The Bar Council chairman, Nicholas Lavender QC, addressing a cross-section from the legal community at the Old Hall in Lincoln’s Inn 24th November 2014
Lawyers and their Regulators: What Next?
Ladies and gentlemen, thank you for taking the time and the trouble to be here this evening. I am very grateful.
I have to begin with an apology. I may seem unusually nervous tonight. If I do, the reason is that this is the room in which I sat my Bar exams in 1989. Even after 25 years, I still get a twinge of apprehension every time I enter this Hall.
And when I look up at Hogarth’s great painting, I don’t see St. Paul appearing before Felix. Instead, I see Lavender before the Examination Board, pleading for their indulgence towards the woefully inadequate exam script trailing at his feet.
I will try to put those thoughts out of my mind tonight. But please forgive me if they creep back in from time to time.
Meanwhile, let me start by trying to explain why we have invited you all here tonight. There is a debate going on about the future of the regulation of legal services. It was prompted by the Government’s call for evidence last year, and it was given added impetus by the Lord Chancellor’s remarks at the CILEx dinner in June, when he said as follows:
“I also think there are too many layers of regulators. I have said to Sir Michael Pitt that during his time at the Legal Services Board, success means creating an environment where that organisation is not necessary in the long term. This will not happen overnight but I am clear that this should be the direction of travel.”
Many of you have contributed to that debate, and if you haven’t already, you probably will before too long. It goes without saying that it is an important debate. And the voices of the approved regulators need to be heard. Now the Bar Council is the approved regulator for a profession of specialist advocates. And if we, as specialist advocates, failed to make our voices heard, then something would be very wrong indeed.
I should stress that what you are about to hear are my personal views. This is a speech by an individual, not a manifesto drafted by a committee.
But it is a speech by an individual who has been involved in the regulation of legal services for 25 years. One of my first jobs for the Bar Council was to read all of the Parliamentary debates on the Bill which became the Courts and Legal Services Act 1990. I was then heavily involved in presenting the Bar’s perspective throughout the implementation of the changes effected by that Act. This included giving evidence in 1991 to the Lord Chancellor’s Advisory Committee on Legal Education and Conduct, which was in a sense a predecessor to the Legal Services Board, the LSB.
For much of the 1990s I was a member of the Bar Council’s Professional Standards Committee, which was the committee responsible for monitoring and proposing any necessary changes to the Bar’s Code of Conduct. In the year 2000 I helped George Leggatt QC, now Mr. Justice Leggatt, to produce the 7th edition of the Code of Conduct, taking account of changes to the regulatory landscape made by the Access to Justice Act 1999.
As a member of the Bar Council from 1994, I was a member of the Bar’s regulatory body until the responsibility for regulation was delegated to the Bar Standards Board, the BSB, in 2006. Thereafter, I was a member, and for 3 years chairman, of the Bar Council’s Professional Practice Committee. We provided ethical advice to barristers, both individually, through the ethics helpline, which receives about 150 calls and emails every week, and generally through notes published on the Bar Council’s website.
And we were also the primary point of contact between the Bar Council and the BSB, making representations to them on a whole host of issues. Indeed, in 2009/10 I was, with Matthew Nicklin, one of the two chairmen of the joint working party on the implementation of the LSB’s Internal Governance Rules.
And as Chairman of the Bar Council this year I have had many dealings with the BSB, the LSB and the Government. So it seemed appropriate for me to say something about regulation before, in 37 days’ time, I return to welcome obscurity and, like disgraced politicians everywhere, I get to spend more time with my family.
Given my background, it will be no surprise to learn that my focus is on the regulation of barristers. Barristers are, above all else, advocates. And I want to say five things about advocacy:
- Advocacy imposes conflicting duties on the advocate.
- Advocacy is personal.
- Advocacy is a skill.
- Advocacy is different.
- Advocacy matters.
I start with the proposition that advocacy imposes conflicting duties. Like other lawyers, advocates spend most of their time seeking to promote the interests of their clients. But their duties do not end there. They also owe a duty to the court, which may override their duty to promote their client’s interests, for instance by prohibiting them from advancing an unarguable point of law or a factual claim which they know to be untrue. And they also owe a duty to victims and other witnesses. The right to cross-examine witnesses is one which must not be abused.
These duties reflect the fact that the courts do not exist merely to serve the interests of individual litigants, but of all others involved in a dispute and of the public in general. So while it is important that we should continue to promote and protect the interests of consumers, by which I mean our clients and potential clients, that is only part of the picture.
I turn to the proposition that advocacy is personal. One of the buzz-words or phrases which I have heard used in recent years is “entity-based regulation”. This is not an expression which is used in the Legal Services Act, let alone something which is required by that Act. It is not a necessary feature of our regulatory landscape at all. It is simply a fashionable idea amongst regulators.
I say nothing about the appropriateness of “entity-based regulation” for solicitors’ firms doing transactional work, or even, perhaps, some forms of litigation, although I know that its suitability in that context has been questioned, in research commissioned by the LSB on regulatory barriers to entry, exit and merger in the solicitors’ market. A report published in December last year by the Regulatory Policy Institute contained the following statement:
“Regulation of the profession has traditionally been focused on the conduct of individual solicitors (i.e. individual professionals) for fairly obvious reasons. The post-LSA arrangements have shifted the focus much more to business entities, and the rationale for that is less easy to understand. An obvious question is: why is the regulation of individual conduct not sufficient to achieve the desired policy purposes? We have found no convincing answer to that question.”
