SRA, lacking the confidence not to spin?

The SRA’s latest SQE press release caught my eye. It starts like this:

Our proposals to introduce a centralised assessment for would-be solicitors could lead to improved diversity in the profession and increased social mobility, a new report says.

An independent study published by the Bridge Group considers our plans for the Solicitors Qualifying Examination (SQE) and the impact it could have on diversity in the profession. The report said: “The proposals are highly likely to increase the number, and broaden the range, of training providers in the market, and provoke new models of training including online provision. 

What the report makes clear, though, is this:

This report is neither a review of the proposed SQE reforms, nor an equality and diversity impact assessment; these areas are to be covered by the wider consultation process being led by the Regulator.

The report suggests the need for all to work together on diversity and education, to build trust and shared solutions. It also suggests the significant risks and work the SRA has to do to give the proposals a chance of improving things. Leading with spin is not the way to do this. Leading with spin is a way to build on the considerable cynicism that exists about the SRAs proposals. The report is in fact more of a recognition of the considerable risks entailed in the proposals. Better to accentuate that understanding, if the regulator is to produce proposals that people will and can work with.

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Some perspective on the McKenzie Friends Marketplace (Guest Post, Dr. Leanne Smith, Cardiff Uni)

This week Twitter has been alive with sharp criticism of University of Westminster undergraduate Fraser Matcham’s new McKenzie Friends Marketplace (https://mckenziemarketplace.co.uk). The concerns (to use a mild descriptor) highlighted are numerous and well outlined on blog posts by Giles Peaker (https://nearlylegal.co.uk/2017/03/bpp-fee-charging-mckenzie-friends-errors-judgment/) and Lucy Reed (http://www.pinktape.co.uk/rants/a-little-knowledge-is-a-dangerous-thing/#comments). The criticisms highlight important issues but I don’t need to rehearse them here.

As a teacher of law students, I would like to sound a strong note of disapproval in response to the MFM’s encouragement to law undergraduates to become fee-charging McKenzie Friends. I suspect that most involved in delivering clinical legal education for undergraduates (I am not one of them, though colleagues at Cardiff oversee a range outstanding opportunities for our students) would acknowledge the reality that students who work with real clients on pro bono schemes require intensive supervision and, often, direct assistance to ensure the work is of an acceptable standard. I doubt even the strongest undergraduate could offer something sufficiently valuable to a litigant to justify charging for her support (mature students might be an exception here, depending on their prior experience). In any event, I will be advising my own students to boost their student bank account balances with more mundane part-time employment and to obtain their legal experience in well-supervised placements and pro bono schemes. I will go further, recommending that they give this and any similar initiative a very wide berth.

There is in any event an oddity in the MFM’s facility for registration of ‘student traders’ to register and provide services at a lower rate than ‘business traders’. There is nothing whatsoever to prevent students from acting as fee-charging McKenzie Friends and, given that the discount on commission that the MFM offers to students is unlikely to offset the reduction in fees that the site permits them to charge, as compared with the ‘business’ members, I see no reason whatsoever why students inclined to explore this line of work would avail themselves of the student trader option. Enough on the negatives though, because the real purpose of this post is to attempt to insert some nuance into and soften some of the sharper edges of discussion of the MFM.

I have two motivations for contributing to the debate. First, and principally, I am currently leading an independent research project (funded by the Bar Council) exploring the work of fee-charging McKenzie Friends in private family cases. In the coming weeks I and the research team, which includes Dr Emma Hitchings (Bristol University) and researcher Mark Sefton, expect to share the final report on that research.  In the meantime, as someone who has spent much time recently reflecting on the range of issues presented by fee-charging McKenzie Friends, I’d like to pick out some elements of the MFM initiative that merit consideration but have not yet featured in discussion.

To begin, I will raise a few hackles with a disclosure: I do not see that the emergence of a body of non-lawyers as advice givers is self-evidently a bad thing. That is not to say that fee-charging McKenzie Friends operating within (or rather outside of) the context of our current regulatory frameworks pose no concerns or problems; clearly they do. But there is plenty of research indicating that non-lawyers, particularly specialist non-lawyers, can provide competent legal advice and support within considered frameworks that involve training and supervision. Does the MFM provide such a considered framework? Absolutely not, in its current form. But does that mean it should be rubbished entirely? On this question I am more circumspect.

