Checkout the debate

It would be going too far to say that the future of the legal profession in Scotland now lies in its own hands. However the response by the Office of Fair Trading to the “super-complaint” brought by the Consumers Association, or Which?, against restrictive rules that allegedly operate against the consumer interest, provides a possibly unique opportunity to devise a model for the future which government would have an incentive to adopt.

“It’s been a great week for us, a challenging week, and it gives us an opportunity to get on the front foot”, Douglas Mill commented to the Journal three days after the response was published. The Law Society of Scotland’s chief executive was reflecting on a few days in which the Society’s planned conference and consultation paper on alternative business structures for the profession have been thrust centre stage after the OFT passed the ball firmly back to the Scots to devise their own solutions.

Work in progress

The shift in the debate is striking. As the Society noted in its submission to the OFT, Which? seemed to have ignored the political processes in Scotland which resulted in the Legal Profession and Legal Aid (Scotland) Act and the new Complaints Commission. “Instead, the summary and aspects of the complaint seek to simply trace onto Scotland some aspects of the [Clementi Report and Legal Services Bill]”, the Society wrote.

Although the OFT did not take up the Society’s position that the super-complaint was premature since Which? had undertaken no consultation with the Scottish Executive or the professional bodies, it has reached an outcome not unlike the Society’s submission that further action by the OFT was unnecessary, due to the work already in progress in Scotland. Its recommended timescale for reform proposals, however, adds a whole new impetus to the process.

“The OFT’s approach is welcome as it has raised the profile of the debate and has allowed us to get people round the table quicker”, Mill comments.

The scene is indeed set for a defining moment in the history of the profession in Scotland. The OFT recommended that the Scottish Executive publish by the end of 2007 a statement of its policy views on the matters in the super-complaint, and a timing commitment. Kenny MacAskill, the new Justice Secretary, in turn clearly expects the Society to be proactive in formulating proposals.

An inclusive conference

Hence the importance of the 28 September conference, “The Public Interest: Delivering Scottish Legal Services”, a crucial step in a tight timescale of events through which the Society hopes to have proposals at the “white paper” stage by the turn of the year. Building on the work of the ABS working party, which has already been meeting for some months, a consultation paper will be published for the conference, dealing with the OFT response. Thereafter, the intention is that Council will produce a “green paper” for wider consultation, and then the white paper to put to the profession.
“The conference is the key in formulating ideas, the most important part in the development of the solicitors’ profession’s strategy in responding and formulating a reply”, says Michael Clancy, the Society’s Director of Law Reform. “It’s an opportunity to have an educated level of debate, with representations from stakeholders, and to let different voices within the profession be heard.”
The date chosen is also that already scheduled for the annual Special General Meeting at which practising certificate and other fees for the coming year are set. That meeting has been moved to 2 pm at the same venue.
While the format will be that followed last September, when “Balancing the Scales of Justice” reasserted the need for professional independence ahead of the parliamentary debates on the Legal Profession Bill, Mill is keen that there will be scope for all points of view to be fully heard. To date the three main speakers will include one from the OFT, and Jonathan Goldsmith of the CCBE, the Council of European Bars and Law Societies, which takes an interest in professional regulation in all its member jurisdictions. Panel members will include Douglas Connell of Turcan Connell, who champions the cause of multi-disciplinary partnerships; Christine McLintock, Council member and McGrigors’ risk and knowledge management partner, for the firms with cross-border interests; Julia Clarke of Which?; Martyn Evans of the Scottish Consumer Council; and Valerie Stacey QC, Vice Dean of the Faculty of Advocates. The other UK and Irish law societies, and the relevant departments of the Scottish Executive, have also been invited to share their views. These concern economic as well as justice interests, given that the legal sector in Scotland employs over 20,000 people and has an annual turnover exceeding £1 billion.

Call for full debate

Mill does not expect the end result to be one of consensus. “We wouldn’t expect unanimity of view either within Council or in the wider profession. High street firms will have a different perspective to big firms.”

He reiterates that now is the time for anyone with ideas to come forward.

While it welcomes the opportunity to move the debate forward, the Society will undoubtedly be hoping to engage in a full dialogue on how any new regulatory structure can be made to work in practice.

The OFT response, summarised below, provides at least part of the agenda. It recognises that work needs to be done on, among other points, the future of the cab rank rule for advocates; regulation of legal disciplinary partnerships; safeguards to ensure the proper operation of law firms owned by non-lawyers; and generally “the appropriate safeguards that would need to be put in place in order to protect the interests of consumers and the integrity of the profession”.

So the Scottish profession in general, and the Society and Faculty in particular, find themselves with a window of opportunity to try and define their future in terms acceptable to government and to the competition regulator.

