“No appetite for Tesco Law”

Most lawyers are happy to remain self-regulating, say the
Group of Experts, with doubts over the prospect for outside
investment in firms.

El Grupo de Expertos
de Iberian Lawyer
afirma que la
mayoría de abogados
autorregularse. Los
abogados que
respondieron al
cuestionario del
Grupo de Expertos
de Iberian Lawyer
sugieren que los
cambios recientes en
el Reino Unido y
derivados de las
Reformas Clementi,
donde la Law Society
ha transferido sus
regulatorias a un
ente externo y la
posibilidad de que
empresas – como los
TESCO- puedan ser
propietarias de
despachos de
abogados, es algo
impensable por
ahora en España.

Sin embargo, y a
pesar de presentar
cierta preocupación
en relación con la
eficacia de las
organizaciones y los
cuerpos reguladores
existentes, una
reforma profunda no
parece formar parte
del orden del día.

Despite concerns regarding the effectiveness of the current organisation and
regulation of the legal profession in Spain and Portugal, wholesale reform
is not currently on the agenda. Morever, respondents to the latest survey
of Iberian
Lawyers’ Group of Experts suggest that the recent changes in the UK following
the Clementi Reforms, where the Law Society has passed over its regulatory
role and businesses – including the supermarket Tesco – will be able to own
law firms, are highly unlikely. The listing of a law firm on the Stock Exchange,
as recently seen in Australia, it seems, will not be happening soon.

This does not mean, however, that Iberia’s lawyers are unanimous in their support
of the status-quo. “Clients have been trying to tell us for a long time – that
there are many rotten apples in our yard,” says Pedro Cardigo at ABBC in Lisbon. “If
the Portuguese Bar does not address these issues quickly and efficiently the
remedies proposed by Clementi – the lack of
transparency that led to a perception that there was a clear conflict between
the Bar’s
promotional, regulatory and disciplinary responsibilities – consumer protection
oriented rules from Brussels will impose similar measures in Portugal.”

In Spain Charles Coward, originally a US-trained attorney, also thinks that
such changes should be adopted or at least considered, although he is unsure
whether there is the
necessary consensus for reform. “I think there is merit to the proposition
that the regulatory body that has the responsibility for representation of
interest should be separated
from the body that has responsibility for disciplinary regulation of activities
of lawyers. The
independence of this second body should be clearly established and protected
in order to guarantee that it functions effectively. This would be consistent
with the approach that has been followed in other countries as well as in connection
with other regulated activities.”

Do you believe that the current reforms in the UK legal profession will be
followed in Spain and Portugal?

“There has already been a step towards this in Spain (for example ending the
Law Society Ethics Tribunals – Tribunales de Honor). However I understand that
in some areas, eg the setting of ethical standards for lawyers, they will stay
under the control of the Bar Associations.” Francisco Prol, Prol & Asociados

“The present challenge is to find a structure
to accommodate lawyers’ careers and keep
them motivated when the market is not
growing – which seems to be the general
outlook at the moment. This is the most
pressing challenge currently and the
possibility of multidisciplinary practices is
not really even on the agenda for
discussion.” Fernando Ferreira Pinto, Sérvulo

“There are more advantages to
the current system than others
could potentially provide. Additionally, this kind of change
would be very difficult to
implement in Portugal where
traditionally we are not in favour
of de-regulation.”
Gonçalo da Cunha, FCB-Legal

“I think Spanish law
firms are still far away
from being affected by this
type of change. My
impression is that we all
take the weight of our
professional responsibility
very seriously.” Anonymous

“Yes. Greater transparency,
perceived fairness and
independence would be
achieved if the body which
regulates is not also the one
which considers and applies
disciplinary sanctions. At
the very least this would assist in improving
the public´s perception of the legal profession.” Jorge Santiago Neves, Barrocas
Sarmento Neves

“It is important that the regulation of lawyers within the judicial
system is kept independent from the State to keep the balance of
justice. Portuguese Lawyers would always look at it as a
disadvantage and prone to political interference sooner or later. So
far history has failed to show a better way to do so but has excelled
in presenting far worse solutions.” Nuno Brito Lopes, PLMJ

“The regulation and application by
Bars of ethical and professional
standards in Spain’s larger law firms to
law firms in Spain is to say the least
outdated.” Anonymous

What do you see as the risks or opportunities of outside investment in law firms?