I do not pretend to have found any such answer myself. But I must not get drawn into discussing the regulation of solicitors. Instead, what I will say is that the suitability of an “entity-based” approach, or indeed an “outcomes-focused” approach, for advocates is limited, because advocacy is personal.
When a case comes to court, the man or woman representing the claimant or the defendant is exactly that, a man or woman. He or she is not a company, an LLP, a partnership, an alternative business structure or anything of the kind. He or she may practise through a company, an LLP, an alternative business structure or what have you. But those legal fictions are not present in court. What is present in court, representing, say, the defendant in a murder trial, is a living, breathing human being.
And proper regulation needs to recognise this. The job of a regulator of advocacy is to regulate individuals. Quite often gifted and talented individuals, but individuals nonetheless. Occasionally idiosyncratic individuals, but individuals all the same.
The brilliant and devastating question, or the banal or undermining question, is never asked by an LLP or an ABS. It is always asked by a real person.
And if advocacy is done well, that is because the man or woman asking the question, or making the submission, has some skill in the art of advocacy. This bring me to my third point, which is that advocacy is a skill. But skill in the art of advocacy is like the proverbial elephant. It is easy to recognise, but difficult to define.
This is one of the many reasons why any regulator of advocates faces a difficult challenge. They want, understandably, to require that everyone who practises advocacy has achieved a minimum level of competence. But a line of questioning which may be devastating with one witness may look inept with a different witness. And there is often no way of telling in advance which kind of witness one is dealing with.
It follows that a formal assessment even of competence, let alone excellence, in advocacy is difficult in the extreme.
Consider St. Paul. When he appeared before Felix, he proved to be a fearless and eloquent advocate, stating the case for the new religion in terms which are still admired today. Sadly, his eloquence did him no good before an indecisive and greedy tribunal. Felix ordered that Paul be kept in prison for two years, hoping in vain that Paul would pay a bribe to secure his release. So it would have been a mistake to judge the quality of Paul’s advocacy by the outcome of his case.
For these and other reasons, I believe that advocacy is different from other legal services. This is my fourth point about advocacy. But, whatever the legal context, advocacy is a very different type of activity from what most lawyers do most of the time.
And this is a concern. It seems that there are around 150,000 practising lawyers in England and Wales. But only about fifteen and a half thousand of them are barristers. So we account for only about 10% of practising lawyers. And there is an obvious risk that, as regulating the majority of lawyers takes up the majority of regulatory time and effort, the particular circumstances of the Bar can be overlooked or misunderstood. Let me give two examples.
The first example is the report on the cab-rank rule which was prepared by a pair of academics and published last year by the Legal Services Board. It was apparent when you read the report that the academics had not even understood what the cab-rank rule was. They seemed to think that it included the quite separate and independent rules on when a barrister has to refuse to act, or to continue acting, in a case by reason of, say, a conflict of interest or some other reason.
A great deal of time and effort went into responding to that report, and in the end nothing came of it. So all that it achieved was to put people to the trouble of replying to it and correcting its errors.
My second example is the submission made by the LSB last year to Sir Bill Jeffrey. In this document the LSB set out their views as to the future of the market for criminal advocacy services. To my great surprise, they did so in terms which assumed that it was for the solicitor, and not the lay client, to decide which advocate would represent the client in court. So for instance, they wrote that:
“Firms will decide whether or not to outsource advocacy to a barrister of their choice.”
And they referred to:
“The decisions of … solicitor firms about whether to undertake the advocacy in-house, or refer it out to a self-employed advocate …”
You will note that the client, the consumer, did not feature at all in the LSB’s view of how advocates came to be instructed. We at the Bar Council believed that that was quite wrong. It is for the client to decide who is to represent him or her in Court. One of the litigator’s roles is to advise the client as to the choice of advocate.
Moreover, as Sir Bill acknowledged in his report, where the solicitors’ firm also has in-house advocates, there is the potential for a conflict of interest between the solicitors’ firm and its client. The solicitors’ firm will have a financial incentive to obtain work for its in-house advocate, but the client’s interest is to obtain the best advocate for the case. The two interests will not always align.
The fact that the LSB completely missed this issue, and indeed assumed it away, is particularly troubling when one considers its significance in relation to Sir Bill’s key findings. Sir Bill said that:
“as it exists now, the market could scarcely be argued to be operating competitively or in such a way as to optimise quality.”
Sir Bill explained that:
“The group of providers [i.e. barristers] who are manifestly better trained (if not always more experienced) as specialist advocates are taking a diminishing share of the work, and are being beaten neither on price (in a system where fee rates are fixed) nor on quality.”
Sir Bill found when he visited Crown Court centres and spoke to circuit judges that “the main area of concern” was:
“relatively inexperienced solicitor advocates being fielded by their firms (for what were presumed to be commercial reasons) in cases beyond their capability.”
Sir Bill described the judges’ views as “remarkably consistent and strongly expressed” and said that:
“It would in my view be a mistake to discount them.”
