The year that was - survey of a year in which legal aid reforms and criticisms of the Solicitors Indemnity Fund dominated the political agenda, while rumours of recession began to hit the press

IT WAS A GOOD YEAR FOR .

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-- David Mackie, head of litigation at Allen & Overy, who was the only solicitor to be made a QC this year-- Solicitors Andrew Phillips and Timothy Clement-Jones, who were made life peers-- David Price, who was the first solicitor advocate to appear in the Civil Court of Appeal without a leader-- Sheffield firm Irwin Mitchell, which won legal aid for mediation-- Freshfields, which came top in both a table of legal advisers on UK mergers and acquisitions work compiled by Corporate Money and a table of legal advisers on UK private takeovers in compiled by Acquisitions MonthlyIT WAS A BAD YEAR FOR .

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.-- Wilde Sapte, whose merger with Arthur Andersen-affiliated law firm Garretts failed-- Denton Hall, whose merger with Theodore Goddard and Richards Butler failed -- Women lawyers at Clifford Chance, only one out of 18 new partners was female-- Mishcon de Reya, which attrac ted widespread criticism over the fees which it charged to the Diana Memorial FundTHE BIG MERGERS OF THE YEAR WERE .

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.-- Eversheds and Frere Cholmeley Bischoff-- Arnheim & Co and Tite & Lewis-- Linklaters & Paines and the Alliance of European Lawyers-- Freshfields and Deringer Tessin Herman & SedemundMULTI-DISCIPLINARY PARTNERSHIPSThis was the year when the juggernaut that is fast becoming multi-disciplinary partnerships (MDPs) probably became unstoppable.In October, the Law Society issued a consultation paper on MDPs that had been more than two years in the making, with President Michael Mathews saying he hoped 'a satisfactory way to permit' MDPs could be found.The paper said the fundamental issue was 'whether it remains appropriate for the services of solicitors to be available to the public only through businesses owned, funded and managed by solicitors themselves.

If not, what other business organisations can provide appropriate safeguards to maintain the independence and integrity of legal advice'?.The Society is coming to this issue with the benefit of having watched many other countries struggle with it, especially in Europe, although the accountants are also making major moves in Australia and New Zealand.

In fact, the French Bar threw in the towel in July, passing a resolution approving MDPs as long as the lawyers involved in them swore an oath that they were properly independent from the accounting arm.Rather closer to home, in June the merger between City firm Wilde Sapte and Garretts, the practice associated with Big Five accountants Arthur Andersen, broke down, supposedly over the departure of two key Wilde Sapte partners.In September, the International Bar Association finally approved its policy on MDPs.

It passed a motion effectively approving them so long as the questions of independence, client confidentiality and conflicts of interest were tackled.

A similar motion from the Council of Bars and Law Societies of Europe, drafted this year and likely to be approved in 1999, will specify these three issues as the reasons MDPs should not be favoured.But perhaps the main signal that MDPs are now centre stage came in August, when the American Bar Association (ABA) - which has ignored the issue for years - set up a commission to review its MDPs ban.

The last year has seen opposition to MDPs begin to drain away, replaced by a grudging acceptance of MDPs with conditions to protect the unique qualities of the legal profession.

The next year, when both the Law Society and the ABA make up their minds, should start a new era in the practice of law.PROPERTY SELLINGNew property selling rules were approved in December 1997, but when it came to taking advantage of them, for most of the following year there was more talk than action.In January, a report by consultants BDO Stoy Hayward commissioned by the Law Society said there were opportunities for solicitors in property selling, but estimated that 2,300 law firms would have to get involved for them to gain a significant share of the market.In April, it emerged that the planned London Solicitors Property Shop, to be set up by the successful Edinburgh Solicitors Property Centre (ESPC), had failed to sign up the 350 firms it wanted in London and the south east.

The plans were put on hold, although ESPC reached agreement with the London Evening Standard to distribute its weekly newspaper of properties for sale.Instead, solicitors in Newcastle took the lead, again with ESPC help, and in October the newly-established Newcastle Solicitors Property Shop ( NSPS) published its first weekly HomePages newspaper for distribution throughout the region.

