New model army

1. What has happened since your February Journal article?

First of all, the consultation paper was published in early March and we have had a chance to consider it in some detail. It is an impressive document and runs very much along the lines we anticipated, though perhaps with more focus on regulation and less on business models. I am pleased that it acknowledges fully that the consultation affects only England and Wales but it also confirms that any decisions will have knock-on effects in Scotland and Northern Ireland.

It is a thorough piece of work, which accepts the fundamental differences between the law, legal services and other areas of economic activity. It also shows a clear understanding of the principles or precepts of the legal profession as including independence, integrity, the duty to act in the best interests of the client and confidentiality.

The 80 page paper is available from: Mrs Susan Samuel, Review of the Regulatory Framework for Legal Services, 2nd Floor, Selborne House, 54-60 Victoria Street, London SW1E 6QW (tel 020 7210 1454), and on the web at: www.legal-services-review.org.uk.

It is divided into six chapters of substance, covering Objectives & Principles; Regulatory Models; Complaints & Discipline; Governance, Accountability & Related Issues; Regulatory Gaps; and Alternative Business Structures. It asks 38 questions, many in some detail. I will touch later on the salient points for the Scottish profession.

2. Will the Society respond?

Certainly. The response date is 4 June, which allows time to continue our process of communication with the profession and develop a draft for our April Council. The questions of principle encapsulated in the three key questions I highlight below are going to be a major topic at our AGM on 13 May. We will have a final session taking the AGM outcomes into account and sign off our response at the 28 May Council meeting.

3. What has the Society’s work focused on since February?

It is commonly accepted that the Law Society of Scotland must give serious consideration to the issues which come within the scope of Clementi. Although we went through the Scottish Parliament’s Justice 1 Committee inquiry a couple of years ago, Clementi is far more broad-based as that inquiry focused on complaints procedures.

In previous articles I mentioned our programme of faculty visits, culminating in a debate on 31 March at the WS Society chaired by John Elliot, at which Duncan Murray our Vice President, Nicholas Gould of Lovells (giving a big firm English perspective) and Neil Brailsford QC all took part in a thought-provoking and informative panel discussion.

Two main themes came out of the faculty visits. First, they were very well attended and showed the profession’s interest and engagement. Secondly, they were all extremely challenging – and tended to reach differing conclusions! None of us anticipates unanimity. That is unrealistic – indeed it would be a bad thing. The profession in Scotland can pride itself on its independence of thought and ability to challenge current thinking.

We have also been consulting with other major stakeholders in the Scottish legal system and, importantly, participating in a research working group established by the Scottish Executive’s Justice Department.

4. What does it seek to achieve?

The Executive have sensibly created a group which aims to establish an evidence base for any analysis of regulation and business models in Scotland. Chaired by Colin Imrie, Head of Justice Department Access to Justice Division, its members represent the Society, the Faculty of Advocates, the Scottish Consumer Council, Citizens Advice Scotland, the OFT, SLAB and others. I am a member and if I am unable to attend any meeting, Michael Clancy, our Director of Law Reform, will deputise. Michael Walker of Maclay Murray & Spens represents the big firm perspective. Neil Ross, a former Council member and a partner in Grigor & Young, Elgin, will promote the interests of rural practitioners. His appointment recognises the importance of the rural sector in Scotland.

The group has a demanding schedule of meetings and undertakes to report within a year.

5. Is it covering the same ground as Clementi?

Broadly yes: same issues; different jurisdictions; different concerns. The first meeting, which I thought was excellent, was attended by Sheila Spicer, one of the Clementi Review team, who made a very interesting presentation. I was able to determine:

(1) With a possible General Election and difficulty with timetables, it is unlikely that anything would hit the statute book until 2008. Any Scottish developments would be likely to follow perhaps up to two years thereafter.

