The regulatory maze: can the regulators work it out?

In the note that follows, I summarise the recent paper on Legislative Options Beyond The Legal Services Act 2007 emerging from discussion between the LSB, and front line regulators, chaired by Stephen Mayson.  It’s a long summary, only for those interested in the detail. So I provide a very quick overview of some key points in the next few paragraphs. In the broadest terms it does not resolve, but rather restates or clarifies, the key problems with the Legal Services Act as seen by the regulators (although the paper is way of saying that there is in fact agreement that these are the key issues as seen by all the regulators).

I would say the key points are:

  • This is an attempt to get the Government to take reform of some of the central concepts behind the Legal Services Act more seriously and not to be persuaded into rethinking the shift away from self-regulation put in place by the Legal Services Act (as the professions’ representative bodies would like). In particular:
  • the concept of reserved legal services needs revisiting, with the potential for regulation of high risk legal services and low risk legal services differing significantly – in broad terms the tenor is that legal services regulation should be wider – to encompass more easily the unregulated sector) but more targeted and proportionate;
  • implementation of independence between representative and regulatory arms needs completion; and,
  • the realities of the new legal services market needs acknowledging. On the latter, of particular note, is that the paper comes interestingly close (reading between the lines a bit) to saying a single regulator is likely to be the way forward.  The pragmatic argument will be – if we have mixed different types of legal service and lawyers together in ABSs we need a regulator that can get to grips with all of them.

A restatement of activity-based versus provider-based regulation comes no closer to resolving this issue (and I would add is not greatly informed by evidence or research into effectiveness in regulation. This is not the fault of the authors of the paper but it is the fault of the regulators – research on legal services has tended to focus on what services are risky and merit regulation or on dealing with issues around access to justice and innovation rather than on the effectiveness of regulation).


The paper, “explores options for reform of the Legal Services Act 2007 (LSA). [being]…the product of LSB-facilitated cross-regulator discussions [1] chaired by Professor Stephen Mayson.  It is not apparently a consensus document, articulating “the choices ahead and the regulatory tools that are available” rather than agreed positions or decisions.  It is clear that there was not always unanimity within the group, although it is not clear what this unanimity was lacking on: it might be expected that unanimity was not present for solutions to all the problems, but it is also likely – I surmise – that the regulators did not all agree on what the key questions they faced and what the options were for resolution.

The paper founds itself on the now familiar idea that regulatory reform has the potential to contribute to access to justice, even though:

Regulatory reform following the LSA has been wide ranging: collectively the regulators have simplified processes and removed barriers to market entry, enabling innovation among new and existing providers, improving consumer choice and competition. The structure of the market has already changed as a consequence of liberalisation, allowing a wider range of business models.

…While many factors beyond regulation affect access to justice, an efficient and effective regulatory framework – one which eases market entry, sets only proportionate constraints on commercial operations, and which seeks to minimise burdens on practitioners – can make a positive contribution.

The contribution of regulation to access to justice is important, but it is also a slightly strange place to focus.  Indeed, the rest of the paper, although it is not set out initially, is more concerned with how best to protect key consumer interests and public interest element associated with legal services.  In reality, to my mind, the access to justice emphasis is a palatable way of making the (perfectly plausible) case for greater de-regulation where possible.

The paper sees the chief problems of the current regulatory settlement as being:

  • Its foundation in a fixed list of six, somewhat arbitrary reserved activities, which may be misleadingly narrow from the perspective of consumers.
  • An inconsistent approach to non-reserved activities:
  • for some authorised providers provision of unreserved services are automatically regulated; and,
  • non-reserved legal services by non-authorised providers, “cannot be brought within the scope of legal services regulation regardless of the risks posed by the activities undertaken.”
  • Insufficient independence between some lawyers and their regulators, “because of the historic link between the professional bodies and regulators being largely preserved under the LSA.” This holds back the pace of reform, “undermines public confidence in the independence of regulation,” and requires practitioners, “to fund representative activities regardless of their wishes”.

It then focuses on a key set of questions:

  • What should be the number, nature and presentation of any regulatory objectives?
  • What should fall within the scope of regulation? Essentially, should all, some or no legal services fall within scope?
  • Should regulation be focused on activities or the providers who carry them out?
  • How can the independence of legal services regulation from both government and representative bodies best be assured?
  • Does the regulatory framework need to give consumers a [stronger] voice?
  • How should the legal services regulator(s) be structured?

The paper argues that there is a need for the sector specific regulation of legal services (i.e. the normal laws of contract, tort, competition and consumer protection are insufficient):

…sector-specific regulation could even be argued to enable that market to exist, by:

  1. giving consumers sufficient assurance in the justice system and in the regulation of legal advice and regulation that they have confidence to purchase services;

  2. ensuring that rogue practitioners do not compromise the quality and credibility of legal services more generally; and

  3. allowing practitioners to act ethically without putting their reputations or livelihoods at risk.

