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Should in-house lawyers embrace legal service liberalisation

Liberalisation has given in-house lawyers more choice than ever before, so what are the barriers preventing many from taking advantage?

When the Legal Services Act (LSA) was passed in 2007, it was with the intention of opening up the legal profession, creating more competition as well as improving access to justice through the introduction of so-called alternative business structures (ABSs) that allowed non-lawyers to own law firms for the first time.

The first ABS was licensed in October 2011 and, with it, we started seeing a marked shift in the mood in the legal profession and the appetite to change and innovate more. Where previously there was limited interest in different ways of working – despite a few pioneers beating the drum for change – it provided the opportunity for in-house legal teams to accelerate buying services from different models at scale; and for legal service providers to create different ways of organising themselves.

Flexibility and freedom of choice

So began the growth of alternative legal services providers (ALSPs) and new ways to deliver and procure legal services. Without the Act, the ability of corporate legal teams to instruct a range of diverse suppliers, not just traditional law firms, would not have been possible.

As Chris Fowler, former general counsel at BT’s technology division, explained in Obelisk Support’s recent report reflecting on liberalisation, “The real big thing for me was that it just created a whole market in the UK of different sets of providers, all offering different things at different levels within one ecosystem.

“Because ALSPs are very good at account management, service delivery, process definition, diversifying, landing and expanding, BT spend with ALSPs has consistently grown.”

Liberalisation might not have put the pressure on fees that had been hoped – mainly because demand has continued to grow – but what it has done is to lift the standard of service, along with demand for more value for money and tailored services.

It has brought more flexibility and freedom of choice, more client-centric services, the option of access to multi-disciplinary expertise as well as an increased use of technology. Despite these benefits, 15 years on from the Act, it is questionable whether in-house lawyers have taken full advantage of the opportunities available. So what are the barriers in their way?

Cultural barriers

I would be inclined to agree with Crispin Passmore, founder and Managing Director of Passmore Consulting who suggests in-house counsel need to be “much braver” in how they buy and deliver legal services. Certainly the law is not known as a profession of risk takers and I think that one of the biggest reasons that there has not been even more change since the introduction of ABSs, is the culture of the legal sector.

Entrepreneur Karl Chapman, now CEO of KimTechnologies, was one of the first people from outside the legal profession to see the opportunities that the Act presented, launching Riverview Law as an ABS in 2012. The business was bought by EY in 2018. He reckons that, if the law worked like other industries and sectors, the pace of change “would have been much faster”.

It is still the case that many general counsel and senior executives prefer to instruct a well-known law firm, often one they know well and have worked with for many years. There is comfort in sticking with a known quantity, even if that means paying more for services that may well not be structured in a way that works well for the organisation.

Furthermore, General Counsel can, according to Crispin Passmore, too easily default to instructing the firm they trained at. This is the model that City law firms have developed - recruit a group of lawyers, some make it to partnership, some go in-house. Those who have moved client-side are more inclined to give work to their old firm.

As new routes to becoming a lawyer open up, with in-house teams beginning to train their own lawyers, along with some ALSPs and the Big Four, this will no doubt start to change, but at present the cycle continues.

For many in-house counsel, a lack of time a resources can also act as a barrier to exploring alternative suppliers – many don’t have the bandwidth they need to analyse and investigate how they might do things differently – particularly when it comes to new technologies.

Chris Grant, head of legal market engagement at HSBC is not surprised that lawyers have been slow to innovate. “Everybody’s trained to do things in specific ways, so you don’t really ever have the opportunity or the thought to do something differently.”

In his opinion, an education process leading to behaviour change is still needed among the in-house community, led by the leadership teams that are, arguably, made up of those most resistant to change. “Do they know the options they’ve got available to them? They know the law firms – they’ve been working with them for a long time. So, we’ve got a job internally to be able to identify which lever can be pulled for what type of activity that we’re trying to do.”

Change is inevitable

As budgets are placed under greater pressure and as work demands increase, the benefits of having the choice to select from a range of legal service providers, that have both the advantage of thinking as businesses do, and take into account the wider business demands within which the legal function operates, will become increasingly apparent.

Despite the cultural barriers, progress is being made. There is a new wave of providers that are focused on building services that are genuinely client-centric. The idea that all law firms are pretty much the same no longer holds true and ALSPs are now an increasingly prominent feature of the legal services landscape.

While in-house lawyers may not yet be taking full advantage of what is on offer, mindsets are changing and evolution of the market is only going to accelerate from here as a value-based approach to legal services takes a firm hold.

Dana Denis-Smith, founder and CEO of Obelisk Support which recently published a report:  Liberalisation: Reflections on the future of legal service delivery.

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