All change for the legal sector

This article appeared in the August 2007 issue of Public Affairs News

Public affairs practitioners with little or no interest in the legal sector will be forgiven for missing a piece of legislation that promises to revolutionise the UK’s legal industry, making it the most liberal in the world in the process

Until now law firms have operated as somewhat of a closed shop, with ownership restricted to partnerships of practicing lawyers. Non-members of the Law Society, currently both the profession’s regulator and trade union, are prevented from joining the club.

This is all set to change with the introduction of the Legal Services Bill which promises a massive shake-up of the UK’s £19bn legal market. Dubbed ‘Tesco Law,’ the Legal Services Bill, currently making its way through Parliament and due to be enacted by 2010, will allow law firms to create Alternative Business Structures, including multi-disciplinary practices, pull-in outside investment and float on the stock market. The main driver for this change is a desire to make the legal profession more transparent and accountable to its customers through increased competition, and better regulated in the process.

The reforms have been broadly welcomed by industry and consumer groups, although there is currently some intense lobbying going on over plans to allow the Lord Chancellor to directly appoint members to the newly formed Legal Services Board that will oversee the sector and standards as the overarching regulator. Opponents to this plan say that it could threaten our £2bn of annual legal exports by undermining the independence of what, until now, has been a fiercely independent profession.

Whatever the outcome of these lobbying efforts, the more enlightened businesses are preparing for a regulatory shift that will see significant structural changes for a growing number of new operators in the legal market whose watchwords are now commoditisation and consolidation. Household names like Halifax, Co-Operative Group and RAC have already stepped into the market and, no doubt, will continue to use their existing customer base, brand awareness and marketing muscle to take advantage of the changing legal landscape as the legislative picture develops.

Law firms themselves are fast waking up to the reality of a new dawn. Recent research for The Lawyer magazine found that around 30 per cent of the top 100 UK law firms were in favour of attracting external investment once the new legislation is enacted. Additionally, a separate survey showed that half the solicitors who took part said they might be interested in adopting an Alternative Business Structure (ABS).

What about the possibility, then, of lawyers and public affairs consultants one day forming an ABS with, perhaps, outside shareholders? The proposed legislation in its current guise would certainly allow such a scenario.

The involvement of law firms in public affairs is not new, at least not in Washington and Brussels. In the UK it is a growing phenomenon, becoming more embedded into the political arena. The most notable law firm to have successfully integrated public affairs and PR specialists into its legal practice is global giant DLA Piper in the form of Global Government Relations, the strategic communications and government relations arm of the firm. Bircham Bell Dyson is also well known for its parliamentary arm in the UK and national law firm Russell Jones & Walker, the first to publicly embrace the opportunities presented by the Legal Services Bill by radically overhauling its business, recently hired a public affairs specialist who will be part of the firm’s new parliamentary and legal affairs department. The main thrust of the new department will be to offer a 'lobbying' service, where lawyers will give advice to clients that are campaigning to change the law.

The eventual possibility of legal and public affairs practices becoming integrated under the legal reforms will, in my opinion, much depend on what the public affairs bit can ‘bring to the party.’ Some argue that lawyers are already well placed to offer clients public affairs advice and see it as an additional ‘value added’ service; others will point out that lawyers can tend to get bogged down in detail and public affairs people are better at seeing the bigger picture. The increased regulatory spotlight on the legal profession and the largely unregulated nature of the public affairs industry could present an issue, with the legal profession and its existing and proposed new regulators making huge efforts to make the profession more accountable to its clients. The Public affairs industry may need to do the same.

Clearly, we are going to see increasing market segmentation, which will become even more pronounced as the structural changes are implemented. Supermarkets, motoring associations and financial institutions are all planning to join the party. Those public affairs practitioners who may have missed the Legal Services Bill until now, may want to start taking note.

Gus Sellitto is a director of specialist Legal PR agency, The Byfield Consultancy.

The main provisions of the Legal Services Bill, which is due to be enacted by 2010, are:

  • A new Legal Services Board to oversee the sector and standards as the overarching regulator–day to day regulation will remain the job of professional bodies such as The Law Society. The Board will have a lay chairman and a majority of lay members
  • A new Office for Legal Complaints against legal service providers
  • The introduction of Alternative Business Structures (ABSs), allowing non-lawyers to become owners and investors in legal practices. Firms seeking to do this will need approval from the LSB and possibly other regulators.
  • Legal Services Bill set to receive Royal Assent this autumn

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