Being a City lawyer: Pro Bono

Here’s the thing, kid. Corporate lawyers aren’t into charity work. Or at least, they aren’t as part of their day-to-day. Some of them are excellent people who do marvellous charitable things, but it can’t be allowed to get in the way of the job.

I’ve been to a couple of graduate recruitment events, and students ask about the extent of pro bono work at my firm. Truthfully, if you want to be helping people with landlord disputes, benefits and immigration issues, don’t come to the City.

City firms often have a pro bono commitment. You can do a set number of hours on business time of pro bono work, take days off to do charitable things, give ad hoc advice at drop-in legal clinics. The theory behind this is a bit odd, I think. It is supposed to show clients that the firm is committed to doing good deeds, and this is supposed to make clients want to use the firm. Frankly, everyone knows that both the firm and the client exist to make money, and therefore, to my mind, the idea of impressing clients with these efforts is backward. If a firm spends firm time on charity, it basically needs to charge more to cover those costs (or, certainly, it will make sure any pro bono work achieves a net positive financial result). The client is then (in theory) paying more so that the firm can spend it (given time = money) on someone else. Cut out the middleman, chaps. Let the clients give direct.

The problem too is that City firms aren’t really cut out to give the pro bono advice that is most needed. Commercial property lawyers don’t know about residential tenancy rules. Those who advise on complex international construction disputes aren’t really your first choice consumer litigation advisers. Maybe they’d be better providing services (books, facilities, trainee resource) to those lawyers who can do those things.

Ronald Dworkin, Tom Bingham and the Rule of Law

Modern jurisprudence has lost one of its most renowned intellectual heavyweights. Ronald Dworkin was the legal philosopher who really challenged HLA Hart’s “Concept of Law”, and in so doing, shaped many theoretical debates from the 1970s onwards.

As an undergraduate, I did not subscribe to Dworkin’s beliefs. I must confess that it may well have been largely due to my inability to really grasp his arguments, and nail down how his views changed over the years. This is not a flaw in his writing; I am not sure I could promise I read his books with anything like the requisite diligence. As a full time working chap, I was delighted to come across this piece, which outlines the Hart v Dworkin debate; although I would caution that I think Shapiro’s proselytising at the end may go so far as to his view on what the debate is, not just his view in the debate.

Dworkin believed moral principles were part of the law and any theory of law had to account for them. Sometimes law runs out, and morality plugs the gaps. I hope I’ve not simplified too brutally.

I prefer, where possible, to keep law and morals separate (not in my day job, of course). As I’ve discussed before, what is legal and what is good form are not one and the same. I do not know how helpful it is to get bogged down in typographical issues of what can therefore be ‘law’ or (as Finnis would have it) the central case of law. I prefer to identify law, and then decide if it’s any good.

Which reminds me of a book by another legal superstar, Lord Bingham. In The Rule of Law, Bingham argues for a ‘thick’ ‘Rule of Law’. The rule of law, or the principle of legality, is a nebulous concept that many different authors have ascribed many different meanings. At its core, it’s about all people being subject to clear rules, applied by an independent judiciary. In this thin meaning, it is a sword that can cut both ways. It is feasible to have malicious, discriminatory laws that conform to the definition[1]. Bingham argues for a ‘thick’ definition, that includes the substantive protection of Human Rights.

For all that I disagree, I have sympathy with his view. Bingham had such an enormous impact on human rights protection in the UK, and if I were him, I’d include ‘human rights protection’ as part of my definition of ‘breakfast cereal’, never mind ‘the rule of law’. My point remains, however, that as the bare legality principle can be conceptually distinguished from the substantive protection of human rights, it should be. In legal theory, I don’t want catch-all handles. The more elements to a definition, the more utopian and inapplicable the definition becomes.

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[1] And this is what Joseph Raz would tell you the Rule of Law is. 

My Reaction to Starbucks' Reaction to the Public Reaction to Starbucks not paying tax.

It is a hard thing to live a moral life. I have vegan friends, who would insist that the delight I take in [eating] a melting slab of pork belly is depraved. There are difficulties in both utilitarianism and deontology, the two major competing schools of moral philosophy. And what happens when morals run out, and you have to choose between ‘fighting the Nazis’ and ‘saving your grandmother’[1]?