The exact number of firms which have signed up is still unknown, but it is more than 60.

Firms had to pay up to £18,000 in start-up costs depending on their size.The next step for NSPS - opening a property display centre in central Newcastle - was held up because of planning problems.

It should open in January 1999.

Early signs from the NSPS are encouraging and could lead to more centres opening in other cities next year.The other main commercial organisation looking to promote solicitor property selling, Solicitors Property Centres (SPC), has been hit during the last year by delay, staff departures and various unsubstantiated rumours.

However, an announcement of the location of first SPC centre is expected shortly.The government review of the home transfer process, unveiled this month, was also seen as giving solicitor property selling a boost.

Solicitors were found to be the most highly regarded professionals in the process.LIMITED LIABILITY PARTNERSHIPSA draft Bill for limited liability partnerships (LLPs) was published in September and was immediately given a warm welcome from City law firms and the Law Society.Both worked closely with the Department of Trade and Industry to ensure that partnerships retained their tax status, and that individual partners would not be held to strict financial guarantees on fixed liabilities.

However, several firms, according to DTI research, were still worried that publication of their accounts would give non-LLP law firms an unfair competitive advantage.

There were also 'clawback' provisions to protect creditors from partners making withdrawals from the partnership profits just before it became bankrupt.

While LLPs were not introduced in the October Queen's speech, the Law Society is still confident that they will be part of the parliamentary programme.FINANCIAL SERVICES AUTHORITYOne proposed piece of legislation that did make the cut was the much-heralded Financial Services and Markets Bill.

It would create the Financial Services Authority (FSA) which will authorise law firms carrying out non-incidental investment business.

However, a number of questions still remained unanswered.

For example, it was not clear what role the Law Society's monitoring unit would retain in scrutinising firms with investment business practices.

And as yet there were no final figures on the number of firms that would be authorised by the super-regulator.

Clifford Chance was one of a number of firms expressing concern over the investigatory powers of the FSA and the structure of the FSA's disciplinary tribunal.INTERNATIONALGlobalisation has been the key word in 1997, with the major City law firms strenuously pursuing strategies to make themselves truly global.This has meant looking to bring foreign law expertise within their own control and structures, rather than through alliances or networks with foreign law firms.

When the German Punder group broke up in September, it said that 'the era of alliances is over'.

Allen & Overy hopes that within five years, half of all its lawyers will be foreign qualified.Europe, because of the single market, has initially been the main arena for merger activity.

After months of rumours, Linklaters brought in the Swedish, German, Dutch and Belgian members of the Alliance of European Lawyers, to form Linklaters & Alliance.

More members from France, Spain and Italy are likely to follow.In January, Freshfields formed a strategic alliance with German firm Deringer Tessin He rrmann & Sedemund with a view to eventual merger, and added an Austrian firm to the arrangement recently.

Rather than merge, Clifford Chance responded by saying it would double the number of lawyers it had in Europe to 1,000 within two years.International activity is likely to grow during the next year, although recent global economic problems have led some to wonder whether Slaughter and May's strategy of concentrating in London with a few established overseas offices in main financial centres might in the long run be wiser than many had thought.Hand in hand with these moves has been continued attempts by the Law Society to open foreign markets which have been resistant to foreign lawyers to varying degrees.

And the International Bar Association passed a resolution in September to facilitate cross-border legal practice.TAXThe year opened with panic reaching the high street amid fears that firms would be hit by a one-off charge of 20% extra tax.

Government plans to withdraw the special 'cash basis' practices available for professional firms to calculate their tax would have entailed a one-off charge to bring firms in line with the way companies are taxed.The Law Society moved on to the offensive, responding to the Inland Revenue's consultation on the subject with a statement that small high-street practices should be exempt from the proposed changes.

But nevertheless the changes were included in the March Budget.

However, the government made some key concessions that saved firms from the potentially ruinous windfall tax.

The Chancellor of the Exchequer, Gordon Brown, delayed implementation of the changes until the 1999/2000 tax year, and he gave firms ten years to pay the catch-up charge rather than the three years originally promised.MEDIATIONThe year opened unfavourably for mediation.