My fifth point about advocacy is that it matters. Our adversarial legal system depends upon the advocates, and depends upon there being advocates of the highest standard. Sir Brian Leveson said as follows on 21 May in the Operation Cotton case:
“The criminal justice system in this country requires the highest quality advocates both to prosecute and to defend those accused of crime: in addition, they are the potential judges of the future. The better the advocates, the easier it is to concentrate on the real issues in the case, the more expeditious the hearing and the better the prospect of true verdicts according to the evidence. Poor quality advocates fail to take points of potential significance, or take them badly, leading to confusion and, in turn, appeals and, even more serious, leading to potential miscarriages of justice. We have no doubt that it is critical that there remains a thriving cadre of advocates capable of undertaking all types of publicly funded work, developing their skills from the straightforward work until they are able to undertake the most complex.”
And let me quote two non-lawyers on this subject. When he gave evidence to the Justice Committee in July, the Right Honourable Chris Grayling MP said as follows:
“It is very important that the independent criminal Bar has a good future.”
And Sir Bill Jeffrey said as follows in his report:
“The particular strengths of the English and Welsh criminal Bar – intellect, expertise, independence, ability to represent both prosecution and defence – may not be unique; but they are a substantial national asset which could not easily (or perhaps at all) be replicated, and they contribute significantly to the high international reputation of our legal system. There is also a distinct national interest in having available sufficient top-end advocates to undertake the most complex and serious criminal trials. Although senior judges have traditionally been drawn from all areas of legal practice, and ability is the main criterion, there is a persuasive argument that criminal law is an increasingly specialist area and that the High Court benefits from having on the Bench judges with deep criminal experience.”
Sir Bill was speaking of the criminal Bar, but his words are equally applicable to every other part of the Bar. And it seems to me that one test of any regulatory system, actual or proposed, is the extent to which it upholds and promotes what Sir Bill described as a substantial national asset.
There is a great temptation when one engages in armchair legislating to imagine what you might do if you were starting with an entirely clean slate, and designing the country’s legal system from scratch. This can result in what might seem a tidier or perhaps more logical solution than a reality which is the creature of history and evolution rather than mere blue-sky thinking.
But I believe that this is a temptation which is very much to be resisted. We have in this country legal institutions of which we can be proud and which are the envy of the world. Our focus should be on enhancing them, not sweeping them away or trampling over them. Sir David Clementi understood this point, and it was one of his reasons for recommending an approach which built on existing professional institutions.
It follows that I see no attraction in the idea which is sometimes mooted that we might move to what is called, to use the catchphrase, regulation by function rather than regulation by title. The armchair legislator might find it neater or tidier to imagine a single regulator for all advocates, a single regulator for all litigators, and so on. But that would be to work against the grain of our legal system, where we have institutions such as the Inns of Court and the Bar which not only have hundreds of years of history, but also remain a force for good, as Sir Bill has recognised in the case of the Bar.
Take the Inns of Court. Every barrister belongs to one of the Inns. Indeed, the very definition of a barrister is a person who belongs to that class of members of an Inn who are known as barristers. The oldest of the Inns have existed for over 700 years. They have a long tradition, as buildings such as this Hall remind us every day. And that tradition matters, because it inspires today’s barristers.
From the moment that an aspiring barrister joins an Inn as a student, his Inn will encourage in him a sense of what it means to be an advocate, and of the ethical obligations and values of the profession, such as honesty, integrity, independence and fearlessness. And the Inns also play a leading role in training young barristers in the skills of advocacy. All of these activities by the Inns help to do that which a mere regulator cannot easily do, which is to promote and foster excellence and values, as opposed to merely requiring competence and compliance.
We need a regulatory system which works with institutions like this, rather than cutting across them.
And we need a regulatory system which respects the independence of lawyers and of the legal professions. That is one of the reasons why there is such value in self-regulation. One of the important safeguards of the rule of law is the existence of an independent legal profession or professions. If the rights of the citizen are to be real, they need to be capable of being enforced. And that requires that citizens should have access to lawyers to speak for them who are truly independent of the Government and its appointees.
That is no doubt why the self-regulation of the legal profession has been identified as one of the ten core principles of the European legal profession by the CCBE, the Council of the Bars and Law Societies of Europe. The form of modified self-regulation which Sir David Clementi recommended also supports one of the regulatory objectives embodied in the Act, i.e. that of “encouraging an independent, strong, diverse and effective legal rofession.”
I trust that no-one in this room would consider it appropriate for lawyers to be regulated directly by a Government Minister. Likewise it would be unsatisfactory for lawyers to be regulated by a Government Minister’s agents or appointees. So that is another reason why it would be an inappropriate and retrograde step to set up an new quango, or series of quangos, to regulate, say advocates, and litigators, and conveyancers, and what have you.
And another obvious, and practical, objection to the idea of regulation by function is that it could subject individual lawyers to a multiplicity of regulatory regimes. An individual lawyer, or a law firm, who practised, say, advocacy, litigation, conveyancing and probate, would have to deal with at least four different regulatory regimes. And if the lawyer or firm provided legal advice outside of these areas, then that aspect of their practice would continue to be regulated by his professional body, unless we took the radical, yet unfortunate, step of making the mere provision of legal advice a reserved activity. I will come back to this point.
