Regulating Culture: Information Sharing & Collective Understanding

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Professor David Westbrook’s recent Opinion piece, “Regulating culture: navigating economies” and UNSW’s recent forum on regulating culture has been invaluable to the longstanding discussion of the interface between regulation and culture. The discussions to date have focused on the recent events surrounding LIBOR and the crisis involving the financial services industry over the last few years.

One of the most interesting discussions that emerged from these forums was Professor Westbrook’s suggestion that regulators could fare better and be more responsive in preventing such crises if they adopted a “paraethnographic” perspective, that is, “use of an actor's articulation of her context in order to get a handle on that context” to begin to understand the management of financial institutions. According to Professor Westbrook, adopting a paraethnographic perspective to regulation “would transform the relationship between bankers and their regulators from antagonism to mutual interdependence.”

A paraethnographic perspective in regulation seems to be based on the need for effective communication and mutual understanding between the regulator and the regulatee.  That is, honesty and trust must belie the regulatory regime. As Professor Westbrook has written of the financial world, “[t]he current culture of disingenuous reporting and perennially insufficient oversight could be replaced by a more reciprocal relationship in which those who act and those who authorise and ultimately insure speak earnestly and candidly about their worlds.” 

Professor Westbrook’s suggestion resonated well with me. As a regulator of the legal profession for close to two decades I have always approached regulation as a ‘conversation’ that needs to continually occur. My Office regularly engages with the profession and consumers of the legal profession to ensure that we are aware of and understand behaviour and the paradigm within which lawyers practise.  So, when we receive a complaint against a legal practitioner, unless the complaint involves an obvious and egregious breach of ethics or standards, we commence an interaction with both the practitioner and the complainant which focuses on determining the substantive nature of the complaint and how things could have been done better. Our treatment of complaints in this manner also enables us to learn from the profession about what actually occurs in practice and understanding the culture within which practitioners act.

At the OLSC we like to hit practitioners with ‘carrots’ rather than ‘sticks’ (cf. Bob Ferguson: “Regulating Culture: The Limits of Sanctions”). Our role as regulator of the legal profession is as an educator, an adviser and where necessary a disciplinarian. Our focus is on promoting professionalism and high ethical standards in the legal profession so that legal practitioners can provide a better service to the community.

Where we receive a complaint alleging serious misconduct as opposed to a consumer dispute, we must take a more formal investigative and potentially disciplinary approach, but notwithstanding this, our aim is to treat complaint as providing an educational tool for both legal practitioners and complainants. This is reflected in our stated purpose which is to reduce complainants against lawyers within a context of promoting professionalism, protecting consumers and promotion of the rule of law.

However, having a conversation between the regulator and regulatee is only half the answer to understating and better regulating culture. In my view, effective regulation also requires a conversation between regulators of the legal profession and regulators in other fields, particularly where there may be an overlap. 

At the OLSC, our conversations are not just limited to legal practitioners or complainants. We also engage with a range of organisational stakeholders, including the professional associations, legal profession indemnity insurers, other legal regulators in Australia and overseas etc. on a regular basis about a wide range of issues including complaints, discipline, education, policies and procedures. We have been having these conversations with these organisational stakeholders for many years. These conversations allow us to better understand the dynamics of the legal services marketplace and to be kept abreast of practice developments and behaviour.

In addition to the conversations with these organizational stakeholders we also engage in conversations with other regulators where there is regulatory overlap. Regulatory overlap between different regulatory offices can, if not addressed, cause problems in implementation and practice. For example, we have, for some years, maintained a regular conversation with the Migration Agents Registration Authority (MARA) who regulates registered migration agents who may be legal practitioners. The OLSC has met with MARA to discuss regulatory overlap and how it can be addressed. Our meetings with MARA have resulted in a Memorandum of Understanding (MOU) between our office and MARAS to share information where appropriate.

The MOU further states that if either Office receives information which it believes to be of relevance to each other in the discharge of each Office’s responsibilities each Office should liaise with one another and refer matters to the other where appropriate. The MOU also allows each Office to conduct joint investigations.

Regulatory overlap has also recently occurred with the introduction in January 2011 of the Australian Consumer Law (ACL) which replaced the existing state-based and Commonwealth consumer protection laws. The Australian Competition and Consumer Commission (ACCC) and the New South Wales Office of Fair Trading (OFT), as marketplace regulators, are responsible for administering the ACL. The ACL is broad in its effect and covers “any business or professional activity”, which includes the legal profession. This can create confusion, particularly for consumers as the ACL takes a different approach both philosophically in terms of definition to the Legal Profession Act 2004 (NSW) and may create a system of unintended dual regulation.

In response, the OLSC has worked with the OFT and developed an MOU similar to that of MARA which covers information sharing, referrals of appropriate matters, joint investigations and communication. 

As Professor Westbrook warns, ‘regulating culture’ can be difficult to achieve because ‘culture’ is difficult to define and changes in culture are difficult to measure. The OLSC has designed a regulatory process which is proactive and successful in creating ‘ethical infrastructures’ in legal practices. This approach focuses on regulating behaviour in a way which is measurable simply by assessing changes in complaint patterns against individuals or firms. The approach that we have taken encourages us to have closer relationships with other legal regulators and the profession itself which forms the basis of our paraethnographic” perspective.

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