Richard Samuel writes in this month’s Barrister Magazine about his proposal for a Financial Services Tribunal and the deregulation of the Bar which led to it.
In a series of articles in the Financial Times, Capital Markets Law Journal and other specialist legal journals since 2016, I suggested that a permanent, specialist tribunal should replace the unsatisfactory ad hoc ‘mass redress schemes’ that the FCA has used to compensate victims of banking misconduct, like those at RBS’s notorious GRG unit, since the financial crisis of 2008.
My idea was based on experience I had as an advocate in Employment Tribunals, which are a quick, inexpensive way of empowering employees to bring claims. They ensure that employers respect the rule of law in labour markets.
I suggested that small businesses should be given a similar forum to bring claims against banks. The claims they could afford to bring there – but cannot afford to bring to the Courts – will ensure financial firms respect the law and regulation that governs them.
In particular I suggested that a Financial Services Tribunal should help solve the intractable culture problem in some parts of the industry, in the same way that Employment Tribunals moved employment culture from ‘master and servant’ – which is how the common law courts had described the relationship – to the world of fairness, non-discrimination and equal rights that we know today.
How did I come to make that suggestion?
There is a sub-plot to this story that may be of interest to readers of The Barrister. On 2 January 2014, the first day of the deregulation of the Bar that allowed it, I was joined in chambers by the first non-English law qualified partner in London of a magic circle law firm, Jeffrey Golden. He was founding head of Allen & Overy’s US practice, which he grew from one to several hundred lawyers around the world. His own practice was primarily concerned with the capital markets, but his involvement from early in his practice was with institutional clients and professional bodies; he was in the room when the International Swaps and Derivatives Association chose its name and was a principal author of the ISDA Master Agreement, on which hundreds of trillions are now traded by its members every year.
More recently, he was Chair of the American Bar Association’s Section of International Law. His experience of practice goes well beyond fee earning and runs deep into the public policy work of non-profit associations in both finance and law. Shortly after he joined chambers, he was called to the Bench of the Middle Temple. In short, Jeff brings a new breadth of experience to bear upon the work of 3 Hare Court. It is, I believe, a first for the English Bar.
In my ignorance and with little more to my experience than that of a senior junior grinding away in the Temple at a practice that by then straddled the employment and M&A markets, one day a couple of years ago Jeff pulled me aside. He mentioned that the FCA was ‘getting hammered’ with its mass redress schemes for SMEs who have claims for mis-selling of the products based on the very ISDA Master Agreement that he had been instrumental in bringing about. He suggested to me that I should take a look at it and see if I could come up with a better idea. He suggested that if I did, I could put it in an article. Slightly non-plussed, I asked ‘What if I do? Then what?’ He replied: ‘I know those guys. There will be positives – e.g., legal certainty – for the financialinstitutions and the regulators too,which hopefully they will be quick torecognise. We can talk to them andwe can see if we can make it happen.’I looked at him for a moment. Heseemed genuine. So I said ‘OK’.
I dove into the subject, which proved fascinating, because just then, there was angst and anger growing about culture in the City, which seemed to have ‘got away with it’ after the financial crisis. As a result, this was not just an issue for the financial and legal markets, but was a political issue. There was much to say, most of which ended up in a trilogy of articles in Oxford University Press’ Capital Markets Law Journal, which – by the way – Jeff edits. Did I forget to mention he was a Visiting Professor of the London School of Economics and sits on its Court? Or that he co-founded and chairs P.R.I.M.E. Finance, an arbitral institution for the resolution of wholesale financial markets disputes? Perhaps I did.
Why am I telling the Barrister Magazine?
This is the lesson of deregulation. People from different areas of legal or other practice can now become members of chambers, not as ‘door tenants’ or whichever name one attaches to such sinecures, but as a full member of chambers. There, they can devote as much or as little time to chambers management as they wish for any chosen period, without charge to chambers, in return for a secure platform from which to practice – in Jeff’s case as an arbitrator and expert witness in financial markets. Such non-barrister members offer a breadth and depth of experience – and most importantly networks – that neither barristers nor clerking teams can hope to match.
Such people create opportunities the Bar rarely sees. It should, perhaps, be no surprise. Unlike clerks, they are lawyers, so they are naturally able to make contributions to conversations about legal disputes that clerks could never hope to make. They are therefore at the centre of what is going on in the legal marketplace in the way clerks cannot be. Unlike barristers, partners in magic circle firms have made a career out of finding work for colleagues to do; that is what the leveraged, profit sharing law firm model requires of its partners. Those firms do not pay the partners based only on the work they do, but also to find it for their team to do. Barristers, who work in chambers which share cost but not profit, make money solely by doing the work themselves. As any experienced solicitor or clerk knows, all they know is how to put themselves first. Even the silk system does not convert them into people whose primary job description it is to find work for juniors.
We at 3 Hare Court have perhaps been lucky in finding someone with Jeff’s breadth of skills and experience. But the lesson for the Bar seems to me that the right lawyers from outside the Bar can open up exciting new opportunities for barristers when they work alongside strong clerking teams which provide chambers with the traditional support work the Bar needs – i.e. building relationships with litigation solicitors to help them clear the administrative hurdles to getting their chosen barristers safely in front of judges ready to argue their cases. Putting these two traditions together should open up new horizons for the Bar in this jurisdiction and around the world.
So where has it led?
Like all things, it took a little luck. Nevertheless, Jeff’s instinct for a hot legal issue was right. Amazingly enough, the CMLJ pieces went viral, so the articles and associated blog posts have been downloaded over 3,000 times. The All Party Parliamentary Group on Fair Business Banking formed, in part, around the idea the articles advocated. The Treasury Select Committee conducted an inquiry into SME Finance, which concluded on 26 October 2018. The TSC roundly rejected a counter-proposal of UK Finance, the industry’s lobby group, for a beefed up Ombudsman specialising in SMEs. Instead, at paragraph 138, the TSC concluded that ‘the Treasury should [bring] forward proposals for the creation of a Financial Services Tribunal’ that came out of Jeff’s encouragement to me.
What next?
For the Tribunal project, the next step is to move the argument on to highlight the benefits a tribunal would bring to the industry. The TSC recognised them at paragraph 124, but its primary concern was not with them, but with the political problem of access to justice for SMEs and the rule of law in financial markets. So I set them out here.
In short, there are two important ways in which a Financial Services Tribunal will help the industry. First, it will help rebuild consumer confidence damaged by scandals which have dominated headlines since 2008, by reassuring small businesses they have access to justice if something goes wrong. Second, unlike the Financial Ombudsman Service, the Tribunal’s public, reasoned decisions will build a body of case law, which in turn will clarify the meaning of regulations that the industry needs to apply every day.
At the moment, there is no mechanism for clarifying the large amount of complex regulation that governs financial markets – in the way our courts clarify the legislation Parliament passes, or indeed the common law as it develops from one age to the next. That is a systemic deficiency that needs fixing. A Financial Services Tribunal would fix it and by doing so stimulate growth, reduce costs and increase profits for the City of London and UK plc as a whole. The work before us now is to get the industry to be brave enough to overcome its anxiety at the prospect of a new tribunal in which its clients can bring claims against it – and to appreciate that this will be a tribunal in which firms will want to bring claims and applications to get the answers they want to allow them to trade more profitably.
Meanwhile, in chambers, we will be looking for ways in which our non-barrister head of chambers can help barrister members of chambers work together in teams with his support and put themselves in positions where they can attract work coming to England from overseas or originating within our own shores.
Read the full news article here.
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