Now I can hear the advocates of regulation by function say that it would be neater and tidier if all advocates, or all litigators, or all conveyancers, were subject to the same rulebook. Indeed, a very senior judge said something to this effect in a speech in Belfast in June.
But, with the greatest possible respect, there are greater issues at stake here than the desire, beloved of armchair legislators, to make things neat and tidy. And there is no evidence that the fact that, say, the Bar Council and the Law Society, acting through the BSB and the SRA, both regulate advocates is causing any real problems in practice. And if it were, I see no reason why they couldn’t sort it out.
On the contrary, however, there is evidence that the existence of these two regulators is a force for good. Sir Bill Jeffrey’s report drew attention to the marked difference in the two regulators’ advocacy training requirements.
This has provided a strong impetus to the SRA to up their game in this regard, and we look forward to seeing how they respond to the challenge. But this impetus would have been lacking if they had had a monopoly of the regulation of advocates.
Likewise, the BSB’s clear and simple prohibition on advocates paying or receiving referral fees is a good example which I believe that the SRA would do well to follow. A litigator has a duty to give proper, unbiased advice to his client as to the best choice of advocate for the client’s case, and to instruct the advocate chosen by his client in the light of that advice. It cannot be right for a litigator, in this case a solicitor regulated by the SRA, to demand and receive a payment from another lawyer (whether a solicitor advocate or a barrister) as a condition of recommending and instructing that lawyer as an advocate.
If the advocate is the right man for the job, then the litigator ought to be able to say so, and indeed is required to say so, without demanding a kickback from the advocate. And if the advocate is the wrong man for the job, then the litigator has a duty to say so to his client, uninfluenced by the advocate’s willingness, if he is willing, to pay a kickback to the litigator.
It is fanciful to think that these problems can be solved by disclosure to the client. Just imagine how a litigator would make full and frank disclosure. In theory, of course, he could say the following: “Mr. A is a good advocate, with 20 years’ experience of conducting cases like yours. He would be a good man to conduct your case. However, he is not allowed, and not willing, to pay me a kickback. Mr. B has only 2 years’ experience, mostly on cases which are less complex than yours. However, he is willing to pay me a substantial kickback. So, on balance, I recommend Mr. B as the best man to represent you.”
Can you really imagine that any litigator, whoever his regulator, is going to say that? But if that is the truth, and he doesn’t say it, then he may even be falling foul of the criminal law.
It has always seemed to me that referral fees have something in common with the worst excesses of the Common Agricultural Policy. Imagine a firm of lawyers who say, in effect, “We can arrange for this case to be conducted by an in-house advocate, and we will do so unless we receive a large enough kickback from an external advocate.”
In that circumstance, if a kickback is paid, its purpose is, in effect, to prevent the firm from itself conducting the advocacy in the case. Under the Common Agricultural Policy, some farmers used to receive payments not to farm their fields, but to set them aside. In the same way, referral fees are a form of “set-aside” for lawyers. Where is the value to the client or, in a legal aid case, to the public purse, in making such a payment?
Returning to the notion that there should only be one regulator for, say, advocates, this reminds me of a question which was frequently posed in his manifestoes by the late Screaming Lord Sutch. He used to ask, with the same disarming innocence as the boy who asked why the Emperor had no clothes on, why it was that there was only one Monopolies Commission. Put another way, why should the Monopolies Commission, of all people, enjoy a monopoly of combatting monopolies?
Or, in our context, why should any one regulator enjoy a monopoly of regulating advocates, or litigators, or conveyancers, or lawyers in general? What is wrong with the present system of what Professor Stephen has termed “regulatory competition”?
But I am in danger of moving on to a bigger issue before I finish with the issue of regulation by title or regulation by function. I hope that I have said enough to explain why I believe that the only sensible answer to that issue is to stick with what is so inelegantly called regulation by title.
The next issue I want to look at is the question of what activities should be regulated. For the professions, this is easy. Acting through our regulatory arms, we regulate everything our members do in relation to the provisions of legal services as a barrister, solicitor or what have you. And we do not regulate people who are not members of our profession.
But for the armchair legislator, this is a much trickier issue. Bringing the full force of a statute to bear on an activity is a strong thing. It is a criminal offence to carry on the reserved activities without authorisation. Yet one hears calls for expanding the reserved activities, and thereby expanding the reach of that criminal offence.
A respected academic suggested this very thing at a seminar in September, when he proposed that the full panoply of the Act should apply to any legal service, unless it was provided free of charge.
In this context, it is worth recalling that the view is taken in some jurisdictions that even the activities which we currently regard as reserved activities don’t need to be regulated by statute. In Finland, for instance, there is, so far as I am aware, no offence of appearing as an advocate without authorisation.
Let me illustrate what is involved by imagining that two undoubtedly legal activities were to become reserved activities. One is the provision of legal advice, and the other is acting as an advocate in an arbitration. Suppose for a moment that it became a criminal offence to carry on either of these activities in England without authorisation under the Legal Services Act.
The first consequence would surely be that many foreign law firms would have to close, or significantly reduce, their London offices. Any lawyer from, say, New York or Paris, who currently comes to England to visit his clients would have to think twice about doing so. And such a lawyer would be unable to come here to represent his client in an arbitration.
