finnish bar association 2006 1 benefits of low regulatory environment – the finnish case kari...

Finnish Bar Association 20061

BENEFITS OF LOW REGULATORY ENVIRONMENT – THE FINNISH CASE

Kari LautjärviPresident

”The Economic Case for Professional Services Reform”13 December 2006, Brussels


Background information

In Finland 5.2 million inhabitants

Total amount of lawyers (a ”lawyer” means LL.M. degree) 15,000 of which appr. 50 per cent practice in the public sector

Members of the Finnish Bar Association (the ”Bar”), in Finnish ”asianajaja”, i.e. advocates, amounts to 1,800 working in appr. 1,070 law firms across the country (80 per cent of the law firms are 1-2 lawyers’ firms)

Furthermore, 600 non-members employed by the members of the Bar

230 public legal advisors (state officials) employed by appr. 60-70 legal aid offices; 130 are members of the Bar (all, however, are under the disciplinary system of the Bar)


In addition, appr. 600-700 lawyers that provide legal services without being members of the Bar (e.g. in-house counsels, lawyers in so-called ”wild law firms”)

In Finland there is neither a monopoly of the Bar members nor a compulsory use of Bar members in the court proceedings or in legal counselling

→ Bar members enjoy no other privileges than the right to the title ”asianajaja”

→ until 2002 also non-lawyers could represent clients in court proceedings (since 2002 a law degree is required)

In Finland there are no reserved rights for members of the Bar

→ Only in very exceptional criminal cases an advocate is required, and in some criminal or publicly funded cases an advocate is primarily recommended


Bar members (unlike other lawyers/non-lawyers) have professional and ethical duties such as

• Independency, loyalty, confidentiality/professional secrecy and avoidance of conflict of interest (usually referred as the ”core values” of the legal profession)

• Obligation to comply with the ethical code of the Bar (in Finnish ”Hyvää asianajajatapaa koskevat ohjeet”)

• Obligation to submit to the disciplinary system of the Bar (having an independent supervision board consisting of 9 members, whereof 6 are members of the Bar)

• Obligation for on-going professional education and a professional indemnity insurance


The Finnish Bar Association (in Finnish ”Suomen Asianajajaliitto”)

A public law institution regulated by the Act on Advocates of 1958, as amended; the organisation was preceded until 1959 by a registered association with an identical name (established already in 1919)

The Act on Advocates sets the framework for the Bar and each Bar members’ practice and this is completed by the Statutes of the Bar

The Statutes are confirmed by the Ministry of Justice but all proposed amendments thereto are initiated by the Bar


Self-regulation of the Bar

The Bar is self-regulated and independent as a profession, meaning, inter alia, that the Bar has

• A right/obligation to determine and maintain the profession’s ethical rules

• A right/obligation to approve as a member all the lawyers fulfilling the criteria for the membership and permit all the licenses necessary to practise pursuant to the Act on Advocates

• A right/obligation to supervise its members

In these decision-making procedures the Bar is using a public power

The self-regulation of the Bar guarantees the independence of the Bar and its members, is necessary for guaranteeing the rule of law as well as individuals’ and corporates’ access to justice


Entry to the profession

The qualifications for Bar membership (the Act on Advocates 3 §)

• Age of no less than 25• Citizen of Finland or other EEA country• Passing of the academic requirements stipulated in

Finland for a judicial office and having the practical experience

→ 4 years after academic examination of which 2 years practising law

• Passing of the Bar examination• Having full legal capacity• Suitability for the profession

– honesty– way of life and characteristics– professional and independent


Special rules for foreign lawyers (the Act on Advocates 3 §, 5a-b §)

The EU commission has in its Report on Competition in Professional Services COM(2004)83 stated that ”Quality entry restrictions, combined with reserved rights, ensure that only practitioners with appropriate qualifications and competence can carry out certain tasks. They may thus make an important contribution for ensuring the quality of professional services.”

→ The Finnish qualifications for an advocate comply with the Commission’s approach and do not restrict competition

→ If the criteria for providing legal services in Finland are increased, the qualification of four/two years practical experience should be reconsidered and possibly be shortened


Regulation on pricing

In Finland there are no restrictions of fixed, maximum or minimum prices for legal fees: the Bar’s recommended pricing was removed in 1992

Legal fees of advocates should be ”reasonable” (the Bar’s Code of Conduct) and in compliance with the Grounds for Determination of Legal Fees (the ”Grounds”, confirmed by the Bar, amended in 1993)

The parameters for determining advocates’ fees include factors such as amount and quality of work required, degree of difficulty of the assignment, value and importance of the case, responsibility of the advocate, time pressure

In Finland advocates operate often on fixed hourly rates, usually disclosed and agreed in advance


Increasingly the advocates and their clients discuss and agree on various pricing methods for specific assignments or transactions (fee estimates/capped fees, frame agreements on pricing with permanent clients etc.)

In legal aid and criminal defence work, remunerated from public funds, fees are determined by laws and regulations

In Finland, trends related to the pricing of legal services include improved transparency and increasing competition (competitive pitching)

Pricing regulations in the ethical code and the Grounds do not have a direct impact on competition within the legal services branch, but they do provide a certain level of consumer protection, especially to clients that are natural persons.


