Lawyers Face Shake Up
Legal Services Act
14/12/2007
30th October 2007 was a defining day for the English Legal system. On that date the new Legal Services Act received Royal Assent and this Act will have a major impact on law firms in our region and throughout the country.
The Act aims to put the consumer of Legal Services first and introduces a number of reforms. Notably, it removes complaints handling from the lawyers and introduces a single and fully independent office for legal complaints.
However, the provisions which are most likely to create the greatest changes on the legal scene are those that lead to outside investment in the equity of law firms and to ownership of law firms by "non-lawyers" including large companies.
The intention of this new framework is to widen consumer choice, but its actual outcome and the effect it will have on the current structure of the legal profession is the subject of intense debate throughout the legal world. Many believe that commoditisation of legal work will bring about the demise of many smaller "high street" solicitors practices. They also predict that the corporate work of large city practices will be unaffected. However, the potential for the injection of large amounts of capital from external investors could mean change for all law firms.
In Australia, where wider ownership of law firms has already been adopted, the world's first stock exchange listed law firm is using its new found wealth to expand rapidly by acquisition. This indicates that there is likely to be future consolidation in the legal industry.
In addition to this, at home, we are already seeing major banks, insurance companies and other institutions taking increasing interest in moving into the legal services industry. That is far from all. For instance, if you visit the Tesco website, "Tesco Law" is already with us.
Even though it will take some time (up to 2011) to fully introduce all of the provisions in the Act, the market is already reacting to the opportunity it presents.
As a firm, Irwin Mitchell has welcomed the opportunity that outside investment will offer and also the benefits that that changes should bring to the consumer. It is establishing close relationships with a number of major companies to support them in satisfying the legal requirements of their customers and employers and advising on the changes that are taking place in the legal market place.
One thing is certain, there will be unprecedented changes in the legal market with greater competition which will offer keener price, quality and convenience to the consumer. It may take a few years for the transformation to be complete, but it will be a challenge to all law firms.