Darrois--Clementi Comes to France?

I went along to a presentation by Jean-Michel Darrois on his commission's proposals to reform the French legal profession at the Law Society yesterday. It, of course, begs comparison with the Clementi Review in the UK.

Darrois prefaced his remarks by saying that President Sarkozy was concerned that French lawyers weren't as present in the world as US and UK lawyers. It seems that French lawyers, apart from a few big firms like Gide, are more inward looking.

Taking this to heart the commission was composed of few lawyers, a couple of professors, judges, administrators and one in house lawyer, although it heard evidence from a wide range of people.

The French legal profession is divided rather like English lawyers with turf wars constantly being fought. When notaries were about to get the power to grant mutual divorces, French lawyers (avocats) objected that they were being excluded--hence Darrois.

Part of the trouble with the French legal profession is the perception of what each part's role is. Notaries are seen as quasi-public officials who can do "authentic acts". (Apparently, according to Prof Aynes, learning what these are is the bane of French law students' studies.) Avocats can't do them. In fact, avocats are seen as court lawyers whose prime duty is to the client--a defender.

Others do law as well including accountants and legal advisers. But strangely in house counsel are not lawyers. They are merely employees of the company and don't enjoy lawyer-client confidentiality or secrecy. The French legal profession likes it this way.

Overall, the reforms proposed by Darrois are modest, when compared to Clementi's.

• Some fee sharing between notaries and lawyers will be allowed, but merging the two arms of the profession won't happen.
• French lawyers can become in house counsel, but without the normal privileges.
• Forms of multidisciplinary practice (or more likely legal disciplinary practice) will be permitted, eg. lawyers and accountants (but not lawyers and auditors). These can be temporary, short term or permanent.
• Law firm partnerships will be encouraged.
  
• Legal aid will be properly introduced and funded.
• Some form of joint legal training will be introduced so that law students will know what others in the legal profession do and can therefore make an informed choice.

Nicolas Sarkozy has said he will introduce the reforms next year.

Are they going to increase the presence of French lawyers in the world at large? Unlikely. At best this is a minor reconfiguration which brings the French legal profession into the early 20th century, but nowhere near the 21st century of Clementi and the Legal Services Act.

I can't see how the Darrois reforms are going to reduce the fragmentation of the French legal profession. One lawyer who spoke about the reforms expressed strong doubts. Another mentioned that being a notary in France still depended on nationality and therefore excluded UK notaries. (This is being heard by the ECJ.)

Even though Darrois kept lawyer participation on his commission to the minimum, they have won through. Of course, it's possible that if he had come up with radical Clementi-style proposals, Liberty would be raising her tricolor once more and we would have heard the screams from London.

The final conclusion to draw from this is that the French legal profession doesn't want to liberalize in the same way that the British have. Nor it seems do the Americans. At least the US recognizes the difficulties it faces. And at some point New York state will liberalize its own rules to cope with the pressures of globalization. The French haven't realized that globalization has already been in action for some time. They have a lot to catch up.

Darrois--Clementi Comes to France?

Attracting Attention

We have been running our blog for a short time only but it is beginning to attract readers from around the world as the graphic from Sitemeter illustrates. The power of Web 2.0!

Attracting Attention

Philosophical Foundations of Law and Finance - 21sth Weekly Meeting

At the 21st meeting of the Philosophical Foundations of Law and Finance (Friday 26th June, from 6.00-8.00pm, in room 501, 309 Regent St) we shall read Aristotle discussing rhetoric and persuasion.

Joe will also present a framework for a corporate-centric finance view of epistemology-ontology. He will show how Aristotle's method could be applied to the knowledge of the world through the lens of finance; and use, yet again, concepts of risk symmetries for the clarification and understanding of the implications of stem cell technology on humanity (see Clive Cookson, "An Industry to Grow", FT, 25 June 2009 at http://www.ft.com/cms/s/0/2fe059ae-60ed-11de-aa12-00144feabdc0.html). As Edmond Curtin says, "this is about harvesting humans and individual sovereignty". We can also imagine what "stem cell financial derivatives" might be. We need to get ahead of the curve on this because the curve is going to be a tsunami.

We shall seek more bubbles and rations at Vapiano thereafter

See you tomorrow

Joe and Laura

Philosophical Foundations of Law and Finance - 21sth Weekly Meeting

Civil Justice

I went to a seminar on the decline of civil justice today at University College London where it was argued that mediation is a cheap alternative to adjudication. Here's proof.

(Thanks New Yorker)

Civil Justice

Philosophical Foundations of Law and Finance - 20th Weekly Meeting

On Friday 19th June (from 6.00-8.00pm, in room 501, 309 Regent St), Westminster LLM student Arianna Consalvi will enlighten us on the ontological, epistemological and legal conundrums regarding the ‘Swap Contract’ in Italy – these inverted commas will be the erratic focus of investigation.

Please note that it will be nothing less than our 20th meeting. We shall celebrate the Philosophical Foundations of Law and Finance afterwards at Vapiano or at the movies.

See you then!

Laura

Philosophical Foundations of Law and Finance - 20th Weekly Meeting

Straight There No Detours

Avis Whyte and I have just finished an article derived from the research we did for the Bar Council on direct access to clients. It can be downloaded here.

The Bar has been a referral profession for many years and now it is attempting to reconfigure itself towards direct dealings with clients. This has a serious impact on the manner in which the Bar constitutes itself as a profession.

