Back to top
Article

Heading for a split?

12 November 18

The report of the independent review under Esther Roberton has called for a new single regulator covering all legal services. What is her thinking, and what have been the reactions to date?

by Peter Nicholson

“I concluded that those who use legal services, and those that deliver these services, will be best served in the future by independent regulation.” With that central proposal, Esther Roberton has sparked a debate that puts the spotlight squarely on the Law Society of Scotland and the other legal professional bodies.

Fit for the Future, the Report of the Independent Review of Legal Services in Scotland, is the outcome of an 18-month study, commissioned by the then minister Annabelle Ewing. Roberton's brief was to reform and modernise the framework for the regulation of legal services and complaints handling, with a particular view to the public and consumer interest, along with the promotion of a flourishing legal sector in Scotland.

The Society had of course been pressing for reform for some time, focusing on the difficulties caused by the now outdated Solicitors (Scotland) Act 1980, as well as problems that have emerged with the 2010 regime for alternative business structures. And both it and the Scottish Legal Complaints Commission have come to regard the complex rules for dealing with complaints as not fit for purpose.

But Roberton, who was given something of a blank sheet in her remit, has presented a “transformational” (her word) blueprint for a completely new model – one that would see the Society, and the Faculty of Advocates, lose their regulatory functions to a single independent regulator, though being expected to work with the new body, for example to “co-produce standards and codes of conduct”. Meanwhile the SLCC would be entirely superseded. 

System weaknesses

What persuaded Roberton to take this line? From the outset she was struck by the complexity of the present system: for a small jurisdiction with around 12,000 practising lawyers she lists five main regulatory bodies (including the Association of Commercial Attorneys and the Scottish Solicitors' Discipline Tribunal).

Indeed she found “a lack of clarity even among some senior solicitors on whether they were required to have a practising certificate only if they worked in those areas reserved to solicitors or if a certificate was required to work in unreserved areas” – a situation that also puts consumers at a disadvantage, she comments.

She also finds the system lacking when measured against the internationally recognised consumer principles, used to assess whether goods or services are being provided in the consumer interest. In brief, these are access to what people need, choice that allows consumers to influence the market, information to help them make choices, quality and safety standards, simple redress if things go wrong, representation where things need improving, and non-discrimination. A study carried out for the review backed up the perception of a power imbalance due to consumer confusion, the prevalence of legal jargon and lack of clarity over pricing, with consumers not always complaining even when they feel dissatisfied. And power imbalance is one of the key things Roberton sees as the task of the regulator to correct.

It is not that the Society or others are failing to do a good job: “There is little evidence of significant wrongdoing in the current model. Yet, complaints are increasing and there is concern that Scotland is losing its share of the UK/global legal services market, and the power imbalance between client and provider is not improving.”

She also records finding “a sense of anxiety in some that the legal services market in Scotland may be in decline”, and a view that what is needed is “strong leadership... and a shared vision for legal services in Scotland”. She adds: “I share that view. I consider that the current regulatory system is not sufficiently able to support a forward-looking, dynamic and innovative legal services sector of the future.”

After also surveying the direction of travel elsewhere, especially in England & Wales where the Competition & Markets Authority has found the market still not to be functioning as well as it might, and moves are afoot to achieve full separation of regulators from the professional bodies – which, Roberton finds, many believe “inevitable” – her report concludes that: “It is clear that the current regulatory framework is not able to meet the needs of all whom it serves. There is therefore a clear and pressing need for strategic change.” 

In place of the dual role

The crux of the argument will centre round her finding “a consistent view, albeit not universally shared, that regulation should be independent of those who are being regulated”. In support she cites the CMA and certain submissions in evidence, as well as solicitors who have told her privately that the Society's present dual role amounts to a clear conflict of interest. Looking at sectors including healthcare, teaching, accounting, architecture and the press, she continues: “It is evident that models in other professions where there is a clear split between the roles of the regulator and the professional body or bodies deliver best practice in regulation.”

It is the perception of conflicting roles that Roberton believes “risks compromising public trust”. In addition, “Encouraging and supporting open competition within that dual role is also challenging; regulatory bodies should be expected to encourage open competition, subject to maintaining standards, and that is a complex area for bodies which perform both representative and regulatory functions. Some senior solicitors I spoke to privately supported this view.”

Roberton's new single regulator would:

  • cover individuals, entities and activities;
  • have a non-legal chair and non-legal majority, “to provide consumer and public confidence”;
  • have the Parliament appoint the chair, who would then appoint other members through an independent process;
  • be financed by a levy on practitioners and entities, the cost not to exceed the current model and also “ensure proportionality”;
  • develop new systems, rules and processes (principles based and risk based) in partnership with consumer bodies and the professions;
  • be accountable to the Parliament and subject to scrutiny by Audit Scotland. 

