Legal blog: 2012 – An Olympian leap for the legal profession?

As new year’s resolutions go, keeping a better eye on the Ministry of Justice website ranks as neither my most challenging nor my most exciting! That said, I was glad that I strayed onto that site to see the justice minister Jonathon Djanogly heralding the advent (last of the festive references I promise!) of the brave new world of alternative business structures (ABSs) under the Legal Services Act 2007.

From 3 January, the Solicitors Regulation Authority (SRA) has been added to the licensing authorities for the new ABSs. These ABSs remove existing restrictions on law firms, allowing them to join with other businesses, such as banks, supermarkets or insurers, to offer legal services alongside other products. It allows non-lawyers jointly to own law firms.

Does this mean that the much-vaunted ‘Tesco Law’ is imminent? Is this a seismic change in the legal profession? You don’t have to be a genius to recognise that, starting in 2012, we are likely to see the most fundamental changes to the legal profession in a generation.

Harnessing the potential

The opportunities presented under an ABS model, together with the significant reforms in the civil justice arena currently being driven by government and a continuing economic downturn, make change irresistible. There has never been a more important time for legal practitioners to be change-focused and to recognise that the status quo is no longer an option.

The SRA is already considering the first applications for ABS licences, and these could be granted as soon as next month. There are concerns that important issues, such as conflict-of-interest and the suitability test for non-lawyers, require more clarity – but the fact is that ABSs are on their way.

There will be new entrants to the legal market, and some may be significant and powerful players in their current field of operation. They may seek to drive increasing commoditisation in certain sectors. Some may argue that the traditional partnership model will no longer be the optimum fit for operating in an environment where the key is to drive a consistent and quality product in significant volumes and at a highly competitive price.

Getting ready for change

Commoditising markets invariably leads to greater consolidation. If current players are to compete with new entrants, it is almost inevitable that they will investigate new sources of financial support from non-traditional sources. The new regulatory regime offers an opportunity for some to take long-term investment support through new profit-sharing arrangements.

From a consumer perspective, if regulated properly and sensibly, the new model should mean more genuine competition, more choice, and a price and quality-led service.

The Jackson reforms, some of which are embodied in the Legal Aid, Sentencing and Punishment of Offenders Bill (LASPO), particularly in relation to the banning of referral fees, are likely to act as a further catalyst for change. While the detail around how the ban is to be implemented and then policed still requires clarification, referrers of work that are no longer able to receive referral fees may look at ownership of a law firm as a legitimate alternative.

So what to expect in 2012? Well, in this Olympic year, the legal profession, which has traditionally moved at a pace more akin to Mo Farah than Usain Bolt, will undoubtedly experience change. The dynamic of legal firm ownership and structure will start to flex and change. Practitioners will need to be agile and fleet of foot to compete with new entrants. Volume legal work will be further commoditised and that combination of price and quality will dictate who prospers and who fails to make the medal ceremony.

FOIL will be closely involved in monitoring this emerging market, and I will comment further on ABSs later in the year as the new landscape takes shape and new entrants start to show their hands.

Don Clarke, president of the Forum of Insurance Lawyers