Category Archives: Business Law

The Law Society on the Future of Legal Services

Future

The Law Society recently published a report in which it detailed its vision for the future of the legal services industry. In its Future of Legal Services report, the Society details how it believes the sector is going to evolve in the years leading to 2020.

Some of the changes that the Society expects to take place will represent a significant shift in the way that legal services operate, most particularly in where work is carried out and by whom. In light of reductions in the number of private clients who can afford professional legal support as a result of cuts to legal aid, the Law Society expects fewer solicitors to work in the consumer sector. By contrast, the number of solicitors working with business is expected to grow as a result of “unbundling” of work by clients. Another significant shift involving business law that the Society expects to take place over the next few years is significant growth in the in-house sector.

Changes to competition within the legal services sector are also expected to be significant. More and more businesses from other sectors may begin competing with dedicated law firms in the provision of legal services through Alternative Business Structure (ABS) licenses. The growth of the in-house legal sector may encourage more businesses to make use of the assets and expertise that comprise their in-house legal teams to begin offering external services in this way. It is expected that some of the most serious ABS competition, in both domestic and international markets, could come from “Big Four” accountancies.

Some lawyers may cease operating as solicitors in order to take advantage of the recent changes to competition rules. Instead, many will give up the official title of solicitor, the Society expects, to instead start operating as non-lawyer providers of legal services and compete with traditional law firms.

Another change that the Society predicts will take place over the next five years is an increase in the average age of solicitors. This will have knock-on effects, including difficulties for small and medium-sized firms when it comes to covering runoff.

Many firms are also expected to shrink the number of mid-ranking employees in favour of those at the top and bottom of the ladder. Employment numbers in certain positions and at some levels are also likely to be impacted by the continued growth of technology. This could mean fewer solicitors are employed by many firms, as a combination of automated systems and paralegals will be better able to handle much of the work that currently falls into solicitors’ hands.

Supreme Court Makes Major Decision on Director Responsibility

The Supreme Court has handed down a potentially landmark decision in the case of Jetivia SA and another v Bilta (UK) Limited (in liquidation) and others [2015]. The ruling could have major implications in future cases where the directors of companies in liquidation face charges of fraud.

The defence mounted in this case, which the court unanimously rejected, would have seen two directors of an insolvent company rely on their own wrongdoing to escape responsibility and avoid paying damages. In order to do so, they cited the precedent set by a previous, very unpopular decision from the case of Stone & Rolls Limited v Moore Stephens.

In the case recently ruled upon by the Supreme Court, the two directors of defunct company Bilta were being sued for damages on behalf of that company by its liquidators. Acting in conjunction with others, whose responsibility is also established by the ruling, they are accused of neglecting their duties to the company as directors and deliberately engaging in fraudulent transactions through Bilta for personal gain, most of which involved the European Emissions Trading Scheme Allowances. Upon Bilta being forced to close down in 2009, the liquidators attempted to claim damages on Bilta’s behalf from the two former directors. Any compensation payments gained through the case would be used to help pay back those who were owed money by the company when it was forced to go into liquidation.

The two defendants and their accomplices attempted to mount an illegality defence. They claimed that because they had used the company to carry out their fraudulent transactions, Bilta was unable to make any claim against them. Because of their actions, they claimed, it was a criminal company and a tax fraud vehicle, and therefore had no right to damages. Had this defence been accepted, it would have meant that the very fact they were guilty of fraud meant that they could not be sued for their offences.

However, the Supreme Court rejected this defence unanimously, and this could prove an important decision for similar cases in the future. Where the unpopular ruling in the Stone & Rolls Limited v Moore Stephens case opened up the possibility of mounting such an illegality defence in similar cases, the more recent ruling may have closed this potential loophole.

The defence also claimed that section 213 of the Insolvency Act, under which the action against them was brought, did not apply extraterritorially and so was not valid for use in this case. The Supreme Court also ruled against this claim, and therefore established that Section 213 of this act can be used extraterritorially in future cases.

Solicitors to Feature on Comparison Websites

Comparison

Information on solicitors is to be passed to comparison websites in response to calls for more information on practitioners of law to be made accessible. The Solicitors Regulation Authority has agreed that, by the end of this year, it will begin sharing data it holds with third party comparison sites.

