Category Archives: France

France, Stories

Kami Haeri, Partner, August Debouzy

If you gather five interns in your office, you will see immediately which ones have been encouraged and loved. You will see immediately which ones had a father or a mother or an uncle who said to them “you know what — you’re 13 years old — you should read this, you should read that. And you can do it.”

Kami Haeri is one of four authors of “L’Avenir de la profession d’avocat” (The Future of the Legal Profession), a report submitted to the French Minister of Justice in February, 2017.

The structure and the representation of our profession raise governance issues. We have three governing bodies, the CNB (Conférence National des Barreaux), the Conférence des Batonniers and the Barreau de Paris. The Paris bar is by far the largest of the French bars, and also by far the richest. In our highly centralized county, the Paris bar has the most direct exposure to the French public authorities. The CNB is the general assembly representing the overall community of French lawyers and is meant to represent all of them, nationwide, via its 82 members. The Conférence des Batonniers represents all of the bars in France, except Paris: that’s 160 (again, excluding Paris) super diverse bars. When there are new ideas to develop and new issues to debate, the fact that we have these three bodies to be consulted raises a huge structural problem of representation. I state this not as a reproach, but as something I regret.

We see this problem manifested in our professional bar schools, for example. The vast majority of the students who are admitted to an Ecole d’avocat know that they will just have to suffer through an 18-month program that does not convey the energy and practical education that they expect in anticipation of their future job. All they do is hold their breath and wait for it to finish. Why aren’t we, as a profession, able to create an attractive forum for education?

The answer is that we don’t always have the information and governance that we need for the profession to move forward: to conduct a qualitative or quantitative approach or analysis of us as a profession, to understand who we are and where we are going, who joins us, and why. In this context, I think it makes sense that the Minister might have asked someone outside of the representative bodies to do the work that we (the Haeri Commission) did.

I met the Minister of Justice for the first time in July, 2016, when I attended a dinner that he organized (something he does from time to time). I did not know him and I don’t know for sure why he invited me to that particular dinner, but it might have been linked to the work I did in 2013 on the quality of new lawyers and access to the profession. (In that report, I deplored that it is our universities and not us, lawyers, who decide who joins our profession).

I’m not a big fan of small talk, and certainly I wasn’t going to waste my time with the Minister of Justice on small talk. So I immediately spoke with him about the image of our profession that new lawyers have, and that we as lawyers have of ourselves. I spoke about how we are blinded by the legend of our profession, and how the storytelling around us keeps us from thinking about our profession with more creativity and curiosity.

I teach in a variety of contexts and for that reason I have spent a lot of time with law students. With that experience, I could speak with confidence to the Minister about how worried today’s law students and new lawyers are. We spoke for two hours — it was an amazing moment. The Minister expressed a genuine interest in our discussion.

To be honest, I don’t think I know or understand these matters any better or worse than anyone else does. I do feel that technology is changing our market, as is globalization – we have not integrated the changes of the outside world into our profession, or into our thinking. And young lawyers are right to be worried, and they are right to demand that we address this.

So, he asked me, what are your ideas? I responded that we need to re-think our approach to legal education. We need to be more focused on how we, as a community, can be more structured and innovative and how we can better train young lawyers. (I also believe that we need to re-think our institutions, but that was not the focus of my conversation with the Minister and it is not the focus of the Report. In the Report, we seek to make what we hope are useful suggestions. If our institutions agree, then they will use them and if not, they won’t). It was a very cordial and very pleasant dinner.

A week or two later, I received a call from the Minister’s office asking me if I would be interested in going further — in doing research and preparing a report. Of course I responded that I would be honored. So I was invited to the Minister’s offices, where I met with Professor Pierre Berlioz, who is a law professor and also the person responsible in the Ministry of Justice for France’s variety of legal professions. We agreed upon format and methodology. We agreed that the approach needed to be balanced and that it was important to include all kinds of lawyers in the work (Paris/province, solo practice/larger firm, litigation/transactional, men/women). I was honored to gather a team composed of Sophie Challan-Belval (a sole practitioner in Rouen), Eleonore Hannezo (an associate at Linklaters, Paris) and Bernard Lamon (the founder of an IT dedicated boutique in Rennes). It was important to keep the number of people on the Commission small as a large one would be too difficult to manage, and certainly impossible to manage quickly. And, given the upcoming elections, we agreed that the work needed to be done very quickly. We ended up doing the work in just over three months.

Regarding our methodology: Of course it was important that we speak with elected representatives of the bar institutions and as well as with representatives of the lawyer unions, and we did speak with them. However, we felt it was equally important that we speak with people who are not representatives of either — who are not elected and do not have a public duty of any kind — and that we spoke with them first. Also, we felt that it was important that the four of us on the Commission work together as much as possible, and that the result be a mutual product of the four of us. We didn’t want to split up the work as “this is Eléonore’s part, this is Bernard’s part, this is Sophie’s part,…” with the result being a mere agglomeration.

Officially we spoke with 130 persons but unofficially we spoke with about 160. The reason that not all of their names appear at the end of the report is partly by mistake but mostly because some did not want their names to appear. They wanted to be able to speak freely about their institutions. Further, you’ll note that we did not quote anyone in our Report.

