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💼 Non-lawyers could own law firms soon


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The European Court of Justice is deciding if non-lawyers can own German law firms (the current rules in Germany only allow lawyers to own firms). This case could change law firm ownership rules across Europe — this would bring more money and innovation to law firms but could also risk the independence and quality of legal services.


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💼 Non-lawyers could own law firms soon

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What's going on here?

The European Court of Justice (ECJ), Europe’s top court, is considering a case that could let private equity investors and non-lawyers buy shares in German law firms. Depending on its outcome, it will have an impact on Europe more widely.

What’s the story?

Daniel Halmer, a legal tech entrepreneur, sold 51% of his law firm to an Austrian company that’s owned by non-lawyers. This is against the current rules in Germany, which only allow lawyers to own law firms. So, Munich’s Bar Association took away his law firm's license.

Halmer believes it’s unfair that only lawyers can own law firms. So, he’s challenged the decision in court.

The ECJ now has to decide Germany’s Federal Lawyers’ Act is compatible with the free movement of capital, the freedom to provide services, and the freedom of establishment in the EU.

Why does the ban exist?

Lawyers deal with important things (wills, contracts, litigation). Bans on non-lawyer ownership exist to ensure the quality and independence of people delivering legal services. The bans try to limit risks of outside influence on lawyers.

But critics of it (like Daniel) say the ban is unfair and slowing down innovation in the legal industry.

What’s the position in other countries?

Nearly 12% of law firms in England and Wales are owned by non-lawyers (so it’s popular here).

Everywhere else, it’s a mixed bag— this table gives you an overview 👇️ 

Whatever’s decided in this case, it will have a knock-on effect across other European countries that currently ban non-lawyer ownership.

What’s the big picture effect?

💼 For law firms: There would be fresh competition through alternative legal service providers (think: the Big Four providing legal services) — this could be a downside for traditional firms. Plus, some people think non-lawyer ownership would raise issues with the independence and integrity of legal services.

But on the positive side, it means law firms could more easily raise money from non-lawyers — money they can use to help them open new offices, invest in technology, or hire more staff.

🏢 For non-law firms: This change would open new investment opportunities into law firms (probably from private equity companies). Thomas Kohlmeier, a partner at Nivalion (a litigation finance company), called law firms “the last untapped gold mine for investors”. Investors could buy equity in law firms and participate in their growth.

It could also lead to innovative business models from non-law firms (for example, Farewill, a tech company that creates wills more efficiently than a law firm). The change could see clients get better, cheaper services.


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