Solicitors say Bill will not reduce legal costs

A survey finds that most solicitors expect the Legal Services Regulation Bill to change the profession

More than 70 per cent of solicitors believe the Legal Services Regulation Bill will not lead to a reduction in costs for clients, a major survey of solicitors’ firms has found.

It also found firms had increased the use of fixed-fee arrangements with clients in place of hourly fees.

Some 93 businesses took part in the Irish Law Firm Survey, carried out by accountancy firm Smith Williamson, with 70 per cent of the firms based in Dublin and three-quarters categorised as “small”. The report found there were “passionate” feelings about the Legal Services Regulation Bill and a lot of uncertainty.

The Bill, published in October 2011 by Minister for Justice Alan Shatter, followed a memorandum of understanding with the EU-IMF. It includes the introduction of an independent regulator, multidisciplinary partnerships with barristers and solicitors working together and the removal of restrictions on direct access to barristers.

Change ahead

It also includes the removal of the monopoly on legal professional training and proposals to introduce clarity and transparency around costs and to provide for dispute resolution concerning costs. The measures were recommended in a report by the Competition Authority published in 2006.

Almost 90 per cent of those who responded to the survey said the Bill would bring some change, ranging from slight to significant, to the legal profession. Almost one in five said this would mean changes in their practice, while 13 per cent said it would lead to increased regulation.

“It will undoubtedly be a disappointment to the Competition Authority and the Minister that a significant majority, 72 per cent, of respondents expect no reduction in legal costs for clients,” the report said.

A quarter of respondents said the introduction of the Bill would lead to a reduction in costs and 3 per cent were unsure.

The survey also found the appointment of legal cost consultant Declan O’Neill and solicitor Rowena Mulcahy to the Office of the Taxing Master, which assesses fees, had “anecdotally led to greater control being placed on legal fees”.

One-third of respondents felt the new Bill would have less impact on fees than their appointments.

Only one in four of the firms surveyed supported the proposed introduction of the Legal Services Regulatory Authority as part of the Bill, although it has the support of the Law Society.

More than 60 per cent of those surveyed believed there would be no benefit to clients in terms of costs or services if barristers and solicitors were allowed to practise together in multidisciplinary teams.

The report also found there had been a “marked increase in competition between firms for corporate and commercial work”. More than 70 per cent had increased the level of agreed fixed fee arrangements for services provided.

“Firms are now asked to quote for the provision of legal services across the board and even when they are on a panel they are obliged to quote for each individual piece of work,” the report said.

Many professional service providers “do not like speaking about or haggling over fees” and lawyers found negotiating with clients “extremely stressful”. It also said the increasing move from hourly bills to fixed fees was “inevitable”.

Improving confidence

The survey found confidence was improving in the sector, with 70 per cent of firms saying they expected things to stabilise or improve in the next 12 months, compared to 57 per cent in the previous 12 months.

More than half the firms saw a decrease in turnover, but this did not translate into a loss of profit, with almost 80 per cent expecting profits to remain consistent or slightly improve in 2012 compared to 2011.

The key issues that firms envisaged facing for the next 12 months included dealing with pressure on fees, as well as maintaining profitability, managing cash flow and coping with the economy. Almost 40 per cent of firms had experienced an increase in their bad debts in the last year.

The survey also found one in three firms had restructured their financial commitments in the last 12 months and the changing attitudes of banks had made it more difficult to obtain funds.

Almost all of those surveyed, 94 per cent, expressed their support for the introduction of incorporation for partnerships in Ireland. Although the Law Society had campaigned for such a change, it was not included in the Legal Services Regulation Bill. At present, individuals in partnership are jointly and severally liable for all the debts and obligations of the firm.

Firms believed the introduction of incorporation would lead to a limit on their liability in partnerships, a reduction in risk and insurance costs as well as protection for individuals.