We did a small experiment with the online collection of opinions. While we did receive interesting input in that manner, we quickly decided not to place any emphasis on it as a method for collecting input. This is because, we discovered, if we conducted an online information gathering process, we would also have to hold an online debate regarding our work, and we did not want to do that. Instead, we wanted to be able to completely focus on our analysis and deliver a finished work. In our opinion, if you launch a live debate, you cannot work on the report at the same time. It was either-or. This was especially the case since we had so little time.

The first steps — the first weeks — of our work were devoted to learning as much as we could about society at large, about how clients and people in general live, work, consume. What do they need today? What is their relationship to institutions? To mobility? What is their relationship to work, and how it is structured? With this analysis, we can understand where we are going as a society, which should permit us, as a profession, to realign our own projection to match society’s.

We spent those first weeks on the one hand reading as much as we could, and, on the other hand, speaking with as many people as we could who were experts in those areas. We also spoke with experts in diversity and gender parity. We spoke with clients of legal services, and union members. And we spoke with people who used to be lawyers but have left the profession. It was only after those discussions that finally we spoke with members of the profession. In other words, we tried to have an outside-in approach, where we looked at what is happening outside our profession before we looked in detail at what is happening inside.

We did not speak with elected representatives of bar institutions or of lawyer unions until the very end. This was not because we didn’t want to speak with them or because we didn’t think that what they had to say was not important — we did and it was. But their conversations are the most structured. We wanted our discussions with them to be useful. So we wanted to absorb a lot of information before, and we wanted to be able to challenge them if necessary with what we had learned.

And we learned amazing things. About how people approach work, about why certain generations think and work certain ways, about how loyal we are to our legal community, … We would very much have liked to speak to many more people, and especially to more people outside the legal profession, but the four of us are all practicing attorneys with heavy workloads, and we just didn’t have time. In the end, we focused on what we thought was the most urgent. We wanted to wake up our collective conscious on what we are as a profession, and on the huge gap in salaries between men and women.

Much of the information we present in the report, and notably the statistics regarding the profession, is not new — it’s been in the public domain for quite some time. By including it in our report, in a consolidated format, it is our hope that it will finally get the attention it needs and deserves. We hope that the fact the report was prepared by persons who are not connected to any of our bar institutions will mean the report carries additional credibility. Further, we say things in the Report that you wouldn’t read in any official document issued by our bar institutions, and we do so in a tone they would not use. It is our hope that this also adds to the Report’s credibility.

Over 200 years ago we had a Revolution in France. Yet here we are, still with a highly centralized system, still with our love for strong leaders. We despise weak leaders. We cut off the head of our king, yet just a decade later we crowned an emperor. Social change is hard for us in France. Our profession could be so much more innovative than it is.

In the end, we hope that we have created a momentum, first for discussion and then for change. Will this in fact happen? I don’t know.

We didn’t prepare the Report for people who as a general matter don’t pay attention to issues it raises. We didn’t prepare the Report for people who don’t appreciate the fact that we were entrusted with this mission. And make no mistake, there are those who don’t appreciate it — they have said: “Who are you? You are not from any of our institutions and your appointment is an insult to our institutions. Who are you to open debates, and to re-open debates that have been closed?” My response is: are there only specific, designated groups who are entitled to debate? To decide what is open for debate? The world doesn’t work this way, and I am glad that people from outside our institutions open these debates.

We lack dialogue among law students, young lawyers, and older, established lawyers. This causes us to miss many things, and to fail to develop an understanding of how the profession needs to develop. How do you think it makes us look when creators of legal start-ups go to conferences and explain how our institutions sued them to keep them from operating, but lost?

I believe in appearances. And I also believe we should take ideas from innovative sectors. Take their working spaces, for example. They like to work in open spaces to encourage the free-flow of ideas. I believe that if we as lawyers set up our working spaces in a more creative way, we would create the appearance of creation, and our thinking and our work product would also be more creative. Same for education. If we change our methods, if we change our spaces for education, it will automatically change the content. Immediately.

I believe in equality of opportunity. In this context, I have had the chance to observe the many interns we have had in our offices at August Debouzy. From the moment they walk in the door, I see major inequalities among them. Learning substantive law can be tough, but it’s not the toughest thing we have to face in our profession. After all, we often face challenges bringing us to learn or update our knowledge on in areas in which we’ve had little to no training. And when a law changes, it can force us to develop a completely new understanding. That happens every day. Our substantive knowledge becomes outdated every day. And someone who has better substantive knowledge than us comes along every day. That’s not where the problem of equality of opportunity lies.

If you gather five interns in your office, you will see immediately which ones have been encouraged and loved. You will see immediately which ones had a father or a mother or an uncle who said to them “you know what — you’re 13 years old — you should read this, you should read that. And you can do it.” (I don’t know what, say To Kill a Mockingbird or Camus’s L’Etranger, whatever). The fact that someone has done this for some of our new lawyers but not for other creates a massive gap in equality. Because the new lawyers who have had a father or a mother or an uncle like this are the new lawyers that have confidence in themselves. They have the real skill, which is to know how to speak, how to behave, how to convey confidence.

I believe that with legal education we can provide balance — we can and we must help the less fortunate students and young lawyers to develop the soft skills they need to succeed in our profession. We can help them to develop confidence in themselves. We are proposing a continuing legal education program for new lawyers — for their first six years or so after law school. In this program, each year they will be invited (not required) to learn a new soft skill.

