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Independent Review of Regulation of Legal Services - March 2018

By Michael Sheridan

 

Independent Review  of Regulation of Legal Services -  March 2018

This month of March 2018 brings us  a late opportunity to make a submission to the Scottish government's current Independent Review of the Regulation of Legal Services in Scotland. A few weeks ago that Review issued a call for evidence to be submitted by 30th March 2018. We have therefore hastily convened a general meeting in Glasgow and have discussed matters as fully as we could in the time available and have now produced the undernoted response to the call for evidence.  You will recollect that developments took place in England about 14 years ago for the deregulation of legal practices permitting the sale of shares in these practices in the commercial market. The vigorous rejection of that notion in Scotland was led by the President and Council of the Law Society of Scotland (CLSS}. That was until 2008 when that policy was turned on its head so that CLSS came to support  an even more liberal sell off than was permitted in England. This became known as Alternative Business Structures  (ABS). It then transpired that  the equity  partners of certain large legal firms which were in financial difficulty had seen the opportunity to hugely increase their personal returns by selling off the firms to banks and other commercial investors. The Scottish Government has shown clear misgivings about this policy and has set up a review into the future regulation of legal services in Scotland .  Now the Scottish public has until the end of this month to write to the Independent Review into Scottish Legal Services, GW10, St Andrew’s House, Regent Road, Edinburgh EH1 3DG to explain why Scottish legal firms should not be made saleable, in whole or in part, outwith the Scottish legal profession .

We propose to submit this response to the Independent Review on Thursday 29 March 2018 and would be happy to receive any input thereon from the membership in the meantime.

MS 

 

RESPONSE TO CALL FOR EVIDENCE

FROM THE

INDEPNEDENT REVIEW OF THE REGULATION OF LEGAL SERVICES 2018

 

The Scottish Law Agents Society (SLAS) was formed by Royal Charter of Queen Victoria in 1884 and is the oldest, largest and, indeed the only voluntary national society for solicitors in Scotland.  The existence of this Society is proof of the collegiate and independent nature of the Scottish legal profession.  The Society is wholly owned by the profession with no public or statutory input and exists to promote the interests of the legal profession and to promote the strength and independence of that profession in order to make it better able to serve the interests of the public and the rule of law.   The main objective of this Society was the formation of a statutory  body so that standards of training and conduct could be made compulsory in order to provide the public  with a reliable service and protection.  This object appeared to have been achieved with  the formation of the Law Society of Scotland in 1949, as currently  governed by the Solicitors (Scotland) Act 1949. However, members of SLAS were aware that the statutory body would not be under the control of the profession  and SLAS was retained mainly for professional representative purposes. 

SLAS Council meets monthly, usually in Glasgow or Edinburgh but, in order to help keep in touch with the membership, meets also in various parts of Scotland so that, in the past three years, meetings have been held also in Perth, Oban, Inverness, Wick and Dumfries.

The Society’s Council has instructed a response to the above review in the following terms.

