Wednesday, January 04, 2006

Tesco Law

The Financial Times today carried an interview with the new Bar Council chairman, Stephen Hockman QC. He was giving his reactions to proposed changes to the legal profession including the bar.

Government is in favour of liberalising the organization of the legal profession. In a white paper, it recommends that the categories of people and organizations eligible to practice law be expanded. This is where the notorious term "Tesco law" has come from. Why shouldn't consumers be able to buy legal services in their local supermarket, just as they do pharmaceutical products?

The bar, along with solicitors, has always fought to retain conventional ways of organizing its businesses and how they are conducted. Solicitors have predominantly been partnerships and barristers are sole practitioners. This conventionalism has been intertwined with the ideology of professionalism. What is a profession? Professional knowledge is usually presented as something abstruse, arcane and not easily interpreted or understood by mere consumers. And since only professionals can really judge each other's competence, they should be allowed to control themselves. This is often a ruse for saying, "We want to maintain our monopoly practices. We like rent!" Our experiences with other professions, eg, doctors, show we can evaluate their skills. They may not like us doing it, but they can't stop it now. And government is itself taking that view as regulation moves more to external bodies away from professional associations.

Is there anything sacrosanct about keeping lawyers separate from other professionals? The white paper has adopted the philosophy of the OFT report on competition in professions and the view of the Clementi Review that legal disciplinary practices (LDPs) should be allowed. This is where you get different groups of lawyers coming together in the same organization with a bit of outside minority control. LDPs are a watered down version of multidisciplinary practices (MDPs) where different occupations operate as a single business. MDPs are everywhere. Look at the big accounting firms. They don't even call themselves accounting firms anymore. They have become "professional service firms" offering a range of services from tax, law, banking to consulting, and probably more. Lawyers are frightened of MDPs because, I suspect, they would be taken over by the other parts. One example: the law firm that started the move to merging and going global with a vengeance was Clifford Chance. A driving force behind the merger was that CC would merge with an accounting firm like KPMG. If ever there was a fatuous ideal, this was it. Today CC has over 3,000 lawyers while a firm like KPMG has over 70,000 professionals worldwide. Merger? Impossible. Even those bastions of the haute bourgeoisie, the investment banks have divested themselves of partnership and adopted corporate forms.

Is there any reason to protect lawyers from the market? I don't think so. In fact the opposite is preferable. Law firms could benefit from raising capital in the markets. At present law firms are flat structures of partners and associates: more layers would increase the productivity of employed labour. It could also introduce innovation in practice. There is no reason why law firms couldn't be the ones to operate legal clinics in the supermarkets (as well as advising on the financing to fund a range of clinics). Law firms could experiment in offering multi-skilled services to specific industries--many law firms already organize themselves internally along "know-how" lines that in effect adopt these ideas. One could further extend this into franchising law firm brands and creating new hybrid entities that straddle the public/private line.

If law firms and the legal profession want to get to grips with modernity, they will have to become modern, in form and substance. Legal services are international and globalization will favour those who are prepared to take risks and challenge orthodoxies. My prediction is that a brave few will try this out when the government relaxes current restrictions. My fear is that lawyers are by nature risk averse.

"For now we see through a glass, darkly; but then face to face: now I know in part; but then shall I know even as also I am known" (I Cor 13:12).


Anonymous said...

Some points:

1. How do you explain the concept of justice to outside investors in ABS's who are accoutable to their shareholders for the profit they are making / not making. I realise that law firms are run for profit but a great many run in areas which produce very tight profits indeed which presumably outside investors would not be looking to suport.Where will this leave legal aid for example when high street solicitors are forced to close? Will supermarkets take on this role?

2. If the outside investor invests in thoses areas where margins are tight how will they make money. Cut overheads. What are the overheads, largely qualified staff. Will this lead to more advice from unqualified staff? Is this in the consumer interest?

3.If this is such a great idea why are we the only country to consider this capitalist investment in the legal sector approach

3. Will firms in other countries be willing to trust such a legal system. Will there own legal systems allow them to deal with us? International experts think not.

John Flood said...

Thank you for the insightful comment. I have commented more fully in my latest post, "Justice and Tesco Law", using your comments as the basis.