A better way?

Several questions have already been prompted by her outline. Most fundamentally, does it square with an independent legal profession? Is a profession independent if it is regulated by a body from outside, even if that is itself constitutionally independent? Noting the Irish Legal Services Regulatory Authority as the only example she has found of independent regulation, Roberton quotes a commentary that initial proposals were significantly amended through an “onslaught of amendments” in a campaign “orchestrated” by professional bodies. Yet to others, those proposals constituted a genuine threat to professional independence and the Irish Government was forced to backtrack in the face of international as well as domestic pressure.

As for cost, it takes a leap of faith to accept that it would not exceed that of the existing arrangements. Though the present system may be complex, as regards the Society it is heavily dependent on both solicitors and lay people volunteering their services to its many committees. Roberton “would hope and expect that this would continue in the interests of the profession”; but it may not be wise to make that assumption for such an altered regulatory environment.

Her contention that splitting the role of regulator from the professional bodies delivers best practice in regulation will not go undisputed either. Professor Alan Paterson of Strathclyde University, in evidence to the review, argued that even if it solves the tension between public interest and the profession's interest, it creates other challenges. “The Law Society, SRA and Legal Services Board model has not been a conspicuous success in England & Wales,” he observed. “The last two seem to favour competition over the other professional principles and objectives enshrined in the Legal Services Act. Nor is it clear that the medical model of the Royal Colleges, the BMA and the GMC has been any more successful.”

Other potential downsides, in his submission, include a shortage of professional expertise and experience (a problem some say has been a feature of the SLCC), and regulatory capture (an alleged weakness with large accounting firms). “Any model that favours independent regulation of providers of legal services needs to demonstrate how it would overcome these perceived weaknesses.”

In Paterson's view the answer is not self-regulation but “to focus on effective co-regulation”. The professional bodies should retain their dual roles, but subject to oversight by an independent Ombudsman with fairly extensive powers of review except in relation to individual disciplinary decisions. (He is also not convinced by principle based regulation: “This is the form of regulation that was less than spectacularly successful in policing bankers before the credit crunch.”)

It is interesting to note that Professor Ken Mackinnon of Robert Gordon University, who Roberton cites as among those supporting her approach, also calls in his submission for a rethinking of the introduction of alternative business structures, which is certainly not part of Roberton's thinking – but also believes it is time to remove the “anachronistic” division of the profession into solicitor and advocate branches, which some consider would be necessary if the principles of the report are to work properly. 

First reactions

In the preface to her report Roberton accepts full responsibility for her recommendations, adding that a minority on her advisory panel “expressed significant disagreement with the primary recommendation”. Below we feature contrasting views from two solicitor members.

In its initial reaction the Society, while pleased at the adoption of its suggestions including the protection of the term “lawyer”, entity regulation and ensuring all legal services are regulated, complained at the lack of consultation on the central proposal. President Alison Atack commented: “We strongly oppose the primary recommendation of a new single regulatory body because of the unnecessary risk it places on protecting consumers and higher costs. The Law Society has almost 70 years’ experience of successfully setting and enforcing standards in the solicitor profession. I find it surprising that, following such a long review, Ms Roberton would conclude without any consultation with the profession, that a new regulatory body be set up and that the Law Society be removed from the regulatory process.”

She added: “The ideas that we put forward are carefully thought out. It is these changes that the Scottish Government should be focusing its attention on and we look forward to engaging with them.”

In a panel session at the Society's annual conference a few days later, Roberton in turn expressed surprise and disappointment at this response, claiming she had spent much time listening to the Society and to lawyers; her task had been to put proposals to the minister and it was for the minister then to consult with the profession.

Carole Ford, convener of the Society's Regulatory Committee, described the main recommendation as “disproportionate, because there is no evidence of the need for this reform”, adding: “As [Roberton] admits in her own report, there is little evidence of significant wrongdoing in the current model. She describes the outcome of the current regulatory system in Scotland as being the home to a well-educated, well-respected legal profession with a high degree of public trust, of which she believes we can be very proud. This chimes with my own experience.

“As a non-solicitor myself, I have seen first-hand how protecting the public interest sits at the very heart of the Law Society. It is recognised around the world for its work in ensuring Scottish solicitors are highly trained and well qualified and that consumers are protected when things go wrong. That is why the Law Society of Scotland is best placed to regulate Scottish solicitors.”

The SLCC, on the other hand, warmly welcomed the report, even though it would mean its own demise. Chief executive Neil Stevenson commented: “We recognise that the independent review has adopted the vast majority of our proposals into the final recommendations and found the evidence of best practice in other jurisdictions and sectors that we presented to be compelling... For too long the barrier to change has been a failure to tackle the issue of whether five separate statutory bodies are really needed to regulate lawyers in Scotland.”

