History of proposed reforms
The consideration of reform in the legal services market in the UK was initially driven by the 2004 European Commission report on competition in the liberal professions. In England and Wales, this was followed by the Review of the Regulatory Framework for Legal Services in England and Wales in 2004 ("the "Clementi report"),and the Legal Services Act 2007 ("the LSA 2007").
The Clementi report concluded that;
- the regulatory framework of the English and Welsh legal services market lacked clear objectives and had insufficient regard to the interests of consumers; and
- business structures had changed little while business practices had changed significantly.
It favoured a new regulatory framework which permitted a high degree of choice for consumers in how they obtain legal services, and choice for lawyers in the type of business they worked within.
The LSA 2007 which followed created a new "super-regulator", the Legal Services Board ("LSB"), to license the regulators of legal services, and established a comprehensive regulatory framework overseen by the LSB. Once the new system is fully in place, English solicitors and barristers will be able to operate in a variety of new business structures. From 31 March 2009, it has been possible for English law firms to operate as "legal disciplinary practices". These can be owned and managed by lawyers from different branches of the profession (e.g. solicitors and barristers) and have up to 25% of owners or managers who are non-lawyers. The full range of alternative business structures are not likely to be in operation until late 2011.
In Scotland, a Research Working Group ("RWG") was set up by the Scottish Government to research the Scottish legal services market. The RWG reported in 2006. It considered alternative business structures ("ABS") for the legal profession, and concluded that this was a matter for further policy development by the Scottish Government. It recommended that sections 25 to 29 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 be commenced, and this was done on 1 March 2007.
" Which?" submitted a super-complaint to the OFT on 8 May 2007 claiming that the current regulation of Scottish legal firms restricts choice to consumers and prevents the formation of alternative business structures. " Which?" argued that the lack of ABS reduced consumer choice and the potential for consumer savings, and advocated:
- removal of the current regulatory restrictions on solicitors and advocates working together on an equal footing, or bringing together lawyers and other professionals (for example accountants) to provide legal and other services to third parties;
- removal of the prohibition on consumers having direct access to advocates; and
- the creation of an independent Scottish Legal Services Board, which would be responsible for the regulatory control of the Scottish legal bodies and consumer protection.
In its response to the supercomplaint, the OFT, although not assuming that the changes proposed for England and Wales through the LSA 2007 would automatically be suitable for the Scottish legal services market, supported greater liberalisation of that market. The OFT recommended that the Government publish a statement to indicate how it intended to reform the current system. In September 2007, the Cabinet Secretary for Justice set out the Scottish Government's view that, although it did not agree that the Scottish legal system needed the radical changes being implemented in England and Wales, there was a need for reform. He challenged the profession to take a lead in identifying how to move forward. In a debate in the Scottish Parliament on 15 November 2007, MSPs generally welcomed the Scottish Government's approach.
In December 2007, the Scottish Government published a policy statement in response to the OFT, noting the consultations which were underway within the Law Society of Scotland ("the Society") and the Faculty of Advocates ("the Faculty") and setting out the Scottish Government's provisional views.
The Society published a policy paper, "The Public Interest: Delivering Scottish Legal Services" in April 2008 which argued that it was in the interests of the public and profession to permit ABS for a more modern and competitive legal service. The Society's Council had no objection in principle to any business model and stated that the key issues were to establish an appropriate regulatory framework and to maintain the core values of the legal profession. The Society's AGM approved the policy on 22 May 2008.
The Faculty response, "Access to Justice: a Scottish Perspective: a Scottish Solution" published in May 2008, favoured maintaining an independent referral Bar subject to the "cab rank" rule. Although the Faculty does not wish advocates to participate in ABS at this time, it has no objection to solicitors being able to do so, and argues that it should be open to any advocate wishing to join an ABS to do so by becoming a solicitor advocate.
A Legal Profession Bill was announced as part of the 2008 legislative programme on 3 September 2008. The main aim of such a bill would be to introduce alternative business structure (ABS) for the legal profession by creating a flexible regulatory regime for legal services which will allow different sorts of business models to develop where they are appropriate and in line with the regulatory principles underpinning that regime.
The overarching driver for primary legislation was identified as access for all to high quality legal services within a competitive market which is appropriately regulated to ensure public protection and maintain quality.
Consultation prior to introduction of the Legal Services (Scotland) Bill
A Bill Reference Group ("BRG") was set up in autumn 2008 to support policy development and inform public consultation. The BRG included representatives from the Society, the Faculty, Consumer Focus Scotland, the Scottish Legal Aid Board ("SLAB"), the OFT, and Professor Alan Paterson of Strathclyde University. Issues considered included how best to protect the core values of the legal profession and ensure high quality of service, how to regulate firms which combine legal and other professional services, and how best to support access to justice in the new environment. Discussions were also held with key stakeholders such as Which? and the Institute of Chartered Accountants of Scotland ("ICAS").
Papers and minutes from the BRG meetings are available.
The Scottish Government issued a consultation paper " Wider choice and better protection: a consultation paper on the regulation of legal services in Scotland" on 7 January 2009. It sought the public's views on the proposed regulation of ABS for the delivery of legal services in Scotland. 47 responses were received, with around two thirds from organisations (i.e. law firms, representative bodies, consumer bodies, etc.) and one third from individuals.
The consultation responses were broadly supportive of the introduction of ABS on the grounds that it would enable better access to justice, with more choice, reduced prices, and the convenience of a one-stop shop. Balanced against this was a minority view that there was no need for ABS as it could threaten the independence of the legal system and there was not sufficient evidence to support its introduction. The consultation looked at three different models of ABS (ABS involving non-lawyer ownership, ABS involving external ownership, and multi-disciplinary practices) and the majority view was that any of the proposed models should be permitted. Individual responses to the consultation and the consultation report are available.
The Legal Services (Scotland) Bill was introduced to the Scottish Parliament on 30 September 2009.
Consultation on regulation of non-lawyer will writers
Following representations made to the Scottish Government expressing concern about non-lawyer will writers, a consultation was carried out on the possible regulation of such individuals. This took place between 18 December 2009 and 19 February 2010.
48 responses were received (some respondents wished to remain anonymous). The responses have been analysed, and a report of the main findings is available.
Amendments introducing a system of regulation for non-lawyer will writers, and prohibiting the provision of will writing services by unregulated persons, were successfully passed at Stage 2 of the Legal Services (Scotland) Bill. However, it should be noted that these provisions are not yet in force, and discussions will be held with relevant stakeholders prior to implementation.