It’s not often we hear from the smaller jurisdictions around the world. So this detailed report / survey from Malta is a great way to highlight the issues of lawyers in many countries the world over,and, if this report is anything to go by. Things look pretty awful for the profession.
Chamber of Advocates President Louis de Gabriele told The Malta Independent that lawyers and law firms are feeling the effects of the COVID-19 outbreak, and while being more resilient than other sectors, the profession will need support if it is to weather the storm.
Among other things, the Chamber President highlights how the closure of the courts is having a serious impact on those litigation lawyers who do not have other areas from which they can earn income. While not being one of the hardest hit sectors, the profession is asking for some measures to be set up as a safety net to help them get through a hard period.
Law firms are expecting dips in revenue, and cash collection problems.
The Chamber of Advocates conducted a survey among its members, of which there were 282 respondents (a number of whom were representing whole law firms).
The survey was conducted between the 27 and 30 March
The survey was divided into two parts. The first was to be answered by those who are sole-practitioners (including those who employ less than 5 persons; The second part was to be replied to by law-firms including sole practitioners employing 5 or more – but where only one response would be made for the firm.
The part of the survey dealing with sole practitioners (including those who employ fewer than 5 people) indicates that more than 83% of these practitioners are anticipating that COVID-19 will have a high or extremely high impact on their practice, or that of their employer, and 16% believe that the impact will be either slight of moderate.
“We have tried to evaluate whether sole practitioners or employees within the sector consider that that impact will be such as to constitute a threat, and to gauge the level of that threat. More than 66% of respondents consider the threat to be high or extremely high, with circa 31% that believe there is a moderate or low threat to their practice or employment,” the survey reads.
The survey highlights however, that very few lawyers consider that the situation will cause permanent difficulties for them to continue their practices, but almost 66% anticipate that there is a very likely scenario that they would have to suspend their professional activity, with 60% who consider it very, to extremely likely that they may have to reduce at least one day a week; and 67% who believe that it is more likely that they would reduce their working week by two days or more. “A staggering 88% anticipate a reduction in salaries (for employees) or their income from the profession.”
Law firms and sole practitioners employing more than 5 people
This section was replied to by law firms for the whole firm and therefore inclusive of all lawyers and other personnel engaged in each firm. 21 firms employ between 6-10 people constituting 50% of respondents, with only 2 firm employing more than 100, and ten (10) firm employing between 31-100 people. “These responses therefore represent the position where the people involved, lawyers and support staff range between 860 and 2040.”
Law firms, according to the survey, are expecting a significant dip in revenue. “Around 30% considering that the hit by the virus on revenue will be in the range of 21%-40%, and 19% of respondents fearing higher levels of depressed revenue of between 61%-80%. 21 % fear a hit of more than 80% on revenue.”
This, however, is not the only problem, and such a situation needs to be coupled with cash collection issues, the Chamber President told this newsroom.
The survey reads that “cash collection of past debtors and with respect to current work is another major concern, where more than 80 % fear that cash collection will be down by more than 21%; with 15% considering that cash collection will decrease by 21-40%; 25% by more than 41%; and 28% by more than 61%.
In terms of the effects that COVID-19 are projected to have on the firms themselves, resulting from the revenue loss etc. the survey found that most firms will stop recruitment immediately (87%) and more than 50% are considering terminating employees who are still on probation.
“Few think that the current situation will be the end of their practice (10%). Reduction of working hours and revision of remuneration packages seem to be more the line being taken by firms to manage the situation. More than 32% are seriously considering reduction of headcount by less than 15%; and another 32 % by more than 15%. Most firms 43% do not believe that they would need to reduce headcount by more than 15%.”
“More than 50% of firms will consider shifting to a 3 or 4 day week and 64% of firms are looking and reducing the pay packages of their employees. Only 14% of respondents consider the possibility of lowering remuneration packages as a low or very low possibility”
Chamber President Louis de Gabriele explained that over the past three weeks, a group of five professional bodies – The Chamber of Advocates, the Kamra Tal- Periti, the Notarial Council, the Dental Association of Malta and the Institute of Accountants, came together to put forward a proposed strategy to the government to help the country. He explained that the professions know what their clients’ issues are, and that the strategy focuses on the principle of broad based burden sharing. They also put forward proposals pertaining to their own respective professions.
Referring to the legal profession, the Chamber of Advocates’ President said that lawyers depend on clients. “If they have a difficult time, there are two things that will happen. They won’t pay legal fees, and there will be less work as there is a dip in the market’s sentiment for new business. This affects us. There will be a dip in work and a huge dip in revenue.”
In professions like ours, the last thing you would want to do after having dedicated significant time and resources to recruit and train your people, is to lose them. Our human resource is our first priority. The strategy we want to pursue is to look beyond the crisis and not just focus on the now. Our mind-set in terms of our proposals relating to our profession deal with first weathering the storm, if this is prolonged the time will come when we will need the government to provide a sort of umbrella cover for lawyers during their tough times, so that once the storm passes, we can hit the ground running.”
Proposed assistance measures
The Chamber of Advocates, together with other professional bodies, has made a number of proposals to the government, with the Chamber President stating that their implementation could be staggered depending on the duration and gravity of the situation.
The Chamber is asking for tax deferrals (not a waiver) on provisional tax, final settlement tax, VAT and Social Security contributions for employees. This, he explains, will help lawyers and firms have more cash on hand for the current period, and ascertain that they can survive longer without direct financial aid.
Another proposal deals with some relaxation of certain labour laws and regulations, highlighting that the present situation is extraordinary. He said that the Chamber is asking to pre-establish parameters with the Director of Labour that will allow firms, the flexibility to negotiate with their employees to be able to change the conditions of employment for the period of the crisis without having to get the said director’s approval each time. This, he said, would allow them to further extend their ability to retain their teams longer during a time when the depth of the crisis starts becoming more acute. “allow us to negotiate like this with our employees, as our employees are smart enough to realise that everyone needs to share the burden.”
Another proposal is that if there are schemes for moratoria on personal and home loans, then lawyers should be included. If a lawyer has his income reduced, they might not be able to meet all their payment obligations but if there is a moratorium on their loans, they might be more inclined to accept the previous proposal as well.
The Chamber is also asking the government to make lawyers eligible to participate in any soft loan or overdraft schemes by banks or the government.
As a final proposed measure – which would be a kind-of last resort, the Chamber President said that lawyers should be eligible for the €800 wage assistance measure, but not retroactively, and that it would be triggered only when needed. “Essentially lets give the profession peace of mind that the aid will be there if and when needed.”
“We are not asking for handouts, just assistance to be able survive if this situation persists beyond certain limits. We have also included clawback provisions in our proposal, to ensure that if what today are bleak projections, turn out to be wrong, and a lawyer who has received such assistance, recovers and makes even a small profit by year end, then there will be a claw-back and refund of any income supplement received over the period.
On the idea of the court holding sessions electronically, he said that the Chamber is discussing the possibility and is in contact with the Court Administration about it, but highlighted certain practical difficulties.
“This situation caught the whole system unprepared. There are certain acts that, before the court was closed, could be filed electronically but the system is still too rudimentary to be upgraded in the long term to a fully operational e-filing system. We are also looking into other measures such as, moving more towards written form pleadings and holding sittings in a virtual environment, particularly in instances when no witnesses are required, such as in making submissions on appeal. There are however a number of challenges – not only legal ones, as most of these would need legislative intervention, but also technical and logistical ones. There have been instances in the past where cross-examination takes place via video conferencing, and we are looking into it, but my guess is that by the time we have this in place, the virus might have been long gone.”
