Monday, June 14, 2010

The Future of Legal Services


The Legal Services Board held a conference today on the Future of Legal Services: Emergent Thinking. Its key themes were: risk based regulation; alternative business structures; innovation and the future of law firms; and consumers, lawyers and law firms.

Rather than summarize each paper I prefer to focus on those that raised the most interesting questions for the future. For those who would like to know more, the Legal Services Board has produced a pamphlet with digests of the papers which you can obtain from their research manager, Alex Roy.

Julia Black dealt with risk based regulation and showed that it needed a determined approach if it were to succeed. Often institutions might have risk based frameworks in place but don't implement them when a crisis arises. The Financial Services Authority's handling of the Northern Rock bank debacle was evidence of that. To succeed it needs the commitment of the organization (eg. the regulator and the law firm) and active monitoring. Since inevitably resources are scarce where are they best deployed? It's clear that most complaints come from the small law firm sector and hardly any from the large corporate sector. But when Arthur Andersen blew up after Enron, its law firm--the ninth largest in the world by revenue--had to be wound up to the satisfaction of the regulator.

So far regulators have only had to deal with what they know (known knowns)--law firms--but with the introduction of alternative business structures (ABS) in September 2011 they will be faced with known unknowns. Tony Williams, who was head of Andersen Legal when it had to be wound up, sketched a future where law firms wouldn't necessarily have to travel the ABS route or take external capital, but they had to be absolutely sure about what direction they would take. They could not afford to ignore this movement. Those that did elect to take external investment from private equity funds would find their management and decisionmaking processes rigorously challenged and audited. Moreover, their remuneration, if lockstep, would be overhauled as their billing was changed from hourly billables to fixed price or value billing.

Jon Trigg, A4e, spoke about the opportunities that existed in the individual end of the legal services market. He gave an example of A4e's work in its partnership with the Community Legal Advice Centres in Leicester and Hull bringing a range of legal services including telephone legal advice under one roof, in conjunction with a law firm. He demonstrated that innovation was not limited to the corporate sector of legal practice.

Legal Process Outsourcing (LPO) was described as a player that could truly exploit the legal services market. Mari Sako explained that LPOs were now beginning to move from low end, commoditized legal work into more high end work. With this is coming a new approach that sees LPOs forming ABS with law firms overseas and in India. In other words, LPOs will buy law firms. What LPOs have is the potential to colonize legal services in the way Apple did with combining hardware, software and music--iPod, iTunes, iPhone, etc. Their ability to take this road is because they are not constrained by the conventional wisdom of what law practice or the legal services market ought to be.

To remind you, if you want more information contact Alex Roy at the Legal Services Board. The board is committed to opening up research in this field and making all its research available via its website. They can't be any plainer than that.

The spaceship has landed and now it's time to contact the aliens.....




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9 comments:

Marc Beaumont, Barrister said...

Marc Beaumont responds: I specialise in defending Solicitors, Barristers and Doctors in disciplinary proceedings. I see more and more cases in which the allegations are becoming both pettier and/or an intrusion into the private lives of professional people. At the Bar, the Tribunals seem to be overflowing with cases of failure to do CPD. Risk-based regulation would surely preclude training the might of a large organisation at such tiny infractions. A profession that investigates and prosecutes Barristers for the smallest misdemeanour runs the risk of bringing itself into disrepute in the eyes of the public and of its own members. A new test of "serious" professional misconduct would weed out such cases. CPD breaches could be dealt with on a fixed penalty and "totting up" basis. The vast cost of running the BSB could then perhaps be kept under some degree of control.

John Flood said...

Marc, I think this is where risk based regulation could make a contribution by weeding out petty cases that have low impact and instead focussing on the substantial matters that affect the public interest. And therefore your suggestion of fixed penalties for minor breaches makes perfect sense.

The purpose of such regulation is to devote the resources of the regulator to where they are most needed. Sometimes, of course, regulators like to take the easy way out.

Marc Beaumont said...

Thanks John. Nice website. best wishes, Marc Beaumont.

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