Thursday, 20 May 2010

Are Lawyers being made the Scapegoats?

Recent reports of the Chief Minister's reference to the requirement to regulate the legal profession have not only given an incorrect account of the regulatory and supervisory obligations imposed on the legal profession but have also implicitly cast the blame on the profession itself  The perceptions created have the potential to make the whole legal profession the scapegoats for recent events (yet to be proven) involving the law firm, Marrache & Co.  Whether this is due to inaccurate reporting or not is unknown but one can only comment based on what has been made public.  What can be criticised is that the Chief Minister chose, inappropriately, to do this at a conference organised by the Gibraltar Association of Compliance Officers, which has nothing to do with lawyers.

According to the Chronic (19th and 20th May 2010) the Chief Minister has said that there needs to be greater regulation on business conducted by lawyers in the field of financial services and that lawyers who are involved with financial services will have to move to compliance as have other sectors. The Chronic emphasised that the Chief Minister made a distinction in relation to their need to retain independence of the legal profession when undertaking their judicial and advocacy roles.

Additionally, in his editorial  (Chronic 20th May 2010) Dominique Searle writes "That the Chief Minister, himself an experiences lawyer, should signal to the profession, in what were rather gentle terms, that they should look towards having more modern compliance standards, can hardly come as a surprise in the context of recent events... Here, the Government is only ruminating on issues that might well have come better as a dynamic from within the profession itself". Such a statement is disingenuous, because the Bar Council has for years been advocating better implementation and enforcement, or, at least, an ill informed criticism of lawyers.  It is also a wrong  exposition of the position in law. Unsurprisingly it comes from the quarter that has shown his bias against the legal profession by having coined the expression "barristocracy".

The conclusion that most readers of the Chronic cannot be blamed for having reached is that the legal profession operates without laws or rules and in a privileged environment even when competing within the field of financial services, in which field all others need licensing and are regulated.

When undertaking any financial services business that requires a licence under any financial services laws or regulations, lawyers require EXACTLY the same licence as anyone else. This means that all laws and regulations that apply to licensed persons and entities apply equally to lawyers.  lawyers licensed in this way are regulated and supervised to the same extent as any other person or entity.  In truth few, if any, lawyers are engaged in a business that requires to be licensed.  The reality is that law firms usually structure these activities by the use of limited liability companies that are licensed entities. it is these entities that fall to be regulated and supervised.

Turning to the legal profession itself and the practice of law. The profession in Gibraltar has been licensed and regulated throughout living memory.  Licensed because only properly qualified person can join it and then only after being called, admitted or enrolled in England (in the main), which requires certain due diligence to be overcome.  A candidate also has to be interviewed and certified fit in Gibraltar by the Admissions and Disciplinary Committee. It is a committee, chaired by the Attorney General with two other senior lawyers appointed by the Chief Justice, this committee advises the Chief Justice, as the name suggests on admissions and DISCIPLINE.
The ultimate responsibility to discipline lawyers rests with the Chief Justice who acts on advice from the Admissions and Disciplinary Committee.  The laws and regulations that govern the profession are those either made in Gibraltar (which are few)  or, where none are made, those that govern the legal profession in England. In shorthand lawyers in Gibraltar are by law required to behave to exactly the same standards and principles of conduct as lawyers in England.

What about client accounts? These are governed by local rules, the Solicitors' Accounts Rules. These rules are very closely modelled on rules that govern client's accounts of Solicitors in England and Wales. The Admissions and Disciplinary Committee are the persons who have extensive powers of inquiry and investigation.  These rules also regulate what money can and cannot be paid into and out of client accounts. These requirements were strengthened in 2005 with the introduction of a requirement that client's accounts be audited before lawyers would have their annual practising certificates renewed, without which a lawyer cannot practice.

It is clearly not right to say that the legal profession falls outside the reach of regulation and supervision.  To this extent the impression  created by the Chronic's report of what the Chief Minister said  is false.  It is imperative that the public should not only understand that a regulatory and supervisory regime exists but that they should not be misinformed in a manner that might be used to support a system of regulation and supervision that undermines the independence of lawyers and the principle of professional secrecy.  An independent judicial system can only exist in an environment where the legal profession itself remains independent.  A legal profession that falls under the control of a government is another step towards undemocratic rule.
There can be no democracy without an independent judicial system and no independent judicial system without an independent legal profession.

The causes of recent events (yet to be proved) involving the firm of Marrache & Co will need to be analysed and determined. Undoubtedly there seem to have been failures.  One of these is not that the legal profession is not governed by laws and rules.  It may be that lack of proactive application of these and of supervision may have contributed, namely failure of implementation.  Undoubtedly the system of supervision of lawyers will need to be  revamped and resourced, if not completely overhauled but with great care taken not to transgress the boundary of independence from government. 

What is clearly not true is that it is the legal profession as a whole that has failed. .  Perhaps the intervention into the law firm would have been better and given a better impression and been better perceived if it had been undertaken by persons from outside Gibraltar and outside the legal profession of Gibraltar as was proposed to the Chief Justice by certain senior members of the profession.  .


