Category Archives: The Legal Profession

What Is Esto Law? And Why is the Glasgow Bar Common Room Seething?

John McGovern is one of the hardest working and best lawyers at the Glasgow criminal Bar.

He is also a prolific Twitterer. On Saturday, he tweeted the following:-

 

Ain’t seen an angrier Bar Common Room than Glasgow Sheriff Court yesterday. What you got to say about this one @lawscot? Your Esto position?

 

What had upset him?

On 10th October 2011 a company called Place D’Or 712 Ltd was formed, with its Registered Office care of Peterkins Solicitors in Aberdeen.

On 7th November the company changed its name to Esto Law Ltd. On 24th November the Registered Office was changed to 1 George Square, Glasgow.

On the same day, 24th November, seven directors were appointed. These were Ken Dalling, Vincent McGovern, John Scott, Ian Bryce, Neil Robertson, John Keenan and Stuart Munro. They are all solicitors. More than this however, the first four were, until the recent resignations of Ian Bryce and Ken Dalling, members of the Law Society of Scotland Legal Aid Negotiating Team.

The system of Criminal Legal Aid has suffered what some practitioners have described as “death by a thousand cuts” over recent years. The rates of pay are being eroded – more work is expected for less pay.

The Glasgow Bar Association reacted furiously when the Scottish Legal Aid Board cut the money paid for criminal defence work in JP Courts. Glasgow JP Court, being extraordinarily busy, has a number of Stipendiary Magistrates sitting, whose powers of sentencing equate to those of a Sheriff in summary proceedings. However, the cut of pay disproportionately affected solicitors who worked in Glasgow JP Court. Some complained that they had been sold down the river by the Law Society Negotiating Team who had, in the eyes of many, failed to stand up for the Society’s members in Glasgow. The Glasgow Bar Association has also felt marginalized, as it has perceived itself to have been denied representation on the Negotiating Team since 2008.

In addition, the cut in fees for the Stipendiary JP courts was, in fact, suggested by the Negotiating Team to SLAB, without consultation with the GBA, or indeed any Glasgow criminal solicitor. Many viewed this as the Negotiating Team being happy to sacrifice interests of the GBA membership in favour of the wider Law Society membership. Whilst that, per se, might not be unreasonable, the very least the GBA could have expected would have been consultation, rather than a fait accompli. John McGovern, at the time the head of the GBA, voiced his concerns about the issue in the Firm magazine. The perception was not that this was a decision made to balance interests of members across Scotland, but to” punish” the GBA for its impertinence.

The massive upheaval which occurred after the Supreme Court’s decision in the Cadder case allowed SLAB to further shift the goal posts. Significant and onerous changes were brought about to the Duty Solicitor scheme, following the decision that the practice of questioning suspects in police stations without the suspect having had the opportunity of speaking to a solicitor was illegal and evidence obtained in that way was inadmissible.

The bulk of the criminal solicitors in Scotland boycotted the original “new” Duty Plans. This brought concern that SLAB would use this opportunity to give significantly more work to the Public Defence Solicitors Office. Whilst there were some changes made to the scheme, these fell far short of what many solicitors wanted, but the Law Society Negotiating Team hailed the changes as a good deal. There were more than a few rumblings of discontent.

The criminal Bar fears the action that SLAB might take, without intervention by the Law Society as far as some are concerned, will make it even harder to carry out this work. Many are concerned that ultimately SLAB wants to make the role of the PDSO mandatory if a client wishes to receive criminal Legal Aid. Alternatively, following the model of Legal Aid in England, there are fears of “franchising”.

That then leads us to the news which broke on Friday. Four members, or recent members, of the Law Society Negotiating Team, along with three others, had set up this new company, Esto Law Ltd. It does not appear that any of them are leaving their existing firms for the new entity.

Why would solicitors from Glasgow, Livingston, Edinburgh, Wishaw and Stirling combine to form a practice based in Glasgow?

The concern I have heard expressed is that this is the first step to there being a criminal Legal Aid franchise in central Scotland. The people in the Law Society who would have the best idea of the SLAB plans are the Negotiating Team. It seems unlikely that they would have formed the new entity on a whim, or a wing and a prayer.

Long standing criminal practitioners, like John McGovern, are clearly very concerned for their livelihoods, but more so for the ability of the profession to carry out its vital role in the criminal justice system.

Criminal Legal Aid work is not popular outside its practitioners. The public see the “guilty” being defended. They ask how lawyers can defend “people they know are guilty”. The police, some of them, feel that the defence lawyers are simply “getting the criminals off”.  From time to time, and clearly unjustly, defence solicitors get the feeling that they are seen as nothing but nuisances by the Bench.

But they do a vital job, testing the Crown case and representing and assisting some of the most disadvantaged in our country. Many “criminals” become so as a result of problems such as drug abuse etc. That is not to excuse them, but it is a fact, and if the cycle of offending is to be broken then ironically the ability of criminal defence lawyers to put across their client’s position clearly, and to explain what is happening to the client, plays an important role in that.

When the team negotiating with SLAB as to the future goes off and, almost in its entirety, sets up a new company, outside the geographical areas where many of them are based, is it unreasonable to be concerned?

Civil servants and politicians now face restrictions on jumping from government straight into an industry position related to the area of their responsibilities. The creation of Esto Law looks as if it falls into that category too.

There may be nothing in this at all, but so far, as I understand it, the Law Society has made no comment, and nor have the solicitors in question, although a PR offensive is expected imminently.

