With sir David Clementi hinting that he will allow legal disciplinary practices, the five legal professional bodies are weighing up the pros and cons, reports Grania Langdon-down


Sir David Clementi gave his strongest hint yet that he will recommend allowing legal disciplinary practices (LDPs) when he told delegates at the International Bar Association’s annual conference in Auckland recently that consumer groups were very much in favour of them – ‘and that weighs very strongly on me’.


So, with his report imminent – mid-December is the latest guess – how keen are solicitors, barristers, legal executives, conveyancers and patent agents to form partnerships together? And, assuming the government runs with Sir David’s ideas, what do the five legal professional bodies (as recognised by the Legal Services Ombudsman) think of the two key questions raised by LDPs – how should they be regulated and what safeguards are needed if external ownership and investment are permitted?


Law Society chief executive Janet Paraskeva says LDPs are the way of the future. ‘We will welcome them in terms of shared lawyer partnerships as well as shared partnerships with non-lawyers.

‘Why on earth should someone – such as a barrister – have to go through the rigmarole of requalifying as a solicitor so they can become a partner in a law firm? Why can’t they be a partner in their own right? My own guess is that if LDPs are allowed, there will be a short rush then a levelling out and then a gradual development as people look to see whether they are profitable.’

For Desmond Browne QC, joint chairman of the Bar Council working group on Clementi, the arguments for LDPs are drawn more from economic theory than from any pressing demand from barristers to become partners with solicitors. ‘All we say is, if a barrister wishes to go into partnership with a solicitor and handle clients’ money, why doesn’t he become a solicitor and practise under Law Society regulations? It is now much easier to switch backwards and forwards.’


He says there was an indication of interest in LDPs from some employed barristers, but it was by no means substantial. ‘I doubt many barristers would want to become partners in a legal practice because the moment they do, they become liable under ordinary partnership law for clients’ money, which is something the bar’s regulatory side has never had to deal with.’


John Higham QC has seen both sides of the fence. He was called to the bar in 1976, took silk in 1992, left the bar in 1999 and three months later was admitted to the solicitors’ roll, joining City firm Stephenson Harwood and then in March the London office of US firm White & Case as a partner in the disputes group.


He says: ‘After 20 years at the bar, I took exams in professional conduct and accounts to requalify as a solicitor and, once I was admitted, I immediately received higher rights of audience because of my experience. Clients are well served by being able to approach me directly so they don’t need to use the bar and can make substantial savings.


‘However, while it is fine to suggest that barristers should be able to enter into partnerships with solicitors, I can’t see how they can continue to practise as barristers. The whole point of being a barrister is being in independent practice.’


David Gold, head of litigation at City giant Herbert Smith, foresees potential in bringing in barristers as partners. He predicts they would benefit from having plenty of support, a guaranteed income, and a share in the profits, while the firm would gain from having their skills in-house and helping to develop their own solicitor-advocates.


Christopher Style, a partner in Linklaters’ litigation and arbitration practice, takes a different view. ‘Will we hire a lot of barristers? No. We do as much of our own advocacy as we can. Where we chose not to, we look for the best advocate in the market in the interests of the client. It is not obvious to me what the advantage is of recruiting members of the bar – any generalisation is unreliable but the skill sets of a barrister and those of a senior partner in a law firm are very different.


‘I can see why a barrister might want to become more of a businessman and might want to make the change, but I can’t see why we would want to hire a barrister to do the job they currently do. We have 35 solicitors with higher rights and I concentrate on encouraging them to exercise those rights.’


Irwin: terrorist threat to firms

However, other legal professionals take a much more positive view. Sandra Barton, president of the Institute of Legal Executives (ILEX), says LDPs are well supported among her 22,000 members.

Ms Barton, head of the property department of Ian Newbery & Co in Poole, Dorset, says: ‘It would raise our profile because we would be on a par with solicitor partners. It would mean accepting the liability that goes with it, which could be a downside depending on how the business goes. But on the plus side, you would be far more involved with the decision-making and the management of the business.’


Mark Bishop, a fellow of ILEX and a legal executive in the litigation department of London law firm Healys, agrees. ‘Becoming a partner would allow me to have a significant input into how the business is run, its direction and investment. Being able to be a partner is important for career progression and I see no real basis for not allowing it – many legal executives are already running departments and have a significant value for their firm both in their initiatives, their practice and their fee earning, and they should be able to reap the greater benefit.


‘The current rules restrict our status and put an early block on our ability to progress our careers. If you can become a partner, the sky’s the limit because it would obviously enable you to open your own practice. The Law Society seems to think that if LDPs are allowed, there will be masses of legal executives opening offices, but I personally don’t think that will be the case. If you want to become a partner, you have to accept the potential liabilities that come with it and there will be many legal executives who prefer the comfort zone of being employed.’


Mr Bishop concedes there may be an ‘element of resentment’ among some barristers and solicitors about the prospect of becoming partners with legal professionals such as legal executives, with their different routes of qualification (unlike solicitors, for example, they need not be graduates). But he says: ‘I hope it would be seen as recognition of the value they bring to a firm.’


The Chartered Institute of Patent Agents (CIPA) says its 3,000 members are firmly in favour of LDPs. Its president, Bruce Alexander, a partner at London-based Boult Wade Tennant, one of the largest patent and trade mark firms, says: ‘We see no reason why they shouldn’t be allowed. Many firms have had one or more solicitors on the strength for many years – but they have had to requalify as trade mark attorneys if they wanted to be partners.