Our conclusion reads:

Modernity unsettles professional certainties. For four centuries the Bar has enjoyed many privileges (Prest 1986) but there has been a hollowing out of its professional core as its reserved areas have come under threat. The gradual erosion of the referral aspects of barristers’ relationships with solicitors and others exposes barristers to the contingencies of the market in a raw form not usually experienced. The rising intervention of the state into the lawyer-client relationship through the control of the legal aid budget is accelerating these moves. These are moves to bureaucratic control and potential proletarianization (Larson 1977: 232). The Bar is losing its grip on its professional project. Or is it? Muzio and Ackroyd (2008: 49) argue we are not observing the end of professionalism but rather various defensive manoeuvres by professionals to maintain their privileges.

How does the rise in direct access work fit with the changes in the Bar? In part it has to do with what Boon and Levin (2008: 77) described as “The legal services market has a multitude of sites in which different norms proliferate.” Barristers occupy many positions outside traditional private practice. They are in business, government, the Crown Prosecution Service, and even inside solicitors’ firms. And when we add to the mix an increasing diversity of professional members in gender and ethnicity, common cultural values change and may not hold. This is reinforced by the division in work at the Bar between those who largely undertake publicly aided work and those who act for private clients. Barristers paid by the state operate under considerable control in terms of what they can do and what they can charge for their labour. No equivalent constraints fall on private client practitioners: they function within the market. Further controls are imposed by chambers arrangements which are becoming more corporate in focus. Chambers are increasingly specialized in their practice areas. They target potential lateral hires, including groups of practitioners, and establish business targets, all of which compromises the ethic of individuality espoused in the Bar.

Although the fusion of barristers and solicitors is unlikely to happen, the introduction of Legal Disciplinary Partnerships in 2009 has opened up the organization possibility for the conjoining of the two. And when alternative business structures make themselves known, many conventional arrangements might begin to fail. Alternative business structures will seriously affect numbers and structures within the legal profession and increase the employed section of the legal profession. We suggested that up to a thousand law firms could fail in competition with supermarkets and other legal service providers. Barristers too will be affected.

With these eventualities direct access work grants the possibility of holding onto traditional values and procedures. Prest (1986) is clear that the settling of the referral structure of the Bar did not come into being until the 19^th century, so that an earlier paradigm of professionalism for the Bar encompassed direct relations with clients. Attorneys and solicitors stepped in when geography made it difficult for clients. Direct access recaptures these pre-modern ideals of working. But perhaps of more significance is that barristers can situate themselves more centrally in the market through doing direct access work. Their potential for control over their work and professional relationships is enhanced.

Straight There No Detours

Graduate Conference Follow Up: First Amendment Opportunism

There is something deeply counterintuitive in constitutional rights claims such as freedom of speech that are rooted not in protection of private life, but in mitigating financial losses. The fact that businesses can invoke the First Amendment arguments is not in itself new. In late 70s, the First Amendment was used to protect economic liberty in cases of commercial speech and, more specifically, price advertisement. Frederick Schauer (2000) pointed out quite insightful that people and organizations with a wide array of goals use First Amendment argument when "find that society has not given them the doctrinally or rhetorically effective argumentative tools they need to advance their goals."

The unique problem associated with granting the First Amendment protection to market players and, more specifically, credit rating agencies, is their ability to argue that their function is merely to provide “opinions”. The credit rating agencies long maintained that their core business is financial publishing and, therefore, were generally shielded from liabilities under the securities law unless actual malice is demonstrated. The credit rating agencies had some success in persuading courts that their core activities constitute a matter of public concern and holding a credit rating agency liable for its bond ratings would have an oppressive effect on the publication of important financial information to the public.

My conference presentation illustrated the phenomenon with a series of court cases. Various courts have reached a range of results in cases filed against the rating agencies. Even though the rating business can be positioned as publishing of financial opinions, such a publisher can be held liable for malfeasance. Further, the securities law regulates commercial speech by providing for liability for false and misleading statements. Applicable to the credit rating business, the court have distinguished whether rating agencies were merely collecting and analyzing information or were playing a more significant role in the transaction thus can be qualified as agents of the issuer. On the other hand, the United States Supreme Court has stated that it is difficult to see why the expression of opinion about a marketable security should not also be protected: credit rating agencies do not profit from the sale of the bonds of any company that they rate for creditworthiness and they perform an essential service for economy and efficiency of the capital markets.

In light of the on-going credit crisis fueled, in part, by poor performance of the credit ratings and heightened concerns regarding rating agencies independence, the courts are less likely to establish First Amendment protection of credit rating opinion. We can point out at least two reasons: (1) if a credit rating opinion is not disseminated to investment public at large, but only made available to a limited number of investors (i.e., private ratings) then such an opinion is less likely to qualify a "matter of public concern;" (2) if a credit rating opinion is published in regard to a security that was structured followed an instructive communication process between a rating agency's analysts and underwriters then such a process is less likely to qualify as merely publishing, but could be viewed by the courts as administering a professional advice. In addition, in foreign jurisdictions where the freedom of speech argument is less culturally accepted, credit rating agencies may have to use other argumentative tools to organize the defense.

Schauer, F., 2000, First Amendment Opportunism, KSG Working Paper No. 00-011

Graduate Conference Follow Up: First Amendment Opportunism