Next Monday I am taking part in a Panel discussion at the International Conference of Legal Regulators in Toronto entitled "Lawyer Trust Accounts: Is there a better system?" Members of the Panel are drawn from Europe and North America. There is clearly an ongoing debate worldwide about alternatives to the current system where lawyers hold their client's money as part of a transaction or litigation. Almost all jurisdictions have such arrangements which are backed up by rules, disciplinary regimes, insurance arrangements and a compensation fund for clients where insurance is not available. These expensive arrangements exist in order to protect clients from the consequences of a small number of practitioners.
These questions have also been picked up in a briefing paper published this week by the England and Wales legal regulators entitled "Alternatives to handling client money." This document is a very useful contribution to the debate.
The next few years are likely to see regulators give lawyers greater freedom to use approved third party escrow arrangements. These broadly present less risk and may more convenient to lawyers who do not do a large number of transactions and wish to rid themselves of the administrative burden and cost of holding the money themselves. One such scheme is BARCO which is run by the Bar Council of England and Wales. It is easy to see that as such third party schemes become established their costs will drop and more lawyers will find them attractive. This may consequentially increase the costs for those lawyers who stll hold client money and we will reach a tipping point.
At the same time, the increasing ease with which money can be transferred between accounts may make it less necessary for lawyers to be involved in holding money in any event.
One day the client account may cease to exist. In some ways this would be good as it will ease an enormous regulatory burden but the death of client accounts will also remove a part of what it means to be a lawyer.
• A briefing paper on alternatives to the handling of client money. Not all legal practitioners are allowed to handle client money. But where they do handle client money, this represents a significant source of risk to consumers. As a consequence, the handling of client money also attracts a significant volume of prescriptive regulation, the costs of which are ultimately passed on to consumers. The legal services regulators have therefore collectively developed an overview report on what options there might be for practitioners who no longer want to handle client money.