Hire us, not consultants, barristers tell government

“The independent Bar allows [government clients] to obtain short-term counsel and assistance, without having to sign up to complex, ongoing engagements with large firms seeking to ‘up-sell’ services,” the Bar submitted.

“This may be contrasted to a large firm with a pyramid structure that sees partners as hunters for work which is then ‘farmed out’ to a team below.”

Regulation gap

The Bar said the quality and cost-effectiveness of large-firm advice was susceptible to influence by firms’ need to “maintain ongoing and long-term relationships with the government client” with profit as a primary motive.

As sole practitioners who were prohibited from forming partnerships in Australia, barristers’ costs were necessarily lower, and they could bill “no more work than there are hours in a day”, the Bar said.

It also submitted that large multidisciplinary partnerships such as the big four accounting firms and, increasingly, large law firms that combine legal and non-legal functions, presented a gap in regulation.

This gap could be remedied by extending legal profession discipline and regulation to non-legal functions in multidisciplinary firms, the Bar said, pointing to the existing regulatory regime in England and Wales.

There, the Solicitors Regulation Authority regulates non-legal activity when it overlaps with the type of work a lawyer might provide, such as taxation advice. Except where certain activity is excluded by agreement, the SRA will regulate the multidisciplinary firm as a whole, and any misconduct in non-SRA regulated areas may be taken into account when considering a firm’s fitness to hold a licence.

In Australia, state-based lawyers’ authorities do not regulate non-legal professional activity, and personnel in large multidisciplinary firms can be subject to differing regulatory regimes, or none at all, depending on their profession.

Bid for transparency

The tax office is grappling with this issue. In a test case last year, the Federal Court found that PwC had wrongly claimed legal privilege over the majority of documents it was trying to keep from the ATO relating to its work for meat production giant JBS.

The ATO has been trying to force more transparency from the big four consulting firms around their work for multinational companies, after a slew of cases in which the firms used increasingly novel interpretations of legal privilege to withhold tax and auditing information from regulators and shareholders.

It believes that dozens of audits of multinationals have been interrupted by privilege claims in recent years, warning that penalties and legal proceedings may await advisers who made “reckless or baseless LPP claims in an attempt to withhold facts and evidence from the commissioner”.

The Bar submitted that the joint committee “might well take the view” that the English regulatory regime “points to a gap” in how multidisciplinary firms are regulated in Australia.