There were rumours that the Lord Chancellor's Department was ready to scrap the mediation provisions of the Family Law Act 1996 because the divorce mediation pilot - under the auspices of the Legal Aid Board (LAB) - had shown mediation to be unviable, and in May that the family mediation pilots were failing solicitors as many cases which the firms saw had no hope of reaching mediated settlements.

But in a landmark decision in October, the LAB extended all non-family civil legal aid certificates to include mediation.

The ruling, which took effect immediately, authorised the LAB to pay solicitors acting for legally-aided clients who chose to settle their disputes through mediation rather than litigation.SOLICITORS INDEMNITY FUNDThis year has seen the Law Society Council gradually shift towards a more open attitude regarding the option of solicitors purchasing indemnity insurance on the open market.

Under intense pressure from the lobbying groups which have been springing up in all sectors of the profession, the Law Society responded in September by taking the landmark step of commissioning research into ending compulsory membership of the Solicitors Indemnity Fund (SIF).THE SIF DIARIES-- January: The Law Society's indemnity insurance review group recommends a hybrid mutual fund which would split the SIF into a series of smaller funds covering specific practice areas.-- February: A report compiled by insurance broker Nelson Hurst & Mars claimed commercial firms could have saved up to 67% in premiums during 1997 by purchasing indemnity insurance on the open market.-- March: SIF chairman Peter Williamson presented a scheme to the Council which would allow firms to pay off the SIF shortfall projected at £465 million through a syste m of bank loans.-- June: The Law Society's Council voted in favour of introducing risk banding to the SIF.-- July: The Council voted to buy re-insurance for the SIF costing £5 million, triggering a 2% increase in SIF contributions for firms.-- August: Results from a Law Society consultation showed that more than two thirds of solicitors favoured retaining a mutual fund.-- September: A group of mainly small law firms which favoured obtaining indemnity insurance on the open market - the Millennium Law Group - was set up.

The Law Society's Council voted in favour of continuing to provide indemnity insurance through a mutual scheme, but also commissioned a report on the possibility of allowing firms to opt out.-- October: There was talk of judicial review of the SIF from the November Group of City law firms opposed to the SIF's monopoly, the Solicitors Property Group and an individual solicitor.-- November: The Millennium Law Group said it hoped to bring a special general meeting of the Law Society to force the indemnity issue.LAW SOCIETYIn a low-key Law Society elections contest in July, City solicitor and former Vice-President, Michael Mathews, beat high-street personal injury specialist, Michael Napier.

For many commentators, the most striking aspect of the election was the low turn-out - only around a quarter of the profession bothered to vote.The Deputy Vice-President and west London high-street solicitor, Robert Sayer, was elected Vice-President for the second time.

Equal Opportunities Commission chairwoman and commerce and industry council member, Kamlesh Bahl, won support from both camps when she became the first member of an ethnic minority and the first women to occupy a top Society office, that of Deputy Vice-President.In September, Mr Mathews reminded the profession he was elected on a reform platform, and announced 'sweeping' changes to the Society following Sir Dennis Stevenson's (chairman of Pearson plc) wide-ranging and critical review.Two major initiatives were proposed - a cull of the 160 existing Law Society committees and a more assertive role for Chancery Lane in promoting the profession.SOLICITOR ADVOCATESThe year ended triumphantly for solicitor-advocates when the government confirmed in the Queen's Speech its intention to extend higher rights of audience to nearly all lawyers.

The Access to Justice Bill, published this month, proposes extending advocacy rights to all solicitors, with the exception of state-funded Crown Court advocacy.This year, the pace of the battle for rights of audience quickened when Geoff Hoon, then parliamentary secretary at the Lord Chancellor's Department and now minister for state, announced that the government was unhappy with the 'complex, bureaucratic and slow procedures' under the Act and promised to reform it.The Lord Chancellor's relish for the task of reform brought him into a head-on collision with most of the profession in October when 98 High Court judges and 36 Court of Appeal judges joined the Law Society and the Bar Council to oppose his proposal personally to rule on rights of audience, as opposed to the four designated judges who currently have the veto.Meanwhile, Tony Loader, partner at Sussex firm McGivern Loader, became what is thought to be the first solicitor-advocate to act as lead advocate in a murder trial in October.

