WORKING GROUP FOR RESEARCH INTO THE LEGAL SERVICES
MARKETS IN SCOTLAND
NOTE OF FIFTH MEETING ON 25 NOVEMBER 2004
Present :
Andrew Dickson, Scottish Executive Justice Department,
Head of Access to Justice Division
Professor Robert Baldwin, London School of Economics
and Political Science
Professor Alan Paterson, Director of the Centre for
Professional Legal Studies, University of Strathclyde
Professor Frank Stephen, Professor of Economics,
University of Strathclyde
Elaine Samuel, University of Edinburgh, School of
Social and Political Studies
Sarah O'Neill, Scottish Consumer Council
Chloe Clemmons, Citizens Advice Scotland
Grahame Horgan, Office of Fair Trading
Lindsay Montgomery, Chief Executive, Scottish Legal
Aid Board
Douglas Mill, Chief Executive, Law Society of
Scotland
Neil Ross, Grigor & Young, Elgin
Michael Walker, Maclay, Murray & Spens
Roy Martin QC, Dean of the Faculty of Advocates
Debbie Headrick, Senior Researcher, Scottish
Executive Legal Studies Research Unit
Alison Dewar, Scottish Executive Justice Department,
Legal Services Policy Team
In attendance :
Eleanor Winton, student placement with the Scottish
Executive Justice Department
Apologies
1. Apologies had been received from Martyn Evans,
Scottish Consumer Council (SCC), Michael Clancy, Law
Society of Scotland, James Wolffe, Advocate, Dr Anita
Morrison, Scottish Executive and Mike West, Scottish
Executive. Apologies had also been received from Alan
Williams, Office of Fair Trading (OFT) who was now the
OFT's official representative on the Group.
Introductions
2. Andrew Dickson welcomed Eleanor Winton who had a
student placement with the Justice Department and was
observing the meeting. Mr Dickson conveyed the Group's
congratulations to Roy Martin on his election as Dean of
Faculty. Mr Martin intended to continue to sit on the Group
as a representative of the Faculty.
Group Membership
3. The Group noted that there was outside interest in
its composition, including an article in the Herald on 22
November. The Executive confirmed that Ministers were
content with the composition of the Group. The article
quoted in part a response to a Parliamentary Question. A
sentence had however been omitted, to the effect that "The
research undertaken under the auspices of the Group has
sought evidence from other organisations with an interest
in the relevant issues: and the Executive will of course
take into consideration any further relevant submissions
put forward".
4. The Executive was asked how the views of
organisations and individuals who had expressed an interest
in membership of the Group would be taken into account. The
Executive advised that it would consider representations
made, but reiterated that Ministers were content with the
composition of the Group.
5. Mr Dickson noted that the members of the Group, other
than the researchers, represented the organisations to
which they belonged and had been chosen by their
organisations and not by the Executive. However, in
response to the concerns raised by the Society about the
position of Mr Grahame Horgan as a member of the Group, OFT
had agreed that Mr Alan Williams should be the formal
representative of OFT. The Executive thanked Mr Horgan for
his contribution to the Group.
Minutes of the Last Meeting
6. The Group discussed the draft minutes. The Society
had asked that the word "formal" be removed from the fourth
sentence of paragraph 8, on the grounds that OFT had said
that no action of any kind was currently planned. OFT
resisted this, saying that as a summary of the discussion
as a whole the word reflected the OFT position. The matter
could not be resolved and it was agreed to note the
opposing views. The minutes would be published with the
word "formal", but with a note to the effect that this
wording had not been agreed.
Matters Arising : Society and OFT correspondence
7. The Group noted the correspondence between the
Society and OFT on the position of the former OFT
representative on the Group and related matters.
Matters Arising : Action Points
8. The
Faculty had prepared its paper on
advertising and would send it to the Executive.
9. The Society circulated its response to the Home
Office consultation on the Proceeds of Crime Act 2002 and
the Money Laundering Regulations 2003.
10. The Faculty confirmed that it had no formal record
of the Dean having instructed an advocate to take a case
under the cab rank rule. There was however anecdotal
evidence that this happened informally from time to
time.
