Editors Blog
MSPs going for wider view
10 Jun 10
First stage 2 debate suggests bill will be permissive
The odds are shortening on the Legal Services (Scotland) Bill introducing wider forms of ownership of legal practice, including at least up to the 49% external ownership now officially supported by the Society, to judge by the newly published official report of the first stage 2 debate.
A key discussion took place on an amendment proposed by Labour MSP Bill Butler, which would have defined the "licensed legal services providers" to be permitted under the Bill as a firm or incorporated practice that "is owned and managed to the extent of not more than 25% by a non-solicitor investor, but is otherwise owned and managed by legal professionals".
Note that this is wider than the "Dailly motion" now backed by the Scottish Law Agents Society and others, because it contemplates external investment of up to 25% – chosen, Mr Butler said, as representing the "negative control" threshold in company law. So far as I can see from the amendments tabled, there is none that proposes the 25% non-lawyer investment confined to those in the business, in line with the Dailly proposal, although the 49% external limit is reflected in a new section tabled for a later part of the bill.
Mr Butler argued that there was a case for not being too adventurous at present and that it would be easier to raise the permitted non-lawyer percentage later, than to attempt to restrict a wider ownership if that was found to be leading to undesirable consequences. His amendment would also mean that we would not need to start introducing regulators other than the Society.
While Mr Butler had some support from other oppositon members for his desire not to move in one go to the full range of ownership, and due note was taken of the continuing division of opinion in the profession, the committee voted 5-3 against the amendment (Labour members being outvoted this time). Minister Fergus Ewing argued that it was incompatible with the policy intention behind the bill, and convener Bill Aitken pointed out that it would suit neither the big firms who wanted to attract investment, nor the smallest high street practices due to the 25% rule.
However the prospects for the 51-49% amendment are different, that having tabled by Liberal Democrat Robert Brown, supported by Bill Aitken, and if that also receives Labour support, that will be the face of the bill by the time it comes back to the full chamber.
The spectre was raised in debate of a further super-complaint to the OFT if a restrictive policy is passed, though the committee did not seem unduly perturbed. As we reported yesterday, the OFT continues to argue that allowing 100% external ownership would open up the prospect of better legal services for those on lower incomes, though it also acknowledges that it would be unlikely to make a market investigation reference where an elected parliament had specifically chosen not to act. Super-complaints are for others to initiate.
It seems to me as a result of all this, that there is little if any support in the Parliament for permitting no external ownership at all, and it is time for solicitors to start reviewing their business models on the basis that it will happen, probably up to the 49% mark.
However there may well be more mileage, the principle of regulating non-lawyer will writers now having been accepted by the Government, in looking for other areas where unprofessional practice can operate to the detriment of the public. A proposal to regulate companies offering to handle employment tribunal claims was defeated, but largely on the basis that it had not been put to consultation and proper evidence of malpractice was needed. Members were attracted to a suggestion from Robert Brown that residual powers might be introduced at stage 3 under which any area of claims management might be brought into regulation by affimative order.
Do not underestimate the other ways the public and professional interest might be brought together under this bill.