Bar Focus | Changing the game

In a rapidly expanding legal services marketplace it would be naïve to assume that the Bar would allow itself to be left behind. While the arrival of alternative business structures, fixed-fee models and new schemes to aid direct access may have been met with apathy or scepticism by some, a lot of chambers are responding in a bid to compete.

The most familiar of all new models are alternative business structures (ABS), which for the first time enable non-lawyer owned legal service providers to offer reserved legal activities to the public. The Solicitors Regulation Authority (SRA) has authorised just over 30 ABSs in total since an inaugural trio was announced on 28 March and there have been no reports of traditional high street firms, or sets of chambers for that matter, turning to dust as a direct result so far.

So what is the perceived threat from these newcomers? On the record, market-savvy lawyers and commentators argue that there is no real threat, just a new tranche of opportunities that can either be embraced or, at the cost of being left behind, rejected. On a purely commercial level this is true but it fails to take into account the previously unchallenged cultural paradigm that many lawyers remain bound to.

The fixed-fee fiasco

It is perhaps for that reason that one of the most high-profile new entrants, Riverview Law, despite marketing itself as a radical and disruptive alternative to traditional offerings is not an ABS. It is comprised of Riverview Solicitors and Riverview Chambers, which are regulated by the SRA and the Bar Standards Board (BSB) respectively, just as any other firm or chambers would be. The only notable departure from the traditional model is the complete rejection of hourly billing.

'Nobody except traditional law firms likes the billable hour' explains Riverview's COO, Adam Shutkever, even less so general counsel who he says have 'become more embedded, more strategic within major corporates and the way they procure external legal services is starting to match that'. It is this market that makes up the bulk if Riverview's clients, which perhaps explains why the fixed-fee model works for them '“ it is relatively straight forward to sell a package of services at a fixed price, but what about litigation.

Shutkever admits that there is a risk with fixed-fee litigation. Unforeseen events may arise and have an impact on cost but, as yet, he says Riverview has not had to come good on its promise to absorb any additional costs incurred by under-quoting the client. Putting it into a commercial context he says 'anywhere else in the economy, if you misprice people or underestimate the amount of work required to do the job then it's your problem, that's how most of the economy works'. As Riverview's barristers are essentially a panel of affiliates that can take as much or as little work as they like from Riverview on a fixed-fee basis, for them it is a convenient additional extra source of revenue '“ diversification, that most Darwinian of survival techniques, is what keeps industries afloat in the face of unprecedented change, so it's little surprise that Riverview has been able to attract a willing panel of 50 members, including ?14 Silks.

Riverview is not alone in launching a fixed-fee model. Red Bar Law, founded by lawyer John Esplen, who heads up legal practice, and former business consultant Hatti Suvari, who is head of finance and administration, was authorised as an ABS in June. As a non-lawyer partner, Suvari's belief in the fixed-fee model being in the best interests of the consumer is evident from the moment she starts speaking about it. Having felt the financial sting of hourly billing herself in a divorce she willingly puts forward as a case study in how it should not be done, Suvari feels, like many looking in on the legal profession from the outside, that the proposals lawyers are so worried about are common sense. She feels that firms that don't take the needs of their clients seriously will be eclipsed by the growing tranche of commercially aware legal businesses that do. She is also candid about the benefits of her model for the barristers she has brought on board.

'Barristers are up for it because we're not saying give us a cheap deal, what we are saying is give us the right and reasonable price and you'll be paid within 24 hours', she says. Because Red Bar Law offers their clients a fixed quote at the start of proceedings, clients pay up front and in turn Red Bar pay barristers up front. She is quick to add that she does not believe that barristers that charge by the hour are necessarily unfair in the rates they charge but they do have to think more about cash flow '“ with Red Bar that concern is taken out of the equation.

It seems that models like Riverview and Red Bar Law represent not a direct threat to the hourly billing model that barristers are so attached to but a route to diversify and enhance the security of their income. As many areas of the Bar come to terms with recession, modernisation, increased competition and, for some, what is regarded a shameless assault on the justice system by government, it is perhaps only a matter of time before fixed-fee work is welcomed behind closed doors, as well as publically, as a profitable supplementary income.
The simple fact of the matter is that as fixed-fee work becomes more sought after by clients barristers are going to have to take it on, whether they like it or not '“ as one head of chambers put it, any grumbling that goes on as a result is really neither here nor there.

Discreet initiatives

With the recruitment of CEOs and other lay professionals to give them a more commercial edge and present new ?offerings to market, most chambers are coming round to the idea that change is not a choice but an imperative.

In particular, expansion into the international market has been a growing trend, not only because it presents new opportunities but because it mitigates the effects of any domestic downturn. Christine Kings is the commercial director at Outer Temple Chambers and feels that international work is still one of the most prominent areas of expansion for the UK Bar. 'We are ourselves exploring new legal structures to help increase our presence, communicate with international contacts and to deliver new ways of working', she says and with the introduction of ?the BARCO the likelihood is that direct-access work with clients abroad will ?become a popular new revenue stream for barristers looking to take advantage of a deregulated Bar.

The Bar Council launched BARCO, a third-party escrow account for barristers, on 27 September. It won't be up and running properly until next year, after the current programme of awareness raising and a pilot has been run, The Bar Council is also applying for regulation by the FSA.

The scheme is still in its infancy but chairman of the Bar, Michael Todd QC expressed high hopes for the new financial tool lauding it as 'one of the most important developments in the legal services sector since the Legal Services Act came into force' and confirmed what we already know about international expansion and fair fee charging when he said: 'Demand for barristers' advocacy and advisory services is growing all over the world. Domestic and international clients of all sizes, which regularly turn to the Bar, need a trustworthy and transparent vehicle to manage payment of their legal and litigation costs.'

BARCO will help to change the game for barristers seeking direct access work from abroad but it is a reactive rather than a proactive move, it doesn't signal any collective grasp of how to adapt in general. On this barristers are still the victims of their own culture, the word 'business' doesn't feature in most barrister's lexicon, let alone inform their approaches to the legal work. As a result chambers that already have non-lawyer or non-clerking drivers are likely to survive more easily.
It is not only understanding the business needs of the Bar that will help them survive, the ability to understand the business needs of their fellow legal service providers is also critical. As the number of ABSs increases and law firms start to adapt to meet the needs of the market, any residual cynicism toward those new models by chambers will only damage their relationships and ultimately run them out of business.

In the meantime, there is real and tangible tension taking its toll within chambers. Cuts to publically funded work mean the earning potential of some parts of chambers are being seriously eroded, while others continue to thrive.
In April 2013, the new costs regime will usher in yet another game-changing era in which those that might have been doing very well up to then, will see a large chunk of their income lost. As a result chambers are fracturing. To keep the chambers model intact, some are arranging themselves more strategically '“ creating departments by practice area for example, with separate budgets and business objectives so that less profitable revenue streams are not subsidised by more profitable ones.

It might not be to everyone's liking but chambers have certainly woken up, if a little late for some, to the need for change. Those that still can't understand are at least being forced to watch it happen and listen to the debates surrounding it.
In time, the mere fact that a barrister's work is tied to that of other legal professionals, probably more progressive ones, will leave them with a stark choice: evolve or die out. There will be no back-up pool of clients who will want the old model for the old price when the market is flooded with more competitive options.