This year’s legal model

It has been more than a decade in the making, but in 2012 the long-heralded revolution in legal services will become a reality.

Dubbed Tesco Law – shorthand for allowing non-lawyers to own and invest in law firms – it should perhaps be more accurately called Co-op Law. Co-operative Legal Services is the highest profile of more than 50 organisations which have already begun the process to be licensed as alternative business structures (ABSs) by the Solicitors Regulation Authority.

This radical liberalisation of law-firm structures, started by Labour and taken on by the Coalition, could lead to solicitors and accountants in partnership, law firms floating on the stock exchange and in-house legal departments offering their services to other companies – and much more besides. Justice minister Jonathan Djanogly says ABSs will help law firms develop new markets and join up with other businesses to offer different products. “Customers will find legal services more accessible, providing a much more competitive and efficient service,” he says.

Among those in the first wave of applicants are national law firm Irwin Mitchell, which last year became the first practice to say it wanted external investment, and legal expenses insurer DAS. In addition, online conveyancing business In-deed, chaired by Rightmove founder Harry Hill, has signalled its intention to invest in law firms.

It is those keeping their heads down who are exciting observers; so might other big brands enter the fray? It seems distinctly possible, although some will undoubtedly decide to wait and see.

Will commercially minded entrants to the market put sufficient weight on principles such as access to justice?

In any case, just the mood music of ABSs has encouraged innovation. The last couple of years have seen an increasing number of lawyers and non-lawyers launching new approaches to the law – mainly for consumers, but expect more for businesses too – that have not needed the structural liberalisation of ABSs.

There are various efforts to build national legal brands, backed up by networks of law firms, most notably QualitySolicitors (QS), which made waves by locating stands in large branches of WH Smith and is shortly to launch a £10-million advertising campaign. Having secured significant private equity investment last autumn, QS is ramping up its recruitment; it currently has 110 firms in 220 locations and wants to get to 1,000 locations by the end of 2012.

Collectively QS firms would then have a turnover of £1 billion, the network estimates, giving it 10 per cent of the consumer legal market. Among the many other models being developed are user-friendly, city-centre law shops, and video conferencing kiosks in shopping centres and elsewhere that will connect people with a lawyer for instant advice. Certainly for law firms that want to do “something”, there is no shortage of somethings to choose from.

Online legal documents are also increasing in visibility, with various financial institutions and law firms offering them. This is set to explode in 2012 with two of the biggest legal brands in the US, LegalZoom and Google-backed Rocket Lawyer, both launching UK versions of their document assembly sites.

Conventional wisdom is that the largest corporate law firms will shy away from ABSs for a variety of reasons, such as losing some control to an outside owner, and because they can currently raise any money they need.

But a report last year from Espirito Santo Investment Bank predicted that this will be “unsustainable in the long run”. It identified two key drivers for the take-up of external financing: the need for capital to fund expansion and law firms’ doubts about the internal strength of their organisations; and the need to retain human capital and keep pace with labour market forces.

Many barristers too think they will be unaffected by ABSs, but there is a creeping realisation that they will not. The Bar Council has developed a procurement vehicle through which chambers can bid for work, while it is also encouraging barristers to take up “direct access” rights, which allow many clients to seek out a barrister directly without needing to instruct a solicitor first.

Various trends are developing as a result of these initiatives, such as more use of fixed fees, better communication with clients, and smarter use of technology to strip much of the manual process out of the system, leaving the focus on the specialist advice that only a qualified lawyer can provide and for which clients are prepared to pay.

There remain fears, however. Will easy work be cherry picked and the difficult stuff that pays poorly, such as domestic violence cases under legal aid, be ignored? Will commercially minded entrants to the market put sufficient weight on principles such as access to justice? Can legal services be packaged and sold in a different way without quality suffering?

By bringing the law to people, rather than making them seek it out, ABSs should improve accessibility and thus, for lawyers, increase the size of the market. But market shares will change and that is currently where the battle lies.