ABS in Canada? Closer than you might think

By Published:

This post was originally published as two articles in the October 25 and November 1, 2013 issues of Canada’s The Lawyers Weekly newspaper. Reproduced here with thanks.

Unless you’ve been making a special effort not to notice them, you’re probably aware of Alternative Business Structures (ABS), the most radical of several developments introduced in England & Wales by the Legal Services Act 2007. An ABS license permits ownership of a law firm, or of any enterprise delivering legal services, by people who are not lawyers. It’s exactly as paradigm-shifting as it sounds.

In the 18 months since ABS status has been made available, more than 200 ABS licenses have been issued in Great Britain by regulatory bodies such as the Solicitors Regulation Authority and the Council for Licensed Conveyancers. Most of these licenses went to existing law firms or into enterprises in the personal injury and road accident sectors, but not all. Here are a few ABS highlights worth considering:

  • Slater & Gordon is the Australian personal injury firm that became the world’s first publicly traded law firm more than a decade ago. S&G has gone on an acquisition spree since gaining its ABS license last August, most recently with its acquisition of Manchester-based Pannone, The firm now counts 460 staff in 12 locations throughout the U.K., and its CEO has confirmed that the firm is eyeing the broader consumer law market.
  • Riverview Law is a corporate law firm that charges fixed fees for all its services. While its original focus was small and medium-sized enterprises, it has drawn interest from large companies as well. Riverview is owned by holding company LawVest, which has applied to become an ABS and is itself owned in part by global giant law firm DLA Piper. Riverview already counts 100 lawyers and plans to double in size over the next several months.
  • The Co-Operative is a nationwide consumer goods and services company that sells groceries, financial services, insurance, travel and funeral services, among other things. Last year, the Co-Op obtained an ABS to convert its existing Co-Op Legal Services division into a full-fledged legal services provider in the areas of family law, real estate, wills, personal injury, and employment law. Its website offers a toll-free number to phone for locations in the caller’s area.

Among the other entities that have received, have applied for, or are known to have interest in an ABS license are legal expenses insurer ULR Additions, venture capitalists Smedvig Capital, the Direct Line Insurance Group, private equity firm Duke Street, legal textbook company Jordans, logistics company Stobarts, outsourcing giant Capita plc, and a couple of accounting firms you may have heard of: KPMG and Ernst & Young.

Many of the new ABS providers have gotten off to strong starts. But not all of them have, and there’ve already been some high-profile stumbles and even failures. Conveyancing ABS In-Deed Online closed down in June just two years after its debut, its demise perhaps spurred in part by an overly hasty stock-market listing after it premiered.

For its part, Co-Op Legal Services reported a £3.4m loss in the first half of 2013 after breaking even in 2012, part of an overall terrible year to date for the parent company. (In fairness, Co-Op Legal did record an increase in revenue over that period, and it plans to stay the course.) And although it’s not an ABS, small-firm franchise provider Quality Solicitors is backing away from its plan to operate legal information kiosks in WH Smith bookstores around Britain. Law Firm Publishing

So far, then, the ABS market is playing out much as you’d expect in a startup industry: many diverse players, several early successes, a few notable shortfalls. The important thing, to my mind, is that the early predictions of disaster — non-lawyer shareholders driving unscrupulous behaviour, senior law firm partners selling out their equity shares to private investors, the collapse of professionalism — have not come to pass. Nor do they appear to be on the horizon.

Now, this may be all very interesting to a Canadian reader, but surely, it’s also academic? Whatever the merits of England & Wales’s great experiment in legal services delivery, Canadian lawyers can rest assured that nothing this radical will jump the pond and land in the colonies anytime soon. Right?

Well, maybe not. Four separate provinces are looking closely at potential reform of their legal services regulatory regimes, reviews that include consideration of alternative business structures and the delivery of legal services by entities other than lawyers. Many Canadian lawyers are at least aware of the changes taking place in Great Britain; fewer are aware that we may be closer to similar developments here in Canada than they realize.

Ontario is at the vanguard of this process, of course, having become in 2007 the first jurisdiction anywhere in North America to recognize and regulate non-lawyer providers of legal services (independent paralegals). There are now more than 5,000 paralegals licensed to provide legal services in Ontario.

