Non-lawyers can now own law firms in Britain. Where's
*This article originally appeared in
The Economist on Jan. 28, 2012.
©The Economist Newspaper Ltd.
Lawyers have long considered themselves a breed apart: highly
educated professionals, not dim-witted businessmen who think a
"whereas" is a man who turns into a small member of the horse
family when the moon is full. Many countries bar business types
from owning even a bit (much less all) of a law firm. But in
Britain, that law changed in October.
Companies are queuing up to form new "alternative business
structures" (ABS). The Solicitors Regulation Authority, the biggest
legal regulator, has received at least 65 applications. The first
ABSs should be approved in February.
The "alternative" possibilities are many. Irwin Mitchell, a big
personal-injury firm, may float its shares. Slater & Gordon,
which in 2007 became the first Australian firm to go public, has
since bought some smaller firms and nearly tripled its revenues, to
AUD $182m (USD $194m).
Another new structure will be that of the Co-operative, a
membership organisation best known for its supermarkets, but which
also runs a bank and buries and cremates more people than any other
entity in Britain. The Co-op already has a legal arm for its
members. Approval as an ABS will let it sell the same services to
the general public. In anticipation, it plans to add 150 people to
its current legal staff of 400.
Liberalisation will make lawyering cheaper, say its boosters.
Tech-savvy entrepreneurs may buy or start law firms and offer more
services online. Quindell Portfolio, a software-outsourcing
com-pany, has said it will seek approval to buy Silverbeck Rymer, a
Liverpool-based law firm. Newcomers may be less deferential to
tradition, and more innovative. Tony Williams of Jomati, a
consultancy, says that if lawyers "insist they're not a business,
they'll carry on until they're out of business."
Many lawyers fear that cheap, off-the-shelf products will replace
expert advice. (The nickname "Tesco Law" has stuck, though Tesco, a
supermarket chain, has not applied to become an ABS.) Critics of
change also fret that taking outside capital might make lawyers
favour investors over clients. But lawyers have always cared about
making money, and giving duff legal advice is seldom a good
Liberalisation will probably affect low-end services first, such
as will-writing and conveyancing. Britain's "Magic Circle" of big
profitable partnerships (Clifford Chance, Allen & Overy,
Linklaters and Freshfields Bruckhaus Deringer) show little interest
in being bought -- by Tesco or anyone else. But if their new rivals
prove capable, they may have to adapt. Some see this. Clifford
Chance has had a back office in India for years. Allen & Overy
launched one in Belfast last year. Recession-racked clients demand
value for money.
Foreigners are watching Britain's example with interest. Current
American law on this issue is like Britain's used to be. But Jacoby
& Meyers, a big personal-injury firm, is suing three states
(New York, New Jersey and Connecticut) for the right to raise
outside capital. The managing partner, Andrew Finkelstein, has
already talked to potential outside partners about buying in, but
can go no further unless the rule is overturned. (He has not yet
talked to investment bankers about going public, but he says he is
interested.) The states are trying to get the suit thrown out on a
technicality. Jacoby & Meyers may lose this round. But if
Britain's reform is successful, the American old guard may struggle
to win the next one on the merits.