Profile: Alasdair Douglas
A more tailored approach should be taken to the regulation of law firms, the City of London Law Society's chairman tells Manju Manglani
After 35 years as a tax lawyer, Alasdair Douglas, the retired senior partner of Travers Smith, wants to give something back to the City.
“City solicitors are a bit unsung. If you pick up a business newspaper, it never says ‘and the lawyers who spent 18 hours a day for months on this and who actually knew how to do this transaction were these people’ – we should get a bit more credit,” he says.
Part of the problem, he suggests, is a certain reticence on the part of lawyers to put themselves forward and increase recognition of their role in the economy.
“We should have more lawyers sitting on the boards of government departments and more lawyers as non-executive directors of companies – then we might have more of a voice when important issues come up.”
As the new chairman of the City of London Law Society (CLLS), Douglas is also keen to dispel the myth that lawyers aren’t commercial or business oriented. “City lawyers have a huge amount to offer and managing partners run very complex people businesses,” he says.
“Because lawyers are so busy all of the time, maybe they don’t put themselves forward and maybe their firms are, for good or bad reasons, not keen for partners to do that sort of thing.”
However, Douglas suggests that law firms would benefit from releasing some of their senior lawyers’ time to take on board roles. “City firms should be keen, particularly when partners get north of 50 years old and are towards the end of their careers as lawyers.”
“I would certainly see part of my role as trying to ensure there are opportunities for lawyers at that time of their careers, if only in other law firms”.
External ownership
Regulation of City law firms is another area which Douglas has been targeting for improvement in recent years as part of his work on the CLLS’s regulatory committee.
A hot topic for many law firms is the upcoming option of forming alternative business structures, which includes the option of enabling non-lawyer ownership. While there has been much speculation about which firms will take the plunge, Douglas predicts firms with expansion and restructuring plans will be among the first.
“It will be a good idea for a lot of firms which don’t have enough capital. There will be some firms that have expansion plans that are so significant that their partners don’t want to take the risk and might be unable to access sufficient capital,” he says.
“I also suspect there will be a number of firms that think their business model would be better suited to being a listed corporate vehicle. First-mover advantage is important, so one or two might well be queuing up to be listed.”
Douglas notes that the first law firm listings on the stock exchange may well have a follow-on effect on how other firms measure their market value. “Once a value has been put on something, it’s very difficult not to be drawn into somehow realising it. So I think it will have an effect on people’s views of the value of their own business and may well change behaviours.”
Senior lawyers will likely also be making plans to obtain a return on their years of service in building their firms’ client bases, he says. “If you think your firm is worth £200m and you leave it for the young guys, you may think ‘if we sell it within five years after I leave, I should get a share of that’.”
Douglas notes that, having spoken with many private equity houses, several have said they are interested in investing in the legal market. “I don’t think they’re interested in City law firms, but they are interested in firms where they think capital would make a big difference to their business and firms for which they think consolidation of the market is an obvious play that they think they can execute.”
There are also several PE houses eyeing investment in law firms’ service providers. “A good number are interested in services around the law, where they think there is a lot of scope for consolidation and innovation through technology,” he says, citing Lyceum Capital’s interest in business-related software.
Focus on outcomes
Although the deadline for alternative business structures has been postponed by the Solicitors Regulation Authority (SRA) to an unspecified date, the new outcomes-focused regulation will come into effect on 6 October, as scheduled.
Douglas welcomes the regulator’s focus on the high-level principles and outcomes that drive the provision of legal services. “It’s a great step in the right direction, provided it’s policed and enforced properly, and the acid test will be over time whether it does work better.”
However, he disputes the SRA’s view that it has moved away from a one-size-fits-all approach to regulation. “We’ve consistently said to the SRA that our clients are extremely sophisticated, our market is extremely competitive and, by and large, our clients are satisfied with the services we provide. Our clients are very different from high street solicitors’ consumers. However, the one-man firm on the high street, the Co-op, Clifford Chance and Travers Smith still have the same rules.”
Douglas gives the following example. “In the rulebook, it says you have to write a letter to your client saying what service they can expect to get from you, what you are going to tell them about and what you are going to advise them on. It’s great for someone who’s been in car accident and is going to a personal injury lawyer and wants to know how the lawyer can help him.
“But it’s not really appropriate for a law firm advising Barclays Bank on its 500th syndicated debt issuance. You really don’t need to write to the general counsel at Barclays saying ‘we’ll draft the documents’ and so on,” he says. “There are some rules which have to help high street consumers but are not really appropriate for City law firms.”
Growth plans
As part of his role in representing the interests of City firms, Douglas also plans to increase representation of foreign law firms with a presence in London’s Square Mile.
With around 14,000 solicitors (82 per cent of the City’s total) and 60 firms on its membership roll, Douglas notes an increasing interest among US firms to join the CLLS.
“Skadden, for example, thinks it is very important to be part of what’s going on in London, partly to support the sector and partly to be involved in our committees,” he says.
With nearly two years as chairman ahead of him, Douglas may well transform the CLLS so that it fully reflects the diversity of law firms in the City.
Fighting every battle
Alasdair Douglas knows firsthand the challenges of managing a City law firm, having served for six years as managing partner and four and a half years as senior partner at Travers Smith.
Reflecting on his time as managing partner, Douglas notes the importance of self-awareness in the role.
“I enjoyed my time as managing partner, but I think you should only do it for a limited period, because the same intractable problems come up in every firm on a regular basis and you can tackle these problems with energy and dynamism two or three times. But by the time you’ve done it four or five times, you’re tempted not to fight every battle.
“The minute you don’t relish fighting and winning every battle, it’s time to hand over to the next person. It’s a difficult job to keep doing for forever and a day, and you’re always best to quit when you’re marginally ahead and let fresh blood and fresh ideas come in.”
Douglas also has a few pointers on how to manage partners effectively. “My major lesson is that if someone is shouting pretty loudly and complaining about someone or something else, it’s often because they’ve let themselves down in some way.
“That was an early lesson which I took to heart and has served me quite well,” he says.