Alternative Business Structures (ABS) are not a new creation. They started life just after the second world war in Germany when lawyers and tax accountants set up in business together.
Since that time they have become common in other European countries and have migrated to France, Canada, Australia, Hong Kong, Singapore and more recently in India and other parts of Asia.
Also known as Multidisciplinary Practices or MDP's the definition of one is; a partnership, professional corporation, or other association or entity that includes lawyers and nonlawyers and has as one, but not all, of its purposes the delivery of legal services to a client(s) other than the MDP itself or that holds itself out to the public as providing nonlegal, as well as legal, services. It includes an arrangement by which a law firm joins with one or more other professional firms to provide services, and there is a direct or indirect sharing of profits as part of the arrangement.
The most prolific academic writing in this area appears to be Professor Mary Daly who collaborated on a voluminous tome on the subject called Multidisciplinary Practice; Staying Competitive and Adapting to Change. What's of interest to me is that she wrote two complete chapters on the legal profession's opposition to change, citing that this would be the biggest challenge of all.
Given the recent events with The Law Society of Scotland debates, she's not wrong. In fact, you don't need to read the whole book as the clue to what to do is in the title.
Also, the 1982 Nobel Prize winning economist George Stigler (whose son David is a lawyer) wrote about the regulation of law in a 1971 article called The Theory of Economic Regulation where he stated that "...as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit. The actual purpose of regulations is to provide special privileges for the powerful interest groups that want to restrict competition and raise prices; so regulations hurt the public."
Interesting stuff considering that the main thrust of the opposition is that the lawyers who are against ABS have a perception that they prevent a non-lawyer from exercising undue influence over the independence of a lawyer who is representing a client and that this somehow unduly affects the protection of the client for the pursuit of profit.
In the same year Stigler won his Nobel Prize, the American Bar Association (ABA) formed the Kutak Commission to try to relax these prohibitions, but the ABA's own committee then rejected the proposals of that commission: Here are the objections they raised:
1. The Commission proposal would permit accounting firms and others to open law firms in direct competition with traditional law firms.
2. Non-lawyer ownership of law firms would interfere with the lawyers' professional independence.
3. Non-lawyer ownership would destroy the lawyer's ability to be a professional regardless of the economic cost; and
4. The proposed change would have a fundamental but unknown effect on the legal profession.
Not dissimilar to the recent objections that we have seen from those in the anti-ABS camp in Scotland
The common denominator of these objections is that they clearly indicate the mind-set of a protected guild and not that of professionals operating in a free and competitive marketplace. The protection of customers and the pursuit of profits are not something that are or should be at odds with one another. You could argue that they are in fact a perfect alignment of business interest; and if not, then they most certainly should be.
But let's look at each of the objections in turn:
1. The Commission proposal would permit accounting firms and others to open law firms in direct competition with traditional law firms - Why is competition objected to? We know that consumers benefit from competition, that is surely not in doubt and any action that restricts competition is therefore a net harm to the very consumers that the legal profession purports to protect.
2. Non-lawyer ownership of law firms would interfere with the lawyers' professional independence - Also strange since prospective non lawyer owners could be subject to rules of independence.
3. Non lawyer ownership would destroy the lawyer's ability to be a professional regardless of the economic cost - pure exaggeration as there should be no correlation between ownership rules and conducting oneself as a professional subjected to a code of ethics and principles.
4. The proposed change would have a fundamental but unknown effect on the legal profession - Surely the strangest objection of all as it effectively states "We don't know what the effects are going to be but we oppose them anyway!"
I work in Intellectual property and almost every new business idea is a model or an experiment. As long as no laws are broken, private individuals and companies must be allowed to test their ideas in a free marketplace.
Imagine the argument against BT and a flotation because it would open up The Post Office to competition for their telephone services and it's effects would be unknown! A ludicrous suggestion and an unworthy argument coming from professionals who allegedly act in the interests of consumers.
ADP's should be allowed and we should leave the consumers to decide their fate.
If they turn out to be unviable then traditional law firms will have nothing to fear.
If on the other hand they do turn out to be a success, then it will have proved that they work and are therefore in the consumers' best interests; which is exactly why Stigler won a Nobel Prize nearly 30 years ago.