Let’s put it in this context: We know that after about five or six years of practicing law, most lawyers reach a pivotal point in their careers when they must take full stock of their opportunities and make decisions about how they want the rest of their career to progress: do they want to go in-house, do they want to be on a partnership track, etc. Now let’s step back, to when such a lawyer was a law student: Law students are inundated with classes, programs, information — a lot of things are put in their brain. But once they are sworn into the bar, they are abandoned. They are completely abandoned. And so what happens? Those who have a father, an uncle, a friend in the profession — they are helped by wise people who can guide them to make the right decisions, as well as guide them through the many other challenges they encounter in their career. On the other hand, those who are alone, they will learn, sometimes by making mistakes, by banging their heads against a wall and thus being forced to change direction until they finally find a path, if indeed they do find a path. Those are the people I want to help. Those are the people I think can be helped by the CLE program we are proposing.

Our bar institutions do a fair amount of research and collect certain statistics with respect to the legal profession. To be sure, there are many skilled and dedicated people doing good work in this regard. However, I would fault their work in two ways. Firstly, there is little planning and strategy to it — their work seems to go off in all directions without any thought as to how it does or should fit together. Further, most of their work is retrospective; very little is prospective. That is, very little looks ahead to the future. Further, we should have a research body that is only dedicated to numbers and statistics. Especially we need statistics in order to understand bias, and notably gender bias. Without statistics, we cannot show how we have failed with respect to diversity and gender parity.

In the Report, we deliberately did not address the problems of our bar institutions. This is not because we don’t think that they have problems — of course they do. We just didn’t see any point in addressing them in the Report because it wouldn’t have changed anything. Those who govern our institutions know the institutions have problems and that they suffer from them. They have not been able to fix those problems, and there is nothing our Report could do that would make them more able to fix them. It takes a huge amount of courage to give up some of your sovereignty, even when you know it’s for the greater good. It is unlikely that our bar institutions will change without some kind of powerful force from the outside.

Another problem we have as a profession is in working with the other regulated professions. We see each other in meetings, and we say nice things to each other, like “we should work together,” and then nothing happens. We need to create spaces and platforms that bring the different regulated professions together, that facilitate their work together. In my opinion, interprofessionality is the future. It’s the addition of intelligences. We are far too inward-looking. We have so far to go. There was so much controversy around the Macron Law. So many debates that afterwards we’re now all exhausted. And for what? All the Law does is allow us to create platforms for different professions to work together. I can’t understand the resistance to this.

Look at what happened with AGN Avocats. This is a law firm that has set up their offices to look like shops, where anyone can walk in without an appointment. They were able to raise funds in the way a start-up would, but in order to stay within the rules, only members of the bar were allowed to invest. Our bar institutions were opposed to AGN, and they sued them, but lost. And for what? What is wrong with making it easier for people to see a lawyer? We should have law firms in malls, so that people who feel lawyers are inaccessible can access them.

It was only relatively recently that lawyers were allowed to join together in firms. For a long time, law was seen as strictly an individual endeavor. Lawyers that still practice alone today see our new structures and cannot recognize the bar or themselves.

Blog, France

Alternative Structures: Why is France Succeeding While the US Continues to Fail?

Of course it’s impossible to do full justice to this question in a simple blog post. But I’ll try.

If you follow the question of alternative structures or ABS in the United States, you’ll know that since 1983 the ABA has considered them no fewer than four times, the most recent being in 2016. On each occasion they were rejected. The decisions to reject were not passive, unemotional affairs. To the contrary, the ABA’s rejection of them was almost visceral, with members seeming to scream on paper “WHAT PART OF ‘NO!’ DO YOU NOT UNDERSTAND?”

This is the last in a series of eight posts relating to France. Links to the other seven in the series are provided below.

While France’s Conseil National de Barreaux (CNB – National Bar Council) has perhaps not considered and rejected alternative structures as many times as the ABA, its rejection of them is no less visceral. On June 15, 2012, the General Assembly of the CNB unanimously adopted a resolution stating that ABSs “place in danger the core values of the profession and the interests of the public.” The CNB has never changed or otherwise reconsidered this resolution.

If that is the case, then how can it be that France is on the road to adopting alternative structures while the US is not?

There is more than one reason for this. This post will focus on just one: On paper, in most states it is the state supreme court that holds regulatory power over the legal profession, but for the most part they abdicate this power in deference to the ABA. As a result, while on paper the ABA has no regulatory power at all, in reality its regulatory power is immense, even being described as hegemonic. With this power, the ABA can block not only ABSs in their entirety, but also any attempts to take small steps towards their adoption – small steps of the kind we see today in France and that can also be seen in Canada. The ABA has effectively used its power for this purpose and there is no reason to believe it will take a different approach any time in the near or distant future.

In contrast, neither the CNB nor any other bar organization in France comes close to having so much power. That is not because they wouldn’t like to have it, but because the country’s executive and legislative branches have not, in contrast to US state supreme courts (as well as to US executive and legislative branches), abdicated their regulatory powers to the bar. The Macron Law was adopted over the strong objections of the CNB as well as other bar organizations. (The Macron Law was also “rammed through” under a highly unusual and controversial procedure that allowed the executive branch to override the legislature). The Haeri Report was commissioned not by any bar authority but by the Minister of Justice.

