Should We Build Walls or Gates? by Paul McLaughlin - Center for Professional Responsibility

Should We Build Walls or Gates?

Paul McLaughlin

Practice Management Advisor, The Law Society of Alberta
Chair, National Ethics Group, Federation of Law Societies of Canada

Presented to

Commission on Multi-Jurisdiction Practice

American Bar Association

San Diego

February 16, 2001

© 2001, Paul McLaughlin

Should We Build Walls or Gates?

Paul McLaughlin
Practice Management Advisor, The Law Society of Alberta
Chair, National Ethics Group, Federation of Law Societies of Canada

 Robert Frost wrote in Mending Wall, one of his most memorable poems,

The topic of today's discussion, interjurisdictional practice, is about walls: the walls we, as a profession, build along state and provincial boundaries. We build the walls to keep other members of our profession out of our back yards. But they also keep us in and prevent us from using our professional skills and knowledge to their maximum potential. The "frozen-ground-swell" that is undermining our walls is rapidly changing economic and technological environment where geographical borders mean less every day.

The key change in the past couple of decades that, in my view, has put pressure on lawyers to move toward interdisciplinary and multijurisdictional practice has been the increase in the size and complexity of our clients' business organizations and the deals they do. It wasn’t very long ago that only governments could do billion-dollar deals. Now they are almost commonplace. Many factors have contributed to this change. In Appendix "A", I outline the contribution of technological change, which in my mind is the most important driver.

Clients expect us to adapt to this change, not to fight it.

And in case you are tempted to remind me of the most famous line from Mending Wall,

I remind you that the farmer who speaks these words insists on a maintaining a wall between his pine forest and Frost's apple orchard, where none is needed. Frost describes the farmer as "an old-stone savage" and says,

Frost, it is clear, prefers openness to barriers—as I do.

Canada-U.S. Differences

Before we get into the heart of my presentation, I should perhaps very briefly clarify some major differences in the way the legal profession is governed in our countries. In Canada, the courts have a very limited role in setting ethical rules and judging lawyer conduct. Under the relevant provincial statutes—professions are a provincial jurisdiction—the law societies create and amend the rules of professional conduct without the involvement of the courts. They also investigate, prosecute and adjudicate lawyer misconduct independently of the courts. The court's role in disciplining lawyers is limited to judicial review and appeals on issues of law.

In other words, it is not necessary to convince the courts to go along with changes in the rules. We can make many of the changes ourselves, and those we can't make ourselves, we take to the legislature, not the courts. And in Alberta, at least, we have a very good relationship with our legislators, so it has not been difficult to get the legislative changes we have needed to progress in this area.

Some other relevant characteristics of the legal profession in Alberta are,

• law societies are statutory bodies mandated to act in the public interest, not advocacy bodies; advocacy on behalf of the profession is the responsibility of the Canadian Bar Association, a voluntary association that is not involved in professional governance

• law society membership is mandatory for all practicing lawyers
  
• malpractice insurance of at least $1 million is mandatory for all lawyers in private practice, provided by captive insurers operated by the law societies
  
• all law societies operate client security funds, and while there are some differences in how the various funds function and the amount of compensation available to clients, they are fundamentally very similar to each other
  
• lawyers are subject to extensive, detailed trust accounting rules, backed up by mandatory annual filings and, in some cases, spot audit programs

In summary, compared to the United States, there is in Canada a relatively high level of consistency among the law societies with respect to the fundamental issues of powers and roles, membership, liability insurance, client security funds and trust accounting. I believe that this consistency has provided a comfort level that has enabled Canada to move forward toward greater interjurisdictional mobility.

Another factor is the relatively small number of players. There are now 14 law societies in Canada. Of these, 13 are members of the Federation of Law Societies of Canada; the 14th is the new Law Society of the Territory of Nunavut, with only about 25 lawyers. Of the 13 members of the Federation, six have small memberships, under a thousand lawyers each. In all, there are about 80,000 members in the 14 law societies. With such small numbers involved, it is easier to achieve consensus than in the United States.

MJP in Canada

Section 6 of the Charter and the Black case

The Canadian experience with multijurisdictional practice has been shaped by section 6 of the Canadian Charter of Rights and Freedoms. The Charter was part of the package of constitutional reforms adopted in 1982. The subject matter of section 6 of the Charter is mobility rights, an expression of Canadian citizenship. The relevant provisions of section 6 are as follows:

Section 6

One of the early Supreme Court of Canada cases to interpret section 6 involved my law society. A group of Alberta lawyers formed a partnership with a Toronto law firm. The Law Society of Alberta responded with a rule that prohibited Alberta lawyers who ordinarily reside and practice in Alberta from entering a partnership with anyone who was not an active member of the Law Society of Alberta ordinarily resident in Alberta.

In Black v. Law Society of Alberta [1989] 1 S.C.R. 591, the Supreme Court found the law society rule to be unconstitutional because it interfered with lawyers' right under section 6 to gain a livelihood anywhere in the country, without regard to provincial boundaries. The court acknowledged law societies' duty to regulate competence, ethical standards and financial responsibility in the public interest, but said they must not encroach on section 6 rights when doing so.

GATS and WTO

Another development that has spurred Canadian activity in this area is the decision by our federal government to liberalize trade in legal services under the General Agreement on Trade in Services (GATS). You can find the full text of the GATS document at www.wto.org.

