From court fee hikes to a mooted City law tax to legal aid cuts, the profession’s relationship with government is at a low ebb. With the Law Society’s fundraising powers under threat, is it time for a new trade union?
It was the most contentious attack on City lawyers in recent memory. A proposal by incoming justice secretary Michael Gove to tax top law firms to fund the criminal courts acted as a rallying cry to the usually placid commercial profession. But it wasn’t the Law Society, which receives £35m a year to represent the profession in England and Wales, leading the fight. Opposition was mounted by the firms themselves and a tiny body operating on nearly a hundredth of the Law Society’s budget.
The meeting on 26 October 2015 had been planned for months after Gove dropped unsubtle hints in the summer that he was targeting City firms to shore up the austerity-ravaged justice system. Thirty senior figures from leadership and pro bono roles at the City’s largest firms gathered on the 20th floor of Clifford Chance (CC)’s Canary Wharf HQ to state their opposition.
Hosted by CC senior partner Malcolm Sweeting and chaired by the City of London Law Society (CLLS)’s Alasdair Douglas, the senior partners at Freshfields Bruckhaus Deringer, Allen & Overy (A&O), Slaughter and May, Ashurst, Simmons & Simmons and Travers Smith aired their concerns.
Chancery Lane was conspicuous by its lack of senior representation. City head Stephen Denyer and chief executive Catherine Dixon had both turned down invites, leaving deputy vice president Robert Bourns and pro bono and public legal education policy officer Rebecca Wilkinson as its sole representatives. It was taken as another slap in the face to City firms long resentful of subsidising a body focused on high street law. And that subsidy is considerable. Estimates provided to Legal Business are that London’s five Magic Circle firms alone contribute around £4m in practising certificate fees annually, over £1m of which goes to the Law Society’s budget.
Chris Hale, senior partner at Travers Smith, bluntly sums up a near-universal view among his peers: ‘The Law Society has done very little for us in recent years.’
Historically, City law firms have shrugged off the Law Society’s lack of engagement, viewing the fees they pay as a gesture of professional solidarity. But now the foundations of the profession are shifting, with the government’s plans to fully separate the Solicitors Regulation Authority (SRA) from the Law Society raising the possibility that Chancery Lane will lose its right to fund itself from the compulsory fees.
Many City veterans privately admit they would not be willing to fund the 191-year-old body if payment becomes optional. And after bitter recriminations regarding the fight over legal aid reform, support would be uncertain from other branches of the profession.
This comes at a time when relations between the legal industry and the government have reached a low point, with the profession’s inability to speak with a unified voice belying the UK’s remarkable success in the $600bn global legal market not to mention the remarkable international currency of English law. White & Case London head Oliver Brettle observes: ‘The way in which Gove thought it appropriate to float his levy idea tells you that the connections between the government and the profession are pretty bad.’
‘Law is a huge asset to the UK and needs a constructive voice. We want to work with other industries.’
James Palmer, Herbert Smith Freehills
The legal sector has doubled its trade surplus in the past decade to £3.1bn in 2014, according to TheCityUK. The sector contributed £25.7bn to the UK economy, 1.6% of GDP, in 2015 and directly employs 316,000 people according the Office for National Statistics. Much of this contribution derives from the City, with the UK’s top 100 law firms generating £20.64bn in 2014/15, and major US law firms generating further billions of pounds in London revenue. Yet the profession remains near invisible in broader business circles.
The fear, with the Ministry of Justice (MoJ)’s budget on course to have dropped from £9.1bn in 2010/11 to £6bn by 2019/20, is that without a stronger voice in policy circles the thriving commercial profession will be increasingly tapped to fill holes in the justice system beyond the substantial tax contribution the profession makes.
City firms have a packed agenda, with a looming vote on Brexit, the introduction of an apprenticeship levy, rising civil court fees and an underfunded judiciary, not to mention controversial proposals to overhaul the UK training system. Hale sums up the mood for many: ‘Lawyers in the UK are under-represented and have a much lower profile than in other countries, such as the US. One reason is that there is a revolving door between law and government in the US, but another is that we have weaker representative bodies.’
A house divided
The current threat to the Law Society goes back more than a decade, to when the 2004 report into the legal profession by Sir David Clementi recommended a fundamental shake-up, including the separation of the main regulatory functions of the Law Society and the Bar Council from their representative arms.
