I expect that very soon the Solicitors Regulation Authority will announce that it has granted the first group of licences for alternative business structures if, indeed, an announcement to this effect has not already been made by the time this article is published. The end of the profession? I think not. At an event held by the SRA to mark the starting point of its regulation of ABSs, as it reviews the 100-plus applications it has already received, I offered the following reflections at this seminal moment in the development of our profession.
ABSs are unquestionably a significant innovation in legal practice - not just in this jurisdiction, but also when viewed from an international perspective. The degree of liberalisation of ownership of legal practices which has been permitted under the Legal Services Act goes way beyond what is allowed in almost any other country.
Allowing ABSs is not axiomatically either a good thing or a bad thing - they bring with them both opportunities and risks. It is primarily for the market - through the owners and managers of legal practices and those who wish to invest in them - to identify and pursue the opportunities which have been created by these new structures. The Law Society sees it as its function to do its best to ensure that the profession is fully aware of the options now available and the potential implications of change, so that solicitors can take the most rational decisions concerning the future of their practices and careers.
Also, at one level, it is for the same group of people, namely those who are active in the legal services market, to manage the financial, client service and reputational risks that ABSs create. It is very much in the interests of managers of legal practices to do just this. Particular risks arise from external ownership of law firms - and the Law Society applauds the measures that have been adopted by the SRA to minimise and manage these risks.
It is vital that these measures are successful, if harm to clients and to the legal profession’s standing, at home and abroad, is to be avoided. I anticipate that ABSs will accelerate a move towards greater efficiency and consolidation which is already in progress. It is essential that this consolidation does not reduce competition, or lead to inadequate client choice, or to relative inaccessibility of legal representation and advice. From the perspective of competition in the market, it is important that neither increased regulatory burdens on smaller firms, nor brand investment by larger players, raise barriers to entering the market that may eventually allow the largest businesses to charge uncompetitive prices. The possibility of new small-scale entry has always been a vital aspect of the competitiveness dynamism of our sector; of its ability to evolve to meet changing client demand; and of its ability to offer real and accessible choice to clients of all types.
It is equally essential that firms which decide to close as a result of increased competition, do so in a way that poses no risk to clients and does not place an unwelcome cost burden on the profession as a whole. The cost of a single SRA intervention - borne by the profession - is substantial. The rapid change in the legal market which will evolve over the coming years will pose challenges to firms, the SRA and the Law Society alike.
The Law Society looks forward to working with the managements of ABS organisations, as we do with other firms, in pursuance of our role in supporting all solicitors in whatever environment they practise. We will encourage new corporate entrants to the legal sector to engage fully with the profession in its mission to serve the rule of law, support access to justice, and ensure that a legal career remains open to all with the requisite ability and ambition.
I congratulate the SRA on the intensive work it has done in bringing the ABS process to, as it were, the banks of the Rubicon, and to thank it for the responsiveness it has shown to issues of concern, which have been raised by the Law Society and others, in the course of the journey on which we have travelled together so far. There is no turning back from this Rubicon, however, and we will continue to support the SRA in meeting the challenges, both expected an unexpected, which will confront them as the liberalisation of our legal markets continues to unfold.
Much work lies ahead for both the Law Society and the SRA over the coming months, as issues relating to ABSs are identified and managed, in the interests of the public and the regulatory objectives of the Legal Services Act.
John Wotton is president of the Law Society