Pursuing a better bill

The Regulation of Legal Services (Scotland) Bill represents the biggest shakeup of the regulation
of solicitors in well over a decade.

It would introduce new forms of regulation over legal businesses, changes to the way complaints are handled, and new restrictions over who can and cannot call themselves a lawyer.

It also proposes sweeping new powers for Scottish ministers to intervene directly in the regulation of solicitors, which has caused huge concern at the Law Society of Scotland.

The Society submitted an in-depth response to the Scottish Parliament’s Equalities, Human Rights & Civil Justice Committee in July, and here sets out where the bill could bring long-sought improvements, alongside some of its
key concerns about the proposals.

What is the Society saying about the bill?

There is much in the bill that we welcome.
New proposals for business (entity) regulation and restrictions around who can call themselves a lawyer are positive.

There are also some process improvements which should help speed up elements of our work to take regulatory action when we need to.

However, many of the suggestions we made for system improvements are absent, particularly around complaints handling. We have set out a number of concerns in our response and have highlighted some of the key areas where we believe changes are needed.

We hope these can be addressed as the bill progresses through the Parliament.

Threat to independence

Our current President, Sheila Webster has said that the proposals for new ministerial powers to intervene directly in regulation are “dangerous and wrong” and should be removed from the bill as a matter of urgency.

These powers risk undermining the rule of law and the independence of Scotland’s legal sector from the state. A key component of a free and democratic society is having an independent legal profession that can challenge Government and protect citizens from the excessive use of power by the state. That is why it is so concerning that the state, through Government, could direct or control how legal professionals work.

“While we think the overall setup is appropriate for a jurisdiction of our size, we know the system for dealing with legal complaints is not working”

The bill would empower the Scottish Government to direct the Society to take certain action and could give Scottish ministers a direct role in approving rules on how existing law firms operate and on the practice of solicitors. It opens the prospect that the state could regulate law firms directly. These are levels of political control and intervention never before seen in the Scottish legal sector, or in fact in any other Western democracies.

Strengthening the Regulatory Committee

In her 2018 report, Esther Roberton recommended creating a new independent regulator of solicitors. There were serious concerns over the costs of setting up and running a new body. There was also worry about having a politically appointed body regulating the legal sector.

Rightly in our view, the Scottish Government chose not to take forward that model. Instead, the legislation proposes to strengthen the independence of the Society’s existing Regulatory Committee, to make it more transparent and accountable, with a new requirement for annual reporting to the Parliament on its work, which we support.

Complaints

While we think the overall setup is appropriate for a jurisdiction of our size, we know the system for dealing with legal complaints is not working. It is too slow, too rigid, too complex and increasingly expensive. The bill includes positive changes which should help the SLCC deal with the eligibility stage of complaints more quickly. We also welcome new provisions allowing the Society to start our own complaints investigations when we want to, without having to go through the SLCC as we do at the moment.

However, we want the bill to go further and have sought new powers which would allow us to dispose of conduct cases early in limited circumstances. We also want to widen our limited powers to suspend a solicitor on an interim basis when possible serious wrongdoing is uncovered or to restrict a solicitor’s practising certificate when necessary.

SLCC powers: practice rules by the back door?

An area of concern however is around enhancing powers for the SLCC.

The bill would give the SLCC (renamed the Scottish Legal Services Commission – itself something we think is unnecessary and potentially confusing for consumers) new powers which go well beyond issuing recommendations and would allow it to set minimum standards.

We interpret the provisions as creating very broad powers which would allow the Commission to set certain minimum standards directly for practitioners, along with a provision which would require them to comply with those minimum standards.

Taken together, we think these provisions effectively amount to practice rules set by the Commission, but without any of the existing checks and balances such as the requirement for approval from the Lord President. It could also mean any Commission rules are confusing or even contradictory for practitioners.

This would be a major and serious departure from the current arrangement, where the SLCC has the power to make recommendations that the Society then decides on.