Under GATS, all measures of general application affecting trade in services must be administered in a "reasonable, objective and impartial manner." Licensing and qualification requirements must be

• based on objective and transparent criteria, such as competence and the ability to supply the service
  
• no more burdensome than necessary to ensure the quality of the service
  
• in the case of licensing procedures, not in themselves a restriction on the supply of services

When professional services are brought under GATS, the procedures established to verify the competence of professionals from other countries must not constitute a means of discrimination between countries or a disguised restriction on trade in services.

The general principle that our profession can set rules regarding competence and ethical conduct is secure, but some of the specific restrictions on multijurisdictional practice will probably not be permitted under GATS.

AIT—Agreement on Internal Trade

"AIT" is a set of initials you have probably not heard before. They stand for "Agreement on Internal Trade", an agreement among the Canadian federal and provincial governments that came into force on July 1, 1995. The goal of AIT is to foster more liberal interprovincial trade within Canada—much like a GATT/GATS within Canada.

AIT has not been a major factor in the development of more interprovincial mobility in Canada because the legal profession has not yet been put under the AIT microscope. However, it is clear that our traditional barriers to interprovincial mobility would probably not pass muster under AIT. For more information on this agreement, go to http://strategis.ic.gc.ca/SSI/il/provincial.gif.

The AIT will help us to confront a particular danger that faces us. Although professional governance is a provincial jurisdiction, the treaty-making powers of the federal government are paramount. If the federal government brings legal services under GATS with a set of rules that are more open than existing internal restrictions on mobility, we could find ourselves in the crazy position that it is more difficult for a lawyer from another Canadian province to engage in temporary local practice than for a lawyer from another country with a right to practice here under GATS.

The Reciprocal Interjurisdictional Practice Protocol

All these developments spurred the Federation of Law Societies of Canada, a national alliance of law societies, to develop a reciprocal interjurisdictional practice protocol that was agreed to by most Canadian law societies in 1994. Quebec’s lawyers joined in 1996. The Law Societies of Yukon and Northwest Territories have not joined yet, but they represent a very small number of lawyers. A copy of the interjurisdictional protocol can be found on the Federation's Web site at www.flsc.ca. The highlights of the protocol are as follows:

• commitment to mobility: the signatories commit themselves to facilitate the temporary and permanent mobility of lawyers within Canada and the provision of legal services by interjurisdictional law firms and to cooperate in sharing information and generally in implementing the protocol
  
• temporary mobility: the protocol's temporary mobility (or "safe harbor") rules are too complex to summarize here; they allow visiting lawyers to appear in court, practice local law and practice non-local law, and to do so occasionally or more than occasionally, with or without consulting with a local lawyer, and with or without check-in with the local law society, depending on the circumstances (these rules turned out to be too complex to administer and have been superseded by a simpler rule, which I will discuss in a minute)
  
• occasional appearance: a lawyer who qualifies can engage in the practice of law on not more than 10 matters for not more than 20 days in total during any 12-month period (the "10-20-12 rule")
  
• code of conduct: a lawyer who practices in another province is subject to the local code of professional conduct and rules, even if not a member of the local law society
  
• trust accounts: a visiting lawyer may not maintain a trust account and may not handle trust funds other than retainers which are promptly put in the lawyer's home territory trust account
  
• discipline: when misconduct is alleged against a lawyer practicing in a host province,

The host governing body will assume responsibility for the proceedings unless the governing bodies agree to the contrary

The sanctions available to a host governing body include

When such a declaration is made, the home governing body must take disciplinary action and may impose any penalty it consider appropriate

In addition, the home governing body retains original jurisdiction over its members for their conduct in other provinces, notwithstanding any discipline imposed by the host governing body

• insurance: in essence, each signatory guarantees its members will be covered for up to $1 million per occurrence and $2 million per member aggregate limit per year
  
• client security funds: misappropriation claims are dealt with under complex uniform guidelines under which the home governing body takes primary responsibility, backed up by a national defalcation fund
  
  
• arbitration: disputes arising out of the protocol are subject to mediation, and, if it fails, to arbitration

The protocol also covers permanent mobility, foreign legal consultants and provides a very minimal set of basic rules for interjurisdictional law firms.

Implementation of the protocol was protracted because of the need to amend the provincial statutes that govern the Law societies. It was also delayed by the very high standard it sets for jurisdiction-specific competence, an expensive and cumbersome requirement for local consultation, and very complex rules about different types of practice that would have made it very complex and expensive to administer.

Other developments overtook implementation of the protocol as the four provinces that make up Western Canada (British Columbia, Alberta, Saskatchewan and Manitoba) moved in stages to an even more open arrangement.

The law societies of the Western Canadian provinces concluded that since we trust our lawyers to refrain from taking on matters where they lack competence (although they have unrestricted licenses), we should be able to trust lawyers from other provinces to limit themselves to matters where they are competent when practicing in our province and to seek assistance of local lawyers when they need it. This is similar to the basis on which we have admitted out-of-province lawyers pro hac vice for decades, although limited to a single case.

The Western provinces have therefore replaced the protocol's complex safe harbor rules with a principle of self-monitored competence. An analogy for this is the drivers licenses rule: we allow people who hold a valid drivers license to drive their cars across state/provincial/international boundaries, with all the attendant problems of competence, liability, attorning to local rules, enforcement, etc.

The Western provinces have also moved beyond the 10-20-12 rule for occasional practice and now allow a lawyer licensed in a Western Canadian province to practice on any number of matters for up to six months in a year in any other Western Canadian province. Anyone who wishes to practice more than that must apply to become a member of the local law society. This very open arrangement, which is very close to internal free trade in legal services, is open to any province that will reciprocate.

The protocol's other provisions with respect to jurisdiction over discipline, insurance, trust accounts, client security funds, etc. continue to apply in the Western provinces.