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ABS workout

15 February 10

Developments in legal services reform and the progress of the bill over the past month, with two contrasting standpoints from the legal profession

by Peter Nicholson, Janet Hood, Ian Ferguson

Solicitors across Scotland are taking a renewed interest in legal services reform, as the Legal Services (Scotland) Bill approaches the conclusion of stage 1.

Six free-of-charge ABS roadshows organised by the Society for dates in March (see panel) had already attracted over 500 bookings between them as the Journal went to press at the beginning of February, with the Glasgow event being oversubscribed. Attracting two hours’ management CPD, the events will feature a short presentation from members of the Society’s office bearers and executive before the meeting is opened to the floor. Those attending will be able to raise matters concerning the bill and how it might affect them, or any other ABS-related issues. The Society has promised to take on board the views expressed.

Key blueprint

By the time of the roadshows, consultation will be open on the Society’s proposed regulatory and financial model, a draft of which was discussed at January’s Council meeting. As part of its application to be an authorised regulator, the Society will have to prepare a regulatory model for licensing LLSPs (licensed legal services providers, the bill’s term for a practice owned wholly or partly by non-lawyers), and the paper sets out its current thinking on how to go about this.

As the President explains elsewhere in this issue (see letters, 11), the Society believes it should remain the regulator of legal practices that choose not to adopt one of the newly permitted structures. And though others can apply for approval as regulators of LLSPs, the Society’s aim is to be the regulator of choice for the new forms of practice, on the basis of price, branding and efficiency of supervision.

The paper is an important one, outlining the Society’s approach in trying to ensure a level playing field between conventional firms and LLSPs, and covering such matters as ethics, privilege and standards; regulation of non-solicitor investors; the Accounts Rules and Guarantee Fund; the Master Policy; and the very funding of the Society, including the types of membership and the proposed balance of cost recovery as between individuals and entities. A closing date for submissions is likely to be set for the second half of April, to enable final proposals to be put to the AGM in May.

As respects individual solicitors there will be little change in approach; firms will notice further moves towards “entity” regulation, as in effect already happens with the likes of accounts certificates and the Master Policy.

Bill centre stage

In the Parliament, meanwhile, 26 March is the target completion date for stage 1 of the Legal Services Bill, with the Justice Committee’s report on the general principles of the bill being followed by the stage 1 debate.

In two further evidence sessions in January, the committee heard in the first week from a variety of witnesses, including representatives of ICAS, the Unite trade union and Consumer Focus Scotland, the latter two of which took opposing views on the desirability of liberalising the legal services market; and from solicitor Gilbert Anderson of Andersons LLP, who opposes external ownership of legal practices, at least if more than a 25% minority stake. Mr Anderson argued that a genuinely independent legal profession was essential to a free and democratic society, and he could not see “on a commonsense basis” how this could apply to a firm of solicitors owned from outside.

In the final session Fergus Ewing, the Minister for Community Safety and a solicitor, reaffirmed that the reforms had been requested and approved by the legal profession itself, and his belief that the bill contained sufficient statutory protections to underpin professional independence. He added that he had met representatives of the Scottish Law Agents Society to hear their concerns (see panel), but believed these were unfounded. The bill, he maintained, was necessary to enable Scottish solicitors to compete with firms from elsewhere for lucrative work with an international dimension, and had the potential to benefit consumers at home.

The debate on the bill remains very much a live one, and the Journal will aim to keep pace with it, so far as the monthly schedules permit. In the April issue we will be able to report on the Society’s roadshows, as well as the outcome of stage 1 in the Parliament; any significant developments in February will feature in March.

News as it happens will also appear on www.journalonline. co.uk .

Peter Nicholson


ABS perspective: Scottish Law Agents Society

SLAS believes its response to the Legal Services (Scotland)

Bill (see www.slas.co.uk) was misquoted in last month’s Journal. We are not against all of the bill. SLAS believes a valuable opportunity to deal with legal services is being missed. This bill is more about regulation of solicitors than legal services.

Unqualified and unregulated providers

Why is the bill further regulating the most regulated profession in this country but doing nothing about unqualified and unregulated legal services providers? There is no level playing field and the bill makes this worse. We are concerned regarding:

  • lack of specification of the qualifications of other providers, and the problems caused by claims management companies, unregulated will writers and confirmation service providers;
  • the dangers posed to the public by such unregulated and unqualified providers and by the “execution only” legal services they offer;
  • the need for extension of the reserved areas of legal work to include will writing and the winding up of estates, not just the application for confirmation.

