The Scottish Government

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Chapter 2 Setting the scene

2. This chapter explains the regulatory framework for legal services in Scotland, examines issues relating to governance of the legal professional bodies and looks at the implications of Scottish policy developments such as legal aid reform, community legal services and the Public Defence Solicitors' Office.

(a) The Regulatory Framework for Legal Services in Scotland

2.1 One of the Group's first steps was to map the regulatory framework for legal services in Scotland, focussing mainly on legal services provided by solicitors, solicitor advocates, advocates and conveyancing and executry practitioners.

(i) The role of Parliament, Government and the Court

UK Parliament

2.2 Competition is reserved to the UK Parliament, subject to an exception which devolves responsibility for "the regulation of particular practices in the legal profession for the purpose of regulating that profession or the provision of legal services" ¹⁰. The legal profession is defined in that context to mean advocates, solicitors and conveyancing and executry practitioners ¹¹. The legislative responsibility for some aspects of the work of Scottish lawyers, such as investment business, immigration advice and consumer credit, is reserved to the UK Parliament and the policy lead rests with UK Government Departments.

Scottish Parliament

2.3 Regulation of the legal profession in Scotland is a matter which is within the legislative competence of the Scottish Parliament. The legal profession operates within a statutory framework which the Scottish Parliament can repeal, alter or amend. As noted in chapter one, the Parliament's Justice 1 Committee carried out an inquiry into the regulation of the legal profession, on which it reported in November 2002.

Scottish Executive

2.4 The policy lead on regulation of the legal profession in Scotland lies with Scottish Ministers.

The Office of Fair Trading

2.5 The Office of Fair Trading has power to review and provide advice on restrictions on competition in professions under the Enterprise Act 2002 and to enforce the provisions of both domestic and EC competition law on a UK basis. Its aims are that the professions, including the legal profession, should be fully subject to competition law and that any unjustified restrictions on competition should be removed in the interest of the users of legal services.

The Court

2.6 Lawyers who practise advocacy before the Courts must conduct themselves in a manner which is acceptable to the Court. The performance and conduct of such lawyers is subject to continuous public scrutiny from an informed third party, namely the judge, and may also be seen by other lawyers, their clients and members of the public. Moreover, such lawyers have a dual role : as well as representing their clients, they owe duties to the Court which may in some circumstances conflict with the desires and interests of their clients. Lawyers are "officers of the court" with duties and responsibilities beyond those to their individual clients. They are not a simple service provider able to provide their clients with a service in a way and at a time entirely of their or their clients choosing.

The Court of Session

2.7 The Court and the Lord President of the Court of Session also have responsibilities in relation to the regulation of the legal profession :

• The Court of Session is responsible for the admission of solicitors ¹² and has various disciplinary powers in relation to them (see paragraph 2.33 below), including a power to strike a solicitor off the roll;
• Rules of the Law Society of Scotland require the concurrence or approval of the Lord President;
• Any scheme for rights of audience or rights to conduct litigation under sections 25-29 of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1990 would require the approval of the Lord President (see paragraph 2.28); and
• Advocates are admitted by the Court of Session, changes to the requirements for admission as an advocate require the approval of the Lord President, and any lawyer who practises advocacy is subject to the immediate control of the Court in relation to his conduct in court.

(ii) Regulation of solicitors

2.8 Arrangements for the regulation of solicitors by the Law Society of Scotland are set out in the Solicitors (Scotland) Act 1980. The Law Society of Scotland has statutory responsibility for the promotion of the interests of the profession of solicitor in Scotland and the interests of the public in relation to that profession ¹³. In carrying out its functions therefore, the Society must not only have regard to the interests of the solicitors' profession but also to the interests of the public in relation to that profession.

2.9 The 1980 Act provides for the statutory basis for the Society, the right to practise, professional practice, conduct and discipline, and complaints and disciplinary proceedings relating to solicitors in Scotland. It has since been amended by subsequent legislation ¹⁴ which has strengthened some of the statutory protections available to the client. The business of the Society is conducted through a Council comprising up to 53 members, 44 of whom are elected by the members of the profession and up to 9 of whom may be co-opted by the Council. In turn, the Council exercises its authority both itself, through a variety of Committees and through the Executive Officers of the Society. The Council deals both with the Society's regulatory functions (eg the setting of standards for entry and education, rule making and monitoring and enforcement) and its representative functions (eg negotiating with Government, contributing to the development of the law and the system of administration of justice, representing the profession to the public and other stakeholders, services to members, marketing, and international activities).