…it is unlikely that generic consumer protection regulation and enforcement could adequately address public interest issues such as risks to the rule of law or problems with legal services such as poor quality of service. These matters require a more focused, proportionate and tailored approach than is possible with cross-economy legislation and enforcement.

Nevertheless, any sector-specific regulation must be proportionate and, where appropriate, remove barriers to competition, support market entry and exit, and reduce regulatory burdens and costs wherever possible, consistent with the public and consumer interests it seeks to promote.

A key problem is, and will continue to be:

The sector itself also needs to be defined more fluidly to recognise the role that law plays in the fundamental operation of society. It permeates many spheres of service supply. Dentists, architects and accountants, for example, will interpret law as part of their service supply but would not necessarily be understood by the consumer nor indeed themselves to be supplying legal services. Regulation, if appropriate, needs to have boundaries that recognise the prime areas of expertise and the alternative protections available to the consumer.

In other words, the activities that a legal service regulator will regulate and the identities of those it regulates are not likely to be or remain clear any time soon.  In relation to the statutory objectives for legal services regulation, the paper says that regulator experiences are that they, “are not necessarily fully clear in their intent or meaning” but that having principles is useful (in practice) as it helps regulators analyse and manage the competing dimensions of decision-making.  Beyond that, the paper does not appear to favour any particular approach to objectives, although it does float building in a more deregulatory emphasis.

As it turns to what should be within the scope of sector-specific regulation there is something of a steer towards a, “spectrum of regulation” somewhere between a total absence of sector specific regulation and “full regulation” (akin to the US’s prohibition on the unauthorised practice of law –although even the US, this does not bring all legal services within scope).  Beyond rehearsing some options, the discussion immediately runs into the linkages between this issue, statutory objectives (if you define these then perhaps it is easier to see what range of legal services needs regulating is the gist of this argument I think) and whether to regulate activities or providers.

In deciding how any future regulatory settlement would be decided they propose

assessing the extent to which a particular legal activity or provider protected or promoted the delivery of public interest outcomes or, conversely, had the potential to put such outcomes at risk.

Implicitly, the paper suggests quite a narrow sense of what constitutes a public interest that contributes to what it calls, “public good outcomes” rather embedded in the (historical and arbitrary?) definition of reserved legal services, “certain kinds [intriguingly, which?] of advocacy, conducting litigation, notarising documents, or swearing oaths” and services/providers that, “present a particular risk to consumer protection outcomes.”  In terms of the public interest questions, it is interesting to reflect on the role of lawyers in corporate governance generally and specifically – for their clients – their engagement with regulators: are corporate and banking lawyers ever relevant to public good outcomes: evidence from Lehman brothers, Standard Chartered Bank, the News of the World all suggest they are or can be. Indeed, legal professional privilege, which applies generally to legal advice, not just advice on litigation sees a general public interest in permitting privilege.  Advice, and other lawyerly activity beyond litigation and advocacy, can and does have public interest dimensions.

There are what look like sensible, if debatable, attempts to outline how thresholds of harm might determine when consumer protection might be significant enough to justify sector specific regulation:

activities that result in irreversible harm (including, for example, advice or representation that might lead to loss of liberty, home, children, or citizenship, or arises from a threat to health, physical or mental well-being, or education), and those activities in the legal sector that involve forced participation in the justice system (such as advice or representation given to those on criminal charges or to some defendants in civil litigation).

The paper acknowledges that, “providers will be subject to different requirements in different situations” and activity based regulations seems (to me anyway) an idea very much aimed at how regulators see the world.  Let’s match an articulation of risk to an articulation of regulatory response and we will be proportionate and effective regulators.  Consumers who come face to face with an activity based regulator who tells them that problem a falls within the remit but problem b is outside of scope, is likely to be baffled and annoyed.   Complexity is the enemy of public confidence.  The paper recognises the problem:

[It] requires a balancing act between the attractions of simplicity derived from a largely common approach and retuning a finely calibrated model where various intervention tools are applied based on shifting patterns of risk.

The result may be to increase the pressure to move away from sector-specific regulation in law (we’re starting to see something like this in the relaxation of the separate business rule).

The alternative is the (more traditional) regulation by provider.  The paper lists a number of challenges to regulation by provider:

  • it helps render routes to qualification more inflexible;
  • it may not guarantee competence (as provider qualifications are typically taken once at the start of one’s career);
  • it tends to increase regulatory reach into areas that do not need it (because all work done by Lawyer X may be regulated if regulation is truly provider based);
  • it is becoming increasingly difficult in the light of, “innovative business and operational combinations” which bring together and blur the divisions between different types of practitioner.

They suggest that these problems should be borne in mind when considering whether to regulate individuals, titles or organisations.  It may well be the case that at least some of these also create problems within activity based regulation.

