LEGAL OPINION:A DIFFICULTY surrounding the debate on the Legal Services Regulation Bill is the poor level of analysis in the Competition Authority's reports that preceded its introduction. A feature of their reasoning was reliance on vague generalities about the benefits of competition to the exclusion of detailed examination of the reality of the legal profession.
Typical was the reasoning supporting their recommendation that barristers should be allowed to form legal partnerships, a recommendation adopted in the Bill.
Criticising the rule that barristers must operate as sole traders, the authority started from “the basic tenet that the market will give rise to the business structure or structures that will be the most efficient”. Aspects of this efficiency mentioned were that groups of barristers could pool their costs, build a shared reputation and realise economies of scale in advertising. Benefits mentioned were an increased pool of knowledge, a reduction of transaction costs, new ways of doing business and shared risk.
The benefits to barristers and those resulting to clients are not distinguished in this analysis. In fact, expenses incurred by barristers are small relative to fees and so savings in expenses are unlikely to affect those fees. It would not benefit clients that barristers acquire by osmosis a group reputation not necessarily related to individual merit or that they are able to advertise more economically – but not necessarily more informatively. The other supposed benefits are nebulous or speculative and would not necessarily result in better value for clients as barristers’ bargaining power would be enhanced by grouping together.
Bargaining power is the nub of the matter. Barristers must be in a stronger position negotiating fees if they combine than if they operate in isolation. If they form full partnerships, so precluding members from appearing against one another, the choice of barrister available to clients is reduced. That must enhance further the bargaining power of barristers in negotiating fees.
Isolde Goggin, who now chairs the Competition Authority, argues that the sole trader system inhibits entry to the profession because a neophyte barrister, unlike beginners in other professions, cannot “get a job” with an established practitioner (Irish Times, April 9th). Disingenuously, she omits to mention that barristers may now employ other barristers to help them on a fee basis.
If it wants to be true to its self-image as champion of the consumer, the authority should concentrate on the central weakness of the Bill, which is the absence of any effective provision to ensure that outsize fees charged by solicitors and barristers do not deter all except the very rich (and in some cases the penniless) from asserting or defending their legal rights.
Under the Bill, lawyers may evade the requirement to give an overall estimate of their fees on the ground that it is not practicable to do so and merely state broad criteria for their calculation. Nothing is done to give effect to a recommendation of an expert group established by a previous minister for justice that hourly rates should be mandatory in such cases. Percentage fees related to the amount recovered, which might be a guide for clients shopping around in some cases, are forbidden.
The name of the officer adjudicating on fees is to be changed, so creating an illusion of reform, but there is nothing in the legislation to ensure that the new officer will be more effective in protecting clients who are overcharged. Indefensibly, where a client who has not been quoted an exact overall fee challenges what is charged, that client is to be saddled with the costs of the adjudication unless the charges are reduced by 15 per cent.
A solicitor may still retain a client’s papers to pressurise the client into paying up. The authority’s recommendation to abolish this “lien” has been ignored. An unsuccessful litigant may be liable for the outsize costs of an opponent, even where that opponent has conducted the litigation more extravagantly. Here also the 15 per cent rule discourages challenges to costs claimed. If a litigant succeeds in the High Court and the decision is reversed on appeal in the Supreme Court, that litigant generally has to pay for the appeal occasioned by the High Court’s error.
These are the real issues related to costs that need to be confronted.
Charles Lysaght is a non-practising barrister who lectured in competition law at London university