2.10 The 1980 Act provides the Society with powers to

• make regulations in respect of admission to the profession and training within it (section 5);
• make rules in relation to applications for and issue of practising certificates (section 13);
• make rules relating to admission as a solicitor with extended rights of audience (section 25A);
• make rules relating to professional practice, conduct and discipline (section 34);
• make rules relating to the keeping of accounts (sections 35, 36 and 37(6));
• make rules relating to professional indemnity insurance (section 44);
• control and manage the Scottish Solicitors Guarantee Fund (section 43, Schedule 3, Part I);
• handle compliance, enforcement and disciplinary issues arising out of the rules of the Society; and
• handle complaints about solicitors (sections 38 - 42C).

The Society also has statutory responsibility for investigating complaints that a solicitor has been guilty of professional misconduct or provided inadequate professional services ¹⁵.

Approval of rules

2.11 Rules made by the Society require either the concurrence or approval of the Lord President of the Court of Session. Rules relating to incidental investment business require the approval of the Financial Services Authority. Any rule made by the Society which has the effect of prohibiting multi-disciplinary practices requires to be approved by Scottish Ministers, who are required in turn to consult the Office of Fair Trading ¹⁶. A similar requirement applies to rules relating to rights of audience for solicitor advocates. ¹⁷

Reserved work

2.12 Certain legal work is reserved to those with legal qualifications or to those who meet other statutory qualifications (section 32). The preparation of deeds transferring heritable property and grants of confirmation in favour of executors is reserved to solicitors, advocates and conveyancing and executry practitioners. The preparation of writs relating to court proceedings is reserved to solicitors and advocates, subject to exceptions (for example, unqualified persons not being paid for their services).

Solicitors from England, Wales and Northern Ireland and the European Union

2.13 Solicitors from England, Wales, Northern Ireland and lawyers from other parts of the European Union who wish to requalify as Scottish solicitors may sit a transfer test set by the Law Society of Scotland. The Intra- UK Transfer Test is applicable to solicitors qualified in England, Wales and Northern Ireland, while the Aptitude Test for EC Qualified Lawyers applies to all other European Union qualified lawyers.

Registered European Lawyers

2.14 Registered European lawyers may practise in Scotland by virtue of legislation ¹⁸ which implemented the EC Lawyers Establishment Directive of 16 February 1998 in Scotland. The Directive provides for European lawyers to practise on a permanent basis under their home State professional title in another European jurisdiction and to be able to integrate into the host state profession after 3 years of regular and effective practice. The European lawyer must register with a competent authority in the host State, which in Scotland is either the Law Society of Scotland or the Faculty of Advocates. Registration entitles the European lawyer to practise the law of the relevant part of the UK as well as the law of the home State, thus enabling the 3 years of regular and effective practice to start to be accumulated.

Registered foreign lawyers

2.15 Regulations came into force in October 2004 which enable Scottish solicitors and incorporated practices to enter into multi-national practices with registered foreign lawyers ¹⁹. The Regulations provide a statutory framework for regulation by the Law Society of Scotland of the entry of Scottish solicitors and incorporated practices into multi-national practices and for the registration of foreign lawyers who wish to enter such practices. The registration process permits the Council of the Law Society of Scotland to satisfy itself that the legal profession of which the foreign lawyer is a member is properly regulated.

2.16 The Regulations meet an obligation on EC member states under the General Agreement on Trade in Services ( GATS) to allow foreign lawyers and firms to come into Member States' legal services markets and practise their home country and public international law.

2.17 Multi-national practices will involve Scottish solicitors and incorporated practices and foreign lawyers from overseas jurisdictions, but may also be multi-jurisdictional practices which in effect involve solicitors and incorporated practices from the three jurisdictions within the United Kingdom. Registered foreign lawyers will not be able to carry out reserved legal work or appear in court proceedings.

(iii) Regulation of advocates

2.18 The Faculty of Advocates was not established by statute, but its role as the professional body to which all advocates belong has long been recognised by the Court. The Faculty exercises a dual role of representing the interests of advocates and regulating advocates in the public interest.

