The US will have to accept non-lawyer ownership of firms because the changing market will force it to do so, a leading academic expert has told the Gazette.

Professor Paul Paton (pictured) said American lawyers continue to be fascinated by the ‘living laboratory’ of England and Wales, where alternative business structures are allowed, despite the American Bar Association opting not to pursue the policy in the US.

Paton was a reporter to the ABA’s commission on ethics which looked into non-lawyer ownership, and he described the association’s decision not to move forward as an ‘opportunity missed’.

But that is far from the end of the issue, he suggested, as developments beyond the ABA’s control bring the need for reform ever closer.

‘One of three things will bring about change in the US because I don’t see debate happening at the ABA in the near or even the medium term,’ he said in Chancery Lane yesterday.

‘State legislators may introduce legislation that brings reform. It could come from the courts from a lawsuit or other challenge to state supreme court rules regulating lawyer conduct, particularly given the courts’ concern for facilitating access to justice.

‘The third way would be through market forces. There will come a point when it is so strongly in the economic self-interest of lawyers to effect change that they go back to the ABA and demand it happens. That is where the experience of England is so instructive. Change is going to happen because the market is changing so quickly; the question for me is where that change is going to come from, and whether the profession will be ready to respond.’

Paton, professor of law and director at the University of the Pacific, is in the UK to research the experience of alternative business structures, with 200 entities now licensed by the SRA.

He said the challenge faced in the US is how to promote innovation in the market while continuing to protect the public interest.

But the option of doing nothing was not realistic for US firms, especially when businesses such as Legal Zoom, the online legal document site, are winning so much market share outside of the regulated profession while law firms continue to be constrained.

Paton said: ‘This is one of the most disturbing things for me, that you have non-regulated businesses (often headed by lawyers) who have decided the best approach is to opt out because regulations are too suffocating. You have to ask whether both the public and the profession are better off with regulations that force innovators outside of regulatory control.’

He added: ‘If I’m sitting in New York, I have to be concerned about the impact on my ability to continue to survive at an international level when other jurisdictions are so far ahead. And if I’m in North Carolina, or Wisconsin, I have to be concerned about how I can remain competitive in a domestic market with other non-regulated offerings starting to eat my lunch.

‘Unless legal regulators take responsibility for bringing forward ideas for a system of regulation that fosters innovation, you run the risk of it being externally imposed. And the legal profession may not like the result.’