Clementi’s report was a response to competition concerns and a poor reputation for complaints handling at the Law Society. With a smaller, more generalist profession, City solicitors had been relatively engaged with the body until the 1980s, when a reasonable number of heavyweight practitioners were involved in Chancery Lane governance. But through the 1990s, the Law Society gained a reputation for turf wars, poor governance and public spats, with the controversial presidency of Martin Mears in 1996 doing huge damage in the eyes of many. Meanwhile, fast-expanding and increasingly specialised City firms – already disenchanted over the Solicitors Indemnity Fund – had less common ground with a body dominated by high street lawyers and smaller firms. CC finance partner Michael Matthews was in 1997 voted in as vice president, being one of the last genuine City veterans to cross the Chancery Lane threshold, but the ties binding the varying branches of an expanding profession were visibility fraying.
Against this backdrop, the fallout and £1m legal bill related to bullying allegations levelled against vice president Kamlesh Bahl in 2000 were the final straw for City firms already exasperated with the Chancery Lane soap opera. Through the 2000s chief executives Janet Paraskeva and Des Hudson were touted as progressive modernisers but the society, at the best of times bureaucratic and resistant to change, showed little progress. The presidencies of Irwin Mitchell’s Michael Napier and CMS Cameron McKenna’s Fiona Woolf during this period were in relative terms well received but were nothing like enough to rebuild broken bridges.
It meant the body – with well over 1,000 staff, one of the most powerful and well-funded professional services organisations in the world – faced a serious challenge to its role in a divided and weakened state. Clementi’s vision was largely implemented in the 2007 Legal Services Act (LSA), leading to the arms-length creation of the SRA and the Bar Standards Board. The Law Society’s complaints-handling powers and responsibilities over training and education passed to the SRA, leaving championing the public interest and professional representation its two remaining functions.
It was soon clear that the LSA framework, which included the launch of the oversight body the Legal Services Board (LSB), encouraged jostling between the major legal bodies, which were increasingly acting in competition. The Law Society could barely conceal its antipathy to the SRA and was felt by many to actively campaign to undermine the infant regulator, conveniently overlooking that it had for years faced (and blithely ignored) criticism of its track record as a regulator. Then chief executive Des Hudson was a particularly strident critic of the splitting of the Law Society’s brief, feeling the society had conceded too much ground ahead of the LSA.
Attempting to tap into City discontent with the new watchdog, the Law Society commissioned reports from Nicholas Smedley and former Beachcroft senior partner Lord Hunt to address what it argued were shortcomings in the SRA’s ability to police large commercial law firms.
The line of argument was understandable but hypocritical: the SRA was ill-prepared to deal with City firms and the shift towards entity-based regulation envisaged under the LSA. But this was a trait it shared with its Law Society predecessor (most of the staff had transferred to the new agency). This had been embarrassingly obvious in 2004 when Freshfields’ conflict in the takeover battle for Marks and Spencer hit the High Court and the headlines, while Chancery Lane dragged its feet despite being warned repeatedly over problems with client conflict rules.
‘No one in government trusts the Law Society to do its job well as it has a reputation for large unwieldy bureaucracy.’
David Hobart, City of London Law Society
In hindsight, the Law Society’s tactics proved an own goal, stoking resentment among its better-funded regulatory division and prompting the SRA to bolster links with the City. The SRA launched a London office with a team of handlers each assigned to five large law firms. A string of arrivals, most notably former Herbert Smith partner Charles Plant as chair of the SRA board, allied with a shift towards relationship management of large law firms helped to steady the ship. It also benefited from the consultancy of ex-Linklaters partner Nick Eastwell and well regarded former Law Society head of international policy Alison Hook. It was their advice that led the SRA to abandon plans for a group licensing approach to impose UK regulation on firms’ overseas offices and lawyers in 2013. The SRA was beginning to develop what was obviously needed: a different approach to regulating the institutional legal market. There would be stumbles and mis-steps along the way – not least a shambolic initial attempt to approve alternative business structure (ABS) applications – but in relative terms the body was getting better at understanding and policing the City (see box, ‘The rise, stumble and rise of the SRA’).