(On the other hand, the commission that prepared the Haeri Report was composed entirely of lawyers and the overwhelming majority of the persons with whom the commission consulted were lawyers, in-house counsel or law school instructors/administrators. This probably explains in part why the Report does not contain any recommendation nearly as radical as those contained, for example, in the Clementi Report, which was prepared by someone entirely outside the legal profession).

There is at least one more reason to explain the limits on the power of the CNB and other bar organizations as compared to the comparatively unlimited power of the ABA: Given that the US has essentially just one legal profession with essentially just one de facto governing body on a national level, this means the ABA overwhelmingly dominates all other bar organizations in the US. Any bar organization on a national or state level that sought to take an initiative perceived to be contrary to a position taken by the ABA would most likely have great difficulty gaining traction, let alone succeeding.

In contrast, and as mentioned in previous posts in this series, France has a number of regulated legal professions – lawyers (avocats), notaries (notaires) and bailiffs (huissiers de justice) are only three. Many of these professions have their own governing bodies comparable to the CNB for lawyers. This means that France has not only many different legal professions, but also many different governing bodies for each profession, on both the national and local levels. None has dominance in any manner that approaches the ABA’s dominance (hegemony) in the US.

Further, as regards Open Law and the ADIJ (the organizations responsible for the Charter of Ethics, as described in this post): participation in the activities of both of these organizations is entirely open – not only to members of the various legal professions, but also to members of the public at large and to companies and other kinds of organizations. Anyone who is interested can participate. It is easy to imagine that this diversity of participation results in very different discussions than those occurring in bar organizations whose participants consist of persons belonging to the same legal profession. Equally if not more importantly, it is easy to imagine that while organizations such as Open Law and ADIJ would not want to unnecessarily alienate bar organizations, nor would they feel obliged to only take initiatives of which bar organizations approved.

Seen in this light, it is easy to understand how organizations such as Open Law and the ADIJ could not only initiate but also see through to completion the development of the Charter of Ethics. By the same token, it is difficult to imagine that comparable organizations could do the same in the US, at either a national or a state level.

Let’s finish this series of eight posts with this additional comparison of France and the US:

The World Justice Rule of Law Index for 2016 ranks the US 18th out of 113 countries on an overall basis. France’s ranking is a close 21st. (The US’s score is 0.74 out of 1.0 while France’s is 0.72). This overall ranking is based upon nine factors, such as constraints on government powers, absence of corruption, and openness of government. These overall rankings for the US and France are not stellar but are respectable.

In contrast, when one element is singled out –– affordable and accessible civil justice –– the rank of the US falls to 94th (yes, 94th) of 113. This ranking is behind countries such as Albania, Belarus, Kyrgyzstan, Myanmar, Russia and Zimbabwe. In very stark contrast, France’s rank for the same element is 30th. (The US’s score is 0.41 out of 1.0 while France’s is 0.62).

France is by no means perfect. But when it comes to affordable and accessible civil justice, it is clear that France gets right many things that the US gets wrong.

If you’d like to subscribe in order to receive notices of new posts, you can do so by scrolling to the bottom of this page — you’ll see the place in the bottom left corner. Thanks for subscribing!

Related posts on this site:

Chapter 3: Alternative Structures Will Jeopardize Self-Regulation

Chapter 21: Abdication of Regulatory Power

Links to the other seven posts in this series:

  1. There’s Something About France
  2. A Big Happy (French) Family
  3. A Little More Liberté
  4. France’s Haeri Report on the Future of the Legal Profession: Intro
  5. France’s Haeri Report and Alternative Structures (1 of 2): Je t’taime un peu
  6. France’s Haeri Report and Alternative Structures (2 of 2): Je t’aime, moi non plus
  7. France and Alternative Structures: Putting the Pieces Together

All eight posts, regrouped, can be viewed at this link: Regroup of posts on France

Blog, France

France and Alternative Structures: Putting the Pieces Together

Let’s put together the pieces from the previous posts. Today in France:

  • Legaltech companies have worked together with representatives of the various legal professions to prepare a “Charter of Ethics.” Intended for signature by legaltech companies, this 7-page Charter describes the ethical principles that signatories will apply to their activities, the means by which they will maintain data security, and the service levels they will provide to their clients. Regardless of how “successful” the Charter ultimately proves to be (and however “success” might be defined), the document is a form of general recognition and acceptance of legaltech companies as well as first step in regulating them.
  • The members of the various legal professions will very soon be allowed to join together not only with each other but also with certified accountants (experts comptables) in order to practice from the same company (referred to as SPEs). These structures will allow such professionals to serve the needs of their clients in a more seamless and holistic manner. It is true that, today, the range of professionals allowed to form such companies is relatively limited. Nevertheless these companies are a first form of fully integrated multidisciplinary practices. Once a variety of questions regarding the coordination (if not eventual harmonization) of varying ethical rules are addressed, little will stand in the way of allowing the members of other regulated professions (such as doctors and architects) to join, as a next step, and then members of previously unregulated professions (IT, marketing, finance, social work,…) after that.
  • Lawyers are now allowed to form, be a shareholder of, and practice with almost any form of commercial company, not just the forms of company reserved for professional services. Further, they can form, be shareholders of, and practice with an unlimited number of any such commercial companies (including SPEs). Finally, lawyers as individuals as well as any of those companies can now carry out “commercial” activities (that is, offer non-legal goods and services together with legal ones), albeit within certain limits.
  • The February 2017 Haeri Report recommends that law firms be allowed to open their share capital to nonlawyers (specifically, to persons who are not members of one of France’s regulated legal professions), provided that nonlawyers remain minority shareholders.

