Review of the Legal Profession Act Final Report
Arguments against maintaining the current licensing scheme include:
National Licensing Scheme
Currently, inter-state practitioners in NSW are subject to one of two recognition schemes; the national practising certificates scheme or the Mutual Recognition Scheme. There are potential problems with both of these schemes.
The Standing Committee of Attorneys General agreed in principle to the implementation of the national practising certificate scheme, based on reciprocity rather than unilateral recognition. This approach was intended to ensure that as far as possible, the scheme remained uniform, and to provide an incentive for all jurisdictions to provide the same rights of entry and practice to all Australian practitioners.
Part 3B of the Legal Profession Act gives effect to the national practising certificates scheme in New South Wales. Inter-state practitioners in NSW are governed by the national practising certificates scheme if the state in which the practitioner was admitted has corresponding legislation. However, practitioners from jurisdictions which elect not to participate in the scheme continue to face barriers to entry in NSW. Practitioners not governed by the national practising certificate scheme are governed by the Mutual Recognition Scheme which requires the legal practitioner to pay significant costs to be admitted in NSW.
There are a number of ways that the national practising certificates scheme could be expanded to allow all inter-state legal practitioners to practice in NSW under the scheme. These include:
A national scheme would facilitate the development of a uniform national market for legal services, but could also become remote from the needs of both practitioners and consumers, reducing their ability to have input into the development of ethical and professional standards.
Practical legal training before admission represents a significant expense for students which is ultimately passed on to consumers of legal services. The diversity of legal practice calls into question the need for all practitioners to complete practical training in all areas relevant to private practice. In addition, formal practical training might not be essential for practitioners who plan to work in large firms, in corporations, or in Government, because of the supervision and professional development which such organisations can offer. A possible alternative to formal practical legal training could be the introduction of a system of articles of clerkship for graduates employed by such organisations.
Limited exemptions to the requirement to complete practical training exist for Government employees. However, there appears to be little reason for the exemption for Government employees, but not to other employees. Similar skills and experience can be obtained in the private sector and other Government employment.
Respondents supported restrictions on entry to the legal services market, and the licensing system supervised by Government, as they believed that they assist consumer protection. The ACCC, NCOSS and PIAC stated that licensing assists in overcoming the information asymmetry between legal practitioners and consumers. The Bar Association stated that the effectiveness of the court system depends on the competence and character of legal practitioners. The issue of practising certificates by the Law Society and the Bar Association ensured the close supervision of the education and discipline of lawyers and provided an integral source of support for the supervision of the Court. The scheme also protected vulnerable clients from exploitation. Mr Justice Windeyer stated that proper controls were required for the legal profession in order to ensure that the public interest was served, rather than the interests of individual clients.
The Law Society stated that licensing avoided market failure and facilitated the development of an efficient market by providing consumers with basic information.
The suggestion raised in the paper that the current scheme for uniform licensing be replaced or supplemented by activity based licensing drew diverse responses. The ACCC indicated that there might be a public benefit in adopting a more flexible approach to the licensing of professionals providing legal services. The ACCC was of the view that while licensing of legal practitioners might be warranted, this did not mean that all legal services had to be licensed in the same way. The ACCC noted that many legal services may be discrete and relatively simple, such as uncontested divorce and administrative and welfare advocacy. The ACCC suggested that a scheme of voluntary certification and mandatory licensing for some areas of work, similar to that which applies to accountants, should be considered for legal practitioners.
However, this proposal was rejected by the Law Society, the Bar Association and NCOSS. The Bar Association’s position was that such a scheme was incompatible with the role of legal practitioners as officers of the Court, and would impede the maintenance of ethical and professional standards. The Law Society argued that such schemes would bring about overlap, gaps in expertise and duplication of resources. The Law Society also identified insurance and fidelity cover as problematic and was of the view that any organisation administering a selective licensing scheme would probably conclude that most or all of the elements required for legal training were necessary in any case.
It is noted that at present there does not appear to be demand from either consumers or rival professional groups for the implementation of new schemes to facilitate the entry of non-lawyers into the legal services market. In particular, activity based licensing could affect the access of consumers to complaint resolution and disciplinary bodies and the ability of those bodies to supervise individuals performing legal work.
Nevertheless, the scheme for conveyancers set out in the Conveyancers Licensing Act 1992 has now been operating for several year. It is suggested that the possibility of activity based schemes applying to non-lawyers should be considered further as the market develops.
There was general agreement that a disciplinary scheme should be maintained in the public interest.
National scheme for licensing
This issue was addressed by the Law Society and the Bar Association. Both organisations supported a national licensing scheme. The Bar Association suggested that it might support the abandonment of reciprocity as a condition of the national practising certificates scheme, in order to encourage the participation of all jurisdictions. However, the Law Society was of the view that reciprocity was an integral feature of the scheme and necessary to ensure uniformity in insurance and fidelity fund cover and that local practitioners competed on an equal playing field.
The Law Society indicated its support for a single national scheme of regulation based on uniform State Acts. However, the Law Society indicated there are some issues of divergence between States which would need to be addressed. The Bar Association rejected the proposals for a single regulator, but indicated that all regulatory bodies should be encouraged to coordinate their activities as far as reasonably practicable. The ACCC stated that any proposals for uniform legislation would not necessarily remove anti-competitive practices and that therefore proposals would need to be examined for anti-competitive effect.
The ICA stated that practitioners should be able to practise automatically in other jurisdictions and that a single, national regulator should be considered further.