To make it worse, Mr Bryce is standing for election as the Vice President of the Law Society, and if successful, will by convention become President the following year, without an election. Does a prospective President have an obligation to the profession not to be seen, even incorrectly, to be behaving in what some of the more polite lawyers have called a “sleekit” manner?

Mr Bryce stood down from the Committee citing his wish to spend more time with his family. Clearly this opportunity arose following that to take up a little of the free time he had created for himself.

Until there is a clear response, excellent lawyers like John McGovern, and solicitors across the Bar Common Rooms of Central Scotland, will be right to be angered by the lack of information, and concern as to the future.

 

 

 

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Filed under Esto Law, The Law Society of Scotland, The Legal Profession

The Coming Bonfire – Lessons from Guy Fawkes for the Scottish Legal Profession?

 

 

Austin Lafferty, Vice President of the Law Society of Scotland, and Walter Semple, Law Society Council member, last week used the electronic pages of The Firm to discuss the coming “ABS tsunami”.

The highly esteemed gentlemen fail to see eye to eye on the role of the Society in how the profession got to this point, but each acknowledges the struggles which lie ahead, with Mr Lafferty bluntly saying “the core workstreams of many firms will be decimated, with obvious consequences.

Conveniently for the days after 5th November, the blogger Guido Fawkes, normally one for hot-off-the-press political gossip, has written a piece about the role of the investment banks in the global financial crash, prompted by his having read the excellent and chilling “The Big Short” by Michael Lewis. Anyone wanting to understand the limitless greed and stupidity which brought the financial world to a halt should read Mr Lewis’ book.

Dealing with investment bankers, Guido, as a former investment banker himself, points out when the rot set in at the major institutions. He describes one of the problems as the fact “that investment banks were no longer partnerships; they were publicly listed companies, with shareholders who were not involved in day-to-day management. This has proved to be a disastrous form of capitalism, with owners who don’t know what the managers of their money are doing.

Investment banking, till the early 1980’s, was carried out by partnerships made up of investment bankers. The capital in the firms, and the risks, were both the responsibility of the partners. As Guido says “the oldest and most experienced partners tended to have the most capital in the firm. This had a risk management effect greater than any Nobel Prize winning computer-calculated risk model, the old guy with the grey hair stood to lose everything when some testosterone charged 27 year-old trader bet the firm’s capital … The bosses’ desire to keep their retirement pots concentrated their minds”.

Stock market listing, and external ownership, such as that brought in by the Big Bang during the Thatcher years lead to a situation where the providers of the capital, and therefore those bearing the risk, were no longer in any control of that risk. Is it a coincidence that Collateralised Debt Obligations and the rest of the alphabet soup which made up the speculative “investments” at the root of the crash were financial instruments dreamed up by the corporate whizz kids on massive salaries, but who stood only to lose their jobs if they got it wrong, rather than everything they owned?

As Guido says “There is nothing moral in asymmetric markets where the risks are borne by others than those taking the risks.

The Scottish legal profession faces an imminent and huge upheaval. As Mr Lafferty says, “The threat…is that the high street legal market will get hoovered up like the high street optical market has been, in which 80 per cent of the trade is owned by a tiny number of brand names.” As a profession, solicitors “need to be sales-savvy, market-alert, entrepreneurial” to avoid “having to watch as companies with increasingly bizarre names and brands try to elbow their less-qualified way into the market place.

Mr Semple, expressing a concern going further than merely commercial and marketing matters, warns that “(The Law Society has) been presiding over a potential catastrophe for many solicitors in Scotland which was entirely avoidable. … The changes in the Legal Services legislation now require solicitors to act independently (rather than be independent)…This change will compromise the independence of solicitors who offer services to the public. External owners of legal service providers will not be directly bound by solicitors’ ethics. They will be motivated only by commercial interests.” (Emphasis added.)

I have no doubt that investment bankers, in the old days, were as a rule, as professional and ethical as solicitors. However, the passage of time, and the loosening of the direct connection between capital and risk, allowed corners to be cut, and edges to be shaved, all in the interest of profit. The creators of the wacky financial “instruments” described by Mr Lewis were not unethical either. But, as I mentioned above, is it coincidental that they were only created once the capital/risk link was broken, or at best severely stretched? Financial backers will want a dividend on their money – we are in a capitalist society after all, and pressures will inevitably increase on legal businesses under ABS to provide a good return on their investors’ capital. Over time, as with the investment banks, things are likely to slip.

Even although the ABS model to be applied here is not (yet) full flotation, the twin risks identified by Messrs Semple and Fawkes place the profession at great risk. The “liberalisation” of the financial markets too was intended to allow greater competition, and permit the investment banks to act outwith the hidebound old rules, whilst of course remaining true to their ethics, thus allowing them to increase their profitability, both for the banks themselves and their investors and backers. We can see, laid out in Mr Lewis’ book, and indeed on the news daily, where that led to.

Self-interest is a necessary human trait, and who could fault a partner at a big practice who sees the possibility of their business floating, with a huge windfall for the people lucky enough to be owners when the music stops? It seems inevitable that, as time progresses, the restrictions in place in the imminent ABS structure will fall away, as they are seen as being “anti-competitive” or still as leaving legal businesses at a “financial disadvantage” in raising capital, as compared with other professions. Full flotation will come in due time, even though there are probably only a handful of firms where, in reality, this will have any substantial direct effect. It is unlikely that, for example, even the best High Street one-man criminal practice will be able to have an IPO!

Mr Lafferty refers to the “ABS tsunami”. As we have tragically seen in real life, if a tsunami is already on its way towards you, then there is nothing which will stop it.

 

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Filed under Alternative Business Structures, The Law Society of Scotland, The Legal Profession