Meanwhile, the Court of Appeal ruled in June that it was in the public interest for solicitor-advocates to have the same rights as barristers to conduct litigation.

The ruling concerned London-based solicitor David Price - the first solicitor advocate to appear before the civil Court of Appeal without a leader - who was representing journalist John McVicar in the Linford Christie libel action.WOOLF REFORMSWith the countdown to the April implementation of the Woolf reforms moving into its final phase, a timely warning was issued from the Lord Chancellor's Department (LCD) to practitioners that judges were already 'sharpening their knives' last month.David Gladwell, head of the civil justice department at the LCD, told lawyers that the start date for the new civil procedure rules - 26 April 1999 - would see the profession moving to a position where the judges would be 'centre stage', and they were already preparing to exercise new powers with 'firmness'.When the draft rules were published in July, the Law Society voiced concerns from the profession that the deadline was 'too tight', and called on the government to delay.

By November, opening night nerves were much in evidence.

Lord Justice Scott, vice-chancellor and head of civil justice, told an audience of personal injury lawyers that the deadline was 'too soon', and that there was 'something approaching panic' from some quarters.

Indeed, he said existing rules would be continuing in two areas, appeals and execution, because the rules committee was not ready.Meanwhile, the president of the Association of Personal Injury Lawyers (APIL), Ian Walker, told delegates at the same conference that there were 'enormous gaps' in the rules.

Also the new era of co-operation between plaintiff and defendant personal injury lawyers, as foreshadowed in the October APIL/Forum of Insurance Lawyers conference, seemed in the balance.

Mr Walker said he did not believe 'for a minute' that the insurance industry would be able to meet time limits imposed under the new regime.

If insurers were not prepared to embrace the new rules, he threatened, plaintiff lawyers would do 'all that was necessary' to protect client interests, even if that meant returning to 'trench warfare'.CROWN PROSECUTION SERVICECrown Prosecution Service (CPS) historians will mark 1998 as a watershed in the organisation's 12-year existence.

In late May 1998 the sitting DPP, Dame Barbara Mills QC, resigned, saying that the re-organisation of the CPS would involve changes that went 'well beyond' the expiry of her contract in April 1999.On 1 June 1998, the long-awaited Report by retired Appeal Court judge Sir Iain Glidewell was published.

It made 75 proposals, including the appointment of a chief executive to relieve the DPP of the bulk of managerial and administrative work.The new chief executive, civil servant Mark Addison, was appointed immediately.

A new DPP took longer to recruit.

In October, senior prosecuting barrister David Calvert-Smith QC was named, to begin work the following month.Relations between CPS lawyers and managers - which had been strained during much of the Mills era - began to improve in 1998, despite an ongoing dispute regarding pay and conditions for lawyers taking part in the Narey criminal justice pilot.THE BIG ISSUE: LEGAL AIDLegal aid solicitors will view 1998 as a defining year in the history of publicly-funded practice.

It was the year in which the Lord Chancellor's plans fundamentally to reform legal aid took shape, culminating in a legislative blueprint for a fully contracted system that would involve fewer than a third of the existing number of private practitioners.At the beginning of 1998, the profession was still reeling from the uncompromising stance taken by the Lord Chancellor, Lord Irvine, in his speech to the solicitors' annual conference in Cardiff three months earlier.

Then, he announced his support for exclusive contracting for civil and criminal legal aid.

Conditional fee agreements (CFAs) would be extended to all civil cases and replace legal aid in money and damages cases by April 1998, he said.The Law Society and legal aid practitioners began to campaign vigorously against the proposals, promoting an alternative conditional legal aid fund (CLAF) and presenting evidence that legal aid was not 'spiralling out of control' as the government claimed.

The Society produced a 'lobby kit' to help practitioners spread the message.In January, it emerged that the Legal Aid Board (LAB) had been invited to devise a plan to implement exclusive contracting for civil advice and assistance by the end of 1999.

