The USA in general is still a long way from adopting UK-style non-lawyer ownership of law firms, despite a handful of states embracing change. Legal ethics expert Dr Paul Paton told the International Bar Association’s conference that there remains widespread resistance to greater liberalisation of the legal market, despite some in the profession casting envious looks towards progress made in the UK.

In recent years, Arizona has allowed fee-sharing between lawyers and non-lawyers, while Utah has started a ‘sandbox’ model to test new legal ownership models.

But Paton was pessimistic about whether this is likely to have a domino effect on the rest of the US. ‘I sat on the 2020 commission [which recommended reform] and the solution we came up with are still not being recommended – the US takes one step forward and two steps back,’ said Paton, professor of the faculty of law at the University of Alberta.

‘Until either legislators or the bar in its self-interest decides to expand regulatory reach then nothing will move forward. The moves in Utah and Arizona were remarkable but there remains this anti-competitive instinct.’

The sticking point in the US remains the American Bar Association’s rule 5.4, which prohibits lawyers or law firms from sharing legal fees with a non-lawyer except in limited circumstances. Lawyers are also prevented from forming a partnership with a non-lawyer if they are offering legal services.

Paul Paton

Legal ethics expert Dr Paul Paton

Various academic reports over the last 10 years have recommended reforming these rules and adopting a model more in line with that adopted in England and Wales.

But Paton said lobbying from lawyers – particularly personal injury firms – had successfully shot down any attempt to allow non-lawyers into the profession. As recently as this August, a resolution passed by the American Bar Association house of delegates affirmed support for the idea that fee-sharing with non-lawyers was inconsistent with the profession’s ‘core values’.

Paton said: ‘The core values rhetoric is often a substitute for being anti-competitive. I am very conscious of the ethics issue around conflicts of interest, independence and reporting requirements to the stock market, but all of those lead to us doing nothing rather than working through the problems with creative solutions.

‘In the UK the sky has not fallen in. There was such fear that this would lead to the end of legal practice as we know it, but that has not happened. In the UK the government and competition authorities stepped in to say "fix this or we will".

‘What has been interesting in Utah for example was that judges saw the problems in courts [of lack of access to justice] and decided something needed to chance. It did not come from the profession itself.

‘Unless there is a crisis there will not be a response from the profession. But we lose credibility if we are singularly focused on competition – I would ask whether this is about protecting incomes for lawyers. In the UK, consumer welfare is specifically listed as a regulatory principle but not in the US.’

 

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