Issues relating to regulatory independence are said to have, “manifested in various ways”:

  • resistance by professional bodies to some reforms which would appear to benefit competition and consumers;

  • complex governance arrangements …to manage relationships between the representative and regulatory functions, which do not achieve full independence of the regulator and distract senior management attention from regulatory matters; and

  • lack of transparency of the cost of regulation… as well as some costs that should be collected from providers as optional professional membership being imposed as a compulsory regulatory levy.

“[E]xpert knowledge, constructive criticism and a practitioner’s perspective on the market and regulation” can be gained other than through links with the representative bodies and, it is claimed that:

the current structure risks undermining the credibility of regulation in the public perception in that some professions are still seen by consumers to be policing themselves (and therefore inferentially to be ‘protecting their own’). To ensure public confidence in regulation, it needs to be independent and be perceived to be independent. The experience of the legal regulators is that the public continue to question the fairness and independence of regulatory decisions despite the changes introduced by the 2007 reforms.

Perhaps more importantly in the long run, as a predictor of regulatory change, “the advent of legal disciplinary practices (combinations of lawyers) and multi-disciplinary partnerships (combinations of lawyers and non-lawyers) in the market is breaking down barriers between professional groups and thereby undermining regulation structured primarily by reference to those groups.”  Whilst the paper rehearses the benefits of regulatory arrangements more like the current or old ones, it clearly favours formal, clear statutory independence.

The consideration of consumer representation is strange and seems to respond to agendas not made clear in the paper itself.  The paper states the benefits of the current Legal Services Consumer Panel and floats only one alternative, “a remit for Citizens Advice”:

Citizens Advice could be given a remit to work on legal services regulation issues, funded through practising certificate fee contributions (as the LSCP is now). The energy and postal services work of Citizens Advice, for example, is funded on a similar basis.

What is not acknowledged here is that Citizens Advice is also a legal services provider.

The paper is also concerned with the vexed question of whether to reorganise the regulatory bodies.  Should there be a similar number of regulatory bodies? Should there be an oversight regulator?  Etc.  The steer seems to be towards single regulator (perhaps with, “specialist sub-units or divisions (focused on professional groupings or activities, or possibly a flexible combination of both)”:

an approach …close to the current settlement …brings the potential for specialist expertise by type of practitioner. But it also runs the risk of lack of independence, of perceptions of conflict and regulatory capture, lack of consistency in the regulation of the same legal activities carried out by members of different professional groups and, for that reason, of regulatory arbitrage.

Further, in the new landscape of organisations carrying out multidisciplinary legal and other activities within the same business, the multiple regulation of practitioners and employees from different professional groups presents potential complexity, burden and cost, and exacerbates the risks of inconsistency in regulatory standards.

Similar problems would apply, it is said, to purely activity based regulators.  Interestingly, as I read it, even with a single regulator, the report does not contemplate the abolition of an oversight regulator such as the LSB.  Full, real independence of regulatory and representative functions might enable more “relaxed” oversight.

[1] Bar Standards Board, CILEx Regulation, the Costs Lawyer Standards Board, the Council for Licensed Conveyancers, the Institute for Chartered Accountants in England and Wales, the Intellectual Property Regulation Board, the Legal Services Board, the Master of the Faculties, and the Solicitors Regulation Authority

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BSB moots fresher degree, more flexible BPTC and proper pupillage tests

I’ve not had a lot of time to look at the document yet, but in the light of the dominant theme at the minute being, Ooh, isn’t the BPTC rubbish , with the press very conventionally judging that it is (someone’s been briefing?), I thought I’d emphasise a few other interesting elements to the Bar Standard’s Board’s consultation on the future of Barrister training:

One under noticed point is the future of the academic stage (the prescribed bits of the law degree).  The BSB suggest that undergraduates at, “the end of the academic stage of training …should demonstrate “knowledge and understanding of the basic concepts and principles of public and private law within an institutional, social, theoretical and transnational context”.”[2]  That might be it: no more list of foundation subjects.  Perhaps. Also, they signal a shift towards looking, “more at the outcome, and less at the process of training for barristers.”[3]  In relation to the – potentially significant – relaxation, reduction or reconsideration of the foundation subjects, and in the context of my own interest in professional ethics, it is worth emphasising the observation by the BSB that:

For example, a barrister will not be able to act “in the interests of justice” (paragraph 4.1 of the draft Professional Statement) without knowledge and understanding of theoretical aspects and social dimensions of the law and how these relate to concrete and practical legal contexts and problems.[4]

Also, that acting with independence and integrity, in the interests of justice and with courage, fearlessness and perseverance, are emphasised as matters that should acquired in part during the academic stage.[5]  This seems to suggest that some consideration of professional ethics (the interesting bits in fact) might become a key part of what the BSB expect the academic stage deliver, whilst allowing for a significant reduction in the breadth and depth to which they specify the other foundation subjects.  If this is the case, I would welcome it.

