Exposing the Regulatory Reform Agenda of Large Law Firms

John Flood, The Re-Landscaping of the Legal Profession: Large Law Firms and Professional Re-Regulation,  59 Current Sociology 2011, available at SSRN.

Lawyers and legal academics, especially in the US, have been very interested in the radical changes taking place to the regulation of the legal profession in England and Wales. These reforms will allow alternative “business structures” for law firms and put in place an independent “super-regulator” overseeing the legal profession. Similar reforms have already been instituted in Australia, generating their own share of interest. Much of the debate has focused on the possibilities of law firms incorporating and publicly listing their shares.  The most strident proponents of the new regulation welcome it as important economic innovation, while critics herald these developments as the collapse of the profession as we know it.

John Flood’s paper, “The Re-Landscaping of the Legal Profession: Large Law Firms and Professional Re-Regulation”, forthcoming in Current Sociology and currently available on SSRN, provides a though-provoking analysis of how large law firms “are undermining, modifying, escaping and ultimately reconstructing professional regulation regimes.”  Flood’s paper was part of an excellent panel at the International Legal Ethics Conference in Stanford in July 2010, which included papers by Judith Maute and Andy Boon that also provided nuanced and sociologically insightful perspectives on the reforms overcoming the English legal profession.

Flood shows how the self-regulatory “bargain” or “monopoly privileges” that legal professional associations negotiated with the state – and which were the subject of much of the traditional sociological scholarship on the legal profession – are being fundamentally changed not only by the regulatory intervention of the state but by large law firms (now reconfigured as “global professional service firms”: GPSFs) themselves. Flood’s key insight is that up until now “the actors engaged in regulatory debates [about regulation of the legal profession] have been professional associations and government officials; and that the logic of ‘professional governance’ is based on trusteeship and ethics over economic gain, yet we are beginning to see an emergence of the GPSF as an institutional player in its own right [at both domestic and global levels].”

Flood describes how the individual and collective lobbying power of a group of large, global law firms based in the City of London has led not only to a more lenient approach to conflicts of interest (and information barriers) but also to the development of “Authorised Internal Regulation” (AIR). AIR is a type of recognition of the capacity of trusted — read “commercially powerful”? — law firms to self-regulate themselves at the firm level, even as the profession is losing regulatory legitimacy and self-regulatory privileges at the level of the professional associations. He also shows how these same firms are intimately involved, again at the firm, or managing partner, level, with British government efforts to break down regulatory barriers to market entry for the legal profession in countries like Brazil and India, and other impediments to  globalised law practice through GATS.

We see the same pattern echoed (indeed prefigured to some extent) in Australia where the eight largest law firms now have official representation as a group on the Law Council of Australia (previously the umbrella organisation for professional associations) and have been extremely influential in introducing a range of reforms to regulation of the legal profession including allowing full incorporation and listing of law firms and the current National Legal Profession Reform Project (aimed at simplifying and reducing regulatory burdens for national firms).

Flood concludes that “[i]n this respect, large law firms have won not so much a turf battle but a class war within the profession.” He goes on to say that “[l]arge law firms have, by making the organization [i.e. the law firm] the salient unit, shifted away from traditional logics based around notions of public interest and asymmetrical relationships [between lawyers and clients] and replaced them with the logic of the market. They have created a new professional ethos.” (references omitted)

This analysis opens up an important new area of research as to the role of large law firms as institutional actors in relation to the legal profession and its regulation, what “ethos” they are (re-)creating for the profession, whether this ethos is being transmitted to smaller firms by some mechanism, or whether their ascendance is a sign of a disintegrating profession.