‘However, we did point out to Sir David that there are potentially some problems with privilege because ours isn’t exactly the same as solicitors and that would need to be straightened out.’


Several solicitors are requalifying as licensed conveyancers to take advantage of the profession’s more liberal rules. Licensed conveyancers can already form limited partnerships with other legal professionals, such as legal executives, so long as they only provide conveyancing services. The other option is to form a ‘recognised body’, a company structure that allows external investment.


Simon Blandy, solicitor for the Council for Licensed Conveyancers (CLC), says it would like to see legislation allowing LDPs that are able to offer the full range of legal services. ‘Personally, I am very much in favour of relaxing market conditions, but I am not sure of the extent of demand from consumers. However, the facility should be there because it is for practitioners to decide on the most appropriate vehicle for providing their services.’


A crucial issue for any opening up of the legal market will be how any new structures are regulated. Unsurprisingly, most of the professional bodies want to continue regulating the professional conduct of their own members.


Law Society chief executive Janet Paraskeva says: ‘We recognise that LDPs would be a new business entity and they would need some kind of licence to practise. We believe the Law Society, with a few amendments, could meet the challenge of regulating them. Our compliance directorate and the rule book already deal with the whole business rather than just the individual solicitor through the account rules, compensation fund and indemnity insurance.


‘When it comes to professional conduct, we would hope that [it] would remain with the professional bodies. Clementi may recommend – and the government may agree – that consumer redress needs a different style of governance through a predominantly lay-led body. While we may be prepared to accept that, in the public’s mind, this is a good way forward, we would argue very strongly that conduct matters must be passed back to the professional bodies.’


However, Mr Browne says a barrister becoming a partner in an LDP would have to surrender his right to be regulated by the Bar Council because it would not be in a position to regulate those managing client funds. ‘I envisage the possibility of the Law Society regulating LDPs, though there may need to be a new LDP regulator.’


Mr Blandy says the CLC has no firm views yet on how LDPs should be regulated. ‘We are reviewing our recognised body rules to take account of any comments made by Clementi and will do any fine tuning that is necessary.’


Ms Barton says ILEX also does not have a simple answer to the issue of regulation, although the institute maintains it should continue regulating its own members over professional conduct issues, leaving service complaints to be dealt with by a separate body. ‘We have expertise in regulation, as do the Law Society and the Bar Council, and it would be a shame to lose that.’


Mr Alexander says CIPA is hoping that Sir David is ‘reasonably satisfied’ with the way it operates from a regulatory point of view, with the likely proviso that he would like to see a clearer separation between regulatory and membership functions, which CIPA – like the Law Society – is already considering.


When it comes to the issue of external investment, ownership and management, Ms Paraskeva says that ‘clearly there will need to be some very strict safeguards around the people who are – or aren’t – allowed to own or even invest in them’.


Mr Browne sees the prospect of non-lawyers managing or owning LDPs as a ‘real possibility, otherwise one wouldn’t be talking about “Tesco law”. However, we have reservations about commercial investors being able to own all or part of a legal practice without it compromising unacceptably the independence of the lawyers’.


Bar Council chairman Stephen Irwin QC has been less understated, declaring that such investment could lead to terrorist groups taking over law firms.


Mr Blandy points to the CLC’s requirement that all directors and members of a recognised body, whether they are licensed conveyancers or not, must enter into a covenant with the regulator that if there are any claims on the compensation fund as a result of a default by the recognised body, they will indemnify the fund. ‘This is an important safeguard and counters a lot of the criticism that non-lawyers will breach the rules and defraud the clients.’


Richard Dinning, a partner at leading national law firm Addleshaw Goddard for ten years, requalifed as a licensed conveyancer last year when he led a management buy-out of the law firm’s volume conveyancing arm, Enact, and became its chief executive and chairman. It operated as a recognised body under CLC regulation rather than a partnership because it brought in external investment. Six weeks ago, the management sold the business to an insurance company.


Mr Dinning argues that the CLC’s recognised bodies structure, which allows external investment and ownership while ensuring a majority of the directors and the chairman are licensed conveyancers, would translate well to law firms.


‘I think ours is a model which allows a practice to grow, to have external investors and give returns to the market while at the same time safeguarding the independence of the advice given to the customer – financing hasn’t influenced the way the practice is run as a law firm offering services to the public.’


For Ms Barton,‘times have changed and we should consider outside investment, as long as it is properly managed and protects the public – we don’t want the tail wagging the dog. But we can’t necessarily fund everything ourselves, particularly with the major investment needed in technology.’



Mr Alexander says ‘Clementi seems to be coming from the standpoint that anybody could own LDPs but management should probably be kept to the lawyers or other legal professionals who have a stake in it – that’s probably right’.


But, however eagerly the Clementi report is awaited, the five professional bodies are all aware that, with a general election expected in May, there is still a lot of work to be done.


Ms Paraskeva says that in a recent meeting at Number 10 between Prime Minister Tony Blair and a delegation from the Law Society and Bar Council, Mr Blair was pressed to ensure his government’s response to Clementi is prompt. She explains: ‘We need a manifesto commitment and a promise of early legislation if it is required. The last thing any of us want now is planning blight.’


Grania Langdon-Down is a freelance journalist