17 May 2011

Will the world reject ABSs? Government to monitor “international acceptance”

The Ministry of Justice (MoJ) is to review the international reaction to alternative business structures (ABSs) early next year, it announced yesterday.

An action plan to promote the UK’s legal services sector, published in collaboration with UK Trade & Investment, said the MoJ will monitor “the international acceptance” of ABSs, with an initial review in February 2012.

Though the action plan lauds the Legal Services Act 2007 for offering “a robust and dependable regulatory regime”, the commitment reflects concerns that many countries around the world will refuse to let English and Welsh law firms which have become ABSs operate in their territories.

During the Act’s passage through Parliament, Germany’s legal regulator warned that firms owned by non-lawyers would be “inconsistent with the requirements of German law” and “therefore encounter a major obstacle in Germany”.

Similar problems are thought likely in the US. Although the American Bar Association recently floated the possibility of allowing forms of ABSs, it ruled out passive non-lawyer investment in firms, including flotation.

It is expected that such reservations will significantly cool the desires of any firms with international operations to become ABSs.

The 11-point action plan is part of the Coalition’s wider “Plan for growth”. It includes having representatives from legal professional bodies on trade trips where appropriate, an online promotional tool-kit for trade and investment advisers in British embassies, and ensuring that the trade and investment ministerial sub-committee discusses legal services promotion this year.

The plan has a commitment from TheCityUK – a trade promotion body – the Law Society and the Bar Council to produce a strategy to promote the UK as a centre of excellence for dispute resolution.

The trio will also encourage firms and chambers to fund secondments of junior solicitors or barristers to UK embassies in high-growth markets, where they will research opportunities and also restrictions on UK lawyers practising.

TheCityUK is to relaunch its legal services and dispute resolution group as part of the plan.

Justice Secretary Ken Clarke said: “As Britain’s economy emerges from a difficult period, it is vitally important that the country builds on its strengths to support the recovery. There are few areas where Britain is stronger than in the law.

“Whether it’s in the provision of legal services, the use of our courts for the resolution of disputes, or the application of English law for contracting, the UK is truly a global centre of excellence.”

Peter Lodder QC, chairman of the Bar Council, said: “The Ministry of Justice and Department for Business, Innovation and Skills are to be congratulated for taking an active interest in how the potential of the legal services sector can be unlocked as part of the government’s wider growth strategy.”

By Legal Futures

Tags: ABS, Alternative business structures, Legal Services Act