This is the seventh in a series of eight posts relating to France. Links to the other seven in the series are provided below.

Some of these changes (perhaps for some readers, all of them), considered alone, might appear unremarkable. Legaltech companies can volunteer to conform to certain ethical and conduct rules, without any way to ascertain their conformity and without any established penalty if they fail to conform? That’s nice. Lawyers and other legal professionals can practice together with accountants? Haven’t they already been doing that? Lawyers can use a wider range of forms of company and a lawyer can be a shareholder of and work with more than one company at a time? Those restrictions were difficult to justify and were regularly breached, anyway. Lawyers can offer “commercial” services in connection with legal ones? Well, setting aside that we still don’t have a complete understanding of just what that means, haven’t lawyers been doing that already, through publishing, teaching/training, and subletting office space? And nonlawyer minority share ownership? Who cares? Few took advantage of the possibility in New South Wales or the District of Columbia – why should it work better in France?

That’s one way to look at it.

Here is another: When these changes are considered as a whole, they constitute real and concerted steps towards the adoption of alternative structures. The Charter is a first step towards bringing “legaltech” under the umbrella of regulation, and of expanding the regulation of lawyers (and the other legal professionals) to the broader category of the regulation of legal services. SPEs are a first step towards bringing different kinds of professional service providers – legal and non-legal – together in the same structure to offer holistic services to the same clientele. Freeing up lawyers to participate in variety of different kinds of companies and to offer “commercial” services together with legal ones are first steps towards enlarging the concept of “practicing law” – the first steps towards allowing lawyers and other legal professionals to develop a much larger variety of business models, potentially quite different from the “professional consultancy”/”solution shop” model of the traditional law firm. And allowing for minority nonlawyer ownership of law firms might be just a preliminary phase in ultimately allowing for majority nonlawyer ownership.

They say that the first step is the hardest. Once France has taken these first steps, the next ones will surely follow: previously unregulated legaltech professionals, having demonstrated the willingness as well as ability to respect ethical rules, will be allowed to fully participate in regulated SPEs alongside other kinds of professionals. SPEs and law firms, having demonstrated the ability to operate a limited number of different business models in an ethical manner, will be allowed to experiment with an even greater variety. Nonlawyers, having demonstrated they are “safe” as minority shareholders, will be allowed to become majority. The end result will be structures – whatever they end up being called – that can be easily compared to the alternative business structures (ABSs) of England & Wales and the incorporated legal practices (ILPs) of Australia.

That is, in the end, the French will get there. They’ll do it in their own special French way.

In the next post I’ll ask the question: why is France succeeding while the US continues to fail?

If you’d like to subscribe in order to receive notices of new posts, you can do so by scrolling to the bottom of this page — you’ll see the place in the bottom left corner. Thanks for subscribing!

Links to the other seven posts in this series:

  1. There’s Something About France
  2. A Big Happy (French) Family
  3. A Little More Liberté
  4. France’s Haeri Report on the Future of the Legal Profession: Intro
  5. France’s Haeri Report and Alternative Structures (1 of 2): Je t’taime un peu
  6. France’s Haeri Report and Alternative Structures (2 of 2): Je t’aime, moi non plus
  7. France and Alternative Structures: Putting the Pieces Together
  8. Alternative Structures: Why is France Succeeding While the US Continues to Fail?

All eight posts, regrouped, can be viewed at this link: Regroup of posts on France

Blog, France

France’s Haeri Report and Alternative Structures (2 of 2): Je t’aime, moi non plus

This is the sixth in a series of eight posts relating to France, and the third and last post specifically focused on the report entitled The Future of the Legal Profession (L’Avenir de la profession d’avocat), recently submitted to the Minister of Justice by French lawyer Kami Haeri.

Again, background information about the Report is available here.

The immediately preceding post examined in detail one element of the Haeri Report, which expressly recommends that law firms be allowed to open their share capital to nonlawyers (specifically, to persons who are not members of one of France’s regulated legal professions), provided that nonlawyers remain minority shareholders.

While the Report does make this recommendation, it does so in a lukewarm manner. It simply says that “there’s no obstacle” to it, at the same time emphasizing that this is only the case as long as the nonlawyer shareholding remains under 49% .

On the other hand, there are a number of other recommendations that the Report makes with enthusiasm, if not outright passion. Whether the commission realized it or not, these recommendations bear a direct relation to alternative structures.

More specifically, the Report recommends that lawyers:

  • Unlearn their highly individual manner of working. Instead, the Report calls on them to learn and apply methods of co-working, and notably to learn from more innovative sectors how to better work together,
  • Better understand and utilize technology in order to make themselves more accessible to clients and more efficient in their work,
  • Develop a “brand strategy” that allows a firm to be known on the basis of its own brand rather than only on the basis of the names of its founders,
  • Introduce into their firm management tools and practices borrowed from the business world,
  • “Professionalize” firm management by favoring the placement of nonlawyers in upper management positions,
  • Reform their firm cultures by reducing censure, self-censure and skepticism and supporting innovation and risk-taking, and
  • Reconsider their firms’ profitability requirements, to better support periods of lower revenue that often result from the development and implementation of innovation.

