Lord Carter's proposals for very high-cost cases, wich inclue the introduction of a controversial bidding process, could lead to the closure of some firms, as Jon Robins discovers


Unsurprisingly high on the list of Lord Carter’s targets for reform of legal aid is bringing under control the notorious 1% of cases that swallow up almost 50% of the Crown Court budget.



As the government’s favourite trouble-shooter spent a year considering the lamentable economics of legal aid, he had some vivid illustrations of the huge expense of big cases going off the rails. Notably, Revenue & Customs’ botched prosecution of a gang alleged to have swindled £107 million in a VAT scam involving imported mobile phones cost taxpayers £65 million, while the abortive Jubilee Line trial cost another £60 million.



However, the proposed implementation of the Carter proposals on very high-cost cases (VHCCs), as interpreted by the Legal Services Commission (LSC), is proving controversial even in the context of the increasingly fraught relationship between criminal defence lawyers and the commission. Last month, the Law Society threatened a judicial review of its proposals for VHCCs (defined as trials whose estimated length is more than 40 days). Chancery Lane is seeking a withdrawal of plans to establish a best-value panel of providers unless further consultation is carried out and, in particular, a race equality impact assessment is carried out.



The main focus of the review might be on the LSC’s apparent failure to consider the impact of the measures on ethnic minority firms but Law Society Vice-President Andrew Holroyd argues there are ‘very many issues that the Society is unhappy about’.



He explains: ‘We need to have effective mechanisms to ensure money isn’t wasted on cases and where money has been wasted it has often been due in some circumstances to poor judicial management, for example a prosecutor taking too many issues forward, trying to argue issues that may not have been in dispute or failing to get down to the real issues, such as what the dishonesty is. There is lots of work to be done there.’



The Lord Chancellor, Lord Falconer, last week announced a series of other measures, including powers to replace lawyers where they are causing delay in VHCCs. The proposals would enable a judge to refer cases to the LSC, which could ask a defendant to find another lawyer.



The criminal defence profession is already reeling from the pace of changes being imposed by government and feels that the plans for VHCCs could be the final straw for many firms. The Law Society’s letter before action flags up the report by consultant Andrew Otterburn, which described the financial position of many practices as ‘highly fragile’ – a fact of which many solicitors do not need reminding.



‘They are going to change completely the structure of firms which rely on these cases to support the loss-leading work of criminal law,’ reckons Ian Kelcey, chairman of the Criminal Law Solicitors Association. ‘The LSC at the moment is like a hunter trying to find a weapon in the hope that, when it finds it, it can aim without even being sure what the target is. The way the LSC has gone about the consultation is entirely wrong and thoroughly disruptive.’ The Society complains that the LSC consultation was shortened from the usual 12 weeks to six, and that vital information (for example, concerning rates) was only provided at the last minute.



What would it mean for the average criminal defence firm not to make it on to the VHCC panel? Mr Kelcey, who practises in Bristol, replies: ‘For a firm like ours, not to get on the panel would mean that we would find criminal legal aid unsustainable.’



Robert Brown, executive officer of the London Criminal Court Solicitors Association and a partner at the white-collar crime specialists Corker Binning, points out that the LSC reckons that the average cost of a VHCC per year to a firm is £60,000. ‘The LSC might say that’s not very much money, but for some firms it can be the difference between life and death,’ he says.



David Keegan heads up of the LSC’s complex crime unit of 45 staff, which was set up in 2001 to introduce a regime of contracting and case-planning for Crown Court cases likely to run longer than 41 days, equating to 0.25% of cases and 20% of the Crown Court budget. He reckons that there about 100 of these cases every year. ‘We have worked with about 400 firms since 2001, out of 3,000 criminal contracted firms,’ he says. ‘It tends to be a hardcore of firms which do the work, costing us about £100 million a year.’ He reckons the unit has already saved the legal aid budget around £40 million. As for any potential discrimination against ethnic minority firms, he makes the point that such firms have a greater than average representation in terms of the firms he deals with.