1 Regulatory System

Who is being regulated ?     It appears to be obvious that it is solicitors who are being regulated. However, that may not strictly be the case. This is because the word solicitor now has a multitude of meanings. It includes solicitors who carry out in exchange for financial remuneration  some or other of the reserved  areas  of work identified in the  Solicitors (Act) 1980 and  whom we might refer to as reserved work (RW) solicitors.  That  work may  be   summed up as acting  for  clients in the Courts and also in   the purchase and sale of land and buildings.   A  substantial majority of solicitors, however,  do not in fact carry out that type of work  or, if they do, they do not receive financial remuneration from clients.   We  might refer to the latter category as in house  solicitors. These include the many hundreds and probably  thousands of solicitors who are employed by local authorities  and do not work for clients nor for professional remuneration related to services provided in the reserved areas but rather for salaries as public employees. While these solicitors do not require practising certificates  from  the Law Society  to enable them to carry out their employment, nevertheless, it is normal for them to obtain practising certificates, presumably for the status of solicitor which goes with the holding  of a practising certificate. Likewise, the hundreds and possibly thousands of solicitors employed by the Crown  Prosecution Service and other government agencies   have no need of practising certificates  from the Law Society.   In house  solicitors, therefore, have no clients  in the normal sense  and do not hold clients money and  are only marginally affected by the regulatory system for solicitors.  The vast majority of these solicitors could give up their practising  certificates and carry on with their work relatively undisturbed and might be regarded as having less at stake in the regulatory regime.   RW  solicitors, on the other hand enjoy the legal monopoly of undertaking work in the reserved areas  in consideration of professional remuneration paid to them by their clients and, in exchange for that monopoly,  are subject to the full gamut of the regulatory system which is now under consideration.  A whole barrage of accounts rules compel solicitors not only to properly account to clients for every penny entrusted to the solicitor, but also, policeman like, to carry out checks as to where that money came from, to earn appropriate interest for the client  on these funds and not to hold funds outwith certain time limits. Other regulations make solicitors liable to repay fees to clients and to pay compensation in addition in circumstances where no legal wrong has been done but where a non-judicial finding has been made that the service provided was not good enough. These fees are then repayable  notwithstanding that up to about 80% of them may already have been applied to support costs such as staff wages etc  as well as VAT and income tax  and are therefore not refunds of fees but simple fines upon  a solicitor who may well have completed his undertaking towards the client in a legal sense  but whose service  has been  deemed not to have been good enough.   Other regulations extinguish solicitors’ entitlement to remuneration for legally aided work years earlier then would apply to other businesses.  Other regulations make solicitors liable for professional misconduct and possible striking off and loss of livelihood if they omit issue clients with written terms and conditions of engagement. None of these constraints apply to in house  solicitors.

The number of solicitors in Scotland probably exceeds eleven thousand but the number of RW solicitors who are materially affected by the regulatory regime under review is unlikely to be any more than a third of that number.

It is important to understand from the outset who stands to be governed by the regulatory regime, how many practitioners are included and what facilities are available to ascertain the representative views of those practitioners. For example a solicitor depute procurator fiscal may have no objection to a solicitor having an obligation to report the illegal financial activities of a client but that depute will never be subject to that responsibility or to the  risk to his person and his family that may arise when that client comes to be prosecuted and learns of the source of that prosecution.  Because of the relatively small number of RW  solicitors within the overall category of solicitors there is a danger that their  views may be diluted by the views of the overall category, notwithstanding that it is the RW solicitors who stand mainly to be affected the regulatory regime under review.  While the Law Society consists of the whole body of solicitors, SLAS membership is concentrated among the RW fraternity and is therefore much more representative of the views of the solicitors who stand to be affected by the regulatory regime.  This is  quite apart from he circumstances narrated below at Appendix 1 paragaph 4 which indicate that the Law Society policy toward ABS in particular  may have been influenced by the interests of the tiny minority of equity owners from large firms in financial distress, rather than by the interests and views of the general body of the solicitor profession or of the RW solicitors in particular.

 Recommendation.

The Review should ascertain which and how many solicitors will be governed by the regulatory regime which is under review and should seek confirmation from the Law Society of Scotland as to the extent to which and the basis upon which the input of that Society should be taken as representative of the solicitors likely to be affected by that regime and as having the confidence of those solicitors.

 

2.Activities undertaken.  

 There was formerly a professional  requirement or at least an expectation  that the main work undertaken by  solicitors  was or would be  the provision of legal services.  In recent times, that requirement appears to have become very much more relaxed so that in  a recent case of insolvency, it transpired that the law firm in question had  substantial  undertakings in fund management and letting services  quite apart from the provision of legal services. Whether or not that structure had any causal connection to the insolvency of the business is perhaps a matter into which enquiry should be made with reference to the public documentation available including the insolvency practitioner’s report .  This is  particularly the case because of the significant number of substantial  Scottish  law firms which have either gone into insolvency or been acquired in circumstances of financial distress  by foreign entities in recent years – events which  were extremely rarer and exceptional up until about 10 years ago when the whole issue of Alternative Business Structures first  emerged in Scotland. While law practices cannot claim any dispensation against insolvency it is, nevertheless, a state which impacts upon a wide range of members of the public as well as the owners and employees who would be adversely affected by any business insolvency.  In law firms clients have entrusted their confidential information as well as their money  and their important papers and the insolvency process transfers those  monies and confidences and papers to an insolvency practitioner in whom the client has never reposed his trust and who is unlikely to deliver any papers or other items or provide any assistance until the insolvency process has been either completed or at least substantially so. There is therefore a public interest against the insolvent winding up of legal practices which is perhaps not the case with most other businesses.  For whatever reason, the uncontrolled insolvency of law firms, in Scotland at least, was a rarity prior to the moves towards ABS.   If the failure of these Scottish law firms has been attributable to their substantial undertakings of non-legal services then some  consideration should be given to the regulatory control of the activities undertaken by solicitors firms and the restriction of non legal services.

