Plant: firms 'deluded' to think ABSs won't have impact
A regulation chief has warned the UK’s biggest commercial firms that they are ‘deluded’ to think alternative business structures will not affect them.
Solicitors Regulation Authority chairman Charles Plant told the Association of Personal Injury Lawyers conference on Friday that no firm could assume they would be immune from the impact of the new ownership model. ‘For those firms and businesses who say they have no interest I say you’re looking through the wrong end of the telescope,’ he said.
‘Your competitors are very interested, as are the young lawyers who represent your future. The tentacles of ABSs spread to many other areas and will impact directly on you.’
Young lawyers entering the profession want to be part of progressive practices, Plant said. ‘The new generation want to control their destiny and, given the choice between joining a traditional law firm with slow steps up the ladder and joining one with share options, many will take the latter course. City of London firms take note.’
Plant, a former partner at City firm Herbert Smith, said ‘Well-run, ambitious firms who understand what is going on in the market will treat this period as one where the opportunities are great. If these firms take the opportunities I am sure they will succeed, just as those who fail to take the opportunities I fear are doomed to fail.’
He stated that 74 applications for ABS status were now at an advanced stage and denied there had been delays to the process.
The SRA announced its first three successful licences last month but no further applications have been completed since then. Of the next round, Plant said: ‘Many are not straightforward, some of the structures being proposed are complex and need careful scrutiny by us, whilst some are incomplete. There is no backlog - the applications are being properly and efficiently processed.
‘You will have read some applicants have expressed surprise by the rigour but that is what the protection of the public and the profession requires.’
Plant said it was important that personal injury firms prepare themselves for the future, with government reforms of civil litigation set to coincide with new competitors gaining ABS status. He gave his backing to law firms having official links with claims management companies and said it was one option for negating the effects of a ban on referral fees.
Plant also warned that the SRA will be looking closely at firms that continue to offer services on a no win, no fee basis.
‘Some firms will conduct too many cases on contingency fees and will expose themselves to collapse if they don’t win those cases. We will conduct enquiries on such firms.’
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Welcome to Purgatory Hill
Welcome to Purgatory Hill!
They say there’s no gain without it and there’s a fine dividing line between the aforementioned and pleasure. So for all you legal sadists out there I present to you a break from reality and a one way trip up the ABS pass.
Across the pond on that small one tree island called America, the American Bar Association has crawled onto dry land and taken the first tentative step at becoming a new species. But we have already identified it as being the Alternative Business Structured law firm, and for a change they are following us.
Perhaps it will be whatever the UK does today the US will do tomorrow and that will be a nice change. They are obviously watching us more closely than we had ever imagined and have seen something they like.
They will also note a majority reluctance to take on this brave new world but this doesn’t seem to have deterred them in their quest for progress and profit.
The ABA have highlighted the move by Kobre & Kim who are a New York litigation firm, to convert its’ London office to a Legal Disciplinary Practice in 2010. Their move allowed their UK Lawyers (which include two Barristers and one Solicitor) to practice English Law as partners in the firm.
However, there is a certain reservation from the ABA. They have made it quite clear that they are not prepared to allow what they term as ‘passive external investment’ by any non lawyers. In particular they aim their comments towards private equity investment and kindred secondary associations thereto.
In a recently released consultation paper the ABA states quite clearly and unequivocally that ‘The competitive environment in which US firms of all sizes now operate has changed. The economic challenges of the intervening period invite reconsideration of whether alternative business structures might serve to enhance access to legal services for those otherwise unable to afford them, and to provide new and varied opportunities for lawyers and firms, domestically, to better serve clients. While the regulatory environment elsewhere may not directly map the regulatory structures in place in the United States, US firms and lawyers are already participating in ABSs abroad. The discussion is no longer simply theoretical.’ They exude strong and determined attitudes that you can only but admire.
In the UK firms can apply the Financial Services Act and convert to LDP’s thereby allowing people who are not lawyers to make up 25% of a legal business. It’s surprising that there are many lawyers who are unaware of the finer details of these provisions. Alternatively there will be those that are aware but choose to ignore them.
At present in the US only the District of Columbia allows non lawyer ownership of firms. Albeit only one exists to my knowledge at this time, I’m sure many more will be considering the process of conversion. There, this radical attitude places no limit on the percentage of a firm that can be owned by non lawyers. I am sure they are being observed in great detail, and in particular by the negative pessimists that blight our own legal profession.
It is interesting to note that the particular firm to which this applies is prohibited from carrying out non legal work and I feel there are no surprises there.
I watch with interest North Carolina that is in the process of introducing legislation along similar lines to Columbia.
Three major and radical changes are at present being considered by the American Bar Association that will allow capped non lawyer ownerships of firms that will follow the lines of Columbia or even allow firms to provide non legal services ancillary to legal practice.
Only in the US can you expect to see a system that is so flexible that it allows Judiciaries and their State Governing Bars to adopt ABA rules without the need for costly and time wasting legislation. It is a system that allows the profession the courtesy of making its own mind up on issues of legal practice. They are moving forward whilst the UK still…well, remains the UK.
So it’s time to put out those everlasting flames that engulf us and move on. After all; what have non lawyers got to lose?
Think about it.
firms 'deluded' to think ABSs won't ..zzzz
Uh huh.
Not in the next 5-10 years, but by then, you'll get legal advice sold with 5 litres of fuel, the way the Government have allowed the dumbing down.