It is almost five years since Sir David Clementi rocked the legal establishment with his report on the regulatory framework for legal services. Since then, debate on the product of that report – the Legal Services Act 2007 – and the impact on the profession of new legal disciplinary partnerships and alternative business structures has been extensive.
In March this year, the Solicitors Regulation Authority amended its rules to allow solicitors to form LDPs. Since then, 105 LDPs have been set up and 125 of the partners within them are not solicitors – these include licensed conveyancers, legal executives, accountants and a patent attorney.
Barristers remain restricted to their self-employed chambers model because, despite several consultations on the act, the Bar Standards Board (BSB) has yet to determine the desirability of amending the bar’s code of conduct to permit barristers to work in partnerships.
Christine Kings, commercial director of Outer Temple Chambers in London, says most barristers have not begun to consider the act and seem unaware of the impact of deregulation next year.
But, she says, the act should be having an effect. ‘The bar should have strategy groups and consultants coming in. I’m shocked there aren’t a load of consultancy firms banging on our doors.
‘Chambers should be asking questions, like: what if our competitors merge with a solicitors’ firm as an LDP? What do our solicitors want us to do? Does it matter to them what structure we practise in, and what are their issues in a deregulated market?’
Outer Temple Chambers has for some time been addressing the changes that may become necessary to remain competitive and offer the best quality and value-for-money service. The chambers has big ideas about how to add value to its already successful offering. There is frustration in Kings’ voice when she says it is being prevented from implementing any of these ideas until the code of conduct is changed.
‘We want to have closer relationships with solicitors’ firms and foreign lawyers. We want it to be possible for barristers to be part of LDPs as well as being self-employed, but at the moment there’s no flexibility,’ she says.
Different practice groups within chambers, she adds, will require different responses. ‘We may look to set up limited companies for particular initiatives that some barristers will be part of while also remaining self-employed barristers in the main chambers.’
Some chambers, Kings predicts, will want to merge with solicitors, such as ‘top-class medical sets that only do defence work, so there will be no danger of conflict’. A merger would have huge commercial benefits for them, she believes.
Crucially, she says, the bar will need to change the way it operates to meet the threat from external non-traditional providers – the so-called ‘Tesco Law’ phenomenon – but not because there will necessarily be less work to go around. ‘Tesco Law will empower more middle-class people to take legal action, which will mean a huge new area of legal clients coming into the market,’ she predicts.
And the provision of legal services, she says, will become much less specialised. ‘It will be similar to opticians – they were once seen as highly specialist, but are now on every high street and glasses have become a fashion accessory. I’m not saying that’s a good thing, but it’s the opportunity.’
Clementi-style restructuringTo compete in the new legal market the bar must step away from the structures it operates through now, which, Kings stresses, are burdened by its culture and hierarchy. ‘Retail outlets are not encumbered by any of that – they’ll be employing lawyers and taking over legal firms, contracting out and making much more rigorous and hard-nosed commercial decisions.’
Varying the way fees are billed is a key area that needs addressing. Chambers should look at conditional fee agreements, contingency fees, block-contracting and fixed fees, says Kings.
At the publicly funded bar there is huge potential for change – the Legal Services Commission will still need lawyers. ‘The likes of Tesco aren’t going to be interested in the non-profitable work, so it will be lawyers who do this and they’ll need to find ways to restructure and cut their costs to remain profitable,’ says Kings.
Unlike many at the bar, Kings does not see the act as a threat but as an opportunity to add value to her practice. But despite the big ideas she and Outer Temple have under their wigs, she acknowledges change will be slow: ‘Change will not happen in the first two years, but once people feel the pressure of competition, there’ll be certain lines of action that will become obvious to barristers and solicitors.’
Ian Dodds, director of alternative chambers Bar Futures, agrees with many of Kings’ comments. He predicts the current ‘antediluvian, rigid and restrictive’ chambers model will not survive in the post-LSA world. Like Kings, he says commercial reality will bring about change. The LSA, he says, is sufficiently non-prescriptive to enable the bar to adopt any number of business structures, limited only by its imagination and enterprise. There is plenty of innovation within the bar, says Dodds, but it is being hampered by the ‘crushingly negative and backward-looking attitude of the Bar Council and glacial slowness of the BSB’.
