Law and Economics of Occupational Licensing: The Case of Law Profession
Category: Law and Economy
By: Leo Kipkogei Kemboi,
Occupational licensing is widespread in Kenya, particularly in professions such as law and medicine, and it sparks debate in law and economics. In Kenya, occupational licensing is provided for through a set of statutes. This has implications for markets of legal service provision, which we discuss in this blog. Why is occupational licensing now a policy issue in Kenya?
The occupation licensing regime for the law profession has birthed legal fee problems for the public sector. For example, a publicised report outsourcing legal services has slapped counties with a Ksh 50bn fees nightmare.[1] The legal fees landscape in Kenya is fraught with challenges, including allegations of exorbitant fees, particularly in cases involving state corporations.[2] Transparency and accountability in fee structures are also major concerns, with stakeholders calling for more straightforward guidelines and justification for fees charged. The high cost of legal services is seen as a barrier to access to justice, especially for low-income individuals. The potential impact of fee increases on the cost of doing business in Kenya has raised concerns about economic implications. These concerns show the importance of a conceptual approach that assures fair compensation for legal practitioners while also making legal services more accessible and affordable to all Kenyans, allowing pricing to occur in marketplaces without legislation.
How the Law Profession is regulated?
The Advocates Act provides for academic and professional qualifications to become an advocate, the existence of a bar, the process of admission as an advocate, ranks in the professions, i.e., senior counsel, precedence, a practising certificate and its validity, offences by advocates and unqualified persons, remuneration of advocates, complaints, and discipline. This is entirely the regulatory framework of the advocate’s entry and existence into the profession. [3]
Section 10 of the Advocates Act allows certain officers to act as advocates in connection with their official duties if they have specified criteria at the appointment. These include officers in the Attorney-General’s or Director of Public Prosecutions’ offices, the Chief Land Registrar, Deputy Chief Land Registrar, the County Land Registrar, and Land Registrars, as well as individuals serving in a local authority established under the now-repealed Local Government Act. In addition, the Attorney-General may name other public authorities or officers in public corporations by publishing a notice in The Gazette. However, the provision prohibits these officers from charging money for acting as advocates.
Section 44 outlines the process by which the Chief Justice can prescribe and regulate the remuneration of advocates. The Act sets out the procedures and criteria for advocates to be remunerated for their services, including the ability to make agreements with clients regarding fees, subject to specific regulations and oversight by the Chief Justice.
All advocates are required to be members of the Law Society of Kenya. The Law Society of Kenya, established by the Law Society of Kenya Act No. 21 of 2014, is mandated with various functions and objectives to advance the legal profession and ensure justice in the country. These include assisting the Government and courts on legal matters, upholding the Constitution, guaranteeing legal practitioners meet professional standards, protecting the public, setting and maintaining professional standards, facilitating legal education, representing and protecting members’ interests, aligning the legal profession with constitutional values, promoting a cohesive and accountable legal profession, ensuring equal opportunities, protecting consumers of legal services, providing training programs, and undertaking other related functions. These efforts collectively aim to promote professionalism, uphold justice, and safeguard the interests of both legal practitioners and the public in Kenya.
Analysis
The argument advanced by the advocate argues that it safeguards consumers by ensuring practitioners meet specific standards of competence and ethics. This other claim is that it may create entry barriers, restrict competition, and ultimately drive-up consumer prices without necessarily enhancing quality. In the legal field, licensing is typically upheld through bar exams and other requirements established by professional bodies or government agencies according to statutes. These regulations can also encompass rules on compensation like minimum fees or fee structures. For example, in Kenya, the Advocates Remuneration Order provides guidelines for advocates’ service charges to keep legal services accessible while allowing advocates to earn a reasonable income.
The legal profession is not the only body regulated by legal statutes. There are other bodies like supply chain professionals and accountants. Similarly, within the medical profession, licensing and fee regulations can impact healthcare costs – doctors’ consultation fees might be subject to guidelines set by medical boards or professional associations. The influence of occupational licensing on competition, consumer welfare, and professional standards remains an ongoing topic of discussion and study within law and Economics.