Lord Chancellor's Department (LCD) minister Geoff Hoon announced that legal aid reform legislation would not be put before Parliament until the 'early summer'.In February, the Criminal Law Practitioners Association announced it would campaign against contracting on the grounds that professional independence would be threatened.

Meanwhile, the Society commissioned an academic study into the effects of the legal aid reforms.

In mid-February, the government revealed it was rethinking.

Legal aid would be retained for medical negligence cases and Lord Irvine's proposal for a 75% merits threshold would be abandoned.

A fund would be created to finance public interest cases.

At the end of the month, the government postponed publication of its legal aid consultation paper at the last minute, because of a 'traffic jam' of policy announcements.The LCD's consultation paper, Access to Justice with Conditional Fees, arrived at the beginning of March.

According to the paper, CFAs would be extended and legal aid would be withdrawn from most PI cases in the summer, while a modernisation of justice bill in the autumn would remove legal aid from other areas of civil work over a three-year period.

A transitional fund would work alongside CFAs in 'exceptional cases' that were no longer covered by legal aid and success fees might be made recoverable from losing parties.

Meanwhile, legal aid for medical negligence would stay.

The Law Society's CLAF proposals were rejected.

The Association of Personal Injury Lawyers described the reform plans as 'horrific'.Soon afterwards, the Law Society advised law firms that there was insufficient incentive to participate in the LAB's criminal contracting pilot.

The LAB said 67 firms had registered an interest in joining.

Soon after, a 'steering group' of pilot firms said they would not sign up to the pilot by the 15 May deadline because the contract terms were unsatisfactory.In April, the LAB published its green form contracting proposals, covering advice work worth £130 million.

It was the first announcement that regional legal services committees would be set up to examine local demand for legal services.

Indicating the scale of the change, the LAB said it planned to let only 2,000 to 3,000 contracts for family work, and 100 to 200 for non-family work.At the end of April, to coincide with a legal aid conference it was holding, the Society published its response to the LCD's March consultation paper.

It reiterated the opposition of solicitors to the removal of PI from the scope of legal aid and their concerns regarding the extension of CFAs.

The Legal Aid Practitioners Group and the Legal Action Group expressed similar concerns.

The Society also published its research into CFAs, which concluded th ey were deficient in all but the simplest personal injury (PI) cases.In mid-May, solicitors were angered by an LCD announcement that there would be no increase in legal aid pay rates for the second year running.

A fortnight later, the LAB said legally-aided medical negligence work would be confined to solicitors' firms with specialist franchises, possibly from January 1999.

The LAB estimated the move could save £57 million in 1999-2000.In June, the Society responded to the LAB's contracting proposals.

Then-President Phillip Sycamore said the proposed scheme could remove legal access from 'many of the poorest and most vulnerable in society'.

A week later, criminal legal aid lawyers were furious when it emerged that the Lord Chancellor would ask the LAB to devise plans for criminal contracting before the contract pilot - which began that month - had yielded results.At the beginning of July, Lord Irvine announced that CFAs would be extended by secondary legislation and that there would be a white paper on legal aid later in the year.

The following week, solicitors welcomed an announcement that the LCD's legal aid budget would not be cut in real terms until 2000-2001.

Later in July, it emerged that the cost of legal aid had fallen in real terms in the previous year, while legally aided acts of assistance had risen.

The Lord Chancellor confirmed that legal aid would not be removed from PI cases at least until October 1999.

At the same time, he placed before Parliament regulations to extend CFAs to all civil non-family cases.In August, family law specialists complained that delays in obtaining legal aid under the LAB's family mediation were causing serious injustices to clients.

The LAB said it would introduce a modification to the pilot to ease the problem.In September, the LAB published its revised franchise specification, the first revision since 1995.

It tightened up supervision and file review conditions, and required firms to submit business plans and budget forecasts.

Soon afterwards, the LAB announced a 31 December 1998 deadline for firms to apply for a franchise in order to qualify for green form contracts starting in January 2000.

The Law Society said the timetable was 'far too tight'.

In late September, the Society altered its policy of neutrality on franchising and urged solicitors to apply immediately.In October, the Lord Chancellor announced that only firms with green form contracts would be able to do certificated family work.

