LSSA warns LPC of anti-competitive aspects in draft Code of Conduct

February 21st, 2019

By Barbara Whittle

In its comments to the Legal Practice Council (LPC) on the draft Code of Conduct submitted in early February, the Law Society of South Africa (LSSA) recommended that the separation of advocates and attorneys, as reflected in the draft code, be reviewed in its entirety. The LSSA also suggested that a number of paragraphs in Part III of the code be reflected as part of a ‘General Section’ as they are applicable to all legal practitioners. The LSSA added that Part VI of the code should be reviewed to determine which provisions would be more appropriate in guidelines as opposed to a Code of Conduct.

The LSSA, also advised that the LPC should refer a number of matters, that may be regarded as anti-competitive, to the Competition Commission. Included in those is para 12.18 relating to an attorney’s dress when rendering services, which the LSSA notes ‘is vague and may be used to increase barriers of entry to the profession’. The rule should be scrapped or rephrased, or the LPC should apply for an exemption for such conduct in terms of sch 1 to the Competition Act 89 of 1998 (the Competition Act).

The LSSA stressed that the Code of Conduct must be assessed against the provisions of the Competition Act. In particular, s 4(1)(a) of the Competition Act prohibits an agreement or concerted practice between competitors or a decision by an association of competitors if it has the effect of substantially preventing or lessening competition in a market unless a party to the agreement, practice or decision can prove that any technological, efficiency or other pro-competitive gain resulting from it outweighs that effect.

The LSSA noted: ‘Accordingly, it is incumbent of the LPC to ensure that the provisions of the Code of Conduct do not contravene the Competition Act or cannot give rise to a contravention of the Competition Act by its provincial councils (PCs) or committees. If there is any risk in this regard, the LPC should consider –

  • engaging with the Competition Commission on a pro-active basis to bring the Code of Conduct in line with the Competition Act; or
  • applying for an exemption from the Competition Act in terms of Schedule 1 of the Competition Act.’

The LSSA reminded the LPC that, in 2011, the commission ruled that certain of the Professional Rules of the four statutory law societies, which preceded the LPC contravened the Competition Act and turned down an application for exemption of those rules from the ambit of the Competition Act. In fact, the commission referred a complaint against the then Law Society of the Northern Provinces arising from certain of its rules to the Competition Tribunal. In subsequent engagements between the LSSA and the commission, it became clear that the commission is closely watching the developments in the legal profession and will most likely scrutinise the Code of Conduct, once adopted, for any contraventions of the Competition Act.

As regards paras 12.16 and 33, which provides for disputes about the quantum or rate of fees to be decided by the council or an authorised sub-structure of the Council, the LSSA noted that the Competition Commission has previously expressed a view that fee assessment committees in the statutory law societies can give rise to price fixing. While the need and rationale for a fee-assessment function of the LPC and fee-assessment committees under its supervision (namely, to protect consumers against overreaching by attorneys) are understood, this conduct will possibly only be allowed if the empowering statute, the Legal Practice Act 28 of 2014 (LPA), permits it (which it currently does not as the fee-regulating provisions of the LPA has not yet come into force) or if the LPC applies for an exemption for such conduct.

With regard to paras 25 read with para 31, the LSSA suggested that provision be made for counsel to provide a breakdown of fees. Should s 35(7) in its current form remain, it will be difficult, if not impossible, for an attorney to provide a client with a cost estimate without such a breakdown.

The LSSA also pointed out that the burden placed on attorneys with reference to advocates’ fees is too onerous. Provision should be made for the payment of advocates’ fees to be negotiated and determined up front.

There is a risk that the paragraphs relating to collapse fees may be regarded as anti-competitive by the Competition authorities as being price fixing among advocates. According to the LSSA, these rules should be scrapped or rephrased, or the LPC should apply for an exemption.

The LSSA noted that it should be possible for an attorney and counsel to enter into an agreement as to how and when counsel’s fees will become payable. It should also be possible for counsel to recover their fees from the client direct. In these circumstances, it will be appropriate to amend para 26.7 to read:

‘26.7 Counsel may expressly, in writing or in an e-mail, conclude an agreement with an instructing attorney and, where appropriate, with the client which includes provision for any or all of the following:’

A new paragraph 26.7.3 should then be included, as such:

‘26.7.3 in the event of counsel’s fees not paid by the client to the instructing attorney pursuant to paragraph 26.7.1, the counsel shall, after performing the brief, be entitled to recover his/her fees due directly from the client and to the exclusion of liability on the part of the instructing attorney.’

Barbara Whittle, Communication Manager, Law Society of South Africa,

De Rebus