4. GROWING THE LEGAL MARKET
4.1 The development of niche markets
4.1.1 The issue of how we compete effectively with England applies equally to non-contentious legal work as it does to litigation. There are areas where Scots law has advantages over English law, and the Scottish government should prioritise reforms to civil law which can develop those advantages, but the quicker win is likely to come from encouraging greater use of Scots lawyers, rather than Scots law.
4.1.2 In doing this, we need to accept that Scotland may not be able (subject to some exceptions) to offer the same degree of specialisation which can be offered by some of the English bar and in the 'magic circle' solicitors firms. The competitive advantages we have include:
- we can offer a more rounded, more personal service - because our commercial lawyers do not specialise to the same degree as the large English firms, the teams can be smaller and more flexible
- we are used to operating in multi-jurisdiction environments - i.e. we know more about English law than the English know about Scots law
- in a relatively small country we can work very closely with other professionals such as corporate financiers, accountants, surveyors etc which offers similar benefits to multi disciplinary practices
- we can carry out major commercial work more cheaply than our English competitors
4.1.3 The 'pitch' for the Scottish profession is, in short, that we are like England (we have the closeness to England to understand and use English law) but not England (we can be quicker, less bureaucratic and give better value for money).
4.1.4 That message needs to be worked up more fully into a coherent marketing strategy for Scottish legal services.
4.1.5 That said, there are specific niche areas where Scotland may have particular potential for development.
4.2 Commoditised legal services
4.2.1 One of the major changes in the legal services market over the next few years is likely to be the further development of commoditised legal services - using technology and business re-engineering to deliver high volume legal processes (such as re-mortgaging and debt recovery) more efficiently and on a large scale. Lower property and salary costs than some other parts of the UK, combined with a skilled workforce and a concentration of legal skills, make Scotland a potential beneficiary of this shift, if the opportunity is grasped.
4.2.2 A key enabler is likely to be the development of alternative business structures ( ABS) in the legal services market, allowing access to external investment. The UK government has already legislated to allow ABS, but full implementation of the legislation is still some way off. The Scottish Government has announced legislation in its current Programme which will allow ABS in Scotland. If Scotland acts quickly, it can keep pace with and even overtake England in developing a framework for ABS in the delivery of services by solicitors, which maintains our current, cost effective regulatory environment. That cost effective regulatory environment is in itself an important factor in maintaining the attractiveness of Scotland as a base for legal business.
4.3 Recommendation
4.3.1 The Government should ensure that the forthcoming legislation on the regulation of legal services provides a flexible and proportionate regulatory regime which will allow the Scottish legal profession compete internationally, and should aim for implementation at least in step, and preferably ahead, of the implementation in England and Wales of the Legal Services Act 2007.
4.4 Intellectual property law
4.4.1 Development of this area of the law could bring with it synergies if the Scottish Government is intending to focus on areas such as sustainable energy sources, biotechnology, and microelectronics - and, indeed, any other area of fast technological development. Businesses looking to develop in these areas need to be confident that:
- there are laws in place to protect their work;
- the legal skills are in place to advise and, if need be, rule on the application of those laws;
- the legal infrastructure is in place to administer the rights provided by the laws (eg skilled solicitors, Patent agents); and
- the jurisprudence favours the innovative development of legal principles to support ground-breaking concepts in technology.
4.5 Recommendations
4.5.1 The Government should conduct a study into the legal needs of the industries which rely on the support of intellectual property law - to understand better what those needs are, and how they might best be met.
4.5.2 The Joint Standing Committee on Legal Education should encourage the enhancement of intellectual property law expertise at Scottish universities (e.g. combined law and technology qualifications) - for the purpose of:
- encouraging a new generation of lawyers specialising in this area; and
- promoting innovation in intellectual property law to keep abreast of - and anticipate - the fast pace of change in the industries that rely on that area of the law.
4.5.3 Identify areas where legal administration could facilitate business in the protection of their intellectual property e.g. registration.
4.6 Employment law
4.6.1 Employment law can have a significant impact on the attractiveness of a jurisdiction to business. Employment law is currently reserved to the UK Government, and in some respects is derived from EU legislation, although the approach to implementing EU Directives may differ in different jurisdictions.
4.6.2 A sub-group discussed the possibility that employment law be devolved to the Scottish Government. This possibility is one which goes beyond the immediate focus of BELF, but could allow a distinctive approach to be developed, which might be attractive to business, including inward investors.
4.6.3 Less radically, there may be ways to improve the operation of employment law in Scotland, to make employment disputes less of a drain on business, and indeed employees. The current reform to UK Tribunals, and the need to consider a Scottish response (as discussed in the recent report by the Scottish Consumer Council 6) presents an opportunity to consider the benefits of a distinctively Scottish approach.
4.7 Recommendations
4.7.1 The Tribunal Service should invest in Employment Tribunal infrastructure and training to expedite the resolution of employment disputes.
4.7.2 The Government should consider a greater role for mediation (and other forms of dispute resolution) in employment dispute resolution. This might address the perception that the relationship between employer and employee is too frequently escalated into a legalistic, polarised process which discourages mutually constructive dialogue.
4.8 Technological leap-frogging
4.8.1 A theme throughout the Forum's discussions was the logistical problems (actual and perceived) associated with Scotland's remote geography - both for attracting legal business into Scotland, and for administering existing business. Existing technologies such as video-conferencing can help but, to date, have often been unsatisfactory substitutes for face to face communication. However, it is likely that technology over the next few years will create substantially new ways of doing business - whether through new communication channels such as instant messaging, or completely new business environments, such as Second Life. Scotland's universities are world leaders in aspects of new technology, and potential synergies should be explored.
4.9 Recommendation
4.9.1 The Scottish Government and Scottish Court Service should work with Scottish universities and other bodies that are developing this sort of pioneering technology and harness their knowledge and skills to assessing how that technology might be adapted, in a cost effective way, to overcome some of the logistical issues arising for the delivery and administration of justice in Scotland.
4.10 Understanding the profile of the business legal market
4.10.1 When considering what "business-focused" looks like for the Scottish courts, there was consensus on the importance of speed, transparency, certainty, and plain English. Beyond that, however, a greater understanding of the "market" and its needs is required. In turn, to know who are the constituents of the "market", more data is required on, for example:
- what sorts of businesses use the courts most (e.g. large corporate, SMEs, partnerships, sole traders) - broken down to show use by volume and value; and
- what sort of litigation those businesses engage in (e.g. debt recovery; contractual disputes; employment; intellectual property) - broken down by volume and value.
4.10.2 At present, there is very little data on the business users of the courts. To gain a complete picture, it is important to know who does not use the courts, and how and where they go about resolving their disputes (essentially an analysis of the courts' competitors whether in Scotland or abroad).
4.11 Recommendation
4.11.1 The Scottish Government should carry out research into the business users of the courts, and the profile of the sorts of litigation they engage in - whether as pursuers or defenders; and the other forms of dispute resolution businesses use.