At the Vocational Stage, there is the finding that their focus groups emphasised that:[6]

First and foremost, an ethical understanding and approach need to be foremost during the training, allowing candidates to demonstrate an awareness of the ethical considerations across their work and an ability to recognise and deal with ethical concerns, especially conflicts.

The signalling of conflicts as a key area is a curious one to my mind. I am not sure why this is prioritised above other areas but the signalling of ethics as a priority is an interesting echo of what the LETR researchers found.

At the pupillage stage there is also the rather familiar but important observation that:[7]

Whilst several participants in our focus groups reported examples of good and excellent practice in relation to, for example, pupil mentoring, support and protection, a number conveyed direct knowledge and/ or experience of very poor practice. This included very poor training and supervision or even inappropriate treatment from supervisors. Frequent mention was made of dependence on individual personalities of supervisors for the quality of the learning experience.

In some chambers, pupils are significantly dependent upon their pupil supervisor for validation of the successful completion of pupillage. There is a low rate of reporting of problems in pupillage and a risk that the dependent relationship may mean that the pupil feels he or she has no alternative but to put up with unacceptable behaviour or actions on the part of the pupil supervisor. Additionally there is limited guidance for pupils on how complaints should be handled within chambers and when it might be appropriate to make an external report.

And they suggest:

in the absence of [8] any external quality assurance system for the assessment process in pupillage, a chambers which, for example, fails to offer appropriately high quality training may equally fail to assess rigorously its pupils, and may even be biased towards passing them. This could result in pupils being authorised to practise despite having received inadequate training, putting the public at risk. Further, public perceptions about such a system are likely to be negative and to diminish public confidence in barristers.

This is quite a critique.  It could well have been headed, Pupillage – it’s a it ropey.

As with other elements of the consultation whilst general menus of options are laid out for discussion there is –given the early stage of the consultation- little detail on what is likely to happen but an independent assessment of preparedness to practice at the end of pupillage is apparently one option:

We currently have a predominantly administrative and arguably unduly bureaucratic role in relation to pupillage and it is not clear what value that adds to our regulatory role. For example, mere receipt of detailed checklists without any oversight of the quality of what the checklists represent cannot give the public confidence that standards are being consistently met or that risks in the training will be identified or addressed.

Some of our focus group participants expressed a desire to see us increase our efforts to maintain consistent standards and to support pupils, and suggested there should be independent assessment of preparedness to practise at the end of pupillage, carried out by an external body.

They also suggested that we need to take a greater role in quality assurance of PTOs and training providers within pupillage, and to make sure that “whistleblowing” and complaints handling were handled seriously and sensitively in the pupillage context.

Of course it is much easier to beat the BPTC providers over the head than it will be to change pupillage, especially when they are perceived (sometimes wrongly I suspect) to be making buckets of cash our of BPTC students (the tight regulation of the BTC makes it hard to make money for at least some institutions I think).  Furthermore, the costs of any post-pupillage assessment will fall on either chambers, pupils or a combination of the two: here there is a risk that the (understandable) concerns about the shrinking pupillage numbers and welfare of poorer BPTC students will drown out the larger question of whether professional education delivers competent practitioners.  There is the interesting suggestion that much greater flexibility in pupillage equivalent training might be on the agenda too.

The document is both interesting and perhaps a little long in coming. The LETR and its now prolonged post-research gestation with the professional regulators is not a model of speed; but I would not wish to dismiss the complexity of the issues and the diversity of stakeholders to be brought along too lightly either.  With quite a long lead in until proposals are likely to be implemented, perhaps the proposal that the BSB steps back from it’s current levels of proscription and allows quite a bit more flexibility where it can is the one which will ultimately prove most important.  It’s also a document which leaves a lot to play for: the issues are thoughtfully but widely drawn – an opportunity to engage, panic indignantly or switch off for another year until more detailed proposals emerge.  It’s not a long document. I encourage engagement.


[1] Future Bar Training: Consultation on the Future of Training for the Bar:  Academic, Vocational and Professional  Stages of Training , July 2015

[2] Id. 4

[3] Id. 9

[4] Id. 15

[5] Id. 13

[6] Id. 20.

[7] Id. 58

[8] Id. 61

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Sleepy, hollow? Innovation in Law Land

The Enterprise Research Centre has done some interesting work for the SRA and LSB on innovation in legal services.  It uses metrics developed in management science to explore the extent and nature of innovation in legal services in England and Wales whilst also attempting to look at “barriers and enablers of change”. The main data source is a survey of 1500 respondents from across the sector although there were also 20 in-depth interviews.

