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Independent panel report throws up ‘significant and complex’ implications for lawyers

16 Mar 2023

| Author: Reweti Kohere

A once-in-a-generation review of how New Zealand’s lawyers are regulated and represented has proven a watershed for the profession as it grapples with a key finding – that a “strong case” exists for a new, independent watchdog. That’s just one recommendation from an independent review panel the New Zealand Law Society (NZLS) commissioned a year ago to analyse the statutory framework for legal services in Aotearoa New Zealand.

With a new regulator likely, NZLS will lose its regulatory function, instead continuing to act as a national representative body with a new single governance layer. But the recommendation flies in the face of calls, including from ADLS’ committees, for the profession to maintain the ability to regulate itself.

The panel has also recommended including Te Tiriti of Waitangi in an improved regulatory framework, specifying regulatory objectives to guide the regulator and empowering it to oversee law firms as well as individual lawyers, reform the “slow, adversarial” complaints process, give lawyers and non-lawyers footholds in new business arrangements and encourage more progress on diversity and inclusion.

The profession has until the end of May to provide constructive feedback on the panel’s recommendations. So far, responses shared with LawNews have been mixed, from lamenting that the panel hasn’t gone far enough on certain matters to expressing disappointment that the trend towards a corporatised” legal profession is being embraced. And concern remains that any reforms must not undermine the fundamental obligation of lawyers to uphold the rule of law.

“When we are acting for clients or for public interest causes, we may be involved in challenging a government policy or decision on behalf of a client or in the public interest,” says New Zealand Bar Association President Maria Dew KC. “So the public also has an interest in ensuring that we remain a strong and independent voice for the public, and regulation of the profession is free from the risk of political influence.”

Rule of law

Dew says the report gives NZLS a valuable resource of recommendations for change, including the streamlining of the organisation’s governance structure, an overhaul of the complaints and disciplinary process, the removal of the pro bono services hurdles for in-house lawyers and the focus on promoting a more diverse culture within the profession.

The Bar Association’s main concern is that changes to the way lawyers are regulated don’t undermine the practice of law as a profession, “which at its heart is charged with upholding the rule of law”, she says. The association will keep pushing for the regulation of non-lawyers, including employment and ACC advocates, as barristers have serious concerns about whether the public is sufficiently protected.

As things stand, non-lawyers lack oversight; the public has no professional body to complain to should they provide inadequate representation. The review panel has recommend not extending regulation to other unregulated legal service providers.

The panel has also parked the issue of how barristers are appointed to the rank of King’s Counsel, although it acknowledges the appointment process warrants reconsideration at some point in the future. Some submitters criticised the process for lacking transparency, which reinforced the perception of an old boys’ club, with an element of shoulder-tapping and rewards for those who are well-connected, the panel said.

Dew explains senior Bar members are appointed to the Bar Association Panel, which considers each application and accompanying references carefully, as does NZLS and the judiciary. Their considerations are collated and referred to the solicitor-general, chief justice and attorney-general. “This is a rigorous process of consideration and it is very far removed from any ‘boys’ club’ process, which might have been a concern in past generations,” she says. “However, the Bar Association does believe it is time to reconsider the format and possible adoption of a joint selection panel to enhance transparency and uniformity of the process.”

‘If it’s not broken, don’t fix it’

Gibbs Mills Livingstone Lawyers partner Sam Khalesi says the report is “disappointing but not at all unexpected”.

In an earlier LawNews article, Khalesi cautioned against the profession’s increasing “corporatisation”, saying opening it up to non-lawyers was “little more than propaganda created by overseas lobbyists to open our profession to private money”. “We must at all costs resist the urge to blindly follow international trends. Larger jurisdictions that have relaxed their rules have done so at the behest of obbyists with very particular agendas,” he said.

The report noted international studies supported the view that business restrictions were motivated less by a desire to protect clients than to protect lawyers from competition. Such protectionism raised the cost of legal services while reducing their availability, stifled new start-ups and constrained competition. The panel referred to reforms in Victoria, New South Wales and Western Australia, as well as England and Wales which it said were at the forefront of how corporate form was regulated.

This overseas experience, on which the report relies heavily, is “premature”, Khalesi says. “The effects of consolidation, which can hinder competition, increase prices and decrease service quality, are significant issues that may take up to 20 years to manifest, as seen in the medical industry in the United States.“It is unreasonable to assume that our industry will be exempt from the potential consequences of consolidation and we should allow for more time to pass before evaluating the overseas experience as a success or failure.”

The panel’s focus on investment in the industry is “misplaced”. Khalesi says the “magic circle firms”, a term describing the five most prestigious London-headquartered multinational law firms, aren’t struggling for cash and don’t require external investors. “The top five law firms worldwide have revenues exceeding US$20 billion. What kind of investment do these firms need that they can’t finance themselves? If it’s not broken, don’t fix it,” he says.