And there’s always the temptation of a gingerbread latte in a red cup, a sweet elixir that the fourth wise man brought Jesus 2000 years ago.

The Starbucks story is well known. Through internal corporate group transfers and payments, Starbucks can manipulate where profits end up. Usually, they end up in countries with lower rates of corporation tax, so that the Starbucks family can cream off the biggest chunk of money that it can. This is a standard sort of ‘tax avoidance’, a perfectly legal way of arranging your finances. But as we know, what is legal is not always what is moral.

Another time, I will look at two ways a state can deal with tax avoidance in law  - retrospective law making and a ‘general anti-avoidance rule’ (or GAAR).

For present purposes, I am more interested in the corporate communications of Starbucks. To me, they look stupendously ill advised.

The initial Starbucks reaction was hilarious. In it, Starbucks claimed to be acting not only to the letter of the law, but in its spirit as well. The ‘spirit’ of taxation, in my view, is that those who benefit from society contribute to it. Not that you move your money away to low tax jurisdictions which are not realistically your key business centres so you can benefit handsomely  Starbucks also claimed to pay £160m in the UK in tax, including in National Insurance, business rates and VAT. Forgive me, but isn’t VAT a consumer tax, paid at the very end of the supply chain? I paid some VAT for Starbucks; give me a medal.

A month or so on, and it’s now reported that Starbucks has acknowledged the ”feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more”.

I like many things about this statement. One, that it’s taken a month or so, and public feedback, for Starbucks to see that their approach sticks in the craw of your average UK taxpayer. Jimmy Carr could have told them tax avoidance isn’t popular. Second, is that it reeks of the corporate sentiment of maintaining customer loyalty, when really what is needed is an appreciation that paying tax is a good thing for society. Capitalism does not necessitate that you forget the world outside your direct business chain. Finally, the ‘need to do more’. No, the need to do the right thing. It’s not more. It’s standard.

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[1] I have no idea if this is a common example. I’ve lovingly borrowed it from John Finnis. 

Phone Hacking Charges: What do we need to prove?

It’s been widely reported that eight people related to News International are facing charges relating to the phone hacking scandal. This post details what the prosecution will have to prove to secure a conviction. The charges are for conspiracy to commit an offence under section one of the Regulation of Investigatory Powers Act 2000, regarding ‘unlawful interception of communications’.

For a defendant to be convicted, they will need to be:

1.       A person

2.       Who agreed

3.       With another person to

4.       Intentionally and

5.       Without lawful authority

6.       Intercept

7.       ,In the UK,

8.       A communication

9.       Made by a private telecommunication system

10.   In the course of its transmission

11.   Without having the right to control the operation or the use of the system; and

12.   Without consent to make the interception

The first three tests are the ‘conspiracy’ requirements. By the Criminal Law Act 1977, a person guilty of conspiracy to commit crime X is liable to be punished as harshly as a person who actually committed crime X. A conviction here could result in a prison sentence of up to two years.

Crib sheets like these are useful things. They let you see where argument in court really happens. No one will argue in this case that they aren’t a person, aren’t in the UK, or that a victim asked them to tap phones. I imagine some or all of the defendants will argue that they had nothing to do with phone tapping, that it happened where they were working but they didn’t know about it and weren’t involved.

It’s interesting that the prosecutors have gone for the ‘inchoate’ offence of conspiracy. Inchoate offences are the step behind the actual commission of an offence. Attempted murder or conspiracy to defraud. The attraction for a prosecutor is that you don’t need to show that the thing happened. Here, the actual phone tapping will be excellent evidence that the defendants conspired to do it, but prosecutors don’t need to show that Rebekah Brooks sat down one day and hacked phones.

Inchoate offences are interesting because it makes us wonder about why things are bad. Attempted murder can result in the same sentence as murder, because why should an incompetent or unlucky assailant get off lightly? But, the reality is, a conspirator need not necessarily have caused any harm. When we decide what crimes are, should we be more concerned with harm caused or the intrinsic naughtiness of an action? If one pushes the boundaries of conspiracy too far, you can end  in the realms of fantasists. Which is exactly what this policeman is arguing – he says he never actually intended to do the thing (my step 2). 