2.19 The Faculty is led by its Dean who is elected by the whole membership and assisted by four elected officials : the Vice Dean, the Treasurer, the Clerk and the Keeper of the Library. In July 1992 the Faculty adopted a constitution for an elected Council. The powers conferred upon the Council include the formulation and implementation of policy for the administration and development of the Faculty; the maintenance of the Advocates Library and the approval of rules regulating its use; the provision, through Faculty Services Ltd or otherwise, of administrative facilities and services to members of the Faculty; and the formulation of regulations governing admission as well as codes of conduct and professional practice.

2.20 The Court of Session admits to the public office of advocate, but has, since the seventeenth century, delegated responsibility for the examination of the suitability of candidates to the Faculty. Changes to the requirements for admission as an advocate require the approval of the Lord President. The Faculty is otherwise self-regulating and controls its own disciplinary procedures, though lay representation is involved. The Faculty has statutory responsibility for investigating complaints that an advocate has been guilty of professional misconduct or provided inadequate professional services ²⁰.

(iv) Regulation of conveyancing and executry practitioners

2.21 In August 2003 the Law Society of Scotland took over statutory responsibility for the regulation of conveyancing and executry practitioners ²¹. It acquired this responsibility, together with relevant rule-making powers, on abolition of the Scottish Conveyancing and Executry Services Board ²². Costs incurred by the Society in relation to the regulation of conveyancing and executry practitioners are met by grant-in-aid from Scottish Ministers. At the time of transfer of responsibility about 20 practitioners were registered with the Board; only 3 of the practitioners were practising in an independent capacity and the others were working in an employed capacity.

(v) Rights of audience

Lay rights of audience

2.22 Individuals may normally always represent themselves in court proceedings. Notable exceptions are that personal conduct of a defence is prohibited in the case of certain sexual offences under the Sexual Offences (Procedures and Evidence) (Scotland) Act 2002; and in cases involving child witnesses under the age of 12 or other cases involving vulnerable witnesses under the Vulnerable Witnesses (Scotland) Act 2004. In general, only a person who is legally qualified may represent someone else in Court proceedings. The main circumstances when a person can be represented by non-lawyers are small claims, proceedings under the Debtors (Scotland) Act 1987 and proceedings before a sheriff relating to attachment under the Debt Arrangement and Attachment (Scotland) Act 2002 :

• In small claims an authorised lay representative may in representing a party do everything for the preparation and conduct of a small claim as may be done by an individual conducting his own claim, if the sheriff is satisfied that such a person is a suitable representative and is duly authorised to represent the party. (Sheriff Courts (Scotland) Act 1971, Section 36 and related rules of court).
• In summary cause actions a party may also be represented by an authorised lay representative at the first calling and, unless the sheriff otherwise directs, any subsequent or other calling where the action is not defended on the merits or on the amount of the sum due.
• Under the Debt Arrangement and Attachment (Scotland) Act 2002 and the related Act of Sederunt a party to any proceedings under the Act may be represented by a person other than an advocate or a solicitor if the sheriff is satisfied that such a person is a suitable representative and is duly authorised to represent the party. (This followed similar provision in earlier legislation).
• At the first diet in summary criminal proceedings where the accused is not present, a person (who is not an advocate or solicitor) who satisfies the court that he is authorised by the accused, may tender a plea of guilty or not guilty on behalf of the accused ²³.

2.23 In terms of the Fatal Accidents and Sudden Deaths Inquiry (Scotland) Act 1976 any person entitled to appear at an inquiry may appear on his own behalf or be represented by an advocate or a solicitor or, with the leave of the Sheriff by any other person.

2.24 Representation by non-lawyers is also permitted in many statutory tribunals.

Rights of audience : solicitors

2.25 Those who are qualified to practise as solicitors may practise as a solicitor in any court in Scotland. Solicitors have rights of audience in the district and sheriff courts and in those Tribunals where legal representation is allowed. Unless a solicitor has qualified as a solicitor advocate, a solicitor may not in general appear in the Court of Session, the High Court, the House of Lords or the Judicial Committee of the Privy Council.

Rights of audience : solicitor advocates

2.26 The Law Society of Scotland has powers ²⁴ to appoint solicitor advocates, who are solicitors who have gained rights of audience in the supreme courts in Scotland, as well as the House of Lords and the Judicial Committee of the Privy Council, through additional training and examinations. Rules made by the Society under those powers in relation to training for solicitor advocates require to be approved by the Lord President of the Court of Session, and by Scottish Ministers who are required in turn to consult the Office of Fair Trading. Rules dealing with conduct in relation to the exercising of any right of audience also require the approval of the Lord President and Scottish Ministers; Scottish Ministers are required to consult the Office of Fair Trading where they consider that any such rule would directly or indirectly inhibit the freedom of a solicitor to appear in court.

