Each to their own

Benjamin Disraeli once mused that: 'In a progressive country, change is constant, change is inevitable.'

Since Sir David Clementi presented his report on legal services in December 2004, there has been an increasing sense that the Bar would not be immune from changes to the traditional, Chambers-based model of the provision of its services. That feeling is now closer to becoming a reality: on 19 November 2009, the Bar Standards Board accepted various recommendations of its Alternative Business Structures Working Group (see Solicitors Journal 153/44, 24 November 2009).

The recommendations include proposals relating to alternative business structures (ABSs), the generic terms for the new entities for providing legal services under the Legal Services Act 2007. This includes legal disciplinary practices (LDPs), which can include up to 25 per cent non-lawyer managers.

The BSB has been characteristically thorough in its deliberations about this complex subject. Its main points are:

• Barristers will be allowed to become managers of LDPs which include up to 25 per cent non-lawyer managers, regulated by the SRA, without having to re-qualify (the position of LDPs with one non-lawyer manager is still under review).
• Barristers will be permitted to act both as independent practitioners and managers of LDPs.
• Barristers are being discouraged from becoming shareholders of LDPs until conflict of interest issues are resolved.
• Barristers should also be permitted to form barrister-only partnerships '“ when these entities come into existence '“ and should also be permitted to practise as barrister-only companies and limited liability partnerships (LLPs).
• The cab-rank rule will still apply.
• The BSB is still deliberating upon its role in regulating these new entities.

The Bar Standards Board has also stated that changes to the Bar's Code of Conduct will now be submitted for approval to the Ministry of Justice or the Legal Services Board.

Members of the profession have voiced a number of lengthy, compelling arguments both for and against the recommendations. This is the flavour of them:

Time for a change

Contrary to popular belief, the Bar is not Dickensian in either its outlook or business practices. An iPhone can be seen as often as a fountain pen in most chambers. Most have grown in size and the Bar as a whole embraces modern thinking as to technology, marketing and management. Restructuring the way the Bar organises itself will not be quantum leap into uncharted territory; merely a reflection of changes in approach and attitude that have already taken place or are in the process of taking place.

The vast majority of chambers are now multi-million pound organisations. Alternative business structures provide a greater ability to spread risk and profit than the current 'every man for himself' model.

The independent, self-employed Bar is no longer the near-exclusive provider of advocacy and specialist advisory services. Many solicitors have, and use, higher rights of audience and many solicitors' firms employ in-house barristers. Indeed, a barrister can already effectively become a partner or member of an LDP by simply re-qualifying as a solicitor. Crucially, the Bar needs to change its own structures to avoid the steady wasting away of the Bar by barristers leaving to join solicitors' firms and to allow chambers to compete with those firms.

Clients would benefit from a simpler approach to the management of their cases. LDPs would allow clients direct access to their barrister as a matter of course, avoiding the need for the duplication of costs and resources which the instruction of a barrister by a solicitor can so often entail.

Essential rules compromised

The cab-rank rule (whereby barristers are, subject to exceptions, obliged to accept all cases sent to them falling within their expertise) is crucial to the Bar as it ensures representation of all parties regardless of the desirability of their case. The Bar Standards Board very properly envisages this as continuing to apply to the self-employed Bar and barristers in barrister-only partnerships. However, to ensure breadth of representation and also to avoid unfair competition, it would be necessary for all advocates (whether a barrister not) to accept the cab-rank rule as well. It is not a foregone conclusion that solicitors would agree to this, as they would be giving up the major commercial benefit of being able to pick and choose the most lucrative or attractive cases from those available to them.

The independence of the Bar risks being compromised if individual barristers are financially linked by partnerships or within other ABSs. The integrity of the Bar would of course remain the same, but there would be the risk of a perception of a conflict of interest if two barristers from the same barristers-only partnership were against each other in court; for instance, it might be beneficial to the profits of the partnership if one party were to win instead of the other because of a higher costs bill.

Crucially, the existing model of a collection of self-employed barristers sharing infrastructure costs but receiving their own profit for the work that they do themselves works very well. The fact that many solicitors' charge-out rates are higher than many barristers of similar experience illustrates how cost effective this model is. It also allows barristers the flexibility to choose their hours of work without impinging upon anybody else's profits, as well as individual barristers directly receiving credit for the work that they do.

Although the client may feel that case management within an LDP is easier, it also presents its complications. Barristers would have to deal with the intricacies of compliance with the money laundering regulations and detailed progress reports to the client (as opposed to the solicitor). This is not a case of barristers wanting to avoid paperwork; the longer a barrister spends on case management the less time there is to provide advocacy and specialist advice. Similarly, the downside of direct access to a barrister within an LDP is that it is harder for the barrister to retain the distance from the client and the client's case required to maximise objectivity. In any event, the appetite for direct contact between the Bar and the public may not be that great on either side. The Bar's Public Access scheme already allows the general public to deal directly with barristers accredited under the scheme without the need for a solicitor. However, anecdotal evidence suggests that the take up by the Bar and by the public has been relatively low.

Balancing the merits with the risks

My own view is that the current chambers model works perfectly well and should not be abandoned. I specialise in commercial and chancery law and so the chambers model is an ideal structure for me. There is a greater emphasis upon the individual practitioner rather than the block contracting '“ which may well be on the horizon for family law or crime. Like most barristers, I am instructed by a large range of solicitors '“ from high street sole practitioners to national and international firms. It is difficult to see that this would be possible in an LDP, as virtually all work would come from the LDP itself. This would be the equivalent of only ever working for one firm of solicitors. Similarly, one of the joys of life in chambers and self employment as a whole is the relative absence of politics; I have dealt with enough partnership cases to know that it is the financial links between partners which often give rise to difficulties, such as when one partner's profitability dips or another's increases. There would also be additional challenges, such as questions over who owns the goodwill in a particular chambers as opposed to an individual barrister's own goodwill and reputation.

These are, however, reasons why I would not wish our chambers to convert to an alternative business structure or merge with an LDP. I do welcome the recommendations in that they give the Bar as a whole a greater choice. The availability of an alternative structure does not mean that all chambers are required to undergo structural upheaval. I think the key benefit of the recommendations is that they will force the Bar, chambers and individual barristers to examine how we work and how we organise ourselves. In particular, we will have to consider whether the merits of self-employment outweigh the merits of profit sharing and risk sharing in an LDP or other ABS; whether we can compete with LDPs offering the advocacy and specialist advisory services that have been the preserve of the Bar; and how we can offer added value to solicitors and clients which they could not obtain elsewhere.

By undergoing this professional soul searching, those who choose to retain the existing chambers model will be doing so because it works well for them rather than out of any blind resistance to change.