Let’s take the indication that the MFM will in October ‘provide a training programme with the assistance of one of its supporting universities’ (since the University of Westminster has not actually indicated unequivocal support for this initiative, I assume BPP, whose logo appears on the MFM website, is the supporting university alluded to). It is not at all clear what form the ‘training’ will take, and BPP has not exactly covered itself in glory in publicly allying itself with an initiative that has undoubtedly been launched prematurely (see Lucy Reed’s list of formal and presentational steps that ought first to have been addressed). I am, however, at least willing to entertain the idea that useful training could be provided by an institution with genuine expertise in law and delivering legal education, and that such training could be the first step in establishing the sort of framework that underpins successful non-lawyer supporters elsewhere. Bespoke McKenzie Friend training courses exist already, as advertised on the websites of a couple of experienced fee-charging McKenzie Friends, most notably this one: http://www.mckenziefriendtraining.co.uk/index.php. So Fraser Matcham is not a pioneer in proposing this but, if the training is going to be designed and delivered by a higher education institution, he might have hit on a way to raise the standard a few notches and thereby increase the potential plausibility and utility of the course(s).

Moving on, I note that the MFM website includes a nod to the recent recommendation of the Competition and Market Authority that ‘aggregate online reviews’ might be used to boost transparency and service quality in relation to unregulated legal services (see chapter 7, CMA, Legal Services Market Study: final report, December 2016). The MFM says it will present a reviewing system that enables clients of fee-charging McKenzie Friends to leave a star based review of their McKenzie Friend to help inform the decisions of others (information, though notably not the review facility itself, buried in this page: https://mckenziemarketplace.co.uk/guideforsellers).

That’s not going to be a fix-all in terms of rooting out bad fee-charging McKenzie Friends,  and it is notable that the CMA stressed the need for a ratings system to be ‘implemented thoughtfully’ – preferably with advice from regulators, but the MFM proposal is a start at least. Further, it shows some effort to engage with those (few) recommendations that have been made with a view to increasing the likelihood that litigants seeking the services of a fee-charging McKenzie will make positive and informed choices. The other recommendation that appears to be reflected in this initiative is the Legal Services Consumer Panel’s 2014 suggestion that fee-charging McKF’s should self-regulate. That, I suspect, is what underpins the presentation of a (very rudimentary and rather untidy) code of conduct and complaints procedure and perhaps also the planned training.

Fraser Matcham has taken much flak for his claim that the MFM will function as a ‘quasi regulator’. I don’t necessarily disagree with the anxieties about the potential for that claim to provide a cloak of respectability for services that are not regulated in any really meaningful sense. That said, it is hardly Fraser’s fault that self-regulation is thus far the only option available to fee-charging McKenzies who might welcome the development and imposition of objective standards and oversight. Worth noting here, is the prior existence of a self-regulatory body for fee-charging McKenzie Friends, i.e the Society of Professional McKenzie Friends (http://www.mckenziefriends.directory). The SPMF describes itself as ‘a self-regulatory body’. The language is slightly different but, to my mind, the terms ‘self-regulator’ and ‘quasi-regulator’ amount to much the same thing. Their value, of course is open to debate (here’s an essay title for somebody: ‘The terms self-regulator, quasi-regulator, and unregulated are distinctions without a difference. Discuss’). The point I want to make though is that, if when it was launched the SPMF’s efforts met with the same public opprobrium as the MFM did this week, I missed the furore. It’s possible that the apparent affiliation of two reputable Higher Education institutions with the MFM increased levels of surprise and concern so as to make this initiative more noteworthy. But those affiliations are precisely what could make the MFM – amateur though its website, materials and underpinning goals do indeed look at this stage – hold more promise than the SPMF. It would be a pity if the premature launch of the initiative overshadowed that.

Of course, viewed from another angle, all the questions about the value (or lack thereof) of attempts to construct pseudo regulatory structures for unregulated legal services point to the fundamental inadequacy of the underlying regulatory framework. It would be great to see as much criticism targeted at that as has been levied at this 19 year old student. Which brings me to the my second motivation for writing this blog. Like most academics, I teach as well as research. Consequently, I confess to harbouring pastoral instincts in relation to 19 year old undergraduate students and their work, instincts that have kicked in and incited sympathy and concern for Fraser Matcham, who has been publicly and mercilessly subjected to the ire of so many this week.