11. It was agreed that the
Executive would circulate a summary of the
outstanding action points with the draft minutes.
Matters Arising : Queens Counsel
12. The Executive's Courts Group had provided a note for
the Working Group on QC appointments in Scotland. An
announcement of the appointment of an independent person to
observe the process was imminent (Sir Roy Cameron's
appointment was subsequently announced). Advertisements
seeking applications for appointment as QC were placed in
the Herald and Scotsman on 26 November and would also
appear in the legal press on the first available
publication date.
13. The Group noted the paper. The Scottish Consumer
Council welcomed the changes to the appointments system but
commented that there was still a need to consider whether
there was any requirement for such a quality mark, whether
it was in the interests of consumers and whether it
distorted competition. All of these issues had been raised
in the OFT report on Competition in the Professions in
England and Wales. The Scottish Consumer Council requested
written comment from OFT.
OFT welcomed the opportunity to provide
comment.
14. The findings from the Group would be included in its
final report.
Auditor of Court research proposal : oral report
15. The
Executive had written to the Lord
President of the Court of Session and Sheriffs Principal
seeking authority to interview the auditors of court and
would provide an update at the next meeting. Anecdotally it
was reported that clients in one sheriffdom were no longer
"entitled" to taxation but rather they could "request" it.
The Group noted the Scottish Courts Service had published
its consultation paper "Arrangements for Extra-Judicial
Audits".
RWG 2004/2/1 Regulatory Framework for Legal Services in
Scotland
16. It was agreed that the paper would be published on
the Executive's website subject to the following amendments
:
16.1 paragraph 6 - include deleted sentences "Advocates
are recognised as "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 choosing."
16.2 paragraph 18.1 - to reflect 18.3 and "if the
sheriff is satisfied that such a person is a suitable
representative and is duly authorised to represent the
party".
16.3 paragraph 29 - "In July 1992, the Faculty adopted a
constitution for an elected Council".
16.4 paragraph 38 - revise to make clear that the
Faculty's Tribunal is only part of its complaints procedure
as Complaints Committees are also used.
16.5
SLAB would send a paragraph on the
interaction with legal aid legislation and its ability to
take a solicitor to the Scottish Solicitors' Discipline
Tribunal (inserted at paragraphs 42-43).
16.6 paragraph 51 - mediators did not give advice but
assisted the parties to come to an agreement.
RWG 2004/2/2 Professional Rules etc with potential
implications for Competition in the Scottish Legal Services
Markets
17. Professor Frank Stephen, OFT and the Faculty had
provided contributions for the paper.
Solicitor Advocates
18. The
Executive agreed to consider rule 1(5) of
schedule 1 to the Solicitors (Scotland) Rules of Conduct
for Solicitor Advocates 2002 which provides that "A
solicitor advocate may not accept instructions on any basis
which would deprive him of the responsibility for the
conduct of the case or fetter his discretion to act in
consultation with the client in accordance with his
professional judgement or public duty." This might be
interpreted to mean that while a solicitor advocate could
act with junior counsel, he would have to defer his
responsibility for the case if he was acting with senior
counsel.
19. Having considered rule 1(5), the
Executive would review paragraph 13 of the
draft paper.
Scale Fees
20.
OFT drew to the Group's attention that on
25 June 2004 the European Commission had fined the Belgian
Architects' Association 100,000 euros for failing to
abolish the system of recommended fees that applied to its
members. The view taken by the Commission was that the
Association's recommended minimum fee scale was in breach
of competition rules because it sought to co-ordinate the
pricing behaviour of architects. The Group agreed that this
case was significant and the
Executive would consider further.
21. Professor Stephen commented that there was a need to
draw a distinction between competition law and competition.
What the legislation delivered might not be what was
required to introduce competition.
Advertising
22. The comments from Professor Stephen on advertising
reflected an appropriate interpretation of empirical
evidence. Academic literature had sometimes been
misinterpreted by non academics: Professor Stephen had
therefore attempted to distinguish between early academic
work which had used flawed methods, and subsequent work on
the effect of professional advertising on the fees of non
advertisers. In the end, the same conclusion was reached
that advertising appeared to increase competition.