The fact is that we currently have the most liberal regime for cross-border practice by lawyers of any country in Europe, let alone elsewhere. This has been shown by research carried out by the CCBE in connection with the negotiations between the European Union and the United States over the proposed Transatlantic Trade and Investment Partnership. It is one of the things which help to make London a global business centre. Why on earth would we want to jeopardise that?
Another international comparative study is that conducted by the OECD, the Organisation for Economic Co-operation and Development. In 2013 the OECD’s researchers analysed the regimes for regulating legal services in 45 different countries and gave each country a score which was intended to reflect the extent to which its regulatory regime provided obstacles to competition. The United Kingdom achieved the best score out of all 45 countries, and was judged to be much more open to competition than countries such as Germany and France. This is surely one of the factors which has helped to make the export of legal services one of the UK’s success stories in recent years.
And why, also, would we want to jeopardise London’s role as a centre for international arbitrations? So much work went into the Arbitration Act 1996, all designed to encourage people from around the world to bring their disputes to London for determination here.
Surely it is a better approach, as at present, to identify those particular aspects of legal services where there is a genuine need for the full weight of statute to be brought to bear. I agree with what Sir David Clementi said on this point:
“A decision to regulate a market arises from the decision that leaving the activity unchecked could lead to undesirable consequences and that the benefits that will flow from regulation will outweigh the costs of that regulation.”
Changes can, of course, be made in response to changing needs, as they were, for instance, a few years ago when it was recognised that there were real problems in the area of immigration law. But there is no need at present for a wholesale extension of the Act to all legal services.
One area which might in future be thought a proper subject for change is the provision of advocacy services for reward in court. At present, the Judges have a residual discretion to allow anyone to address them on behalf of a litigant. Such permission will often be granted to relatives, friends or others acting pro bono. But there are understandable concerns if people are making a career out of acting as unregulated advocates and being paid for doing so. The time may come when this has to be prohibited.
I turn now to the two questions which are most often posed when consideration is given to what a new Legal Services Act might contain. They are, first, should there continue to be two tiers of regulation, or just one? And, secondly, if there is to be one tier of regulation, which tier should be removed?
The Lord Chancellor has helpfully given us an indication of the present Government’s thinking in this regard, and I am grateful for that. I have already quoted what he said in June, namely that the direction of travel should be towards creating an environment where the LSB is not necessary in the long term.
It might be thought that the approved regulators would simply say, “Thank you very much, we’ll buy that.”
So I hope that I won’t be considered ungrateful if I raise a prior question. Changes of this kind would require legislation. But before asking what a new Legal Services Act would look like, surely we ought to ask ourselves whether we need a new Legal Services Act? And I for one am not at all convinced that the answer to that question is “Yes”.
Let me explain. I don’t mean that I think that the Legal Services Act is perfect. I don’t mean that I can’t think of ways of improving the Legal Services Act. And I certainly don’t mean that I don’t see the merit of the Lord Chancellor’s suggestion.
On the other hand, I do see a number of other things which are relevant. Let me mention four:
In the first place, many of the issues which have arisen in relation to the regulation of legal services since the 2007 Act came into force are not the product of the Act. This point was well made in the Regulatory Policy Institute report to which I have already referred, which was commissioned by the LSB and published in December last year. The report’s conclusion included the following:
“The motivation for change was the Legal Services Act 2007, but, so far as we can see, this in itself did not mandate a shift to entity regulation, or to outcomes-focused regulation in its current form, or to principles-based regulation, or to risk-based regulation. These seem to be later, discretionary choices, and they have led to a heavy-handed regulatory structure for a profession subject to what continue to be potentially substantial sanctions for individual misconduct and negligence, operating in a market populated with a large number of suppliers, many of very small size, in an institutional framework that offers multiple additional consumer protections (…).”
And the authors of the report went on to say that:
“We conjecture that the current structure is heavily influenced by what appears to us to be a disjunction between the LSA objectives and the risk-based, outcomes-focused philosophy that has been adopted.”
In other words, the view of the Regulatory Policy Institute was that changes since the Act came into force had resulted in heavy-handed regulation, but it was not the Act itself which had brought this about.
The corollary of this is that there are plenty of opportunities within the framework of the existing Act for regulation to be conducted in a more efficient and effective way. Since the Act does not require the regulators, including the LSB, to engage in heavy-handed regulation, it follows that it is open to them to move to a lighter, more proportionate approach. And no new statute is required for that purpose.
The second of my four points is that change carries with it cost. The economists will confirm this. For instance, Professor George Yarrow of Oxford, who is the chairman of the Regulatory Policy Institute, wrote as follows in his response to the Ministry of Justice’s call for evidence:
“Change can be difficult to manage, and can be a burden to organisations. Regulatory change is no different in this respect, and one of the most consistent findings of Regulatory Policy Institute work over the years, across all sectors of the economy and including multiple projects for the Cabinet Office and BIS, is that it is most often change in regulations, rather than the overall level of regulation, that, on close analysis, tends to be what imposes the largest regulatory burdens, particularly on small firms.”
The legislative process itself consumes a great deal of people’s time. The Bar Council was certainly kept very busy from the moment of Sir David Clementi’s appointment in 2003 to the giving of Royal Assent to the Legal Services Act in 2007.