So, notwithstanding that I share many of the concerns about the MFM that have been raised  this week, I’ve tried to highlight the some seeds of merit that had hitherto been ignored. In closing, I have a few words for Fraser Matcham himself…

This week, Fraser, you’ve had a particularly brutal exposure to the fact that the wider world is altogether less forgiving and less interested in constructive feedback than educational institutions are. Of course, you decided to play in that wider world of your own volition, and if you intend to continue doing so you must accept that this is the level of scrutiny and criticism to which you will (rightly) be subjected.

For now though, let me say that if the MFM was just an undergraduate project it wouldn’t be bad at all. In fact it would be pretty great. You’ve taken steps to research an issue that is unlikely to have featured on your core courses, and you achieved a good level of knowledge for a second year undergraduate. It looks like you also took steps to consult more appropriate individuals/institutions to fill gaps in your own knowledge (albeit that it’s unclear whether you were given entirely adequate counsel), and that can only be a positive thing. You’ve shown initiative, tenacity and conscientiousness in realising this idea and, if those qualities are applied to your academic studies, I expect you will do very well. I admire your gumption in taking hold of an issue so contentious as fee-charging McKenzie Friends. Finally, although your Twitter offer to have a publicly streamed discussion on Facebook about the concerns of some of your critics was not apparently taken up, I note that you made it. It was probably a bit impractical, and might have been interpreted as an attempt to avoid rather than engage with criticism but it suggested a leaning towards candour that, in my view, bodes well for you.

It seems to me that you’ve got a lot going for you but now you need to add evident self-reflective capacities to your skill set. My own feeling is that you’d be better off dropping this hot-potato, particularly if you are serious about wanting to become a real lawyer. Pop it on the CV of failures, own it and return to entrepreneurialism when you have more knowledge and experience and a bit more capacity to judge and navigate sensitive issues with a bit more sophistication. Pay attention to detail in your future work; there is a chance (just a chance) you might have had a slightly easier ride in relation to all this if your website had been more polished (you really do need to work on your grammar). If you want to attract more respect in future endeavours, don’t over-estimate your abilities, never oversell your credentials and know that a little humility can carry you a long way.

But do keep up the energy and the creative ideas. I wish you the best of luck and I hope I’ll see your name pop up in connection with something equally new but more positive in a few years time.

_______

This is a guest post from Dr. Leanne Smith, Senior Lecturer in Law, Cardiff University. She is on twitter @leanneslaw [Disclosure: Leanne and I are married – isn’t she lucky?*]

*N.B. Yes, there is a question mark.

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Algorithmic Anxiety: let’s stop fighting the last war and focus on the future

I have been teaching about the ethics of innovation this week. As a result, I have been doing a good deal of reading. It is an area which, burgeoning in Science and Technology Studies for some time, is beginning to develop in the legal sphere too. With artificial intelligence, and online dispute resolution, moving on apace, it is well and truly time.

My overarching message is that there are issues here rather more important than how independent the SRA is, or whether there should be a mega-regulator for lawyers. Those issues are the scope of legal services regulation and the readiness of legal service regulators to regulate genuine innovation, most especially the application of artificial intelligence in legal services.

Let me briefly deal with scope first. That scope is determined by whether services are provided by approved providers (solicitors, barristers, legal execs, and so on) and/or whether the services provided fall into the rather narrow confines of reserved legal services. The vast majority of interesting innovation either does not involve, or can work around, reserved legal services, and one particular area of importance (online dispute resolution) is excluded from regulation under the Legal Services Act (unless it is provided by approved persons). So ODR is likely impossible to regulate as a legal service unless only lawyers do it. Not much chance of that.

