Monday, July 30, 2007

Law, Society, Berlin and MDPs

Taking a taxi at 4am to catch a plane from Luton is not something I recommend. I can never get to bed early enough to feel awake when I get up. But since I said I would participate in the Graduate Student Workshops at the Law & Society Association meetings in Berlin, I had to arrive in the morning.

Berlin feels so empty compared to London: the only crowded bit was the conference at Humboldt University where 2400 academics clustered in a huddle. Because of my Miami summer school class, I could only come for the last two days. The effect of this was good. Instead of a languorous drift through the conference getting more and more weary, my experience was sharp and intense.

The student workshops were lively and my group forgot we were supposed to take a break. I made up for it by buying them a beer afterwards. My group came from Jordan, Nigeria, Canada, and Argentina--wonderfully cosmopolitan.

I only made it to one legal profession session, but it inspired me to polemicize. Someone gave a paper on MDPs (multidisciplinary practices). It was about the problems lawyers in the US have on working and sharing fees with other professionals. Straightforward and conservative.

I let loose and said this was 20th century thinking and that the real situation was going to be very, very different. After the session I was approached by two of the audience who produce a textbook, Ethical Problems in the Practice of Law. One said:

"I was very struck by your powerful comments about the likely downside of opening up MDPs and of allowing ownership of law firms by business corporations. But I don’t know of any succinct statement of that problem to put in the book. Would you mind giving me a one-paragraph statement of your dire vision of the future of small firms for inclusion in the book? Something that pretty much echoes what you said on Saturday would be perfect. We would quote you and cite your email message as the source."

Here then is that attempt to record succinctly what I said in the session:

The changes that are about to affect the legal profession in England and Wales are the most profound in its history and will be the functional equivalent of the Big Bang in financial services in the mid-1980s. Under the proposed legislation lawyers will be able to practice in any kind of organizational setting, be it partnership, incorporated company, or one that is controlled by external investors, or as an MDP. These changes are driven by two main issues: one is competition (or antitrust) and the other is consumerism. Professions are by their nature monopolistic practices that necessarily produce asymmetrical relationships in favor of the professional. Added to which complaints against lawyers have risen dramatically and the profession has not been seen to deal with them expeditiously. Since MDPs will be permitted, the most likely outcome is not one where lawyers rationally choose to practice with other selected professionals, but rather a more radical one where external investors will see legal services as a natural addition to their portfolios of services. Consider then a supermarket chain offering legal services along with pharmacy and medical services at the checkout—wills, leases, problems with welfare benefits. All of these could be offered. Consider an insurance company deciding to handle all aspects of claims including liability as well as quantum. Many insurance policies offer legal services for motoring and home problems: it could be done by the company’s own unit with lawyers. Consider banks and mortgage companies offering full house sale and purchase services with the legal services thrown in as part of the deal. What place will there be for independent practitioners? Will they be as trustworthy as Wal-Mart? Will their quality assurance procedures be superior to Wal-Marts? Unlikely. Do people like lawyers? Not much, but they won’t mind too much buying legal services in a setting they know on a daily basis at a price that is clearly stated. And what of corporate law firms where already investment banks and private equity funds see law firms as dependable streams of revenue at fairly low risk? Lawyers will take on external investors, but they will be totally unaware of the controls that come with it. One problem with partnerships is that there are too many chiefs and not enough servants. Partnership as an autonomous mode of practice will begin to wither. We already see partners being de-equitized, multi-tiered partnerships being constructed, and private equity will ensure that rational management techniques with a weather eye on costs will make law firms increasingly profitable. But it won’t be the practice of law as we know it now. When the liberation of Big Bang blew through the City of London, the stockbrokers and small investment banks believed they would make lots of money. What they didn’t see was the big US banks coming in behind vacuuming up these small fry into their networks. The small firms disappeared overnight. Lawyers are smart but not about these kinds of events. They are no match for the banks and other entrepreneurs. Only a few elite lawyers and firms will choose their style and mode of practice, the rest will have it done for them. This is a different vision to the one lawyers normally have. And because of the potential repercussions of these changes in the UK, the rest of the world won’t be able to ignore them or defeat them.


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Tuesday, July 17, 2007

Talking About Barristers' Clerks

When I talk about my research on barristers' clerks to other academics, they are curious and interested usually because they have never encountered a group like them before. Today I had a conversation with an academic who is personally affected by them. In addition to lecturing he practises in a set of chambers that actively pursues academics to be members.

This is unusual. Academics who practise at the bar generally do so as "door" tenants, a quaint term for someone who is attached to the chambers but doesn't work in them on a daily basis. Their association is ad hoc. The sporadic member is a difficult person to clerk for as they are not in a position to respond to clients' needs as others can. If you have a seminar or lecture, you can't just abandon it and rush along to the courts because a client wishes it.

The academic I was talking with was concerned to find ways to ensure that academic members would feel part of the chambers, be integrated. He started by asking me what I thought the key attributes of a good clerk were. It's one of those situations where I feel I should have ready-made three-part list up my sleeve to trot out. But I don't so I had to think about it.

Two attributes come to mind. The first is that clerks have to know people, they have to like people and be interested in them. And this has to be genuine not manufactured. Clerks need to know what is going on with their barristers because ultimately they are selling people. Clerks need to know them as individuals so they can track them and counsel them through their careers. They need to know their barristers as a collective force so they can situate their chambers among the others.

Clerks also need to know other people: their solicitors, the listing clerks at the courts and so on. Clerks have to be able to get on with a range of people despite the differences. That's a real talent.

