Lawyers confident Hong Kong market would gain competitive advantage from changes

Law firms in Hong Kong may soon be permitted to operate as alternative business structures (ABS) under reforms similar to those that have transformed the UK legal market.

The Hong Kong Law Society is currently studying the ABS model, which in the UK permits law firms to take external investment from, and be owned by, non-lawyers, as well as allowing companies to offer legal services. 

President Ambrose Lam told Legal Week that the society had been considering the changes for the past two years, and was now preparing a paper on the issue for the society's council to consider.

Proposals set for discussion could allow Hong Kong firms to set up with and raise funds from non-lawyers, and allow non-law firms to provide legal services.

"We have been studying this for the past two years," he said. "But UK law firms with an office in Hong Kong are asking: 'If the parent company chose to have an ABS model, how do we treat the local branch?'

"We are studying the pros and cons. If the council agrees to go in this direction, it will become law. [We are also considering legal disciplinary practices, which allow law firms to have] up to 25% non-lawyers, and only approved non-legal professions are allowed to provide a service in the law firm."

Rules allowing UK firms to operate as ABSs came into force in January 2012 in the wake of the 2007 Legal Services Act, while similar reforms were enacted in Australia as far back as 2001, leading to the landmark 2007 float of personal injury firm Slater & Gordon. 

Slaters managing director Andrew Grech (pictured) said he believed such reforms would be a welcome development for the Hong Kong market. "The experience in Australia and the UK is that it has provided benefits for firms both large and small," he said. "It is very progressive and correct for the Hong Kong Law Society to look at these questions and move in this direction. 

"There is an inevitability about it. If I was a Hong Kong lawyer, I would want to have a regulatory structure available to me that allows me to compete with lawyers in Australia and the UK on equal terms. The risk for Hong Kong lawyers if they don't move this way is that they will be disadvantaged in their ability to compete over time."

UK firms with offices in Hong Kong that have expressed an interest in the ABS model include Kennedys and Withers.

"In England, this issue is a hot topic for us and has been for some time," said Withers Hong Kong managing partner Marcus Dearle. "If this model were to be allowed in Hong Kong, we would certainly consider a change. 

"As a litigator, being able to instruct a forensic accountant, for example, in-house would definitely have some merits. The more people you can have working in a law firm in different professions is something to be looked at very carefully."