Cuts: what kind of courts do you want? (A Reprise)

I posted this in 2010, but in the light of the LCJ’s recent suggesting civil and family courts may need to become inquisitorial., it bears repeating…

Joshua Rozenberg posts an interesting story on legal and court aid cuts today. Mediation is (as ever) set to be trumpeted as a partial cure for the systems ills. This is, I believe, misguided and I also believe that Ministry of Justice Officials already know this. The evidence base on mediation essentially suggests this: mediation is a useful part of the dispute resolution toolkit, but it does not save costs and it is unsuitable for in tractable disputes. I was told recently that the MoJ had some time before the election commissioned an evidence review of mediation which, to the surprise and consternation of policy makers in the Ministry, showed that (and I quote hearsay and from memory here), “The evidence shows it doesn’t work”. Now that’s putting the case against too strongly, but mediation has for at least the last fifteen years been trumpeted as the false dawn on legal cost savings. There are other significant criticisms of mediation, but let’s save those for another time when the bottom line is less dominant.

The second idea is more innovative. “Where courts do have to be used, the government wants a more inquisitorial approach.” This is an idea which, in principle, I support. There is evidence from Ombudsmen schemes that a more inquisitorial approach can help correct power imbalances in a way which legal representation may or does not (see Sharon Gilad’s work at the LSE in particular). There is however a lot of devil in the detail. A structural issue is that in international comparative terms, spending on our courts is very low. This is the reverse side of our legal aid coin: we’ve spent more on legal aids and les son courts than comparator jurisdictions.

This means that courts are not set up to help litigants; and judges are not resourced or trained to do so. An inquisitorial approach demands a profound cultural shift. Judges have to be willing to reach across the bench and yet do so in a way which is, and is perceived to be, fair to both parties. My own research on litigants in person illustrated the difficulties judges faced in this regard and their own disquiet at the way in which unrepresented litigants impacted on the craft of judging. Court staff are inhibited from assisting because of prohibitions of giving legal advice: this prohibition quite literally puts them in an impossible situation. A landlord rings up and indicates they are going to put a tenant our on the street: what can a court officer say without giving legal advice?

There are lots of things that can be done for unrepresented litigants: assistance for litigants online, through workshops, duty schemes and through improved judicial training and support. These require investment, planning, and ‘buy-in’ from the judiciary. There is also the need to look fundamentally at the complexity of both substantive and procedural law: unrepresented litigants have zero chance of engaging effectively in legal proceedings unless the law and court process is simpler. It’s worth noting that one of the findings of my litigants in person research was that where parties were unrepresented some of the
judges felt at a disadvantage because they did not always know the relevant law and did not have the time or facilities to research it. If that problem is posed for judges, what are the chances for unrepresented litigants?

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Precarious Professionalism: An Invitation

My Inaugural lecture takes place at UCL on Thursday 6 March 2014 from 6 – 7pm , chaired by Mr Justice Blair.  It will develop and draw together many of the themes I discuss on this blog.  If you would like to come tickets you can book here (it’s for numbers, there is no cost).  If you’d like a flavour…

Legal Aid and legal market reform has been significantly accelerated by austerity and the creation of the Legal Services Board.   Professional power has decreased and the influence of the market increased.  State – or rather politician – hostility to lawyers and fiscal retrenchment has led to a reduction in legal aid and a hostile ideology.  Globalisation and the growth of large law firms has increased the extent to which law is seen as a business rather than a profession.  Market reform and the recession have shed a harsher light on the economics and ethics of large law firms. 

For many, the market and the State are combining to squeeze out professionalism.   The evidence, however, paints a much more complicated picture.   This lecture will outline that evidence, including some new evidence on the ethical consciousness of commercial lawyers.  It will argue that professionalism is precarious – demonstrably so – but also that the blame lies with markets, with the State, regulators and with lawyers themselves.  And it will consider what needs to be done to renew these institutions.

There is a drinks reception afterwards.