The second attribute connects with the first and it is a sense of timing. Clerks must know how to monitor and guide a barrister's career. At the beginning of a career a baby barrister is dependent on the clerk for work. It's the consequence of being part of a referral occupation. Then it is the clerk's task to develop the career trajectory to suit the talents of the individual, and the desires of the individual barrister. The clerk manages the career expectations and uncertainties of the barristers. All of which must be done with sensitivity.

There are nodal points when decisions have to be taken. What direction will the baby barrister be weaned onto? What are the strengths of a particular barrister? Advocacy or advisory work? When is the optimum time to apply for silk? And what would the consequences be?

Besides being matters of individual choice and decision, for the clerk they are also collective matters. How does the individual fit and perform within the chambers organization? The clerk resembles the Tralfamordorians in Vonnegut's Slaughterhouse Five. They see in four dimensions, that is including time. It means the Tralfamordorians can see any moment of their lives they want, but they can't change their lives.

Clerks have to look at the chambers the same way as if they were on the planet Tralfamadore--from beginning to end as a unit with a life and culture of its own. The individual must be a part without being a disruptive force. It's a talent, especially if you are not born on Tralfamadore. One can see it when clerks talk about former pupils who are now heads of chambers.

How does this work? A lot of it is to do with proximity. Clerks are in daily contact with their barristers. Most barristers have to pass through the clerks' room to enter chambers.

This then is the difficulty of the academic member. They are not proximate; they can't respond to urgency when called on. They take more effort. But for what return? This is not an easy decision for a rational economic actor to take.
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Monday, July 09, 2007

Globalization Works in Strange Ways

Today I started teaching my summer school class for the University of Miami School of Law. My class is "Global Lawyering". The main argument of the course is that whereas we can talk of globalization from an economic perspective, it is actually quite hard to do it from a legal one. There isn't much international law, so the significant gaps have to be filled. They are mostly filled through a system of private ordering or governance that is manifested in transactions crafted by lawyers, primarily in large American and English law firms.

In bringing parties together in transactions, lawyers use law instrumentally. I've mentioned in papers of mine that New York state law and English law are the key choices in capital markets work. Moreover, when banks are lending for asset purchases they display a preference for the documentation to be based on one of these two to avoid irregularities caused by say French or Luxembourg law (eg. problems with "thin capitalization").

To make sense of all this, it's necessary to understand how the law firm came into being, why it has its present structure, how lawyers are educated, and more. My course puts this into the context of globalization. And that means globalization from above and below. Above is the large commercial/financial transaction like the Chad-Cameroon oil pipeline developed with World Bank participation. Below is the move by NGOs and popular movements to make drug companies reduce the prices of AIDS drugs in third world countries, such as South Africa.

So I am always looking for examples to illustrate different facets of globalization. I think the case of the dispossessed Dutch farmers against the government of Zimbabwe is a good one.

Tucked away on an inside page of the Financial Times is an article about dispossessed Dutch farmers taking a dispute against the Zimbabwean government to ICSID (International Centre for Settlement of Investment Disputes). (But see this version from Zimbabwe.) For more on the Zimbabwean dismantling of white farming, see Angus Selby's paper. The case was registered in 2005 (case #ARB/05/6). Fourteen farmers claim that
Mr Mugabe’s government breached its international law obligations by failing to provide adequate police protection for Dutch property owners in Zimbabwe between 2000 and 2002 and by actively supporting a series of violent land invasions that led to their farms being abandoned. They add that the Zimbabwean government subjected them to unlawful racial discrimination by targeting white farmers. (ft.com)
ICSID is an institution that grew out of the World Bank president's involvement in settling disputes on an ad hoc basis. The governor of the Bank of England has done the same. The legal basis of ICSID's dispute resolution process is found in a series of bilateral treaties as well as in investment contracts between investors and governments.

This case has brought together an interesting set of groups around the parties. On the claimants' side are the Dutch Farmers Association, Agric Africa (UK-based NGO run by a former land valuer in Zimbabwe), and George Soros' Open Society Initiative for Southern Africa. So far the respondent, the Zimbabwean government, appears to be on its own.

The Dutch farmers have brought together an international mix of lawyers based in Washington DC, London, and Harare. The Washington lawyers, Wiley Rein, are ICSID litigators; the English lawyers, Bishop & Sewell, do dispute resolution work and have strong African links; and the Zimbabwean lawyers are Coghlan, Welsh & Guest.

Despite Zimbabwe's reluctance to join in the government has appointed an arbitrator. It has selected the former Pakistan Justice minister Mohammad Wasi Zafar. The Dutch farmers have appointed Ronald Cass, a former dean of Boston University Law School. Judge Gilbert Guillaume of France is the third arbitrator. Moreover, Zimbabwe's plea to have their capital, Harare, as the venue because of exchange rate difficulties (ie. inflation at several thousand percent), has been rejected.

This case brings together the fundamental clash between north and south, aspects of colonialism, both British and Dutch, with memories of apartheid and subjugation. This is stark in the case of Zimbabwe and its legacy of Cecil Rhodes and Ian Smith and is assertion of an unilateral declaration of independence from British rule to maintain white hegemony. And it is layered with Robert Mugabe's desperate clinging to power at any cost through his suppression of any opposition and the expropriation of lands: the despotic leader averse to democracy. As Selby's paper above shows Zimbabwe had good, productive agriculture, but now it has famine. There is the involvement of sophisticated international agreements, bilateral treaties, governed by supranational bodies, ICSID. This represents the dominance of western law over more traditional forms. And NGOs--AgricAfrica and Soros' Open Society--are also implicated. All this to be dealt with by lawyers from three continents.

One single case thus encapsulates the conflicts, dilemmas and messiness of globalization.

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