The arrival of the General Medical Council’s deputy chief executive Paul Philip as chief executive in 2014, replacing its initial head Anthony Townsend, was viewed as a positive step with a renewed focus on delivery and pragmatic enforcement.
In comparison, the Law Society had undergone little change. Complaints about its structure and governance, with its bloated 100-strong main council likened to a ‘multi-headed medusa’ by one senior City partner, have continued as they did in the pre-LSA days.
Its annual rotation of its president also attracts criticism. Tim Clement-Jones, London managing partner at DLA Piper and a City ambassador for the Law Society, comments: ‘The presidency is a bit like being the Lord Mayor. They are there for a year and then they’re gone. As soon as they know what’s going on and can add value they are passing on to the next person.’
The City was further disenfranchised by cuts made under Hudson to the society’s international division, which had focused on building links in foreign jurisdictions and lobbying for the easing of Bar restrictions in key jurisdictions. It was the one team that the City firms felt they gained anything useful from.
The SRA and the Law Society entered something of a truce as they underwent a change of leadership in 2014 as controversies over legal aid reform were widely perceived to have contributed to Hudson’s departure in the wake of a damaging confidence vote in December 2013.
The arrival of NHS Litigation Authority chief executive Catherine Dixon as Hudson’s replacement helped an initial thawing of relations with the SRA as she forged a better working relationship with Philip at the SRA. Dixon receives positive notices from a number of City lawyers. ‘Dixon’s a live-wire,’ says one Magic Circle partner with little regard for Chancery Lane. ‘She knows what’s doing.’ There were expectations that a deal was afoot last year to hand over some of the SRA’s remit on training and standards to the Law Society, though it never came to pass.
The period of calm was not to last and tensions emerged when the re-elected Conservative government said that it would review the LSA framework. The SRA and the Law Society both blamed each other for wasting £22m on a failed IT system, the latest in a long line of IT projects to go awry at Chancery Lane. It soon became explicit that the SRA would press robustly to secure total rather than operational independence from the Law Society. (The body is technically a delegated division of the Law Society despite having more staff and a larger budget.)
The SRA lobbying has ramped up, hosting a parliamentary dinner with over 20 peers last month with Philip giving an interview to PoliticsHome calling for a full split. A report the SRA commissioned in January claimed widespread public support for an independent regulator, albeit stretching credibility that the man on the street had ever given the matter much thought. Many senior lawyers now see full independence of the SRA as a foregone conclusion, with CLLS chief executive David Hobart arguing that ‘no one in government trusts the Law Society to do its job well as it has a reputation for being a large unwieldy bureaucracy’.
Even Dixon concedes: ‘We support independent regulation.’ Increasingly, the Law Society has focused on retaining control of the education and training portfolio, a position that would allow it influence while being more credible than a remaining regulatory link.
The Law Society’s ambitions in this regard may be lifted by the SRA’s recent unpopular proposals to introduce a new qualifying exam to become a solicitor. City firms in particular are strongly opposed to any move seen to dilute standards and threaten the global credibility of English lawyers.
Dixon argues: ‘We think that professional standards and awarding the professional title should sit with the Law Society as it’s important the profession has ownership of professional standards and entry into the profession. We support a deregulatory agenda, but if you’ve mixed up regulatory rules with professional standards and you’re deregulating all of that there will be a dilution of standards. It would be highly unusual for a regulator, wholly independent from the profession, to award a professional title. You don’t see that in other major jurisdictions and there are risks about the perception of legal independence. If you have a state-controlled regulator setting who can come into the profession and who exits the profession, wholly independent from the profession, then how can the legal profession be seen as upholding the rule of law?’
It is a finely balanced point, with substantive arguments on both sides. It may be too little too late, but recapturing the training and education brief would enhance the Law Society’s chances of keeping a slice of the practising certificate fees.
No taxation…
Inevitably the debate over funding the Law Society brings scrutiny of what the profession gets for its money. A considerable amount of the Law Society’s resources over the past three years have been spent on advocacy and legal challenges related to access to justice and the debate over legal aid reform. During 2013 and 2014, the group’s provisions for intervention, disciplinary proceedings and litigation costs came to over £10m. Its most high-profile representation came from a legal challenge to criminal legal aid cuts, which resulted in a judicial review. There are individual successes, such as the MoJ abandoning plans for a two-tier criminal legal aid regime that would have slashed the number of solicitor firms awarded duty contracts by about two-thirds from 1,600 to 527.
