ABSs and phone-hacking highlight need for regulators to focus on ethics, says LSB report

Moorhead: law has not been untouched by financial and hacking scandals

The introduction of alternative business structures – along with scandals in other sectors – means regulators need to monitor ethics across the legal profession more closely, new research has argued.

An academic report commissioned by the Legal Services Board on what tools could be used to do this said “the need for greater understanding of ethical risk is underlined by difficulties experienced in other sectors (banking and the press in particular, where lawyers have also been implicated) as well as the potential for rapidly shifting business models associated with liberalisation of legal services”.

This is compounded by the move to outcomes-focused regulation, which “seeks to move professional ethics away from historical notions for rule-based competence”.

The report identified the risk that greater competition and “weaker, more heterogeneous provider identities” could lead to increased pressure and incentives for legal service providers to breach rules and principles, whether knowingly or unknowingly, willingly or with reluctance.

Further, the evolution of ABSs, new models of funding and the greater use of IT to manage or deliver services are “likely to present challenges not yet comprehended by the rules”.

Another risk is that the values of service providers and the legal system may disengage from the values of the public, which can sometimes prove problematic. The report cited as an example debates about adversarialism in litigation – such as the cross-examination of Milly Dowler’s father by counsel for Levi Bellfield, the reception of ACS:Law’s conduct of file-sharing claims and the approach of some firms to miners’ compensation claims.

“Where there is perceived to be regulatory failure, the legitimacy of law and legal services will be undermined. Greater sensitivity to ethics is likely to mitigate that risk.”

Conversely, encouraging ethicality, and monitoring it, may encourage an ability amongst the regulated and the regulators to spot problems which do not fit current regulatory categories and tackle them, the report said. “Similarly, greater competition and innovation may improve the ethicality of legal services providers, but such improvement would go un-evidenced.”

The researchers – led by Professor Richard Moorhead, newly installed in University College London’s first chair in law and professional ethics – said that for risk-based regulators, it is not enough to suggest that ethical challenges are likely to be important to the evolving legal market place.

Instead, using empirical research to assist regulators in monitoring ethics would send a signal that ethics are important, inform educational and regulatory approaches, and inform judgments about whether market liberalisation does or does not “degrade ethicality”.

LSB chief executive Chris Kenny said: “It’s easy to talk about professional ethics. But the truth is that the integrity of individual practitioners and the ethical infrastructure of their organisations, is crucial for maintaining public confidence in the rule of law as well as for protecting consumers.

“Regulators, professional bodies and professionals need to better understand the drivers for ethical behaviour and be able to track changes in a way that goes beyond what the report rightly characterises as the ’anecdote and argument’ of past discussions.”

Professor Moorhead added: “There is a growing recognition amongst professional regulators and sophisticated legal service suppliers that properly managing the ethics of their service goes beyond providing codes of conduct and policing complaints.

“That the law has not been untouched by the financial and hacking scandals is a reminder of the central public interest in ethical lawyering. Our market for legal services is world leading in many respects, not least market liberalisation. We can and should also evolve cutting-edge approaches to professional ethics.

“This report shows that better tools can be developed to understand and promote the ethicality of practice.”

The recent discussion paper from the Legal Education and Training Review also talked about the need for a greater focus on ethics in educating lawyers.

The Moorhead report can be found on the LSB website here.



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