Legal Profession: Regulation

Lord Phillips of Sudbury Excerpts

Monday 3rd December 2012 Lords Chamber

[Lord Phillips of Sudbury]

My Lords, I, too, thank the noble Baroness, Lady Deech, for bringing this subject before the House. I confess that I received her e-mail warning us of all this only this morning, so my contribution may be lacking in coherence, but I will make a few points if I may. I started full-time in a solicitors’ office—admittedly, as an office boy—55 years ago, and have seen an astonishing transformation over that time in the regulation and, I believe, the ethos of what is still called a profession. When I started there was a maximum of 20 partners; you could have only partnerships, not limited liability; there was no advertising and no conditional fee arrangements; referral fees were not permitted; and, above all, there were no such things as “alternative business structures”, that charmingly denominated abortion that we now have among us.

Sadly, I must be honest and say that I do not actually think that solicitors are any longer members of a profession. I think that we are just another business. Thank the Lord, integrity is still largely to be found within the solicitors’ branch of the profession, but I do not see it long maintaining itself because the structures within which we now function have become so commercialised and driven by bottom-line considerations that it is unreasonable to expect integrity to survive organically—in rather the same way, I am afraid, as the City, little by little, has lost its values base. I agree with what the noble Baroness said about the big bang and its consequences

I feel that we are going down a blind alley in thinking that more and better regulation can maintain the essential integrity without which we are no longer officers of the Supreme Court and handmaids to justice but something a great deal less and, in some ways, quite threatening. I say that with great reluctance but cannot avoid it. I was the only solicitor member of the committee set up under Sir Sydney Kentridge, and he had a very lively belief in the ethos of the profession—a set of values, if you like, autonomous to each practitioner, without which the whole structure could not survive.

The truth now is that we are deep in regulation—I would say, as have others, overregulation or inappropriate regulation. I looked at Halsbury’s Laws of England this morning and found to my amazement that there are two volumes on the professional regulation of lawyers—1,196 pages of stuff about it. When I started, I doubt that there were 60 such pages. The life of the lawyer today—I can speak only of the solicitors’ profession—is unbelievably bureaucratic. There is somehow a belief that if you are forced to write a six-page letter to a client before you start work, that will somehow improve the work, or that some of the forest of internal bureaucracy that now prevails in big firms can maintain those essential elements without which there can be nothing.

I look to the regulatory objectives of the 2007 Act. I may say that I was one of the very few Members of the House of Lords—in fact, I may have been the only one—who was flat-out opposed to the part of the 2007 Act that set up the alternative business structure. But as has already been remarked, the eight regulatory objectives are not entirely internally consistent. When you think that the eighth of them is,

“promoting and maintaining adherence to the professional principles”,

of which there are five, it all adds up to a not entirely clear set of guidelines for the young person entering the profession. Above all, integrity should surely trump everything. I do not think the word appears in the eight regulatory objectives.

I leave my few remarks at that. I warn against the bureaucratisation that attempts to set the values for the practitioners. Up to a point, of course you have to have a complaints mechanism; of course you have to have somebody who can strike down the few bad apples and maintain that integrity. But I believe, as had been said by the two previous speakers, that we are not at the point where we are doing the regulatory process the best we can. In fact, going back to the drawing board—as I think was the phrase of the noble Lord, Lord Faulks—might well be what is needed.

I have not embarked on the alternative business structure, except to say that if anybody thinks that you can have a law firm 70% or 80% owned by whoever the hell you like and that that is not going to impact directly on the ethos of that enterprise, they are living in cloud-cuckoo-land. There are 120-plus applications now for ABS status and it is already observable that these big combines are going to be driven first, secondly, and thirdly by profit, profit, profit. It is all about the bottom line, just as in the City. Everything else can go hang. The notion of informal pro bono work is, I am afraid, inconsistent with the values that will bring into existence the vast majority of these alternative business structures. I would like a re-examination of them as soon as is feasibly possible, because they are a real nail in the coffin of professionalism.

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[Lord Phillips of Sudbury]

Is it not also true that the university which emerged from the College of Law is a profit-making entity? I rather think that it is.

[Lord Mackay of Clashfern]

I am just about to come to that point. I understood that the something or other—I am not sure exactly what—of the College of Law has been sold to a commercial organisation, which I assume has a profit motive in it. I do not think that it is a charity. However, the university would be a charity, at least under the ordinary definition of charity which prevails as an institution for the advancement of education. I would be glad to know a little about the Government’s policy in relation to having the legal profession taught, and a university financed, by a profit-making organisation. I am not against profit for profit’s sake at all but, hitherto, universities have not been regarded primarily as institutions set up for profit, except for the profit of those who profit from them.

The noble Baroness, Lady Deech, has led the Bar Standards Board with tremendous distinction. I sensed a certain amount of frustration in her remarks this evening about the way in which really efficient standard-setting for the Bar can be damaged by unnecessary and sometimes overcomplicated interventions by those who do not quite share the same objectives as the Bar Standards Board. I feel that the same may be somewhat true in the solicitors’ branch of the profession.

I hope that the Government will take very seriously the suggestion that this whole area should be subject to post-legislative scrutiny. The Joint Committees of this House and the other place have shown themselves to be very valuable in scrutiny of legislation. Post-legislative scrutiny of this legislation, which is so fundamental to the success of our free legal profession, is now due.

