We live in an era of broad consensus that levels of public borrowing cannot move outside certain limits. This has profound implications for all areas of publicly funded services. The justice system faces this issue but the resulting debate has been dominated by the level of government funding for legal aid. This has become a war of attrition.
In any war, it is necessary to avoid sympathising with the enemy. This has, however, been costly to both sides as it has constrained constructive dialogue about new approaches to the provision of legal services and access to justice. We have silently observed a gradual erosion of the proportion of the populace which can access legal advice and support in areas which were not part of the legal aid scheme in the first place.
This article proposes a different approach which is based on the following premises:
- A strategic approach should be taken to the legal system which is explicitly based on national self-interest and commercial benefit. This approach needs to be led by the profession and government jointly. Its rationale is economic and it rests on the fact that access to justice is a business issue as well as a societal one.
- Funding for public services will require a mixed approach in which private investment, philanthropic investment, commercial investment and local and central government investment will co-exist.
- Government should be a last resort for investment in areas which require innovation. It is hidebound by procurement rules which inhibit and burden it. It is also risk averse.
- There is an exceptionally strong national economic argument for supporting a strong legal system. This argument, if properly made, should encourage a diversity of funding sources.
- Government can play a central role as a promoter of investment by others in the legal system but this requires engagement with the legal system and understanding of it.
These propositions take as read that there should be a commitment to an independent justice system which underpins our democratic state. They take as read also that there should be a commitment to the separation of powers which underpins our constitutional settlement. The absence of comment on these issues should not imply any failure to recognise their fundamental significance.
The fact that these fundamental social and constitutional arrangements are generally unchallenged in principle has not, however, helped to identify a level of investment in the legal system which commands general agreement. We have become stuck on arguments which contend that our commitment to liberal democratic values results in a duty on the part of government to fund certain public services. If, however, a part of those services can more effectively be provided through other channels, the current debate may be misconceived. In any event, this debate is rarely productive or simple because it cannot be divorced from the related debates about efficiency and cost savings. The result that there is no comprehensible calculation of specific levels of public investment that can command agreement without first concluding complex, long running arguments about efficiency and cost saving.
We should instead begin with an acknowledgement that our national economic interest favours a strategic approach towards investment in the legal system. If such a strategic approach is taken, the result will be a diverse set of investment sources across public, private and third sectors which will produce an environment in which innovation is actively rewarded and incentivised. The level of investment required will not be great in net financial terms and the bulk of that investment could most effectively come from outside government but with informed strong strategic support from government.
We often separate access to justice and business reliance on the rule of law as if they are separate worlds: they are not. We need our approach to access to justice to be business-like, evidence based and founded on solid analysis of needs and capabilities. We need the world of business to embrace an awareness of its debt to society and the rule of law. When this happens, we can prosper in all senses of the word.
1. The Business of Law
The legal profession now covers a range of entities which encompasses self-employed barristers, sole practitioner solicitors, small firms of solicitors and legal executives, in-house legal departments, ABS providers of legal services, providers of outsourced and paralegal services, providers of support services, advice sector agencies, national firms and global firms (which now employ solicitors, barristers, legal executives, paralegals, trainees and apprentices). It is a multi-faceted business sector with professional duties and obligations. The 2015 City UK report on the legal sector indicates that the sector directly employs 316,000 people in the United Kingdom and produces an aggregate turnover in excess of £30 billion with a trade surplus in excess of £3 billion. It is, therefore, a significant business sector in its own right. The sector’s funding is now provided by practitioners, financial institutions, private equity houses, public and private capital markets, corporate owners, litigation funders and government.
Whilst it is widely recognised that the legal sector contains firms which are very successful global businesses, it has another important feature. It is home to thousands of identifiable SMEs, many of which are striving to adapt to a competitive, digital era. In any other sector, it would be a matter of considerable interest to BIS and the Treasury that these firms should successfully adapt to the digital world and that they should invest in their businesses as well as consolidate where necessary, thus providing a growing source of sustainable employment. They are often ‘reluctant organisations’ in that they are home to professionals with a strong vocational calling who are not yet convinced that their vocation can survive a transition into an efficient business setting.
The relationship between government and many of these firms has been dominated by their legal aid links with the Legal Aid Agency and the Ministry of Justice. It is now time for them to be viewed as a strategically important group of SMEs which, if given encouragement and incentive to invest in people, skills and technology, can be an important engine for economic growth. This cannot, however, be achieved without recognising the peculiar challenge of matching vocation and sustainable profitability.
The first strand of a strategic approach to the legal sector would therefore be to view this as a business challenge and to shift the terms of the legal aid debate accordingly. This might lead to a greatly reduced emphasis on specific case outcomes and on the time taken in delivery of legal support when the quantum of legal aid payments is determined. Instead, payment would be made to providers who invested in new business practices, technology and effective training. In other words, firms which consolidate and which then modernise their training and technology would be rewarded by payments from the Legal Aid Fund which do not take account of case outcomes. The purpose of the Fund would be primarily to build efficient capacity which is able to deliver affordable access to the law but which has also demonstrably invested in the areas which underpin quality. The resulting increase in sustainable employment alone would be a goal worth pursuing in itself. If it can be accompanied by lower cost provision of affordable and reliable legal services, it will be a doubly valuable achievement.
