Client accounts – French connection

The Gazette reported that the chair of the Legal Services Board had announced that the LSB is looking at the French bar system for holding client money, as a way of avoiding theft by solicitors. But I wonder whether the LSB has ever been to France.

The French system treats its bars as responsible adults able to regulate their own affairs, not as naughty children to be continually monitored and chastised.

Be careful, LSB. Margaret Thatcher and Tony Blair have never governed in France, and there might be a contagion of other ideas that treat lawyers like grown-ups.

The French bars’ client money arrangements are handled through an organisation called CARPA (la Caisse autonome des règlements pécuniaires des avocats, or Fund for Lawyers’ Pecuniary Settlements). Each bar has one. The Paris bar’s CARPA, the first to be set up (in 1957), now employs 40 people. There are 173 CARPAs throughout the country, united in a body called UNCA (Union Nationale des Caisses d’Avocats, or National Union of Lawyers’ Funds).

It is mandatory that lawyers practising in France deposit with their local CARPA the money they receive for their clients’ account, regardless of the payment instrument. A lawyer who ignores this is liable to disciplinary proceedings. The bar then controls the money. The pooling of funds in this way by a single bar produces a sum which can be invested and used to promote the collective interest of justice and the legal profession. So the Paris bar finances access to justice activities out of its CARPA, including a ‘solidarity bus’ from which free legal advice is given.

There are several reasons to favour CARPA. First, it enables the interest obtained on the holding of client money to be centralised in one place by the bar and used for the promotion of a social good. Second, it provides a formidable obstacle to money laundering by lawyers – and it is this which has been sold heavily by French bars trying to persuade other European bars to adopt it.

But these are not the reasons put forward by the chair of the LSB. He is, of course, imprisoned by the spirit of the Legal Services Act 2007, and wants to take away powers and duties from professional organisations that have been naughty. So he wants CARPA to prevent theft of client money, which is indeed another of its consequences.

But CARPA is part of a wider structure of the French bars, which not surprisingly (in view of the country’s other structures) involves a good deal of centralisation. So professional indemnity insurance for lawyers in France is handled almost entirely through a single broker run by the bars (la Société de Courtage des Barreaux), which is able to negotiate insurance policies for French lawyers from a position of strength, influencing positively the outcome of premium pricing.

To return to money laundering, reports of suspicious transactions are not made by lawyers direct to the financial intelligence unit (FIU), but are reported to the president of the local bar, who will then decide whether the report deserves to be passed on to the FIU. This is another system which the French bars are keen to export to European bars, because they feel that it better protects lawyer-client confidentiality.

In other words, CARPA is part of a system of governance whereby strong bars are encouraged to retain power in order to use that power to influence outcomes positively for the legal profession, and indeed for society as a whole. The Legal Services Act on the other hand – do I really need to spell it out? – is part of a system of taking powers away from the bars on the grounds that they are not to be trusted with them and might set the nursery alight.

I would encourage the LSB to go to France and find out about their system. Sit at a pavement cafe, have a glass of wine, watch the passing parade. Forget the English trope that what France needs is a good dose of Thatcher-Blair. For as long as I can remember, the English have believed that France is about to collapse unless it quickly adopts some current English passion.

A future review of the Legal Services Act, carried out after a visit to other countries (any democratic country apart from Australia, please), might acknowledge that the legal profession here has outgrown its rattles and dummies and can at last be trusted to take a few steps on its own.

Jonathan Goldsmith is a consultant and former secretary-general at the Council of Bars and Law Societies of Europe, which represents around a million European lawyers through its member bars and law societies. He blogs weekly for the Gazette on European affairs