“I see a number of risks (in particular as far as the
independence of legal practitioners is concerned)
and no particular advantage.”
Ricardo Oliveira, PLMJ

Francisco Guijarro
“To accept investment from
outside will be a risky decision
that will dramatically affect the
way in which the legal
profession performs, although
certain capital investments could
in some cases accelerate the
expansion of some Iberian firms.”
Francisco Guijarro, Hammonds

“Provided that independence, professional secrecy
and conflicts of interests are safeguarded – which is
not an easy proposition (but not too different from
the challenge multidisciplinary practices have faced
and overcome eg in Spain and in Germany) – I think
that the advantages will be larger than the risks.”
Pedro Cardigos, ABBC

“Having equity investors that are not legal
professionals working in the firm but who are able to
exercise the pressures of an equity owner will
inevitably lead to conflicts and a lack of
independence.” Charles Coward, Uría Menéndez

Manuel Castelo Branco“Spain will be the first to experience partnerships between lawyers and investors
and Portugal will follow some years later. Provided that the control of lawyers’ activities
remain with lawyers and that appropriate regulatory rules and survey are put
in place, I don't see
any risks.” Manuel Castelo Branco, Gonçalves Pereira Castelo Branco

Other respondents hold even stronger views. “The role
of the Law Society in England regarding the activity of
large law firms and that of the Spanish Bars is in no way
comparable,” suggests one Spanish lawyer. “Prior to
talking about the latest developments in the UK (some of
them already contained in the Ley de Sociedades
Profesionales) it may be useful to compare rules on
conflicts of interest, confidentiality, client privilege, chinese
walls, money laundering, liability insurance, etc. as well as
the actual authority and activity of the Spanish Bar over
large partnerships.”

The majority opinion in Spain, however, like Portugal, is
that change may be a long time coming. “I don’t think it
will happen in Portugal,” says José Miguel Júdice, a
founding partner at PLMJ. “I was the President of the
Portuguese Bar Association that made the most effort to
modernise the profession and I was against that evolution. Anyway the Portuguese
Bar is now in a much more
conservative mood than during my mandate.”

In fact many respondents suggest that
Portugal is
further away than Spain from adopting change. Until 1979
the establishment of law firms was not permitted with
lawyers required to conduct their business entirely
independently. Given that these changes are relatively
recent further significant structural changes are unlikely to
come any time soon, says Fernando Ferreira Pinto at

“Recent exploratory attempts to create multidisciplinary
firms – with accountants, lawyers and
economists – in Portugal have not been accepted by our
Bar Association and thus we are sure that the idea of
allowing non-lawyers to become partners would face
powerful resistance from our governing body,” he says.

“Disciplinary matters
relating to lawyers are already entrusted to a special body (the Conselho Superior)
is independent from the President and the Governing Body
of the Bar,” says Manuel Castelo Branco, “and currently
even shows some signs of disagreement on some aspects of
the governance of lawyers’ interests.”

Gonçalo da Cunha at FCB-Legal agrees but, like some
other, sees some disadvantages to the current system. “The
Bar is often a corporative institution adverse to social
changes and has difficulty in the representation of the
diverse interests of lawyers and law firms.”

The latest Group of Experts survey also asked the extent
to which Iberian law firms would be seeking outside
funding – now possible in Spain up to 25% following
recent changes in the Ley de Sociedades Profesionales.

Javier Fernández-Samaniego at Bird & Bird sees two
possibilities where the ownership of law firms may change
in the future: either where business professionals gain a
share in equity profits (eg a law firm head of finance or
marketing) or in the very limited cases where outside
investment is required by a law firm. This might be
possible, he says, for volume work (eg mass residential
conveyancing or debt) requiring investment in IT systems,
where a firm is seeking rapid acquisition or where the
partners want to realise the value of their business. “Why
should an advertising agency or a tax consultancy be able
to realise a capital gain for their owners but lawyers are not
allowed to,” he asks.

Most believe, however, that there may be little apetite
from investors to take a minority share in a law firm where
they may have little control over the firm as a whole and,
ultimately, their investment.