Back in March 2015, the Lawyer Commission (“Advokatlovutvalget”) submitted their report on proposed changes to the regulation of lawyers in Norway. Now, the report is being evaluated by the Norwegian Ministry of Justice and Public Security.
The Norwegian Ministry of Justice and Public Security has asked Copenhagen Economics to analyse two of the Lawyer Commission’s proposed changes: 1) the regulation of the right to provide legal services, and 2) the ownership regulation for law firms.
The main purpose of this analysis is to evaluate the impact of the proposed changes to the regulation of lawyers in Norway on competition.
The competition in the market for legal services is relatively good
We start our analysis by looking at the current competitive climate in the market for legal services in Norway.
We conclude that competition in the market for legal services today is relatively good and there are no signs of competition declining over the years. In Norway, many players in the market, including lawyers in private firms, compete with lawyers in law firms to provide legal services to clients. The competition is strongest for less complicated cases.
A liberalisation of the regulation of the right to provide legal services will not affect the competitive situation significantly but can be appropriate anyway
Today, lawyers have a monopoly over providing legal services on paper. However, there are several exceptions that allow our players to provide legal services as well.
The Lawyer Commission proposes liberalising the market by effectively removing the lawyers’ monopoly for legal services outside the court room, allowing anyone to give legal guidance and advise to clients.
We find that liberalising the regulation over the right to provide legal services will not affect the competition significantly because the many exceptions already allow many different players to provide legal services – at least within their area of competence.
Yet, a liberalisation can make it easier for “legal tech” firms to enter the market which will increase competition in the time to come. Moreover, a liberalisation may result in additional benefits as it is difficult for authorities to enforce the current regulation.
A tightening of the ownership regulation is not appropriate; a liberalisation can improve competition but bear some risk of quality issues
Today, everyone can own a law firm as long as they spend a “significant part” of their professional activity in the firm’s service.
The Lawyer Commission proposes tightening the regulation so that only lawyers can own a law firm.
We find it inappropriate to tighten the regulation as it may restrict the competition unnecessarily without addressing any major quality issues.
We have also evaluated a liberalisation of the regulation that allows for external owners (owners that do not have professional activity in the law firm). We conclude that such liberalisation can have a positive impact on competition because of the increase in capital, such as new skills from non-lawyers and innovation. However, a liberalisation can also threaten lawyers’ independence. Therefore, new regulation is needed to secure lawyers’ independence if a liberalisation is introduced – and the costs of enforcement of such new regulation can be high.
The study is commissioned by The Norwegian Ministry of Justice and Public Security (Justis- og beredskapsdepartementet).
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