The legal profession is not immune to changes in society – and one trend has been the movement of law firm partnership structures increasingly closer to the business model.
The International Bar Association has long been aware of potential developments in this area. In resolutions passed by its council on professionalism versus commercialism and on multi-disciplinary partnerships, this trend was acknowledged along with a commitment to maintain strong ethical standards.
The provision of legal advice and representation in court makes the legal profession essential for the administration of justice and maintaining the rule of law. Thus, lawyers must avoid placing an excessive emphasis on profit, or being seen just as businesspeople selling their services.

Economic drivers

The opening of legal profession boundaries has been driven from an economic perspective, and regulation is being directed to reduce inefficiencies.
In the UK, the trend gained pace with the Clementi Report of 2004, the subsequent Legal Services Act 2007and the licensing process before the Solicitors’ Regulation Authority that now permits the first alternative business structures (ABSs). That model allows legal services in the UK to be provided either through entities open to external investors, which can include in their structure non-lawyer managing partners and offer solicitor-services only, or entities offering different types of services including legal services.
The advent of ABSs triggers substantial change for the legal profession. On the one hand, their arrival creates competing business models for the offering of legal services and should help make the costs of certain services more accessible to the wider community. This raises the possibility that, in the future, the prevailing model for offering legal services may not be a law firm.
Yet care needs to be taken regarding placing an emphasis only on market perspectives. The legal profession has ethical duties that are unique. Regulators must develop regulation applicable to ABSs without creating a regulatory arbitrage detrimental to the profession’s ethical standards.

Conflicting interests

In addition, the possibility of investment in law firms by those outside the profession will bring about issues of corporate governance for these new models. There may be conflicting interests between investors and managers, and also with the principles of conduct of the ABS’s lawyers. In particular, it is paramount to ensure that ABSs do not create a negative impact on the independent judgement expected of lawyers, and/or on maintaining duties to clients, for example, regarding the confidentiality of the information, and not using it for other non-legal services offered by the ABS.

Akira Kawamura is a partner at Tokyo-based law firm Anderson Mori & Tomotsune and President of the International Bar Association