Supermarket sweep

Clementis far-reaching review has paved the way for Tesco law. What will this mean for the future of the legal profession?

Supermarket sweepThere can’t be many words in the English language that are more likely to instantly extinguish the enthusiasm of a law student for their future career than Tesco law. Where do you see yourself in five years time brokering big deals in the City or fighting for the rights of the oppressed? Where you will not want to be is aisle 19 of your local supermarket, situated somewhere between the baked beans and the toiletries, doling out legal advice to shoppers. But what does Tesco law mean? Perhaps you dont know your MDPs from your LDPs and are too embarrassed to ask? And just where will Sir David Clementis revolutionary review of the legal profession leave your career in the law? Lawyer2B offers some answers.

Sir David Clementi is a former deputy Bank of England governor and ex-chairman of Prudential. Two years ago, the then Lord Chancellor, Lord Irvine, asked the freshly-knighted man from the Pru to sort out the lawyers. He published his findings in December last year and ministers have just produced their own response to his report.

So what was wrong with lawyers in the first place? Shockingly, lawyers are not that popular. The economist Adam Smith once observed that people of the same trade seldom meet together… [without] the conversation ending in a conspiracy against the public.

One recent broadsheet leader on Clementi added: Today it is the professions that evoke such sentiments, especially where they enjoy the right to regulate themselves. Consumers often see such arrangements as ineffectual, allowing professionals to look after their own.

Lawyers, it went on to argue, are the chief conspirators today. The functions of bodies such as the Law Society and the Bar Council often clash most jarringly, they represent the interests of their members as trade unions, but are also responsible for handling complaints from the public and disciplining miscreants.

Nor has the Government been shy in voicing its own concerns about the perceived failings of the legal profession. The current regulatory system is outdated, inflexible, over-complex and insufficiently accountable or transparent. That was the view it expressed when it set up the Clementi review in 2003 and it has not changed its mind.

The most compelling reason for reform is down to solicitors and their sustained failure to deal with complaints from aggrieved clients. It is a crisis that has deepened over the years, but the backlog of complaints almost doubled between January 2002 and September 2003, according to the Legal Services Ombudsman, with delays of more than two years in some cases. Last year, Zahida Manzoor, the current Ombudsman, explained the problem to The Lawyer. I always use the analogy of the [Law Society] being the England football manager and referee at the same time, he said. Your side is playing in a crucial game against France then something happens do you throw up a red card or dont you? You cant be both.

And what did Clementi make of the challenge he took on? The regulatory system was complex and fragmented. There is a wide range of regulators with overlapping powers and responsibilities, he continued. This lacks transparency and is confusing to the public. Therefore it seems not to be very accountable. We need to establish whether or not the system meets the demands of a modern, changing legal services market. As the Law Society pointed out early on in the review, the status quo was not an option.

What do lawyers make of the review? That depends on who you talk to. It is fair to say that lawyers do not see eye to eye. The bar has always refused to see why it should have to lose its self-regulatory powers for other peoples mistakes, as the barristers delicately put it. The bar is also dead against multidisciplinary partnerships (MDPs), where lawyers can go into partnership with other professionals. Last year, the then Bar Council chair Stephen Irwin QC memorably described mixing lawyers with other professionals as bad karma. Somewhat surprisingly, Chancery Lane readily embraced MDPs under the Clementi review, despite the fact that many in its key constituency, the high street firms, regard relaxation on the professional rules as something akin to professional suicide.

In what amounts to a full-blown barney, Law Society chief executive Janet Paraskeva squared up to Irwin in the Financial Times and suggested that barristers had a less than contemporary take on MDPs. In the same article, the society was reported to have been stung by the bars unwillingness to be lumped together (the Bar Councils words) with solicitors.

As far as lawyers are concerned, Clementis big three issues are: the regulatory framework; the complaints systems; and the restrictive practices that block MDPs.

So does the Clementi review herald the end of the profession? One of the big questions is to what extent will the law survive the Clementi review as an independent, self-regulating profession. In his consultation paper, Sir David decided on two broad models of regulation for the professional bodies. This is not just about the Law Society and Bar Council, there are other bodies, such as the Institute of Legal Executives, Institute of Trade Mark Attorneys, Chartered Institute of Patent Agents, Council for Licensed Conveyancers and the Immigration Services Commissioner.

The nuclear option was to strip lawyers of all regulatory powers and transfer them to a new body which was, in Clementi speak, Model A. This would leave the professional bodies as mere trade unions with purely representative roles and lawyers would have to live under a Financial Services Authority-style super-regulator.

The second option, Model B, would allow professional bodies to keep some of their regulatory powers while setting up a Legal Services Board to supervise them. This is the one that the Law Society and Bar Council really wants because the board would nominally have all the powers that the FSA-style regulator would have, but they would then be devolved back down to the professional bodies. In other words, providing nothing went wrong, life would go on as before. But just to muddy the waters a bit, Clementi threw in a variation on Model B, Model B+, which involves hiving off the representative functions to a separate body. Clementi came down in favour of model B+.

So, how will Sir David deal with dodgy solicitors? He has called for the first port of call for unhappy clients to remain their own lawyers, but a new Office for Legal Complaints will take over complaints-handling from the Law Society, the Bar Council and the other professional bodies. The Bar Council is not happy. We dont want the service provided to the public to be diminished by being sucked into a large bureaucratic Office for Legal Complaints, it said.

But are you going to end up working at Tesco? Tesco law is simply the political shorthand for the government reforms that will allow banks, financial institutions and supermarkets to offer legal services directly to the public. This move threatens to change the landscape of legal services so happy shoppers could pop down to Tesco and get their wills drawn up. Incidentally, Tesco has become a somewhat unwitting symbol of the movement as it has shown little enthusiasm for it it seems to be only the RAC that is chomping at the bit. Despite Chancery Lanes enthusiasm for MDPs, high street firms gloomily predict that Tesco law will do for them what the supermarkets did for the corner shop.

In the end, Clementi introduced another acronym in the legal lexicon the LDP, or the legal disciplinary practice. LDPs allow different types of lawyers to band together and allow non-lawyers to take an ownership stake in law firms. So concerns about Tesco law have now mutated into fears of Robert Maxwell law, as dodgy owners of law firms ride roughshod over professional ethics. Clementi has not rejected MDPs, but wants LDPs to bed down first. The accountants have always been keen on one-stop-shops combining the two professions, but the impetus to create MDPs has stalled in the wake of the Enron scandal and the collapse of Andersen.

So what does the Government make of it all? The Lord Chancellor, Lord Falconer, unveiled his own measures in March pretty much based on Clementis proposals (see box). I share David Clementis view that reform of legal services is overdue, said Lord Falconer. Were committed to taking it forward as quickly as possible. We will not jeopardise the integrity of the system we will preserve what we do well.

Government proposals

  • A new Legal Services Board will be created, with the majority of the membership made up from people outside the legal profession. Regulatory powers will be invested in the new body with powers to devolve regulatory functions to the frontline bodies subject to their competence and governance arrangements. The regulatory and representative functions of all front-line regulatory bodies will be separated.

  • The Office for Legal Complaints will be set up to handle all consumer complaints against regulated legal service providers, where the complaint cannot be resolved at the local level. It will be demonstrably independent, with the majority of the membership from outside the legal profession.

  • Legal disciplinary practices will form. For the first time, non-lawyers will be able to be managers or partners in legal practices as well as owners and investors.