A 12-month suspension of a further 8.75% cut in criminal legal aid fees was also announced under Gove, though some of the back-peddling appears to be because a hurried reform process from the MoJ was unravelling in the face of outright grassroots opposition from publicly-funded lawyers and poor preparation by the ministry. Dixon also flags a successful appeal, in a campaign led by Rights of Women, against plans to limit legal aid for victims of domestic violence that would have forced some victims into representing themselves in court before their attackers.
Still, fairly or not, many publicly-funded lawyers believe the Law Society’s policy of engagement with the MoJ during the widely derided term of Gove’s predecessor Chris Grayling was supine and ineffective. For all the Law Society’s claims of its role as an independent champion of justice and the rule of law, it shares the same problem as the BBC: the body relies on a statutory underpinning for its fundraising powers. It is a formula that gives it money, but means the government can ultimately cut off its income. It is independence but only of a sort.
There remains as well the brutal realities of austerity. The UK government continues with fiscal retrenchment and the Law Society has lost a number of key battles, failing to prevent the closure of 86 courts across England & Wales. Critics claim that the society has failed to build meaningful relationships outside of the MoJ, a ministry seen as a backwater in Whitehall terms. This makes it harder to advocate for the profession’s commercial clout and substantial role as a tax contributor (the full distribution model and high profitability make commercial law firms a disproportionately high contributor to the public purse).
The rise, stumble and rise of the SRA
‘Three years ago the SRA [Solicitors Regulation Authority] was completely incompetent at renewing individuals’ practising certificates,’ argues David Hobart, the chief executive of the City of London Law Society. ‘They could not distinguish between a large firm with 1,000 lawyers and a high street practitioner with one lawyer.’
While SRA education proposals issued in December, which intend to scrap the rule that trainees must have contentious and non-contentious experience and allow people to enter the profession without a training contract, have gone down badly among City firms, gripes over its watchdog role have largely become historical.
This change in fortunes is in part attributed to the arrival of Paul Philip as chief executive at the start of 2014. A regulator unusually able to converse in plain English, Philip is candid about the agency’s performance failings: ‘When I arrived, the SRA wasn’t delivering the level of customer service that anybody would expect. Things were taking too long, particularly ABS applications, as we didn’t train our staff well enough on the [approval] criteria. Our disciplinary work was taking forever and the sword of Damocles was being held over people for far too long. Our operational work was terrible and the annual exercise in collecting the practising fee certificate was fraught with problems.’
In the two years that have passed, Philip has overseen improvement across all these metrics. The regulator is now dealing with 91% of cases within a year and the approval process for alternative business structure (ABS) applications has accelerated with 334 ABSs operating in 2014 compared to 72 in 2012. This has all been achieved while shaving £3.4m from the SRA’s 2016 budget, down to £44.1m, though its slice of practising certificate fees stands at £54.1m.
With an effective City unit now in place following the creation of a London office tasked with relationship management in 2012, Philip is aiming to slash red tape as the SRA switches further from a rules-based to principle-based approach, regulator-speak for pragmatic, proportionate policing. ‘If you look at the rule book in the 1950s was tiny, now it’s 480 pages long. It’s bureaucracy got out of hand. We would hope to get it down to about 40 pages.’
Philip is now engaged in an aggressive push to go fully independent from the Law Society. He and the chief executive of the Law Society, Catherine Dixon, have already made an agreement to separate the £40.6m in shared services costs for the two bodies and the UK Treasury announced in November that it would look to separate legal regulation from representation.
‘It’s wrong in principle that the SRA is not independent. The public presumes we are independent and not under the influence of the profession. We are here to regulate in the interests of the public, not the profession, and that’s why we think we should be an independent body. Most members presume we are independent, so when they find out we are part of the Law Society they say: “What do you mean? I thought you were the regulator?”.’
Philip has built an experienced leadership team, hiring his former colleagues at the General Medical Council Robert Loughlin and Jane Malcolm as director of operations and quality and director of external affairs respectively. ‘Paul is pretty shrewd,’ says Fieldfisher senior partner Matthew Lohn. ‘He needs to be respected by lawyers he regulates but there’s a difference between being respected by lawyers and being respected by the Law Society.’