There was general support for the existing requirements for academic and practical legal training. The Bar Association rejected the suggestion that restrictions be placed on the practice of legal practitioners who had not trained in certain areas and stated that this issue should be dealt with by encouraging practitioners to develop the necessary insight and skills to recognise and address limitations in expertise.
The Law Society and the Bar Association agreed that all practitioners should be required to undertake the relevant practical training to practise as either a barrister or solicitor. The Law Society’s position was that any exemptions should be considered on a case by case basis and be given because of the practical experience demonstrated by individual applicants, rather than by category. The Bar Association was of the view that the character and competence of the applicant, not experience alone, should determine whether an exemption was made.
Mr Rob Zikmann stated that the current system is unfair to mature people who may have substantial experience in particular areas of law. He suggested that such graduates be immediately permitted to practise without restrictions in particular fields of law. However, the implementation of a new scheme of practising certificates based on these considerations would create difficulties for clients who would not necessary know of practice restrictions.
There appears to be general agreement that the current licensing scheme for solicitors and barristers serves the public interest by protecting the public from incompetent and unqualified persons. Many matters dealt with by lawyers cover more than one area of law and a general licence ensures that practitioners can recognise and deal with all types of work. Further, it would be difficult for consumers to be sure that a practitioner who could only act in certain areas of law was licensed to accept their instructions. On balance, it is recommended that the current general licensing scheme continue to apply to solicitors and barristers who have been admitted and hold practising certificates.
Although the licensing scheme for conveyancers has shown that it is possible to separate discrete areas of work and allow non-lawyers to perform them, provided that suitable training is provided, there does not appear to be demand at present for the creation of further schemes for activity based licensing. Examples of areas of work which may warrant further consideration are the conduct of probate work, simple family law matters and advocacy in tribunals which do not apply evidentiary rules. The advantages of opening these markets may include greater competition among service providers and lower costs for consumers.
The ethical and professional duties of solicitors and barristers set them apart as members of a profession from other participants in the market. However, compliance with ethical and professional obligations might be made a condition of the grant of a licence to perform select categories of legal work, or might be required as a condition of membership of voluntary associations representing occupational groups. Such conditions would enhance the confidence of the public in the competence and integrity of service providers.
As Governments have recognised, it is imperative that national practising certificates legislation be enacted to facilitate the development of a national legal services market. However, the inconsistencies between various State and Territory Acts, in areas such as business structures, insurance and fidelity cover, may affect the efficacy of the national practising certificates legislation. In addition, the requirement for reciprocity which is a condition of participation in the current scheme has delayed its implementation. Nevertheless, it is likely that significant revenue would be lost by regulatory bodies in jurisdictions which have enacted national practising certificates legislation if the requirement for reciprocity was abandoned. Further, the requirement for reciprocity may act as an incentive to other jurisdictions to enact the necessary amendments.
These issues would be overcome by the enactment of a uniform regulatory scheme, on a co-operative basis, administered by each jurisdiction. It is recommended that this issue be placed on the agenda of the Standing Committee of Attorneys General.
As noted above, there appears to be general acceptance of the current scheme which requires academic and practical legal training to be completed by most students before admission. However, it is noted that the LSC has stated that many complaints which are made to the office of the LSC appear to arise from poor communication between solicitors and barristers and their clients. It is suggested that training in client service skills, including communication and negotiation skills, might be included in training as a prerequisite to admission.
There does not appear to be significant dissatisfaction with practical legal training, or demand for a broader range of exemptions. The issues paper canvassed the possibility of employers offering in-house practical legal training as a substitute for practical legal training conducted by an external service provider. However, this option is not supported because it would favour certain graduates who were employed by those firms and place others at a relative disadvantage. Further, the provision of training at arm’s length from employers promotes public confidence in the integrity of the profession and the ethical training provided to students.
2.1 Does the public benefit of a uniform government licensing scheme of lawyers outweigh the compliance costs and restrictions on competition which are generated by such licensing?
2.2 Should the scheme for licensing of lawyers apply only to certain categories of work, as in the case of accountants? Which categories of work should be subject to licensing?
2.3 Should the scheme for the licensing of lawyers be replaced by activity based schemes, which apply to all participants in the market for legal services, such as schemes to regulate professionals who hold funds on behalf of others, and professionals who represent clients in litigation and court advocacy?
2.4 Would activity based licensing compromise the professional and ethical standards adhered to by all practitioners?
2.5 Could statutory licensing be replaced by a scheme based on voluntary compliance, established by professional bodies representing lawyers?
2.6 Is a disciplinary system which applies solely to lawyers warranted in the public interest?
National practising certificates
2.7 Should Part 3B of the Act, which establishes a scheme for national practising certificates, be amended so as to provide for the automatic recognition of practitioners who are eligible to practise in other jurisdictions, or should the conferral of rights of practice be contingent on the passage of corresponding laws as at present?
Further consideration should be given by Governments to the removal of the requirement for corresponding laws to be passed in each jurisdiction, as a prerequisite to permitting practitioners from other jurisdictions to enter State and Territory markets. The requirement for corresponding laws is likely to affect competition across State and Territory boundaries. However, this consideration should be weighed against the incentive for the enactment of national practising certificates legislation provided by the requirement for reciprocity.
2.9 Academic training
2.10 Given that the current system of admission permits a legal practitioner to accept instructions in any area of law, should restrictions be placed on the types of matters undertaken by legal practitioners who have not completed formal study in certain areas of practice?
2.11 Practical Training
2.12 Should limited exemptions be available to practitioners proposing to work for Government, corporations, or firms which have their own training arrangements in place?
2.13 Should the limited exemption from practical legal training which applies to some public sector employees be retained in the public interest?