Douglas Mill accepts the challenge but warns that a lot of detaled work lies ahead. “While devising an alternative business structure could be relatively easy, devising a regulatory model to oversee that structure might prove more complicated. Whatever the outcome, we will endeavour to provide the best regulatory framework that we can: one that allows individual firms to thrive but ensures that consumer choice does not compromise public interest.”

The end result, it should be remembered, is not in the Society’s gift. The better the level of debate, however, the more credible will be any set of proposals ultimately presented to government.

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THE OFT: A MEASURED RESPONSE

In its response to the Which? super-complaint, the Office of Fair Trading has accepted the assertions by Which? concerning the restrictions on the provision of legal services in Scotland, but rather than exercising its statutory powers, recommends that action be taken by the Scottish Executive and the legal professions in Scotland towards lifting the restrictions.

Although the Which? complaint was clearly directed to promoting similar reforms for Scotland to the new regime for England & Wales contained in the Legal Services Bill, the OFT begins its response by noting the different legal services market in Scotland. “The OFT also considers that it is important to develop an appropriate Scottish solution to any perceived problems… [it] has not assumed that the changes currently being made in England & Wales will be automatically suitable for the Scottish market.”

The Society pointed out in its submission that the Which? complaint was not supported by documented facts and evidence as set out in OFT guidelines. However the OFT has drawn on its participation in the Scottish Executive’s Research Working Group of 2004-05, as well as representations made as it considered its response, for its conclusions on the grounds of complaint.

The Which? reference asserted that interests of consumers in Scotland were significantly harmed by:

• the restrictions on advocates’ business structures;
• the restrictions on solicitors and advocates providing services jointly;
• the restrictions on third party entry; and
• the restrictions on direct access to advocates.

Which? further submitted that the regulatory structure for legal services in Scotland should be reformed in order to accommodate the lifting of these restrictions.

Responding, the OFT recognises that particular considerations apply to the legal profession, but in each case concludes that the cost of implementing safeguards does not outweigh the benefit to consumers from lifting the restriction. Thus it states at para 5.11:

“The OFT recognises that particular safeguards would be necessary in order for law firms owned by non-lawyers to operate properly, if the current restrictions were to be lifted. The OFT considers that the costs involved in implementing such safeguards do not, however, outweigh the benefits for consumers that could be achieved by lifting the current blanket ban.”

Similar comments can be found on each of the restrictions considered.

It is well known that a number of leading firms in Scotland already favour a relaxation of the restrictions, and they took the opportunity to put their views to the OFT. “Since the publication of the SE [Scottish Executive] Research Working Group Report, views of the solicitors’ profession on the issue of ABSs, including MDPs, have been shifting”, it reports.

The response document records submissions from practising solicitors on the advantages of LDPs as a “one stop shop”; the difficulty of expanding or funding innovation, or indeed securing succession to high street firms, without outside equity; the need to attract individuals with skills such as management by offering an equity interest; the possibility of ABSs leading to improved service quality, and business efficiency through cost sharing; and views that outside ownership would not affect access to justice. It is not stated whether any firms made representations to the contrary.

Recognising that reform does not mean compulsory change, the summary of findings in the response begins: “It is important to note that lifting the restrictions on ABSs will not compel legal services providers to adopt such structures. The current business models will still be available to solicitors and advocates should they feel that the current structure is best for their business. Legal services providers should, however, be free to choose the model that best suits their clients’ needs.”

Although the OFT does not accept the Society’s submissions that the benefits of ABSs are untried and it cannot be assumed that they would benefit consumers, it welcomes the Society’s initiative in organising the 28 September conference and its intention to produce a green paper to discuss with the Executive. “Given the circumstances,” it concludes, “we believe that it is appropriate for the SE and the Scottish legal profession to take a leading role in taking these issues forward and to consider how these restrictions might best be lifted in Scotland, subject to appropriate safeguards being put in place in order to protect the interests of consumers and the integrity of the profession in Scotland.”

Importantly, the OFT does not consider the subject a suitable one for exercising any of its powers, such as a reference to the Competition Commission or (at least at present) an investigation under the Competition Act. Instead its concluding “Recommendation” section reads:

“10.1 The OFT recommends that by the end of 2007, the SE should publish a statement which details its policy views on:

• how it considers legal services in Scotland should be regulated
• how the restrictions outlined in the super-complaint can be lifted,
  
• and a timing commitment for these aims.

“10.2 The OFT recommends that the legal professions in Scotland take full advantage of these opportunities and that the [Faculty of Advocates and the Law Society of Scotland] lift any of their own practice rules which contribute to the restrictions discussed in this response.

“Next steps

“10.3 The SE has told the OFT that it expects to be able to publish its views on the recommendations contained in this response within 90 working days of publication. The OFT looks forward to those views and will, of course, work closely with the SE and other stakeholders in seeking to ensure that the recommendations contained in this response are implemented as soon as possible.”