Not far enough

Te Hunga Rōia Māori co-presidents Renika Siciliano (Waikato, Ngāti Maniapoto) and Baden Vertongen (Ngāti Raukawa) agree that fundamental change is needed as the profession’s current model of regulation and representation is fundamentally flawed. “The report shows that we are not alone in this, and that the current system is outdated, unrepresentative, and unresponsive.”

The Māori Law Society welcomes the recommendation that an independent regulator should include Māori representation, that Te Tiriti be incorporated in any new statutory framework and that cultural competence should form part of lawyers’ ethical and professional competence.

However, the co-presidents would’ve gone further than the majority of the panel in a number of areas, including whether to add regulatory objectives covering the use of te reo Māori and the preservation of tikanga, and including Te Tiriti in the fundamental obligation to uphold the rule of law.

The report noted that panel chair Professor Ron Paterson and member Jane Meares believed a less expansive list of regulatory objectives was better, in contrast to member Professor Jacinta Ruru (Ngāti Raukawa, Ngāti Ranginui, Ngāti Maniapoto) who advocated for specific references.

“The report is silent on key structural issues relating to the representative function of NZLS in any new model,” the co-presidents say. “We encourage NZLS, and the profession as a whole, to move towards the type of model suggested by the panel in order to best support all members of the profession and the clients who depend on us.”

Not going soft

Among the key submissions made by ADLS committees to the independent panel: lawyers don’t want or need an independent regulator. NZLS should continue to act as the regulator, but it must first relinquish its advocacy function to avoid actual and perceived conflicts of interest. Triage is needed for the complaints process, which is broken and not fit for purpose. And any move to incorporate Te Tiriti into the Lawyers and Conveyancers Act is likely to be divisive and have unintended consequences.

The committees’ biggest concern on regulation was the potential for conflicts of interest between the regulatory and membership representative functions of NZLS. The committees were unanimous on this issue: confusion existed as to whether the law society was the police or an advocate. There was a perception the model skewed disproportionately toward the regulator role, reducing the law society’s ability to make submissions to Parliament on bills and to other government agencies on relevant matters. Most committee members agreed, however, that there was no need to establish a new, independent regulator.

“Having a new, independent regulator, likely with members appointed by the government of the day, may impede the ability for lawyers to fearlessly uphold the rule of law, challenge the government and as a result diminish access to justice. Indeed, any arrangement other than the legal profession self-regulating may lead to such an unintended perceived and/or actual outcome.” Self-regulation did not mean going soft on practitioners, the submission said.

No longer tenable

In recommending a new, independent regulator without direct ties to the government, Paterson says it is no longer tenable for NZLS to be both regulating the profession and representing lawyers’ interests. “The conflict between these two competing functions is undermining the efficiency and effectiveness of the law society as a regulator and eroding the trust of lawyers in their membership body.”

The proposed governance structure – four lawyer members, four public members, with one of the public members as chair – will “clearly signal a clean break with the past and a shift to regulation in the public interest”. Paterson says the law society will continue to serve as a national representative body for lawyers. The panel heard more concerns about the current complaints system than any other topics and “wholesale” reform has been recommended, Paterson says.

The highly prescriptive system of using volunteer Standards Committees would be replaced with a professional in-house model focused on low-level resolution. Formal disciplinary procedures would be reserved for only the most serious of complaints. Meares says the recommendations on business arrangements will protect consumers, ensure fair competition and enable innovation.

It’s envisaged non-lawyers will be allowed to have ownership interests in law firms and lawyers will be permitted to formally team up with non-lawyers. A “compelling” case exists for freeing up the profession to embrace such arrangements, Meares says. “Both consumers and lawyers will benefit if lawyers can partner with non-lawyers, such as accountants, to provide a broader range of services to the public.

Ruru says there’s much more work to do to improve the profession’s culture. “There is a lack of gender equality in many senior positions, a striking lack of ethnic diversity across the profession and barriers for lawyers with disabilities. Coupled with the well-documented issues of harassment and bullying, it is no surprise we heard from many lawyers about the urgent need for change.”

Law Society

The NZLS board and council are reviewing the report ahead of preparing a response by the end of July for the Minister of Justice, Kiritapu Allan, to consider. An NZLS spokesperson confirms the response will be passed on to the government to facilitate the shape any future legislative reforms might take.

The panel is undertaking a series of information sessions with the profession in the next month and practitioners can still provide feedback on the review until the end of May, the spokesperson confirms. “Submissions from the profession would also form part of any legislative reform.”

NZLS President Frazer Barton says the “very substantial” report had given the profession a lot to consider and “significant and complex implications” flow from the recommendations. “Any legislative change wouldn’t happen quickly. We will work with government to understand the likelihood of legislative change as we strive towards our commitment to being a best-practice, modern regulator and peak national representative body for the legal profession.”

Barton says progress has already been made in line with the panel’s conclusions and the law society will continue to make headway.“This independent review is an important step forward to outlining the potential changes that are needed for the legal profession in the future, but it is going to take all of us working together to achieve the differences that are needed.” ■

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