This is a conference* about ‘trust in the market’ and building confidence within the sphere of legal services regulation. I shall therefore open with the observation (or reminder) that regulation is a public intervention in otherwise private transactions and free markets. It must therefore stem from a political judgement that we should not have complete trust and confidence, and must instead rely on the intervention in the market. issue of how confidence in regulation develops and is then sustained is a fascinating one. It begs preliminary questions of what we mean by ‘confidence’, and from whose standpoint we are assessing it.
The long-known tensions faced by in-house lawyers between serving their employer and staying true to their professional obligations receive some tough probing in research published today – with fascinating insights. To what extent is the ethical imperative or ‘moral compass’ of in-house lawyers affected by their personal characteristics and by the overt, subliminal or cultural influences within their client-employer organisation? The short answer is that it is affected, by many influences, contexts and drivers, and to varying extents. As the lead author, Professor Richard Moorhead, says, the research report provides “as rich a picture of what it means to be an ethical in-house lawyer as has ever been attempted”. A summary is available, and the full report can be downloaded here.
Evidence of the tension in in-house legal practice is perhaps most acute in the finding that almost 50% of respondents agreed that actions were sometimes taken in their organisations that were against their advice on legally important matters. More than a third also agreed that loopholes in the law should be identified that benefit their employers. These and other findings raise interesting and important questions about the extent to which lawyers’ professional codes are being diligently applied by in-house lawyers. It might also perhaps prompt one to wonder ‘where were the lawyers?’ when various corporate scandals were being perpetrated….
This month marks the tenth anniversary of the publication of Sir David Clementi’s final report on the regulatory framework for legal services in England & Wales. How time flies! The report is still a good read, and a helpful reminder of what needed to change – and why.
The report laid the foundations for the Legal Services Act 2007 (even though the Act went further on alternative business structures than Sir David was willing to recommend). Its principal aims can be summarised as:
- creating the Legal Services Board and establishing the principle of regulation that is independent from professional representation
- improving the way in which – and the speed with which – complaints against legal services providers are handled, including setting up the Office for Legal Complaints and the Legal Ombudsman
- liberalising the business structures through which lawyers can operate by permitting ownership and investment by individuals who have not qualified as lawyers, and allowing legal businesses access to external capital.
All of these primary objectives have been achieved – more or less. So what now?