Law Firms, Ethics, and Equity Capital: A Conversation

The correspondence collected here represents an effort to start a conversation. Pending legislation in the United Kingdom, based on what is known as the Clementi Report, would permit non-lawyer equity investment in law firms, subject to regulatory oversight. In other words, UK law firms could become publicly-traded businesses. This legislation has been proposed as part of reforms heralded as improving the delivery of legal services to consumers. By contrast, such investment in law firms is forbidden by ethical rules in the United States. What will happen when the two countries with the most dominant global law firms begin to move along such different paths? Australia already allows such investment, but the prospect of major UK firms raising capital in the equity markets has the potential to produce seismic shifts in the global market for legal services. It also could have far-reaching implications for the legal profession that we can only dimly anticipate. Until now, there has been remarkably little discussion -- especially in the United States -- about the possible effects of the UK legislation. This paper attempts to redress that situation. It consists of an exchange among Bruce MacEwen, an expert on law firm economics and editor of the on-line publication Adam Smith, Esq.; Mitt Regan, a Professor at Georgetown University Law Center, an expert on the legal profession; and Larry Ribstein, a Professor at the University of Illinois College of Law, an expert on partnership law