But changes to the regulatory structure also impose a cost on those who are regulated, a cost which is often passed on to their clients. At the Bar, for example, we are still getting to grips with the new Handbook which the BSB introduced in January of this year. I am not, for this purpose, making any criticism of the new Handbook. (For the avoidance of doubt, that doesn’t mean that I am uncritical of some aspects the new Handbook, but that is a separate issue, which is not relevant today.) But it takes time to deal with at least two types of change:
- First, there have been some substantive changes to the rules which we are supposed to obey. The exercise of getting 15,000 people to realise, let alone address, the fact that the rules which apply to them have changed is not an easy one. It is certainly not a quick one. As with changes to the law, it can take time and perhaps some test cases before new rules are bedded down and a common understanding of their effect is achieved.
- Secondly, even where the rules have not changed, they have moved. It takes time to locate the rules applicable to situation which faces you. This is not a small point. From my experience dealing with queries received the ethics helpline I know the value of familiarity with the architecture of the rules.
Before I move on to my next point, can I take the opportunity to deal with a proposition which seems to me to be rather facile, yet which, judging from a speech I heard in April, clearly exercised the first chairman of the Legal Services Board. I refer to the length of the rule book. Absent other considerations, shorter may well be better. But other considerations are never absent.
After all, it may be that any regulator’s rulebook could, in the ultimate analysis, be reduced to only two words. Those two words are “Be good”. And any legal regulator’s rule book could be reduced to four words, which are “Be a good lawyer”. The rest, it might be said, is detail. But it is rather important detail.
There are, for example, potential problems associated with the current fashion for moving from prescriptive rules to what is called “outcomes-focused regulation”. Professor Yarrow addressed this point in his response to the call for evidence. While generally supportive of a move away from unduly prescriptive regulation, he said that:
“There is, however, a balance to be struck, since a focus only on effects can lead to highly uncertain and arbitrary regulation. I think there are some indications that this may be a problem in the way in which the 2007 reforms are being implemented in some areas. For example, the descriptions of ‘principles-based, risk-based, outcomes focused’ regulation to be found in some of the legal services regulation literature do not translate easily into interpretations of what it is that is expected of legal practitioners: the objectives cited appear too general and too open to interpretation to be effectively operational.”
He then spelt out the potential practical effects of this:
“Taken to its limit, ‘outcomes-focused’ regulation seems to me to require firms constantly to appraise the anticipated implications of their conduct for the public interest, using that term as short-hand for the set of regulatory objectives set out in the legislation. Not only is that a hopelessly infeasible task, the attempting of it would require substantial amounts of ‘cognitive effort’, that most valuable of human resources, which necessarily have to be diverted from other activities such as the actual practice of law.”
I suspect that many lawyers would agree with this, perhaps especially solicitors, since the SRA has gone in for “outcomes-focused” regulation to a greater extent than the BSB. This has left some solicitors wondering what they are supposed to do in order to comply with the SRA’s new “outcomes-focused” rules. Many solicitors in this position find that the safest course is to engage regulation consultants, and the cost of such consultants is a not insignificant cost of the present regulatory regime. And, inevitably, this is a cost which has to be passed on to the consumer of legal services.
Given the potential problems caused by over-simplification, it seems unhelpful at best to argue, in effect, that a rulebook which has n pages is inappropriate on that ground alone, whatever the value of n. For every profession, there may perhaps be a value of n which is ideal, although that is rather difficult to ascertain, since it depends upon both the sublime (i.e. what are the tricky ethical issues which the profession faces) and the ridiculous (i.e. what font size and line spacing do you use).
The very idea that complex and difficult issues about how people should behave can be reduced to simple numbers is troubling. For me, it brings to mind Animal Farm. The slogan which emerged in that book was “Two legs good, four legs bad.” Two pages good, four pages bad is no way to judge a code of conduct.
Far more important than counting the pages in the rulebook is addressing what is, to my mind, the most important aspect of a profession’s, or at least my profession’s, commitment to observing proper standards, which is the commitment which members of the profession have to their conception of what an advocate is and of what is valuable about being an advocate. Our task ought to be to reinforce that commitment. And rules which are too generally stated or too outcomes-focused are unhelpful in that regard.
My third point about the Act is that it is still very new. It only came into force six years ago. One would not expect everyone to get everything right in these first years of a new regulatory system under a new Act. Mistakes will be made, as the Regulatory Policy Institute’s report from last December illustrates.
More fundamentally, it was bound to take time for the relevant parties to settle into the new roles accorded to them by the Act and to work out their proper relationships with one another. That is what we have all been doing since 2007, and we are getting the hang of how to make the new regulatory arrangements work. That suggests to me that now would the wrong time to start trying to overhaul those arrangements, instead of giving them an opportunity to operate properly.
And my fourth point also concerns timing. A number of key personnel have changed or are about to change. Within the space of eight months, starting in May this year, the LSB, the BSB and the SRA will all have acquired new Chairmen, and the LSB is to acquire a new Chief Executive. They bring the promise of a fresh start, the opportunity to build new and more productive relationships and an obvious determination to make the system work.