Having read the report, I’d suggest the central message about innovation within the legal services sector as a whole is best summarised by this from their conclusions:

Innovation in legal services is rather ‘closed’. Ideas for new innovative services rarely come from outside the organisations concerned, and we do not see in legal   services the extensive networking with external knowledge sources which   characterises innovation in some other business and professional services.    Innovation is more often than not incremental in nature with very few providers   consider themselves to be radical innovators….

…Overall, the impression is of a profession in which ideas for new services and new ways of   working are internally generated and rarely radical in nature.   …Our evidence also suggests, perhaps surprisingly given the legislative changes that have   occurred, that the profile of innovation in the sector has changed relatively little since 2009.

Indeed, if one looks at the actual innovations that are offered up by survey respondents as examples of innovation we get a mundane list.  One set of examples involves simply doing an area of law that they did not do previously (agricultural law is innovation, in case you didn’t know it).  Another for solicitors was:

…the use of electronic communication with clients, including the use of electronic forms, and improved case management systems.  …Among Barristers’ chambers innovation was focussed on direct access to clients and the need for a more client-focussed approach.

A shift to communication from email to post gets quite a strong mention.  I wonder slightly despairingly how recent that was.  Other examples I was not really blown away by include:

changing opening hours…

…We didn’t previously have a website

There was though perhaps more genuinely, if rather low level, development of:

a new file view facility…

improved on our case management systems [and

changing] …the way that they priced services…

Only very occasionally did there appear something rather more interesting:

We’ve developed a training delivery package. We’ve developed a project using law students to deliver services. There are some specific projects to support refugees and asylum-seeking women. We’re also leading on another project to introduce sustainability for advice services’.

[We] provide hot-docs documents online.

It gets worse if one takes literally the following finding:

Just over one quarter of all respondents had introduced a new or improved service in the previous three years…

Now reverse the statistics to tell it’s other ‘truth’: almost 75% of all respondents (may) have not improved service in the last three years. Again, depending on how literally one interprets the logic of findings.  Perhaps, more incremental, natural service improvement escaped such research questions.

There is also a sense in which understanding and commitment to service improvement (which is essentially what we are talking about when innovation is discussed) is rather shallow. So:

80 per cent of legal services organisations feel they have in place a leadership and culture which supports the development of new ideas…. [whilst] 40 per cent have put in place the practical steps to promote the development of new ideas.

On the other hand, in terms of more radical innovation:

The introduction of a new-to-the-market innovation is much less common, indicated by less than 8 per cent of respondents.

Interestingly, though, the adoption of ABS status appeared on the researcher’s modelling to have a positive effect on innovation.

“All else being equal, they are 13-15 per cent more likely to introduce new legal services.

…They are also more likely to engage in strategic and organisational innovation. These findings allow for differences in characteristics, age, area of work, gender, and the ethnicity of ABS and non-ABS Solicitors.

In truth the researchers’ approach cannot fully control for differences between ABSs and more traditional business forms, but it is interesting evidence that ABSs may be trying significantly harder to be innovative (that does not answer the question of whether they are being successful in the market of course, or that quality is better, or cost lower – which some separate studies have begun to address).

The report is perhaps most interesting to innovation anoraks in considering the antecedents of innovation from the management literature and examining the adoption of these more innovation friendly strategies and management practices.  Here again ABS Solicitors’ show a, “higher level of investment, staff engagement and external involvement in innovation.”  Indeed, the report seeks to make distinctions between, “Service innovation – relating to the production and delivery of new (or improved) legal services”; “Business process innovation – relates to the way in which legal services are delivered.”; “Strategic innovation – reflecting the impact of a change in corporate strategy”; “Management innovation involving the implementation of new managerial approaches such as a structured innovation process.”; “Organisational innovation involving structural changes to an organisation such as the introduction of multi-functional teams or joint development teams.”; and, “Marketing innovation involving changes to marketing concepts or strategies, e.g. a move to media advertising or commercial partnerships. ”

It also seeks to examine what it calls the innovation value chain, a three stage process of knowledge sourcing; knowledge transformation; and, knowledge exploitation, which essentially look at the extent to which firms invest in research and development; do full client review; create multi-functional (and multi-disciplinary teams), and engage with external partners to generate ideas for their businesses, build the products and then sell those products.  On this model, according to the report, legal services does not look like a hot bed of management best practice. I am imagining everybody’s surprise.

Similarly, the report is implicitly critical of the what extent to which legal service providers incentivise innovation (answer, not much, even though they (claim to) have a culture of innovation). The report holds up as counter examples:

R&D departments [where] scientists are allowed 10-15 per cent of their time to work on the projects they choose. The type of practices, if any, law organisations adopt to provide creative space to employees is unknown; however, there are some examples, such as the Portuguese law organisation Vieira de Almeida which created a structured programme to promote innovation that includes creativity workshops and ideas campaigns.

