Scotland shies away from single legal regulator but backs ABSs

Whitham: Greater consumer confidence

The Scottish government has chosen the least radical option for regulatory reform of the legal profession, rejecting the ideas of either a single or an oversight regulator.

But it is to open up the market to alternative business structures (ABSs) and go further than England and Wales by restricting use of the title ‘lawyer’.

A consultation issued in 2021 built on the 2018 Roberton review, whose primary recommendation was to establish a single independent regulator for all legal services in Scotland. But this polarised the views of stakeholders.

The government put forward three potential regulatory models: a single regulator; a ‘market’ regulator akin to the Legal Services Board in England and Wales, overseeing independent regulators of the different parts of the profession; and “enhanced accountability and transparency”, meaning each professional body has an independent regulatory arm accountable to the Scottish Parliament or the Lord President, the head of the judiciary.

Shortly before Christmas, the Scottish government decided to go with the third option.

The Law Society of Scotland – which represents solicitors and solicitor-advocates, specialist conveyancers, ‘executor practitioners’ (who deal with probate) and notaries public – already has an operationally independent committee to oversee its regulatory work.

There are two other main lawyer bodies: the Faculty of Advocates, which oversees the Scottish Bar, and the Association of Commercial Attorneys, whose members have a statutory right to appear in court in relation to construction and building law.

The Scottish government’s response to the consultation said it would create “a two-tier system for legal service regulators would allow for a proportionate and risk-based approach while allowing the framework to adapt to change in the market and address concerns that the landscape is complex and difficult to understand”.

The first-tier regulators would be those with “a significant membership or whose members provide largely consumer-facing services”, who would have delegate their regulatory responsibilities to an independent committee comprised of legal and non-legal members, chaired by a non-legal member.

They would have to lay an annual report before the Scottish Parliament in respect of performance and compliance with the regulatory objectives.

Second-tier regulators would be those whose members were “less consumer facing or more specialist in nature in terms of the legal work undertaken, and whose membership is comparably less in number”.

The response explained: “In this tier, it would be considered disproportionate to the size and lack of direct consumer contact for such regulators to delegate to a regulatory committee.

“Second-tier regulators would however be required to publish its regulatory regime, to produce an annual report which will be published on its website, and keep a register of members which would be publicly available.”

The Lord President and the Court of Session, Scotland’s supreme civil court, will maintain responsibility for prescribing the criteria and procedure for admission to the legal professions, the approval of changes to practice rules, and retain an overarching role in the regulatory framework.

But the forthcoming legislation will include “a process for intervention by Scottish ministers in the light of concerns being raised on how and whether regulators are delivering their regulatory objectives and the operation of regulation in relation to public interest…

“Alongside this ability to investigate, a process for applying sanctions would also be necessary. This approach would require appropriate safeguards.”

A law passed in 2010 allowed ABSs where they operate for profit and have majority lawyer ownership but has never been brought into force. The Scottish government said it would remove these restrictions “to address concerns that Scottish legal firms are at a competitive disadvantage compared to other jurisdictions”.

Liberalisation should allow for employee and community ownership of ABSs, “greater potential for outside investment into ABS”, and third-sector organisations directly employing lawyers to undertake what was currently reserved activity, such as court proceedings.

As south of the border, the title ‘solicitor’ is protected by law. The government said there were “notable and legitimate reasons” for people to call themselves a lawyer while not being on the roll or subject to regulation – such as legal academics, in-house lawyers and those who practise religious law.

“In taking a targeted and risk-based approach, we view that it should become an offence to falsely pretend to be a ‘lawyer’ or ‘a member of the Faculty of Advocates’ in order to provide legal services to the public for a profit.”

Other reforms approved include introducing entity regulation, allowing regulators to set up sandboxes to promote innovation, creating a statutory definition of legal services, and making the legislation which underpins the Scottish Legal Complaints Commission “more flexible and proportionate”.

Community safety minister Elena Whitham said: “While Scotland has one of the best legal professions in the world, improvements to the regulatory structure are needed to further support access to justice.

“The Scottish government wants a modern, forward-looking regulatory framework that will promote competition, innovation and public and consumer interests in an efficient, effective and independent legal sector.

“Measures that instill greater consumer confidence, such as preventing people struck off from referring to themselves as lawyers will give consumers and members of the legal profession greater protection.”

Murray Etherington, president of the Law Society of Scotland, described the policy decisions as “good news, both for consumers and for the Scottish legal sector”.

David Gordon, the non-solicitor convener of the society’s regulatory committee, added: “We are proud of our track record in maintaining professional standards and protecting the public. This is why we are so pleased to get confirmation from ministers that the Law Society will continue as the regulator of Scottish solicitors and do so independently from the state.

“This is a big and important vote of confidence in the work we do.”

The consultation response said the legal sector contributed over £1bn to the Scottish economy a year and was responsible for over 20,000 high value jobs.

“It is not only an economic generator in its own right but a profession that is critical to Scotland’s other key sectors – financial services, oil and gas, renewables, science and technology. both the sector and the Scottish government are working together to ensure the sector makes its maximum possible impact in a competitive global market.”

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