(2) She accepts “differential effects” in any changes in different areas of geography and practice subject. She also thinks that “supply base” problems could be solved by new “permissive” business models. I am not sure I agree, and hope to expand on this in a further article.

(3) She is willing to return to Scotland and hopefully will address our Council on 30 April. Duncan Murray, our Vice President will attend one of the Clementi roadshows in Newcastle in April and our President, Joe Platt, has been invited to the English Council meeting. We are as tuned in to what is happening in England and Wales as we can be.

(4) She has correctly identified three fundamental questions in the review, namely:

(a) Question B1 – “What do you see as the broad advantages and disadvantages of Model A in comparison with Model B? In particular, what do you see as the strengths and weaknesses of (1) combination and (2) separation of regulatory from representative functions?”

(b) Question C2 – “In connection with complaints, what are the advantages and disadvantages of (1) having a uniform complaints organisation, independent of the bodies, similar to the Financial Ombudsman Service or (2) each body remaining responsible for its own complaints? Is the New South Wales example a useful model?”

(c) Question F2 – “How do you see the advantages and disadvantages of LDPs? Can the current restrictions (by professional bodies) preventing the development of these practices still be justified?”

To explain these questions:

The first relates to three models Clementi is proposing for future regulation of legal services in England and Wales. He has said that the status quo is not an option. Model A is essentially a legal services authority – the regulator would have control of entry standards, rule making, monitoring and enforcement, complaints and discipline – along the FSA model with which Sir David Clementi is familiar.

Model B sees the creation of a Legal Services Board to oversee the professional bodies with regulatory and representative functions. A further variant is Model B+ which would require the Law Society of Scotland to split into a regulatory body and separately – in a constitutional and probably physical sense – a support group for the profession.

Question C2 goes to the heart of who should handle complaints. One interesting feature of the faculty visits is the willingness of the profession to consider disposing of service complaints to another body, with the Society retaining admission, rule making and prosecution of serious conduct matters. The New South Wales example which uses a “single gateway” for complaints is often referred to. My own view – and it is a personal view – is that this would simply add another “hedge” to any regulatory maze. There is already a confusion of organisations with responsibilities over solicitors in Scotland.

Question F2 mentions LDPs – these are legal disciplinary practices. Whilst Clementi mentions multi-disciplinary practices, I think it is clear from the consultation paper that he is less keen on these than the possible provision of all-embracing LDPs. These could be owned by the lawyers within the firm (advocates may be concerned about a degree of fusion here) or outside bodies. This is another essential question which the profession in Scotland will have to consider.

6. So no status quo in Scotland either?

I am sure the Scottish Executive will not predetermine any outcomes and will look at matters carefully. The Clementi “process” in Scotland will take some years and involve a full assessment of the best interests of the public. It would be rash to dismiss out of hand a model which has worked in the public interest for decades and to ditch the findings of the Justice 1 Committee. Any change could prejudice the future of the Guarantee Fund, the Master Policy and a “free at point of delivery” complaints system, all of which are major benefits for the public in Scotland and also the envy of many other jurisdictions.

I believe that the Executive should defer any major decision-making not only until the Clementi Report comes out, but until sufficient time has elapsed after the implementation of change in England and Wales to allow an analysis of the costs and benefits.

I cannot over-emphasise that Clementi does still go to the heart of the concept of professionalism both in terms of regulation and also whether or not lawyers should remain independent of outside influence – and indeed the Government.

7. What should the profession do?

I wrote recently to all Deans of Faculties in Scotland enclosing a copy of the consultation paper and asking them to provoke discussion within their area. Although there is only time for a limited number of roadshows before the 4 June deadline, issues remain live in Scotland and we could schedule more visits in September-December. Members are also invited to attend the AGM on 13 May and contribute to the Clementi debate.

It is up to individual solicitors, firms or faculties to respond to Clementi should they wish. I encourage them to do so with or without involving the Society. I would be grateful for a copy of any reports sent independently – before or after the deadline.