The report below was submitted to the Parliament by MacRoberts solicitors, detailing their concerns over the Legal Services Bill and the possible introduction of alternative business structures.  It is published here in the interests of promoting debate and discussion on matters of crucial importance to the legal profession in Scotland, and all those affected by it.  Any further contributions to the debate or alternate perspectives are welcomed and should be sent to the Editor for publication. 

THE RISKS FOR SCOTLAND

• The importance to Scotland of having its own separate legal system which could be undermined or destroyed by external pressures.
• The risk to Scottish business, the public sector, and the public in any diminution of the role and extent of Scots law
• Within Europe, only independent lawyers are entitled to claim legal privilege on behalf of their clients. Any move away from a position of legal services providers being other than solicitors may lead to withdrawal of this and therefore put Scottish advised businesses at a disadvantage to their European competitors

Scotland has always had its own legal system; indeed the Act of Union in Article XIX expressly recognised the right of Scotland to have its own legal system. In the almost 300 years before the re-establishment of the Scottish parliament, separate and distinct laws existed for Scotland.

Whilst the separateness of Scots law had throughout that period been gradually eroded through the enactment of United Kingdom legislation, in many areas of law, Scotland had been able to maintain its unique legal identity. Throughout the world Scots law, and particularly some of the aspects which place it apart from its southern neighbour, is held in the highest regard.

It is one of the hallmarks of nationhood that the nation has its own distinct legal system and character. Whilst historical influences will inevitably mean that there is a cross-influence with other legal systems (and within much of the Commonwealth, with English law) Scots law has drawn many of it influences and that which makes it distinct from its European neighbours rather than from England; indeed, in its earliest forms, in the writings of Stair and of Bell, Scots law was a codified legal system rather than a pure common law system, and equity had no place in Scots law.

The position of Scots law, at the very heart of the nation and the fabric of Scots society makes it imperative that its existence and strength be not jeopardised and that it be allowed to grow and develop in a way which meets the needs and aspirations of the Scottish people and not those of some external power.

The real concern for the future of Scots law arises in the proposals which exist in the Legal Services Bill to allow new Legal Services Providers to offer to provide legal services within Scotland. It has been suggested that this so called “Tesco law” will encourage supermarkets and other large organisations to offer legal services together with the other services they offer. The legal profession does not fear competition; with some 11,000 solicitors in Scotland, and significantly more in England, competition is something which is encountered every day. Nor is the concern merely that these new LSPs will cherry pick what they see as the profitable areas of law, leaving the necessary but perhaps less remunerative areas to me met by Consumer Advice Bureaux, Law Clinics and the like, or worse still not met at all.

The concern is to the integrity and vibrancy of Scots law; experience has shown that dealing with large organisations with a headquarters in England, but operations in Scotland, leads to the imposition of English law into contractual relations as standard form documentation is utilised both in order to standardise and because having different legal regimes adds to costs.
Scots law will not die overnight, but the inexorable path to extinction will have started.

This has consequences outwith the narrow confines of the legal profession; University study of law will become less attractive to students if opportunities for its practice are seen to be diminished; legal scholars of the future will see greater benefit in studying abroad, and this brain drain will leave Scotland the poorer; and finally, the role of the Scottish parliament in enacting legislation will become less and less relevant in a jurisdiction where much of the legal activity is conducted under a foreign law.

Finally, looking at the position of Scotland within the wider European context, the rights of legal privilege are only extended to lawyers within the legal profession; indeed employed lawyers are not afforded the same status as those within the profession either by national authorities, nor by the European Commission.

Comments from the professional bodies in France and Germany, as well as the CCBE indicates that a system in which Scottish solicitors were in business relationships with non lawyers could have a detrimental effect on the status of Scots lawyers and the influence of Scots law. As legal professional privilege is seen by business as being an essential requisite of their relationship with their legal advisers, the risk must exist that businesses who can choose, will choose to seek legal representation in relation to international matters from lawyers in other jurisdictions.


THE RISKS FOR THE PUBLIC

• A strong and independent legal profession as the guardian/protector of the rights and interests of the individual
• Public interest is not the same as consumer interest
• Any influx of major service providers (i.e. Tesco law) is likely to lead to a further diminution of the availability and extent of legal service provision outwith the major conurbations and particularly in rural areas
• Service availability may become less extensive for many prospective users of legal services


Solicitors are not only legal professionals; they are also officers of the court and owe a duty not only to their clients but to the courts and to society as a whole.

In an increasingly complex world in which the citizen is confronted with the state in every aspect of his existence, a strong, vibrant and above all independent legal profession is an essential counterbalance against the power of the state.

In a society in which human rights are perceived as of primary importance, one would only be paying lip service to the principles enshrined in the ECHR and the Human Rights Act if there were not an effective means of the citizen to exercise or protect his rights – and ensure that others meet their obligations.