Unfair or Unread Standard Terms

I’ve not long moved into a flat. To get to stay in the flat, I signed a lease agreement. Because I’m a man who likes some law, I read my lease. One of the terms was that I have to regularly iron my net curtains for the duration of my stay.

I doubt very much that anyone will notice if I do, or do not, iron the net curtains. In fact, there are no net curtains. Or indeed curtains. So I’m almost certain no one will mind that I don’t iron the non-net not-curtains. The terms in the lease were standard terms, used by our estate agent, and likely others, when they rent out residential property for short periods to normal, average people.

These standard term agreements abound. You buy a plane ticket, update iTunes, sign up to phone contracts, change bank accounts, and all the time you’re ticking boxes or signing forms saying you agree to terms and conditions. And you’ve not read them. Easyjet have tickets, I have money, and I can’t negotiate with them. Their terms will have to do, and so I’ll tick the box.

There is statutory protection for us little Droogs when dealing with Fyodor Ltd’s standard terms. Landlord and tenant law is a peculiar area that I won’t delve into here. But the main protection for consumers dealing on standard terms with companies come from two pieces of legislation.

The Unfair Contract Terms Act deals with clauses that exclude or restrict liability under the contract, but applies to all contracts. The Unfair Terms in Consumer Contracts Regulation deals only with standard form consumer contracts, but with all types of clauses in them. If a clause is unfair, then it doesn't bind the consumer. The UTCCR can’t be used to challenge clauses dealing with the price in the contract, or the key subject matter. That why the (controversial) banks charges case in failed[1]. The charges on letters sent by banks form part of the price you pay for their services.

But I’d like to think that another bit of law could apply. When you sign a contract it is immaterial if you’ve read it[2]. In cases where there is no signature, then terms must be reasonably brought to the attention of the party accepting those terms[3]. But there is doctrine of ‘non est factum’. It allows those who are faultlessly unable to read a document from being bound to its terms by their signature. Traditionally, that’s blindness and illness. Further, the key case of Saunders[4] says that the doctrine would only be available to such a person when they were held to a contract radically different from that which they thought they were entering into, and would not be available to a careless person. So the capable but lazy man who misses the small point in the standard terms but signs anyway decidedly cannot plea non est factum[5].

I can’t help but think that the old cases lay down principles that apply at a very different time. Now, it is simply not plausible that anyone (including the Supreme Court Justices) read standard terms every time they book a flight. Are terms buried in reams of small print reasonably brought to our attention before we tick the box? Should the principle behind non est factum apply? I think there is, therefore, an argument to say you should only be taken to agree to standard terms that you could have realistically actually read.

It’s hard to say how big an issue this is. It’s not like Dostoevsky Ltd.’s terms give them an interest in your house, or permission to enslave your first-born. And unfair terms law prevents them introducing too onerous charges and exclusions. But no obligations should be imposed on anyone lightly. And contract law is generally about the agreement of intentions. So why should Mr Droog be bound by stuff he could not reasonably be expected to put his mind to?

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[1] [2010] 1 A.C. 696

[2] L'Estrange v F Graucob Ltd [1934] 2 KB 394

[3] Parker v South Eastern Railway Company [1877] 2 CPD 416

[4] [1971] A.C. 1004

[5] Non est factum means not my deed. 

What is Insider Trading?

This story broke on Monday 1^st October 2012. The linked article talks of intrigue involving senior bankers, stock brokers, foreign businessmen and an investigative operation codenamed ‘Tabernula’. A tabernula, apparently, is a small booth. Welcome to the small booth, in the back of a City tavern, wreathed in cigar smoke, and to the murky world of insider dealing.

Insider dealing is bad. But what is it? Quintessentially, it is the trading of shares based on secret ‘inside’ information. If I work for Fyodor plc, and I know that Fyodor is about to announce huge profits, or a potential acquisition, or the resignation of its charismatic chairperson, and I trade my shares on the basis of that knowledge, I am guilty of insider dealing. The regime exists to create parity in share trading – how can Mr Droog hope to compete in the stock markets with me (and others like me) when we know so much more than he does?