Recommendation.  The Review should seek to ascertain the amount of the loss sustained by the Scottish economy  including the reduction of tax receipts  during the past eight years as a result of solicitor firm  becoming the subject of acquisition by English and other foreign entities.  In order to minimise the occasions of insolvency in the legal industry consideration should be given to the restriction of services that might be provided by solicitors operating in the reserves areas.

 

 and also what has been  the effect upon the Scottish economy of the reduction of the Scottish owned legal services sector during the past 8  years and what might the effect  of the whole Scottish legal sector. The findings of such enquiries  might  instruct future regulation of the activities undertaken by solicitors firms.

 

3. Making Complaints.

  An obvious advantage of maintaining a complaints and discipline  system within the profession is that members of the profession are best placed to understand the factual backgrounds of complaints and the extent to which the dissatisfaction of a client is due to adverse legal circumstances or to the actings of the client himself  or  of other persons  and to what  extent it is due to shortcomings on  the part of the practitioner. The corresponding disadvantage is that members of the profession may either be, or be seen to be, unduly sympathetic towards each other.  The latter disadvantage might be, or be seen to be, exacerbated by the fact that members of the legal profession in Scotland are not only  members of the same profession but are quite likely either to know each other or, at least, to know of each other. Against that, in previous years when complaints and discipline were  maintained  within the profession, it was certainly not seen by the profession to be unduly lenient. Rather, there was seen to be an element of severity in the application of discipline arising from, among other causes,  a perceived  desire to demonstrate to the public the maintenance of the very highest of standards. On more than one occasion there was successful resort to the courts to remedy the excesses of the discipline inflicted by the professional body upon its own members,  not that any remedy, judicial or otherwise, can undo the damage done in these circumstances.  There is always, of course,  an external complaints system available to the public in as much as solicitors are always liable in damages  for breach of contract in respect of failure to deliver legal services of a reasonable standard.  That is likely to be seen as a much less generous provision for dissatisfied clients than the current arrangements which enable clients, dissatisfied otherwise, a cost and  risk-free opportunity to make a complaint which might well result in a financial payout whether or not the complaint was justified. The solicitor, on the other hand, has no realistic appeal against what  he might see to be an unjustified award because of the potentially ruinous expense of taking it to the Inner House for determination. The complaining client is subject to no such risk.  Indeed, there are as yet unconfirmed reports of clients writing spurious letters direct to the Solicitors Disciplined tribunal (SDT) seeking compensation payments from solicitors. The Review might therefore consider obtaining information from SLCC and the Law Society and the SDT as to the frequency and extent of spurious complaints  containing statements which can be proven to be untruthful  and the extent to which there is any disincentive for the making of such complaints. Under the current regime, members solicitors are  losers as soon as a complaint is made whether or not there  is any justification in it. This is because of the immediate resources which have to be applied in order to deal with the requirements of the Scottish Legal Complaints Commission.  As a result, many solicitors are inclined to offer a  payment in order to avoid proceedings which fall to be determined outwith the profession and against the outcome of which there is no realistic  right of appeal. It cannot be in the wider interests of the public that the legal profession is burdened  in this way because, eventually, these losses and expenses must find a way through to the public whose instructions are the main or only source of  finance for  the legal profession. There is one other element which perhaps distinguishes the legal profession from other service providers.  Every  principal solicitor contributes to the Guarantee Fund /Client Protection Fund so that clients are absolutely protected against theft or other dishonest activity by solicitors or their staff. Also, every principal solicitor contributes to a professional indemnity fund which compensates clients for loss occasioned by the professional negligence of solicitors. These funds operate not only to compensate clients of solicitors but the operate also to supervise and support solicitors in the development of practices which minimise the risks incurred by these funds.

