In a week in which a painful rise in contributions to the Compensation Fund is expected, what better than seeing how another jurisdiction handles clients’ money?
Us, learn something from the French? OK, don’t throw your tomatoes yet.
In France, they have something called CARPA (Caisses des Règlements Pécuniaires des Avocats). It means that lawyers are not allowed to hold clients’ money, but must pay it into the bar’s account, under the control of the president of the bar. There are over 100 CARPAs in France, and each is under the political and ethical control of the local bar, rather than of a central body or of a financial institution. CARPA is not itself a bank, but works with banks.
The French are very proud of their system, for a number of reasons. First, it guarantees the safety of client funds. Accordingly, their response to our Compensation Fund is to say: what Compensation Fund? They don’t need one, because clients’ money is not susceptible to theft by individual lawyers, all going to the bar.
Second, transactions relating to the funds are immediately traceable, and so they believe that money laundering and other lawyer-related financial crime become impossible, or nearly so. And, third, although there are rules for paying interest to clients in exceptional cases relating to length of time or size of deposit, the usual rule is that the interest remains with CARPA. The interest payments accrued to CARPA in this way are sizeable, and, once CARPA’s own expenses have been paid, they go towards public interest activities undertaken by the bars (such as the Paris Bar’s Solidarity Bus, which travels around Paris giving free legal advice to citizens).
Are you convinced yet? Well, the French government is so convinced of the respectability of the system that they gave responsibility for payment of all legal aid funds to the CARPAs as well in 1991.
There are two things in play here, which do not need to go hand in hand. First, the bar controls all client money, taking it out of the control of individual lawyers. It is a disciplinary offence for a lawyer not to hand over clients’ money to the CARPA system. And second, the interest payments by and large go to the bar. It seems to me that you could have the first without having the second.
Would it work here? I am throwing it into the ring as something to think about, but I know that it has been considered before, and been rejected. Here are some of the possible reasons for rejection.
First, France has a fragmented system of local bars – over 180 of them, more than there are French cheeses. Well over half of them have fewer than 100 lawyers. Apart from the Paris Bar and maybe a handful of larger cities, the rest are very small, and indeed the total size of the French profession is under half that of ours. That contrasts with the centralised system in England and Wales, where our regulator would have to manage singlehandedly the accounts of over 100,000 solicitors.
Second, the work of French lawyers - avocats - is different to that of solicitors, in that the avocats work in a notarial system where notaries undertake real estate, family and other work which traditionally involves the transfer of large sums of money. Therefore, I assume that the sums passing through solicitors’ accounts are much, much larger, and probably more complex, than those passing through the accounts of avocats. On top of that, although Paris is also a financial centre, the combination of the nature of the City of London and the work of solicitors would make handling the City law firms’ accounts particularly challenging.
But I’m still trying to be positive, and offer it as something to be considered in a week when pockets are smarting from the way that we handle clients’ money. Look across the Channel - there might be another way.
Jonathan Goldsmith is the Secretary General of the Council of Bars and Law Societies of Europe (CCBE), which represents over 700,000 European lawyers through its member bars and law societies.