They tell us that the management literature evidences, “significant positive evidence on the relationship between workforce quality and innovation.” and elsewhere in the report emphasise how legal service providers tend to  only see the recruitment of lawyers as ‘very important’, other types of staff are not so critical to their strategy.  Diverse teams are not developed or embedded within the business; indeed team-working generally appears to be on the low side.  Nor were legal services providers generally open to, or looking for, ideas from outside on the metrics used by the researchers.

In many ways we should neither be surprised nor disappointed with the general findings of the report.  Although, given the low hurdle of what passes for service innovation (we must get on top of email and longer opening hours before we attempt to design and build the first CILEX robot) I don’t think it is unfair to expect everybody to be doing some innovation as defined here.  The legal services market does not necessarily need lots of firms innovating radically to develop; it just needs a small number of successful innovators who then develop market share and change practice within the broader market.  ABSs were twice as likely to claim to have engaged in radical service innovation – offering something genuinely new to clients. If this claim is halfway to being accurate then there may be the potential for change if such innovations are cheaper or better and persuade the public.  Their markedly higher emphasis on marketing suggests they are trying harder to sell those innovations and develop market share.  They spend, “more than twice as much of their turnover on reputation and branding” according to the survey.  And they were, “nearly three times as likely to be using some form of intellectual property protection.”

A final comment is worth making on the CEO of the LSB’s reported complaint that innovation is not developing sufficiently on the unmet needs of consumers. There are clues in the report about this.  In particular the regular complaint that firms that had depended on legal aid (or personal injury) for a substantial part of their income did not have the appetite or financial space to change/invest.  I think one has to wonder which parts of unmet legal need are genuinely serviceable by the kinds of innovation currently being adopted in the legal services sector.  I wonder if it’s fair to suggest we are some distance from radical cost saving approaches that can be practically let alone cheaply adopted or developed?  It seems to me that almost all the big innovation gains (if that is a fair way of describing them) are being made in the backroom, commercial sector.  Without significant public investment, legal services has generally chased money.  I’m not sure there is any good reason to think innovation will be any different.  I think we have to wonder too whether innovation can trickle down into the hard pressed areas without some help.

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Corporate Lawyers Symposium: You’re not expensive, you’re not trusted?

Last week I attended a Symposium on Corporate Lawyers organised by Steven Vaughan and his colleagues at CEPLER.  It was a great event, bringing together a wide range of academics working on corporate lawyers alongside a fair few from corporate practice.  I thought I’d share a few highlights:

Joanna Gray told a story about a corporate partner in a very large firm advising his friends at a dinner party to consider their investments carefully as trouble was coming. This was in 2006.  Her critique of the role of finance lawyers in engineering complexity was accompanied by an interesting suggestion: that Magic Circle firms (in particular, though I don’t think the idea was confined to them) be required to report on levels of risk in the market.  She was not suggesting they report on individual clients but that they report generally on problems in financial services, venture capital investment and the like.  She pointed out  that like the corporate partner they were as well placed as anyone to understand the legal risk given the pivotal role of a small number of firms a very high volume of banking and venture capital deals. In fact Joanna’s was but one of a whole heap of really interesting academic papers: Steven Vaughan on what (on earth) the public interest means in the Code of Conduct; John Flood on why Freshfields ethical troubles of the past were like Japanese Noodle eating (you had to be there); Joan Loughrey on meta regulation in law law firms, to name but three.

Paul Gilbert, formerly a GC and now a consultant and partner on our Ethical Leadership Project, gave a powerful talk on the problems facing some in-house lawyers.   He suggested, some in-house teams have accidentally reached crisis point.  IHLs generally come with really solid training from a supportive team and infrastructure from private practice and also come with the idea that (billable) casework activity is what drives success.  They find themselves in an environment with (and he emphasised he was generalising) no or limited peer support and small teams.  The instinct in such an environment is to get busy, to try please people, and this leads to overload.  Some in-house leaders, he felt, had not properly tackled this with a proper sense of priorities and with risk management brought properly into focus.

He also questioned some of the tropes of in-house practice trotted out at GC conferences which he felt meant some GCs might not be fit for purpose. An ambition to simply be a “trusted advisor” was a vanity project without real meaning. “Is being listened to the height of their ambition?” he asked.  Managing, understanding legal need and legal risk was much more important and involvement, he said, does not equal influence.  To put it another way he wondered how bank lawyers can think they have been doing their jobs well with their businesses subject to such stratospheric fines?  Although he also emphasised that he thought banks had begun to turn this around.  More generally, he felt in-house legal teams had missed the opportunity to properly define their role and look beyond the narrow definition of legal. As an example, he suggested lawyers can’t sign off on T&Cs and not deal with the sales process; the environment driving the process that the T&Cs are meant to govern. He also suggested, “More with less is a ridiculous idea. We can do less with less.”  Such banal business-speak he suggested was a cliche, which is unhelpful and drove a process of negative incentivisation.  He worried that HR appraisal processes were full of false constructs which sponsor a “faux heroism” such as “More for less” or “being commercial” and distracted attention from the fundamentals of the role.

