Where is the evidence that making legal services regulators independent of their representative bodies will boost competition?
If you have not yet read the Treasury’s recent foray into the regulation of the legal profession - A better deal: boosting competition to bring down bills for families and firms - prepare to be treated as a baby.
It reminded me most of Communist Party propaganda from, say, Poland in the 1950s. Only certain keywords were changed to reflect the difference in ideology. So there was no talk about ‘scientific socialism’ or ‘raising the consciousness of the workers’. Instead, ‘competition’ and ‘competitiveness’ were mentioned 88 times, and ‘market’ 100 times.
There was not one mention of the public interest, not one. Oh, I know that we are supposed to think that this has nothing to do with ideology. Rather - as in Poland in the 1950s - it represents the natural order of things and the end of history.
Take this core paragraph for our profession by way of an example: ‘2.11 The government will launch a consultation by spring 2016 on removing barriers to entry for alternative business models in legal services, and on making legal service regulators independent from their representative bodies. This will create a fairer, more balanced regulatory regime for England and Wales that encourages competition, making it easier for businesses such as supermarkets and estate agents among others, to offer legal services like conveyancing, probate and litigation.’
Where is the logical link between the two sentences in that paragraph? In particular, where is the empirical evidence that making legal service regulators independent from their representative bodies will create a ‘fairer, more balanced regulatory regime that encourages competition’, which will open the way to alternative business structures?
I know of two prominent jurisdictions where the regulatory body has been separate from the representative for many decades – Germany and the US. They are different models. In Germany, there is the version our chancellor wants. In the US, the courts by and large regulate lawyers, and there are separate representative bodies. In both of them, ABSs have been considered and rejected (apart from minor local exceptions, which are not spreading).
In the US, the separation of regulatory from representative has not led to greater competition – almost the opposite. Anyone who knows the first thing about legal practice in the US will tell you that the barriers to practice across state boundaries - in the same country - are high and solid, and not likely to come down soon.
As for Germany, it is in the middle of the road so far as legal competition issues are concerned; not at the wild end of market liberalism nor extremely conservative. What is true is that the separation between the regulatory and representative has promoted competition – but between the two bodies themselves.
I know that ‘I told you so’ is not an attractive emotion, but when officials from the Clementi report came to see me in Brussels several years ago and raised the question of separation between the two functions, I warned them of the German example. The recent history of relations between the Law Society and Solicitors Regulation Authority has made me feel like an Old Testament prophet. Yes, competition, but not as you intended.
When I look at the regimes governing the legal profession around the world, the clue as to whether they tend more or less to what our chancellor would call ‘market values’ does not come from a separation between the two functions. Just look at ourselves: the Law Society, the devil incarnate, created the regulatory conditions which made possible the extraordinary expansion of English law firms into foreign markets.
Well before the Legal Services Board was dreamed about, the Law Society - yes, the Law Society, which was both representing and regulating at the same time in those days - was seen as a market maverick abroad, creating the regulatory conditions with which English solicitors conquered the world (sorry for the lapse into imperial language).
Market liberalism, for better or worse, comes from things other than separating the representative from the regulatory. The cultural values which generate it deserve a book, not a brief blog.
When ABSs were first mooted, there was no research undertaken into their impact. We were told to BELIEVE. Similarly, where is the research into the link between the separation of functions and competition? There is none. We are supposed to think the link is an obvious part of nature. I am not expressing an opinion as to whether separation may or may not be a good thing.
But just a brief examination shows that the chancellor’s rationale is unsupported by evidence.
When will lawyers (indeed citizens) be treated a little more seriously than this?
Jonathan Goldsmith is a consultant and former secretary-general at the Council of Bars and Law Societies of Europe, which represents around a million European lawyers through its member bars and law societies. He blogs weekly for the Gazette on European affairs