European union? Not among lawyers
Josephine Carr doubts that we shall ever see the legal equivalent of a single currency
Wednesday 31 May 1995
Appearances are deceptive, however. While the laws governing business in the member states of the European Union undergo rapid harmonisation, its lawyers are resolute in their determination to retain their national identity. No legal equivalent of a single currency for them.
When recently compiling detailed checklists for clients, warning them of the do's and don'ts when retaining lawyers in each of the European jurisdictions, it became clear that Europe's business lawyers still have widely divergent attitudes to regulation and client rights.
But clients in cross-border transactions tend to start from the assumption that all lawyers operate in a similar fashion to those in their own country. At best, this can lead to unfortunate misunderstandings; at worst, to expensive and potentially disastrous conflicts.
Take one example. It is not always compulsory for lawyers in Belgium, Cyprus, Gibraltar, Greece, Ireland, Italy, Monaco, Portugal, Spain, Switzerland and Turkey to carry professional indemnity insurance, although it is about to become compulsory in Ireland. While the firms that tend to advise on international transactions do carry insurance, in the absence of a set standard it is vital to check the extent of that cover, the excess that is payable and whether it covers the firm or just the individual lawyer.
A cynic might argue that the omission of such a requirement is not because it is rare for lawyers to make mistakes. In some countries litigation is a lengthy and expensive nightmare; costs in jurisdictions such as Portugal are irrecoverable; and it is often impossible to find a lawyer who is prepared to act against a colleague. In that environment, why bother with expensive insurance?
Belgium, supposedly at the heart of Europe, has successfully maintained a protectionist approach to its legal market and provides a good example of a confused regulatory system pitted with traps for unwary clients.
Its lawyers luxuriate in a total of 29 bar associations, some French- speaking, some Dutch and some German. In Brussels alone there are four bars.
A client's rights vary, depending on which bar the lawyer is a member of. Some do not require members to carry any professional indemnity insurance. Others contribute part of the lawyer's annual subscription towards a joint policy. But the policies vary in the amount and extent of the cover. For example, a number cover negligence, but not fraud or misappropriation. The excess payable by the lawyer also varies considerably.
Then there are old, sometimes very odd, rules that apply in many jurisdictions. For example, you are not entitled as of right to see communications between your lawyer and the other party's lawyer unless the lawyers' names are removed. If you fall out with your lawyer and move to a new firm, the new adviser cannot act until all outstanding disputes with your former lawyer are settled. Disciplinary rules and systems for complaints also vary widely. As does the approach to enforcement.
The system of regulation in the United Kingdom is equally confusing to foreign clients. Where most legal professions are united, in the UK we still split the legal function between barristers and solicitors, although some lawyers can perform both functions. If that is not confusing enough, the profession is then split between England, Scotland and Northern Ireland. Which leads to six different regulatory bodies, each jealous of its own rules.
But the lack of harmony does have some benefits. Cost-conscious clients can sometimes play the system to their advantage - for example, when appointing notaries.
Notaries have a protected role in many transactions in civil jurisdictions and can dramatically increase the cost. The informed client can play one jurisdiction off against another. A German or Austrian transaction may require the extensive use of notaries, who enjoy a monopoly and are very expensive. A quick trip to Switzerland, however, can substantially reduce costs. Swiss notaries can notarise some documents, and their fees are markedly lower.
Europe's lawyers are today as far apart as they ever were from accepting a common approach to regulations and discipline. The regulatory bodies jealousy guard their jurisdiction and powers. They are wary of foreign lawyers, and suspicious of the motives of lawyers in countries such as Germany, the Netherlands and the UK, which argue for greater freedom and where the firms are large and have strong international ambitions. In particular, lawyers in France, Spain, Luxembourg and Belgium still adhere firmly to a protectionist approach.
Attempts to bring harmony rarely find any consensus and generally get bogged down in in-fighting. The European Commission's as yet unpublished draft directive on lawyers' rights of establishment across Europe has already caused a three-way split between the bars of Europe. The protectionists argue there should be no rights at all, another group believes that there should be limited rights, while others, including the English, argue for extensive freedoms.
This same split caused the Council of the Bars of Europe - the pan-European body made up of delegations from all the member states - to engage in more than 15 years of debate to patch together some form of consensus.
Despite the best efforts of the Euro-rebels, national governments may one day agree to converge under one currency. But Europe's lawyers will never accept one system of regulation.
Perhaps it is time that clients started knocking a few heads together.
The writer is editor of 'European Counsel Direct'.
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