The calls that prompted this move came from the Legal Services Consumer Panel. They felt that online registers should have a greater amount of useful information on solicitors made available to them. The Panel was first set up after the implementation of the Legal Services Act, and has considered the publication of this kind of data to be a key aim from the beginning.

In a letter sent to the Legal Services Consumer Panel in response to this, executive director of the SRA Crispin Passmore detailed steps that will be taken to improve in this area. Passmore said that, by Christmas, a “data extract” will be in place. This will most likely include details of any disciplinary action that a given firm may have faced in the past. It is also expected to include information on the size of the firm. This initial move will be followed by the development of a complete online register, expected to be completed before the end of 2015. The complete register will be able to feed data directly to comparison sites.

Other information which the Legal Services Consumer Panel suggests may later be made available include pricing information and feedback from previous clients.

The SRA are not alone in agreeing to share data towards this end. The Intellectual Property Regulation Board (IPReg) and the Council for Licensed Conveyers have also agreed to make information they hold available in a form that can be used for this purpose.

The Legal Services Consumer Panel has singled out eight comparison sites which, based on self-assessment, it feels meet the required standards. It stresses that this does not form an endorsement of those sites specifically.

According to Elizabeth Davies, who chairs the Panel; “Not every regulator is fully on board yet, but this progress is really positive and there’s scope to build on it in the future…

“The quest for open data has been at the heart of the panel’s policies since 2011. Transparency is absolutely essential for consumers if they’re going to be able to make informed choices, protect themselves from harm and have confidence in the regulators.”

Research Highlights Stress Problem in Legal Profession

Recent research from Lawyer 2B has identified huge amounts of stress among legal professionals factors behind the problem include long hours, poor managerial support, and difficulty creating an effective work-life balance.

In recent times, legal firms have made efforts to improve the experience of staff when it comes to stress. Programmes have been introduced by many firms to help maintain the mental health of employees. Hagan Lovells pledged to carry out a review of its policies around the management of employee stress after an IP partner committed suicide. This resulted in the firm’s counselling service being moved on-site. Clifford Chance are another example, having announced a firm-wide rollout of its trainee anti-stress programme in April. Despite such moves, however, the research suggests that stress continues to be a major issue for professionals in the industry, particularly young lawyers.

The survey was carried out in April and looked at a number of factors to get a picture of the state of the industry. Among the areas examined were a number of key stress-inducing factors, working hours, perceived employer commitment to providing a work-life balance to employees, and the stress-busting initiatives that firms put into place.

One interesting and, for some, unexpected finding of the survey was that stress is not necessarily linked to long hours. However, many respondents found that high volumes of work were a key factor at causing stress, and long hours were certainly prevalent within the industry. 36% of respondents reported a typical working week of 46-55 hours and 20% said they worked between 56 and 65 hours. A further 11%, mostly working in a corporate, finance or litigation practice, reported working 66 hours or more in a week, and 2% exceeded 75 hours.  The longest hours are worked by Magic Circle lawyers across all seniority levels.

Nonetheless, support from the firm for which they work was a far more central factor than working hours. The worst-performing firms in this regard were generally those from the US. Of those lawyers working for a US firm in London that responded to the survey, 70% felt that their management did not make any real effort to encourage a work-life balance.

Given the various recent moves by major city firms to combat stress, the discovery may come as a disappointment to some. The problem could potentially be one of awareness. According to the findings of the survey, a mere 17% of lawyers are aware of their firms’ stress management initiatives.

Field Fisher Waterhouse Reports 7% Revenue Boost

Field Fisher Waterhouse (FFW), one of the UK’s largest international law firms, has reported that they have come in ahead of budget in their half year global revenue. The figure of £49.9 million exceeds expectations, and puts their revenue 7% higher than at this time last year. Their turnover for the equivalent part of 2012 was £46.8 million.

The City Office of the firm was a strong performer, achieving better results than it has seen in five years. Other major contributors to this success were the offices in Paris and Brussels, which both also achieved excellent figures.

The announcement of the figures took place at FFW’s annual partner conference. This was held outside the UK for the first time in order to demonstrate the firm’s impressive European expansion. The conference too place in Lille, France.

Michael Chissick, who has held the role of managing partner of FFW since February, was pleased with the figures. He attributed the firm’s strong performance to the fact that many practice areas within the firm saw high-billing periods. These include the corporate law section of the firm, as well as financial services and dispute resolution. By contrast, FFW’s real estate practice experienced a slow start to the financial year, but this was more than compensated for by the strong performance in other areas.

