Let law firms be sold to non-lawyers, Canadian Bar Association says

The industry group that governs lawyers in Canada is pitching an ambitious, 22-point plan that includes the possibility of allowing non-lawyers and investors to own law firms, something the law currently forbids.

Lawyer's group also recommends law school debt forgiveness

The industry group that governs lawyers in Canada is pitching an ambitious, 22-point plan that includes the possibility of selling law firms to non-lawyers an investors, something the law currently forbids.

A report published Thursday from the Canadian Bar Association outlines 22 recommendations the regulatory body has for the industry and its 37,500 members in Canada to adapt to changing times. But the most disruptive suggestion of what the group calls "a bold rethink of the way law is practised, taught and regulated in Canada" is a recommendation that would allow law firms to be owned by people who aren't lawyers — possibly even be publicly traded on stock markets.

"Client expectations are changing quickly and if lawyers don’t find better ways to meet those expectations, clients will go elsewhere to have their legal needs met. Statistics show that they are already — so, something needs to change, CBA president Fred Headon said.

Currently, law firms work on what's known as the partnership model, where lawyers join a firm and as they rise through the ranks, they are invited to buy in and pay for an equity stake, which entitles them to a share in the firm's profits.

It's a system that worked relatively well for generations, as it gives lawyers an incentive to keep customers happy and drum up new business. The system was set up that way a long time ago, Headon says, because there were concerns about lawyers' independence and lawyers not beinginfluenced by outside considerations. But that system needs to change to to keep up with moderns times because it's been less successful in recent years, as the industry has been slow to adapt to new business realities. 

"Innovation is important and that's going to take money and expertise, so we realized we need to learn to work better with people who have both," Headon said.

Heenan Blaikie a warning sign

Venerable Montreal law firm Heenan Blaikie LLP collapsed earlier this year as the firm's business model became unsustainable. 

"The recent decline and demise of longstanding Canadian legal partnerships suggests that more research may be required on if and how the partnership model can be viable in the future," the CBA report reads.

But the report stops well short of throwing the door open to complete deregulation. "Non-lawyer investment in legal practices should be permitted, but only on a carefully regulated basis," the group says, insisting that whoever has an ownership stake would still need to ensure that existing rules on things like disclosure, conflict of interest and ethics are adhered to.

A few countries, including the U.K. and Australia, have tentatively opened the door to that type of ownership structure for law firms. In 2007, Australia's Slater & Gordon became the world's first publicly-traded law firm.

But that's very much the global exception.

"In the U.K., the impetus for the change came from politicians, not lawyers," Headon said in an interview. "Our  [motivation] is from the clients, and what lawyers can do to better serve them."

"Clients expect to engage in legal things the same way they engage in everything else," he said.

The report also lays out some other suggestions which would change the way the legal industry works in some fairly major ways, including opening the door to partnering with other businesses for a-la-carte legal services, and other ways of using online technology to offer small-scale legal services.

"If we don't adapt, people are just going to find ways to work around lawyers," Headon said.

The report also has two recommendations sure to resonate with students and associates — one calls for law firms to consider life experience when assessing would-be law students, and another that calls for debt forgiveness for law grads "who practise within under-serviced communities, with low-income individuals, or primarily in the public interest."


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