Irwin Mitchell and Marks & Clerk set for MDP conversion
24 October 2005
Irwin Mitchell and Marks & Clerk set for MDP conversion" />Irwin Mitchell and Marks & Clerk Solicitors are set to lead the first wave of law firms to take advantage of a radical regulatory change for the legal profession in new legislation outlined by the Government.
Both firms have indicated that they are likely to become multidisciplinary partnerships (MDPs) under new legislation due to be introduced before the end of 2006.
Irwin Mitchell managing partner Howard Culley says: "It's not unlikely that we'll take the opportunity to widen the structure of our partnership."
When asked about the possibilities of working in partnership with its associated patent attorney practice, Marks & Clerk senior partner Mark Blair says: "It's certainly something we'd look into."
Meanwhile, the RAC, which has been heavily involved in lobbying for a liberalisation of the legal profession, welcomed the news and said it would review its options.
The white paper on the future of legal services published last week (17 October) builds on the recommendations made last December by Sir David Clementi in his review of the regulation of the legal profession.
Most of the proposals follow Clementi's recommendations closely, establishing a single oversight regulator and complaints-handling body for the legal profession. But the Government has gone much further than Clementi by recommending that lawyers should be permitted to practise in partnership with other professionals, potentially in businesses owned entirely by outside investors.
In his December report, Clementi recommended the introduction of 'legal disciplinary practices' (LDPs), such as solicitors and barristers in partnership, but said MDPs were a step too far.
But the Government said MDPs - or 'alternative business structures' (ABSs) - will stimulate competition and innovation, and will provide "greater convenience for customers". It laid out the robust safeguards that it believes will protect the firms and their clients from problems such as conflicts of interest.
All ABSs will have to be licensed by new oversight regulator the Legal Services Board (LSB), and regulated by an approved 'front line regulator' such as the Law Society. That regulator will have been authorised by the LSB. The Government is planning to push through legislation requiring each firm to identify the person in charge of the legal function and also a head of finance and administration. Although each ABS will have to have a dedicated legal function, lawyers will not have to be in the majority.
The concept of MDPs has caught the profession's attention. Tony Williams, formerly managing partner of Andersen Legal and Clifford Chance and now a management consultant at Jomati, says: "It's fascinating because Clementi had put MDPs in the 'too difficult' box, but one's got to be careful."
However, Williams believes that the Government's safeguards appear to be good ones. "It's quite a robust defence of why they believe that's the right structure," he says.
For firms such as Marks & Clerk or Irwin Mitchell, which already employ a number of non-legal professionals working in one single partnership, it would make perfect sense. For larger, international firms, or those wanting to work with accountants, the potential pitfalls are greater.
Williams and others, such as Christopher Tite, formerly of Ernst & Young-tied Tite & Lewis and now at Lawrence Graham, have first-hand experience of working with other professionals, specifically accountants. Both argue that the failure of the accountants' legal networks had more to do with the knock-on effects of Enron and the Sarbanes-Oxley Act than an inherent problem with the structure.
"We were always convinced there was a market and a demand," explains Tite. "The challenges that we were confronted by were extraterritorial."
Tite believes that if accountancy firms separate out audit functions - the element that has caused the most regulatory problems - there could be a future for partnerships between the two sectors.
MDPs are welcomed by the Institute of Chartered Accountants, which sees economic benefits in the structure. But international hurdles will still have to be jumped, as no other country has gone this far in opening up the legal market.
The necessary legislation to allow the reforms could be implemented by the end of 2006. The world of MDPs is no longer a dream. It will shortly be reality.