Nonlawyer Ownership in England and Wales Deserves US Attention

Nonlawyer ownership of legal services providers, despite several notable attempts, appears stalled in garnering widespread support in the US.

Yet in England and Wales, nonlawyers have been permitted to own and operate legal services since 2011. The Legal Services Act was implemented in 2011 in response to governmental concerns about access to legal advice.

These nonlawyer owned and/or managed law businesses, or alternative business structures, provide legal services directly to consumers. These licensed bodies follow authorization rules set by the Solicitor Regulations Authority—the largest regulator of ABS.

Over 10 years after first authorization, ABSs exist alongside traditional law firms in numerous areas, providing both regulated legal services and ancillary or disparate offerings. One ABS employs former general counsels to provide virtual corporate legal departments.

Even local governments have established ABSs under exceptions to public contract regulations that represent mostly the county councils themselves, but also provide legal services to consumers. Other ABSs permit employees to own law firms through employee ownership trusts.

An ABS may provide reserved legal activities and unregulated legal and non-legal services. For example, clients of an ABS may receive advice on legal, accounting, tax, will drafting, estate administration, intellectual property, and employment issues all from one ABS provider.

Unless exempt per Scheduled 3, LSA permits individuals and businesses qualified by an approved regulator to provide six codified reserved legal activities. These are: exercise of a right of audience, conduct of litigation, reserved instrument activities, probate activities, notarial activities, and administration of oaths.

The approved types of legal providers are solicitors, barristers, legal executives, licensed conveyancers, patent attorneys, trademark attorneys, costs lawyers, notaries, and chartered accountants. Each is regulated by a separate approved regulator and is authorized to practice law, though not all possess rights to exercise all reserved legal activities.

Together with authorized claims management companies and immigration advisers, which lack a recognized approved regulator under the LSA, unauthorized providers also provide legal services to consumers.

In addition to ABS successes, there are failures that fall into administration owing tens of millions of pounds in debt, or winding down after failing to secure renewal of required malpractice insurance from approved insurance providers.

An original ABS—one of the first three authorized—received one of the largest fines levied for failure to adhere to SRA regulations in 2020. And one of the largest SRA interventions occurred this year, resulting in thousands of seized client files. Clients were told to seek alternative legal representation, due to the collapse of an ABS that purchased multiple other law firms operating each as an aggregator.

The PwC UK Legal Services Market Report 2022 viewed the LSA as permitting more varied legal service models, culminating in greater use of large accounting and consulting firm ABSs to provide legal services.

The report also noted most publicly traded ABS law firms, since their initial public offerings, generated positive returns despite significant price corrections due to expected poor performance or management replacements.

The Legal Services Board, the overall regulator of all legal services in England and Wales, noted in its 2023 Annual Report that “ABS firms are over twice as likely to have innovated within the last three years compared to traditional firm structures.”

The report also said such firms “are more driven by factors such as increasing service quality when considering innovation, and are more likely to report that such innovation allowed them to be more responsive to the needs of clients.”

The ABS structure requires mandatory confirmation by an approved regulator of a compliance officer for legal practice for each ABS permitted to conduct one of the six reserved legal activities, as well as a head of finance and administration accepted by an approved regulator.

These individuals, along with the ABS, must produce policies, procedures, and records to show compliance with SRA regulations, mandates, and risk management requirements.

Each ABS holding client, trust, or third-party monies must ensure systems and controls exist with appropriate periodic testing undertaken to comply with the SRA account rules required by its SRA license.

Also, per regulatory and license requirements, ABSs must possess an internal complaints procedure or participate in an existent process, and notify in writing each consumer of such at the outset of undertaking legal services. If the internal procedure fails to resolve a complaint, then the consumer may resort, subject to restrictions, to the legal ombudsman, a statutory office with the LSA.

Additionally, various intervention powers by approved regulators exist if an ABS fails regulatory standards, together with possible imposition of significant financial penalties.

ABS subsistence in the English legal marketplace offers success stories, significant failures, and an empirical data set for evaluation by US states and legislators.

Scotland, over 10 years after permitting ABSs by statute, begins this year to license legal services providers. Scottish and English experience with nonlawyer ownership or investment might serve useful as the US legal market continues to innovate.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Daniel H. Erskine is chief legal officer of Project Execution Services LLC and sole solicitor and attorney in Connecticut and New York, focused on corporate and high tech cross-border transactions.

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