Now let me turn to the issue of ethics and technology. There are acres of things to say here, many of which I am not ready to say yet. Quite a lot of what is emerging from my reading in the area gets very well captured by a piece on automated copyright enforcement by Niva Elkin-Koren and others (referenced at the end, and well worth a read). [1]

What does it tell us? Algorithms are non-transparent by nature; their decision-making criteria are concealed behind a veil of code that we cannot easily read and comprehend.  Additionally, these algorithms are dynamic in their ability to evolve according to different data patterns.  Their decision-making models evolve and change.  Moreover, algorithms that enforce online activity are mostly implemented by private, profit-maximizing entities, operating under minimal transparency obligations. They can be self-interested, incompetent, virtuous or skilled.

Because of this, “We do not know what decisions are made, how they are made, and what specific data and principles shape them.”Algorithmic decision-making is written in (to most of us impenetrable) code, often protected by trade secrecy, and further enveloped (usually) in mathematical complexity. Because algorithms adapt to the data they learn on, their ‘rules’ or meanings change as they learn and they may be founded upon, “immense volumes of unintelligible data.” Disclosure of the ‘rules’ or ‘data’ of a decision are thus likely to be banal, mathematically complex, unintelligible and overwhelming. Transparency may be, “partial, biased or even misleading.” It will not work on its own, if it can work at all.

The Blockchain has prompted a great deal of excitement about smart contracts. Enthusiasts wonder at the potential for contracts to self-execute. Yet, according to the paper, systems which apply and execute law without direct human agency are already well-established in automated copyright enforcement. Algorithms are widely used, “by all major intermediaries as algorithms …to monitor, filter, block, and disable access to allegedly infringing content.”[2] They apply discretionary standards rather than bright line rules to develop ‘codish’ interpretations of concepts such as “originality”, “substantial similarity,” and “permissible use”. They decide automatically when material is posted online (e.g. on Twitter or Facebook or YouTube), or by searching (using web crawling robots) for material that may breach copyright, or through responding to complaints, whether material posted online may breach copyright.  These complaints may themselves be generated by robots, leading to high volumes of AI generated, proto-legal claims to be tackled at high-volume by automated decision-makers. All this virtual activity has a potentially significant impact on intellectual property, and its commercial exploitation, but also on free speech. Given the variation in performance of these algorithms that the authors found, we must also wonder at the quality of some of them. There is the potential for manipulation, abuse of power, barriers to competition and innovation, and damage to basic rights. There is also the potential for just being a bit rubbish.

If we imagine the application of such systems into legal services, automated decisions about decisions to complain or what steps to take in litigation might, if inappropriate, constitute vexatious litigation or taking advantage of third parties or inadequate professional services or worse. Decisions to advise or defend criminal proceedings may constitute weakening or strengthening of the rule of law, of defendant rights. Automated negotiation may discriminate between one type of party over another. Data which enters the system from one source, or more likely one set of sources at volume, may pose conflicts of interest with another. I could go on.

My point is not to suggest that these systems are bad. I think they are fascinating and potentially liberating. Whilst lawyers like to highlight stories about the biases that algorithms have, we know too that they can correct for, or drain out, social prejudice from noisy, flawed, human systems. Similarly, automated or intelligent systems may protect against or correct for problems where they are not defeated by the social world’s complexities. Imagine, for instance, a contractual explanation system like nift being used to test whether clients read client care information, or even better whether they understood it, or better again that assessed the fairness of their terms and renegotiated them. My point is that the evidence shows that each system is different and its application is a human phenomena – whether these systems are good or bad are unknown and, in important senses, unknowable – especially at the individual level of the consumer or a complaint.

The potential sophistication of such systems is not purely scientific. The errors and skills of their designers, their values and presumptions about what data to look at and how to weight it contain sometimes ineluctable value judgments. Some of those value judgments will very likely relate to the central values of the legal system and the provision of legal services. An interesting question will be whether this leads not just to the merging of professional regulators (yaaaaaawn) but to a merging of responsibilities for regulating legal services and the legal system as a whole. Understanding this services-system singularity (if it comes) will be important to fighting the the battle after next, but for now, we need to ask some more basic questions about the fitness of the current regulatory settlement to engage with innovation in legal services; to understand it, where some feel they are more inclined to simply worship it; and to know whether and how they should regulate it. I suspect the powers of the regulator and the type of thinking going on needs a step change. And there is not yet an app for that.

——————

[1] Niva Elkin-Koren and others, ‘BLACK BOX TINKERING: Beyond Transparency in Algorithmic Enforcement’ <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2741513&gt; accessed 3 March 2017.