In the fall of 2012, the Law Society of Upper Canada set up an Alternative Business Structures Working Group, whose mandate includes studying new developments in alternative legal service delivery worldwide, developing criteria to assess these developments, and identifying any legal service delivery models and regulatory changes that the law society should be considering. The ABS Working Group has already heard from many people with an interest in these matters (including yours truly), and it published an interim report in June 2013.

That report recommended continuing study of the issue and engagement with the professions on the subject of (a) limited non-licensee ownership of law firms and (b) a review of existing rules regarding business structures (including the absolute ban on fee-sharing and referral fees with non-licensees). Any recommendations made by the Working Group would be subject to Convocation’s approval. The Group’s final report is slated for spring 2014. (Read this Storify collection of tweets from last month’s LSUC ABS conference, too.)

In British Columbia, the law society has already investigated ABSs, publishing its own report in October 2011, shortly before ABS licenses became available in England & Wales. That report stated that although there was much talk about the promise of innovation and access to justice arising from ABSs, it was too early to tell whether other jurisdictions should follow Britain’s lead in radically liberalizing their legal services regulatory regimes.

But the report did not close the door on ABSs, recommending further study as more evidence came to light. Indeed, this past June, the Law Society of British Columbia’s annual Bencher Retreat was devoted to the topic: “The business of law in the 21st century: Do we risk losing (or can we maintain) our professional values?” Guest speakers (including yours truly again) and benchers spoke at length about emerging issues such as ABSs, access to justice, and the impact of technology on legal service delivery.

In Nova Scotia, at its most recent annual meeting in July, the Barristers’ Society Council approved a project plan called “Transforming regulation and governance in the public interest” (PDF), and began discussing goals relating to another strategic priority, “Enhancing access to legal services and the justice system for all Nova Scotians.” An executive summary of the latter report (PDF) stated that “[n]ew and innovative models for the delivery of legal services would be an essential component of any access to justice strategy.”  This article describes Nova Scotia’s plans in more detail. Evolutionary Road

And in Manitoba, the Law Society has established a committee of local innovators (both those who are lawyers and those who are not) with an intriguing mandate: assume there is no law society, and design a structure and system to regulate legal services. For instance: Should lawyers have a monopoly on legal services, or should they be simply one competitor among many? The innovators will also examine ABSs, law firm regulation, and the controversial issue of recertification (requiring lawyers to demonstrate competence every several years). This committee will report in March 2014, with implementation of its recommendations planned for that fall.

(Separately, it should be noted, Manitoba is also collaborating with Saskatchewan, Alberta and B.C. about a common approach to ABSs.)

As you can see, the issues that these four law societies are investigating go beyond the relatively narrow topic of ABSs. They’re really looking into whether and to what extent legal services regulation in this country requires a serious reconsideration, and maybe even a major overhaul. These concerns, in turn, are prompted by the very real crisis in access to legal services in Canada, and by a sense that we may need to fundamentally rethink how we define “the best interests of the public” in the 21st century.

Having had the opportunity to address Benchers in Ontario and B.C. on these issues, I’m encouraged by what I’ve seen and heard. Each of these four law societies (and, I’m sure, others across Canada) recognize that we’re entering a crucial period in the evolution of the legal market, and that traditional models of legal services regulation cannot and will not pass through this period unchanged. Our law societies are asking the right questions, and I’m optimistic that they’ll come up with good answers.

So this would be the worst possible time for lawyers to again circle the wagons, as we’ve done so often in the past, demanding the continued ring-fencing of our traditional protected territory. Forces far beyond the control of lawyers are now driving this market. I would like to see us work with these forces, not strive pointlessly against them, towards the twin goals of improving access to legal services and enhancing lawyers’ professional values.

Will we see alternative business structures approved in at least one Canadian jurisdiction within the next five years? I’d rate that as a strong possibility. But for us to even get close to that point, we’ll have to engage in an thorough and overdue reconsideration of the purpose lawyers serve in Canada’s legal market.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.  

Print Friendly

No Responses to “ABS in Canada? Closer than you might think”

Leave a Reply

  • (will not be published)

 

Post Categories