Rights of audience : advocates

2.27 An advocate is entitled to plead in any Court in Scotland, including the Supreme Courts (the High Court of Justiciary, the Court of Criminal Appeal and the Court of Session); the Judicial Committees of the House of Lords and the Privy Council; the European Court of Human Rights and the Court of Justice of the European Communities; and a wide range of tribunals, inquiries and other such proceedings.

Rights of audience and rights to conduct litigation : members of a professional or other body

2.28 Sections 25-29 of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1990, which have not yet been commenced, set out arrangements by which rights to conduct litigation and rights of audience can be granted to members of a professional or other body. These provisions are considered more fully in chapter 12.

(vi) Scottish Legal Services Ombudsman

2.29 The Scottish Legal Services Ombudsman is appointed by Scottish Ministers ²⁵ and has a remit to investigate the handling of complaints against legal practitioners. The Ombudsman is independent from the legal profession and is not a lawyer. S/he is also independent from Government and the Ombudsman's findings and recommendations are not reviewed by Scottish Ministers or the Scottish Executive.

2.30 Complainers who consider that their complaint has not been dealt with satisfactorily by the relevant solicitor, law firm or advocate may take the complaint to the Law Society of Scotland or the Faculty of Advocates, who must investigate the complaint and thereafter report on their investigations to the complainer and to the practitioner concerned. If a complainer is dissatisfied with the outcome of an investigation by the professional body concerned, he or she may then take a complaint to the Ombudsman, requesting the Ombudsman to examine how the complaint has been handled by the professional body. The Ombudsman is concerned with the professional body's handling of the complaint, i.e. whether the investigation by the professional body has been fair and thorough, whether all the relevant heads of complaint have been properly addressed and whether appropriate action has been taken.

2.31 Having arrived at an opinion, the Ombudsman may make appropriate recommendations to the professional body which is required to consider them and to notify both Ombudsman and complainer as to what action it has taken or if it has decided not to comply wholly with the recommendations. If the professional body has not wholly complied with such recommendations within a period of three months, the Ombudsman may publicise that fact. The Ombudsman may include any such case in an Annual Report to Scottish Ministers, without identifying the parties involved, and may report a case to the Scottish Solicitors' Discipline Tribunal where it appears that a solicitor may have been guilty of professional misconduct. In her Annual Report the Ombudsman may also make general recommendations about how the complaints handling procedures of the professional bodies might be improved.

(vii) External regulators : discipline

2.32 The members of the Law Society of Scotland and the Faculty of Advocates are subject to external regulation by the Court of Session and the legal profession discipline tribunals. Non-lawyers are already involved in the Scottish Solicitors' Discipline Tribunal and the Faculty of Advocates Disciplinary Tribunal. In relation to complaints-handling, the Law Society of Scotland increased lay membership of its Client Relations Committees to 50% in 2003.

Court of Session

2.33 In the case of professional misconduct by a solicitor, the Court of Session on appeal from a decision of the Scottish Solicitors' Discipline Tribunal may use its powers under section 55 of the Solicitors (Scotland) Act 1980 to

• cause the name of a solicitor to be struck off the roll; or
• suspend the solicitor from practice as a solicitor for such period as the court may determine; or
• suspend the solicitor from exercising any right of audience held by him by virtue of section 25A for such period as the court may determine; or
• revoke any right of audience so acquired by him; or
• fine the solicitor; or
• censure him; and in any of those events,
• find him liable in any expenses which may be involved in the proceedings before the court.

The Court of Session does not exercise its powers in relation to professional misconduct, unless there has been a decision by a Discipline Tribunal.

Scottish Solicitors' Discipline Tribunal

2.34 The Tribunal is a statutory body empowered to adjudicate on complaints about professional misconduct and the provision of inadequate professional services by solicitors. The composition of the Tribunal is defined in statute ²⁶ and must consist of between 10 and 14 solicitor members and 8 lay members, all appointed by the Lord President of the Court of Session.

2.35 The Council of the Law Society of Scotland nominate solicitor members to the Lord President and Scottish Ministers nominate lay members to the Lord President, who makes the appointments in accordance with the 1980 Act. The Tribunal has a range of disciplinary powers under section 53 of the 1980 Act, including the power to order the name of a solicitor to be struck off the roll, to order a solicitor to be suspended, fined, censured etc.