Of the recent promising figures, Chissick said: “We don’t want to count our chickens until they come home to roost, but partners are feeling confident and I’m pleased with our direction.” He also pointed out that the firm has a history of performing slightly better in the second six month period of a year than in the first.

Chissick went on to describe the figures, and the conference at which they were announced, as an example of the firm turning the corner. Several difficulties are still firmly in FFW’s recent memory. Not least among these is the fact that in May 2013, three franchising partners flew away from FFW to join Bird & Bird. FFW is also aware that it did not escape unscathed from the recent recession, and the last financial year the firm saw an overall drop in turnover of £2.5 million. 2012/2013 ended with a total figure of £95 million, compared to £97.5 million the year before. Set against this backdrop, the recent figures will surely come as a reassuring sign for the firm, its partners, and others with an interest in FFW.

FFW is also due to downsize its physical offices in the near future. This is expected to significantly reduce the business’ running costs, which also leads many to look positively towards the firm’s future.

EU Legislation for British Firms Increasing

Legislation

Campaign group Business for Britain have released figures which, for some, have raised concerns about the rate of increase in EU legislation. According to the newly published data, the number of new business regulations sanctioned at EU level in the past three years is just short of 3,600.

Small and medium sized enterprises (SMEs) in particular have expressed concern about their growth being hindered by large amounts of legislation that just does not seem necessary. This fact seems particularly pertinent in light of David Cameron’s stance on the role of small businesses in the British business environment. The Prime Minister has describe SMEs as holding a central role in the country’s economy, and has openly expressed a desire to make expansion easier for new startups.

These new regulations, introduced in the period since May 2010, equate to a combined total of 13 million extra words added to the legal bureaucracy surrounding British business. Reading the legislation from start to finish would take companies an estimated 92 working days.

Business for Britain’s Chief Executive, Matthew Elliot, said that the issue needs to be addressed urgently. He described the EU as having “an addiction to red tape.”

Elliot went on to say that the fact regulation is needed for a single market to function properly is undeniable. However, he said that the amount of new legislation being sanctioned, and the rate at which new rules are added, “is a serious restraint to British Business.”

Jo Swinson, Business Minister, recently made an announcement detailing a number of proposed reforms to the legal environment surrounding UK businesses. These changes, it is claimed could positively impact upon the situation of an estimated 3.2 million companies across the UK.

She said that the main purpose of these reforms is to get rid of unnecessary obstacles within the administrative process. This is intended to allow SMEs to spend less time and effort on paperwork, and instead focus on expanding their operations and creating innovative new ideas. Ms Swinson suggested that this would contribute to the development of a stronger British economy.

A panel of leading businesses – commissioned by the government and including major firms such as Marks & Spencer – has also recently revealed findings in the area of unnecessary EU business regulation. The panel identified 30 specific EU-sanctioned regulations which they believe should be discarded, in order to create an easier environment for British businesses.

Europe and Employment Law

The current debate over an upcoming referendum on UK membership of the EU has raised some serious questions. Many people remain apathetic to the situation – citing the ‘it will all be the same anyway’ excuse – but the truth is that European law has exerted a lot of power and influence over how we live our lives, and in particular, how we can go about our daily working life.

The EU’s influence over employment law in the UK is colossal, and there have been many changes that have come about thanks to this power. The following are just a few that would affect us all as employees:

  • Pregnancy/maternity/paternity leave rights
  • Minimum paid annual leave
  • Agreed working hours
  • Equal pay

Taking just those few we can see that changes – including the maximum 48 hour week, with exceptions, and the minimum annual leave of 28 days could have a major effect on smaller companies.

More Changes from Europe

The EU has also had a hand in devising and implementing discrimination laws, parental leave changes, the rights of agency workers and part time employees and so on, and to publish a full list would mean dedicating many pages. Some of these changes have been very much in the favour of the employee, but where smaller, newer employers are concerned – start up businesses and so on – there are serious concerns that they could be harmful in the long run.

Even if the UK votes against membership of the EU – if and when the promised referendum arrives – changing laws that have been implemented under EU law will be difficult. Nevertheless, it remains a fact that while we remain under EU membership, we are party to many amendments to the laws regarding employment, and some of them may not be to our satisfaction.