- Costs: Licensing imposes costs on individuals seeking to enter the profession, including the cost of education and training, exam fees, and ongoing professional development requirements. These costs can deter individuals from pursuing certain occupations or increase consumer prices as practitioners seek to recoup their investments.
- Monopoly Power: Schools that provide training for the legal profession, such as the Kenya School of Law (KSL), may retain monopoly power, potentially leading to higher tuition fees increased and limiting access to training programs.
- Regulation: A regulator, in this case, the Council of Legal Education (CLE), charges taxpayers additional fees to monitor the licensing process and assure compliance with professional standards.
- Consumer Prices: Consumers may pay higher prices for legal services due to the limited supply of licensed practitioners, which can result from the barriers to entry created by licensing requirements.
- Economic Opportunity: Licensing can reduce economic opportunity for unlicensed workers who may be qualified to perform certain legal services but cannot do so without a license.
- Upfront Costs: Individuals who successfully obtain licenses must pay upfront costs, such as Continuing Professional Development (CPD) costs and the opportunity cost of lost wages while undergoing training.
- Geographical Mobility: Licensed workers may face limited geographical mobility if licensing requirements vary between jurisdictions, potentially restricting their ability to practice in different locations.
- Earnings: Licensed workers sometimes earn more than similar workers who are not required to obtain licenses, which can contribute to disparities in income and economic outcomes.
These points reflect the complex interplay between licensing, economic outcomes, and access to professions like law. Critics argue that while licensing can serve critical regulatory functions, it may also have unintended consequences, such as restricting competition and limiting economic opportunity for some individuals
Repealing the Advocates Act, particularly the provision requiring the Chief Justice to set the Advocates Remuneration Order, and granting autonomy to universities to determine training requirements could significantly alter the legal profession’s regulatory framework in Kenya. Here’s how these changes might impact various aspects of the legal sector:
- Advocates Remuneration: Repealing the provision requiring the Chief Justice to prescribe legal fees through the Advocates Remuneration Order would likely give advocates more control over their fees. This could lead to more significant variation in pricing and potentially lower costs, as competition may increase without the constraints of a centrally determined fee structure.
- Training Requirements: Granting universities autonomy to determine training requirements could lead to a more diverse range of legal education programs. This could enhance the quality of legal education by allowing universities to tailor their programs to meet the needs of the legal profession and society.
- Competition and Market Dynamics: These changes could also impact competition within the legal profession. Allowing advocates to set their fees and universities to determine training requirements could lead to a more competitive market, potentially benefiting consumers through lower prices and improved service quality.
- Professional Standards: However, some concerns removing central regulation of fees and training requirements could lead to decreased professional standards. Without uniform standards, there may be variations in the quality of legal education and legal services.
- Access to Justice: Changes to the regulatory framework may also affect access to justice. While decreased costs may make legal services more accessible to some, there is a risk that weaker regulation would result in unethical activities or a reduction in the availability of legal aid services for marginalised areas.
Endnotes
[1] Omulo, Collins . “How Outsourcing Legal Services Has Slapped Counties with Sh50bn Fees Nightmare.” Nation, 30 Mar. 2024, nation.africa/kenya/business/how-outsourcing-legal-services-has-slapped-counties-with-sh50bn-fees-nightmare-4574030.
[2] Menya, Walter. “Lawyers and Outrageous Legal Fees Charged on State Corporates.” Nation, 2 July 2020, nation.africa/kenya/news/lawyers-and-outrageous-legal-fees-charged-on-state-corporates-1072320.
[3] “The Advocates Act.” Laws Of Kenya, kenyalaw.org:8181/exist/rest//db/kenyalex/Kenya/Legislation/English/Acts%20and%20Regulations/A/Advocates%20Act%20-%20No.%2018%20of%201989/docs/AdvocatesAct18of1989.pdf.
