UK is ‘living laboratory’ for ABS innovation, says US expert

Topics: Alternative business structures

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  • Paul Paton

The US will have to accept non-lawyer ownership of firms because the changing market will force it to do so, a leading academic expert has told the Gazette.

Professor Paul Paton (pictured) said American lawyers continue to be fascinated by the ‘living laboratory’ of England and Wales, where alternative business structures are allowed, despite the American Bar Association opting not to pursue the policy in the US.

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Paton was a reporter to the ABA’s commission on ethics which looked into non-lawyer ownership, and he described the association’s decision not to move forward as an ‘opportunity missed’.

But that is far from the end of the issue, he suggested, as developments beyond the ABA’s control bring the need for reform ever closer.

‘One of three things will bring about change in the US because I don’t see debate happening at the ABA in the near or even the medium term,’ he said in Chancery Lane yesterday.

‘State legislators may introduce legislation that brings reform. It could come from the courts from a lawsuit or other challenge to state supreme court rules regulating lawyer conduct, particularly given the courts’ concern for facilitating access to justice.

‘The third way would be through market forces. There will come a point when it is so strongly in the economic self-interest of lawyers to effect change that they go back to the ABA and demand it happens. That is where the experience of England is so instructive. Change is going to happen because the market is changing so quickly; the question for me is where that change is going to come from, and whether the profession will be ready to respond.’

Paton, professor of law and director at the University of the Pacific, is in the UK to research the experience of alternative business structures, with 200 entities now licensed by the SRA.

He said the challenge faced in the US is how to promote innovation in the market while continuing to protect the public interest.

But the option of doing nothing was not realistic for US firms, especially when businesses such as Legal Zoom, the online legal document site, are winning so much market share outside of the regulated profession while law firms continue to be constrained.

Paton said: ‘This is one of the most disturbing things for me, that you have non-regulated businesses (often headed by lawyers) who have decided the best approach is to opt out because regulations are too suffocating. You have to ask whether both the public and the profession are better off with regulations that force innovators outside of regulatory control.’

He added: ‘If I’m sitting in New York, I have to be concerned about the impact on my ability to continue to survive at an international level when other jurisdictions are so far ahead. And if I’m in North Carolina, or Wisconsin, I have to be concerned about how I can remain competitive in a domestic market with other non-regulated offerings starting to eat my lunch.

‘Unless legal regulators take responsibility for bringing forward ideas for a system of regulation that fosters innovation, you run the risk of it being externally imposed. And the legal profession may not like the result.’

Readers' comments (11)

  • Many years ago the majority view was that the Earth was flat, and this view persisted for quite some time since anybody challenging this orthodoxy was labelled a heretic because innovation, as a word, was not around at the time.

    Change and the public interest are not synonymous.

    I am sure that I am not the only solicitor tiring of the constant wave of pro-ABS propaganda coming out of the Gazette.

    Presumbly every change can be justified on "innovation" grounds, so that those barristers and solicitors facing a bleak future following the changes to criminal legal aid can seek solace in the fact that their work in future will be undertaken by innovative but ethically challenged new law firms!

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  • Who are the rats then?

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  • There was another unrelated story on here about a judge saying public morality no longer fell within the judiciary's purview. Although it was concerned primarily with religious legal disputes, I think it shows a trend towards further merchant-driven amoralism in yet another sector of society. Basically, the future of law is not dominated by the sage-technocrat as it has been for decades, who has held sway over what is right and wrong in society i.e. justice. Now, every person in a society is guided by his or her own morality which is a mercantile, consumerist one. It's the same across the board, whether you're working in the services sector or retail, a consumer yourself of retail or the like, or a client... you're either a business or a customer. There will be a change soon.

    References to all the archaic terms are courtesy of David Priestland's Merchant, Solider, Sage, which is by the way a great read (http://www.theguardian.com/books/2012/aug/23/merchant-soldier-sage-priestland-review).

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  • The ABA will oppose ABSs until either the Government or the Supreme Court forces their hand.

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  • ‘living laboratory for ABS innovation'

    I was thinking more of Victor Frankenstein creating a huge lumbering simple beast from a mismatched bundle of inanimate body parts.

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  • .....and where are all the protesters campaigning against this laboratory experimenting on live animals?

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  • This all reads like a John Grisham novel about all that is wrong with the legal trade, I cannot bring myself to call it a profession as it no longer is one.

    Survival of the fittest has become survival of the fattest!

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  • Law Hamster says: nice to see the UK leading for once on something innovative.

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  • There is nothing innovative about big fish eats small fish and we have a government hell bent on giving these large corporates rains to everything, circumventing referral ban obstacles faced by a small practice for the large players, insurers and their law firms, that's what ABS's are for the PI market and the high street practice.

    It is often reported here and elsewhere, that this is an opportunity to make joint ventures with outside investment, as though every small high street practice has an AXA representative ready to do a deal with them!

    Insurers were selling all their work to a small number of their solicitors, the ban only effects the small practice, the insurers whose names I do not wish to repeat were given ABS licences the very next day to go on with merry arrangements. Give it to the SRA for timing their application to the T.

    It's a shame the profession is being undermined in this way..

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  • The innovation is
    a) I wiil sell you the most expensive funeral I possibly can basing my argument on "the more you pay for the funeral the more people will think you really loved the deceased" followed by
    b) then I will call round your house and with the same careful and respectful act bearing in mind your grief I will look at all your paperwork and based on the value of the estate I will give you what those nasty old solicitors won't give you, ie a FIXED price. You have all the reassurance you need the price will never change so ain't that nice? The fact the price is huge by comparison to solicitors fees is neither here nor there and we won't talk about that. I am not leaving till we are signed up. If you are in any doubt I will do you a new will for free. Ain't that lovely? You will be appointing me as executor and so we have the next lot of probates ready made together with even more fancy funeral.
    Killer of an innovation

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