Alternative Business Structures for Lawyers and Law Firms: A View from the Global Legal Services Market

Abstract

From a global perspective, the composition of legal practice components is undergoing tumultuous change. The concept of multidisciplinary practice has been embraced in many countries, where lawyers partner with non-lawyers and offer both legal and non-legal services. Less well received are alternative business structures, where lawyers and non-lawyers are permitted to be partners, and outsiders are permitted to be investors, in entities that offer legal services. The move away from the traditional law practice has sparked spirited and diverse debate, especially in European Union [EU] countries where trade in services is an essential component.

Through a series of Directives, qualified lawyers in EU Member States are permitted to cross borders and engage in the practice of law. However, the polarized positions on alternative business structures taken by the Member States threaten to compromise this exchange. Lawyers and law firms engaging in alternative business structures maybe precluded from practicing in some Member States, since the “legal services” offered may not be “lawyer services,” and these practice configurations may be contrary to host state rules of professional conduct.

Australia was the first country to embrace alternative business structures, with the creation of a more competitive market for legal services being an object of this reform. England & Wales and Scotland soon followed suit. Germany and France, on the other hand, opposed this practice, as did the Counseil des Barreaux de la Communauté Europeénne [CCBE], which is a representative body for the law and bar societies of the EU Member States. A primary concern of the opposition was the compromise of the core values of the legal profession. However, while the debate on alternative business structures continues, it is of interest that in those countries where the practice is embraced, no adverse effect from outside investors has been reported. If this continues to be the case, and if these business configurations give lawyers a competitive advantage, it is likely that the naysayers may be more open to innovation and the development of these new paradigms.

Keywords: legal services, law firms, lawyers, legal profession, alternative business structures

JEL Classification: K40