Through these recommendations, the Report in essence calls on lawyers to dramatically change, if not revolutionize, the way that they work. The Report calls on lawyers to do this not by looking inside to themselves or to other lawyers, but instead by looking outside of the legal profession.

In fact, it is entirely unrealistic to think that lawyers could implement any of the recommendations above with any modicum of success without help – a lot of help – from persons outside the legal profession. One of the recommendations is even explicit on this point, calling on firms not only to “professionalize” firm management, but to deliberately seek out nonlawyers for that purpose.

“So,” you might be thinking, “what’s the problem?” What do alternative structures have to do with it? If you need more expertise, just find the nonlawyers you need and either hire them as consultants and pay them their fee, or hire them as employees and pay them their salary. There’s no reason to make them partners or shareholders. And if you need more capital to “better support periods of lower revenue,” then that’s what bank loans are for.  It’s not rocket science. Case closed.

Not so fast.

Certainly those are the solutions for some firms. Certainly larger firms that have the resources. But this is not a solution for all firms, or even for many firms, for two reasons:

1)         Not all firms have the resources:

They do not have the financial reserves to pay consulting fees or to bring a non-fee earner onto their payroll. This is especially true for the “young lawyers” (the principal focus of the Report) who are seeking to establish their own firms, as well as for the not so young lawyers seeking to do the same. They, the Report painstakingly points out, already face considerable start-up and overhead expenses, notably for office space (as discussed more here). For these firms, the only way they could access the help they need to implement the Report’s recommendations would be in partnering with those who have the necessary skills and expertise. That is, by bringing them into the firm as partner or shareholder.

Further, not all firms have the capital to “better support” periods of lower revenue due to the development and implementation of innovation. As Jeff Winn, the Managing Director of Winn Solicitors in England has explained, banks are used to lending on invoices of 30, 60, 90 days payment. They are not used to lending on the basis of distant, uncertain outcomes. Only capital investment can fill this gap.

Today, of course, that is impossible in France. Under today’s rules, lawyers can only partner with or have as shareholders other lawyers, members of other regulated legal professions, and accountants (experts comptables), as discussed here. Lawyers cannot partner with, for example, experts in technology, management, marketing, etc., nor can they partner with passive equity investors (unless they are themselves a member of a regulated profession).

As noted above, the Report does expressly advocate for nonlawyer minority ownership of law firms. It is possible that this might help some firms to access some of the expertise they need. And yet, history teaches a different story: As explained here, when minority ownership of law firms was permitted in New South Wales (Australia), very few firms took advantage of the possibility. Further, minority ownership of law firms has been permitted in the District of Columbia (United States) since 1991: it appears that few firms take advantage of this possibility, either.

And while France may prove to be different from NSW and DC in that minority nonlawyer ownership of law firms may indeed end up helping some firms in France, that help will necessarily be limited. Certainly some nonlawyer experts may be satisfied with minority shareholding, but just as certainly others will not be. They will prefer to take their time and talents to other industries, where their stake in a company is not subject to such a limitation, but instead can fully match the value of their contributions.

2)         Consultants and employees are not motivated in the same way that partners and shareholders are. Hiring an expert as a consultant to advise for a fee on how a firm might better use technology is one thing; bringing that expert in as a partner or shareholder and staking his/her success (and compensation) on the success of the firm in using that technology is something entirely different. Multiple studies show that when workers are given a stake in a company, the workers are more productive and more innovative, and the company’s profitability and revenue increase. Further, such companies are more resilient during periods of economic crisis. A partner/shareholder “owns” the success of a firm in a way that a consultant or employee cannot.

In sum, even though the Report mentions alternative structures only briefly, and expressly advocates for only a limited form of them (minority nonlawyer ownership) in a lukewarm manner, a close reading the Report suggests that its authors in fact enthusiastically support alternative structures. Or, at least, they enthusiastically support outcomes that for most lawyers and law firms can be achieved only with alternative structures. And not just the kind that limits nonlawyer ownership to less than 49%, but the kind that imposes no such restriction.

Perhaps you could say that France’s Haeri Report supports alternative structures in spite of itself.

If you’d like to subscribe in order to receive notices of new posts, you can do so by scrolling to the bottom of this page — you’ll see the place in the bottom left corner. Thanks for subscribing!

Related posts on this site:

Chapter 6: The Payment of Salary is Adequate Compensation for Nonlawyers

Adrian Powell, Partner, Proelium Law

Richard Stephens, Partner, Proelium Law

Jeff Winn, Managing Director, Winn Solicitors

David Simon, Chair, Triton Global

Jenny Beck, Partner, Stephensons Solicitors LLP

Robert Camp, Managing Partner, Stephens Scown LLP

Martin Powell, Director, OmniaLegal Limited

John Ray, Senior Consultant, Law Firm Consulting Group

Links to the other seven posts in this series:

  1. There’s Something About France
  2. A Big Happy (French) Family
  3. A Little More Liberté
  4. France’s Haeri Report on the Future of the Legal Profession: Intro
  5. France’s Haeri Report and Alternative Structures (1 of 2): Je t’taime un peu
  6. France’s Haeri Report and Alternative Structures (2 of 2): Je t’aime, moi non plus
  7. France and Alternative Structures: Putting the Pieces Together
  8. Alternative Structures: Why is France Succeeding While the US Continues to Fail?

