Hare or Tortoise? The Bar and ABSs

The Bar Standards Board agreements to regulate advocacy focused legal entities (in principle) and allow barristers to conduct litigation are interesting developments. Lagging somewhat behind the Law Society (with implementation dates stretching into 2013 well beyond the introduction of LSB and/or SRA MDPs regulation in the Autumn) the Bar (or rather the BSB) has taken a deliberately more cautious approach.

Decided to focus on advocacy focused alternative business structures is intuitively appealing; playing to the Bar’s key specialisation. As the regulatory maze that is the LSA works out against market forces, this narrow and clear focus provides the Bar with a clear identity in a way that the more diffuse notion of solicitor roles and competences does not. This diffusion is going to pose enormous difficulties for the SRA not least during the legal education review.

The Bar’s clarity however also poses problems. Their proposals for alternative business structures will include legal disciplinary practices (LDPs) and barrister-only entities, but not multi-disciplinary practices. The BSB have also (to quote from the Gazette’s recent story), “placed restrictions on the types of structures that it will seek to regulate in order to keep the regulatory risks and their associated costs down.” In particular:

  • BSB-regulated entities will not be able to hold client money or have external ownership;
  • all owners of BSB-regulated entities must also be managers (a majority of the owners/managers of ABSs regulated by the BSB must be barristers or other advocates with higher rights of audience), and
  • there will be a 25% limit on non-lawyer owners or managers of ABSs regulated by the BSB.

It will be interesting to see how much litigation can genuinely be done without holding client money and whether any workarounds are genuinely cheaper. There’s also an interesting debate to be had about whether it is better for all owners to be managers (Paul Grout’s work suggests it may not be – to (over)simplify managers with more money to gain from poor behaviour as owners may have more incentive to manage unethically than those who are not owners). The professions are rather complacent in their belief that self-management is naturally better in ethical terms (I mention sole practitioners and the SDT here and await some angry comments) but there are some broader questions which ought to also be raised.

I ask you to imagine a group of randomly selected lawyers in a room and then to ask that group to raise their hands if they think lawyers make good managers. That’s a flippant way of making a series of more serious points which would include:

  • What do we mean by management (are clerks in Chambers managers, for instance)? Do we mean any form of management? Management of casework? Management of ‘ethical’ issues?
  • Is management something which is best left to professionally motivated, but (arguably) amateur managers (who under the Bar’s proposals will also be highly commercial and so self-interested managers as it happens) or whether there is advantage in bringing in professionally qualified managers to run ‘entities’ differently? One of the points of Clementi’s report is that institutional change brought in fresh skills and ideas. The BSBs proposals seek to adopt the form of ABSs whilst resisting the underlying idea.

Whatever one thinks about the merits of the arguments the Bar Standards Board (anxious I assume to inch the profession into a position where they might have a foothold in the brave new world of alternative business structures) is deliberately tying the hands of the profession qua profession. At least, it is doing so for now.

Interestingly, there is – or will be – nothing to stop Barristers joining in LDPs or MDPs regulated by others (and the BSB having decided to permit barristers to practise as managers or employees of ABSs regulated by other approved regulators, and to have ownership interests in ABSs). That will be subject to the development of rules and guidance on managing any resulting conflicts of interest. An interesting question is whether this plus the conservative culture of the Bar will prevent sufficient numbers from breaking ranks and joining entities regulated by (say) the SRA. If many do, the Bar’s position as a regulator will be under threat. I would guess not many will, but it is still a risk: much may turn initially on how personal injury and criminal defence markets shape up.

In waiting this long to and in responding with such caution, the Bar has allowed first mover status to be granted to the SRA and others, expecting to be ready for entity based regulation itself by 2013. It is hoping that a canny and careful tortoise will outwit any hares that (as we are increasingly seeing in the legal press) are beginning to limber up.

An interesting sideshow is how this all relates to the fusion debate. Patricia Robertson QC (lead for the BSB’s working group on entity regulation), has indicated ‘in one sense fusion is already with us’. What I take her to mean is that fusion regulated by others is already with us. BSB chair Baroness Deech has said apparently simultaneously ‘Fusion is not on the agenda.’ Both are sort of right: fusion at an entity level is already here and the BSB’s tentative steps into the LDP arena make entity-level fusion somewhat more likely. The professional qualifications of Barrister and Solicitor of course remain separate, which is how (I suppose) Baroness Deech makes her claim.

I have heard the denial that fusion is on the agenda a good deal recently. One can only protest that something is off the agenda so many times. If the Bar has to keep denying fusion is on the agenda, then really it is on the agenda – they just don’t want it to be there. Similarly, whether the BSB is right to claim that, “What we’ve designed is something that preserves the bar’s independence” will depend in part on whether fusion regulated by outsiders is kept to sufficiently minimal levels. The proposals for ABSs have to be sufficiently flexible to be commercially attractive. If many barristers move into SRA regulated entities the Bar’s position as a regulator and a profession will be in doubt.

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