Law firms Bowmans, Webber Wentzel and Werksmans are concerned that the current version of the Broad-Based Black Economic Empowerment (BBBEE) Legal Sector Code of Good Practice (LSC) is not workable and sustainable, is not based on sound empirical evidence, and inadvertently harms the broader legal profession.

The three firms’ view is that the LSC introduces significant implementation and structural challenges that risk undermining transformation efforts and the long-term sustainability of the sector.

The firms have intervened in the legal proceedings initiated by law firm Norton Rose Fulbright (NRF) to review the LSC.

The LSC was gazetted by Trade, Industry and Competition Minister Parks Tau on September 20, 2024, and came into effect immediately.

The LSC introduced new BBBEE requirements for the legal sector, thereby altering how large corporate law firms are measured, rated and expected to implement transformation.

The three firms currently hold Level 1 BBBEE ratings under the Generic Codes, which demonstrates their long-standing and measurable commitment to empowerment.

But, under the LSC, South Africa’s large corporate law firms’ BBBEE rating scores are expected to decline from Level 1 to Level 6 or lower, they note.

“Given that the LSC is already in effect and to ensure that it meets these standards, the firms believe a review application is both necessary and appropriate.

“The firms’ decision to intervene is aimed at ensuring that any LSC is evidence-based, practical, tailored to the unique nature of the legal profession, and that it does not discard the well-established principles of the Generic Codes that benefit black lawyers as well as other black persons more generally,” the law firms say.

Further, the LSC also entirely removes socioeconomic development (SED) from the scorecard, even though it is a core pillar of BBBEE under the Generic Codes. SED initiatives, including pro bono legal work, community education programmes and bursaries, are crucial to enabling broader participation in the profession and advancing inclusive economic development, they note.

Another challenge is that the LSC requires that 60% of a law firm’s procurement spend on advocates be allocated to black advocates by year five. This spend is paid for by clients, and is only paid by law firms as a disbursement on behalf of clients, so it is not true procurement, the firms argue.

“Difficulty arises because, although law firms can recommend the choice of an advocate, clients can and often do decide which advocate should be briefed.

“While the firms actively support black advocates, the current procurement requirements do not reflect how the sector actually works,” the law firms highlight.

OBJECTIVE ADVICE
Additionally, there is the further complication because law firms should provide disinterested, objective advice to their clients when recommending advocates, and so should not have regard to their own interests in the form of the effect on their own BBBEE rating when providing this advice, they emphasise.

This is fundamentally different from decisions relating to the firm’s own service providers, such as landlords or IT suppliers, they point out.

However, the LSC places relatively little emphasis on significant procurement spend on black-owned suppliers, such as IT services, facilities and legal tech, which amounts to close to R216-million a year for the three firms.

This is a significant driver of broad-based empowerment, all of which counts towards a procurement score under the Generic Codes. The LSC’s approach to procurement fails to give due acknowledgement to the real, measurable transformation driven through firms’ broader supplier networks, Bowmans, Webber Wentzel and Werksmans say.

Meanwhile, the timeline for the achievement of the LSC’s black ownership targets is problematic, with the LSC doubling black ownership targets to 50% by year five.

This fails to recognise that, in the legal sector, only practicing lawyers in a firm can be owners, namely through equity partnership. They are personally liable for the debts of the firm, and retain ownership until retirement.

Junior lawyers follow a structured progression path that generally takes 10 to 11 years before becoming equity partners, whereafter most tend to retain ownership until retirement.

This means that, even with the best intentions, firms simply cannot meet these targets within the required timeframe, the law firms note.

“Revising the implementation timelines would allow firms to meet transformation goals effectively while maintaining stability in the sector, as well as ensuring that junior lawyers are properly trained and equipped with the necessary skills to advance to more senior positions,” they advise.

Further, the LSC focuses narrowly on legal practitioners, excluding black non-lawyer professionals, like those in finance, IT, HR and marketing, from management control measurements, even though they play a critical role in the leadership, operations and transformation of large corporate law firms, they add.

“We fully support meaningful transformation and believe that, when appropriately configured, the LSC can build on the significant work that has already been done to broaden transformation within the legal sector. Our goal is to help shape a legal sector code that is evidence-based, practical and inclusive,” says Bowmans chairperson and senior partner Ezra Davids on behalf of the three firms.

“We are ready to work with government and other stakeholders to achieve a solution that promotes real empowerment while preserving the strength and resilience of South Africa’s legal profession. Strong, stable corporate law firms are essential to supporting public institutions, securing foreign investment, and building international confidence in the rule of law, which are all critical ingredients for a thriving democracy and economy,” he says.

UNION OPPOSITION
Trade union Solidarity's Law Network has brought a court application against the sector codes for BBBEE that authorities have introduced for the legal profession.

In its court application, the union seeks to have the Mnister's decision to issue and/or publish the sector codes reviewed and set aside, and for the sector codes for the legal profession to be declared illegal, irrational and unconstitutional.

“Solidarity's Law Network believes that overregulation of the legal profession is uncalled for and unnecessary, and will limit people's freedom of choice with regard to legal representation because clients’ options for attorneys or advocates must comply with regulations and prescriptions,” says Solidarity Law Network head Riaan Visser.

Solidarity is taking legal action after its earlier warning that these prescribed sector codes for the legal sector are in conflict with the Constitution fell on deaf ears, he adds.