ABSs will spark City “litigation revolution” and de facto fusion, says SRA chief

Plant: fusion is in the public interest

The UK is on the cusp of a “litigation revolution” involving boutique alternative business structures (ABS) offering externally-funded contingency fee deals, according to the chairman of the Solicitors Regulation Authority (SRA).

Speaking yesterday at the Legal Futures conference in London, sponsored by NatWest, Charles Plant also predicted that de facto ‘fusion’ of the profession would take place as young barristers opted to join solicitors in ABSs that offered the prospect of more rapid rewards than the traditional route to advancement.

However, Bar Standards Board chair Ruth Deech told a roundtable of legal regulators that the Bar was a vital bulwark between the citizen and the state and that the legal profession should stand together as access to justice was threatened by legal aid and fee cuts.

Mr Plant, a City litigator for over 40 years, predicted that third-party funders of litigation would flock to ABSs to obtain protection against adverse costs orders in the event the case is lost. Meanwhile, City firms would chase valuable commercial dispute work by offering to work on a contingency fee basis, using ABSs to provide access to outside capital.

“I can foresee top-class litigation boutiques springing up,” he said, adding: “They will take advantage of the opportunities offered by contingency fees and in the process, being a boutique, they will avoid conflicts of interest which being part of a major firm involves. This is going to be a litigation revolution and it is inevitable.

He suggested that ABSs regulated by the SRA would attract barristers to join with solicitors, with the effect of creating “fusion in another way”. In any case, regulation by professional divide, barrister, solicitor, is not fit for purpose in a world of entity regulation. It is my personal view… that fusion is in the public interest, but of course self-interested, powerful forces will prevent it – I recognise that,” he said.

Young lawyers, members of the so-called ‘Generation Y’, were “in a hurry” and would shun the usual routes to progress within the profession, he continued. “Given the choice between joining a traditional law firm with slow steps up the ladder or joining a set of chambers quite possibly living in the past, and joining a dynamic business offering share options, I suggest that many talented lawyers will take the latter.”

Partnership as a form of organisation has had its day, he argued. “There is now no reason why partnership should be the default model.”

On the subject of the two-year Legal Education and Training Review, commissioned by the SRA, the BSB and ILEX Professional Standards (IPS), Mr Plant said that while its outcome must not be pre-judged, “surely the old model of separate routes to qualification must be replaced by a much more flexible and integrated system of education and training for legal professionals”.

Baroness Deech said the £3bn brought into the UK by English law would be threatened if governments were allowed to weaken the legal profession’s independence. Its role as “the [legal] system of choice for international trade” hinged on its “professionalism, independence, high standards and an ethical code”.

Barristers’ independence was essential to democracy, she added, which made them a target. “No doubt some people would like to see the end of the Bar as a separate profession partly because of costs and partly because it’s chippy; it’s always there to challenge the government.”

The Baroness delivered a spirited defence of maintaining separate regulation of the various regulators of the profession, on the grounds that smaller regulators were “close to practice and teaching, close to continuing professional development, and discipline”. She highlighted failings of the Financial Services Authority and Care Quality Commission as examples of problems that can occur when regulators become too big.

Also at the regulators roundtable, the chair of the Council for Licensed Conveyancers (CLC), Anna Bradley, reported that the CLC – which was the first regulator to licence an ABS – is considering six ABS applications, five of which “are entirely new either to regulation itself or to regulation by the CLC”.

Completing the quartet of legal regulators, IPS chairman Alan Kershaw confirmed that they would be applying for chartered legal executives to have the full range of practice rights. “What better way can there be to promote equality and diversity and social mobility than to allow people who have shown themselves capable of it to set up and run their own businesses?” he asked.

Opponents to the move would cite such things as “risks to the public or the public interest” but in truth it would be “dressing” for “an old-fashioned demarcation dispute”, he said.

Mr Kershaw strongly backed Baroness Deech’s arguments in defence of smaller regulators. “In regulation bigger is not better”, he said. “Regulation like government works properly only with the consent of the relevant population… Professionals are most compliant with regulators when the regulation is close to, even if independent from, their professional home.”



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