Faculty of Advocates Complaints Committee and Disciplinary Tribunal

2.36 Complaints against advocates are handled in the first instance by the Dean (or another office-bearer of the Faculty to whom he may delegate this task), who may refer the complaint to the Complaints Committee for determination and disposal. The Complaints Committee may dispose of the complaint itself or may remit it to the Disciplinary Tribunal for determination or disposal. The Disciplinary Tribunal may impose more severe penalties than the Complaints Committee. If the complaint is determined by the Complaints Committee, the complainer or the advocate may appeal, with leave of the Complaints Committee to the Disciplinary Tribunal. The Faculty's Disciplinary Rules set out the membership and procedures. Both the Complaints Committee and the Disciplinary Tribunal include lay members from a panel of lay persons nominated by Scottish Ministers for the purpose. With effect from 1st January 2005, the Complaints Committee in a particular case has four members, two of whom are lay persons, and the Disciplinary Tribunal consists of a Chairman (who is either a retired Senator of the College of Justice, Sheriff Principal or other appropriate person appointed by the Lord President), and five other persons of whom three are lay persons.

(viii) External regulators : specific professional activities

2.37 Co-regulation involving the Society and other bodies occurs in the areas of investment business, insolvency, legal aid, immigration and consumer credit.

Scottish Legal Aid Board

2.38 Under the Legal Aid (Scotland) Act 1986 the Scottish Legal Aid Board maintains a Register of Solicitors who can provide criminal legal assistance and has issued a Code of Practice in relation to criminal legal assistance. The Board has powers to remove solicitors from the Register and powers to require information, enter solicitors' premises and investigate compliance with the code or contraventions in relation to criminal legal assistance.

2.39 The 1986 Act allows any solicitor to provide Advice and Assistance on any matter of Scots law if the client meets the statutory tests. Solicitors providing advice on criminal matters have to be registered as already noted. Civil legal assistance was reformed in October 2003 and practice rules made by the Law Society of Scotland require solicitors providing civil legal assistance to be registered with the Board and subject to a quality assurance regime involving peer review. The 1986 Act does not place any restrictions on counsel providing Advice and Assistance.

2.40 The Act does however provide that the Law Society of Scotland, the Scottish Solicitors' Discipline Tribunal or the Faculty of Advocates can decide to exclude a solicitor or an advocate from providing advice and assistance or from representing someone who has been granted legal aid. This can be done on the following grounds

• their conduct when acting or selected to act for persons to whom legal aid or advice and assistance is made available; or
• their professional conduct generally; or
• in the case of a member of a firm of solicitors or a director of an incorporated practice, such conduct on the part of any person who is for the time being a member of the firm or a director of the practice.

A solicitor or advocate can be excluded for a specified period or without limit of time. An appeal against such a decision lies to the Court of Session.

2.41 Separately, the Solicitors (Scotland) Act 1980 permits the Scottish Legal Aid Board to make a complaint to the Scottish Solicitors' Discipline Tribunal where it appears that

• a solicitor may have been guilty of professional misconduct; or
• an incorporated practice may have failed to comply with any provision of the Solicitors (Scotland) Act or of rules made under the Act applicable to it, or a solicitor of an incorporated practice may have provided inadequate professional services.

2.42 A Strategic Review was carried out of the delivery of legal aid, advice and information in Scotland, including the role of the Scottish Legal Aid Board. The aim of the review was to modernise legal aid, streamline criminal justice and improve the access to justice agenda for the benefit of the citizen. The report to Ministers and the Scottish Legal Aid Board was published in October 2004 (Strategic Review on the Delivery of Legal Aid, Advice and Information ISBN 0-7559-4372-4). The issues were the subject of a consultation paper "Advice for All" which set out the Scottish Executive's vision for reforming publicly funded legal assistance in Scotland; the consultation closed on 9 September 2005.

Financial Services Authority

2.43 The Financial Services Authority is directly responsible for the authorisation and regulation of solicitor firms which conduct mainstream investment business under the Financial Services and Markets Act 2000. The Law Society of Scotland is a recognised professional body under the 2000 Act and responsible as such for the licensing and regulating of solicitor firms which conduct incidental investment business, that is investment business which is incidental and complementary to the provision of legal services.