All eight posts, regrouped, can be viewed at this link: Regroup of posts on France

Blog, France

France’s Haeri Report and Alternative Structures (1 of 2): Je t’aime un peu

On February 2, 2017 French lawyer Kami Haeri submitted to the French Minister of Justice his report entitled The Future of the Legal Profession (L’Avenir de la profession d’avocat).

The Haeri Report totals 138 pages and covers a large range of topics. Any attempt (by me, at least) to communicate its contents in any comprehensive manner would be foolhardy. Instead, I’d like to examine the Report from one specific optic: alternative structures.

Before moving getting into that examination, if you are interested in some general background information about the Report – how and why it was commissioned, by whom and how it was prepared, a general description of its contents, and a selected list of its recommendations that are not related to alternative structures – you can access that here.

This is the fifth of series of eight posts relating to France and its move towards alternative structures. Links to the other seven in the series are provided below.

A quick reading of the Report would lead to the conclusion that its authors didn’t give a lot of thought to alternative structures and that, to the extent they did, their support of them was lukewarm.

Here’s what would lead to that conclusion:

The Report’s express discussion of alternative structures doesn’t even take up one (again, out of 138) pages. Here’s how that very short discussion goes:

First, the Report explains that the question of how to finance a law firm has become a “crucial subject” for young lawyers. Opening a law firm requires either entering into debt or borrowing from family members. The Report deplores this, stating that it both “accentuates social disparities” in the profession and slows the growth of firms. New structures such as SPEs, the Report continues, allow for members of different regulated professions to coexist under the same capital structure, but do not, except very indirectly, address the problem of how to finance a lawyer’s activity.

In the course of the commission’s consultations, the Report continues, a number of young lawyers expressed strong interest in the ability to benefit from minority investment in their firms. They envisioned varied profiles for such investors, each with the purpose of providing support for both opening the firm and the development of its activities. These young lawyers “consider that their independence would not be threatened by such an investment,” and that having a nonlawyer shareholder (be it a physical person or a company) would bring a different and innovative perspective to the management and operations of the firm.

It’s on this basis that the Report makes this recommendation:

The Commission considers that provided it remains a minority shareholding, there is no reason why the capital of certain kinds of practice structures – up to 49% – cannot be opened to a shareholder of another profession, including one that is not regulated.

And that’s it. In a document of 138 pages, that’s the entire direct and express discussion of nonlawyer ownership of law firms. It’s not exactly a ringing endorsement. “Tentative,” “hesitant,” “cautious:” those might be accurate descriptions.

When the commission considered this point, did it look beyond the comments of the “young lawyers” that the commission cited, to consider other information available with respect to minority nonlawyer ownership of law firms? Given the brevity of the relevant portion of the Report, it wouldn’t be unfair to conclude that the commission simply heard the requests of the “young lawyers,” didn’t disagree with their reasoning on its face, and so, without exploring the question any further, simply formulated a recommendation on that basis.

This conclusion seems more than plausible when you consider that the commission performed its work in a very short length of time: less than four months. (Compare that to David Clementi’s 18 months and the 2-year mandates of the American Bar Association’s Commission on the Future of Legal Services and the Canadian Bar Association’s Legal Futures Initiative). Given the large number of topics addressed in the Report and the high level of detail accorded to a number of those other topics, it wouldn’t be a surprise to learn that the commission accorded this specific topic only a (very) small portion of its time and attention.

If the commission had accorded more time and attention to the topic, here is what it might have discovered (for better or for worse):

1)         Minority shareholding of law firms by nonlawyers is, in certain places, a highly controversial topic

Most notably, this has proven to be the case in Ontario, Canada as well as in the United States.

As regards Ontario: The Law Society of Upper Canada is the principal regulator of lawyers and paralegals in Ontario. In 2014, the Law Society’s Alternative Business Structures Working Group issued a Discussion Paper in which it proposed for comment four models of alternative structures, two of which would allow for nonlawyer minority ownership of law firms and two of which would allow for nonlawyer majority ownership. The Discussion Paper triggered an avalanche of responses in which the large majority of respondents pronounced their opposition – vehement opposition – to all four models. A notable example is the Ontario Trial Lawyers Association, which, among a host of other arguments, stated “there is an inescapable tension and conflict in maintaining professionalism and ethics under [structures] that include nonlawyer equity shareholders, controlling or otherwise.”

Given the strength of the opposition to nonlawyer ownership of law firms in any amount (minority or majority), in September 2015 the Working Group decided that it would not further examine any majority or controlling nonlawyer ownership models. The Working Group did say that it would continue to consider whether minority ownership should be permitted, but there is no evidence that the Working Group has undertaken any further activity in this regard since September 2015.

As regards the United States: the American Bar Association (ABA) holds a de facto regulatory role for lawyers on a national level in the United States. The ABA has considered the question of minority as well as majority nonlawyer ownership of law firms on more than one occasion. The most recent was in April 2016, when the ABA’s Commission on the Future of Legal Services released an “Issues Paper Concerning Alternative Business Structures.” In the Issues Paper, the Futures Commission proposed essentially the same four models as those proposed by the Ontario Working Group in 2014. The Futures Commission’s Issues Paper triggered an even larger avalanche of responses (over 100) in which the overwhelming majority of respondents pronounced their also vehement opposition to all four models, in most if not all cases failing to make any distinction among them. Most notably, the ABA Section of Family Law succinctly wrote “WHAT PART OF ‘NO!’ DO YOU NOT UNDERSTAND?”