For Dodds the future will be about fusion. ‘The market of the future is one where solicitors and barristers will combine, as appropriate, to deliver affordable, comprehensive and easily accessible solutions to all their clients.
‘The distinction between solicitors and barristers, in the eyes of the consumer, will disappear and, while there may still be a division of labour between them, solicitors and barristers will inhabit the same commercial and corporate space,’ he says.
Barristers in large and successful commercial, chancery, tax and intellectual property sets need not fear – they will remain largely unaffected, Dodds says. But common law sets and those doing publicly funded work ‘will have to change or die’.
Many barristers remain in denial about the LSA, but the bar has no option but to modernise and organise itself in a more cost-effective and consumer-friendly manner. Chris Owen, chief executive at Birmingham’s St Philips Chambers, warns that it will be a case of ‘survival of the fittest’, where mediocre sets and poor advocates fall by the wayside.
‘I see a future where insurance companies, accountants, hedge funds, private equity houses, banks, entrepreneurs, non-lawyers and law firms get together to produce a model which will work for the consumer.’
He envisages closer collaboration between barristers and solicitors that will enable them to share overheads, resources and knowledge, advise each other without some of the present formalities, and provide a more seamless service to clients.
Better connectedMurray Rosen QC, a barrister who became a solicitor and heads the advocacy unit at City firm Herbert Smith, offers an interesting perspective on this new mode of cooperation. His firm’s in-house advocates work on cases with solicitor teams in an ‘integrated’ way, but are briefed as though they were external counsel, which, he says, lets them approach their work like a barrister and retain a distance and objectivity.
Independence, says Rosen, is an important consideration, ‘but a lot of that is about the mindset of the firm and the individual barrister or advocate’.
‘When it comes to making a decision in a case, the individual is responsible and has to do what is right and acceptable. You need an ethos that means the individual takes the right decision in the case, even where they fear it might make them unpopular with the judge or mean they may not get paid.
‘The idea that self-employed barristers aren’t affected by these considerations is not real – they have to grapple with the possibility of not being instructed again by a firm or not getting paid,’ he says.
Rosen sees no impediments to a law firm being a mixture of solicitors and barristers ‘assuming we sort out the regulatory issues and we all have one code of conduct’.
‘How would a firm of barristers and solicitors differ from a solicitors’ firm that includes solicitor-advocates?’ he asks. And, if LDPs had been around when he joined Herbert Smith, Rosen says he probably would not have become a solicitor. ‘It didn’t make an awful lot of difference – we just had to do an open-book exam on accounting and change our regulator. I was allowed to continue as a bencher at Lincoln’s Inn – if I’d had to have given that up it would have been a real sacrifice,’ he says.
He predicts that the take-up of LDPs will be slow, but says solicitors may take on barristers if a sound business case can be made and the right person comes along. ‘The bigger and more successful firms will need more convincing, but if they see others, perhaps the national firms, doing it successfully, mixed practices may become common.’
He adds: ‘It could take years for that major change to happen and some would like it to happen quicker. But things that work can take off quite quickly – it’s hard to predict and quite speculative at the moment.’
The bar’s attitude to the act is perhaps best summed up by one criminal silk who wishes to remain anonymous. ‘The range of opinion varies from "over my dead body" to those who say they’ll change if they have to. The bar doesn’t want to change the way it operates; its structure works well. If we have to turn chambers into a limited company and employ people, we will.’
The publicly funded criminal bar, he says, has other forces to contend with apart from the act, which will impose change whether practitioners like it or not. ‘We can influence these changes, but the Crown Prosecution Service and the Legal Services Commission have their own agendas.’
There are, he says, different models that might be adopted. ‘Chambers could set up some form of block contracting for advocacy services and form a procurement company to contract with the LSC.’ One you have done this, the next step would be to contract with other firms, he says.
