By Kieron Wood, Barrister-at-Law
Are Irish lawyers anti-competitive?
By Kieron Wood, Barrister-at-Law
According to the head of the new Legal Services Regulatory Authority, Dr Don Thornhill, his intention is not “to start off on an ‘Ah sure, it’ll do’ basis”. But he may have his work cut out!
For many years, Irish lawyers have been facing criticism about alleged overcharging, unfair restrictions and anti-competitive practices. These allegations have been examined by bodies such as the Restrictive Practices Commission in 1982, the Fair Trade Commission in 1990, the Organisation for Economic Co-operation and Development in 2001, the Legal Costs Working Group in 2005 and the EU Troika in 2011.
Recommendations were regularly made for change, but few of those proposals have been implemented. In 2001, Ireland’s Competition Authority (since abolished and replaced by the Competition and Consumer Protection Commission) announced that it would examine the legal profession. Its preliminary report came out in February 2005, and its final report was published in December 2006.
The report considered both branches of the Irish legal profession, solicitors and barristers. Solicitors (who are subject to statutory regulation by the Law Society) mostly do office work and appear in the lower courts. Barristers (who are regulated by their own disciplinary body, the Bar Council) tend to be specialists who provide legal opinions and appear in the higher courts.
The Authority’s final report concluded that the legal profession was “permeated with unnecessary and disproportionate restrictions on competition which should be removed so that consumers can benefit from greater competition in legal services”. The report said that legal services were essential for access to justice and for the operation of the Irish economy. “Access to justice requires, not only that the legal advice given is sound, but also that it is provided in a cost-effective and client-responsive manner. Excessive legal fees and inefficient business methods increase the cost of living and the cost of doing business in Ireland, and negatively affect Ireland’s competitiveness.
“Irish consumers, businesses and organisations paid just over €1 billion for legal services in 2003. This is equivalent to almost 1 per cent of everything bought or sold in the country (Gross Domestic Product). This underestimates the impact of the sector on the economy as a whole. Legal services provide part of the fundamental infrastructure of an economy and are the essential backbone for contracts in trade, property and employment.”
The Authority said that competition in legal services was “severely hampered by many unnecessary restrictions [which] emanate mainly from the regulatory rules and practices of the Law Society, the Bar Council and the Honorable Society of King’s Inns, but also from the relevant legislation”.
Among the competition issues it highlighted were:
The report said that the Law Society, Bar Council and King’s Inns (which has a monopoly on training barristers) had “presided over restrictions on competition which may have benefits for lawyers, by sheltering them from competition, but which harm consumers. The overall effect of the myriad restrictions on competition in legal services has been to limit access, choice and value for money for those wishing to enter the legal profession and those purchasing legal services”. The final report said: “Overall, the legal profession is in need of root and branch reform reflecting the important need to create a modern system of regulation that is proportionate, accountable, transparent, flexible and reflects the needs of consumers.”
The authority’s 29 recommendations were in line with reform of the legal profession in other common law countries, such as England and Wales, Northern Ireland, Australia and New Zealand.
The Competition Authority recommended a Legal Services Bill which would establish an independent Legal Services Commission with responsibility for regulating the legal profession and the market for legal services. The Law Society and the Bar Council would continue to have a role in the day-to-day regulation of the profession, but would have to separate their representative and regulatory functions.
The Legal Services Bill would also remove the Law Society’s and King’s Inns’ monopolies in legal education. Any institutions that wanted to provide training for solicitors or barristers would have to apply to the Legal Services Commission for approval. The Bill would also introduce the profession of conveyancers who would be qualified to provide conveyancing services and have the same consumer protection regulation as solicitors.
Legal Services Commission
The Competition Authority’s key recommendation was that a Legal Services Commission should oversee regulation of the legal profession and legal services. This “independent, transparent and accountable body”would involve “a wider group of stakeholders than the current model of self-regulation”.
The report said: “In their role as regulators of the legal profession, the Bar Council and the Law Society must ensure that the legal profession operates to the benefit of consumers. These two roles can come into conflict. Housing them in the same organisation lacks transparency. Under the new model for regulation proposed by the Competition Authority, the Law Society and the Bar Council would still have a role to play in the regulation of the profession but would be required to separate this role completely and distinctly from that of representing their members...
“Independent regulation of the legal profession would be consistent with reform towards greater transparency, accountability and consumer focused regulation in other professions and sectors in Ireland...and in the legal profession internationally.”