Insolvency Practitioner regulation

2.44 The Law Society of Scotland is a recognised professional body under the Insolvency Act 1986 and issues licences to solicitors who wish to be appointed as insolvency practitioners. The Society monitors and inspects all its insolvency solicitors and is itself subject to monitoring and supervision by the Department of Trade and Industry Insolvency Service every 3 years.

Consumer Credit

2.45 The Law Society of Scotland holds a group licence under the Consumer Credit Act 1974. The licence is granted by the Office of Fair Trading, lasts for 5 years and enables members of the Society to provide services in consumer credit, credit brokerage, debt-adjusting and debt-counselling and debt-collecting.

Immigration and asylum services

2.46 The Law Society of Scotland and the Faculty of Advocates are designated professional bodies in terms of section 86 of the Immigration and Asylum Act 1999. Designation removes the need for Scottish solicitors or advocates to be registered individually with the Immigration Services Commissioner. The Commissioner has the power to receive complaints against Scottish solicitors or advocates giving immigration advice and is required to monitor how any complaints passed to the Society or Faculty are handled ²⁷. The Commissioner is required to review the list of designated professional bodies and report to the Scottish Ministers if a designated professional body is failing to provide effective regulation of its members.

(ix) Other legal service providers

2.47 Provision of legal information and advice in Scotland by non-lawyers has developed over the years, as a result of local initiatives of providers in the public, private or voluntary sectors. The most common sources of legal advice on civil matters are solicitors and local Citizens Advice Bureaux. There is however a wide variety of other sources of advice, ranging from the police to trade unions, local authority departments, housing associations, insurance companies, advice agencies, welfare rights and trading standards officers, law centres, voluntary organisations and interest groups, social workers and court staff.

2.48 Local authorities are the principal funders of the voluntary advice sector as well as being significant providers of advice services themselves. Central government funding (of voluntary sector provision or for specific initiatives in local authorities) is less prominent, but does involve a number of UK Government Departments, such as the Department for Trade and Industry which provides funding for Citizens Advice Scotland and support initiatives such as the Consumer Support Networks. The Scottish Executive also provides funding for advice provision, through several Departments, such as its Development Department which provides financial support for locally based money and debt advisers; and funds organisations such as Shelter, the Shelter Housing Law Service and Legal Services Agency, through its housing sector voluntary grant scheme. The report of the Strategic Review on the Delivery of Legal Aid Advice and Information published in October 2004 recommended better integration and coordination of legal advice services by solicitors (funded through legal aid) and non-legally qualified advisers funded from other public sources; and an enhanced role for the Scottish Legal Aid Board to help deliver a better coordinated and more flexible and responsive system.

2.49 There are also mediators who seek to develop effective communication and build consensus between parties in dispute with the aim of securing their agreement to a settlement. Mediators may be regulated through voluntary adherence to certain training standards and codes of practice but they are not subject to any statutory regulation.

Claims assessors and claims management companies

2.50 In recent years companies have started up, often on a GB basis, which pursue personal injury cases on behalf of clients. There is no statutory definition of what they do and the companies work on an unregulated basis, though a Claims Standards Council was established in 2004 which has been working to self regulate in that area and has prepared draft codes of conduct for its members. Claims companies in Scotland usually charge on a contingency fee basis under which they receive a percentage of any damages awarded or of the agreed settlement and usually seek to negotiate settlements without litigation. Claims management companies are known to contract with solicitors to act on their behalf and operate by advertising their services on a "no win, no fee" basis. Employees without a legal qualification carry out the initial assessment of claims and pass those they think worthwhile to solicitors contracted to the claims management company. If the claim succeeds, the company will usually take one third of the damages awarded.

2.51 The Compensation Bill introduced in the House of Lords on 2 November 2005 contains provisions for the regulation of claims management services in England and Wales. Scottish Ministers are monitoring the progress of the Bill and will consider whether future Scottish legislation on similar lines may be required in the light of its progress and their assessment of Scottish circumstances.

