Tuesday, January 30, 2007

Justice and Tesco Law

About this time last year, I started blogging about Tesco Law and what its implications for the legal profession would be. An anonymous commentator (AC) today raised some good questions on this score that I will try to answer. AC said

1. How do you explain the concept of justice to outside investors in Alternative Business Structures who are accountable to their shareholders for the profit they are making/not making. I realize that law firms are run for profit but a great many run in areas which produce very tight profits indeed which presumably outside investors would not be looking to support. Where will this leave legal aid for example when high street solicitors are forced to close? Will supermarkets take on this role?
2. If the outside investor invests in those areas where margins are tight, how will they make money? Cut overheads? What are the overheads? Largely qualified staff. Will this lead to more advice from unqualified staff? Is this in the consumer interest?
3.If this is such a great idea why are we the only country to consider this capitalist investment in the legal sector approach?
4. Will firms in other countries be willing to trust such a legal system? Will there own legal systems allow them to deal with us? International experts think not.

AC's points zero in to some of the major concerns about Tesco Law. But let's clear the air. The reason the government is pushing these reforms/deregulation is because of consumer interest. This lies at the heart of the matter. There have been too many complaints against lawyers, which the professions--solicitors and barristers--have not resolved quickly enough. The result is a huge backlog of complaints for which the legal ombudsman chides the professions each year. Each year the Law Society and Bar Council say their mea culpas and promise to do better, but don't.

Because any professional-client relationship is perceived to be asymmetrical, the power balance is considered to be in favour of the lawyer at the expense of the client. Students of the professions will know better. (The classic text, Terence Johnson, Professions and Power, Macmillan, 1972, shows how professional-client relationships really work.) Yet it's not the reality that counts here but rather perceptions. If then professionals are not to be trusted in their dealings with clients, it is only a small step to not trusting them in other areas as well. And legal aid is one crucial area where they've lost the trust of government who are refusing to fund over £2 billion of legal work a year when money on the NHS garners more votes than does legal aid.

For lawyers this means the loss of self-regulation and a move to external regulation. At which point it becomes harder to justify the range of "normal" professional privileges. And so the step is taken to deregulating the organization of the legal profession, moving from partnerships and enforced solo practice to any kind of business structure.

The simple answer to most of AC's questions is "yes". Legal aid will remain for certain areas of criminal law, children, and some immigration work. Elsewhere it will disappear. Supermarkets won't take over most of this work because they will want more standardized types of work, eg. leases, wills, contracts. The types of work one can place into routinized "diagnostic related groups", as the medical field calls them.

Any investor will cut overheads to increase profits. We can guess how that might happen: see my last post, "Psst, Wanna Buy a Law Firm?" Law firms are already committed to using more paralegals, in both individual and corporate spheres, and boosting that with the more sophisticated uses of technology, especially where this is linked to outsourcing. Remember the cost of common law trained lawyers in India is 10% of the UK. (This article in Lawyer.com confirms the outsourcing trend for lawyers.)

Some of AC's questions apply mainly to the corporate sector. Issues of law firms in other countries trusting UK law firms will, I suspect, prove redundant. It depends who the investor is, but remember the largest law firm for a long time in mainland Europe was FIDAL, wholly owned by KPMG.

And whereas regulators and bar associations in other countries are going to complain mightily about what is happening here, they will eventually join in. The competitive stakes are too high to stay outside. If you need an example, read McKinsey's report on the state of New York City as a financial centre. Parlous is the appropriate descriptor and London is basking in its new found glory.

Finally, AC's most telling point: the concept of justice. Now there is a difficulty. I don't know how that will be maintained in the brave new world of Tesco law, alternative business structures, and consumer interest. I think it will suffer the fate of justice versus legal rationality in early law school. We start with high ideals but then the lure of the City calls and the Sirens always seem so attractive...

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