2) As controversial nonlawyer minority ownership of law firms is in places like Ontario and the United States, in other places nonlawyer majority ownership is neither prohibited nor controversial

To the contrary, it is allowed and even encouraged. Two obvious examples are Australia, on the one hand, and England & Wales, on the other. New South Wales (Australia) has allowed nonlawyer majority ownership since 2000 and most of the other Australian states followed NSW’s example soon thereafter (and, as discussed below, NWS allowed nonlawyer minority ownership before 2000). England & Wales has allowed  nonlawyer majority ownership since 2011. Going even further, both countries today boast publicly listed law firms (Slater + Gordon, Shine, IPH Ltd., Gateley).

In proposing minority ownership of law firms, the Haeri Report raises the issue of lawyer independence, and suggests restricting nonlawyer ownership to no more than 49% should be sufficient to protect lawyer independence. In Australia as well as England & Wales, rules are in place to protect lawyer independence in the case of any level of nonlawyer ownership – minority or majority. There is no evidence to suggest that these rules are not effective. (Indeed, to the contrary, there is evidence that that they are effective, for example, here and here).

In fact, the Haeri Report’s commission would be hard-pressed to refute the ability for rules to protect lawyer independence, regardless of the percentage of nonlawyer ownership. This is because of arguments the commission makes in a different section of the Report. In that section, the commission rejects a common assertion that an in-house counsel’s economic dependence upon his/her employer precludes him/her from exercising intellectual independence from that same employer. The commission refutes this argument in two ways: Firstly, it rejects it on its face, simply maintaining that an in-house counsel’s economic dependence on his/her employer does not preclude intellectual independence. Secondly, the commission states that the independence of in-house counsel can be controlled by “contract.” Not only can it be but it has, the commission reminds us, given that Association Française des Juristes d’Enreprise (AFJE, or French Association of In-House Counsel) has already adopted a Code of Professional Responsibility that affirms the independence of in-house counsel. Of course, in this manner, in-house counsel exercise their intellectual independence from companies that are majority owned by nonlawyers.

3) In the few places that have permitted nonlawyer minority – but not majority – shareholding of law firms, it has had only limited to no success

The first example is New South Wales (Australia), which permitted nonlawyer minority ownership of an incorporated legal practice during a period of six years, from 1994 to 2000. More specifically, lawyers had to retain the majority of voting rights and 51% of the net income. According to Susan Fortney of Hofstra University and Tahlia Gordon then with the Office of the Legal Services Commissioner of New South Wales, these restrictions were unattractive and as a result the structure was little used (that is, as noted above, until 2000, when the restrictions were lifted and nonlawyer majority ownership was permitted, at which time the structure became widely used, especially among newly-formed firms).

The second example is the District of Columbia, in the United States. In contrast to the 50 states, the District of Columbia has allowed for nonlawyer minority ownership of law firms since 1991. While no statistics are kept on the number of firms that have taken advantage of this possibility, it is believed that the number is low. Because no data has been collected, no one can be sure exactly why this is the case, but one of the explanations typically offered is the rule’s restrictive nature: On the one hand, the rule requires that the firm provide legal services only (multidisciplinary practices are not allowed). And, on the other hand, the nonlawyer shareholder must provide professional services for the firm (he/she may not be a passive investor).

Even if few firms have taken advantage of DC’s different rule, it does not mean that none have. This website, for example, contains in-depth interviews with two people, one a lawyer and one not, who have formed such firm in DC. You can access those interviews here and here.

One thing that can be said is that since 1991, no disciplinary actions have been brought against any lawyer in connection with his/her partnership with a nonlawyer. In other words, DC’s different rule has not led to any known compromise of any lawyer’s independence. Is that because these types of structures haven’t raised the types of issues that would lead to disciplinary actions? Or is it because so few DC firms actually take advantage of the possibility to have nonlawyer minority ownership? No one knows.

Again, it is unclear if the commission made its recommendation regarding nonlawyer minority ownership of law firms with any or all of the above in mind. It is also unclear the extent to which any of the above may or may not have influenced the commission’s thinking. All that is clear, based upon a quick reading of the Report, is that the commission expressed lukewarm support of allowing law firms in France to open a minority of their share capital to ownership by nonlawyers.

Again, this is based upon a quick reading of the Report. Could a careful reading lead to a different conclusion? That is, could a careful reading suggest that in fact, the Haeri commission’s support of alternative structures is more than lukewarm?  That’s the next post.

If you’d like to subscribe in order to receive notices of new posts, you can do so by scrolling to the bottom of this page — you’ll see the place in the bottom left corner. Thanks for subscribing!

Links to the other seven posts in this series:

  1. There’s Something About France
  2. A Big Happy (French) Family
  3. A Little More Liberté
  4. France’s Haeri Report on the Future of the Legal Profession: Intro
  5. France’s Haeri Report and Alternative Structures (1 of 2): Je t’taime un peu
  6. France’s Haeri Report and Alternative Structures (2 of 2): Je t’aime, moi non plus
  7. France and Alternative Structures: Putting the Pieces Together
  8. Alternative Structures: Why is France Succeeding While the US Continues to Fail?

All eight posts, regrouped, can be viewed at this link: Regroup of posts on France