While the proposed Legal Services Regulatory Authority would provide an independent forum for complaints about lawyers breaching the rules, the Legal Services Commission would scrutinise the rules themselves.
Entry into the legal profession in Ireland is still controlled by those already in the profession: the Law Society and the Honorable Society of King’s Inns have a monopoly over the training of solicitors and barristers respectively. Potential solicitors must attend lectures in Dublin or Cork, while potential barristers from anywhere in the 26 counties must attend lectures at the King’s Inns in Dublin.
The Competition Authority recommended that the proposed Legal Services Commission should set the standards for the provision of legal education and any institutions that wished to provide training for solicitors or barristers – including the Law Society and King’s Inns – should have to apply for approval to do so. “This reform will ensure that an appropriate number of training places are available to match demand for legal services and that competition in legal services is not restrained,” said the report.
The Competition Authority also recommended a new system for recognising the qualifications of non-EU lawyers, changes to the Irish language requirements and a relaxation of the rules for switching between the solicitors’ and barristers’ branches of the profession.
The legal profession in Ireland currently has to follow a rigid business model:
“Relaxing some of the rules enforcing this model will allow solicitors and barristers the opportunity to deliver their services in other ways which are more suitable, more efficient and more cost-effective for their clients,” said the report.
The Competition Authority strongly recommended that the Bar Council extend its Direct Access Scheme, which allows certain professional groups to approach barristers directly for legal advice. The Authority said that the formation of partnerships by barristers would allow them to benefit from “economies and efficiencies derived from shared costs, shared work, shared risk and shared professional reputation”. Also, groups of barristers who shared premises and overheads, but not fee income (ie groups of sole traders), should be allowed to advertise themselves as a group.
The report also recommended that barristers in employment should be allowed to represent their employers in court. The current restriction “reduces the supply of available barristers. It is also at odds with the fact that solicitors can represent their employers in court”, said the report.
In Ireland, solicitors are the only professionals allowed to provide conveyancing services for the transfer of land or property. In other common law jurisdictions, such as Britain, Australia, New Zealand and South Africa, specialist professionals – known as conveyancers or licensed conveyancers – offer regulated conveyancing services.
The Competition Authority proposed the introduction of a similar profession of conveyancers in Ireland. It said this would lead to “downward pressure on conveyancing fees and more consumer-focused and innovative ways of providing these services, such as use of the internet and offering services outside normal business hours”.
Currently, there is limited information available to consumers about fees and costs before they engage a lawyer. This lack of transparency makes it difficult for consumers to shop around for legal services.
The lack of information available to consumers has also led to the retention of a number of anti-consumer practices, such as:
The Competition Authority recommended that the Law Society and Bar Council “actively provide” useful and accessible information for consumers on their websites. The Authority also suggested that solicitors should face a “meaningful penalty” for failing to provide fee letters, and that the Bar Council should oblige barristers to provide similar fee information.
The report said that the Bar Council should point out to its members that the practice of junior counsel charging a fee of two-thirds senior counsel’s fee without reference to the work done was anti-competitive and anti-consumer. The Authority recommended that those responsible for the state’s system of taxation of costs should ensure that the practice was halted.
Finally, the Competition Authority recommended that the government, as the state’s largest user of lawyers, should consider introducing competitive tendering for legal services.
Barristers who have practised for a certain period may be appointed by the government as Senior Counsel. The title is intended to be a quality mark, indicating that the barrister has a high level of legal knowledge, skill and judgment in the area of advocacy. But in reality, the title of Senior Counsel is not a reliable mark of quality because there are no transparent criteria for awarding the title. Neither is there any monitoring of quality, nor any procedure for withdrawing the title if there is a reduction in quality.
The Competition Authority recommended that the government establish objective criteria for awarding the title of Senior Counsel, with a procedure for monitoring work and removing the title if necessary. It also recommended that solicitors – who have a right of advocacy in every court in Ireland – should be entitled to hold the title of Senior Counsel and be entitled to lead a barrister in court. “Removing these unnecessary restrictions will encourage greater competition in advocacy services,” said the report.
In Ireland, the Bar Council only allowed barristers to advertise by including their names and specialisations on the Bar Council’s website and in the Law Society’s Law Directory. The report said these restrictions on advertising were disproportionate and limited competition.