Also, when the question arose of setting up a complaints body outwith the Law Society  the then Scottish government set a number of targets to be met by the Law Society over a five-year period in order to justify the retention by the Law Society of complaint handling. The Law Society met or exceeded all of these targets and there is no reason to suppose that the profession is unable to operate a fair and efficient complaints system.

 

 Also, a significant disadvantage of operating a complaints and discipline system out with the profession is that this calls for the creation and maintenance of a highly specialised, independent agency. It is for the Review to study the circumstances and make its determination but SLAS  members are of the view that the external agency, the Scottish Legal Complaints Commission. has, since its inception under the  Legal Aid and Legal Profession (Scotland) Act 2007  significantly changed its character without any legislative authority. While the SLCC had the character initially of an independent arbiter in disputes between solicitors and  complaining clients it appears to have acquired a character more of a consumers’ champion which, for example, publishes statistics of the amount of money recovered from solicitors

Recommendation-   Consideration be given to the operation of a clients complaints system  to be operated within the Law Society  to include  lay input to the determination of complaints that cannot be resolved at  reporter level and also a sift to identify complaints appropriate for  the requirement of a means tested  deposit refundable according to the determination of the complaint.

 

4. Structure of Providers.

This Society, together with the Law Society of Scotland until about 2007 and together also with the majority of western legal systems has opposed the authorisation of Alternative Business Structures (ABS) since the concept was first mooted from about 2004.  A separate notice setting out these objections is attached to this document as Appendix 1.

Recommendations – those provisions of the  Legal Services   (Scotland) act 2010 which authorise the institution of Alternative Business Structures (ABS) in Scotland which  have never come into operation  should now be repealed so that the legal system of Scotland is maintained in line with the majority of western legal systems and the ownership and control of the provision of legal services to the public is retained within the legal profession.

Further, the Review should enquire of the Law Society of Scotland

  1. How the system of Alternative Business Structures proposed in the 2010 Act can be  reconciled with the principle of the retention of the control of solicitor  firms by solicitors or how any  alternative future such structure  might be so reconciled.
  2.  To explain how the circumstances narrated in Appendix 1 paragraph 4 can be reconciled with  the objective of the Review to make recommendations which command the confidence of the solicitors profession  and  with the principle that public regulation should not be promoted in order to advance private interests.

5. Entity Regulation.

 From the outset f its existence SLAS has seen the solicitor profession as consisting of individual professionals each with their own responsibility to their clients but with supervening responsibility to the Courts and the rule of law. It would follow from that view that regulation should also focus upon the individual solicitor rather than upon the entities or partnerships in which they practise.  At the same time it is recognised that many, if not most solicitors regard themselves as members of individual firms more so than as members of the Law Society or of SLAS or even of the solicitor profession.   A  firm may employ many solicitors who work to strict methods and targets set by the firm and who have little contact with clients and of whom the firm has no expectations as to control of money laundering  procedures and such like.  It is attractive in such cases to focus regulation upon the firm as a whole rather than upon individual solicitors who have little opportunity to control their compliance or otherwise with regulations. The SLAS  view is that the trend away from individual professionalism is regrettable and contrary to the public interest in a recognisable profession of responsible individual solicitors.  However, rather than move the focus from individual to entity regulation, consideration should be given to a  focus upon the  individual solicitors who are responsible for the proper delivery of legal services, namely, the equity owning partners in the firm who are accustomed to the joint and several liability which such partnership entails.   These are the practitioners who  stand to benefit from economising  on compliance with regulatory requirements. While these partners have decided to entrust their anti-money laundering to one individual partner or even to a non partner practice manager, nevertheless, it remains the professional responsibility of each such partner to ensure that their services, including the services of their employees, solicitor and otherwise,  are properly compliant with the relevant regulations.  Other solicitors in the firm might not be responsible for breaches of regulations carried on the instructions of the equity partners but would remain liable for their own individual actions if these were carried out in the absence of or against the instructions of the equity partners. At the same time SLAS has to recognise that it has little experience in the drawing of regulatory procedures but offers these comments as their perceived solution to the dilemma of maintaining professional responsibility in the modern context of a firm dominated profession.

