Law firms owned by non-lawyers may, contrary to common opinion, be at less risk of undue influence than lawyer-run practices, government-commissioned research has suggested.

Paul Grout, a professor of political economy at Bristol University, said the view that non-lawyer owners would put pressure on lawyers to act unprofessionally so as to maximise profit overlooks the fact that there would be little personal gain for the lawyer in doing so.


By contrast, where the lawyer has a larger ownership of the business, there would be far more incentive to take the risk, Prof Grout claimed, adding: 'A large legal disciplinary partnership or multi-disciplinary partnership with concentrated ownership is more likely to be a problem with a lawyer owner/manager than a lawyer manager and a non-lawyer owner. This is the exact opposite of the view that underpins the current debate.'


Prof Grout said the current focus of regulation on the business structure is wrong, and should instead be on the underlying incentives, including for non-shareholding managers.


The report was one of six academic papers commissioned by the Department for Constitutional Affairs to analyse aspects of the forthcoming Clementi reforms. A White Paper is due this autumn.


Another paper, by James Dow - finance professor at the London Business School - and Carlos Lapuerta, a director of the Brattle Group, said: 'We see insufficient appreciation of the conflicts of interest that currently confront [lawyers]. Lawyers today have direct financial incentives to sacrifice service quality and ethics for the sake of significant short-term financial gains.


'The introduction of outside equity could mitigate such problems, as the separation between ownership and management reduces the incentives of the manager to maximise profits.'


The paper argued that there is no reason to believe that outside equity might degrade service quality and lead to the relaxation of conflicts rules.


The Bar Council has been the most outspoken critic of non-lawyer ownership. A spokeswoman said: 'We continue to have strong reservations about whether it is possible to have outside commercial interests owning a legal practice without compromising the independence of the lawyers providing legal services.


'The protection for the public in a firm owned by lawyers are the ethical duties which bind those lawyers, and if outside ownership is permitted there will inevitably be conflict between those ethical duties and the commercial interests of the non-lawyer owners.'


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