The legal profession - shifts in the market place - UK reforms

While the Indian legal fraternity remains resolute in resisting reforms, including entry of foreign law firms, the profession in the UK is undergoing a sea change in permitting organisational structures having non lawyer ownership. The legal profession, at least in Common Law Jurisdictions is regarded as a self regulated profession, and not ‘a trade, nor merchandise’, as described by the Indian Supreme Court. In India, Lawyers continue to be barred from advertising, as the profession is a ‘noble’ calling, and under the Advocates’ Act, lawyers are officers of the Courts. Rule 36 of the Bar Council Rules under Section 49(1), is in denial of changes in technologies, competition and innovations that have transformed legal services in most common law jurisdictions. The Consumer Protection Act alone recognises legal services as being under the ambit of Section 3. As a lawyer in a changing environment, while I believe probity and integrity of lawyers to be paramount, so are profitability and business models and all lawyers cannot be expected to be activists.

 

The UK reforms are not about issues such as permissibility of websites, or civil society style activism, but about the future of the profession and the survival of the prevalent operating models. Issues of funding requirements, financial liquidity, which surfaced during the recession, are matters which cannot be addressed by taking bank loans. One needs to understand the pressures that a legal practice is subject to, and the circumstances that require acknowledgement of ground realities.

The value of a lawyer has always been the human capital. Apart from establishing the practice, the lawyer is also the manager and financier, the rainmaker, rain-getter and the one who prepares and provides the deliveries. In the current firm structure, all lawyers have to undertake and perform the above in differing degrees. In the new structure, the lawyer is the asset, and the outside owner the equity holder. The Alternate Business Structure [ABS] which comes into effect on October 6 this year in the UK is not bereft of benefits, most importantly, increased access to finance, particularly debt equity, and combining multiple disciplines to provide integrated services under one roof.

Expectedly, there are several concerns, the foremost being whether legal services can be commoditised. Arguments in favour are that medical services have been so, and successfully, resulting in quicker, more efficient and better deliveries under a single umbrella. There is also the possibility of lowering costs, as many items, for example, due diligence, financial, legal and technical, may be undertaken by a single agency possessing all skill sets. With lawyers being the assets, retention would be critical, and instead of attrition and breakaways, there would be a more retentive and positive regime, which would be of comfort to clients. But is this perception shared by the profession, or the customer for that matter?

In so far as the financing, further funding and market place rectifications are concerned, as well as cashing in on goodwill, though all lawyers/partners embracing ABAS have to agree to a minimum lock in period, the answer though positive, is not free from caveats. There is the sense of loss of control and independence. While law firms such as Irwin Mitchell, have openly proclaimed their intent to seek external investment and undergo restructuring as an ABS, the judiciary has expressed discomfort with the structure in articulating that this will not further the cause of justice. Several lawyers are sceptical that customers are being misled that they will effectively have access to over the counter legal advice at TESCO kiosks at supermarket prices. Maybe not entirely accurate, but basic advice and documents will probably be standardised, with clients demanding more efficiency in service and clarity in billing.

Family practices, equity partnerships and sole operators will probably be the first to undergo changes, and not necessarily for the better - in the referendum conducted by Solicitors’ Regulation Authority on ABAS, the divide between big commercial firms and the small time, small size practitioners was reportedly palpable.

The most critical concern is the change in the regulatory space. It’s true that again the victims will be small players, midsize firms, and individuals.

Bottom line – the unfettered environment in which lawyers have been operating for decades, is threatened by several external forces, to be treated as replacement of typewriters and teleprinters, throwing out whatever is obsolete. Reinventing and pursuing the new approach is possibly the only way forward, however unpalatable it sounds. And, its’ time the legal community in India realised this as well.

Kumkum Sen is a partner at Bharucha & Partners Delhi Office and can be reached at kumkum.sen@bharucha.in