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Law and Economics of Occupational Licensing: The Case of Law Profession
| Post date: Wed, Jan 15, 2025 |
| Category: Law and Economy |
| By: Leo Kipkogei Kemboi, |
Occupational licensing is widespread in Kenya, particularly in professions such as law and medicine, and it sparks debate in law and economics. In Kenya, occupational licensing is provided for through a set of statutes. This has implications for markets of legal service provision, which we discuss in this blog. Why is occupational licensing now a policy issue in Kenya?
The occupation licensing regime for the law profession has birthed legal fee problems for the public sector. For example, a publicised report outsourcing legal services has slapped counties with a Ksh 50bn fees nightmare.[1] The legal fees landscape in Kenya is fraught with challenges, including allegations of exorbitant fees, particularly in cases involving state corporations.[2] Transparency and accountability in fee structures are also major concerns, with stakeholders calling for more straightforward guidelines and justification for fees charged. The high cost of legal services is seen as a barrier to access to justice, especially for low-income individuals. The potential impact of fee increases on the cost of doing business in Kenya has raised concerns about economic implications. These concerns show the importance of a conceptual approach that assures fair compensation for legal practitioners while also making legal services more accessible and affordable to all Kenyans, allowing pricing to occur in marketplaces without legislation.
How the Law Profession is regulated?
The Advocates Act provides for academic and professional qualifications to become an advocate, the existence of a bar, the process of admission as an advocate, ranks in the professions, i.e., senior counsel, precedence, a practising certificate and its validity, offences by advocates and unqualified persons, remuneration of advocates, complaints, and discipline. This is entirely the regulatory framework of the advocate’s entry and existence into the profession. [3]
Section 10 of the Advocates Act allows certain officers to act as advocates in connection with their official duties if they have specified criteria at the appointment. These include officers in the Attorney-General’s or Director of Public Prosecutions’ offices, the Chief Land Registrar, Deputy Chief Land Registrar, the County Land Registrar, and Land Registrars, as well as individuals serving in a local authority established under the now-repealed Local Government Act. In addition, the Attorney-General may name other public authorities or officers in public corporations by publishing a notice in The Gazette. However, the provision prohibits these officers from charging money for acting as advocates.
Section 44 outlines the process by which the Chief Justice can prescribe and regulate the remuneration of advocates. The Act sets out the procedures and criteria for advocates to be remunerated for their services, including the ability to make agreements with clients regarding fees, subject to specific regulations and oversight by the Chief Justice.
All advocates are required to be members of the Law Society of Kenya. The Law Society of Kenya, established by the Law Society of Kenya Act No. 21 of 2014, is mandated with various functions and objectives to advance the legal profession and ensure justice in the country. These include assisting the Government and courts on legal matters, upholding the Constitution, guaranteeing legal practitioners meet professional standards, protecting the public, setting and maintaining professional standards, facilitating legal education, representing and protecting members’ interests, aligning the legal profession with constitutional values, promoting a cohesive and accountable legal profession, ensuring equal opportunities, protecting consumers of legal services, providing training programs, and undertaking other related functions. These efforts collectively aim to promote professionalism, uphold justice, and safeguard the interests of both legal practitioners and the public in Kenya.
Analysis
The argument advanced by the advocate argues that it safeguards consumers by ensuring practitioners meet specific standards of competence and ethics. This other claim is that it may create entry barriers, restrict competition, and ultimately drive-up consumer prices without necessarily enhancing quality. In the legal field, licensing is typically upheld through bar exams and other requirements established by professional bodies or government agencies according to statutes. These regulations can also encompass rules on compensation like minimum fees or fee structures. For example, in Kenya, the Advocates Remuneration Order provides guidelines for advocates’ service charges to keep legal services accessible while allowing advocates to earn a reasonable income.
The legal profession is not the only body regulated by legal statutes. There are other bodies like supply chain professionals and accountants. Similarly, within the medical profession, licensing and fee regulations can impact healthcare costs – doctors’ consultation fees might be subject to guidelines set by medical boards or professional associations. The influence of occupational licensing on competition, consumer welfare, and professional standards remains an ongoing topic of discussion and study within law and Economics.
