American Bar Association / ABA, Biglaw, Letter from London, Magic Circle, United Kingdom / Great Britain

Letter from London: Beware of the Innovative Lawyers

The Financial Times Innovative Lawyers Awards ceremony, held in London last Wednesday, was most notable for the contrast between the puppy-like excitement of the lawyer nominees and the auto-pilot professionalism of the host, FT editor Lionel Barber, whose aura was of a man who’d rather be at home watching TV.

This was a shame, not only for the confused lawyers struggling to understand why Barber wasn’t high-fiving them as they collected their trophies, but because it overshadowed the setting of a world record. Never before has the adjective “innovative” — or its derivations “innovate,” “innovation,” and “innovator” — been used with such frequency in a single evening.

Between them, these four words featured in 14 of the 15 award names, peppered the subsequent acceptance speeches, dominated the copy of the awards brochure, and strangled the dinner conversation. Hypnotised by the repetition, I was convinced by the end that lawyers could see the future and were responsible for all of the great achievements of humankind.

However, having regained my sense of reality during the Tube ride home, it slowly dawned on me that most of the innovation I’d spent the last five hours being bombarded with wasn’t innovation at all, but simply lawyers doing their jobs. The “innovation in corporate law” award, for example, went to two law firms which acted on a merger, and the “innovation in dispute resolution” prize was given to a firm that won a case.

At other times, “innovation” was employed as a euphemism for not especially original ways to cut jobs….

Take the “innovation in law firm efficiency” award, which was won by CMS Cameron McKenna for its ten-year deal to outsource all its support services to Integreon (coincidentally, the awards’ headline sponsor). Or the accolade for “most innovative law firm in Europe,” which went to Allen & Overy (coincidentally, the awards’ only law firm sponsor), partially on the back of its new support office in Northern Ireland, which has seen the firm slash 180 positions in London.

The exception to the doublespeak rule was the “legal industry pioneer award,” which, double counter-intuitively, went to the Co-operative, a British supermarket that launched a genuinely innovative pilot project to deliver legal services. Until very recently, it wouldn’t have been possible for a supermarket to do this. But the de-regulating provisions of the U.K. Legal Services Act (LSA) — which came fully into force as the clock struck midnight at the FT awards — mean that companies which aren’t law firms can now offer legal services in Britain. The effect of this rule change is likely to be felt most keenly in the consumer branch of the profession, with other supermarkets expected to follow Co-op’s lead into legal services. U.K. law firms specialising in areas like will-writing and conveyancing are bracing themselves for some tough competition.

What impact the LSA will have on U.K. Biglaw is more uncertain. Allied to the lifting of the restriction on the provision of legal services by companies is, among other things, the scrapping of bans on law firms taking capital from external investors and offering shares on the stock market. While few Biglaw firms have publicly expressed interest in doing either of these things, privately the potential for growth that such options present interests many. According to an anonymous survey conducted by legal information company Sweet & Maxwell, around a third of the top 100 U.K. law firms are considering either accepting outside investment or listing on the stock market.

One of the few firms to have gone public about its desire to raise external capital is top 20 U.K. outfit Irwin Mitchell. Its chief executive, John Pickering, reckons the future for law firms will be “vastly different,” with “joint ventures and ownership of firms by different sorts of corporate enterprises like banks and accountancy firms becoming commonplace.”

But Simon Firth of Linklaters — which, alongside the other four elite “Magic Circle” firms, says it won’t be taking external capital — thinks this vision might not be such a good thing for law firms’ cultures. “As soon as you have outside investors in law — in other words, people who are not involved with law firms directly and have no emotional connection to them — there will be a lot of pressure to generate profits,” he says. “Of course, you have these pressures in a partnership, but not necessarily to the same extent. Young people coming into the profession should be prepared for the fact they might, in the future, find themselves working at very lean commercial enterprises.”

The main sticking point that could prevent the LSA from making it big in Biglaw, though, is other countries’ reluctance to follow the U.K.’s regime of liberalisation. To date, Australia is the only other major jurisdiction that permits firms to take external capital. So investors may be deterred from putting money into the big British firms by the fact that they’d only be able to do so in respect of their U.K. or Australian operations.

As with most things, the path you Americans decide to follow on liberalisation will be pivotal in determining whether or not it takes off globally. The American Bar Association (ABA) has historically been against allowing firms taking external investment. But this view isn’t set in stone. A lawsuit brought in New York by the firm Jacoby & Meyers argues that a ban on outside investment is unconstitutional. And a Republican senator has drafted a bill in the North Carolina General Assembly to similar effect.

Still, there are major doubts to overcome — especially in respect of the effect a relaxation of the rules could have on legal disputes, a particular concern for a highly litigious society like the U.S. Writing in Bloomberg Businessweek last month, Robert Weber, IBM’s general counsel, fired this warning: “Imagine discovering that the law firm you hired to defend your company in a business dispute is partly owned by private investors. And those investors also have financial stakes in the company that is suing you — and perhaps even stakes in the law firm representing your adversary. Would you rest easy, assured that the firm will still represent your best interests in the courtroom?”

Innovation sounds great at awards ceremonies. But, in practice, maybe it’s just not for lawyers.


Alex Aldridge is a London-based journalist specialising in legal affairs. He writes a weekly column for The Guardian and contributes regularly to specialist legal publications. Previously Alex was Associate Editor of Legal Week, having begun his career with The Times. Follow Alex on Twitter @AlexAldridgeUK or email him at alex@alexaldridge.com.

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