(b) Governance and competition

2.52 The Scottish Executive's consultation paper on complaint handling arrangements (see chapter one) also addressed issues dealing with the constitution of the professional bodies. The Law Society of Scotland has a statutory duty at present to promote both the interests of the solicitors' profession in Scotland and the interests of the public in relation to that profession. ²⁸ The Faculty of Advocates has a similar, but non-statutory, dual role. Potential tensions exist between these dual functions and the consultation paper invited views on whether the Law Society of Scotland should keep its regulatory and representative functions undivided as at present or whether these functions should be split and made the subject of separate governance arrangements. Of those who expressed a clear view in response, over 84% were in favour of these functions being split. ²⁹

Competition issues

2.53 With regard to the existing regulatory arrangements of the Law Society of Scotland and the Faculty of Advocates, the Office of Fair Trading (the OFT) noted that

• under current arrangements both bodies were engaged in functions that were both representative and regulatory and there was little evidence of significant attempts having been made to separate these functions;
• while some areas of the regulatory activity carried on by the Law Society of Scotland and the Faculty of Advocates were subject to adequate oversight by external bodies, there were in the OFT's view significant areas where there was either no oversight or oversight arrangements did not appear to be adequate or in line with best practice.

The Law Society of Scotland disagreed with the OFT view that significant attempts had not been made to separate representative and regulatory functions, noting that the Council of the Law Society of Scotland Act 2003 had permitted its Council to delegate responsibilities to individual committees, resulting in appreciable separation of these functions and in regulatory decisions being made by committees.

2.54 The OFT believed that separation of the representative and regulatory functions of the main professional bodies had an important role to play in both consumer protection and in competition. An important public interest objective of the regulatory task (one of a number of such objectives) was to ensure that rules did not unnecessarily restrict competition. Meeting these might conflict with the task of representing members' interests in the OFT's view. The OFT saw a danger that where one and the same body was charged with making rules and representing members' interests, the resulting rules would not strike an appropriate balance between public interest objectives, such as competition, and the interests of members.

2.55 Separating regulatory and representative functions helped to avoid this danger but was unlikely to be a sufficient safeguard, given the ongoing need to strike an appropriate balance between what would often be competing objectives. This suggested to the OFT that, in order to help ensure that professional rules serve the public interest, it was desirable that any significant regulatory activity by the professional bodies should be subject to external oversight by an independent body charged with ensuring that such rules were in the public interest. The Scottish Consumer Council believed that complete separation of the professional bodies' regulatory and representative functions would help to achieve higher priority for the public interest in their work.

Clementi

2.56 In the report of his review ³⁰ (see chapter one), Sir David Clementi recognised the difficulty inherent in a professional body both regulating and representing a profession in the following terms :

• In a regulatory body the public interest should have primacy. Issues such as changes in practice rules should be examined, not against the wishes of the membership, but against the test of the public interest;
• In a representative body the interests of the membership should have primacy;
• Even where a body did place the public interest ahead of that of its members, there remained an issue of perception. Though restrictive practices to be found in the practice rules of professional bodies might have operated in the public interest, there was a perception that the issues had not historically been addressed with the vigour and independence to be expected of a regulatory body.
• Just as there had been criticism that professional bodies gave insufficient weight to the public interest, so there could be criticism from members of professional bodies that their respective bodies gave insufficient attention to representative needs.

• The function of representing the interests of its members to raise remuneration levels funded by the state sat uneasily with the regulatory responsibility of a professional body to act in the public interest.
• It was particularly difficult for professional bodies who combined both regulatory and representative roles to deal with competition issues.

2.57 From his review of experience in England and Wales Clementi concluded that the current combination of regulatory and representative powers within professional bodies had not resulted in the public interest being consistently placed first. A key recommendation of his review was that the regulatory and representative functions of professional bodies in England and Wales should be clearly split. The White Paper "The Future of Legal Services : Putting Consumers First" published by the Department for Constitutional Affairs in October 2005 accepted Sir David's recommendation that front line legal professional bodies should be required to separate their regulatory and representative functions.

Conclusion

2.58 The Scottish Executive is considering the way forward on this issue in the light of the views expressed in the responses made to its consultation.

(c) Legal aid reform, community legal services and the Public Defence Solicitors' Office

2.59 Among the specific issues for examination by the Group were the implications of Scottish policy developments such as legal aid reform, community legal services and the Public Defence Solicitors' Office. These had largely been the subject of continuing policy consideration over the period of the Group's work and in significant areas there was as yet no final policy outcome. It would not therefore have been possible or appropriate for them to be the subject of formal research. It was agreed that the proposals which had been or were being brought forward should be described, and a general preliminary assessment made of their impact on competition.