Paul’s talk prompted a detailed response from a senior In-house lawyer at a very well known corporate.  She felt that her experience was quite different.  One of her previous employers had specifically employed lawyers to give a more rounded, ethical consideration to matters they were advising on.  They were given a mandate to look at the legal and ethical dimension to the problem.  A particularly interesting way of framing it was that she suggested another business she worked for gave a mandate for lawyers to be consumer advocates within the business.  There was a measure of agreement with Paul’s opening remarks about in-house lawyers being prone to over work.  As a way of mitigating this her business closely monitored work life balance metrics to see when legal is ‘running hot’.

A second in-house lawyer, who in fact spoke earlier in the conference was Barry Matthews of ITV. He gave a fascinating talk on the ways in which his business dovetail training, CSR and pro bono programmes but it was his comments on the costs of private practice which really stood out for me.  He talked about the shift towards fixed pricing for legal work in his business.  He said this was not driven principally by a perception that lawyers were too expensive.  Controlling and budgeting for cost were important drivers but they had looked at the cost of legal compared to other consultants and lawyers in fact did not look expensive in comparison.  Yes, you read that right.  The problem was that hourly rates undermined trust within the business. The sound of the taxi meter clicking during meetings and telephone calls undermined a good relationship.  The lesson appeared to be, it’s not that you are too expensive, it’s that the way you charge us undermines trust.

You can read my talk to the Symposium, Corporate Lawyers: Institutional Logics, Values and Ethics, by downloading it here.



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Time to invert the law degree?

Whether you get enough law from your law degree to get you started isn’t perhaps the best test to judge the value of the GDL or the law degree but this @legalcheek story (quote below) reminded me of a discussion I had with my Cardiff law colleagues many years ago. I said there would come a time when the Law Soc/SRA would look harder at whether professional entrants knew the basics that the foundation addresses and that it might make more sense to have those subjects taught at the end of the law degree not the beginning. There was an even better educational justification, I thought. The early parts of the degree could be spent engendering a more genuine and wide-ranging interest in the subject and inculcating the key skills of good law graduates.  Also those who decided not to be practising lawyers could continue to broaden and deepen their interests.  Much huffing and puffing ensued about how foundational foundation subjects were; none of which convinced me, but does tend to convince my bretheren. As is usual, I think I was right; but that doesn’t mean I was…

While I have a degree in law, I also have a Graduate Diploma in Law (referred to as the CPE when I studied it), which was a necessary addition to qualify as a solicitor in England & Wales. In my opinion, having been through both the law degree route and the graduate route, the latter is enough law to get you started in practice. . . .
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Ethics and Compliance: How can IHLs and COLPs be more effective?

LRN has published a very interesting report on ethics and compliance within corporates, the 2015  Ethics and  Compliance Effectiveness Report, which is of broader significance.  It particularly focuses on the vexed issue of whether it is better to separate the compliance and ethics function and in particular whether it is better to have a GC with a Chief Ethics and Compliance Officer (CECO) hat or to have an independent CECO.

Their main way of judging effectiveness is to measure what they call a Program Effectiveness Index (PEI) which looks at the impact of compliance and ethics programmes on:

  • providing advice/ counsel, enabling better decision making;
  • promoting an ethical culture and values-based behavior;
  • celebrating acts of ethical leadership;
  • the frequency of employee application of the company code of conduct; and
  • the perceived effect of E&C education on employee behavior and decision making.

They then measure the scores on the PEI, total them up as a kind of outcome score and compare them with inputs to see if particular inputs correlate with the higher PEI scores.  So, for example, programs in which the senior ethics and compliance leaders report to the CEO are more effective, on average, than those in which senior leaders report to the general counsel.  They have tried to concentrate only on significant correlations between inputs and the PEI (though their method of reporting significance is a bit strange) and yet we get quite a lot of correlations to make sense of.  LRN would say, not at all implausibly, that this reflects the fact that ethics and compliance programmes are run on multiple levels and in many ways.   Indeed, a central finding appears to be:

high-impact ethics and compliance leaders set more goals, seek more inputs, generate more outputs, and use more rigorous metrics than do their less effective peers…

Putting aside the fact that these high-impact individuals sound a bit annoying (joke), I’m going to focus here on one or two lessons from the report and encourage interested readers to download a copy of the report from here for more detail.

A central concern of the report is the debate over whether the positions of chief ethics and compliance officer and general counsel should be occupied by the same person. As LRN puts it:

Beyond the divergent skill sets and share of mind required, their arguments have turned on the role of the GC in advising on what “can” be done, while the CECO speaks to what “should” be done.

Whilst they clearly have a great deal of sympathy with the view that the CECO and GC roles should be separate that is not what the data in their report suggests:  As they say, on this data

It Turns Out That Two Hats Are (for Now)  Better Than One.

