I start with a small matter, which is symptomatic of a larger one.
The report published last week by the House of Lords Select Committee on the Constitution, titled The rule of law: holding the line against tyranny and anarchy, noted that ‘public trust in the ethical conduct of lawyers has undoubtedly been shaken in recent years by instances of poor conduct’ and recommended that: ‘The ethical training of lawyers should be reviewed and strengthened by the relevant professional bodies. Lawyers should receive dedicated ethical training throughout their career.’
There were extensive footnotes to its findings, but I noted that not once did the lords consider how such matters are handled abroad, nor look at the history of solicitors’ legal education. That might have given them a clue as to why the ethical training of lawyers might need strengthening.
Solicitors in England and Wales operate among a handful of European countries not to have specific rules on how continuing professional development (CPD) should be undertaken. Moreover, the Solicitors Regulation Authority is unique in Europe in having had specific rules for CPD in the past and having thrown them away in the name of so-called better, outcomes-based regulation. Could this have had some impact on the lack of training on ethics, or did the lack just fall from the sky?
I mention the SRA – and indeed would include its former cheerleader-in-chief, the Legal Services Board (LSB) – because I have a question as to whether our current regulatory settlement can, or at any rate should, survive for much longer.
As the dust settles on the recent LSB reports into the SRA’s handling of Axiom Ince and SSB Group Ltd, it becomes apparent that the SRA has let the genie out of the bottle in terms of the regulatory structure it has created. Its removal of specific rules and structure for CPD is only a small part of the problem, and we see the genie now causing mayhem everywhere.
The Axiom Ince failure raised, among other things, the problem of accumulator law firms. The LSB now wants the SRA to improve its identification of risks arising from the corporate structure of law firms, and in particular from sales, mergers and acquisitions. When, for instance, must a firm notify the SRA of an activity that will significantly change its profile, including because of a sale, merger or acquisition? Given the size and complexity of the market, and the variable transactions that can take place, is the SRA ever going to be in a position to judge such things at all, and certainly without unreasonable cost falling on the profession?
SSB’s problems, on the other hand, arose from the handling of high-volume consumer claims. These can be found in a wide range of areas: housing disrepair, data breaches, flight delays, diesel car emissions, motor finance commission, and other financial services. The SRA has concluded that many firms are failing in their duty to protect and promote clients’ best interests when pursuing these claims, and currently has 76 open investigations relating to 61 firms. Between them these firms are handling hundreds of thousands of claims. It has also written to more than seven hundred (700!) other firms asking them to complete a mandatory declaration of compliance, the results of which will be studied and acted on by its investigation teams.
The SRA has been consulting on How Can the High-Volume Consumer Claims Market Work Better for Consumers?. How indeed? Is the SRA in a position to look at things like profit-to-debtors/work-in-progress ratios, equity capital versus loan exposure, and overall profitability in such a high number of firms – or, even more, is it able to do so without the cost being an unreasonable burden on the legal profession?
Now that we can reflect more deeply after the recent LSB reports, the picture emerges of a regulator, along with its super-regulator cheerleader, which have allowed a legal services market to develop which they can no longer control. They are running after developments, trying to clear them up. Will accumulator law firms and high-volume consumer claims be the end of it?
I well remember the dialogues at the time of the Clementi report and the passage of the Legal Services Act 2007, when the UK supporters of the new ultra-liberal settlement brought in by the Blair government sneered at the conservative nature of legal professional regulation on the European continent: stuck in the past they were, unable to adapt to the modern world.
There are clear dangers in reopening the current legal regulatory settlement. For a start, we might end up with something worse.
But without a radical restructuring, the genie will never be put back in the bottle, and we might be facing a future of repeated Axiom Inces and SSB Groups. The Sorcerer’s Apprentice comes to mind, where the apprentice floods the premises because he has unleashed magic he does not understand.
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