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Law Agents sound warning over access to Guarantee Fund

26 July 2010

The Scottish Law Agents Society is urging members to write to the minister in charge of the Legal Services (Scotland) Bill and to the chairman of the Justice Committee which is considering the bill, over the proposal to make the Scottish Solicitors Guarantee Fund available to the new licensed legal services providers (LLSPs) to be permitted under the bill.

Concerns have been expressed both from within and outside the legal profession during the passage of the bill that clients of LLSPs should have equivalent protection to those of solicitors' firms from loss caused by dishonesty of their legal adviser. The Guarantee Fund exists to provide compensation in such cases where the solicitor's professional indemnity insurance does not operate.

During the Justice Committee's stage 2 debates, the minister, Fergus Ewing, stated that it had not been possible to come up with an equivalent arrangement without allowing LLSPs to have access to the Guarantee Fund – to which they would contribute on an equivalent basis to legal firms – and moved an amendment, which the committee passed, to allow this to happen. The Law Society of Scotland had opposed the proposal.

In a message posted to its website, SLAS calls on members to "impart their wisdom" to the minister and chairman over the plan to "utilise" the fund, which it claims "would effectively annex without compensation a fund of about £4 million into which many of us have been contributing for many years and, where only a tiny number of us have been or will ever be responsible for claims".

SLAS argues that the safeguards that apply to practising solicitors by way of training, practice rules and Law Society of Scotland supervision would not operate in the case of LLSPs and asks whether the Guarantee Fund would be likely to survive if it is implemented. "Is it fair that solicitors should be asked to underwrite the dishonesty of non-solicitors in LLSPs who compete with them but have no practising certificate?" it asks.

In a letter to Bill Aitken MSP, convener of the Justice Committee, giving an update on matters outstanding at the conclusion of stage 2, Mr Ewing repeats his belief that extending the coverage of the existing Guarantee Fund is the "only viable option", but undertakes to discuss the Society's concerns in detail with the Society ahead of stage 3.

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