Ash Denham, now the minister responsible, has promised a full response from the Government in due course. However, Roberton herself has suggested there may be a legislative slot before the 2021 Holyrood elections, or consumers will be kept waiting too long for reform. The crucial debates over the proposals may not be too far over the horizon. There is much more to be said.

The report can be found at www.gov.scot/Resource/0054/00542302.pdf

Views from the panel

Two solicitor members of Esther Roberton's advisory panel offer contrasting views on her central recommendation

Supporting: Lorne Crerar

Esther Roberton's proposals are bold and ambitious but in some aspects controversial. In recommending a new system of regulation, they are founded on two fundamental principles: the public and consumer interest and the promotion of a flourishing legal sector in Scotland. The extent of the research instructed, evidence taken and meetings with professional, representative and consumer bodies is extremely impressive. Her advisory panel, from diverse backgrounds, had different and often opposing views. It was an interesting experience and a privilege to have served.

Early reactions indicate widespread support for many of the proposals. These include that the term “lawyer” be protected in the way “solicitor” is currently, and that we move to entity regulation, the manifest benefits of which would include regulation of all legal services providers. At last, a level playing field for solicitors, and clarity for consumers that all providers have thresholds of competence and are regulated. Relief too that it was recognised that the current complaints system is not fit for purpose.

The key and controversial conclusion is that there should be a single regulator for all providers of legal services, independent of Government and those it regulates. The reviewer bases her arguments on very robust evidence and international comparison.

The last 10 years have seen an influx of major law firms headquartered in England. These have a much more enabling regulatory regime and we in Scotland need to be placed on a level playing field with them. Firms graduate where possible to their natural choice of law, and English law has become much more prominent in Scotland, as has been noted in recent Journal editions. Some commentators consider that Scots law is on a knife-edge.

To regulate the whole legal services market, the regulator must be seen to be even-handed, and independent of all the providers it regulates. The Law Society of Scotland's purpose should be to represent and encourage us, as well as promoting Scots law as a forum of choice. Regulating and prosecuting us and others for failure should rest with an independent regulator.

I hope your conclusions on the review mirror mine, namely that its proposals should be embraced and actioned as a basis for a well regarded, ambitious and prosperous profession fit for the 21st century.

Professor Lorne Crerar is a partner in Harper Macleod LLP and was the Independent Reviewer of Regulation, Audit, Inspection and Complaints Handling in the Public Sector (2007)

Opposing: Christine McLintock

I cannot support the primary recommendation to create a new regulator of legal services in Scotland. This is not simply a new model for handling complaints (a discrete issue which could be easily streamlined and improved): this is stripping all regulatory powers from our professional body including setting education and entry standards to the profession, admission, setting practice and ethical standards, monitoring, auditing and upholding financial and AML compliance, and ensuring a holistic approach to professional regulation.

There is no evidence to support it. The model has been considered by many jurisdictions and not adopted in full by any. A similar model was recently rejected in Ireland. It is disproportionate, contrary to global best practice, likely to increase costs and risks a fracturing of the profession into separate interest groups. In my view, it threatens the independence of the legal profession and the rule of law and, as such, could damage our global standing and reputation, particularly now when, in the lead-up to Brexit, we are already fighting to ensure continued recognition of our solicitor qualification and practice rights. How do we persuade European institutions (EU and national) to continue to regard solicitors and advocates as “lawyers” within the meaning of the Lawyers Services and Establishment Directives if Scotland proposes to do away with the national regulatory bases on which those enactments are based?

In addition, I believe that what is being proposed would result in more (not less) duplication of work, and hinder progress as we squander many years in a drift towards corporate bureaucracy.

The system in England & Wales is nearest to what is being proposed for Scotland. It is a test bed for regulation driven almost exclusively by a focus on consumerism and competition. There is little evidence after over 10 years that this is being successful in bringing advantages to the consumer, improving quality, improving access to justice or improving economic success. In fact further regulatory separation has been halted there.

I also dispute the suggestion in the report that somehow a new regulator will stimulate growth in the legal services sector. The forces of globalisation, new technology and client demands will shape the future.

I support effective co-regulation. Our existing system is respected both nationally and internationally. It serves Scotland and its people well. Throughout my career I have worked with legal regulators across the world. What we currently have in Scotland is good and compares well against international peers. Yes there are, and always will be, areas for improvement and modernisation. My plea to the Scottish Government is not to throw the baby out with the bathwater or to follow blindly the direction of travel in England & Wales. We deserve the right solution for Scotland.

Christine McLintock is a former President of the Law Society of Scotland

Have your say