Another trend in the market for legal services is often underestimated: the trend towards liberalisation.
This trend is undoubtedly most noticeable in Australia and in the United Kingdom. In the last few years, some law firms in Australia have even been quoted on the stock exchange. Since the enactment of the UK Legal Services Act in 2007, law firms have had the option of registering as Alternative Business Structures (ABSs). An ABS is a law firm that can be controlled and managed by non-lawyers. By now, more than 700 law firms have been registered as ABSs, most recently the so-called “legal arms” of the big4 accounting firms.
If we have a closer look at some particularly distinguished ABSs, we notice that they are often law firms which have an innovative presence in the market, score with their multidisciplinary nature, invest a great deal in IT to push the digitisation of their processes or operate conspicuously attractive and client-friendly fee models. Thus, they contribute towards the development of a range of legal services that is attractive to clients in both the B2C and the B2B business.
Legal lobbyists, legislators and legal regulators in many markets balk at liberalisation. They do not only oppose the break-up of lawyers’ consultation and/or representation monopoly; the capital- or management-based control of law firms by non-lawyers is not permitted in most markets, either. Now, the exciting question is whether in the long term, the preservation of the law firm monopoly will be beneficial or harmful.
What speaks against extensive liberalisation is the clients’ need for protection, the lawyers’ role as independent agents of the administration of justice, and public interest in the quality assurance of lawyers’ work. What speaks in favour of liberalisation is the fact that only a free market provides the conditions in which suppliers in this market are adaptive and innovative and are thus able to do justice to the constantly increasing market dynamism. Both lines of argumentation are, of course, justified. The question is simply which of the two will ultimately be more beneficial – for both lawyers and their clients.
However we answer this question, the legal framework for the exercise of legal consultation and representation activities must in any case be such as to provide law firms with adequate freedom to develop in line with market requirements. If this is not guaranteed, law firms will in the end lose out against providers that have access to the capital market or are run by a professional strategic and operative management of non-lawyer experts. Thus, rigid regulation is bound to be the wrong way!
De facto, large-scale corporate clients are no longer subject to proprietary national regulations even now. Forum shopping, choice-of-law clauses, alternative dispute settlement mechanisms with the option of being represented outside national regulations, or the use of consultancy services from foreign, non-lawyer legal service providers have been reality for a long time. Thanks to modern technology and innovative business models, similar options will soon be available for private clients, too. Legislators and bar associations are called upon to create regulatory leeway for law firms which will result in a level playing field between law firms and alternative legal service providers.
This blog was originally published on 5 March 2018 in Vista, the online magazine of the Executive School, University of St.Gallen, Switzerland.
About the Author Prof. Dr. Leo Staub is a Titular Professor of Business Law and Legal Management at the University of St. Gallen. He also is one of the Directors of the Executive School of Management, Technology and Law of St. Gallen University where he chairs the division “Law & Management”. Leo can be reached at leo.staub@unisg.ch