Siena 2005 REGULATION OF THE LEGAL PROFESSION Nuno GAROUPA Universidade Nova de Lisboa CEPR, Londres

NG2 CONTENTS 1.INTRODUCTION. 2.OVERVIEW OF THEORY 3.COMPARATIVE ANALYSIS. 4.CONCLUSIONS.

NG3 INTRODUCTION Comparative analysis of regulation of professions: lawyers. They satisfy the following requirements in all jurisdictions: –Specialized skills; –Investment in human capital; –Credence goods; –Self-regulated.

NG4 THEORY WHY SHOULD LAWYERS BE REGULATED? –Market Failure (Asymmetry of information concerning quality); –Other Public Interest Objectives (Patronizing views); –Private Interest (Rent-Seeking).

NG5 THEORY HOW SHOULD LAWYERS BE REGULATED? –Regulation by the Government (Licensing); –Self-regulation; –Regulation by Third Parties Regulation through Litigation Self-regulation is not a signal in itself of rent- seeking.

NG6 THEORY WHAT SHOULD BE REGULATED? –Entry Restrictions with Consequent Professional Monopoly Rights; –Restrictions on Advertising and Other Means of Promoting Competition within the Profession; –Restrictions on Fees and on Fee Contracts; –Restrictions on Organizational Forms; –Restrictions on Conduct and Procedures.

NG7 THEORY

NG8 THEORY

NG9 THEORY

NG10 THEORY

NG11 THEORY

NG12 THEORY

NG13 THEORY

NG14 THEORY Regulation by Professional Litigation –Fundamental Divergence between the Private and the Social Motive to Litigate –Alignment of Interests between Professionals and Organizations (should Law Firms be liable?)

NG15 SUMMARY OF THEORY

NG16 QUICK STATISTICS

NG17 QUICK STATISTICS

NG18 COMPARATIVE ANALYSIS

NG19 COMPARATIVE ANALYSIS

NG20 LEGAL PROFESSION IN EUROPE Code of Conduct for Lawyers in the European Union: (a) Personal advertising and publicity is forbidden unless explicitly allowed by the local bar; (b) Contingent fees (pactum de quota litis) are banned; (c) Multidisciplinary partnerships are restricted since lawyers cannot share honorariums and fees with other professionals unless explicitly allowed by the local bar; (d) Lawyers should not conflict with other lawyers, but if they do, the local bar should be asked to intervene before the case goes for litigation; (e) A lawyer should not accept instructions to represent a client in substitution for another lawyer in relation to a certain matter if the client has not fully paid and reimbursed the first lawyer. The Code also refers to the “corporate spirit of the profession" by which a relationship of trust and cooperation should be developed (a principle regulated under the name of duty of solidarity among lawyers).

NG21 LEGAL PROFESSION IN EUROPE CCBE Response to the European Commission Competition Questionnaire on Regulation in Liberal Professions and its Effects, May 2003 : (a) Contingent fees (i.e., an agreement between a lawyers and his client by virtue of which the client undertakes to pay the lawyer a share of the result regardless of whether in the form of money or any other benefit) being forbidden is a necessary rule of the profession; (b) Fee sharing with non-lawyers is a consequence of the duty of confidentiality and avoidance of conflicts, thus multidisciplinary partnerships should not be permitted since they offend the core values of the profession; (c) These restrictions cannot be considered a restriction of competition under EU competition law since they are applied in the specific context of a profession; (d) Comparative conclusions with respect to different regulations across Europe should be avoided because they follow from legal and cultural intrinsic differences, and are respected by the jurisprudence of the ECJ.