- Costs: Licensing imposes costs on individuals seeking to enter the profession, including the cost of education and training, exam fees, and ongoing professional development requirements. These costs can deter individuals from pursuing certain occupations or increase consumer prices as practitioners seek to recoup their investments.
- Monopoly Power: Schools that provide training for the legal profession, such as the Kenya School of Law (KSL), may retain monopoly power, potentially leading to higher tuition fees increased and limiting access to training programs.
- Regulation: A regulator, in this case, the Council of Legal Education (CLE), charges taxpayers additional fees to monitor the licensing process and assure compliance with professional standards.
- Consumer Prices: Consumers may pay higher prices for legal services due to the limited supply of licensed practitioners, which can result from the barriers to entry created by licensing requirements.
- Economic Opportunity: Licensing can reduce economic opportunity for unlicensed workers who may be qualified to perform certain legal services but cannot do so without a license.
- Upfront Costs: Individuals who successfully obtain licenses must pay upfront costs, such as Continuing Professional Development (CPD) costs and the opportunity cost of lost wages while undergoing training.
- Geographical Mobility: Licensed workers may face limited geographical mobility if licensing requirements vary between jurisdictions, potentially restricting their ability to practice in different locations.
- Earnings: Licensed workers sometimes earn more than similar workers who are not required to obtain licenses, which can contribute to disparities in income and economic outcomes.
These points reflect the complex interplay between licensing, economic outcomes, and access to professions like law. Critics argue that while licensing can serve critical regulatory functions, it may also have unintended consequences, such as restricting competition and limiting economic opportunity for some individuals
Repealing the Advocates Act, particularly the provision requiring the Chief Justice to set the Advocates Remuneration Order, and granting autonomy to universities to determine training requirements could significantly alter the legal profession’s regulatory framework in Kenya. Here’s how these changes might impact various aspects of the legal sector:
- Advocates Remuneration: Repealing the provision requiring the Chief Justice to prescribe legal fees through the Advocates Remuneration Order would likely give advocates more control over their fees. This could lead to more significant variation in pricing and potentially lower costs, as competition may increase without the constraints of a centrally determined fee structure.
- Training Requirements: Granting universities autonomy to determine training requirements could lead to a more diverse range of legal education programs. This could enhance the quality of legal education by allowing universities to tailor their programs to meet the needs of the legal profession and society.
- Competition and Market Dynamics: These changes could also impact competition within the legal profession. Allowing advocates to set their fees and universities to determine training requirements could lead to a more competitive market, potentially benefiting consumers through lower prices and improved service quality.
- Professional Standards: However, some concerns removing central regulation of fees and training requirements could lead to decreased professional standards. Without uniform standards, there may be variations in the quality of legal education and legal services.
- Access to Justice: Changes to the regulatory framework may also affect access to justice. While decreased costs may make legal services more accessible to some, there is a risk that weaker regulation would result in unethical activities or a reduction in the availability of legal aid services for marginalised areas.
Endnotes
[1] Omulo, Collins . “How Outsourcing Legal Services Has Slapped Counties with Sh50bn Fees Nightmare.” Nation, 30 Mar. 2024, nation.africa/kenya/business/how-outsourcing-legal-services-has-slapped-counties-with-sh50bn-fees-nightmare-4574030.
[2] Menya, Walter. “Lawyers and Outrageous Legal Fees Charged on State Corporates.” Nation, 2 July 2020, nation.africa/kenya/news/lawyers-and-outrageous-legal-fees-charged-on-state-corporates-1072320.
[3] “The Advocates Act.” Laws Of Kenya, kenyalaw.org:8181/exist/rest//db/kenyalex/Kenya/Legislation/English/Acts%20and%20Regulations/A/Advocates%20Act%20-%20No.%2018%20of%201989/docs/AdvocatesAct18of1989.pdf.
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