For instance, I have already had a number of meetings with Sir Michael Pitt. The fresh and open approach displayed in the speech which he made in September was a welcome change from the very different tone of his predecessor’s speech in April. I am sure that his arrival will signal a more cooperative and productive relationship between our two organisations, and I hope that he will read my comments about the LSB’s first six years in that light.
It would be good if these new leaders had the opportunity to get on with their jobs and to make the present system work without being distracted by the armchair legislators and endless debates about what a different Act might look like.
I am sorry if those four points took a little time to make. But I wanted to make it clear, before addressing the question of what a different Act might look like, that I am not calling for a new Act. On the contrary, I believe that at this point in time it would be a better use of our efforts to focus on making the present Act work.
However, if compelled to state what new Act should contain, I would undoubtedly agree with the Lord Chancellor. The direction of travel should be towards a situation where the oversight regulator becomes unnecessary.
The past six years have demonstrated that the front line regulators are well able to regulate the legal professions in a manner which serves the public interest and meets the eight statutory objectives. They do so because, on the one hand, they have a good understanding of the particular environment in which their particular branch of the profession operates, but on the other hand their decision-making is independent of the professional bodies. The net effect is that they are able to meet their regulatory objectives in a focused and proportionate fashion.
The form of modified self-regulation embodied in the Act is therefore infinitely preferable to the alternative which Sir David Clementi called Model A, i.e. regulation by a super-quango. The last thing we need in this country, and certainly in the legal profession, is more or bigger quangos.
I am surprised that there are those who still talk about going back to Model A. I saying going back because it would be a backwards step. It would be reopening a debate which we had, and which was settled, in the mid-2000s. And establishing a super-quango, with the attendant bureaucracy, would be a backwards step because it would be likely to lead to regulation which was both more expensive and of poorer quality, thanks to factors which I have already mentioned, such as a lack of understanding of, let alone expertise in, the legal professions and the natural tendency of a monolithic organisation towards a “one-size-fits-all” approach, which could be so harmful in the context of specialist parts of the legal profession such as the Bar. Far from drawing on the expertise of the profession, it would run the risk of alienating the people it was supposed to regulate, which is in no-one’s interests, and certainly not in the interests of the clients, victims, witnesses and others who rely on barristers to do their job and to do it well.
Of course, just as Sir David Clementi was not wholly in favour of Model A, he was not a hundred percent in favour of Model B either. He thought it appropriate to impose some conditions on self-regulation, which is how Model B developed into Model B+, also known as modified self-regulation. He recommended two such conditions in particular.
- The first was that we should delegate our regulatory functions to an independent regulatory arm. The Bar Council embraced this recommendation and set up the BSB before the Act came into force.
- His second recommendation was that there should be some oversight of the professional bodies’ regulatory functions, and the Legal Services Board was set up to perform this oversight function.
The Act was based on these recommendations. It follows that the Act involved an element of compromise between the two extremes of Model A and Model B. For my part, I see nothing wrong with that. I was surprised, therefore, in April when I heard the then Chairman of the LSB denouncing the Act as “a creature of compromise”, as if compromise were a bad thing.
If compromise is a bad thing, then thousands of barristers and solicitors have been conducting their cases badly for years. We settle most of our cases on terms which represent a compromise between the parties. We encourage our clients to compromise.
Indeed, our constitutional law and history is full of compromise, as we seek to strike the right balance between the rights of the individual and the interests of the state. In England we pride ourselves on our pragmatic approach, which was one of the things which prevented us from following other states into totalitarianism in the second quarter of the last century. So I am genuinely puzzled as to why the compromise inherent in Model B+ and the Legal Services Act should be thought to be a bad thing.
One aspect, of course, of a pragmatic approach is that one is prepared to learn from experience. And I believe that the experience of the last six years shows that the form of modified self-regulation embodied in the Act is working and deserves to be supported.
Starting with the first of Sir David Clementi’s two conditions, the Bar Standards Board has certainly shown itself to be capable of acting with independence and in the public interest. Members of the Bar have on occasion disagreed, and disagreed strongly, with the BSB, but the BSB has made its own mind up and has done what it thinks right in the light of the statutory objectives.
And within the regulatory framework maintained and developed by the BSB, barristers are continuing to serve their clients well, not only through tried and tested arrangements, but also by exploring opportunities for innovation and new markets.
Some see our more than 550 years of history as evidence that we are resistant to change. I see the opposite. I see it as the best possible evidence that we are prepared to adapt to changing circumstances. If we had clung to the ways of 1466, the date of the first recorded reference to a barrister, we would not have survived to 2014, let alone flourished, as we have done.
And today there is ample evidence of barristers’ willingness to adapt to enable them better to serve the needs of their clients. For instance, thousands of barristers have undertaken the training necessary to enable them to provide their services direct to the public. No doubt many will take up the opportunity to conduct litigation. The Bar Council has supported these initiatives through the creation of BARCO, the escrow account scheme, which overseas jurisdictions are now interested in copying.
Some barristers have formed alternative business structures, and I hope the BSB will, with the LSB’s permission, soon have the power to regulate entities, including alternative business structures.
However, even without entities or business structures, barristers can, and do, assist those litigants who used to be, but no longer are, entitled to legal aid. There are 5,000 such people a month in family cases alone.