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[Lord Hunt of Kings Heath]

My Lords, this has been a very interesting, although short, debate. At the moment we are thinking very much about regulation of the media. Whatever the outcome of the current debate, in most sectors of the economy it is generally accepted that there should be statutory regulation of the affairs being conducted within them—and, where the professions are concerned, by the individuals who practise in that sector. However, there is much less consensus about the right regulatory approach.

The noble Baroness, Lady Deech, said that circumstances had changed considerably in the past decade since the architecture of the 2007 Act was formed—and, indeed, many years after the noble and learned Lord, Lord Mackay, first put his mind to these rather difficult subjects. She was right to say that the economic climate is different, both in the country and for the profession; and she was surely right, too, when she pointed to some of the experiences of regulators in other sectors. She mentioned financial services. I will mention the health service sector, where the existence of the long-standing—almost long-running—inquiry into Mid-Staffordshire has moved on from what happened in the hospital to look at the role of the various regulatory bodies, and at whether collectively they did the right thing or whether there were gaps, shortcomings or tensions between them.

It is absolutely right for us to have this debate and to discuss regulation within the legal profession. I am sure that the Government will welcome the opportunity to state their views and perhaps to reflect on some of the comments that have been made about the need for them to think in the next two or three years about how to take their views forward. I listened with great interest to the comments of the noble Lord, Lord Phillips, on ownership structure in the profession. I readily recognise that there have been huge changes over the past decade. However, in my experience of the National Health Service, doctors in particular as well as other parts of the profession are able to maintain professional standards within a large organisation. I am not persuaded that it is impossible within new ownership structures for there none the less to be a strong ethos that will be very much underpinned by the principles set out in the 2007 Act, and by the regulatory framework that comes from it.

[Lord Phillips of Sudbury]

Does the noble Lord not have concerns that an organisation that buys lots of law firms is likely to be interested only in what it can screw out of them? That is not consistent with any view of professionalism.

[Lord Hunt of Kings Heath]

Of course, in the development of the kind of organisations to which the noble Lord refers, profit will be a core concern. However, one could look to other sectors where people are involved in seeking profit and point to professionals who practise to the highest quality, usually underpinned by regulatory functions. I do not subscribe to the noble Lord’s view that ownership structure per se will change the professional ethos of people working in the sector. I understand his concerns on the matter, but surely he will recognise that even if you are working in a sector where the objective clearly is profit, it is still perfectly possible to act in a responsible and ethical way. Even before the ownership structure changes, it was my understanding—although I am a novice in these matters—that barristers none the less would seek to earn good income if they could.

[Lord Phillips of Sudbury]

I am most grateful to the noble Lord for seeing that I was hovering. Lawyering is a very particular business. It is not like manufacturing tins of beans. It has all sorts of social and ethical issues at the heart of it. Unless you can allow a lawyer to give full vent to his or her social purpose, the position of the lawyer as the gatekeeper to justice is impeded.

[Lord Hunt of Kings Heath]

Having been a Member of your Lordships’ House for 15 years, I now recognise the special characteristic of lawyers, and I rejoice in it. I have only five minutes left and perhaps I ought to press on.

Clearly it is important to ensure that professional regulation works effectively. It should not be overly bureaucratic and it should uphold the independence and integrity of the profession. We should be very proud of the whole legal services profession in this country, the fact that it is recognised globally and that legal services are a huge export for this country. Clearly we should do nothing that undermines the strength of the legal services industry in that regard.

I supported the passage of the Legal Services Bill in 2007. Although the Legal Services Board has come in for some criticism in your Lordships’ House tonight, we should recognise the progress made by the board under the chairmanship of David Edmonds. We should also recognise that the board will be publishing its inaugural assessment of the effectiveness of each of the approved regulators, including the Solicitors Regulation Authority and the Bar Standards Board. It might have been better if this debate had been timed after we had seen the outcome of these arrangements.

The triennial review to which the noble Lord, Lord Gold, referred has suggested that there is a continuing role for both the Legal Services Board and the Office for Legal Complaints. The next review will take place in 2015. The suggestion by the Bar Council and a number of noble Lords for post-legislative scrutiny, which I would always support as a matter of principle, might be better timed to coincide with the next triennial review around the 2015 mark so the two might run concurrently.

I have noted noble Lords’ concerns, and particularly the Bar Council’s concern and criticism of what they describe as mission creep by the Legal Services Board, citing micromanagement, duplication and overlap of regulatory activities and unnecessary cost. These have to be guarded against. I understand the total cost of the LSB start-up and first three years’ running costs of just under £20 million is not insubstantial, although it is modest compared to many other regulatory bodies. The noble Baroness, Lady Deech, commented on examples of where the LSB is considered to have gone overboard, and mentioned equality and diversity data collection. My understanding is that the LSB—as it saw it—gave best practice advice on how that collection could be done anonymously and made it clear that there should be no compulsion on individuals to take part. The consultation was explicit that the reason for going beyond the blanket survey was so that clients and potential employees could see the diversity make-up of individual firms and chambers. I am not going to argue one way or the other, but it is important that we also hear the viewpoint of the Legal Services Board. We have tended to hear from one side.