Professor Stephen considered that if the Group was
providing evidence for any future work, it was important
that evidence from Scotland was recorded. The significant
point was the impact of price advertising. Professor
Stephen also noted that some research failed to distinguish
between different forms of advertising.
Restrictions on receiving a payment for a referring a
client
23. In relation to paragraph 35, the
Executive would update the Group on the
Council of the Law Society of England and Wales'
consideration of the ballot of its members which had found
in favour of the reinstatement of the ban on referral
fees.
Rule against partnerships
24. Professor Stephen also provided comment on the
Faculty's rules against partnerships. He noted that much of
the discussion within the Group had been hypothetical
because of the lack of empirical evidence. Professor
Stephen went over the table he had inserted which set out
the choice of organisational form and the economic factors
likely to affect the choice of organisational form. He
commented that Faculty Services Ltd was likely to produce
economies of scale for members, although there was no
systematic evidence to confirm this. It allowed 450
advocates to share costs, which represented greater
economies of scale than applied to even the largest firms
of solicitors in Scotland. This was, therefore, not a
simple comparison between group and sole practice. He also
noted that economies of scope meant that the ability of a
single firm to provide two services could be cheaper than
two firms providing single services.
25. Professor Stephen advised the Group that it was his
view that if there were no restrictions, the choice of
organisational form would come down to attitudes towards
risk. There would be a trade off between specialism and
economies of risk spreading: this would differ as between
advocates who were specialists and those who were
generalists. Professor Stephen suggested that it would be
helpful if more research was undertaken to judge the
magnitude of the differences and information on the degree
of specialisation of advocates.
26. Professor Stephen went on to say that if there were
no restrictions on the movement of practitioners between
the branches of the legal profession, the rule against
partnerships would not seem to interfere with competition
as it would be a voluntary restriction imposed by a group
who wished to practice in a particular form. There should
however be competition between the regulatory bodies as
well as within the profession itself.
27. Professor Stephen believed that the rule against
mixed doubles had an impact on competition, rather than the
rule against partnerships.
28. The
Faculty welcomed the discussion and agreed
to provide information on the overheads of Faculty Services
Ltd and the Faculty. Advocates contributed a percentage of
their income to both. The percentage total for last year
was 13% and for this year it was 12.5%. The Faculty did not
keep information on travel or other expenses. The Faculty
noted that advocates had access to the finest law library
in the United Kingdom which had on line facilities and was
open 24 hours a day, 365 days a year. Through the
Advocates' Library they could also access the National
Library of Scotland.
29. The Faculty asked whether, if either the
restrictions on transfer or the mixed doubles rules was
abolished, that would remove the restriction on
competition, or whether both would have to be abolished.
Professor Stephen considered that both would have to be
abolished unless further evidence indicated otherwise. The
costs, including the opportunity costs of moving between
branches of the profession, would influence practitioners.
Professor Stephen did not believe these costs to be high.
The rule on mixed doubles was an impediment to solicitor
advocates reaching the equivalent of senior counsel.
30. The point was made that the analysis was of
restrictions affecting lawyers' choice of organisational
form rather than of consumers having access to the lawyer
of their choice. If there were no restrictions competitive
force would filter through, but only in the long term.
31. The
Society too welcomed the discussion and
agreed to provide evidence. Their cost of time survey would
be relevant and it was noted that on average two thirds of
a firms' income went on overheads and a third was earnings.
As at 1 November there were 1255 legal firms and 572 sole
practitioners.
32. The Group discussed how much more work should be
done on the paper. It was agreed that the information from
the Faculty and Society would be useful for this stage, but
that any other follow up work should be considered for
inclusion in Phase 2. Information on implicit as well as
explicit restrictions on movement between the two branches
of the profession would be helpful. An examination of why
solicitor advocates had been slow to take up rights of
audience in civil cases could also usefully be explored in
Phase 2.