  1. Dear Llanito World

    I am not a lawyer and therefore derive comment based on what I have read and understood from others leanred in the law of the realm. If the Chief Justice is responsible for the proper management of client accounts held by law firms. Is his office not responsible for the demise of Marrache & Co (if it were to be proved)? Who is then responsible?

  2. The CM should think of better ways to regulate his party (of which he is the greatest member)and be more accountable to the public.

    The Marrache saga has probably been analysed in all possible angles by each divsion, but within the systematic failures identified (or to be identified, if any) everyone knows that it was not only the work of the brothers! What about the auditors, Banks, etc. etc.?


  3. There is absolutely NO possibility that the office of Chief Justice is RESPONSIBLE for the DEMISE of Marrache & Co.

    We need to see how matters develop before jumping to any conclusions as to whether any responsibility attaches to anyone else and if so who but certainly the net needs to widen and nothing should be brushed under the carpet.

  4. The perception in Gibraltar is the regulations and laws in gibraltar have been written by lawyers for lawyers for far too long.

    It seems we have a lawyer culture where they have the "pulpo" syndrome. They get involved into any lucrative field possible regardless to whether they have the adequate training or experience. In spain they would call it un "todo a cien" or "el chino". Lawyers doubling up as estate agents, financial advisors, book keepers etc etc

    Fact of the matter is most in Gibraltar have been trained and have done examinations for Barristers. They should keep to what they have been trained to do.

    Francisco Franco

  5. Yes, the Admissions and Disciplinary Committee may well be "the persons who have extensive powers of inquiry and investigation". But how often do they invoke those powers? How many law firms have they investigated? Do they have the expertise to conduct onsite visits to law firms and examine the books? Somehow I doubt it.

    The system has clearly failed, which is why the CM wants law firms to be properly regulated. And it is not just the CM who wants this to be done; it was one of the IMF's strong recommendations when they visited Gibraltar in 2006. Had the Govt regulated the DNFBPs when the IMF recommended that they do so we might not now be in this mess with Marrache & Co (allegedly, I know).

    DNFBPs (Designated Non-Financial Businesses and Professions) comprises law and accountancy firms, jewellers, car dealers, casinos (both physical and online), estate agents etc. The sooner the IMF's recommendation is implemented the better because they have clearly shown that they are unable to regulate themselves (with the notable exception of gambling which has its own Gambling Regulator within the GRA).

    And where better for the CM to make this point than at a Compliance Officers' meeting? GACO members are currently mostly from the financial services sector but will soon inevitably encompass representatives from DNFBPs and that, I'm afraid, includes law firms.

  6. Hi Mark:

    You choose to miss the point. The blog admits failures of IMPLEMENTATION by those legally responsible for discipline of the legal profession. The blog admits a requirement that existing systems have failed and need to be resourced and rethought.

    What the blog says is that the CM has no basis upon which to cast the blame on the legal profession, which has never been a self-regulating profession in Gibraltar.

    A law does not prevent a crime. It makes it illegal. The criminalisation of murder does not stop it happeneing. The criminalisation of dishonesty does not stop it. As a brief and simplistic comment it is implementation and enforcement of the law that acts as a deterent. This is what was missing. This is what was not in the power of the legal prfession but rather in the power of others.

    Law firms already have Compliance Officers. I will agree to disagree with you on GACO being an appropriate forum to make inaccurate (as reported in the Chronic) statements about the legal profession.

    I repeat the legal profession has never been resposible in law to regulate itself. The Supreme Court Act makes the holder of the office of Chief Justice from time to time responsible on the advice of the Admissions and Disciplinary Committee.

    I repeat, since 2005 client account audits have been required annually, so systems, as robust as in other sectors of the finance centre, have been in place. What went wrong is the question that needs to be answered. Who will answer it?

  7. agree 100% with Filomeno

  8. Know your clients' clients, their parents, brothers and sisters, their children...what a load of ... hogwash

    Should not MI5/MI6 and GFIU advise and warn every local operator when dodgy punters arrive in town with every intention of laundering their dirty money???

    Cannot be that difficult for them,afterall that's what they are paid for. Policing!

  9. Basil McBrush, if you know so much and have the evidence for your evident indignation with "high profile in your face dodgy deals" then take all the evidence to the Governor, give evidence that you have done so and of who you are in this blog, then publish all the evidence here and also name all your well-informed sources.

    Perhaps we can then consider a full debate on this topic.

    Otherwise, shut up and stop this mud slinging in this genuine and free debating blog for the exchange of ideas, arguments, thoughts and opinions for the better of democracy on topical and important issues.

  10. It is good to hear that "since 2005 client account audits have been required annually". However I find it difficult to understand how "systems as robust as in other sectors of the finance centre have been in place". If that were the case there would be no need for the CM, a lawyer himself, to plan to implement a robust system for law firms as he is doing at present? How many suspicious transaction reports have been made by law firms since 2005? I would wager that the figure has been close to zero, which is why the Government is being forced to take robust action.

