The cultural values the US has adopted from the UK are many and deep. That includes, of course, our legal system. What law student does not remember “The Rule in Shelley’s Case” and other precedent derived from English Common Law? (What was the holding in Shelley’s Case, anyway, and was Shelley male or female?) No matter. The point is: with all this commonality, how can the regulatory schemes governing the practice of law in the two countries be so radically different? It has not always been this way but, since the passage of the Legal Services Act of 2007 by the UK (Australia adopted similar legislation almost a decade earlier), lawyers in the UK and US operate under entirely different regulations. How significant is this difference? Answer: very and becoming more so by the day. Why?
A Very Cursory Overview of the Legal Services Act
Perhaps the most remarkable aspects of the UK’s Legal Services Act of 2007 are: (1) the Clementi Report which serves as its foundation and legislative history; and (2) that it was enacted in the first instance. Sir David Clementi, a former Deputy Governor of the Bank of England with a distinguished career in business, conducted a two- year, exhaustive study of the British legal delivery system, examining both the retail and corporate ends of the market. His conclusions were stark and pulled no punches: that in both segments of the market, clients were not being well-served by the self-regulated legal profession; that law was a monopoly; that the legal delivery system was broken and needed to be repaired; and that client interest should be accorded primacy over lawyers’ (self-) interest. After considerable back-and forth, legislation was passed that fundamentally changed existing regulations (still in place in the U.S. save for DC) that: (1) permitted inter-disciplinary practice; (2) allowed non-lawyer (“outside”) investment in law firms; (3) sanctioned non-lawyer management and equity ownership of law firms; and (4) established a process by which firms could become “Alternative Business Structures.”
What is remarkable–apart from Clementi’s unfiltered findings–is that: (1) Clementi is not a lawyer yet was appointed to conduct the investigation into the delivery of legal services; (2) so many members of Parliament who ratified the Act are lawyers and would, therefore, be presumed to have the same reservations–if not fears–that many of their American counterparts still do about tinkering with their self-regulated monopoly. Query: had Clementi been a Magic Circle Managing Partner, not a sophisticated consumer of legal services and someone who had operated at a high level in the business arena, would he have rendered similar findings? I can hear some readers saying, “Objection! Calls for speculation.” Overruled. Think about it. Who better than a client who has been a large consumer of legal services to render judgment on how lawyers deliver their services as well as to offer recommendations for improvement?
Has The UK Legal Profession Gone to Seed?
The Act did not take full effect until 2012, so there is still a relative paucity of data gauging its impact. But some things are clear: (1) a growing number of law firms (as well as service providers) are applying for and securing ABS licenses; (2) interestingly, this includes Cahill Gordon, a bespoke, U.S-.based firm (who secured licensure via its UK LLC) as well as Legalzoom, a well-known American IT/legal document company; (3) a number of large British firms have done so; (4) so too have several firms from other parts of the globe including Slater and Gordon of Australia (the first law firm to have an IPO); (5) “new model” firms such as Riverview (whose ownership includes partners from DLA) have sprung up, providing consumers with fresh approaches to legal delivery; and (6) the UK has become the epicenter of legal innovation as well as base camp for global expansion. What is also clear is that the profession has been jump-started, not hijacked, by the UK’s regulatory change. Retail clients are benefitting from the market competition being driven by new entrants as well as reconfigured incumbents (the UK has its own access to justice crisis) and corporate clients, likewise, have more value driven options. Even Magic Circle stalwarts like Allen & Overy are flexing their innovative muscles by creating a “hybrid” set of offerings that provide clients different “flavors” of legal delivery based upon matter value and type.
The Legal Services Act, soon to be revamped to make it even more client-centric and devoid of red-tape, has done nothing to undermine the profession. Instead, it has freed up lawyers to collaborate with those trained in business management, process, and IT–among others. Better still, it enables these key non-lawyer participants in the legal delivery process their rightful opportunity to have equity in the firms they have become such a critical part of. This will only benefit clients and, at the same time, make law firms more stable.
Meanwhile, On The U.S. Side of the Pond …
It’s regulatory stasis. Perhaps paralysis. Why? Because: (1) lawyers call the shots; (2) the ones who tend to benefit most from preservation of the status quo are generally setting the rules; (3) the inherent parochialism of State Bars militates against sweeping regulatory reform; (4) fear of change; and (5) the misguided notion that the touchstones of the profession– attorney-client privilege; the zealous representation of one’s client; and freedom from bias (independent judgment)– will somehow be compromised–if not decimated– by adopting an ABS model. Add to that list the common misconception that the UK, Australia, and, soon, Ireland, Canada, and other nations, have or will soon deregulate the legal profession. They have not and will not deregulate it but–as some have aptly characterized things–“reregulate” it.
At no time has fear-mongering about regulatory reform been on display more blatantly than at a recent symposium called “Authorized Revolution: Regulatory Disruption of the Legal Services Market.” The event, sponsored by Oxford’s Said Business School and Georgetown Law Center, was a day-long symposium on the impact of regulation on legal services delivery. One session, titled, “Regulatory Reform and Professional Values”, essentially pitted the Brits against the Yanks; the former group extolling the benefits of regulation unleashing innovation and the latter admonishing that regulatory change would compromise the profession. One of the American speakers proclaimed: “many large U.S. law firms are demonstrating that they can be quite innovative.” Really? Do client mandated discounts on rack rates qualify as “innovation.” Not in my book.
Fortunately, by the time I took the stage, tasked with summarizing the days’ arguments and opining about “The Shape of the Future”, I had been preceded by four remarkably thoughtful, innovative, and forward-thinking lawyers, all of whom were from the other side of a suddenly wider pond. I had almost forgotten–put out of mind is more accurate–the “end of the legal profession will come if we adopt an ABS model” rhetoric that had preceded them.
I have always been an Anglophile, and now I have ABS envy. Innovation in the delivery of legal services is occurring on this side of the Atlantic but its potential impact is being blunted somewhat by the existing regulatory scheme. When will things change? When clients here demand regulatory reform and/or when foreign-based law firms and service providers start eating U.S. firms’ lunches. And the delay is too bad, because it’s a lost opportunity for clients and, as U.S. lawyers might learn the hard way, for them, too.