Nine US general counsel have come to the conclusion, reported in Legal Futures, that there is no need for external ownership of law firms and “that the inevitable chipping away at the profession’s professionalism ultimately will do a disservice not just to the business clients we serve, but to all clients who seek the trusted and confidential advice of counsel”. I would not presume to disagree with their judgement about their own clients. But I would seriously beg to differ with the general sentiment implicit in the conclusion that ‘non-lawyer’ (I still hate that expression) ownership will necessarily erode professionalism, undermine lawyer-client relationships, compromise confidentiality, and encourage unethical, profit-maximising behaviour.
It is perhaps worth remembering that, despite the rapid growth in the number of lawyers in the past quarter-century, ‘non-lawyers’ still constitute the overwhelming majority of the population. It is a bold claim indeed to suggest that members of this group are, or would inevitably become, unethical when they acquire an ownership stake in a law firm. There is, in fact, absolutely no evidence to support this. In part, this is because so few jurisdictions currently allow such external ownership (which makes the suggestion a contestable hypothesis, not a fact). In part it is because, in jurisdictions where external ownership is allowed (such as New South Wales, and England & Wales), there are no facts that suggest that unethical behaviour follows. It is, of course, possible that such evidence will emerge over time: but even if it does, it will take a long time for that evidence to reach the current tally of unethical and unprofessional behaviour of lawyers around the world.
The fundamental problem with the opposition to external ownership is that ethics is a state of mind, not a state of ownership. There are ethical and unethical lawyers, just as there are ethical and unethical ‘non-lawyers’. Until the legal professions rid their ranks of the unethical, the high horse of professional ethics is not a secure vantage point from which to resist ownership by those outside the ranks. By siding with the status quo and suggesting that the case for change is not made out, opponents of external ownership conveniently side-step their own need to justify a restrictive practice whose public interest foundations and justification are tenuous and for which the supporting case in the 21st century has also not convincingly been made out.
The foundations of lawyer-only ownership seem to be built on three propositions:
- that lawyers need protecting from outsiders (so much, then, for their professionalism and independence, which would surely enable them to resist inappropriate pressure and temptation);
- that clients need protecting from unprofessional behaviour by law firms (which might be true for some clients, but does not seem to me to depend on whether or not the firms are owned by lawyers – and, given that the restrictive rules on ownership originated in an era of 100% lawyer ownership, hardly puts lawyers on the front foot); and
- that ‘non-lawyers’ will exert unprofessional or unduly economic pressures – or, in other words, that compared to lawyers they are inherently unethical (which, as I suggested earlier, is a bold statement – and possibly even insulting).
Where, then, is the public interest case for lawyer-only ownership? In the battle between assertion and evidence, assertion is best for lawyers because there is no evidence that external ownership is bad for clients or law firms.
While we’re looking at ‘non-lawyer’ ownership, let me also suggest that this should not be read as being synonymous with ‘external’ ownership. What about all the other people working in law firms who help it to create value for clients and the owners? They are internal, not external. On what basis – other than simply because they are ‘non-lawyers’ – could anyone suggest that these individuals should be excluded from an ownership stake in the businesses they work in? I’ve never heard a convincing defence of their exclusion.
Nor could I accept that these individuals – simply because they are ‘non-lawyers’ – would necessarily apply unprofesssional or unethical pressure if they became part-owners; or, to put it in slightly different words, that they would contribute to “the inevitable chipping away at the profession’s professionalism [and] ultimately … do a disservice … to all clients who seek the trusted and confidential advice of counsel”. If such a proposition were even remotely tenable, how come these sorts of people are already working in law firms?
The resistance to ‘external’ ownership is not on secure ground. The principle of lawyer-only ownership does not hold water. In fact, it leaks terribly – and with a rather unpleasant whiff of self-interest. Let us instead address the real challenges. Of course there is a risk that ‘non-lawyers’ will behave badly – just as there is a risk that lawyers will, too. If the risk of unethical behaviour exists, let us address the risk: otherwise, the principle that the possibility of unethical behaviour must exclude certain people from ownership should, logically, in the interests of fairness and non-discrimination, exclude lawyers as well.
We should therefore recognise the risks and take steps to minimise and mitigate them. That’s what the regulatory framework of the Legal Services Act does. For example, it imposes the same professional objectives on the whole business as it does on the individual lawyers. It also imposes a statutory obligation on ‘non-lawyers’ not to do anything which causes or contributes to a breach by a lawyer or the firm of the regulatory and professional obligations imposed on them. So ‘non-lawyers’ who behave inconsistently with professional requirements, or inappropriately pursue profit at the expense of professionalism and professional obligations, run the risk that their opportunity to be an owner, officeholder or employee in a legal business will be taken away from them. Just as it is for lawyers. Equal opportunity and treatment seems justifiable to me; prejudicial and self-interested bias does not.
The argument, then, shouldn’t be about whether or not ‘non-lawyers’ should be allowed any ownership interest or control in law firms. It should be about how we manage the risks that any owners – whether lawyers or not – might pose to the public, professional and client interests. There is no inevitability about any behaviour, just potentiality and risk. We need to manage the risks as they in fact exist and not as we might prefer them to be.
Let us stop insulting the intelligence of clients, and casting doubts on the motivations and ethics of those who do not hold a professional qualification or badge of ‘lawyer’. Let us remove the forked tongue of ethical bias and withdraw insinuations of unprofessional, profit-driven behaviour by ‘non-lawyers’. Because, of course, we might suggest (with tongue now firmly in cheek) that it has only been altruism and selfless client service that has made so many lawyers around the world multi-millionaires….