  11. Basil McBrush says: thank you Anonymous at 11.52 for your interesting suggestions. Of course the Governor has no authority in internal matters. But your advice that I should take my complaints to the Governor shows that you know exactly what I was referring to earlier on. It may be that when full investigations are completed no scandals of the kind that Filomeno was alluding to yesterday are found. That would be a great relief and it would put paid to the constant hushed allegations that are made of corruption. On the other hand I have no doubt that the British government's spies in Gib know exactly what you and I are referring to.I too am proud of being able to participate in this free debating blog for the exchange of ideas, arguments, THOUGHTS and opinions for the better of democracy on topical and important issues. The problem of course is that you can control most things but not"thoughts"

  12. Hi Mark:

    Well believe it, in the field of regulated financial services lawyers are regulated on equal terms to all others. That is why I suggest that, if the Chronic report is accurate, the CM has created an inaccurate impression.

    I also agree, there is a need for ROBUST implementation and enforcement of existing laws and rules. I say this in the blog. It is not the existence of the laws that is the issue, they are in place, it is the ability to ensure compliance that is at fault.

    If the CM is talking ROBUST steps to ensure compliance bring it on ... I agree. If he is creating an environment of opinion by inaccurate assertions having the purpose of allowing him to legislate in manner that undermines the independence of and results in government control of the legal profession and so the judicial system, I, for one, will fight that tooth and nail.

    I would hope that the entire legal profession would join me. I fear, however, the sycophantic members of the profession that will want to take politically opportunistic views, having in mind that they can thus line their pockets, that may not do so. Hence my frequent analogy with Zimbabwe.

    Only time will tell but always remember, power in an electoral democracy (said carefully because in many other respects Gibraltar has a democratic deficit) lies with the electorate NOT with governments.

    Your very example of suspicious reports shows that you know that what I am saying is true and laws exist. The lack of reports (if there is one at all, I do not know) is an issue that in certain circumstances carries serious criminal penalty. The issue is one of enforcement not absence of laws, that is the disingenuous element that comes through based on what the Chronic has reported.

  13. McBrush is wrong to accuse the opposition of ignoring the loud rumours. The GSLP have called for forensic audits of all major government transactions in recent years. If elected to government the GSLP will ensure that all these things are cleared up.

  14. McBrush, I have no idea what you are referring to. Whatever it is, corruption is a term that the FCO cannot classify as a purely 'internal matter' - it is the subject of international obligations for the UK and also one of its many responsibilities for Gibraltar and its good governance, consistently with the 2006 Constitution.

    Why not have a go if you feel so strongly about whatever it is that is troubling your thoughts? If the Governor tells you to get lost, let us know and we'll debate the Governor's deriliction of duty until we are blue in the face!

  15. McBrush says: Anonymous at 00.52:your clever strategy of getting the F&Co and the Governor involved is sheer Macchiavellian genius, Boom Boom! We are certainly progressing. All this started with Filomeno at 15.53 on the 21 May and we now have a sort of Gslp commitment from Anonymous at 20.13 yesterday. The F&CO and Governor angle is brilliant. I know that this is a topic which is known to our MEPs. At this rate we will have a full blown campaign for an official investigation well before the next General election. It is unlikely that the PDP will want to touch this hot issue but the GSLP have an election winning issue here. The question is will they fumble the ball (again)?

  16. McBrush, it is simply speak out or shut up. Rein your thoughts in mate...they are running too wild!!!

    Perhaps we should call you "el calentita II".

    Over imagination?

  17. McBrush (a.k.a. El Calentita II): I like the nickname El Calentita II. Thanks Anonymous at 10.17. the new self righteous censor on LW. I have said as much as can be said and that is that there is a constant rumour not just in Gibraltar but also in Whitehall that certain government transactions should be investigated. Remember that the setting up of an independent Inquiry does not mean that there has been any wrongdoing. Once the investigation, which should be independant and conducted by outside investigators, is completed I hope and trust that we will be able to say: "all is well in Gibraltar and propriety has reigned under the GSD stewardship..." this is the sort of inquiry / audit that is carried out in all British local authorities. What exactly do you have against a thorough forensic audit (as the GSLP call it)?

  18. I think the CM's attack on law firms will be two-pronged: first he wants to tighten up the annual audit to make sure that proper and through audits are carried out - not just a cursory glance at the books by a friendly auditor - and second, he wants full-fledged AML/CFT monitoring of clients' and partners' accounts and, in particular, bank statements by a statutory body with expertise in this field. The latter was a recommendation of the IMF in 2006 which Govt should have implemented already. The CM has to move quickly on the latter if Gibraltar is not to suffer further reputational damage.

  19. That's better McBrush. Nothing against it. No confundas la seriedad with "self-righteousness".

  20. McBrush says: I am pleased to accept that Anonymous yesterday at 10.45 is not a "self-righteous" censor merely a "serious" censor. I am just not to happy with the notion of censorship and I was brought up never to mock the afflicted.

  21. No confundas, McBrush, la relevancia y substance con tu nocion de censura personal y las habladurias infundadas. Unnecessarily so, but all very prevalent in many discussions.

    What is the context for "I was brought up never to mock the afflicated" and what is it that you are talking about?