Alternative Service Providers

The legal industry is changing rapidly, in particular in the way legal services are provided to the public.

Since the introduction of Alternative Business Structures (“ABS”) in England & Wales in 2011, a number of other jurisdictions have since been actively considering how this innovation will impact them. In September 2015, the Law Society of Upper Canada published a report on this issue and noted that it was considering whether it is in the public interest to liberalise its rules regarding business structures through which lawyers and paralegals may provide legal services. This includes permitting small scale ABS (ie, only minority ownership of law firms by non-lawyers).

In Singapore, the Ministry of Law established the Legal Services Regulatory Authority in November 2015 in order to streamline licensing matters relating to law practices in Singapore under a single authority. The new regulatory regime also introduces flexibility for law practices to apply for non-lawyers to become partners, directors or shareholders of their firms, subject to specific requirements and limits.

In February 2016, the American Bar Association passed a resolution acknowledging the new developments in the legal marketplace and setting out 10 regulatory principles (such as protection of the public, transparency of services and delivery of affordable and accessible legal services) to guide each state’s highest court as it assesses existing regulatory frameworks and any other regulations related to non-traditional legal service providers. The resolution has been viewed by those skeptical of ABS as encouraging non-lawyers and companies not guided by principles of the legal profession to deliver legal services.

The Law Society is closely monitoring developments in this area, taking into account the interaction of Hong Kong’s legal service industry with that in other jurisdictions.

Alternative Service Providers

Apart from the ownership and investment structure of law firms, the way legal services are delivered is also evolving rapidly in response to the changing needs of the market.

The advent of technology is a major factor causing fundamental changes to the manner in which legal services are delivered. As technology keeps advancing our way of life, some entrenched processes in legal practice also find themselves faced with the rise of other options that claim to be equally or more efficient but at a much lower cost, for instance, the development of software solutions to automate proof-reading tasks including processes like checking for defined terms, clause cross reference, spelling and other drafting errors to ensure consistency and accuracy.

Recently, we see the rise of alternative service providers in the market. Some use technology as a promotional tool offering services on review of legal documents by their software applications. Some adopt the approach of a management consultancy claiming to help corporations with their complex legal problems from a business perspective including whether to insource or outsource legal work. Some operate like a multi-disciplinary practice (“MDP”) offering all kinds of professional advice, including legal advice in a non-law firm setup.

These alternative service providers are prevalent around different parts of the world. The way they operate may vary slightly depending on where they are situated, but it appears what some of them are doing in essence is functionally indistinguishable from what law firms do. Further, many of them describe themselves as legally qualified thereby offering the comfort implicitly that they have the capability of a lawyer to provide legal services. However, since they are not law firms, they fall outside the regulatory regime governing legal practices and are not subject to any professional ethical rules.

One of the core values of the legal profession is the obligation of confidentiality of clients. Traditional law firms put in significant resources to ensure that there is strict compliance by their practices. The alternative service providers typically rely heavily on online communication, eg, an intranet portal, among the team and with the clients as well as online storage and retrieval of documents. The disclosure of and access to client information is not regulated by any ethical rules.

Another area of concern is the conflict of interest. Traditional law firms normally implement elaborate conflict checking systems to ensure that they are not in breach of any conflict rules. Again, the alternative service providers are not subject to these professional ethical standards. Nor are they subject to mandatory professional indemnity cover, unlike law firms. The Law Society is keeping a close watch on these alternative service providers and seeking views from the Administration as to how best to bring them into the regulatory regime for the protection of the interest of the public.

The world is changing constantly and with the development of technology, it is moving at a pace faster than we have ever seen before. In the coming years, it is certain that the increase in computing power and new devices will bring in even more advanced lawyering tools on, for instance, document automation, decisions engines, e-discovery tools, communication and collaboration tools, legal research tools, and legal expert systems. It will facilitate a further resource reorganisation and filter out more mechanical tasks.

Nevertheless, technology and unregulated consultancy can never replace the lawyering tasks at the other end of the spectrum – creativity, compassion, empathy, invention, eloquence, argument, advocacy, negotiation, judgment and conviction to work in clients’ best interests in a rigorously professionally regulated environment.

Jurisdictions: 

President, The Coucil of The Law Society of Hong Kong