The New York State Bar Association (NYSBA) is set to review the issue of outside ownership of law firms, but has confirmed that at present lawyers practising in New York cannot be part of a foreign firm in which non-lawyers hold a stake.

The NYSBA has launched a taskforce, chaired by former state Bar president Stephen Younger, to reconsider its "historical opposition" to non-lawyer ownership of law firms. The 77,000-member association, founded in 1876, is the largest voluntary state Bar association in the US.

However, the state Bar's ethics committee determined earlier this month (14 March) that, under current rules, a lawyer who primarily practices in New York cannot be an employee of an out-of-state or foreign firm owned or managed by non-lawyers, even if non-lawyer ownership is permitted where the firm is based.

The ruling affects firms in countries such as the UK and Australia, which allow ownership by non-lawyer investors, and the District of Columbia, where non-lawyer employees can share in law firms' equity. This means it would affect UK law firms with non-lawyer ownership looking to set up in New York, or UK law firms with existing New York offices which are considering external investment.

The news comes as the American Bar Association's (ABA's) ethics committee is currently considering whether restrictions should be eased. Non-lawyer ownership of law firms is prohibited in New York and 49 other states.

The ABA launched a consultation in December, which is set to conclude in February next year, looking into whether it should allow non-lawyers who work at a law firm to own a limited, non-controlling share of the firm.

It also affects law firms in Australia, which like the UK, permits ownership by non-lawyer investors, and the District of Columbia, where non-lawyer employees can have an equity interest in law firms.

Under the UK's Legal Services Act, which came into effect in October last year, UK law firms are now allowed to take external ownership after converting to an alternative business structure (ABS), although this development has mainly attracted interest from consumer-focused law firms.

Law firms such as Irwin Mitchell, Russell Jones & Walker and Plexus Law have all confirmed plans to become an ABS with the intention of taking external investment, pending Solicitors Regulation Authority (SRA) approval.

So far, DLA Piper is the only top 10 UK law firm to be linked to ABS investment, after taking a stake in Riverview Law holding company LawVest. However DLA's capacity to practise in New York will be unaffected, as no non-lawyers currently own a stake in the firm.

Matthew Hudson, senior partner of MJ Hudson, a City law boutique which is considering external investment, said: "UK and US law are both significant export businesses. Every day, all round the world, the two legal systems battle it out to be the governing law, for example on commercial contracts. So any advantages that UK law has to win against US law, the better. Arguably this is good news for UK law, to see the US being so backward."

"It's an unstoppable fact that the law on external ownership and profit-sharing will change throughout the US within the next few years. Individual states will effectively see the ability to compete with other states by allowing external ownership ahead of others – just like George Osborne is trying to make the UK a more attractive country to attract international business and money against the rest of Europe."