Of the first five law firms to float on the Australian stock exchange, only two appear to be in sound health, the International Bar Association’s annual conference in Washington DC heard.
Stuart Clark (pictured), of Sydney firm Clayton Utz and president-elect of the Law Council of Australia, told a session on new business models that one of the five is in liquidation and two of the others are in financial difficulties. The two that have succeeded are ‘boutique IP firms, with more stable cash flow and nothing like the cost base’ of personal injury giant Slater and Gordon, Clark said.
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Clark added that he is ‘not a fan of taking the profession of law and making it a publicly listed business’, saying he could not see how a director’s duty to shareholders squared with a lawyer’s ethical duty to the court. While the assumption is that the duty to the court comes first, ‘that has yet to be tested’. However he said that opportunity that might arise in two class actions against Slater and Gordon by shareholders over the crash in the company’s share price following the acquisition of Quindell in the UK.
Shelley Dunstone, of Adelaide firm Legal Circles, noted that a sixth law firm has now listed in Australia: another IP practice, QANTM Intellectual Property.
With the exception of the District of Columbia, non-lawyer ownership of law firms is still banned in the US, though Washington State has introduced a category of ‘limited licensed legal technicians’ allowed to set up business aimed at clients who would otherwise not be able to afford a lawyer. Session chair Steven Richman of New Jersey firm Clark Hill, said that the 'guild mentality' of US lawyers made it unlikely that the situation would change. But 'to continue to put our heads in the sand as many bar associations have done in the US is not a long term solution'.
Asked whether alternative business structures in England and Wales had helped improve access to legal services, Law Society chief executive Catherine Dixon said that it is too early to judge the overall impact. She noted that Law Society research showed most ABSs to be operating as conventional firms, while enjoying the ability to raise different kinds of finance and bring non-lawyers into the management. As for the widely predicted phenomenon of 'Tesco law', 'in reality that hasn't happened' - though she predicted that as the public gets more used to online services 'that dynamic might change'.
Although the session seemed to show little international enthusiasm for emulating England and Wales and Australia in ABSs, a speaker from the floor said that legal businesses owned by non lawyers were the norm in his jurisdiction. 'We have ABS's everywhere', said Moscow attorney Mikhail Aleksandrov, saying that with the exception of criminal law no qualification is needed to provide legal services in Russia. 'Anyone can set up a company and practise.' A Russian colleague observed that his country is famous for great social experiments - 'But the lesson is usually what not to do.'
IBA 2016: Stock market listing comes at a price
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