Price is usually not the primary criterion when selecting an advocate (the Client Satisfaction Survey regarding Advocacy, conducted by Promenade Research Oy in 2004 for the Bar)

→ the most important criteria for the choice of an advocate are: previous client relationship, referral/ recommendation or reputation of a law firm/specific lawyer

The deregulation on pricing (since 1992) did not have an impact on to the price level of legal fees (the Consumer Office’s Survey in 1998-1999)

A client always has a right to submit its dispute on legal fees to the Supervision Board of the Bar without any cost (or alternatively to initiate a court proceeding)


Regulation on marketing

General statutory provisions in a Council Directive 84/450/EEC concerning misleading and comparative advertising, in the Finnish Act on Unfair Business Practices (1061/1978, as amended) and in the Finnish Act on Consumer Protection (38/1978, as amended)

Code of Conduct for Bar members (in this context) include the Finnish Act on Advocates (5 §), the Bar’s Statutes (35 §), the Rules of Proper Professional Conduct for Advocates (of 1972, as amended) and the Guidelines on Marketing of Advocacy Services (the ”Guidelines”, updated as a whole in 1997)

The specific restrictions for marketing are stated in paragraphs 5-6 of the Guidelines


Soliciting new clients• Attorney may not solicit new assignments by directly

contacting a party in a case that is pending, subject to certain exceptions

Inappropriate marketing include, for example,• Comparative advertising between advocates• Disclosure of client information• Provision of advocacy services to the victims of accidents

or people in distress for corresponding reasons (”ambulance chasing”)

It is possible to give general information on the legal profession and also compete in marketing against other legal service providers

So far, marketing in Finland has not been inappropriate and has not endangered a good relationship between the advocates


Advertisements are costly and probably do not increase the amount of workload of the legal profession as a whole, but there will always be those who are willing to advertise

Restrictions for the advocates on marketing do not have much relevance to competition in the area of legal services

Are the consumer protection laws and regulations in EU member states sufficient to define appropriate marketing, i.e. do we in the future need specific guidelines or regulations for the advocates issued by respective national bars?


Regulation on business structures

In Finland as a general rule only members of the Bar can own law firms (the Act on Advocates 5 § 2), i.e. MDPs and alike are not allowed

→ The Board of the Bar is entitled to permit, based on special grounds, for other than advocates to be joint owners but in practice it has not been done except in cases where a lawyer will within short time period fulfil the qualifications for a Bar membership and will accept to join the Bar

The ownership requirements strengthen the independence as well as the ethical and professional quality of the advocates’ firms

Law firms in Finland have not required investors’ capital and non-legal professionals have been successfully recruited with various incentive programs

→ In Finland there has not been a need or pressure to modify the ownership requirements to allow MDPs or alike


Regulation of quality

In Finland as a general rule only members of the Bar are under regulation

Other providers of legal services are neither subject to any other ethical rules or disciplinary system than civil or criminal responsibility generally applicable to all persons nor under any obligation to educate themselves or have an indemnity insurance

The shortages in the Finnish model have lead to several observations such as, inter alia,

• The recently renewed rules on civil proceedings in all court levels require from parties high quality legal knowledge and other competence

• In criminal proceedings a use of an attorney is necessary to ascertain the equality of arms, especially as the level of education and professional skills of public prosecutors has increased substantially in recent years


• In Finland it is today possible to have a professional legal practice, although the lawyer has disbarred from the Bar due to serious misbehaviour or crime

• In Finland it is today possible to professionally provide legal services outside of courts without being a lawyer (i.e. not having a law degree)

• Protection of consumer laws covers only providing of legal services professionally → also legal services provided by lawyers may fall partly out of the consumer protection

There is a lot of critique against the current situation regarding legal representation


“It is dangerous to assume that the lowest level of regulation in any member state indicates a desirable solution to be adopted by the Community legislator.”

“The ”liberal” rules in Finland and Sweden entitling parties to represent themselves in courts, or entitling people other than members of the bar or qualified lawyers to represent parties before the courts, do not necessarily operate to the benefit of the client. Too often such representatives destroy their clients’ case beyond repair.”

”One should be careful not to discourage the member states or the bar associations from improving further the quality of those assisting parties before the courts.”

(Leif Sevón, President of the Supreme Court of Finland, European Lawyer, Issue 38, May 2004)


The Finnish Government appointed on June 2001 a Commission to inquiry into the development trends of the court system in Finland. The Commission stated in its Report of 2003, inter alia

”The Commission is of the opinion that the qualifications required of attorneys and trial counsel should be made stricter. The objective should be that only a professionally competent and ethically irreproachable person can act as another person’s attorney or trial counsel. The provision of such services should be subject to supervision by an independent and impartial supervisory or disciplinary body.”


The Finnish Bar Association established in 2005 a working group for preparing the ”Report on the Regulation of Advocacy” which will be launched in January 2007. The main conclusions of that Report will include, inter alia:

• The qualifications for the legal services providers should be defined in various types of legal practice, meaning e.g. court proceedings/legal counselling, disputable/ undisputable cases, general/administrative courts

• The obligation to comply with the professional ethical rules and submit itself to the supervision (disciplinary system) should be extended to cover the court practice in disputable cases and the professional legal counselling for remuneration


• The criteria for developing the quality regulation of the legal services should be based on the access to justice, well functioning legal system, consumer protection and efficiency of the legal services

• The regulatory functions are most efficiently and professionally performed by the national Bar and the self-regulation of the Bar is necessary to ensure the independence of the Bar and its members

The Report will be introduced to all major players of the legal circles in Finland and has been welcomed also by the Ministry of Justice. The Bar sincerely hopes that the Report would lead to a dialogue regarding the regulation of quality of legal services and to legislative reforms for increasing the quality criteria.

finnish bar association 2006 1 benefits of low regulatory environment – the finnish case kari...

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