Philip believes a separation from the Law Society could be completed in just six months. While most in the profession support such a move – there are more mixed views on training and professional standards. Proposals by the SRA to remove the necessity of two-year training contracts and replace the system with a more flexible work accreditation system before an entry-level exam were seized upon by the Law Society as a reason for it to retake control of the education brief. There is no doubt the proposal is unpopular with City firms.
Philip responds: ‘How many solicitors have actually ever failed a training contract? None. Ever. You’ve got to ask yourself – is that right? Are you telling me there has never been a person that can’t put theory into practice? Never? Public confidence is bolstered by having a regulator that is independent, sets standards and monitors standards.’
Oliver Brettle, London managing partner at White & Case, comments: ‘The fact it is compulsory to have two years of on the job training is incredibly valuable for both the firm and the trainee. There’s a danger that if you have the current system of light academic training, compared with other countries, and then remove the two years’ worth of practical training you end up with something not very desirable. Changes could damage the standing of UK lawyers’ training.’
This may be a fight the SRA needs to abandon if it wants to secure its core goal of full independence.
While the Law Society has made efforts under Dixon to re-engage with the City, its track record of representing commercial law remains woeful. Despite arguments put forward by the CLLS, the Law Society did not call on the MoJ to separate the budgets of the civil and family courts. The result effectively obscured the losses of the family courts.
A £10,000 court fee on civil claims worth over £200,000 was introduced in January 2015, while the government last year floated plans to hike court fees as high as £20,000. The latter proposals are derided by litigators concerned at London’s eroding position as a disputes hub, while Master of the Rolls Lord Dyson in January told a parliamentary committee that the MoJ’s evidence to justify the move was ‘hopeless’. Dyson, who is stepping down as the country’s most senior civil judge, added: ‘We have warned of the real dangers and we also warned that the research carried out by [the] government before it embarked on this course of action was lamentable.’
With litigation revenues flat at most major UK firms, hit by a falling away of financial crisis work and EU international sanctions on Russia, the charge has not gone down well with City litigators facing increased competition from rival hubs in Singapore, Paris and Hong Kong. There have also been fears growing for years about the quality of the judiciary thanks to the less generous pension, low salaries and the strict enforcement of a retirement age of 70. Pension reductions for judges born after 1 April 1957 even led some 200 judges bringing an age discrimination claim against the MoJ. The concern voiced by a growing proportion of veteran litigators and barristers is that the top legal minds are no longer joining the bench, threatening the high regard foreign litigants have for UK judges.
Brettle comments: ‘Frankly, the success of the entire City is tied to the quality of justice handed down in the courts. We need to be very careful to protect and enhance the quality of the judges and facilities in the High Court. Above all there needs to be a very serious consideration whether the terms and conditions which judges work in are commensurate with their importance to maintaining the quality of English law. If you aren’t getting the right people on the bench, you won’t know there’s a problem until it’s too late.’
Such tensions also reflect conflicting agendas for the Law Society in facing a government increasingly targeting the commercial legal sector to subside other branches of the justice system. Can the body represent the entire profession in the age of austerity?
Observes Hale: ‘Potentially, the Law Society had a conflict of interest as the levy was floated to fill a funding gap, caused by cuts, for those finding it difficult to access justice at the poor end of the legal world. That would probably have helped firms in that part of the market.’
While the arrival of ex-A&O partner Stephen Denyer in early 2014 as head of the Law Society’s international and City arms has gone some way to rebuilding links with the body’s biggest contributors, attracting praise for a renewed emphasis on liberalisation talks in markets such as India, Malaysia, Russia and South Korea, there is still a tension over the lack of resources dedicated to City issues. Of the Law Society’s 295 staff dedicated to representation, just 16 people sit in Denyer’s international and City division.
This imbalance means little attention was given to the industry-wide apprenticeship levy, which will disproportionately affect large City law firms. (Simmons & Simmons estimates it will spend £225,000 a year on the levy.) City lawyers also complain that little has been done in response to the UK Competition and Markets Authority’s recently-launched probe into the legal industry and the Financial Conduct Authority (FCA)’s review of whether general counsel should come under its Senior Managers Regime.