He also guaranteed contracts only to firms with franchises in family, immigration and mental health work.

At least £20 million would be reserved to help advice centres obtain contracts.

A week later, the LAB extended all non-family civil legal aid certificates to include mediation.In a flurry of activity in early November, Lord Irvine announced plans for a community legal service, based on the existing network of solicitors, advice and not-for-profit agencies, and rejected a national salaried legal service.

A 'kitemark' scheme would set national standards for suppliers.

Meanwhile, the LAB announced it expected to award 170 medical - now known as clinical - negligence franchises initially, which would be made exclusive from February 1999.

It also created a generic franchise category for work not covered by the existing 11 categories.In the second week of November, the LAB unveiled the terms under which green form contracts would be awarded.

The Law Society complained the LAB had retained massive discretion to alter the contract terms.In the same week, it emerged at a meeting of more t han 200 ethnic minority solicitors to discuss the 31 December 1998 franchise application deadline, that just two of those present already had franchises and only 20 had applied.

Soon after, giving evidence before the House of Commons home affairs committee, Lord Irvine said all certificated legal aid would be brought under contract by April 2001, criminal green form work by the end of 2000, and all criminal defence services by 2003.At the end of November, the Queen's speech revealed that an Access to Justice Bill would create a Legal Services Commission to replace the Legal Aid Board.

The commission would oversee a Criminal Defence Service that would administer criminal legal aid contracts with solicitors and 'specialist' advocates in complex criminal cases in the higher courts.

It would also oversee a community legal service, comprising solicitors and the advice and not-for-profit sector.

The merits test would be replaced by a flexible 'funding assessment', which would first consider whether CFAs or mediation were appropriate in lieu of legal aid.

Controversially, powers would be awarded to the Criminal Defence Service to set up public defender schemes in areas where there were too few franchised solicitors' firms.

The move was roundly condemned by the Bar Council.In the first week of December, a white paper, Modernising Justice, set out the government's blueprint for legal aid.

Immediately afterwards, the Access to Justice Bill was published.

Contrary to earlier rumours, the Bill would exclude all non-clinical negligence PI cases from the scope of legal aid, although ministers would have powers to alter scope without primary legislation.

Also, in a move widely criticised by family law practitioners, CFAs would be extended to cover matrimonial property disputes.

But in a concession the following week, the Lord Chancellor revealed that the 31 December 1998 deadline for franchise applications would be extended to 31 March 1999.LEGAL AID TIMETABLE-- 31 January 1999: deadline for solicitors to apply to join contract bid panel, essential to qualify for civil green form contracts in first year.-- February 1999: regional legal services committees to publish local legal aid spending strategies.-- 31 March 1999: revised deadline for applications for franchise in order to qualify for civil green form contract in first year (2000-2001).-- May 1999: invitations to apply for civil green form contracts to be issued.-- 30 July 1999: deadline for applications from solicitors for civil green form contracts in year one.-- 1 August 1999: revised deadline for passing franchise preliminary audit.-- September 1999: LAB to complete civil green form contracts with suppliers.-- January 2000: civil green form and certificated family work contracts to begin.-- By end of 2000: criminal green form contracts to begin.-- April 2001: all certificated civil legal aid to be brought under contract.-- By 2003: all criminal defence services, including advocacy, to be brought under contract.LEGAL AID PROJECTSClinical negligence under exclusive franchise contracts-- From 31 January 1999: clinical negligence franchise contracts to be awarded.-- Until 31 July 1999: personal injury franchise holders will be able to do clinical negligence work.-- From 31 July 1999: all new work will be done exclusively by clinical negligence franchise holders.Revised franchise specification-- 1 January 1999: Revised specification to be introduced, including tougher file review and budget forecast conditions, to run alongside existing specification.- - 31 July 1999: Existing franchises will expire, new three-year contracts to be signed.Multi-party actions panel-- 31 January 1999: Statutory instruments for first time to introduce price tendering for MPA legal aid contracts.-- February 1999: panel to be established.

Panel members to be preferred for MPA work under contract.

'The great majority' of new group actions will be managed under contract.