Although Scotland does not have a Bill of Rights (the Declaration of Arbroath may have been an early precursor for this), the US Constitution – signed by a Scots majority – specifically recognised the separation of the legal system and the government.
Of all the necessary attributes of the lawyer, it is independence from the state which is most important. A duty may be owed to the law and to the courts, but the lawyer can never be subservient to the state if he is to perform his function within the system of checks and balances of a modern democracy.

Independence is an absolute; either one is independent, or one is not. One cannot be partially independent. The interest of the public and of the Scottish people requires an independent legal system – one whose only obligations are to the client and to the integrity of the legal system. A system in which the providers of legal services have other duties, perhaps to a commercial employer, can never provide that independence of purpose which the Scottish citizen is entitled to expect of his adviser. Devoid of conflict of interest, with the sole interest, the requirement of the client.

Public interest is not always the same as consumer interest, although those interests may co-exist in some areas. Consumer interest may be narrow or partisan; the public interest is a wider. Wikipaedia defines “public interest” in the following terms: -
“Put simply; to be in the public interest a matter might have the potential to adversely affect any person at any time in their life in any situation if a core matter is not put into the public arena or handled in a more reasonable way when the problem clearly becomes evident as symptomatic of an underlying unreasonableness.”

Public interest is a detached non-partisan view of what is right; of what is fair. Not of what one would like the outcome to be in a case in which one is an interested party.

Public interest means that there should be an availability of legal services at a time and place and in a manner convenient to potential users of those services. It means that legal services should be offered in a universal obligation sort of way throughout the country and not only in those places in which there was perceived to be major pickings.

In a country with the geographic diversity of Scotland, any diminution of the availability and extent of legal service provision outwith the major conurbations and particularly in rural areas will lead to a significant and measurable detriment to the public in those areas. “Consumer interest” may see the growth of hypermarket legal services in the Central belt as being beneficial with perceived cost benefits, but the interests of the public, and of a 21st Century democracy, suggest that those narrow interests may not be compatible with the interests of society as a whole.

Any cherry-picking of what might be thought of as more profitable services by new LSP intrants, can only have the effect of making the residue services less attractive, of removing the existing cross-subsidisation of a range of legal services within practices and communities, and of endangering the availability of those services.

There is little enthusiasm within the profession (or apparently elsewhere) for ABS. We do not propose to go into further reasons why ABS give concern as these are mentioned elsewhere in this note; suffice it to say that at the Law Society meeting at which ABS were approved as a principle, of the approximately 800 votes cast (less than 10% of the solicitors in Scotland), some 670 appear to have derived from 4 large firms. The basic point is that, in general, the profession are not interested in ABS and see little public benefit in its introduction. If it is to be permitted, we are concerned that there do not appear to be adequate safeguards for the public interest.

THE RISKS FOR THE LEGAL PROFESSION (AND THE PUBLIC)

• Independence of the legal profession must be inviolate if the public is to have confidence in the system
• Independence is an absolute; one cannot be partially or substantially independent. The only choices are independent and dependent.
• The functions performed by solicitors have a quasi-public nature; solicitors are officers of the court. The involvement of third parties in the ownership / management of legal service providers is likely (despite any safeguards) to lead to the involvement in the legal system of persons or interests whose basic reasons for being so involved has nothing to do with the rights and interests of the public and all to do with self interest or worse.
• Fewer opportunities for Scots law will inevitably lead to a reduction in the number of persons choosing to study Scots law, with the consequent skills drain to England and reduction of service to the Scottish economy.
• Within Europe, only independent lawyers are entitled to claim legal privilege on behalf of their clients. Any move away from a position of legal services providers being other than solicitors may lead to withdrawal of this and therefore put Scottish solicitors at a disadvantage to their European competitors. This would lead to a loss of quality work to Scotland

In these comments, we do not wish to dwell overmuch on the implications of some of the suggested reforms on the legal profession, lest we be unjustly accused of self-interest. We believe that the interests of the legal profession (as a whole rather than as individual units) and the interests of the public largely coincide.

In the header to this section, we have indicated some of the dangers we perceive; these have been discussed above and we do not intend to repeat the arguments again. There are, however, a number of additional concerns which we have.

Clauses 37 and 50 of the Bill deal with the issue of outside ownership/investors. We are very concerned that the Bill does not provide adequate safeguards to ensure that LSPs (whether solicitors or otherwise) do not come under the influence of those whose interest in the legal system is less than benign. Sadly, in the legal profession, as with every part of society there may be those who, for whatever reason, will be vulnerable to being influenced, financially or otherwise by persons who would not be directly entitled to be recognised under clause 50 as fit and proper persons. Experience in other areas where regulation has been imposed, suggests that those who wish to avoid a declaration of unfitness will find some way to so do.

The public interest requires the probity not only of individual legal service providers but of the system as a whole; solicitors require to be able to trust, implicitly, other solicitors with whom they are dealing. The money laundering regulations recognise the special position in which lawyers find themselves and particular obligations are placed on solicitors under the Proceeds of Crime and Money Laundering legislation.