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Innovation: A Lesson from Bandit Country

Last night I heard a very interesting talk on innovation and high frequency trading by Professor Donald MacKenzie (a financial sociologist from the University of Edinburgh).  As he told it, a Matching Machine, designed by Josh Levine, is – if I have understood this right [I'd greatly appreciate any corrections from people who properly understand HFT, for instance] – at the heart of high frequency trading run initially out of a company called Island based in Downtown Manhattan.  It’s evolution from the periphery to centre stage in share trading was used by MacKenzie to tell an interesting tale of innovation.  That was a tail of innovation as bricolage and ‘hinging’ between linked ecologies in a system (per Andrew Abbott) to allow an innovation to move from being minor to major.  Put another way, high frequency trading ceased to be a small part of the share trading system, and shifted to become the main plank (or macro) of the system.  Put more simply,  a particular innovation became elemental to the system.

The story begins with the automation of the Small Order Execution System (SOES).  A group of traders began to use this system to pick up stale prices (offers to buy or sell shares which were left outstanding even though the share price had moved beyond that price range).  The traders started to become known as SOES Bandits because they royally skewered the conventional traders who had failed to sweep up the stale priced trades.

What Levine did was, as told, extremely simple.  He built a matching machine which automatically matched offers to buy small orders with offers to sell.  That is, he built a piece of software to do it.  The trick was that he built this software to run at a speed of 2 milliseconds per trade.  This he did through an ingenious but simple software design that did not need to save many offers to sell or buy to disk while they waited to be matched, because it quickly deleted matched sale-buys once completed.  This left enough space for unmatched trades to be matched immediately.  The difference between that and the conventional matching was 2 ms to 2 seconds; a difference of 1000 times.  To the human mind it was instant and automation meant – I assume- more trades could be made whilst prices moved. Also, it used a smaller ‘tick price’ (difference in share price) so that smaller differences in shares could be priced in (1/256 of a cent to 1/8 of a cent under the conventional system).  There were more differences to trade against.  APIs were built into to enable the system to interface with other systems.

The impact on time is worth dwelling upon.  The length of cables between trading platforms slowed down the trades more than the software.  Trading platforms began to move towards Island; literally into the basement.  There was a certain amount of negotiation with the SOES traders to keep the trades simple enough to allow the system to work.  Prices were kept low and there were rebates for certain types of failed trades.  There was a geographic coming together of social, economic and technological influences.  A new, quick and (as the flash crash showed) sometimes unpredictable (and so perhaps dangerous) market borne.

There are other interesting dimensions to the story.  Competitor platforms spread out from Island (partly programmers leaving island to assist others).  Levine himself helped a competitor build a better matching machine for themselves.  The culture was part collaboration and part capitalism. My own interpretation whilst listening was that it was a bit like gaming: maybe they wanted competitors to get to a standard whereby there was someone worth trying to beat.  As one of the audience said, “These are such odd people to find at the heart of capitalism.”  Part collaboration, part competition.

To start to see what this might have to do with innovation which might be generalizable, Mackenzie talked of the way in which innovation reached across three different ‘ecologies’ or sub-systems.  I am not entirely sure I followed what these subsystems were.  One was regulation: the SEC had a regulatory system premised on a degree of scepticism of the privileged insiders running trading (where there were clearly some dubious and nepotistic practices).  Another was the value system of the traders themselves.  The third, I guess, was a programming value system which promoted speed and elegance.  Mackenzie’s critical insight seemed to me to suggest that what drives successful innovation are ‘hinges’: strategies which work in more than one ecology, that hinge between the different systems.

Thus the SEC, suspicious of the privileged insider status of normal traders, had a regulatory system that was conducive to the SOES traders.  The simple, quick programming value hinged between the smallness of the trades and the ability to scale small unit profits into high volume profit.  The success of the system (and who’s to say that as well as efficiency there was not also the Pavlovian gratification of instant trading) led to its shift from a small part of the periphery to the core of the system.

