Utah has become the first state in the US to allow non-lawyer ownership of legal services providers. This month the State Supreme Court unanimously voted in favour of approving a 2-year sandbox programme which would licence new forms of legal services ownership.
The move has come about in the face of continued concerns over access to justice, particularly in the face of the ongoing COVID-19 pandemic. The courts have cited the reasoning that regulation should focus primarily on serving the consumer, and acting in their best interests, with Utah Supreme Court Justice Deno Himonas saying “changes will enable individuals and entities to explore creative ways to safely allow lawyers and non-lawyers to practise law and to reduce constraints on how lawyers market and promote services. New forms of providers could include partnerships, corporations and companies and non-profit organisations partnering with other entities to offer legal services.”
Whilst the Utah profession is comparatively small, with 26 lawyers per 10,000 residents compared with 92 in New York and 43 in California, the result of the sandbox will be closely watched by other state bars, particularly in the light of similar moves being discussed in California, and calls by the ABA for other states to follow suit.
Read more about the decision or view the standing order.
The Board of Trustees of the State Bar of California took a 9-2 decision on the 14th May 2020 to form a working group to look into forming a regulatory sandbox in which innovative legal service providers would be subject to fewer regulations. This could include limiting unauthorised practice of law rules, as well as removing limits on fee sharing and partnership between lawyers and non-lawyers.
The decision is a major step forward in a potential move towards innovative business structures in California, following a vote to delay the decision by the Board in March, with board members saying they needed more time to consider the proposals.
Following the board meeting, which was held over Zoom, Chairman Alan Steinbrecher (who as Chairman did not vote) said: “This is a significant step and I think it will lead to an exciting future,”.
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Arizona has become the first state in the US to formally file for the introduction of Alternative Business Structures (ABSs) in the US. The Arizona task force on the delivery of legal services has filed a petition with the Arizona Supreme Court which suggests eliminating rules which prevent fee sharing with non-lawyers and entering into a partnership with non-lawyers.
The petition is quoted as saying “Eliminating the rule would mean, for example, that a professional nonlawyer administrator in a law firm could have an ownership interest or that a Fortune 500 company could be a passive investor. It also could mean that a law firm could attract nonlawyer talent… by providing equity in the firm”.
The petition has also suggested introducing limited license legal practitioners to the state, filling a gap for lower-cost legal services and helping to bridge the justice gap in the state.
Following the March 2015 report submitted by the Advokatlovutvalget (the Lawyer Commission), which suggested changes to the regulation of lawyers in Norway (Report in Norwegian available here), the Norwegian Ministry of Justice and Public Security has decided to further evaluate the recommendations.
The Ministry has commissioned research consultancy Copenhagen Economics to provide further analysis on two of the proposed changes: 1) the regulation of the right to provide legal services, and 2) the ownership regulation for law firms.
The report has suggested that the current competitive climate for legal services in Norway is relatively good, with no signs of a decline in competition and good competition between smaller firms and larger firms, especially for less complex cases. The report also suggested that increased liberalisation of legal activities, particularly non-court based activities would prevent a monopoly forming around legal services, and would allow new entrants to enter the market. The report also recommended that ownership regulations should not be tightened. Currently, anyone in Norway can hold a stake in a law firm, provided they spend a “significant part” of their professional activity in the firm’s service. The Lawyer Commission had proposed only allowing lawyer ownership of firms. The report has suggested that this is not appropriate as it stifles innovation and capital investment, and therefore competition.
Copenhagen Economics English language summary of the report is available here.
The full report in Norwegian is available here.
On February 17th, during its annual midyear meeting, the American Bar Association (ABA) House of Delegates approved resolution 115, encouraging State Bars to consider innovative approaches to expanding access to justice, particularly focused around improving the affordability and quality of civil legal services.
The resolution initially proposed by the ABA Center for Innovation and supported by several standing committees of the ABA Center for Professional Responsibility, calls on state regulators and Bars to consider regulatory innovations that would improve accessibility, affordability and quality of civil legal services. The resolution initially faced strong opposition from several Bar Associations. However, the resolution received overwhelming support from 596 member house following the addition of a provision stating: “Nothing in this resolution should be construed as recommending any changes to any of the ABA Model Rules of Professional Conduct, including Rule 5.4, as they relate to non-lawyer ownership of law firms, the unauthorized practice of law or any other subject.” Rule 5.4 limits sharing of legal fees with non-lawyers as well as bars non-lawyer equity in law firms.
Further details about the meeting and the resolution are available here.
The proposed resolution and report are available here, with the final resolution available here.
The regulatory framework relating to the legal professions in Québec reached a turning point in the 2000s, following the adoption of the Règlement sur l’exercice de la profession d’avocat en société et en multidisciplinarité. More than a decade later, this article examines the negotiation surrounding the drafting of the Règlement, and the various arguments put forward by the Barreau du Québec and other professional corporations to justify its adoption. Data from the registre des entreprises are then used to examine the extent to which Quebec law firms have taken advantage of the diverse legal options at their disposal to organize their activities.
Paquin, Julie, Practising As a Lawyer in a Partnership and Multidisciplinary Practice in Québec: Progress and Prospects (L’exercice de la profession d’avocat en société et en multidisciplinarité au Québec : bilan et perspectives) (september 1, 2017). Les Cahiers de droit, Vol. 58 (3), 2017, 383-607 .
Available from the SSRN site.