Scotland: Still an ABS-free zone
The Law Society of Scotland (LSS) has announced a two-year delay in work to introduce alternative business structures (ABSs) – which will take the wait since they were first given the green light to 17 years.
It said it remained committed to ABSs “in the medium term” but has decided to prioritise other work arising out of the Regulation of Legal Services (Scotland) Act 2025, which received royal asset in June.
Though ABSs – formally called licensed legal services providers (LLSPs) in Scotland – have been allowed since the Legal Services (Scotland) Act 2010, they have never actually been implemented by the LSS, a failure that has been criticised over the years.
The new legislation removes the 2010 requirement that ABSs have majority lawyer ownership. ABSs also no longer have to offer legal services for “fee, gain or reward”, opening the door to charities, and the ban on law centres becoming ABSs has been removed.
As the Scottish government decided not to introduce an independent regulator for legal services – against the recommendation of the 2018 Roberton review that led to the new law – it remains the LSS’s responsibility to introduce ABSs.
In a statement, the LSS noted that it was authorised by the Scottish government in 2021 to be an approved regulator of LLSPs.
“While significant preparatory work has been done, the system for authorising and regulating the new businesses is not yet up and running and new legislation now makes further changes to the LLSP regulatory framework…
“The law society’s regulatory committee, made up of solicitor and non-solicitor members, has therefore concluded that it would be appropriate to prioritise delivery of key parts of the new 2025 Act in the short term.
“This includes work on a whole new system of business-level regulation of 1,200 existing law firms. The committee also agreed to focus on implementing the improvements to the complaints system, recognising that this had been a matter of particular focus for MSPs who had highlighted how the existing system was too slow for consumers in resolving disputes and issues of misconduct.
“The committee therefore agreed to defer further work on LLSPs for the next two years. Noting that only limited interest had been expressed so far by firms in terms of becoming LLSPs, the committee agreed to return to the issue in 2027.”
David Gordon, convener of the committee, commented: “It is vital that we get on and deliver the regulatory improvements which parliament has agreed…
“While we remain committed to getting [LLSP regulation] up and running in the medium term, the limited number of firms expressing an interest makes it right for us to focus our resources initially on where we know we can make the biggest difference.”
Asked by Legal Futures whether it had solid evidence of the interest in LLSPs, a spokeswoman said: “Since the society became an approved regulator of LLSPs, we have been engaged by certain businesses who have expressed an interested in becoming LLSPs, who have asked questions, and also requested that we keep them updated. The numbers doing so have been very limited.”
Well-known Scottish solicitor Brian Inkster – a champion of innovation in the law – argued that the changes the Act made to the regime that the LSS had already drafted were “minor”. He added: “Why can’t that [any tweaks] be done now as a matter of priority and without any need to defer ABS in Scotland for a further two years?”
The chief executive of 12-office firm Inksters also questioned why the LSS would prioritise “key parts” of the 2025 Act “when you have still not implemented key parts of the 2010 Act that has been in force for 15 years?”
Questioning the claim about the low level of interest, he added: “Law firms cannot express an interest in terms of becoming an ABS until the application process is actually launched. There is no process in place to express an interest in advance of that.
“This is a statement made from nowhere with no substance to back it up. I know that it is simply not the case. I believe that the Law Society of Scotland are about to find out that they have misread the room.
“Is the will of the Scottish Parliament being flouted? In any event, even if there was any truth in the statement on limited interest in ABS, it is completely irrelevant.”
Writing on LinkedIn, Professor Stephen Mayson said: “The powers granted by the Scottish Parliament that would allow ABSs are, like the equivalent powers south of the border, permissive. They will not – and should not – be relevant or appeal to all law firms.
“But it is not for the LSS to decide whether or not that choice should be available: Parliament has already said that it should. If even only one firm expressed an interest, it should now be possible for that firm to act on it.”
The legal regulatory expert argued that the delay was the result of “the conflict between regulation and representation, when both reside in the same body”.
He added: “What a shame that parliament did not heed the message that so many of us offered that, for the benefit of society, the pace of change and, indeed, a strong and thriving legal sector in the 21st century, this conflict must not be allowed to mandate inaction.”
Chris Kenny, the first chief executive of the Legal Services Board of England and Wales and long-serving chief executive of MDDUS – the medical and dental defence union in Scotland – wrote: “It’s not just that LSS are apparently seeking to thwart the will of the legislation by delaying implementation. The Act gives them a specific duty to regulate to promote ‘quality, innovation and competition’”
“In blocking diversity in ownership and funding structures, they appear to be positively failing in their own specific obligations . This is not a risk free position for them to adopt.”
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