Has liberalization of the legal industry in England changed anything?

Par Yves Faguy avril 3, 20183 avril 2018

Has liberalization of the legal industry in England changed anything?
Photo by Evan Kirby on Unsplash

 

Mark A. Cohen makes a case for splitting regulation of the practice of law (training, licensing, ethical responsibilities, and client obligations) away from the business of law (to promote competition and innovation):

The core tenets of legal practice—confidentiality, conflict avoidance, etc.—have changed little over time, even as new challenges arise. Lawyers are well-suited to regulate themselves.  But the business of delivering legal services in an increasingly corporatized, digitized, inter-connected, complex world requires outside regulators whose focus is on consumers, not lawyers. Regulation should encourage new delivery models, investment capital, and innovation that promote access and elevate legal buyer satisfaction. The legal industry has the resources to better serve consumers and society. Bifurcation of legal regulation will advance these important objectives and preserve the fundamental characteristics of legal practice.

He holds up the model in England and Wales as an example where a Solicitors Regulatory Authority oversees the business side of the industry, while practice matters are left to The Law Society.  This split happened when the Legal Services Act, 2007 fully came into force five years ago and introduced alternative business structures (ABS), which allows for non-lawyers in professional, management or ownership roles.

But in a recent post Malcolm Mercer takes a look at how the market for legal services in England has evolved since its liberalization five years ago, and proposes that Canadian law societies take more of a wait-and-see approach to re-regulation.  Basing his analysis on a review of a report made public last year by the Legal Services Board, the independent body responsible for overseeing the regulation of lawyers, he notes a few key trends – namely that among those firms who have acquired ABS licenses, roughly 80 per cent were “existing practices” as opposed to “new entrants.”  Also, few ABS (12 per cent) have tapped in to external finance to invest in their business.  His conclusion:

What appears to be clear is that not much has happened in England as a result of ABS liberalization. The conclusion of the 2017 LSB Report is essentially that existing practices have not had to innovate because they have not faced strong competition particularly from new entrants. But the report does not address why relatively easy entry into the legal services market and the fact of unreserved areas of practice have not led to increased competition.

It may be that the emergence of new entrants simply takes time. It may also be that existing legal practices are reasonably well suited to the work that they do and that there isn’t substantial profit to be made serving existing reserved legal markets though new forms of practice.

So the implication of the first five years of ABS liberalization in England is that it has not led to much accessing of external capital nor to much innovation. At the same time, it does not appear that ABS liberalization has led to significant problems either. That said, spending substantial regulatory time and effort to enable a significant regulatory change of rather limited impact does not seem like a great use of resources.

While it is perfectly valid to point that the legal industry has changed little as a result of liberalization, the pace of technological progress could really speed things up ahead. There is growing pressure on lawyers to work more efficiently, and whether it’s investing in technological solutions, R&D, or new partnerships, traditional practices are going to have to figure out how to tap into capital one way or the other.  That might have as much to do with business culture as it does with the regulatory environment. And the two probably go hand in hand.

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