2. International Dispute Resolution: The Economic Case
A second important feature of the legal sector is its growing ability to attract international dispute resolution. The international movement of capital and the global mobility of businesses both result in a growing number of disputes which can be settled in a place of the parties’ choosing. The economic value to the UK of being that place is significant. The choice of venue will depend on a variety of factors. The cornerstone for attracting this business will be efficient infrastructure for the justice system and a reputation for independence, access and predictability. These are features which can often be reinforced by government endorsement and support at little cost.
It should be remembered that the choice of law is made at the point when a contract is negotiated and not when a dispute arises. Most transactions do not end in an actionable dispute. The UK must therefore make its dispute resolution pitch indirectly by attracting people to English law when they are negotiating transactions, irrespective of where they are in the world. Such a choice will help attract other, non-legal services from the UK (insurance, finance, corporate advice). The potential benefit to the UK economy is enormous because the underlying transaction itself need have no direct connection with UK itself.
The second strand of a strategic approach would therefore be to ensure that English law is a law of transactional choice globally and that, in consequence, England becomes a leading destination for the settlement of international disputes. This requires us to recognise the factors which underpin and attract this area of activity (which are all factors linked to access to justice and the rule of law) are of significant economic value to the country. Conversely, it should be recognised that actions which undermine those factors cost the nation money. This is a balance which should be consciously weighed when all policy decisions and legislative proposals are considered.
3. Law: A Whole of Government Approach
A third facet of the law is that it is cross-disciplinary and it crosses all sectoral boundaries. It is an enormous financial burden when it is an afterthought. It is an enormous strength and investment when it is used to plan and influence outcomes. This feature has particular significance for the Government. Government in recent decades has grown in complexity but has significantly increased its own cost base by failing to operate in a co-ordinated manner across departmental boundaries. This problem is illustrated by the fact that legal interventions which span departments could save significant amounts but are not currently contemplated in many areas of government. One department will not spend money on an initiative where the financial benefit accrues to another.
The Ministry of Justice has the ability to promote a strategic approach to cross-departmental use of the law and thereby to become a saving department as well as a spending one. In part, this will involve an acceptance that one element of the demand for publicly funded legal services is caused by poor decision making by government itself, most notably by the DWP and by local authorities. Equally significantly, there is growing evidence that early legal intervention in health issues, housing issues, family issues and education issues can provide considerable savings. There is also clear evidence that these interventions are not pursued because the department which implements them is not the department which benefits from them. This approach is no longer acceptable in an era of public borrowing limits. The third strand of a strategic approach would therefore be to ensure that government incentivises a cross-departmental approach which exploits the saving potential of legal support for many areas of its activity.
4. The English Legal System and the Corporate Boardroom
The pre-eminence of the City in global finance, insurance and certain trading markets is something of an enigma. The reasons for this pre-eminence are varied and have their roots in history. It is probable that a mixture of cultural, political and social attractions is allied to a unique range of skills and a concentration of international businesses to produce the City as a global business centre. It is clear, however, that legal stability, judicial independence and the certainty of English law form a considerable part of the glue which binds this unique institution. Access to justice is not the domain of civil society alone. It is of central importance to global business although large businesses do little to promote it.
Lip service is often paid to the City as a national asset but little attempt is made to identify the influences which preserve the City’s standing. The rule of law and legal stability are fundamental pillars of the City. They are, however, not actively fostered or preserved. If the linkage between the rule of law and economic prosperity is overlooked, we risk undermining the standing and the earning power of the City. That may not be a popular argument with civil society but it should be a powerful one in an era of budget deficit reduction.
There is, therefore, a fourth strand to a strategic approach which is to ensure that the English legal system consistently measures up to all rule of law standards and that nothing impairs the reputation of the UK in general and the City in particular as a stable and predictable business arena and the attraction of the United Kingdom to foreign direct investment. It is unwise to suppose that elements of the justice system can be separated out and disregarded when this reputation is being considered. If a justice system is discredited in any particular context, it suffers as a whole. This is the reason why the City and the corporate boardroom establishment should take a more active interest in finding new ways of supporting the rule of law and access to justice. A surfeit of litigants in person can affect the prosperity of the City and the corporate world. There may be a very long thread connecting the City and the litigant in person but that thread does exist and it would be unwise to allow it to unravel. This argument does not propose blind support for one level of legal aid payment over another. It does, however, propose that strategic support for the legal system must be articulated and evidenced if it is to continue to underpin the City. There is no domestic and international division to our legal system. It is a whole and requires to be approached in this way.
When assessing the rule of law standing of a particular jurisdiction, there is no simple calculation which can be made. The World Justice Project Rule of Law Index provides a series of rankings against a range of factors but these do not easily translate into simple conclusions. It is likely, therefore, that global investors and commentators will be heavily influenced by obvious and visible proxies for legal stability. A smart strategic approach will identify these proxies and ensure that the rule of law shop window displays them to best effect as they represent that rare commodity which is virtue and prosperity combined as one.