…two-hatted stalwarts run programs significantly more effective than those of their one-capped colleagues.

…What we see suggests that the greater effectiveness of the GC/CECOs’ programs reflects the nature of the GCs’ interactions and other roles within their organizations.

Interestingly, in continuing to support having separate CECOs reporting to the CEO, they also suggest CECOs need to become more like GCs, “building stature and cultivating key relationships”.  And they, “must seek to replicate or improve on the business service paradigm that successful law departments adopted decades ago.”

There is a bit of a nagging doubt in my mind about whether the research is always able to compare like with like.  When they say, “dedicated CECOs are considerably more likely to have run into negative results,” for instance I was prompted to wonder whether that is because CECOs have been appointed where ethics and compliance is a bigger problem or where, because they have been appointed, they are more inclined to think – or be willing to acknowledge – that there is a bigger problem.  They may have lower PEIs because they are more clear-sighted about the problems.  They appear to have larger budgets, which may partly support my hypothesis.  Similarly, LRN find CECOs are, “considerably more ambitious and seems much more focused on critical aspects of E&C effectiveness than the GC/CECOs.”

There are also interesting, I would say, counter-intuitive findings which seem a bit less prone to this criticism.  In particular, one thing that caught my  eye was the finding that, “programs led by GC/CECOs are doing substantially more training, in more, and more effective, ways.”  Higher rates of facilitated group figure strongly as a means of improving ethics programme performance.  It is also claimed that:

GC/CECOs may be less interested in nuts and bolts, but they are, on average, far more likely to be  values-focused….  As we have previously determined, values-based programs outperform rules-based programs by- almost every measure.

An equally resonant finding, probably of relevant to anyone who holds themselves out as, or is expected to be, an ethical leader was the finding that

Whether or not the typical member of the C-Suite often or very often addresses issues of ethics and compliance in staff meetings, operational reviews, and similar settings is more closely associated with the presence of an effective E&C program than any other single behavior or attribute.

It was also rare: only 11% of respondents reported that this happened and, “nearly two-thirds of all respondents [reported that] senior leaders bring up such matters rarely or not at all.”  The day to day demonstrable relevance of ethics and compliance seems to be a key here (and middle management commitment in these term may be doubly important).  In a similar vein, whether “employees are likely or very likely to consult the code of conduct when faced with a decision or dilemma,” LRN say is predictive of good performance.

The report contains a wealth of data on quite detailed aspects of ethics and compliance programmes: metrics, evaluation, training, culture and the like.  Most studies of this kind suffer a bit from a degree of circularity and self-reporting: it’s not always possible to disentangle whether those who think they are doing better really are doing better, but even so it is well worth a read.  As well as it’s immediate concerns it got me wondering whether it is time to do something similar with COLPs in law firms.  There are a lot of analogues: does law firm’s C-suite take ethics seriously?  Is it ethics or compliance that COLPs are about?  Is ethics and compliance embedded or bolted on?  Do middle managers (who they?) take this sort of thing seriously?  How is training delivered?  How are values conceived of and promoted?

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Show me the money: Financialisation #101

The Lawyer have done a very interesting survey on lawyer salaries with a very large response (6,000+).  The results on apparent gender disparities  are particularly interesting.  In this context it can be regarded as useful light being shone on the practices of law firms, but in another light it can regarded as part of the ‘judge me by what I earn’ culture which is an (increasingly?) damaging part of the culture of legal practice.  I’m not sure an awful lot can or should be done to resist the spread of such information: and after all there are benefits on top of publicity for the gender issue if one sees partners as appropriating more of the associates value than they deserve (I’m agnostic on that: more information may help the market decide though I suppose).  It is worth saying also why not add data on class and ethnicity?  Perhaps these things are in the fuller survey.

It’s worth thinking too though about the drawbacks.  Research in the US has suggested that lawyers who case success in predominantly financial terms are less happy (or more more depressed depending on what emphasis you wish to take), and other research emphasises the negative impact of the financial framing of work on ethics.

As the Lawyers’ partners (Kinsella Legal, recruitment consultants) in the survey note:

As the UK economy continues to grow, today’s lawyers have never been so sought after, driven by the current war for talent.

Let’s hope this is not a war fought purely in terms of salaries, bonuses and profit share.   It’s interesting to note that the Lawyer survey seems to record data on some analagous issues to the US concerns. There’s some reporting of the results on stress here. There is also data on satisfaction with pay rises and apparently data on broader career satisfaction and aspirations although disappointingly I could not see this reported.  I may have missed it.  It would be good to see a thorough analysis of satisfaction and its drivers if that is possible to compare with the US work and to inform debate which is essentially about the quality of management and about career choices.

By all means show us the money but let us also take a harder look at the other things that make work rewarding (or not).  Happiness and professionalism depend upon it.

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