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,”.
For more information see:
On the 24th March, the Competition and Markets Authority (CMA) released its review and recommendations on the legal services market in Scotland.
One of the key recommendations put forward in the report is that an independent body should be set up to regulate the profession, separating representative and regulatory functions. The CMA has suggested that “Separating regulation from representation will increase trust in this sector and result in better regulation.”
The report also included recommendations that the Law Society of Scotland should carry out a review of price and service transparency guidance, with possible mandatory rules in order to increase public confidence in pricing and to implement rules to allow ABSs to establish, following legislation allowing them a decade ago.
Andrea Coscelli, the CMA’s CEO said:
“It is important that people in Scotland have access to high-quality and good value legal services. In addition to increasing transparency of information, our recommendations are intended to introduce greater liberalisation that could foster growth and innovation in the delivery of legal services which would help the sector grow.”
The full report is available here.
The recommendations are available here.
The Law Society of Scotland’s response is available here.
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.
We recently reported on the work of the California State Bar and their proposals for regulatory reform put forward by the Task Force on Access Through Innovation of Legal Services as well as the work being done by the National Conference of Bar Examiners (NCBE) Testing Task Force.
In her article, ‘Re-regulating Lawyers for the 21st Century’, Jayne Reardon, Executive Director of the Illinois Supreme Court Commission on Professionalism highlights the work of a number of US State Bars, regulators and national bodies who are currently reviewing lawyer regulation issues and reflects upon how any advancements in lawyer regulation could lead to a fundamental re-structuring of the legal market. Read the full article on the Illinois Supreme Court Commission on Professionalism’s website.
The Legal Services Board’s (LSB) annual report asserts that alternative business structures (ABS) continue to have a “direct and positive impact” on the legal market. They have provided an effective structure for firms who wish to take a different approach to meeting legal need. There are now more than 1000 ABS in England and Wales. Research conducted by the LSB in 2018 shows that ABS are significantly more likely to use new technology and are more innovative than other types of law firm.
Read the full report here
Regulators are poised to consider radical rule changes that could decisively open the way to allowing non-lawyers into the legal profession of the US’s most populous state.
The State Bar of California voted earlier this month to accept a report from legal academic Professor William D. Henderson calling for structural reforms to the way the market is regulated. The bar’s board of trustees further resolved to authorise a taskforce to study and come back with recommendations for reforms that balance the goals of public protection and increased access to justice.
The taskforce proposals – not expected until 2019 – could pave the way for a version of the alternative business structure regime in the UK and Australia, allowing a system where non-lawyers are able to own law firms and legal businesses are able to take on external capital investment. Despite repeated attempts to encourage liberalisation in the US – and not withstanding sporadic examples of legal markets opening to outsiders – the US profession has overwhelmingly resisted emulating England and Wales.
In his report, Prof Henderson cited the problem of ‘lagging legal productivity’ and that, in contrast to medical care and higher education, a growing proportion of US consumers are choosing to forgo legal services rather than pay a higher price.
Read the Full Article
Platform economy breaks into the legal profession by pooling lawyers with different specializations into a simple user-friendly platform, consolidating the lower-tier supply side of the legal market and generating economy of scale. This paper is the very first empirical piece looking into China’s online legal service portals. It is found that, the intermediary functions of the portals as the “matchmaker” between the supply and the demand side are often commingled with certain substantive legal services, which cannot be easily unbundled from each other. Given the grand information asymmetry in legal service provision and the potential importance the users may attach to the portals’ recommendation, the quality of such intermediation and matchmaking still leaves to be desired. This being said, because the portals help to improve the access to justice in China by virtue of offering an EXTRA channel for acquiring and comparing potentially useful information, which is made available at a much lower cost than visiting a physical law firm, the regulator should strive to improve the quality, rather than block up the source of the information. To that end, this paper proposes, based on the inspiration of the ABS regime, an alternative license for these online legal service providers, which imposes minimum regulatory and leaves room for new innovative business structures to evolve.
Full Paper Available Here
Jing Li, Tilburg University – Department of Business Law