Recommendation – The regulation of solicitors be maintained on an individual basis and with equity owning partners in firms having joint and several responsibility for compliance with regulations and with employed solicitors having responsibility for their own actions only.

 

6. Legal Education and Training.    

SLAS, since its formation in 1884, has been concerned with the provision of legal education and training. An early objective of the voluntary Society was the formation of a compulsory body so that the proper education and training of future solicitors could be assured. In due course, that compulsory body, the Law Society of Scotland was created by statute with responsibility for legal education and training. However, the responsibility for legal education appears to have been delegated to the university sector and the responsibility for practical  training to a combination of the universities and various other bodies. SLAS is currently involved in the delivery of the post university, compulsory programme undertaken by trainee solicitors. Comparisons are sometimes made with the training of medical students. Whereas medical students are likely to deal with cadavers during the first term and to meet living patients before the end of the first year of study, law students have no requirement to meet clients until after the completion of a three or four year university degree followed by a one-year post university course i.e. until five years after the commencement of their studies. This can lead to a disconnection between the study and practice of law. For example, in recent years, law students have emerged from the University environment in the expectation of finding that legal services are provided both by solicitors and by non--solicitors under the 2010 Act when this has not been the case. There is, however, a major difficulty in the comparison with medical students. While the latter are trained at public expense through the National Health Service and can routinely be allocated for training purposes to NHS primary and secondary facilities, the parallel legal services are provided by individual practice units and there is no parallel facility for such placement. Individual students and practice units are, of course, free to make their own individual arrangements for placement and training but it is difficult to envisage how such a system could be made the subject of formal regulation. In order to achieve equivalence with the education and training of medical students, their may be an argument for public funding for a system of placement to be associated with the university degree and made subject to supervision by the Law Society. That, however, would meet with the further difficulty that, unlike medical students, most law students do not in fact go on to practise in the profession. There is certainly no evidence of any appetite within the SLAS membership for the introduction of such a system of education and training. Given these difficulties and the absence of any prospect of public funding it is difficult to propose a system of education and training that will be satisfactory in all respects. SLAS is broadly satisfied that there is a compulsory system and that, by and large, solicitors enter the profession in a reasonably fit condition in which the public may have confidence. Undoubtedly, that education and training could be improved upon but that appears to be a matter for the legal profession rather than for further external regulation.

 

Appendix 1

 

ABS Summary Note March 2018

 

1.            Professional Independence

Alternative Business Structures (ABS) are inevitably and inherently inconsistent with professional independence.  This is the position of the European jurisdictions as expressed by CCBE (the Council of the European Bars) *(see Code of Conduct below) and this was also the finding of the judiciary in Australia in litigation some years ago in which it was held that the external funding of a class action was inconsistent with professional independence and therefore with proper legal representation.  The Legal Services (Scotland) Act 2010 (the 2010 Act) dilutes the independence of the legal profession with issues of external money and investment. This contradicts the underlying reason for which the legal profession exists, namely, in the public interest.

 

2.            Consequences of Deregulation -m Diminution of Scots law and jurisdiction.

                The proposed deregulation of legal practices was initiated in England prior to the disappearance of the Scottish independent banking sector following similar deregulation in the financial services market and such deregulation should not now be considered for the Scottish legal services market.  However, there is no evidence that this has ever been investigated.  How many Scottish firms have  disappeared since the 2010 act authorised their acquisition by English and other foreign firms?  What has been the loss to the Scottish economy from the incursion of English and other foreign ownership ?  What has been the consequent decrease in Scottish tax receipts ?   What changes in regulation have taken place that have enabled sale  of Scottish law firms to foreign purchasers?           It seems unwise to embark on a new era of regulation without exploring fully the adverse consequences which may have emanated from the current regime of authorising the sale of Scottish solicitor firms to foreign law firms.   It would be particularly unwise to embark upon a new regime which, by making the ownership of Scottish law firms open to general commerce, is likely to bring about the disappearance of even more  Scottish firms, the reduction of the Scottish  legal services economy and tax receipts and the diminishing operation of Scots law in  Scotland and the jurisdiction  of English and other foreign courts into  Scotland.