What can be done in practice to bring a strategic approach to life? Fortunately, many of the proxies for legal stability require little financial support from Government but can still provide powerful signals. Here are some examples to illustrate the point:
- If our court systems can successfully pioneer on-line virtual courts, the world will look to them as an example. This will reinforce the view that the United Kingdom has the ability to modernise the law without destroying its independence and accessibility.
- If the advocacy training systems offered by the Inns of Court are regarded globally as pre-eminent, the world will come to learn from them. This will reinforce the view that London is a centre of legal skills and ethical training.
- If our universities offer globally recognised post-graduate legal training which is an internationally recognised imprimatur for the practice of law, the world will come to receive it. This will reinforce the view that the United Kingdom is a centre of legal knowledge.
- If the Bingham Centre is encouraged to continue its rise to become the acknowledged global leader in the practical articulation of rule of law principles, the world will seek out its assistance. This will reinforce the view that the United Kingdom is a guardian of the rule of law.
- If we can invest in the evidence base of legal needs, of legal capability and of the effectiveness of approaches to help people use the law, we will provide a treasury of learning on the empirical significance of the law which will be adaptable across the world.
- If our advice sector can harness technology to provide affordable access to justice for the populace generally, it will lead the world in terms of civil society infrastructure. This will reinforce the view that the United Kingdom understands the need for affordable justice and knows how to deliver it.
- If the Law Commission can successfully expand its work to cover more rigorous examination of proposed new legislation as well as reform of existing legislation, this will reinforce the view that the United Kingdom understands the need for independence of its legal system and separation of powers.
- If the voluntary sector can develop systems of organised and co-ordinated volunteering which effectively target areas of need, this will reinforce the view that the United Kingdom is a strong and participative democratic state.
- If the insurance industry can develop new approaches to the funding of legal expenses, we can reinforce the view that law and business in the United Kingdom are intertwined in a productive collaboration.
Many of these objectives can be sought with active government encouragement but at little public cost. By way of example, the development in recent years of Tech City in London as a cluster of technological advance provides a good precedent. Much of the development in technology within the legal system could be encouraged by the establishment of a legal Tech City which, once started, could rapidly grow to a position of global eminence. It would require modest seed funding and would be dedicated to issues such as online dispute resolution, online advice services, remote access to knowhow and advisers, unbundling of advice, free repositories of case law and knowhow and other features of a digital legal system. It could have multiple homes in cities such as London, Manchester, Belfast and Bristol.
Many of the outcomes suggested above can be achieved without dependence on government funding. Government can be a powerful partner but it is a poor master. There are at least three good reasons why we should, wherever possible, avoid a reliance on government funding. The first is that government procurement rules result in it being a poor innovator. It lacks the flexibility and the risk appetite which are prerequisites for innovation and it moves too slowly. Secondly, most good initiatives need to be capable of becoming self sustaining and reliance on government funding tends to prevent organisations from becoming self sustaining and leaves them dangerously exposed to the effect of economic cycles on government support when, if anything, they normally need to be counter cyclical. Finally, and most obviously, there is no longer an appetite for public borrowing on the scale required to fund these activities through the modern state.
Where then should funding be sought to complement Government support? The answer must be a mix of private investors, businesses who see a corporate purpose more complex than this year’s bottom line, charitable foundations (whose range is increasing as much of the private wealth of the last thirty years is recycled philanthropically) as well as continued local and central government funding. Given this mixed audience of potential investors, the legal system needs consciously to make an economic pitch for its share of investment. The HMCTS Reform Strategy has a base of funding which provides an opportunity for collaborative effort. It will be more effective if it can extend its collaboration beyond other government agencies.
A more strategic approach might produce some of the following:
- greater use of social impact bonds and payment by results which involve schemes crossing government departmental boundaries. At present, it is almost impossible to develop a proposal for private funding which involves more than one government department if cost and benefit fall on different sides of the departmental boundary. The growing evidence for savings achievable by early legal interventions in health, housing, social welfare and elsewhere suggests that this is an area of opportunity. The hydra of procurement rules will need to be slain if anything is ever to come from it.
- new Legal Tech Cities should be encouraged in selected cities – as outlined above, it will be important that centres other than London are included.
- new incentives for volunteering should be aimed at those with professional skills which can be targeted at areas of need. Tax credits in return for the time of retired professionals who volunteer to fill advice deserts would be a powerful way of building social cohesion.
- a Legal SME Institute should be established to be a central point of reference and support for SME’s facing business challenges in the modern digital world. This could also be a clearing house for best practice which could benefit advice agencies building new charging models of low cost delivery alongside their publicly funded or free services.
- a new movement in the boardrooms of large corporations should be encouraged which supports the rule of law as an objective at least as worthy and valuable as corporate responsibility, diversity or employee engagement.
These objectives, and many others like them, will require a new approach on all sides. It may be time to sympathise with the enemy if the fight is to be worthwhile.