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In-house lawyers, equity-based remuneration, and improved governance

In a fascinating paper, Executive lawyers: gatekeepers or strategic officers? Morse, Wang and Wu seek to measure the influence of individual lawyers in explaining variances in compliance, monitoring, and business development on public corporations in the US. Their claims are eye-catching and important.

Firstly, they find that, “hiring lawyers into executive positions associates with 50% reduction in compliance breaches and 32% reduction in monitoring breaches.” Hiring a GC or placing lawyers into very senior positions in the corporate hierarchy (the top 5 by remuneration in any company) has a significant and measurable impact on compliance and monitoring, especially (it seems) on more poorly performing companies.

Their methods are explained below.*

So far, so good; lawyers make a difference and they make a positive difference. It’s not a story you see empirically as often as one might like. They explore whether the impacts they attribute to the hiring of senior lawyers reflects is attributable to the lawyers or to, “an overall strategy implemented by boards or CEOs to improve governance on many dimensions.” They are naturally limited in what they can do here but as far as they can tell, “We show that individual lawyers matter.”

Secondly, they examine whether, the “contracting of lawyers into strategic activities” reduces that gatekeeping effort. Those paid proportionately more by way of equity-based remuneration do less monitoring, preventing 25% fewer breaches than are typically mitigated by having an executive gatekeeper.”  Compliance levels were not significantly affected though (see below for why). So on monitoring, executive lawyers appear to do less monitoring, “when they have incentive contracts designed to reward business development effort”.

This faces up to the classic guardian-partner tension that Heineman writes so thoughtfully about. Put another way, it suggest that, in the desire to be commercially focused and ‘deliver for the business’, lawyers can take their eye off the gatekeeping ball. Culturally, the pressure on lawyers to be commercially focused is ubiquitous. This impacts on the management of ,and behaviour by, lawyers. Morse, Wang and Wu point to a Reynolds Associates survey report which supports the successful mainstreaming of the commercial awareness orientation: “contrary to conventional wisdom, the legal executives go well beyond spotting legal issues to helping the business actually take risks and find creative solutions.”

The pressure to be commercially aware, or business focused, goes well beyond remuneration incentives. It can lead to a higher risk appetite. We are told – from the same report – that, “executive lawyers that receive the best performance ratings are 11% more willing to take risks than the average executive lawyers, and they are as likely to take risks as any other executive.” Such analyses are concerningly one-sided: there is sometimes a machismo in the ‘risk is good’ analysis which is painfully dangerous. What Morse, Wang and Wu have done is show is how equity-based remuneration can discount the gatekeeping function.

That risk appetite can sometimes be harmfully high, and lead lawyers, as part of their ‘management’ of legal risk to recharacterise unacceptable conduct as higher risk strategy can be seen reasonably clearly in a whole host of corporate scandals involving lawyers (for the latest one in a long line on this blog see here or scan the pages of the Ethics Room for a broader sense of when things go wrong when gatekeeping fails).

Our Mapping the Moral Compass work points to two different orientations at work when lawyers think ‘commercially’: one is a broadly sensible commercial orientation, thinking about how legal work is fit for purpose in commercial contexts. The other is an exploitation orientation which seeks law’s uncertainty as an opportunity to be managed for commercial advantage. The latter, in particular, was associated with weaker ethical inclination. The exploitation of uncertainty orientation stood in contrast to orientations that emphasised independence and ethicality.

In that light, it is worth noting why Morse, Wang and Wu think the data is different for the compliance function. Equity-based incentives did not impact on compliance levels. They think is because, compliance breaches were in areas where lawyers had a “signing -off function”. They had to take personal responsibility for (say) SEC disclosures and, as a result, the lawyers faces personal exposure to liability.” Interestingly, the FCA/PRA are in the process (probably) making clear that the Senior Managers’ Regime should extent to those heading up a Bank’s legal function. Depressingly, when lawyers discuss this, they talk only of legal professional privilege concerns and conflict of interest concerns (see here for an example). They do not mention their obligations to the rule of law or how a regime like the SMR can provide important sustenance to their independence. Morse, Wang and Wu’s study is evidence, though, that personal accountability can work.

