The US’s leading legal governance body has taken a step towards allowing non-lawyers to hold a financial stake in law firms, but is rejecting English-style alternative business structures.
In a discussion paper released last week, a working group of the American Bar Association Commission concedes for the first time the possibility of external investment in firms - provided lawyers maintain a controlling financial interest and majority voting rights.
Firms looking to bring in non-lawyers would have to investigate the professional reputation of new entrants and prove they are acting with integrity, the paper said.
Non-lawyers in ‘alternative practice structures’ would not have their own clients or offer non-legal services under the firm’s banner. ‘Alternative practice structures are not multidisciplinary practices by another name,’ the report stated.
The report, from the ABA Commission on Ethics 20/20, has been issued as a discussion paper with a public consultation set to run until February. The ABA was keen to stress that the conclusions will not necessarily become policy.
However, there is acknowledgment that increasing numbers of firms want reform of the legal market. Many have cited the District of Columbia, where non-lawyers have had access to partnerships for 20 years, as proof that such firms can operate ethically.
The paper notes that small firms in particular want rule changes to help them recruit technology experts and increase client demand.
Research carried out by the commission shows that US lawyers and firms are increasingly working or affiliating with foreign firms that have different business structures, including in the UK.
The commission was set up in 2009 to review the ABA’s model rules of professional conduct. It has already ruled out publicly traded law firms and passive non-lawyer ownership.