Since that time they have become common in other European countries and have migrated to France, Canada, Australia, Hong Kong, Singapore and more recently in India and other parts of Asia.
Also known as Multidisciplinary Practices or MDP's the definition of one is; a partnership, professional corporation, or other association or entity that includes lawyers and nonlawyers and has as one, but not all, of its purposes the delivery of legal services to a client(s) other than the MDP itself or that holds itself out to the public as providing nonlegal, as well as legal, services. It includes an arrangement by which a law firm joins with one or more other professional firms to provide services, and there is a direct or indirect sharing of profits as part of the arrangement.
The most prolific academic writing in this area appears to be Professor Mary Daly who collaborated on a voluminous tome on the subject called Multidisciplinary Practice; Staying Competitive and Adapting to Change. What's of interest to me is that she wrote two complete chapters on the legal profession's opposition to change, citing that this would be the biggest challenge of all.
Given the recent events with The Law Society of Scotland debates, she's not wrong. In fact, you don't need to read the whole book as the clue to what to do is in the title.
Also, the 1982 Nobel Prize winning economist George Stigler (whose son David is a lawyer) wrote about the regulation of law in a 1971 article called The Theory of Economic Regulation where he stated that "...as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit. The actual purpose of regulations is to provide special privileges for the powerful interest groups that want to restrict competition and raise prices; so regulations hurt the public."
Interesting stuff considering that the main thrust of the opposition is that the lawyers who are against ABS have a perception that they prevent a non-lawyer from exercising undue influence over the independence of a lawyer who is representing a client and that this somehow unduly affects the protection of the client for the pursuit of profit.
In the same year Stigler won his Nobel Prize, the American Bar Association (ABA) formed the Kutak Commission to try to relax these prohibitions, but the ABA's own committee then rejected the proposals of that commission: Here are the objections they raised:
1. The Commission proposal would permit accounting firms and others to open law firms in direct competition with traditional law firms.
2. Non-lawyer ownership of law firms would interfere with the lawyers' professional independence.
3. Non-lawyer ownership would destroy the lawyer's ability to be a professional regardless of the economic cost; and
4. The proposed change would have a fundamental but unknown effect on the legal profession.
Not dissimilar to the recent objections that we have seen from those in the anti-ABS camp in Scotland
The common denominator of these objections is that they clearly indicate the mind-set of a protected guild and not that of professionals operating in a free and competitive marketplace. The protection of customers and the pursuit of profits are not something that are or should be at odds with one another. You could argue that they are in fact a perfect alignment of business interest; and if not, then they most certainly should be.
But let's look at each of the objections in turn:
1. The Commission proposal would permit accounting firms and others to open law firms in direct competition with traditional law firms - Why is competition objected to? We know that consumers benefit from competition, that is surely not in doubt and any action that restricts competition is therefore a net harm to the very consumers that the legal profession purports to protect.
2. Non-lawyer ownership of law firms would interfere with the lawyers' professional independence - Also strange since prospective non lawyer owners could be subject to rules of independence.
3. Non lawyer ownership would destroy the lawyer's ability to be a professional regardless of the economic cost - pure exaggeration as there should be no correlation between ownership rules and conducting oneself as a professional subjected to a code of ethics and principles.
4. The proposed change would have a fundamental but unknown effect on the legal profession - Surely the strangest objection of all as it effectively states "We don't know what the effects are going to be but we oppose them anyway!"
I work in Intellectual property and almost every new business idea is a model or an experiment. As long as no laws are broken, private individuals and companies must be allowed to test their ideas in a free marketplace.
Imagine the argument against BT and a flotation because it would open up The Post Office to competition for their telephone services and it's effects would be unknown! A ludicrous suggestion and an unworthy argument coming from professionals who allegedly act in the interests of consumers.
ADP's should be allowed and we should leave the consumers to decide their fate.
If they turn out to be unviable then traditional law firms will have nothing to fear.
If on the other hand they do turn out to be a success, then it will have proved that they work and are therefore in the consumers' best interests; which is exactly why Stigler won a Nobel Prize nearly 30 years ago.
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