Alternative Business Structure: Legislation that will change the shape of the legal services market delayed

By | September 27, 2011

lawPart of Legal Services Act 2007 was due to come into force in October this year. At the last minute, it has been delayed until the New Year which says a lot about its controversial nature. It will mean that firms of solicitors can become part of an ‘alternative business structure’ whereby a firm can be owned in part or totally by non-lawyers.

Non-lawyer involvement is radical change for legal services sector

This is a radical change from how things have been for many years.  Only recently have firms been able to take on a limited number of non-solicitor partners, in very defined circumstances.  Clearly it opens the way not just for outside investment but for active participation in the business by non-lawyer individuals or organisations including financial services organisations or supermarkets.

Only 45% of law firms considering outside investment

This has been a long time coming – the legislation was passed four years ago.  Opinion in solicitors’ circles has oscillated from seeing it as a golden opportunity to seeing it as a threat which is likely to bring the world as we know it to an end. Accountants Baker Tilly recently surveyed law firms in part of the Yorkshire area and found only 45% were considering an outside investor. This seems to show ‘cold feet’ as the big day draws closer as some 56% of these firms were considering such a move last year.

Public must be protected in opening up of the legal profession

A major concern is that the public must be protected in any opening up of the profession – both in terms of the quality of advice received and continued security of finances entrusted to firms. The Legal Services Board, Law Society and Solicitors Regulation Authority (SRA) all believe that the rules which will apply will offer such protection.

Alternative Business Structure will change the shape of the legal services market

Maybe there will not be huge changes on day one, but they will surely come and when we look back in three, four or five years the legal landscape is likely to look different from how it does today. Whether that will be good or bad, and for whom, only time will tell. Further change is likely as a result of Review 2020, currently underway jointly between the SRA and the regulatory bodies for barristers and legal executives and which will take account of the future demands on legal services and the changes that will shape the legal services market of the future.

Fear of polarisation of legal firms

The legal profession is noted for its caution. It is not well loved by the public. It has, however, been in the vanguard of fights for individual rights and liberties and equal access to the legal system. It has also, despite its often unwarranted ‘fat cat’ image, suffered withering attacks in recent years on state funding received by way of legal aid to the point that many firms are at the edge of viability.  It is hoped that a cautious, pragmatic approach to the new order will yield benefits for all but there is a very tangible fear of a polarisation of firms – the well supported new alternative business structures, dominated by non-lawyers, and the remainder of the profession, unwanted by or unwanting of outside investors eeking out an existence.  This would change the legal world for ever and probably not to general benefit.

Despite the often negative reputation of the legal market, we often don’t realise how good things are until they are gone or changed forever. Does the delay to bringing the legislation into force reflect a nervousness that it may be a big mistake that cannot be taken back?

About Chris Gale

Chris graduated from University College Cardiff in 1977 and qualified as a solicitor in 1980. He moved to academia in 1990 with an appointment at the Polytechnic of North London and joined Leeds Metropolitan University (Leeds Law School) in 1994, becoming head of undergraduate studies and being responsible for profiling, timetabling and staff development across the School. He joined Bradford University Law School as the inaugural Director of Legal Studies in July 2005.

Specialties: Human rights, Sport and the Law, Public Confidence in the Legal System