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For the first time in England, it will soon be open to non-lawyers to invest in law firms. In the autumn of 2006, I took part in a revealing seminar that squarely addressed this possibility.

The focal point of the event was the inclusion in the Legal Services Bill (now Act) of “alternative business structures”, the device that would enable this outside investment. It is a move that is being mirrored in several other jurisdictions and is anticipated for many more.

During the 18 months prior to the seminar, law firms’ responses to this development had been mixed. Some had seen it as an irrelevance, doubting on a variety of grounds that anyone other than lawyers would want to invest in law firms. Others regarded it as yet another indicator of a decline from the professionalism of a partnership into the amoral carnage of the limited company.

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Still others were rubbing their hands in glee at the thought of being bought out, serving a couple of transitional years under the new management and then retiring comfortably.

I listened with growing interest to the debate that afternoon. It was a rare experience to hear legal services being discussed as though they were subject to the normal laws of the marketplace and not some kind of special case, sacred cow, or no-go zone.

I discovered that the value of the market for consumer-based legal services in England was thought to be over £10 billion. I learned of market research that reported 60 per cent of citizens would prefer to obtain legal services from common high street brands (supermarkets and banks, for example) than from solicitors in private practice. It was concluded that at least £6 billion worth of consumer-based legal services were up for grabs.

Only a very few of the delegates were lawyers. Most were representatives of these high street behemoths whose remit now seems to know no boundaries. These individuals were not committed to the ways of the past. They were talking about call centres, outsourcing to India, online legal services, the automatic generation of documents, and more.

I thought then, with complete conviction, that the delivery of legal services will be a very different business when financed and managed by non-lawyers.

I wondered what the legal world would be like if dominated or even strongly influenced by the retail industry, by the management methods and ethos of corporate boards, with the backing of venture capital, private equity and other forms of external financing? Would this herald a welcome liberalisation and demystification of the legal market or a lamentable collapse of its professional underpinnings?

I thought how improbable (and have since had this confirmed by specialists in the worlds of venture capital and private equity) that investors would choose to put cash into the traditional business model of most law firms – hourly billing, expensive premises, pyramidic organisational structures, and the rest.

If it were possible to start afresh and build legal businesses from the ground up, surely the hard-nosed investors would not replicate traditional legal service. They might buy a firm for its brand name but would no doubt bring to bear a more contemporary suite of tools and techniques for managing the delivery of legal services.

The new wave of investors and managers will surely find that individual law firms are over-resourced; and, further, that the legal profession itself is over-resourced. They will quickly recognise that, within and beyond law firms, there is enormous duplication of effort and reinvention of the wheel; and, in turn, that there are too many lawyers and too few smart systems.

And I reflected further that there would be no reason to suppose that investors would restrict themselves to legal services for consumers. It is wrong-headed to think, as so many lawyers do, that the greatest impact would be felt amongst those who undertake high volume, low margin work.

Before long, the entire legal marketplace will be under scrutiny, so that commercial law firms will also be challenged rather than purchased.

I know that clients of such firms are increasingly dissatisfied with the level of fees that they pay, that they are under pressure themselves to reduce their legal spend and that they are pushing for much greater efficiency. Their attention is focused not only on the discrete high volume work. They are also looking at decomposing high value, big ticket deals and disputes and identifying what parts of these legal matters can be carried out more efficiently.

And with $40 billion currently being spent each year on the top 100 US law firms alone, there is likely to be some scope for a saving or two.

The major firms may feel they are beyond the scope of commoditisation and systematisation and that, on bet-the-ranch deals and disputes the legal fees represent but pocket change in the grand scheme. But this is not the attitude I find amongst the general counsel of some of the world’s largest organisations.

These managers are under pressure to reduce their legal budget. And these clients’ loyalty to conventional firms will be limited if new legal businesses emerge that offer quicker, more convenient, lower cost alternatives to low- and high-value work that seem to be more geared to the interests of clients and are more business-like in their constitution.

Richard Susskind is Emeritus Professor of Law at Gresham College, IT adviser to the Lord Chief Justice and consultant to leading law firms. He was awarded an OBE in 2000. This is an extract from his forthcoming book, The End of Lawyers? Rethinking the Nature of Legal Services. For more information click here

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