‘When I arrived, the SRA wasn’t delivering the service anybody would expect.’
Paul Philip, Solicitors Regulation Authority
Denyer responds that the Law Society should be judged on ‘awareness of the contribution of the City, not just to the legal sector, but UK PLC’.
Such sentiments, to be frank, are rejected in discussions with City law firms. Comments Hale: ‘Representation is unsatisfactory at the moment. Those who speak for lawyers are spread across a number of groupings. This makes it less effective, dilutes efforts and makes it harder to be heard.’
One senior partner of a top 40 City firm says: ‘If you’re negotiating with the government about legal aid contracts then that is irrelevant to the City. What happens with conveyancing and whether it is taken over by Tesco – who cares? The presidents of the Law Society come from two-partner firms in Lincolnshire. Not to be mean, but they can’t help me.’
He adds: ‘If they are fighting over the PC [practising certificate] fees, they are not focusing their resources. If I were Catherine Dixon, I would be looking at what life looks like without the guaranteed revenue and membership. I’d look at the Royal Pharmaceutical Society, which had to undergo that split in 2007, and talk to their chief exec to find out what commercial income streams they have survived on since going without the guarantee of membership of pharmacists and what assets they have that they can monetise.’
The LSB has further increased the pressure on the Law Society, last month launching a review of practising certificate fee rules in a bid to make spending more transparent. Professor Richard Moorhead of University College London comments: ‘The SRA should split from the Law Society, as it doesn’t and shouldn’t have any formal role in regulating. I don’t see why the Law Society should have the benefit of the top slice of the practising certificate fees. It could and should sell itself to its members on a more voluntary basis.’
Dixon responds: ‘There are opportunities to look at voluntary contributions but what I’m keen to ensure is that we deliver value for money for members, irrespective of how we’re funded.’
‘Standards and awarding the professional title should sit with the Law Society as it’s important the profession has ownership of entry into the profession.’
Catherine Dixon, Law Society
When pressed, Dixon admits her plan B is a ‘hybrid’ system dependent on recapturing the ownership of the solicitor title by charging members for a quality kite mark above what the SRA requires as a minimum competency to practise alongside other commercial activities.
While such comments are a progressive nod, the Law Society remains a long way from a developed agenda for voluntary membership that may soon be imposed on it.
Selling the City
With the Law Society’s role under question, City law firms are being finally pressed into thinking about how to communicate with government, the wider business community and the public. While ideas have been half-heartedly floated in the past – including discussions between the Magic Circle to create a body that would look like a bigger version of the CLLS – the fear of appearing elitist and plain inertia prevented progress.
Solicitors have also been hampered by the split with barristers, which means the government can play off the two sides of the profession (the smaller Bar being cheaper to buy off), while the separation distances solicitors from the judiciary.
There are four main options: to continue funding the Law Society; to relaunch and substantially scale up the CLLS; to back an existing body such as TheCityUK; or to create a new body with a clear agenda.
‘Half of the City firms think the CLLS should have a bigger role and the Law Society be left for high street firms,’ says a senior partner of one of the UK’s leading firms. ‘I am very strongly opposed to not having a Law Society as I do not believe in a split profession. Dividing between rich and poor is philosophically wrong.’ Nonetheless, one of his peers comments: ‘If the SRA splits then I would retain our membership with the CLLS because it is a representative body that focuses on the issues important to me as a practitioner in the City. I would have no reason to join a Chancery Lane club. If I want to have a nice dinner I go out with my clients, my partners or my wife!’
‘The success of the entire City is tied to the quality of justice. If you aren’t getting the right people on the bench, you won’t know there’s a problem until it’s too late.’
Oliver Brettle, White & Case
The CLLS and TheCityUK have attracted praise for their work on Gove’s levy proposals. While Gove clearly calculated that City lawyers are an easy political target, the MoJ faces the bigger problem of the Treasury’s longstanding resistance to other departments ushering in ad hoc revenue-generating powers via the back door. Though Gove indicated in a dinner with City firms in October that the levy was set to go ahead, senior lawyers believe it has since been quietly kicked into the long grass.
