The EU/IMF deal for Ireland heralds legal services reform

When the Irish Government signed up to the EU/IMF programme of financial support for Ireland on 1 December 2010, it gave very specific commitments regarding action on fiscal consolidation, financial sector reforms and structural changes. These are itemised in detail and their implementation will be phased-in on a quarterly timetable that is subject to EU/IMF scrutiny. One of the many commitments given under the structural reform rubric is to increase growth in the domestic services sector. This is to be achieved by the removal of restrictions on trade and competition in the sheltered sectors of medical services, and the pharmacy and legal professions. Legislation is to be introduced by the end of the third quarter of this year. The specific commitments signalled for the legal profession are:

  1. The establishment of an independent regulator.
  2. The implementation of the recommendations of both the legal costs working group (published in November 2005) and the Competition Authority report on competition in legal services (published in December 2006).

Legal costs working group

The principal terms of reference for the legal costs working group (LCWG) were to examine the level of costs, and how they are calculated and assessed.

In summary, the LCWG recommended that the principle of "costs following the event" should be retained. However, there should be greater predictability and transparency through the establishment of a legal costs regulatory authority that would formulate guidelines. Critical principles would be the appropriateness of the time expended, the complexities of the case and the level of the court involved. Rather than lumping the bulk of a solicitor’s instruction fee or counsel’s brief fee into one single amount, this sum should be broken down into its component parts by reference to these guidelines. Scale fees are disfavoured and the value of the case should not be the main determinant in calculating the appropriate charge.

The long-standing but arbitrary practice of junior counsel charging two-thirds of the senior advocate’s brief fee is unacceptable.

The current statutory obligation of solicitors to set out in writing the basis of their charges and anticipated costs should be extended to provide more information and regular updates about both costs as they accrue and material developments in the case. There should be a cooling-off period before the client actually hires the solicitor. Clients should have the option of ending their legal action before costs escalate, even though by doing so they risk becoming liable for the costs of the opposing party.

The current taxation of costs regime should be replaced by a simpler and cheaper legal costs assessment office. Barriers to challenging excessive costs should also be removed. Litigants should be free to pay costs or make a lodgement in court in advance of assessment and, if their offer is not exceeded, the other party should pay the fees in respect of the assessment process. Data on the outcome of these assessments should be published.

There should be more incentives to make lodgements before a case is tried. Courts may also require parties to exchange estimates of costs incurred at any stage in the proceedings.

A more rigorous application of the rules of court is encouraged (including greater use of peremptory orders). Costs of pre-trial motions should be determined at that stage and not reserved to trial. The procedural rule that places solicitors at risk of being personally ordered to pay costs where their own neglect has led to delays should be extended. Post-proceedings letters of offer "without prejudice save as to costs" are to be encouraged.

Competition Authority report

Coming one year after the LCWG report, the Competition Authority weighed in with recommendations to:

  • Abolish the King’s Inns’ and Law Society’s control of legal education
  • Introduce specialised conveyancers operating outside Law Society regulation
  • Provide better consumer information about key features of legal services and how fees
  • are calculated
  • Abolish the “two-thirds” practice for junior counsel, extend direct public access to
  • barristers, allow them to form partnerships and allow employed barristers to represent
  • their employers in court
  • Ease the transfer of files from one solicitor to another
  • Remove restrictions on advertising
  • Make the process of appointing senior counsel more transparent and extend eligibility to solicitors

Many of these recommendations echo earlier reports going back to 1982.

So what can we expect?

The EU/IMF have provided an impetus to implement the work of these two bodies whose reports would otherwise have languished until eventually superseded by others. Given the daunting amount of legislation and other measures that the current administration (as successor to the Government that signed the EU/IMF programme) must now implement, it is unlikely that it will stray too far from the groundwork already done by these reports.  It would be a pity, however, if the opportunity is not taken to facilitate other changes (for example, making it easier to create limited liability partnerships) designed to modernise how lawyers do business in Ireland.

The creation of a new regulator will supersede the intended appointment of a legal services ombudsman which, the minister for justice has now confirmed, would serve no purpose in the light of the more wide-ranging changes now imminent.

While no Irish practitioner would claim that the system under which they practise is perfect, it remains to be seen how much of the measures discussed in this article will ultimately improve the lot of litigants. The Law Society has justified concerns about the implications of unregulated advertising. How conveyancing is to be commoditised also remains a worry. With the introduction of the Legal Services Act 2007 now imminent in Britain, it appears that Irish and British lawyers will have much to compare and contrast in the coming months.

For law firms that are aware how important it is to maintain good client relations and to minimise costs exposure, many of the recommendations of the LCWG and the Competition Authority will have been adopted already in the name of good practice. For such firms, the forthcoming changes will be less dramatic.