This should have been the main focus of the bill. There is no urgency, so why not comprehensively deal with this now?

Alternative business structures

We have been concerned that the vote taken at the 2008 AGM of the Law Society of Scotland (LSS) was not truly representative of the profession, and have ascertained from LSS that some 600 of the proxies were from four big firms. Previously LSS had opposed ABS for many years.

Our more recent soundings showed 85% of those polled against ABS. We may therefore decide to present a fresh motion at a Special General Meeting of LSS on the issue.

Our job is to represent the profession. We have picked up on this as a grassroots issue needing more debate. We wish to provide a final say to the profession.

The legal case for ABS is not made out and our response to the bill gives legal authority for our view.

Why have Scottish Ministers reached the view that it is unnecessary to seek to impose changes on advocates? This is at odds with the lengthy and arcane procedures required to admit to the Faculty a solicitor advocate who already has rights of audience. An advocate seeking to move in the opposite direction can do so seamlessly. This should be addressed.

Independence

The LSS position seems to be that they agree to ABS if A, B and C occur, i.e. solutions to independence, regulatory control and the Guarantee Fund. In our view these problems cannot be solved and are not solved in the bill.

Our fiercest opposition is the proposed direct involvement of the Scottish Ministers under s 92 (membership of Council), undermining independence and the rule of law. Section 1 includes independence and the rule of law as regulatory objectives, but s 92 shamelessly breaches this. Ministers are to directly fulfil the regulatory role fulfilled by the LSB in England & Wales.

Our legal case is in the response on our website and refers to:

  • The UN High Commission on Human Rights Declaration on the Role of Lawyers in Society (1990): “The executive body of the professional associations [of lawyers] shall be elected by its members and shall exercise its functions without external interference.”
  • The Council of Europe Recommendation R(2000)/21: Decisions concerning the authorisation to practise as a lawyer or to accede to this profession should be taken by an independent body.
  • In Principle V 2 the Council of Europe recommend: “Bar associations or other professional lawyers’ associations should be self governing independent of the authorities or the public.”
  • The European Parliament Resolution 23 March 2006, Point E, opposed to ABS states: “the duties of legal professionals to maintain independence, to avoid conflicts of interest and to respect client confidentiality are particularly endangered when they are authorised to exercise their profession in an organisation which allows non-legal professionals to exercise or share control over the affairs of the organisation by means of capital investment or otherwise, or in the case of multidisciplinary partnerships with professionals who are not bound by equivalent professional obligations”.

Privilege

Another concern is professional privilege. The bill covers privilege in relation to proceedings but not as concerns advice in relation to transactions. This needs to be dealt with.

Ian C Ferguson, Spokesman and Council Member of SLAS


ABS perspective: in-house

The Legal Services (Scotland) Bill will provide opportunities for well prepared, enterprising public service practitioners to provide legal services to their internal client/employer, to each other and to the general public.

In-house central services teams already operate in what is now described as an alternative business structure. Different disciplines provide top level legal, financial and business advice to their in-house clients and are, more importantly, used to working together ethically and according to the rules of their various professional bodies. They are perfectly placed to enter the new legal services regime and compete with other providers across the country. Many local authorities have already set up companies and trusts to better drive forward the business of the parent authority and manage long term projects in a manner commensurate with business needs. So why not for the delivery of legal services?

By becoming a licensed legal services provider the in-house team could improve the financial stability of a costly central services team, improve staff retention by increasing the salaries of lawyers who are among the poorest paid in the profession, and enhance the reputation of the parent authority.

Legal services users stand to benefit. In rural Scotland in particular it is proving to be harder and harder to access legal advice. High Street practitioners are under threat. Legal aid, in particular civil legal aid, is just too costly for many small firms to provide. Is there room for local authorities to provide these services in remote areas? They are already out there providing for social and other business needs. If the in-house team would find itself in a conflict situation it may be that cross border relationships could be set up to provide local legal services. Soft partnerships with local firms might improve the ability to deliver legal services across Scotland. In very remote areas local authorities could offer premises or provide web links for the rural public to access new or traditional providers – this would undoubtedly help redress the current difficulties with access to justice. Forging better relationships with other professionals can enable business to flourish in rural Scotland.

I believe that this bill offers local authorities a real opportunity to set up legal services entities across Scotland for the benefit of those authorities and the general public, if they have the vision, the courage and the drive. So watch this space.

Janet Hood, Chair, In-house Lawyers Group

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