33. OFT suggested that the Group might consider the
profession's capacity for capitalisation. In England and
Wales partnerships attracted capital in a way that
barristers' chambers did not. OFT accepted Professor
Stephen's approach but considered that it was important to
be comprehensive if restrictions were being compared and
asked if restrictions on litigation, and the restriction on
individuals instructing advocates direct, should be
included. The Faculty did not consider that capitalisation
was an argument that could be explored as advocates did not
work in chambers and that the absence of responsibility for
litigation reduced an advocate's overheads.
34. Professor Stephen considered that so long as clients
had an ability to choose a practitioner, the regulation of
that practitioner's profession would have an effect on
costs and the choice of the individual. The restrictions on
organisational form a regulatory body put on its members
was another matter. There was no need to remove all
regulation so long as an individual could chose who they
regarded as the best available practitioner at the right
price. The consumer had to be confident that the service
would be of equal standing.
35. It was agreed that
Professor Stephen would provide an
analysis of legal disciplinary practices, including
consideration of how the criminal work of solicitor
advocates had developed.
Mixed Doubles
36.
OFT would consider the Faculty's comments
and respond to these.
37. The
Executive would consider what further
editing of the paper might be required.
RWG 2004/5/1 Rules of court with potential implications
for Competition in the Scottish Legal Services Markets
38. It was agreed that
Group members would provide written
comments on the paper by 31 December.
RWG 2004/5/3 Report on Phase 1 interviews and Phase 2
proposals
39. The transcripts of the interviews were now with the
interviewees for agreement. Three potential markets had
been identified for further research in Phase 2: advocacy
services; wills, trusts and executries; and employment law.
It would not be possible to complete all three market
studies by March 2005. Therefore
the Group agreed that advocacy services would be
researched further and the others would be
considered if the Executive pursued further research in
2005 beyond the work of the Group. A look at the advocacy
services market would include an opportunity to look
further at the issue of overheads, solicitor advocates and
advocacy services in relation to tribunals, debt and
housing. The other markets could be included in the Group's
final report as suggestions for future work.
RWG 2004/5/4 Comparative review of rights of audience
and rights to conduct litigation
40. The
Executive would amend the paper as
follows:
40.1 paragraph 1 - to make it clear that individuals
could instruct solicitor advocates direct; to include the
point that more individuals were representing themselves or
using lay representatives and that the latter were not
always paid for their services; and to indicate the bodies
who had expressed support for commencement of sections 25
to 29 of the Law Reform (Miscellaneous
Provisions)(Scotland) Act 1990, namely OFT, the Scottish
Consumer Council, the Chartered Institute of Patent Agents
and the Association of Commercial Attorneys.
40.2 paragraph 5 - to make it clear that the role of the
Scottish Legal Services Ombudsman was in relation to
complaints.
40.3 paragraph 6 - to reflect that in-court advisers
were not a special case.
41. The SCC was interested in the purpose of the paper
as while it provided an interesting comparative exercise
they considered that it was not clear how the issue would
be taken forward by the Group. They regarded it as an
important competition issue which required to be
addressed.
42. It was noted that there was no evidence on the
numbers of individuals conducting their own cases, but
anecdotally there were more and more people representing
themselves, particularly in ordinary cause cases. It was
suggested that the
Executive should consider the research
conducted on small claims and also seek more information on
in-court advisers. Citizens Advice Scotland had also
conducted research into lay representation some years ago :
some sheriffs had refused to hear lay representatives in
court and others were hostile to their presence.
Professor Paterson would provide the
relevant research.
Elaine Samuel would provide her research
on in-court advisers.
RWG 2004/5/5 Content and structure of final report
43. The
Executive would amend paragraph 2.2 to
include categories of service providers.
44. The Group considered what it had achieved so far and
what else was still to be done before the final report in
March 2005. It was suggested that because the research had
raised more questions than had been expected at the outset,
it might be preferable to extend the life of the Group in
order to provide a truly informed report for Ministers. It
was suggested that an interim report might be the way
forward but the counter argument was that this could be an
unwelcome distraction. European developments might also
influence the timetable. The European Commission had been
silent on any follow up to its February 2004 report in
which it had requested jurisdictions to respond by the end
of the year. If requested to do so the Executive could
provide a response based on the work of the Group.