Nonetheless, many feel the CLLS falls far short of the budget and engagement of government that would be required to become a real force. The CLLS has often focused on technical consultation with a wide band of committees rather that engaging in substantial lobbying and policy debate.
Such is TheCityUK’s lobbying links in government that the Law Society pays a £5,000 annual fee to be a member. Unlike the Law Society, its management is well-connected in the City, with its chief executive Chris Cummings recently appointed to the regulatory decision-making board of the FCA and the enforcement board of the Payment Systems Regulator. The body has also attracted a high calibre of lawyers with Herbert Smith Freehills senior partner James Palmer recently appointed as head of its legal services group, which was involved last year in lobbying for the creation of the Financial List, the specialist court for financial services disputes. Freshfields senior partner Edward Braham, Linklaters senior partner Robert Elliott, CC senior partner Malcolm Sweeting and Mayer Brown UK senior partner Sean Connolly all sit on the body’s 62-member advisory council. ‘Law, accounting and financial services are a huge asset to the UK,’ says Palmer. ‘It’s right they are properly regulated but they need a constructive voice. We want to work in tandem with other industries.’
The body has grown in size, bringing in £5.1m in membership fees in 2015 across the City compared to £4.5m in 2014, and now has 28 law firm members. DLA Piper is one such member and Clement-Jones – a genuine veteran of the lobbying game – says: ‘UK Trade & Investment (UKTI) have taken a bigger interest over the last six years in legal services than any previous occasion and CityUK has had a major impact on that. It puts us at the same table where we’re talking about international sanctions and regulation in Brussels with all the investment banks and accountants. Having that forum in CityUK is important and it’s been well run. The quality of people at the top is very good.’
Gary Campkin, director of international strategy at the body, says: ‘TheCityUK has worked to deliver a clear and robust response to the government’s proposals to raise court fees and impose a levy on City law firms. We were pleased to note a possible change in tone regarding the proposals, but continue to work on this issue.’
Hale sums up the attraction of TheCityUK when he says that ‘solicitors like me have more in common with investment bankers than high street lawyers’, but with legal services a small part of the whole, and TheCityUK not set up to handle technical legal issues or training, greater funding for the body would need to be paired with a legal trade body feeding into it.
‘Public confidence is bolstered by having a regulator that is independent, sets standards and monitors standards.’
Paul Philip, SRA
The CLLS is viewed as the best option by some, but with a budget of just £400,000 its remit is limited. While chair Alasdair Douglas and chief executive David Hobart both receive solid notices among City veterans, the body with three full-time members of staff has nothing like the resources to build links in government. The CLLS is more popular among the mid-tier UK firms but the Magic Circle firms are less convinced about its ability to become a credible representative force. More to the point, the CLLS has shown little hunger to take on a more substantive role. Hobart notes: ‘If you fill the place up with lots of people, the people become the problem and not the solution. A lot of large firms would like to keep us at a small size. If we developed a business case for more we could get more, but the fact there are several hot subjects at any one time is quite enough. You don’t want to divert management effort.’
Yet the contention that the City wants a representative body run on a shoestring budget is dismissed by many, based at least on discussions with more than a dozen senior City lawyers for this article. One Magic Circle partner says: ‘The Law Society has funding but no purpose and the CLLS has no purpose and no funding.’
But what would an effective representative body look like? With poor leadership at the root of the Law Society’s malaise, a strong figurehead such as Slaughter and May’s retiring senior partner Christopher Saul, A&O’s retiring senior partner David Morley or Simmons senior partner Colin Passmore, whose final term expires later this year, would be needed. An operational budget of £1m to £3m would be required depending on how wide its remit was.
Such a role could see the body build links with the MoJ but also the Treasury, UKTI, the Department for Business, Innovation & Skills and City regulators.
Ideally a beefed up body for City lawyers would also build links with a new-look and more responsive Law Society, acting as a unified voice of the profession. The loss of its mandatory fundraising powers may be the shock needed to finally revitalise the Law Society. But it is a vain hope to rely on Chancery Lane putting its house in order.
For years the commercial profession has carried on in denial about its lack of clout in policy and corporate circles. Such inertia remains, but City law needs a credible representative body. Without one, the profession will be diminished and remain the biggest untold success story in British business. LB
tom.moore@legalease.co.uk, alex.novarese@legalease.co.uk