Criminal barristers might contemplate closer associations with solicitors, which could involve them being employed by solicitors or joining them as partners in an LDP. But, he stresses: ‘The bar should concentrate on its function – to provide advocacy and specialist advice – its form should follow that.’
Another, and perhaps surprising, dissenting voice raining on Clementi’s parade comes from a solicitor in praise of the independent bar. Richard Lindsell, head of the professional practices group at national firm Addleshaw Goddard, says: ‘The quality and value for money of the bar is remarkable. No city law firm has anyone they would charge out at a rate of less than £100 per hour, but you can get excellent junior barristers at this rate.’
The chambers model, says Lindsell, is ‘lean and mean’ in terms of its costs base. ‘Barristers provide good value for money and I wouldn’t want to see that go.’
Lindsell sees no advantage in chambers joining up in any formal way with solicitors, but does foresee barristers and solicitors becoming more closely aligned in terms of how they market themselves. ‘If barristers became partners it would limit the work they could pick up because of the conflict rules. At present you can have three parties to a dispute all represented by barristers in the same set,’ he says.
Barristers exist to serve the plurality of the legal community, and Lindsell cannot see them wanting to limit their market. And, he adds, it would be a disaster if a firm of accountants or solicitors carved up the best tax barristers around.
He recalls that the thrust of the act was to open up the legal market to tackle the poor quality of service provided by some solicitors’ firms that had given rise to a high number of complaints. ‘The bar is being sucked into all this, but their model works. If it ain’t broke, don’t fix it.’
Lindsell agrees that the legal scene will alter as new providers enter, but predicts the bar will not be greatly affected. ‘People have been predicting the death of the bar for years, but it’s still here. It has a resilience, and that is due to the quality and value it provides.’
That resilience is demonstrated by the strong performance of many areas of the bar over the past 12 months during the downturn. Criminal practitioners may be struggling because of legal aid reforms and increased competition from the CPS and solicitor-advocates, but the credit crunch has provided a field day for some, a boon they expect to continue into next year.
Lance Ashworth QC, a commercial barrister at St Philips Chambers in Birmingham, says: ‘I’ve had the busiest ever January to July, billed and received the most money in my life and work is stacked up until next May.’ Commercial litigation will remain strong, forecasts Ashworth, as will insolvency and regulatory work.
Stephen Cogley, of London shipping specialists Quadrant Chambers, has also had a bumper year that saw chambers’ revenue increase by over 40% to £21.9m. The economic climate and downturn in the shipping market has, he says, led to an increase in the number of disputes.
‘Parties have been pre-emptively trying to attain a tactical advantage by getting into court early and seeking freezing orders or trying to seize jurisdiction, which in turn has led to an increased number of anti-suit injunctions,’ he notes. Chambers will be kept busy over the next 12 months as these cases go through the system, he adds.
Cogley predicts increased litigation regarding high-value cases as competing claims between parties for decreasing amounts of money, limits the ability of parties to negotiate. However, he also expects the number of mediations to increase.
Jonathan Hilliard, of London’s Wilberforce Chambers, has been occupied with increased pension work, especially in cases relating to insolvency, and expects this to continue into the year ahead. ‘So much is just unravelling slowly, and many cases will go on for years or decades even after the economy has recovered because of their complexity,’ he says.
But Colin Griffin, senior clerk at Kings Chambers in Manchester and Leeds, expects to see a drop-off in property litigation, as those cases caused by the credit crunch are resolved. Costs work, he says, has exploded while the public law team has seen a big increase in volume since the administrative court opened in the regions.
The number of employment cases, says Paul Epstein QC, of Cloisters in London, is a lagging indicator of the market and does not reflect the general economic situation – he anticipates employment work will go up, with claims for equal pay, restrictive covenant work and bonus claim cases arising out of the credit crunch.
All in all, our learned friends seem in reasonable health, and the smart money would probably be on that continuing – even if they have to take stock and reconfigure as Clementi’s new dawn breaks.