The SLCC has occasionally issued recommendations which we rejected as we believed they would have had serious and negative consequences for consumers. For example, recently, the SLCC made recommendations in relation to changing the Master Policy terms which were not in line with the practices of the professional indemnity insurance market. Had the SLCC been able to impose a direction, we potentially could have been forced to progress changes which would not be in the public interest, damaging the interests of both consumers and the profession.

Worryingly, there is no indication in the bill how an SLCC direction could be challenged. To address this we have suggested that the SLCC continues to make recommendations as it does now, and where we believe these are inappropriate, we go to the Lord President for his decision on the matter.

New categories of regulator

We do not believe the Scottish Government has made a compelling case for creating different categories of regulator as set out in the bill.

Category 1 regulators are those with a membership which largely provides consumer-facing legal services, while category 2 have smaller, more specialist memberships. However, both organisations listed in the bill as category 2 regulators include members who offer legal services directly to consumers. Many category 2 regulated individuals would also be involved in highly controversial or sensitive cases, such as murder or rape trials, or work in complex and high value civil cases.

Our view is that simply because the total number of such legal professionals may be comparatively small, it does not necessarily mean the regulatory requirements should be different.

We have welcomed bill requirements which aim to improve the transparency, accountability and independence of category 1 regulators. But surely it would be beneficial if they also applied to category 2? And if the requirements for the different categories become virtually the same, is there any need to differentiate at all?

New proposals for licensed providers

The bill also includes proposals for alternative business structures – licensed legal services providers (“LPs”).

While not yet up and running (the launch is expected later in the year), the provision of legal services through LPs (permitted under the Legal Services (Scotland) Act 2010), is likely to generate innovation in the legal services market and benefit consumers. We’re in favour of reducing barriers to creating LPs, but it’s not clear to us why the new 10% figure has been chosen to replace the current 51% solicitor/other regulated professional ownership requirement – at that level we question whether any restriction is needed at all.

Other challenges also need to be addressed. For example, there is no opportunity for a Scottish LP to list on a stock exchange, unlike in England & Wales and other countries around the world. Similarly, the regulatory requirements for an LP are more onerous than for a traditional solicitor practice.

Depending on the type of work undertaken, it could also see LPs being regulated by other regulators, such as the Financial Conduct Authority, as well as the Society unless changes can be made to the bill’s definition of legal services. As it stands, it would mean unnecessary additional bureaucracy and cost for legal practices – and ultimately their clients. We hope this can be amended as the bill progresses.

Waiver worries

A further aspect of the bill where we intend to press for amendments is around waivers.

The Society’s current processes for granting waivers from practice rules has worked well for many years and is overseen by a dedicated committee involving lay members and experienced solicitors.

There can be good reasons to agree to waive an individual solicitor from a practice rule in a specific case.

Consider the conflict of interest rules, which are important in protecting clients. We can and have waived the rules in certain cases to permit solicitors to act in circumstances which present no real risk of a conflict emerging. For example, where an individual in a family company is buying a property from that company, it can make sense for a single solicitor to act for both.

However, as currently drafted, the provisions in the bill create processes which could stymie the existing effective and efficient waiver system, cost more and be of real detriment to consumers.

Who can call themselves a “lawyer”?

We have long argued for new controls over who can call themselves a “lawyer”. It is concerning that anyone, including those without any legal education, qualification or accreditation, can legitimately call themselves a “lawyer” and offer legal services for profit. It poses a significant risk to consumers who do not differentiate between a “solicitor” and a “lawyer” and may be misled. We’re pleased this has been included, but think the provision in the bill could be even stronger and will make this argument.

Read more

These are just some of the aspects which we have addressed in our response. The Society first went to the Scottish Government in 2015 to argue for reform of the regulatory framework, much of which is over 40 years old. Through
our work on the bill we will continue to press for a modern, flexible regulatory system that not only provides robust protections for legal services consumers, but ensures a framework that allows the Scottish legal sector to innovate and thrive.

The full response is available to read on the Society’s website.