The bottom line is really this:

We find that higher equity incentives imply materially lower monitoring performance.

…We interpret the magnitude relative to the benefit of having an executive lawyer gatekeeper: when firms strongly contract  executive lawyers to be strategic officers, lawyers do less monitoring, preventing 25% fewer breaches than are typically mitigated by having an executive gatekeeper.

Or put another way:

Our results imply that whereas on average the hiring of a [senior] lawyer implies a 31.4% reduction in securities fraud (in column 2 of Table 7), when the lawyer is hired with high equity incentives, she only reduces fraud by 6.6%.

Incentives will only be part of the picture. The lawyers’ own inclinations and the approach of their host organisation may be as or more important influences. But this study supports the claim that lawyers can and do improve compliance, monitoring and even perhaps business performance, but must be managed appropriately. Incentives tied to the bottom line harm their gatekeeping functions whilst being only weakly related to business development.  Both gatekeeping and business development are legitimate aims, but the balance has to be well struck. The challenge to equity linked remuneration for lawyers practising in-house is made stronger by this study and the case for external, individual accountability for leaders of in-house functions is strengthened.

___________________________

* Let me spend a moment explaining their terms. Compliance breaches occur in areas where there are “gatekeeping tasks that require a lawyer to sign off to be SEC compliant” related to accounting and insider training regulation. Monitoring as they define it encompasses a broader range of legal risk management such as guarding against potential breach of law or contract, antitrust, disclosure and so on. In the study, they measure compliance failures from Accounting and Auditing Enforcement Releases (AAERs) and SEC allegations of insider trading. Monitoring failures are measured from, “securities fraud, securities lawsuits purged of AAERs, and general lawsuits.” They also seek to measure the commercial impact of these lawyers by measuring “business development”. They measure, “capital expenditure intensity, R&D, business segments, and filing of patents”. They find a modest (they say weak) positive relationship between hiring executive lawyers and increases in business development.

The sample period for their data is extensive (1995-2012) and includes 32,372 firm-year observations for more than 3,000 unique firms. What they essentially do is look at significant hiring decisions (GCs and GCs/lawyers being hired in the very top bracket of corporate officers by pay) and see if there are any differences in compliance, monitoring or business development performance they can attribute through statistical analysis to such hires.

Interestingly also, Morse, Wang and Wu’s analysis suggests that senior in-housers coming from private practice may, initially, be less prone to dial down their gatekeeping responses than those who have moved from other in-house positions.

 

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Gross earnings at the bar

Legalfutures report today on the Bar Council getting permission to plug a pensions gap through raised Practising Certificate fees. The story contains interesting data on Barrister’ earnings.  It seems these must be gross earnings (I assume therefore the numbers do not include deductions for chambers and expenses and of course tax). The Bar Council’s original paper predicts what they think Barristers will be earning this year, and so I have taken the data and put it in a graph to illustrate the distribution.

bar-gross-earnings

A second interesting point emerging from the LF story is that the £30-60k band contains a ‘significant minority’ who are from the employed Bar so in broad (and crude) terms, if we were imagining this as a distribution of the self-employed bar we might want to depress the second column a bit more than the others.

A barristers’ clerk tells me that, “working on Chambers expenses of 15 to 25% plus travel, books, income replacement insurance etc,” one would take off 30 to 40% from gross earnings to calculate a crude figure, “to be safe”. Though that figure has been disputed.

So using 30% as a cautious guide, [it looks like overheads will bite harder at the lower end]* the columns above would be 0-2ok, £20-40K, £40- 60k and so on. I have not taken much interest in Bar earnings, so it may be readers can point me towards better data. This suggests about half earning £6ok or more before tax (but query how taking out employed barristers would effect this). Given the risks posed in seeking to qualify and establish as a barrister, and assuming the varied earnings associated with certain types of work, these are interesting numbers; but law students tend to focus on the earnings of solicitors at the very visible and well-paid end of the profession when thinking of career trajectories, and that would be a mistake, partly because there is a harmful tendency to equate success with money and money with prestige.