For instance, a husband or wife who cannot afford a lawyer to conduct his or her litigation from the beginning to the end may be able to pay for a barrister to come in and do a specific job, such as appearing in Court at the crucial hearing, or just giving key advice to help the individual to focus on the strong points in their case, not to be distracted by irrelevant or unimportant issues and to counter the other side’s arguments.
The current jargon is to refer to these as “unbundled” legal services. Barristers have been doing this for many years when instructed by solicitors. They are now able to do it, and are doing it, for individuals who find themselves caught up in litigation.
In addition, barristers are always looking to identify new markets. A good example of this is the extent to which our work for overseas clients had grown in recent years. Overseas clients now account for about one-eighth of the profession’s total income. Enterprising sets of chambers are establishing more and more annexes overseas, most recently in Singapore, to give but one example.
Predictably, perhaps, the suggestion was made not so long ago that the BSB and the other front-line regulators should become wholly independent of the professional bodies. But that would be another retrograde step, since severing the links between the approved regulators and their regulatory arms would actually amount to moving away from self-regulation altogether.
In such a scenario, the front-line regulators would become a series of independent quangos, and the result would in effect be a variant of model A, i.e. regulation by quango, but with a number of quangos instead of just one. That would be undesirable for the same reasons as it would be undesirable to have regulation by one super-quango.
It is in relation to Sir David Clementi’s second condition that we have, perhaps, learned most since 2007. The LSB was intended to exercise an oversight function. There may be scope for debate as to how one interprets what is meant by oversight. But it is clear that Parliament envisaged a rather lighter touch than was in fact used in the first six years of the Act’s existence.
For instance, the Parliamentary Under-Secretary of State, Mrs Bridget Prentice MP, said as follows in the course of the Standing Committee debate on the Bill:
“It is important that the oversight regulator does not micro-manage and second-guess the actions of approved regulators”
In practice, however, the LSB was in its first six years rather more active than its oversight function might suggest. We gave many example of this in 2012 in our response to the triennial Review of the LSB.
I understand that much of the BSB’s time has been spent in responding to initiatives from the LSB, which takes up time and resources and risks detracting the BSB and other regulators from matters which they see as a priority.
Another word which gives rise to scope for interpretation is “assist”. Section 4 of the Act provides that it is the duty of the Legal Services Board to assist the front-line regulators in various respects. There are different ways of providing assistance. Sometimes just keeping out of another’s way is the most helpful thing we can do. At the other extreme, there is no doubt room for debate whether telling people what to do is a way of assisting them or whether it goes beyond assistance. We all know that offers of assistance or help, however well intentioned, are not always welcome. Ronald Reagan illustrated this when he said that the nine most terrifying words in the English language are, “I’m from the Government and I’m here to help.”
My point is that section 4 is one of those provisions in the Act which, while it does not require the LSB to adopt a heavy-touch, interventionist approach, is capable of being used to justify such an approach. And if I were rewriting the Act, I would tone down or remove provisions like that. If, and it is a big if, there needed to be an oversight regulator at all, then the limited role of the LSB or its successor could be more clearly defined.
But we don’t need to go as far as rewriting the Act to bring about a desirable result. As it stands, the Act permits the LSB to work with a lighter touch and to confine its role to true oversight. And so it is open to the LSB to do just that, letting the frontline regulators get on with regulation and not seeking to duplicate their work, but merely checking that they have not acted unreasonably or unlawfully.
And a good way for the LSB to carry out the Lord Chancellor’s instruction to prepare for its own obsolescence would be for it to use a progressively lighter and lighter touch, until the point was reached at which no touch at all was needed.
The last substantive point I want to address concerns section 51 of the Act. This specifies the purposes for which approved regulators such as the Bar Council may raise funds by way of practising certificate fees. Those purposes include, but are not limited to, funding regulation of the profession by the BSB or its equivalent and the LSB. The other “permitted purposes”, as they are known, are:
- the education and training of relevant authorised persons and those wishing to become such persons, including:
(i) the maintaining and raising of their professional standards, and
(ii) the giving of practical support, and advice about practice management, in relation to practices carried on by such persons;
- the participation by the approved regulator in law reform and the legislative process;
- the provision of pro bono legal services;
- the promotion of the protection by law of human rights and fundamental freedoms;
- the promotion of relations between the approved regulator and relevant national or international bodies, governments or the legal professions of other jurisdictions.
Some have suggested that this list should be pruned to some extent. For my part, I don’t agree. The permitted purposes are all activities which satisfy at least two criteria. First, they are directed at the public interest. They are not mere representative activities.
Secondly, they are activities where the profession’s specialist expertise is particularly relevant and where the profession is able to make a particular contribution to the public good.
And before I finish, I hope that you will forgive a word or two of a personal nature. As I mentioned at the outset, my term of office is coming to an end. It will cease in 37 days. I have already thanked a number of people for their support over the year, but there are four people here tonight whom I have not publicly thanked. I refer to my wife, Anuja, my daughter, Nikita, and my sons, Sachin and Arjun.
For long periods of this year they have had to put up with a husband and father who has been absent, either physically or mentally. They have had to put up with a lot and I am very grateful to them for their understanding and support. Thank you.
And thank you, ladies and gentlemen, for your attention. I hope that you have found something interesting in what I have had to say. But most of all, I hope that my words do not earn me the same fate as St. Paul appearing before Felix.