Interestingly, insider dealing is subject to two parallel sets of rules. One is criminal (and is in s52 of the Criminal Justice Act 1993), and one is civil (set out in s118 FSMA).

This is a curious situation. The rules that these contain are, whilst not identical, substantially similar. Yet, a breach of s52 is a criminal offence, punishable by up to 7 years in jail; whereas a breach of s118 is only punishable by a fine.

So why the difference? As I’ve mentioned before, it is up to us as a society what we consider ‘criminal’, and what we regulate in other ways. Here, we have a rather pragmatic fudge. Insider dealing is a dishonest way of me taking money out of Mr Droog’s pockets. It is pretty much the same sort of thing as theft, and should be criminal. But, as the linked article implies, catching and prosecuting insiders who deal is hard. Shares are traded often, and their price necessarily fluctuates. How to spot the insider needle in the haystack of trades? And, critically, how to prove that to the criminal ‘beyond reasonable doubt’ standard?

This gets to a point key to ‘white collar crime’. It is often hard to spot, hard to investigate and hard to prove. To do so costs money. The resulting rarity of enforcement means the deterrent effect of punishment is unlikely to be high. High-rollers don’t think they’ll get caught. That’s where the civil regime comes in. A lower standard (‘on balance of probabilities’) allows for more successful enforcement, but the trade-off (‘scuse the pun) is that we can’t punish the insiders so harshly.

Vicarious Liability 1: What it is.

People prefer to sue companies over individuals if they can. Companies generally have more money – Tesco has more cash kicking around than its staff on the shop floor. Sometimes, Mr Droog can sue Fyodor Plc because Fyodor Plc did something wrong in its corporate capacity. It has breached some obligation that it had.

An alternative route that might be available is opened up by the concept of ‘vicarious liability’. This is where an employee[1] (Alex)  does something that causes loss to Mr Droog. If Alex is an employee of Fyodor, and does the act that causes loss in the scope of his employment, then Fyodor is ‘vicariously’ liable. Mr Droog can sue Fyodor, even though Fyodor has itself done nothing wrong. This is no-fault, ‘strict’ liability.

The above paragraph raises a lot of questions.Who counts as an employee for the purposes of vicarious liability? What if someone is an employee of more than one employer? What on earth is the ‘scope of employment’[2]? What link between the work and the act is required? Lawyers would reckon that a London law firm wouldn’t be liable for one of its trainees negligently damaging a fence in Banff on a stag do, but a dry-cleaners will be liable for one of its staff nicking a mink stole at work[3].

Critically, I wonder about the justification of vicarious liability at all. Generally, it is seen as a way of putting economic risk on those who can afford (through insurance) to bear it; and allow tort victims a claim against a defendant who can pay out[4].

However, that rationale is far from satisfactory. Tort comes from the Latin 'tortum' meaning wrong. It is about the claims of a wronged party against a wrongdoer. In vicarious liability, we have claims between the wronged and an innocent party who can afford to pay. But only sometimes. Vicarious liability transforms tort into a most imperfect system of insurance.

This legal imperfection leads to real life moral issues. Currently, vicarious liability is being considered by the Supreme Court in a case relating to child abuse by a Catholic organisation[5]. There have been quite a few such cases in recent years. These cases lead to discussions of whether priests are employees and whether child abuse can be in the course of being a priest. Which is all horrible in itself.

Recent decisions seem to favour Diocesan liability. That may be welcomed – we might think that someone should pay. But what of cases where Mr Droog was molested by his uncle in his own home, not a priest in a church (or, a house master in a boarding school)? In the former case, Mr Droog has no claim against any rich organisation. He will unlikely recover any damages. In the latter cases, he will (remember, the church or the school has done nothing wrong).

Which makes it appear that it is better to be molested by a priest than your uncle. Our law should not let me type that.

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[1] I use this term loosely here –  it is not synonymous with employee in an employment law sense.

[2] Another time, I’ll look at these two (linked) issues of employee and scope of employment.

[3] Morris v C W Martin & Sons Ltd [1966] 1 QB 716

[4] Another time, I’ll run through the different grounds considered as justifications.

[5] The Institute of Christian Brothers case.