*The Legal Services Board published research and had this to say about estimating overheads:

With regards to costs a 2007 survey of barristers, that achieved a 35% response rate, found, “that overheads and expenses accounted for between 11% and 30% of barristers turnover. Median billings were between £100,000 and £125,000 with 20% billing less than £80,000 and 20% more than £200,000 in the year. About 13% bill more than £300,000, and 11% less than £40,0004.” In 2009 it was reported that overheads at chambers are around 35% of turnover5. In 2010 it was reported that: “The ratio of overheads to total fee income in specialist commercial and civil sets was circa 8-14%. In more middle of the road mixed common law sets the ratio was circa 15-22%. In family sets the ratio was 18-25%. In criminal sets the ratio was circa 18-30%. The figures exclude individual barristers‘ expenses such as travel and professional insurance6.”

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Innovation and the Big Mo

Political campaigns, and the journalists that surround them, love to talk of the big Mo. Momentum. Legal aid’s very own Jeremy Corbyn lookalike, Roger Smith,* has prayed in aid the idea that innovation momentum is on the up (follow his blog here, it is terrific). And so it is. I would agree.  He develops the theme in his latest report for the Legal Education Foundation. I have been having a read, and thought I would give you my quick thoughts – partly to distract me from mocking some of the quotes and statistics in this week’s other offering of similar ilk from the Law Society (which mocking aside, has some things to commend it: read it here).

The trouble seems to be that for all that the innovation world is awash with ideas, and stories, and hopes; when it comes to access to justice, the innovation world is not delivering. There are stories, many of which quickly become quite familiar,  but there are no real success stories yet and very little data. There are nearly men, and promising new kids on the blocks but none have so far delivered at anything that looks like scale. Rechtwijzer – for all that I totally agree it is inspiringly designed by marvellous folks at HiiL – has been in the paradigm-busting new hope for a while now category and perhaps needs to show us that it is delivering the transformation it has promised.

This lesson is written, I think, carefully and quietly throughout Roger’s report. It is one reason why it will repay careful reading. He camouflages some of his concerns in a necessary and genuine optimism but from his report I take these as some of the key difficulties for innovation in access to justice:

  • A lack of leadership and resources (especially in the UK where it contrasts poorly with parts of the Netherlands, Canada and Australia) – governments and universities, amongst others, have failed to step up to this challenge;
  • The growing (need for?) likelihood of, and threats posed by compulsion into online dispute resolution models.
  • The lack of performance standards and objective evaluations of innovation. This is one reason why stories is often all we have to go on, and why we should be sceptical that innovation is delivering (yet) in A2J terms, and often elsewhere.
  • And the apparently trenchant (I sometimes think somewhat exaggerated but still very serious) problems of the digital divide. This is mission critical. Great systems have to interface with less great humans. Roger’s section on chatbots vs websites is important: he likes the websites because he can read and judge them. Chatbots – well who knows whether they work – but he can see people will use them.

Anyway, Roger’s report. Read it. And the Law Society’s too (check out the case study on Hodge Jones and Allen for instance). And notice the absence of data, and the quality of the data that does exist, and the hopes, and wonder at what might be realised but also how.

_________________

*To be fair, Roger’s beard aside, he doesn’t really look that much like Jezza, but it is Friday, and I thought it would be funny.

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Rolls Royce Service – risk, compliance, and ethics: where were the lawyers?

Readers of this blog will be familiar with my posts on the tensions inherent in a lawyers’ duties to their clients and their duties to uphold the rule of law and the proper administration of justice. Readers interested in the story of Rolls Royce’s DPA will already have picked up:

  • the reported levels of “full and extraordinary cooperation” with the SFO that Rolls Royce under its current leadership have provided, and,
  • the potential for individual prosecutions to flow from the events covered by the DPA.

That cooperation included the waiving of legal professional privilege over certain information (a reminder that privilege does not provide the fundamental guarantee it purports to for those working within organisations), a point of significant interest to lawyers but not my focus today.

It is perhaps no surprise that cooperation needed to be so fulsome given the litany of events described in the agreed statement of facts (see here for the DPA, the agreed statement and Leveson’s judgment). A series of corrupt deals, between 1989 and 2013, involved intermediaries assumed to have paid bribes to ensure Rolls Royce got orders it bid for. Or they involved the disguising of payments to executives (for example to service that executive’s private jet) within some of the organisation . One such deal seems to have ensnared a leading US University (whether blamelessly so or not, we do not know – but it is a salutory warning to University administrators and entrepreneurial academics).