The concern exists that, as presently drafted, the integrity of the system and the public interest duties placed on solicitors by legislation may be eroded.

If it is considered that external ownership /investment is beneficial, this should be restricted to members of defined regulated professions and persons regulated by the FSA or similar. The risk to the legal profession and, more critically, to society, demands it.

On a similar theme, the possibility in clause 92(4) of the Bill to allow the Scottish Ministers to determine the composition of the Council of the Law Society causes concern as to the chilling effect that this may have upon the profession’s willingness to challenge government in the public interest. We would ask the Minister to reconsider whether this power is required; if this is the correct form; and whether if the Law Society is to continue its dual role (of which more below) should have the potential of this direction which could, as drafted lead to a Council almost wholly comprised of non-solicitor members.

The obligation on the Scottish Ministers is only to consult, the Council, the Lord President, the OFT and a consumer organisation; there is no obligation to obtain agreement or approval. In any event, should it not be an organisation representing the wider public interest, rather than the narrower consumer interest?


THE ROLE OF REGULATION AND REPRESENTATION

• The bifurcated position of the Law Society of Scotland has become increasing untenable as its “public interest” function has been equated with “consumer interest”. As a result neither interest believes that it is being properly served by regulator or representative.
• Recent surveys indicate that 75% of the profession would be in favour of a change in role.
• Lack of involvement of the profession means that small sectoral interests have managed to drive an agenda which may benefit few of its members and potentially prejudice the public interest
• The LSS has lost the confidence of the profession.
• The present rules require that in order to be a solicitor, one must be a member of the Law Society of Scotland; whilst there is a public interest in a regulatory regime, it must be questioned whether requiring lawyers to be members of a body in which they have no confidence as a representative (whatever the position as a regulator) is to impose an unnecessary burden on solicitors

This issue is one which has proved emotive and polarising over the past few years. We do not propose to rehearse the arguments which have been fully rehearsed elsewhere. As is well known, the evidence to the Justice Committee from such disparate interests as the Scottish Law Agents Society, the WS Society and the Glasgow Bar Association have all argued in favour of a splitting of the role of regulation and representation; indeed a recent Poll by the Firm magazine suggested some 75% plus in favour of a split whilst a Poll by the Journal of the Law Society shows 68% in favour of change.

If there is to be a change in the way that Legal Services are being provided, there is no reason why the dual role requires to be maintained and imposed by Statute; whilst this might have been appropriate in 1949, the perceptions and requirements of society necessitate that interests which could prove to be a conflict be separated; for solicitors, specific provisions to prevent and prohibit conflicts of interest were introduced, because the public interest demanded that this be seen to be done. It is now time that a similar exercise be carried out in relation to the Law Society of Scotland.

There is merit, particularly in a small jurisdiction such as Scotland, in having a single regulator and few in the profession would argue against that; however, the interests of participants in the legal services market (even before the proposed changes) are widely different and having a single representative body (which few of those who it purports to represent see as adequate or appropriate in that role) is clearly anachronistic. Legal Services Providers (of whatever hue) should be able to choose those who they wish to represent them, and the Law Society should confine itself to the public interest regulatory function – although it could, we suppose, represent those who wished that to continue.

From the public interest perspective, this splitting of roles would extinguish the argument that the inherent conflict of interest meant that the public was not being served by the regulatory function.

Fortunately, such an outcome is not difficult to achieve legislatively by amendment to Section 1 of the 1980 Act leaving most of the remainder of that Act in place but making it clear that all functions other than those of a regulatory nature were removed.

Such a separation of regulatory and representative functions exist and operate satisfactorily in other jurisdictions, notably in the United States.


UNEVEN PLAYING FIELD

• Whatever the regulatory regime imposed on legal services provider, they will not face the substantial burden of the Law Society’s “representative” and other roles.
• Given the LSS bifurcated status, it is inconceivable that the LSS could ever be a suitable regulator for legal services providers other than solicitors.
• The present rules on the Guarantee Fund / Master Policy operate so as to place solicitors at a disadvantage vis-à-vis other legal service providers


With the proposed new framework for legal services in Scotland there are a number of issues which require to be considered and addressed in addition to those set out in earlier sections of this note.

The additional points made in this section are, we feel, self explanatory and build upon earlier comments.

The position of the Guarantee Fund is a particular anachronism, given that its existence is enshrined in section 43 of the 1980 Act, that it only applies to solicitors and not to non-solicitor LSPs, and that it is by nature open ended.

If legal services are to be provided by persons who are not solicitors, there requires to be reconsideration of the continuing appropriateness of the Guarantee Fund to which only solicitors are contributors, if liability is to continue to exist in respect of alternative business structures where persons other than solicitors have a ownership or investment interest. This may not withstand a human rights challenge.


MacRoberts LLP
February 2010