Monday, February 27, 2017
Rules for a Flat World: the UK experience
Hadfield argues that many of the changes she suggests we make have already been made in the UK and Australia. Such changes are amongst the ‘low-hanging fruit’ that are ripe to be picked by the US Bar. Making such changes will, she argues, promote necessary innovation.
Licensing entities to be legal providers, licensing multiple legal professions and right regulation are the three elements in the modernization of legal markets in the UK triggered by the Legal Services Act 2007.
Hadfield argues that these changes put the UK in a good position for building the better legal infrastructure increasingly complex world.
Let’s examine the impact in England and Wales of the first of these changes. Entities licensed to be legal providers are known as alternative business structures (ABS). An ABS is a firm where a non-lawyer is a manager of the firm, or has an ownership-type interest in the firm. A firm may also be an ABS where another body is a manager of the firm, or has an ownership-type interest in the firm and at least 10 per cent of that body is controlled by non-lawyers. A non-lawyer is a person who is not authorised under the Legal Services Act 2007 to carry out reserved legal activities.
Reserved legal activities in England and Wales under the Legal Services Act are exercising the right of audience in front of a court; the conduct of litigation; reserved instrument activities (instruments for transfers or charges on land); probate or notarial activities and the administration of oaths.
In March 2012 the Law Society congratulated the first three practices licensed as ABS’ by the Solicitors Regulation Authority (SRA). They were Co-operative Legal Services, Lawbridge Solicitors and John Welch and Stammers. At the time, Co-op Legal Services which was set up in 2006, employed 400 staff and had plans to add a further 150. ABS status was intended to allow it to diversify into family law and to support services in personal injury claims, conveyancing, wills, probate, and employment law. John Welch & Stammers based in Witney, Oxfordshire since 1932 had seven fee earners and 11 support staff and ABS status allowed them to appoint their practice manager as a non-lawyer managing partner to join two existing solicitor partners. Finally, Lawbridge Solicitors, based in Sidcup, Kent, had one solicitor who could be joined in the shareholding by the firm’s practice manager who was also his wife.
In our recent Future of Legal Services Report (2016) the Law Society noted that ‘initial take-up of ABS has been reasonably slow’. We have also pointed out that whilst there is some evidence that ABS may be more innovative in the way they deliver services and handle complaints ‘innovation can describe new-to-the-firm services rather than new-to-the-market services’. We are also not aware of any strong evidence that ABS provide cheaper legal services and thereby improve access to justice.
Perhaps one of the most interesting characteristics of ABS – in line with the nature of the first entities to licensed – is that most ABS are small, traditional law firms wishing to take advantage of the opportunity to include non lawyers as owners or investors. We have also pointed out that uptake of ABS status by new entrants offering more innovative business models has been relatively slow and there have been some high profile failures, for example when the Parabis group went into administration owing almost £50m to more than 2,500 unsecured creditors in November 2015.
So what has not yet happened is the leveraging of additional capital to invest in technology to support new processes and, perhaps, new types of legal service that many advocating for ABS originally anticipated. However, as the Chairman of the Legal Services Board pointed out in 2016 ‘it is still early days in the licensing of ABS, and not enough time has passed to come to a definitive view on the long-term impact of ABS on the market.’
Whilst Hadfield may be correct in her identification of low-hanging fruit, it is not clear that they are yet ripe.
Posted by Stephen Denver on February 27, 2017 at 09:46 AM | Permalink