How the Legal Services Act is changing the UK landscape.

• Author: Hodges, Silvia

For years, there has been increasing talk of making the law more like a business. In the United Kingdom, law firms are taking that to a whole different level. With the Legal Services Act 2007 (LSA), the UK Parliament provides the basis for a comprehensive reform and liberalization of the market for legal services.

The LSA intends to "put the consumer first" in the way legal services are regulated and delivered, as well as to provide a framework that promotes competition and innovation.

The act will allow law firms to create alternative business structures, enabling them to explore new ways of organizing their firms to be more cost-effective. This could include permitting lawyers and non-lawyers to work together and allowing for outside investors to gain stakes in law firms.

While these changes do not directly involve the legal industry in the United States, law firms here should be paying attention.

"It would be a mistake for American lawyers to ignore it because it has already changed other professions and legal practices in other nations," cautions British strategy advisor Laurie Young. "Other professions, from accountancy and executive search to consultancy, have seen practices become publicly owned and several have been damaged in the transition. Managing partners have been surprised by the new entrants they are already seeing and are realizing that they might be competing for clients against very different firms in the future."

The practice of law "has been treated with kid gloves, as a learned profession that must be insulated from the more vulgar mores of the marketplace by rules of legal ethics," according to Professor Richard A. Epstein of the University of Chicago School of Law. Despite artificial obstacles and privileges that limit competition and protect economic turf, change started to take place about 30 years ago.

According to Epstein, even earlier than that England and Wales allowed accountants and management consultants to offer most types of legal advice, and the countries allowed lawyers to provide non-legal services such as tax planning and preparation.

"So it wasn't a big step in the late 1980s for the deregulation- minded Thatcher government to allow solicitors and non-lawyers to forge informal alliances that offered legal, accounting, consulting and other services or, more ambitiously, to offer those services through ancillary businesses," says Epstein. It's a strategy that U.S. firms later were allowed to copy.

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