45. It was agreed that it would be vital that the final
report should formally assess progress against the Group's
terms of reference, purpose and aims.
46. The
Group agreed to hold an additional meeting
in March 2005.
Any other business
47. The Executive said that the Chartered Institute of
Patent Agents had submitted a report on rights of audience
for the Group to consider. Since however it had been
received only the afternoon before the meeting discussion
would be deferred until the January meeting. The
Executive would circulate the paper as
soon as possible.
48. The Society asked the Group to note that it was
concerned about unregulated advisers and that the Clementi
review was relevant to this.
49. The Society circulated its draft practice rule on
letters of engagement - the Solicitors (Scotland) (Client
Communications) Practice Rules 2005. The rule would be
before Council for approval on 3 December.
50. The Society circulated a note on the accounting of
commission by Scottish solicitors.
Date of next meeting
51. The next meeting of the Working Group would be on 27
January 2005.
Any comments on the note should be sent to
:
Legal Services Policy Team
Access to Justice Division
The Scottish Executive Justice Department
Second Floor West
St Andrew's House
Regent Road
Edinburgh
EH1 3DG
ACTION POINTS
1. The
Faculty had prepared its paper on
advertising and would send it to the Executive.
2. The
Executive to circulate a summary of the
outstanding action points with the draft minutes.
3.
OFT to provide comment on the use of QC as
a quality mark and if the system distorts competition.
4. The
Executive had written to the Lord
President of the Court of Session and Sheriffs Principal
seeking authority to interview the auditors of court and
would provide an update at the next meeting.
5. The
Executive to amend RWG 2004/2/1 Regulatory
Framework for Legal Services in Scotland at paragraphs 6,
18.1, 29, 38 and 49 and publish it on the website.
6.
SLAB to provide a paragraph for RWG
2004/2/1 on the interaction of the complaints system with
legal aid legislation and its ability to take a solicitor
to the Scottish Solicitors' Discipline Tribunal.
7. The
Executive to consider the implication of
rule 1(5) of the Rules of Conduct for Solicitor Advocates
2002 in relation to solicitor advocates being able to
appear for the same client with junior counsel but not
senior counsel.
8. Having considered rule 1(5), the
Executive would review paragraph 13 of RWG
2004/2/2 Professional Rules etc with potential implications
for Competition in the Scottish Legal Services Markets.
9. The
Executive to consider the implications of
the European Commission's decision to fine the Belgian
Architects' Association.
10. The
Executive to update the Group on the
Council of the Law Society of England and Wales'
consideration of the ballot of it members which found in
favour of the reinstatement of the ban on referral
fees.
11. The
Faculty to provide information on the
overheads of Faculty Services Ltd and the Faculty
12. The
Society to provide evidence on
overheads.
13. OFT suggested that the
Group might consider the professions
capacity for capitalisation and the inclusion of other
restrictions for comparison for example those on
litigation.
14.
Professor Stephen to provide an analysis
of legal disciplinary practices including considering how
the criminal work of solicitor advocates has developed.
15.
OFT to consider the Faculty's comment on
mixed doubles and respond to these.
16. The
Executive to consider how RWG 2004/2/2
should be edited.
17. The
Group to provide written comments on RWG
2004/5/1 Rules of court with potential implications for
Competition in the Scottish Legal Services Markets by 31
December.
18. The Group agreed that advocacy services would be
researched further.
19. The
Executive to amend RWG 2004/5/4
Comparative review of rights of audience and rights to
conduct litigation at paragraphs 1, 5 and 6.
20. The
Executive to consider the research
conducted on small claims and also contact the in-court
advisers.
21.
Professor Paterson to provide the relevant
research on representation.
22.
Elaine Samuel to provide her research on
the in-court advisers.
23. The
Executive would amend paragraph 2.2 of RWG
2004/5/5 Content and structure of final report to include
categories of service providers
24. The
Executive to take a formal look at
progress against the Group's purpose and aims.
25. The
Executive to arrange an additional meeting
in March 2005.
26. The
Executive to circulate the paper from
CIPA.