Mr Keegan reckons that ‘the vast majority’ of what the LSC consulted on was ‘designed by Carter’. However, the Law Society takes issue with that and argues that the LSC has departed from the original recommendations in a number of significant ways. Carter recommended a two-stage process, with the complex crime unit issuing a detailed expression-of-interest document months ahead of the tender. The bidding process, as envisaged by Carter, entailed the LSC offering a start price and, if supply exceeded demand, reducing price and re-tendering until capacity offered matched capacity required. Carter also wanted prospective panel members to be quality tested, as he acknowledged that VHCCs were dealt with by practitioners who demonstrated a high level of specialist knowledge. The Department for Constitutional Affairs (as was) and LSC mainly accepted Carter’s proposals, and the commission published its own consultation paper in February 2007, with its tight six-week deadline.



The Law Society argues that the LSC has abandoned the two-stage process in favour of a one-stage bid (with no expression-of-interest document); stipulated the bid be at three ‘prices’ (the LSC proposes three hourly rates at £155, £150 and £145 against which firms bid); and has conducted quality assessment on the basis of results of peer review of general criminal work (which excludes VHCCs).



Defence lawyers observe that ironically the competition for a key plank of Lord Carter market-based reforms has been rigged by the commission fixing the prices. The LSC originally did not publish any bid price but did so only after defence lawyers pushed for more information, and then published the proposed hourly rates less than two weeks before the consultation deadline.



‘The whole thing is a sham – to announce a competition and then to limit prices in the way that they have,’ comments Mr Brown. ‘It’s not a proper price competition because you’re given three options. A number of economists have said to me that everyone will just bid for the lowest price and the whole process becomes a way of managing rates down.’



Ian Kelcey describes the bid criteria as ‘almost Kafka-esque’. ‘The big issue for me is that they haven’t allowed the market to find its own rates. Firms are between a glass wall and a glass ceiling with little room in between. If they really want to move to a market-based reform, as Carter has suggested, then they should let the market find a rate and, if they did that, they may well find out that they’re in for a shock.’



Mr Keegan says the LSC was mindful of Lord Carter’s concerns that it should be wary of firms coming with ‘uneconomic low bids’. ‘We are actively trying to avoid extreme bids. We don’t want to destabilise the market,’ he explains.



Price is only one issue, argues Andrew Keogh, a partner at one of the largest criminal law firms, Tuckers. When tendering for work, bidders are usually given an indication as to minimum volume levels, he points out.



‘The question of volume is also absolutely critical,’ he says. Firms have no idea how big the panel is going to be, which he contends would have a direct impact on how firms would bid. ‘If it was a panel of ten firms, then you could probably reduce the price to a lot lower than what they’re suggesting, but if it’s a panel of 200, which I think it is probably likely to be, then we’re just getting a price cut anyway [through the imposed hourly rates], which seems to be a very consistent feature of the Carter reforms.’



Mr Keegan assures the profession that ‘it is going to be a large number’ on the panel. ‘We aren’t talking about 50 firms here. We are talking about hundreds.’ He reckons some 300 firms have already been peer reviewed and the vast majority have achieved the standard. ‘We reckon between 300 and 400 firms are going to bid,’ he adds.



Mr Keogh believes the terms of the VHCC contract itself have been overlooked. These, he says, ‘probably represent the most fundamental shift in a relationship between independent practitioners and the sole purchaser of legal services.’ He reckons that the contract is phrased in such a way that the LSC is effectively ‘buying in huge consultancy services’ from panel members as well as expecting open-ended and one-sided commitments to work with the LSC to improve the system.



‘Of course, we share objectives in terms of bringing about an efficient criminal justice system but the LSC wants it both ways,’ he says. ‘If they want a genuine marketplace, they must expect people to behave in a competitive way and what they’re proposing amounts to an abuse of a monopoly position.’



Jon Robins is a freelance journalist