Lobbying offensive blunts overhaul of legal services

It was a formidable exercise of power. This week the Bar Council and Law Society extracted big concessions from the Coalition as it moved, after years of delay, to proceed with a long-awaited overhaul of the legal professions.

At issue now is whether the new regime delivers appreciable savings for clients of barristers and solicitors.

Legal services are inherently expensive, so caution is warranted. Yet the view of Minister for Justice Frances Fitzgerald is clear. As she unveiled more than 100 amendments to a four-year-old draft law to introduce independent regulation of the professions after centuries of self-regulation, she cited several measures to tackle legal costs.

The new proposal “contains substantial provisions which will promote competition, help reduce legal costs in Ireland, and support Ireland’s economic competitiveness”, she said.

The reforms are far-reaching, certainly. But doubt has been raised within Government about the effectiveness of the plan in respect of costs.

Citing the volume of amendments, Minister for Jobs Richard Bruton took issue with the absence of new assessment on their likely impact, in written observations for Cabinet. "Thus, there is no firm evidence that the major changes to the original Bill will actually reduce costs," he said in documents seen by The Irish Times.

The force of the long campaign against the plan by the Bar Council and Law Society points to anxiety within the professions over the scope of the plan set in motion in October 2011 by Alan Shatter, Fitzgerald’s predecessor. Assuming the Legal Services Regulation Bill is enacted by Christmas, the Bill will be quite different to Shatter’s original. That raises obvious questions over the pace at which the legal system will be exposed to the winds of competition.

Refuse membership

For example, the Bar Council retains the right to refuse membership of the Law Library to barristers in employment, partnerships or new business models such as multi-disciplinary practices or limited liability partnerships.

Given the entrenched position of the council, it will benefit from a considerable headstart against any new body acting for barristers who choose to work outside the established parameters of the profession.

The Law Society retains financial and accounting oversight of solicitors. The “co- regulatory split” between the society and the new Legal Services Regulatory Authority smacks more of complexity and duplication than cost-effective efficiency. Financial regulation in the first instance will fall to the Law Society, which is not independent of the profession, but the society itself will be overseen by the authority.

To be self-funding, as required under the draft law, the authority will need to raise some €4.3 million in annual levies from the Law Society, the Bar Council and individual practitioners. It’s in the nature of things that such costs will be built into legal fees .

True, a swathe of separate measures in the new regime are cast to blunt the influence of Law Society and the Bar Council. After all, the ultimate oversight of the professions will soon transfer to the new authority.

Yet the sense remains in Coalition circles – and within the legal community – that the established bodies have seen off what they saw as the most damaging elements of the plan. These developments follow a prolonged lobbying offensive, described as “very severe and very significant on all fronts” by one well-placed Government figure. “I’d say it went all the way to the top.”

Another says Shatter’s abrasive style did little to marshall political support, as lawyers issued their entreaties to the Government. The lesson learned is simple enough, this person says: “Don’t take on any major interest group without having all your ducks in row and having political alignments made in advance – and don’t [antagonise] your political colleagues gratuitously.”

Changed atmosphere

The former minister granted concessions to the Law Society in 2012, but relations with the Bar Council were strained. The atmosphere changed when Ms Fitzgerald took command in 2014.

Still, Ms Fitzgerald’s memorandum for Cabinet points to an implicit legal threat from the Bar Council.

“The Minister was advised by the Attorney General (to paraphrase here in general terms only) that the approach in the published Bill, which sought to prevent a professional body such as the Bar Council from prohibiting its members from providing legal services in the new business models, was at risk of successful legal challenge by the Bar Council based on their constitutional right of association, a challenge which the Bar Council had indicated they would have no hesitation in bringing forward,” the memo says.

“The Minister wishes to propose law which will work and not law which will lead directly into lengthy constitutional challenge.”

Some observers within the Government say the outworking of it all is akin to “game, set and match” to the established bodies, each of which had publicly expressed reservations about the Shatter plan. They note also that the Competition and Consumer Protection Commission has claimed the new regime reflects an effective “veto” over change by the professions, with their views “privileged” over those of the consumers of legal services.

Others in Coalition circles are more sanguine, saying a “glass-half-full” view should recognise reasonable progress made, with potential for more built into the legislation by way of formal reviews of its operation.

Wherever the balance falls, the overhaul is long in the works. “These reforms respond to 34 years of reports recommending reforms to the legal profession, going back to the Restrictive Practices Commission report in 1982,” Ms Fitzgerald said.

These include a 2006 report from the Competition Authority, which made the case for a fundamental revamp of a sector in which service never comes cheap.

Nothing happened for a long time, but the requirement for independent regulation and measures to curtail costs were laid down by the EU/International Monetary Fund troika when the last administration entered the bailout programme in November 2010.

As Fine Gael and Labour took power in 2011, they pledged reforms “to improve access and competition, make legal costs more transparent and ensure adequate procedures for addressing consumer complaints”.

Shatter produced the original Bill within seven months, but enactment next month will be one of the Government’s final actions. Recall, too, that Taoiseach Enda Kenny came very close to calling the general election this month. It didn’t happen, but the legal overhaul would have come to an abrupt halt if it had.

Still, Fitzgerald has stressed that the existing taxing master system is being replaced with a new Office of Legal Costs Adjudicator. She also cited new transparency rules under which legal practitioners will be obliged to inform clients about costs and estimates. New principles will govern the work of adjudicators who assess bills of costs.

In addition, junior counsel who charge a percentage of senior counsel fees will be subject to new rules. The same goes for fees charged as percentage of value of cases.

Excessive fees

The new authority will deal with excessive fee complaints by informal resolution. The authority will also provide State regulation of complaints about all legal practitioners for the first time.

Then there is the introduction next year of new business models, such as partnerships of barristers operating outside the Law Library and of solicitors and barristers working together. Furthermore, barristers will be allowed to provide legal services to their employers as employees.

In the new regime, neither the Law Society nor the Bar Council would have the right to prevent their members from working with solicitors, or barristers operating outside their purview.

Still, the introduction of multi-disciplinary practices in which lawyers would work alongside accountants and other professionals is on hold pending international research.

Separate measures will allow existing solicitors' firms and new legal partnerships to assume limited liability status, meaning partners will not be personally on the hook for debts, liabilities and obligations of a partnership business. This mirrors provisions in the US, Canadian and British legal systems, the quid pro quo being a tougher form of regulation by the new authority and a requirement for a specified level of professional indemnity insurance relative to risk.

We’ll see soon enough how it works.