. For example, Section 7 concerning ministers’ private interests, which is among those that Murphy cites, says: ‘Ministers must ensure that no conflict arises, or could reasonably be perceived to arise, between their public duties and their private interests, financial or otherwise.’ Second, the commercial advantage that a businessman gains by access may not be down to influencing a minister. As Boulter’s own account of his follow-up actions to his meeting with Fox in Dubai seems to show, perceived proximity to a minister can be an advantage. In this case, Boulter made known his meeting with Fox to manufacturer 3M to gain leverage in a commercial dispute. This happened without Fox’s knowledge, but the informal meeting made Boulter’s actions possible. Then there is the matter of Werrity himself, and his own interests here. From what we know, he runs a policy-related charity, for which he is reported to pay himself £90,000. Not enough is known at this stage to comment directly on his financial affairs or funding for his activities. But it won’t be enough to show that he has not received payment for arranging meetings. The modus operandi of US think tanks, especially on the political right, around politics, lobbying and interest show the way that money can be made available – the route is to fund other related matters. Influential people, who have access to those in power, may be paid overly generous ‘expenses’ and ‘speaker fees’, and reports, research, or ‘white papers’ are commissioned at a superannuated rate. In a similar scenario, journalist Peter Oborne recently alleged former prime minister Tony Blair had been paid £27m to ‘consult’ on the future of the Kuwaiti economy, including the production of a ‘report’ that included some fairly derivative recommendations. (Tony Blair Associates say the figure paid was lower, but will not reveal what it was.) The point is, there doesn’t need to be a specific invoice, recorded conversation or an email for wrong-doing to have occurred, helpful though Fox and Werrity’s detractors would find that. For that is not necessarily how ‘business’ is done in this world – and the failure of an investigation to turn up that sort of smoking gun evidence, would fall short of a full exoneration for Fox.last_img read more

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SRA ‘ready and waiting’ for ABSs

first_imgApplications by firms to become alternative business structures (ABSs) could take up to nine months to process, the Solicitors Regulation Authority revealed this week. The SRA, which on Tuesday became a licensing authority after two years of preparation, said it is ‘ready and waiting’ to accept forms from new entrants to the legal services market. More than 10 initial applications were made on the first day. As predicted, the Co-operative Legal Services and personal injury firm Irwin Mitchell confirmed they had begun the process. Eddie Ryan, Co-op’s managing director, said his organisation, founded in 2006, would play a ‘leading role’ in the new era. The Parabis Group, made up of defendant firm Plexus Law and claimant firm Cogent Law, is also believed to have applied. However, two organisations tipped to enter the market, AA and Saga, told the Gazette they had not yet begun the process. Tesco, whose brand name is widely used to describe the new ‘Tescolaw’ era, also confirmed it had not applied. Organisations begin the SRA application process by completing an online expression of interest form before a bespoke assessment pack is created. The normal approval period is expected to last for six months, the SRA said, although the authority can grant an extension of three months for further checks. The process costs £2,000, plus £150 for every individual seeking licensing. Ann Morgan, manager of the SRA’s ABS team, said: ‘One size doesn’t fit all, so we’ll have to assess each application on its merits. And while the preparation work has been very comprehensive, we will need to remain flexible in our approach to deal with these new firms. ‘We have to be rigorous and robust – as robust as we are with traditional firms. We’ll be asking for the employment history of everyone going back five years – we need to have detailed information relating to those who want to be regulated by us.’ The opening of the ABS application process by the SRA is a landmark moment in the liberalisation process set in train by the Legal Services Act 2007. Law Society president John Wotton said that reform is important for the entire profession, not only those seeking to adopt the new business model. ‘ABSs can provide new opportunities and growth for law firms, but equally those not seeking to adopt ABS have an imperative to be more competitive, accessible and innovative,’ he said. Although the Council for Licensed Conveyancers began handling ABS applications in October, the Ministry of Justice said the addition of the much-larger SRA would potentially enable thousands more firms to take advantage of the new freedoms. Justice minister Jonathan Djanogly said the SRA’s entry to the licensing process ‘marks another major milestone for UK legal services’. The new structures will allow the sector to ‘reach new heights, as solicitors’ firms develop new markets, join up with other businesses to offer different products and provide opportunities for growth’, he said. He added: ‘Customers will find legal services more accessible, providing a much more competitive and efficient service.’ Marketing consultancy Rufus Leonard predicted a ‘titanic battle for the hearts and minds of potential customers’ between traditional law firms and new entrants.last_img read more

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Who’s suing whom

first_imgSubscribe to Building today and you will benefit from:Unlimited access to all stories including expert analysis and comment from industry leadersOur league tables, cost models and economics dataOur online archive of over 10,000 articlesBuilding magazine digital editionsBuilding magazine print editionsPrinted/digital supplementsSubscribe now for unlimited access.View our subscription options and join our community Stay at the forefront of thought leadership with news and analysis from award-winning journalists. Enjoy company features, CEO interviews, architectural reviews, technical project know-how and the latest innovations.Limited access to building.co.ukBreaking industry news as it happensBreaking, daily and weekly e-newsletters Subscribe now for unlimited access To continue enjoying Building.co.uk, sign up for free guest accessExisting subscriber? LOGIN Get your free guest access  SIGN UP TODAYlast_img read more

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Raising a stink

first_imgSubscribe to Building today and you will benefit from:Unlimited access to all stories including expert analysis and comment from industry leadersOur league tables, cost models and economics dataOur online archive of over 10,000 articlesBuilding magazine digital editionsBuilding magazine print editionsPrinted/digital supplementsSubscribe now for unlimited access.View our subscription options and join our community Stay at the forefront of thought leadership with news and analysis from award-winning journalists. Enjoy company features, CEO interviews, architectural reviews, technical project know-how and the latest innovations.Limited access to building.co.ukBreaking industry news as it happensBreaking, daily and weekly e-newsletters Get your free guest access  SIGN UP TODAY Subscribe now for unlimited access To continue enjoying Building.co.uk, sign up for free guest accessExisting subscriber? LOGINlast_img read more

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