The issue of nonlawyer ownership of legal services providers hasn’t had significant traction in the United States. Meanwhile, in England and Wales, nonlawyers have been allowed to own and manage legal services since the implementation of the Legal Services Act in 2011. However, this act wasn’t universally adopted, but it did find some application among local governments who use it to provide legal services to the public.
Alternative business structures (ABS), nonlawyer-owned or managed law businesses, have been able to exist alongside traditional law firms, providing regulated legal services and a range of other offerings. One example is an ABS that employs former general counsels to offer corporate virtual legal departments. They also provide legal activities that are not regulated, like providing clients with advice on various legal, accounting, tax, intellectual property, and employment issues all from one ABS provider.
But not all ABSs prospered. Some ABSs fell into administration, with millions of pounds in debt, or had to be wound down due to the inability to secure required malpractice insurance from approved insurance providers. For instance, one of the first ABSs authorized was subject to one of the largest fines levied for failure to comply with Solicitors Regulation Authority (SRA) regulations in 2020.
The PwC UK Legal Services Market Report in 2022 noted that the existence of ABSs allowed for diversified legal service models, leading to the increased use of large accounting and consulting firm ABSs to offer legal services. Simultaneously, most publicly-traded ABS law firms have produced positive returns since their initial public offerings, despite significant price corrections due to expected poor performance.
Furthermore, according to the Annual Report of the Legal Services Board in 2023, ABSs were more than twice as likely to have innovated in recent years compared to traditional firms. ABSs were reported to be more driven by factors such as the increase in service quality when considering innovation, and more responsive to the needs of the clients.
Recently, Scotland began to license legal service providers, more than a decade after authorizing ABSs by statute. The experiences of these nations with nonlawyer ownership or investment could serve as valuable lessons as the US legal market continues to innovate.
Analysing the successes and failures of the ABS model in the English legal marketplace offers invaluable insights and substantial empirical data for consideration by US states and legislators as the nation explores paths toward innovation in the legal sector.