Solicitors, on the other hand, are not generally prevented from advertising. The restrictions relate to the manner and content of advertisements – though Law Society regulations prevent solicitors advertising that they have specialist knowledge of a certain area of law or that they may take a percentage of an award as their fee.
The Competition Authority recommended that existing advertising rules should be reformed for barristers and solicitors. “Truthful and objective advertising gives clients useful information and helps them to choose among competing lawyers,” it said.
If a client wishes to switch solicitor, the solicitor can withhold the client’s file until his bill has been paid, even if the bill is disputed. This unique protection for solicitors against bad debts was an unnecessary restriction on competition, said the Authority. “Of all professionals, solicitors are best placed to pursue clients for money owed to them, as they can self-supply the legal service,” said the report. The Competition Authority recommended legislative change to remove solicitors’ rights to withhold clients’ files.
The Code of Conduct of the Bar formerly precluded barristers from taking over a case from a colleague until the first barrister had been paid. In response to the Competition Authority’s concerns, the Bar removed this restriction in March 2006.
Following the Competition Authority’s preliminary report on the legal profession, the Bar abolished the rule that prohibited practising barristers from having other part-time employment and from acting for a former employer for a set period after beginning practice at the Bar.
In July 2006, there were 7,242 solicitors and 1,665 barristers serving a population of four million people in the Republic of Ireland. This is fewer lawyers per head of population than in other common law countries.
Compared with other professions, such as architects, engineers and accountants, Irish lawyers earn relatively high incomes. The average gross income for lawyers in 2002 was approximately €164,000. The level of solicitors’ fees in the High Court increased by 4.2 per cent above general inflation annually between 1984 and 2003, while the level of fees for senior counsel in the High Court increased by 3.3 per cent above general inflation annually over the same period.
The Competition Authority’s final report made 29 recommendations, including a comprehensive Legal Services Bill and proposals for the Law Society and the Bar Council which would benefit consumers of legal services. The report proposed a timetable for implementation: the Legal Services Bill by June 2008 and other changes and initiatives by the profession in the interim. So, almost a decade later, have the changes been complied with?
The Minister for Justice, Equality and Law Reform (now simply the Minister for Justice and Equality) should publish by June 2008 legislation to establish a Legal Services Commission, an independent statutory body with responsibility to regulate both branches of the legal profession. The Legal Services Commission would delegate many regulatory functions to existing (and possibly new) regulatory bodies.
The Commission would have authority to make new regulations and to veto the rules of self-regulatory bodies. It would also undertake research and analysis of the market for legal services to identify priority areas for reform and to set guidelines for assessing costs in contentious matters. The head of the Legal Services Commission and a majority of its members should not be practising members of the legal profession. (The Legal Services Regulatory Authority was set up in October 2016, under the chairmanship of Dr Don Thornhill.)
By June 2008, the Minister for Justice, Equality and Law Reform should transfer the Law Society’s role of setting standards for legal education to an independent body, such as the Legal Services Commission. The Law Society and any other institution that wished to provide training for solicitors should have to apply to the Legal Services Commission for approval to do so. (The system of education of solicitors is “in the pipeline”, according to Dr Thornhill.)
By June 2008, the Minister for Justice, Equality and Law Reform should give an independent body, such as the Legal Services Commission, the task of setting standards for the provision of legal education. The King’s Inns and any other institution that wanted to provide training for barristers should have to apply to the Commission for approval to do so. (Control of barristers’ education is “in the pipeline”, says Dr Thornhill.)
The Minister for Justice, Equality and Law Reform should introduce legislation by June 2008 to repeal sections of the 1929 Legal Practitioners Qualification Act relating to compulsory Irish for lawyers. The Law Society and the King’s Inns should publish criteria for a voluntary system allowing solicitors and barristers with a particular interest in Irish to be trained and examined to a consistent high standard. Institutions other than the Law Society and King’s Inns should be allowed to provide such courses and exams.
Legislation should be enacted by June 2008 to replace the current system of reciprocity with a system that mirrors Council Directives 98/5/EC and 89/48/EC for non-EEA lawyers who wish to practise in the state under their home title or as Irish solicitors or barristers. That has been done by the EU.
The Law Society should ensure that all unnecessary barriers are removed by June 2007 for solicitors wishing to become barristers. The Bar Council implemented this in July 2006.