Proposals for Reform

2.60 Proposals for reform in the main policy areas had been under consideration for some considerable time. The then Justice 1 Committee of the Scottish Parliament published a report on legal aid in November 2001. The findings of a Working Group established by Ministers to consider how a community legal service might be developed for Scotland were also published in November 2001, under the title of "Review of Legal Information and Advice Provision in Scotland". This was followed by the Strategic Review of the Delivery of Legal Aid, Advice and Information, undertaken jointly by officials of the Executive and the Scottish Legal Aid Board ( SLAB). Their report to the Board and Ministers was published in October 2004. Finally, in June 2005 the Executive published a consultation paper entitled "Advice for All: Publicly Funded Legal Assistance in Scotland - The Way Forward", setting out a number of proposals for change in the medium and longer term. Comments on the proposals in that paper were sought by 9 September 2005.

2.61 The general thrust of the various reviews which had been undertaken was broadly consistent. The Strategic Review found that the current arrangements for publicly funded legal assistance provided valued services to a wide range of people in Scotland, but were in need of considerable reform and development. The Executive's June 2005 consultation paper set out a range of proposals for change in legal assistance paid for from the public purse (advice provided by the legal profession as well as advice on such matters as housing or debt from a wide range of other providers such as local authorities and the voluntary sector).

2.62 The consultation proposed measures to address long term strategic issues, including better coordination and planning of services and service providers, better matching of supply to demand, better value for money and continued, quality advice provision for the future. It envisaged compatible systems of quality assurance covering all types of advice. In order to ensure the availability of appropriate services, it proposed that SLAB should be able to respond to gaps in supply more flexibly, using a range of mechanisms. On the criminal side, flexibility might be achieved through the use of contracts or via expansion of the work of the Public Defence Solicitors' Office ( PDSO). On the civil side, it might also involve the direct employment of solicitors alongside the use of contracts or grant funding arrangements with a range of advice providers, including both lawyers and others, in the private and not-for-profit sectors. For the longer term it envisaged the possible establishment of a national coordinating body which would subsume the current role of SLAB and would also have powers to co-ordinate the delivery of other forms of advice provision. It sought views on the roles to be played in such a co-ordinated mechanism by the legal profession, SLAB, local authorities, other advice providers including the voluntary sector, and the Scottish Executive.

2.63 The proposals sought to balance access to advice with the need to ensure better value for money. They included the introduction of clearer and fixed financial eligibility criteria and more extensive and flexible powers for SLAB to provide greater control over how public funds were spent. They were aimed at ensuring that those who could pay towards their legal costs did so, and at minimising any form of exploitation of the current system. On the criminal side, one specific proposal was that responsibility for granting legal aid in solemn criminal cases should be transferred from the Courts to SLAB, in order to improve the assessment of applicants' financial eligibility. For the longer term the paper floated the idea of a system of contributions in legally-aided criminal cases for those who could afford them, as was already the case in civil legal aid. Proposals to improve planning and coordination would also ensure that public funds were spent more effectively.

2.64 In terms of civil legal advice, the proposals set out a number of improvements in access. In response to concerns that many people on modest but not very low incomes were not getting the access to advice they needed, the paper proposed more flexible ways of paying contributions towards legal costs. For the longer term the paper sought views on the principle of a system of tapering whereby eligibility for civil legal aid would be open to people on considerably higher incomes than at present, subject to concomitant higher contributions being payable: in many cases that would result in people paying the full cost of their case, but would provide a safety net where the costs of the case were genuinely higher than the legally-aided person could afford.

2.65 Separately from the consultation on strategic policy matters, much work had been and was being undertaken on detailed changes to the legal aid system. In some cases these sought to ensure that the legal aid system properly underpinned and supported changes being brought forward in other parts of the justice system, such as High Court reform and the forthcoming proposed reform of summary criminal justice. In other cases the changes sought to streamline the system and improve efficiency and value for money. A review of civil legal aid had already been put in place, as had a new system of fees for Counsel in solemn criminal cases which would be reviewed and refined in autumn 2005. Further proposals for the review of fees for solicitors in solemn criminal cases, and for the modernisation of summary criminal legal aid generally, were under consideration.

Competition issues

2.66 The full implications for competition in the legal services market of those varied and sometimes complex proposals for changes in the legal aid and advice systems could not be clearly assessed until decisions had been taken by Ministers, and where appropriate by Parliament. The timescale for the full range of decisions to be made would extend over a number of years, and certainly well beyond the timescale of the Group's work programme. In broad general terms, however, it could be anticipated that the provision of a wider and better co-ordinated range of advice and related services should encourage the development of competition where that was clearly desirable, while reducing the potential for wasteful duplication where that would best serve quality, efficiency and effectiveness.

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