That diminution is likely to arise from the convenience of non-Scottish owners who have interests in other, possibly larger,  jurisdictions, in having the same contractual terms in all the jurisdictions in which they have interests.  As these contractual terms specify the legal system to be applied in cases of dispute and therefore the courts in which such disputes shall be determined this is likely to reduce and even exclude  reference to the Scottish courts the business will pass out of Scotland and out of the Scottish economy.  There will be a reduction of Scottish legal skills for want of case work and Scots law will wither on the vine for want of the  development in the courts which is necessary to keep it up to date with a changing world.

 

3.            Consumer Detriment

                ABS is likely to bring about serious consumer detriment.

 

                (a)          The ownership of legal practices by external capital is likely to increase the already unacceptable incidence of Scottish consumer contracts being subject to resolution in the English courts so that Scottish consumers have no practical means of raising or defending proceedings arising out of these contracts.   It is difficult enough to raise legal proceedings in Scotland but, in most cases, completely impracticable to do so at a distance in England or some other more remote territory. Instead of promoting this trend through ABS, we should be seeking ways to re-wind a trend which moves business and jurisdiction out of Scotland.

 

                (b)          The Guarantee Fund and the solicitors professional indemnity fund by virtue of which clients of Scottish solicitors are completely protected against dishonesty or negligence at the hands of the legal profession cannot possibly survive in their present form an extension to unknown categories of regulated professionals (including their staff) and wholly unknown external capital providers.  It is clear that the present joint and several liability undertaken by Scottish solicitors is based upon the training and ethics undertaken by the members of the profession and cannot possibly be extended to include persons whose training and ethics are unknown or uncertain.

 

                (c)           The English Experience. ABS has now been in operation in England and Wales for several years and it should be possible to gather some intelligence from the experience in that jurisdiction.  However, our own enquiry in this respect directed to the Law Society of England and Wales met with no acknowledgement or response and our more recent, similar enquiry to each of  the 52 local societies in England and Wales has met with only one acknowledgement by a law Society and one response by an ABS firm.  Our own observations tell us that one early development in England was the acquisition by a lorry transport company of a firm of barristers and the question as to how independent would be the representations of barristers from that firm when acting for driver employees of the transport company. However, that particular structure dissolved after a short period. Other observations have included a number of insolvencies amongst ABS entities and, as argued above (at Activities undertaken. there is therefore a public interest against the insolvent winding up of legal practices which is perhaps not the case with most other businesses.            

 

4.            Private Interests in ABS.

It is fundamental that public general legislation should not be created in order to promote the private financial interests of individual persons including, in particular private individual persons who occupy public positions of influence in relation to that legislation. The whole of the legal profession including the Law Society of Scotland was diametrically opposed to the institution of ABS from the outset in the early 2000s until 2007 when the Law Society reversed its policy without the  support of the generality of the profession and certainly without the support of the RW solicitors  but with the support of the equity partners of certain large firms at least one of which was subject to a £6m plus overdraft and whose equity owners stood not to recover their capital on retirement but also stood to benefit from a significant inflow of funds in the event of the authorisation of ABS. Despite these circumstances being public knowledge, no enquiry appears to have been made as to whether the proposed public legislation has been influenced unduly by private interests.  This issue was brought into greater focus when it was recently disclosed that, during 2015 when the Law Society of Scotland addressed to the Scottish Government a paper entitled The Case for Change in support of ABS, the then President of the Law Society was an equity owner of an old established law firm which was then in dire financial straights leading to its subsequent insolvent administration and sale   but without the benefit of the ABS which the Law Society was at the same time  diligently pursuing.  In those circumstances, any support by the Law Society for the constitution of ABS in Scotland   poses a question over the motivation for that support.   That question had also been posed previously by events in 2010 when some thousands of RW solicitors called for an Extraordinary General Meeting of the Law Society in order to register disapproval of ABS and to call upon their professional body to represent that disapproval. The Law Society duly convened the EGM but, when the President of the Society took the chair as he was entitled to do in terms of the constitution he proceeded to frustrate the objective of the meeting by refusing to take a vote and thereby to disenfranchised thousands of members of the Society.  The remit of the review includes ensuring that the regulatory framework retains the confidence of the profession and the above circumstances should lead the Review to ask the Law Society as the main proponent of ABS how the above actings of the Law Society have the confidence of the profession, particularly of those solicitors who stand to be affected by the new regulation .