Now, what has that got to do with law?  Perhaps nothing.  Perhaps both sides of the Reinvent law debate will enjoy thinking of innovators as Bandits without being too serious about it.  But perhaps there is more to it.  The talk came in a week when I have met two innovative legal service providers intent on hinging between the more for less imperative of GCs (a business driver); the ability to deliver contract management and analysis more quickly than conventional providers (a systems solution); and, a particular view of how contracts and contract negotiation works which stands back from bespoke micro-management of contracts to look more at the social and economic effects of contract negotiations (a value proposition).  Whilst not enabling instant negotiation of contracts, and not being able to dispense completely with micro management of contract terms, it has the potential to significantly reduce and rationalise the process of business to business contract negotiation.

The significance of this depends on many imponderables.  One is the ability of NewLaw to deliver genuinely quicker, better contracts.  I believe the most far sighted lawyers are those best able to understanding contracts at the macro, behavioural level.  If their systems for understanding and delivering such contracts work they will appeal enormously to in-house legal teams and the business units they serve.  I wonder how many lawyers have the data and theoretical knowledge to build these systems; but some – from what I have seen – do.  Those who can develop build and improve the knowledge and systems quickest will likely gain significant market share if they can scale it.  Quicker than one can say PriceWaterhouseCoopers.

The second significant imponderable is how big is this bit of the market.  This is interesting because there comes a point at which such firms may become big enough to attract Big Law into their orbit, rather than the other way round.    The micro may become the macro.  I instinctively doubt it; the two markets are somewhat separate and there would need to be good reason for these middle market systems driven firms to be able to disintermediate between BigLaw and in-housers, but I doubt it a bit less today than I did on Monday.

A final imponderable is whether Newlaw will have its own equivalent of flash crash moments.  Systemic approaches may be more efficient and effective, but they may also be prone to systemic, and therefore, costly errors. Taking some human error out may also take some human good out. The extent to which systems can be developed responsibly and robustly is difficult to know.  Even harder to test.  Regulators, I’d guess, and judges in particular, will be more sceptical of such systems and (I would guess) quicker to punish them for their errors.  This may inhibit innovation but also reduce risk. The Bandits will have some hard yards before they find open country.

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Legal Aid Cuts: The Diversity Argument

Hannah Evans moving, factual account of life on the bottom rung of the criminal advocacy ladder has received many plaudits as an attack on the Government’s legal aid cuts. Government cuts in legal aid are a significant and important driver of the precariousness of such work.  Yet it is important to acknowledge there are several factors behind the precariousness.

One is the Government cuts. Another is the reduction in the volume of criminal defence work. A third is the self-employed model which makes it harder and riskier for people to enter the profession. This was always true, and the Bar have sought to ameliorate this through minimum payments for pupillage but it is important to recognise that it is self-employment and it’s precarious entry route which is a significant part of the problem. The Bar can either do something about it (which would mean a radical change in its business model) or it can plead for government spending to increase (or not be cut as drastically). Neither approach is unreasonable, but only one approach has much chance of happening.

The three things combined mean a reduction in the size of the Bar, the number of criminal pupillages and (unless students wake up and smell the rather poor smelling BPTC coffee) an increase in the riskiness of entry. That increase in riskiness will probably put more working class/’poster girl’ candidates off but, I am afraid, the idea that public spending cuts are going to be successfully resisted on the basis that they are necessary to solve the Bar’s diversity problems is, to put it mildly, unlikely. Fusion will come quicker, if it comes at all; with a very small rump of heavyweight barrister advocates ultimately selected from solicitors firms (or ABS/Barrister hybrids) rather than through a pool of BPTC candidates fighting for diminishing pupillages.

