Former justice minister Michael McDowell: report called for sweeping changes

Nearly six years ago the Competition Authority published a ground-breaking report on soaring legal fees in Ireland. Scathing of the legal profession – both solicitors and barristers – the authority's then chairman, John Fingleton, blamed anti-competitive and antiquated practices for keeping costs high. The report, and a subsequent study commissioned by former justice minister Michael McDowell, recommended sweeping changes to bring legal fees down.

Some of the measures recommended by both reports included far-reaching reforms that would remove the legal profession's control over its training and regulation, while others were common-sense moves that scrapped centuries-old traditions and would drag the legal profession into the 21st century.

Very few of the recommendations were implemented. While costs have tumbled among other professional services, such as accountants, in the last few years, legal fees remain stubbornly high. The Irish market for legal services, at the height of the boom, was estimated to be worth nearly €1.5bn a year.

In the memorandum of understanding with the IMF and European monetary authorities last week setting the conditions of the country's €85bn rescue package, the government pledged to reducing legal costs, which it admitted were out of line with the costs of other professional services.

"It is the last bastion of high professional fees," said Mark Fielding, chief executive of the Irish Small and Medium Enterprise association (ISME). "Legal costs, of all costs, have not come down. Accounting and other professional costs have come down. Legal fees tend to be one-off or non-recurring so it is more difficult to negotiate them or find out what other solicitors are charging."

That view was backed up by the National Competitiveness Council, an offshoot of the government's policy advisory body Forfás, which last week said there hadn't been a strong appetite in Ireland to tackle sheltered sectors of the economy.

"A systematic approach to ensuring that competition law applies to all sectors of the economy is necessary. In addition, the state should use its purchasing power to exert downward pressure on professional fees," the council said in its annual review of Ireland's competitiveness rankings.

One of the chief reasons why costs remain high is that there is little transparency in how they are set. According to John Gleeson, managing director of Access Legal, which offers discount legal services, there is a "taboo" among lawyers about openly discussing their charges, especially with their clients.

"If you are an in-house counsel in a big company you would be an educated buyer but a small business or consumer doesn't know what to expect cost-wise. It's very hard to tell even if you shop around and that is why it would be easier if fees were more transparent," Gleeson said.

He said that abroad there is a push to move away from hourly billing to more fixed-fee work and to place caps on rates. And while in some areas this can be difficult, particularly in litigation, it would give some certainty to clients about potential costs, said Gleeson, who said his fees are roughly half the norm.

He also said there is another reason why hourly rates are so high at the major firms: these firms have huge costs to pay, including swanky offices and high pay for senior partners.

The Legal Costs Working Group, set up by McDowell and chaired by former senior civil servant Paul Haran, called for "greater predictability" to fees and the establishment of a regulatory body to set guidelines against which they can be measured. The guidelines would take into account the expected number of hours worked by the people involved in the case, the complexity of the case and the level of the court in which it is heard.

The group also recommended an end to the practice of lumping together all costs into instruction fees for solicitors and briefing fees for senior and junior counsel. It also wanted the "two-thirds rule", under which junior counsel receive two-thirds the rate of fees paid to senior counsel, scrapped, describing it as "unacceptable and unfair".

None of the proposals has been implemented and only in recent High Court rulings in a number of insolvency cases have the courts forced law firms to take cuts in their proposed fees.

As one of the biggest buyers of legal services (spending hundreds of millions of euro a year), the government has failed to take the lead in seeking value for money from law firms through competitive tendering for state work. For instance, Arthur Cox, one of the biggest firms in the country, was paid double the fees it was contracted for by Nama, the Comptroller & Auditor General said earlier this year. The company took on extra work in addition to what it originally tendered for.

The Competition Authority's report found the biggest obstacle to competition, and lower fees, was the stranglehold of the Law Society and King's Inns over training and regulation of the profession. It wanted an end to that, with a Legal Services Commission taking over those roles. Competition would also be improved by allowing solicitors to carry out some of the work done by barristers, such as advocating in court by being able to take the title of senior counsel. The report also wanted to make it easier to switch legal teams, particularly when there is a dispute over the quality of services, by removing the right of a solicitor to hold a client's file.

In its binding agreement with the IMF, the government said it would use more tendering for legal services to reduce the state's legal tab and would introduce the necessary legislation to implement both the Competition Authority's and the Legal Costs Working Group's reports.

With the IMF pushing for serious transformation, the legal profession has come up against its toughest opponent yet. The groups representing solicitors and barristers have made attempts to reform themselves to stave off direct government supervision. However, centuries of legal tradition finally look set to end.