The Minister for Justice, Equality and Law Reform should bring forward legislation by June 2008 to permit qualified people other than solicitors to provide conveyancing services. Anyone who wants to provide conveyancing services should have to be registered as a conveyancers by a Conveyancers’ Council of Ireland which would have responsibility for regulating their training, qualification and operation. Conveyancers should have to abide by a code of ethics, to have professional indemnity insurance and to contribute to a compensation fund. (The establishment of a system of conveyancers is “in the pipeline”, according to Dr Thornhill.)
The Bar Council should permit unlimited direct access to barristers for legal advice by December 2007. (The ‘new act’ allows barristers direct access on ‘non-contentious business’, according to the Law Society Gazette.)
By June 2008, the Minister for Justice, Equality and Law Reform should give the Legal Services Commission power to undertake research in any area of the market where reform may be beneficial for consumers or the functioning of the market. The Commission should undertake research in the area of direct access to barristers for contentious issues.
Barristers who share premises and costs should be permitted to hold themselves out as practising as a group by December 2007. (The ‘new act’ lets groups of barristers advertise, according to the Law Society Gazette.)
The Bar Council should allow barristers to offer their services in partnerships, subject to appropriate regulation, by December 2007. (The LSRA was due to produce a report on legal partnerships within six months of establishment in October 2016.)
The Minister for Justice, Equality and Law Reform should empower the Legal Services Commission to undertake research in any area of the legal services market where reform may be beneficial for consumers or the functioning of the market, by June 2008. The Commission should examine alternative business structures so that solicitors and barristers have the greatest freedom in choosing their preferred structure.
The government should establish objective criteria by June 2007 for the awarding, monitoring and withdrawing of the title of Senior Counsel.
The Bar Council should propose to the Bar of Ireland that the Code of Conduct be amended to remove the restriction on solicitors holding the title of Senior Counsel and to abolish the rule which stipulates that a barrister may only be led by another barrister. By June 2007, the government should award the title of Senior Counsel to solicitors, as well as barristers, on the basis of transparent criteria.
By June 2008, the Minister for Justice, Equality and Law Reform should give the Legal Services Commission the power to monitor and analyse barristers’ advertising and to identify and promote appropriate reform.
The Law Society should amend its regulations by December 2007 to allow solicitors to advertise themselves as specialists. The Minister for Justice, Equality and Law Reform should give the Legal Services Commission power by June 2008 to monitor and analyse solicitor advertising and to identify and promote suitable reform.
The Bar amended its Code of Conduct in March 2006 to remove the ban on a barrister taking over a case from a colleague before the first barrister had been paid.
The Minister for Justice, Equality and Law Reform should, by June 2008, introduce legislation to ban solicitors retaining clients’ files pending payment by the clients.
The Bar amended its Code of Conduct in March 2006 to allow barristers to take up part-time employment in other professions.
The Bar amended its Code of Conduct in March 2006 to allow new barristers to be engaged by their previous employers.
The Bar Council should formally advise barristers by March 2007 that the practice of junior counsel marking fees at two-thirds of the senior counsel’s fee, without regard to the work done, is anti-competitive and must cease.
The Law Society and the Bar Council, in consultation with the National Consumer Agency, should put consumer information pages on their websites by June 2007.
The Minister for Justice, Equality and Law Reform should bring forward legislation by June 2008 requiring solicitors to issue more detailed and accurate fee letters, and outlining a ’meaningful sanction’ for solicitors who fail to provide such letters.
By June 2007, the Bar of Ireland should amend its Code of Conduct to require that barristers provide fee information letters with the same level of information as the letters recommended by the Legal Costs Working Group.
Taxing Masters and County Registrars should assess legal costs primarily on the basis of the work done, and not on the basis of the size of the award, as at present.
Taxing Masters and County Registrars should cease allowing junior counsel’s fees at two-thirds those of senior counsel. Instead, fees should be based on the level of work done by each individual.
Appropriately qualified people should be eligible for appointment to the proposed Legal Costs Assessment Office.
By December 2008, the Department of Justice, Equality and Law Reform was to identify where competitive tendering would be appropriate for legal services bought by the state, and examine systems in other jurisdictions with a view to introducing them in Ireland.
It will be interesting to see what the government decides in the light of the judgment of the Court of Justice of the European Union in the case of Openbaar Ministerie v Luc Vanderborght C-339/15. The court found that national legislation which imposed a “general and absolute prohibition of any advertising” (in this case relating to the provision of oral and dental care services on a dentist’s website) was contrary to the directive on electronic commerce.
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