Indeed, in terms of quality, the criminal defence system is more fairly described as precarious than world class and yet the government is showing little sign of listening to arguments that significant cuts in real and absolute cost will further damage quality (which they will). A government that does not care about basic criminal justice is unlikely to be swayed by social mobility arguments.  Only catastrophic failures, like serious trials not running, are likely to persuade them.  There are some signs such catastrophes may shortly be upon us  but the Bar will have to sort out its diversity problems on its own.

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Employer Funding in Criminal and Civil Cases

An interesting snippet of evidence emerged from the Hacking trial yesterday according to the Inforrm blog.

You have to think about what is worse – her doing a deal with Max which will be perceived as a cover up or indemnifying Mulcaire so that he won’t say anything about NGN. He could say anything and he could say anybody – Chapman said it would certainly be difficult to prove that he was just making up names. Brooks said it would terrible if seen to be ‘buying off’ Max.”

According to the Inforrm blog, the meeting took place in January 2010, between News International chief executive Mrs Brooks, legal chief Jonathan Chapman, NoW lawyer Tom Crone and Julian Pike from the law firm Farrers.  Indemnification refers, it seems, to indemnifying Muclaire for costs he might incur in any civil proceedings which attempted to force him to reveal who instructed him on hacking jobs.

I have written previously about the risks involved in employer funding criminal litigation (as well as earlier here when Roy Greenslade suggested journalists felt compromised by their funding).

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Clifford Chance Change Ninjas

Applying Continuous Improvement to high-end legal services is Clifford Chance’s ‘white paper’ on the application of lean and Six Sigma techniques to their business. Black belt naffery aside [Yikes, the Six Sigma ninja's will be out to improve me], it’s an interesting introduction to continuous improvement ideas and there are one or two interesting examples.

In particular, document review was reportedly improved by improving access to, and communication from, “the experienced lawyers working on the matter” and, “a statistical ‘sample size calculator’ also enabled the team to decide, on a mathematical basis, the optimum number of documents to be checked for quality assurance purposes.” The implication is this reduced errors and “senior lawyer time spent reviewing irrelevant documents.” They have also introduced, “a standard template briefing document and review protocol. This has ensured that teams are better prepared before the review and the lawyers are engaged from the outset with the review team and the issues.” Rocket science it ain’t but then who said improvement had to be obscure?

There’s some sensible stuff about making their advice/delivery more standard, predictable and quick for clients and also this interesting passage on cutting their advice to the client’s cloth:

The scope of the legal advice required is adjusted to match the risk of the matter, meaning that it is no longer a fixed or absolute concept; the legal dimension has become another consideration in the matrix that will decide whether a transaction, or particular course of action, is attractive or feasible. As a result, lawyers have become part of the process and legal fees part of the financial model – creating greater expectations of flexibility on behalf of external advisors to ensure their input and effort are commensurate with the client’s need.

Now my curiosity is peaked because I am wondering what this really means. We won’t gold-plate advice is one obvious interpretation, but beyond that is it simply stating the (by now ubiquitous) claim to be commercially aware and focused as legal advisers? I really can’t tell.

The importance of understanding law as a process is also welcome. Their “process mapping sessions often become teaching sessions, as more senior lawyers share their deal experience and wisdom with their junior colleagues.” This is to be expected (it’s what legal process outsourcers have known for some time– tacit knowledge can be articulated, documented and tested by further experience once processes are formalised and then road-tested). LPOs can also nick that tacit knowledge.

One hears genuine frustration in the refrain that, “legal processes are rarely repetitive or consistent” and “although law firms collect a lot of information – including extensive time recording for each matter – the data points are often insufficiently granular to support detailed analysis of transactions,” the “frustration” of junior lawyer’s grappling with problems that “the matrixed law firm partnership structure” may struggle to identify (or perhaps accept) and take the lesson that there is some way to go with the continuous improvement. As someone interested in teaching my students about how these things unfurl in practice, I also found it a little bland and high level in places.