These processes involved (amongst other things):

  • Drafting consultancy agreements, side-letters and contracts to give dubious credits to contracted parties which had the effect of (known or unknown to the individuals) facilitating bribery;
  • Advising on tendering processes, and compliance with Indian restrictions on the use of Intermediaries;
  • Inadequate due diligence especially where suspicions of bribery were raised by RR employees;
  • Deliberate advice to destroy documents when they feared an investigation by Indian authorities;
  • Modification of the language of risk reports to minimise understandings of payment regimes;
  • Risk procedures not having the benefit of the full information available in the company, and evidence of deliberate vagueness in some of the information (e.g. about the nature of intermediaries business arrangements); and,
  • Seeking legal advice from an external law firm without disclosing all the material facts to their instructed solicitors.

Whether such work involved lawyers in Rolls Royce is not generally at all clear from the published information. In the Statement of Facts we are told that Corporate Headquarters, where control was supposed to be exercised, “included, inter alia, the office of the Chief Executive Officer (“CEO”), and General Counsel.” Other than that individuals are not generally mentioned and very little of the work described in my bullet points is specifically attributed to Rolls Royce Legal or firms instructed by them. Much of the work might be presumed to involve lawyers internally and occasionally externally, but equally much of it might not have so involved them. Even for work that clearly did or can be assumed to have involved lawyers, we do not know what they were told, and how they responded to any red flags they may have been raised, when engaged in such work. We also do not whether lawyers should have been more involved to meet their professional and contractual obligations. In other words, we cannot see clearly what the sins of omission or commission, if there were any, were.

For the most part, when looking to answer the obvious question that would concern you and I, we would – for the most part – have to guess where the lawyers were. Perhaps this is by design, to protect the conduct of future prosecutions. RR Legal plainly was involved in the contractual arrangements designed to mitigate the risk of, or recharacterise, the provision of funds for an MBA course and associated hospitality which was the subject of one count of failure to prevent bribery; but whether this involvement was problematic or not, we would have to guess at. We do get a few tantalising glimpses of in-house and outside lawyers describing transactions now labelled as corrupt in terms of risk appetites. The advice is sometimes, it seems, framed in terms of risk rather than clear advice that certain things cannot be done. The implication might be, but it would be speculation, that dodgy deals were deemed ‘high risk’ rather than plainly illegal. If I am right, and I emphasise, I have to read between the lines of the DPA here, and am not prejudging, some of the lawyers may have found themselves unable or unwilling to say no.

So, from my point of view, which is hardly the most important view even to me, the DPA is a frustrating document. There is however enough in the details to raise a strong presumption that the conduct of at least some of the professionals involved should be scrutinsed by the regulator. This leads me to my final points. A series of questions.

  • Has Leveson reported any of the personnel involved to the SRA or BSB to have potentially serious misconduct investigated? He has not said he did, but perhaps this is for the same reason that individuals are not focused upon in the DPA. I do not criticise him for not making a public referral, even of unnamed individuals. And of course, being more seized of the facts than I, he may have formed the view that there is no serious misconduct here that should be investigated.
  • Have any of the lawyers involved, especially within Rolls Royce Legal and/or Compliance, reported any of their colleagues or former colleagues for serious misconduct?
  • Indeed, does this kind of case act as a salutary reminder that in-house legal teams may need the equivalent of a COLP?
  • Have the firms who gave advice on anti-bribery and corruption also considered their own exposure to criticism and investigation and, if appropriate, considered making a report?

The answers to these questions may all be anodyne. I am not seeking to raise further speculative criticisms of Rolls Royce. I am, however, suggesting all in-house teams and law firms caught up in scandals like these need to think very carefully about their own exposures and conduct before the regulator comes knocking at their door. Rolls-Royce have partly minimised the damage as a result of doing something similar. That’s just one of the lessons of this sorry tale. The second is, at some point, the detail needs to be more widely known and thought about. In-house lawyers need to learn from the mistakes, if any were made.


Postcript: This from Transparency International evaluates the DPA in broader terms, poiniting out how generously Rolls Royce may have been treated.

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