 

5.            Legislative competence.

The Scotland Act reserves the regulation of restrictive practices to Westminster and there is no exception in relation to the provision of legal services outwith the legal profession, such as by non-solicitor owned LLSPs, will writers and Confirmation agents.

 

6.Control of Legal Practices.

The Law Society of Scotland in general meeting has endorsed the principle that majority ownership and control of legal practices should remain with solicitors but the Council of the Law Society has supported the 2010 Act ABS structure which does not require majority ownership or control of legal practices to remain in the hands of solicitors.  In fact, as we understand the terms of the 2010 Act, an ABS legal services provider might consist of up to 49% of artificial persons such as a registered company with limited liability or a bank or other investment company and 51%  natural persons who must be registered professionals, not necessarily solicitors.  There must, however, be at least one solicitor within the entity. Without a regulatory regime to make sense of these provisions it is difficult to envisage just what sort of provider of legal services is likely to, or might,  emerge but it is very easy to envisage an entity which would not be controlled by solicitors. If such entities are to be in control of clients’ monies or clients confidential information  then much of the purpose of having a legal profession would appear to be defeated.

7. The analogy with the banking sector.   After  many decades and even centuries of nurturing a strong and internationally respected Scottish banking system, the regulation of the activities undertaken by Scottish banks was relaxed in the late 20th century followed in the early 21st-century by the collapse and disappearance of the whole  Scottish banking sector. That is a circumstance which might be regarded as counter to any proposal to open the ownership and control of the provision of legal services to the commercial market..

*CODE OF CONDUCT FOR EUROPEAN LAWYERS

2.1          Independence

2.1.1      The many duties to which a lawyer is subject require the lawyer’s absolute independence, free from all other influence, especially such as may arise from his or her personal interests or external pressure.  Such independence is as necessary to trust in the process of justice as the impartiality of the judge.  A lawyer must therefore avoid any impairment of his or her independence and be careful not to compromise his or her professional standards in order to please the client, the court or third parties. …..

2.3          Confidentiality

………………….The lawyer’s obligation of confidentiality serves the interest of the administration of justice as well as the interest of the client.  It is therefore entitled to special protection by the State.

 

M Sheridan

Secretary

 

Footnote. When interest emerged in the external ownership of legal practices, a similar interest in the commercial ownership of GP services emerged also.  However, the Public Health etc (Scotland) Bill was hastily amended effectively making it impossible for commercial companies to be involved in operating doctors’ practices in Scotland.  Instead, health boards will only be able to enter into contracts with individual GPs or with partnerships of qualified health professionals including at least one qualified doctor.  The question arises as to whether the provision of access to justice is more closely to be equated with the provision of public health or with the marketing of consumer products.  The as yet inoperative provisions of the 2010 Act  point in the direction of the latter.

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It all looks pretty good. Points 3 and 4 may well be hopeless but they are definitely worth making; silence may be regarded as acquiescence.

it is a serious assault on Scots law that the English problem gave rise to a Scottish solution -or not, as the inoperative provisions of the 2010 Act demonstrate. When Which lodged a super-complaint against the Scottish legal profession in 2007, OFT backed them up. Who and Why remain to be more widely understood. Whence did such action originate, if not from a desire to merge Scottish and English legal practice? The same may be seen in the realm of conveyancing where our home-spun model of excellence, the General Register of Sasines,dating from the 15th Century has been overtaken by a Land Register based on the English solution to the English problem. Future generations will judge us.



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