It’s clear though that CCs endeavours have required a significant investment (four full time Continuous Improvement experts, supported by part-time specialists run workshops with teams of fee-earners (and I assume ‘others’) that last a couple of days and then manage a process of implementation and support for improvements. Interestingly, “our greatest successes in this area have involved allocating responsibility for owning best practice methodologies to one or more senior associates.” When Gewande implemented checklists in his operating theatre experiments, he made the nurses do it. They didn’t feel it was beneath them and made the consultants toe the line.

There’s also an interesting attempt to catch the clients’ eyes by claiming to be ahead of some of their in-house counterparts

“because in-house lawyers, as much as their private practice counterparts, may not always recognise the possibilities for process improvement, the opportunities and benefits need to be set out in a way that is meaningful to their particular operating context.”

This has sometimes led to continuous improvement workshops with clients. With some, “transactions …completing up to 40% faster than before. Moreover, our two teams now understand each other better and are working together in a more joined up way.”

The claims for efficiency improvements should perhaps be taken with a pinch of salt. Saying something, “often lead[s] to an improvement of 15% or more, sometimes significantly more.” is a little too adjectival and not definite enough for me. As is, “Improving the speed of a process – sometimes by up to 50%”. But I cavil. It is to their credit that they have embarked on this process. The plan is to turn most of their fee earners into ‘yellow belt’ Ninjas (I mean Continuous Improvement experts) and for improvement to occur organically within teams with all lawyers to be so, “trained over the coming years.” Perhaps the recalcitrants will be like those partners who said they’d never have a computer on their desks.

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The New World of Legal Work vs Global Behemoths

There’s an interesting tension between Sir Nigel Knowles prediction of legal behemoths straddling the globe with investment bankers outriders (or is it the other way round) whilst the remainder squabble over the scraps, downsize or fail (I may have sexed it up a bit, which it does not need; it’s a very interesting piece) and Jordan Furlong’s New World of Legal Work (a supercharged, short Susskind-esque parlez with the world of legal work in 2020 where firms are expected to be smaller).  It too is an excellent read.

Let me pick up some of Jordan’s key points:

Agile workers  …will have to organise and promote themselves in new ways, forming talent and project agencies to advance their interests (much as certified unions protected their salaried predecessors) and constantly renewing and sharpening their own skills and know-how in order to remain competitive in a crowded talent market.

…Firms will be increasingly de-centralised, distributed and diffuse entities that assign tasks not to the highest available biller in the office, but to the most appropriate and best aligned performer, regardless of location. The creation and review of documents, the application of principles to solve a problem, the completion of an approval process, the execution of commercial procedures — all of these can be performed outside law offices, outside the legal profession, or even outside the human realm. With the relentless advance of Big Data, these trends will accelerate.

…In future, firms will abandon this primitive ‘input’ [hours billed] measure in favour of more sophisticated and external-facing ‘output’ measures that revolve around value provided to the client. This will trigger an enormous change in law firm culture, especially with regard to work habits: lawyers will be encouraged to pursue quality of outcome rather than quantity of time, which will further accelerate the trend towards flexible workers providing specialised value from the most effective locations.

I think it is the last point that is most important.  Or rather, what will persuade clients that they will get most value?  Can the behemoth’s innovate?  Can the light on their feet innovators capture sufficient reputation and knowledge to outgun the Big Guns?  I’ve really no idea, save to observe that the investment and networking needs of “lawyer-knowledge curators, lawyer-analysts, lawyer-technologists, lawyer-educators, serving either fellow lawyers, clients, or the general public” (which is a key category of new job types in Furlong’s world of new work) may better be served in big firms or very well resourced and well functioning networks.  A lot will depend on who has access to the data/knowledge on which such  curator/analyst/creative types will have to feed.  Firms will have the data and they will suck in those that they want.  Quite a few big firm’s can fail and a few grow and we have BigBigLaw and a similar or smaller pool of outsiders in commercial work.

So, I’m leaning towards fewer, bigger firms.  Less pyramid-like perhaps.  At least, I am leaning that way for the next ten minutes.  But not necessarily law firms.

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