Britain’s senior consumer watchdog has strongly criticised plans by the Scottish government to allow the Law Society of Scotland to carry on regulating the nation’s 13,000 solicitors. The Competition and Markets Authority reiterated its call for a new regulator north of the border that is properly independent of both the legal profession and government.
The CMA’s plea is contained in its consultation response to The Regulation of Legal Services (Scotland) Bill, which was introduced to the Scottish Parliament in April this year. The bill aims to ‘modernise’ the regulation of legal services in Scotland, informed by a Scottish government-commissioned independent review led by governance expert Esther Roberton.
Crucially, the Scottish government rejected a principal recommendation of Roberton - the creation of a single independent regulator – in favour of an approach that would ‘seek to develop the existing regulatory framework’.
In truth, the 2018 Roberton report was merely the latest chapter in a saga that has lasted for nearly three decades. As the CMA acknowledges, there have been many alleged examples where conflicts of interest ‘may have led the Law Society of Scotland and the Faculty of Advocates to prioritise the interests of their members over those of consumers’.
The Society and Faculty have lobbied ferociously to retain control of regulating their members, occasionally in the face of allegations of a conflict of interest from disgruntled clients. Such allegations have been periodically raised in the Scottish Parliament, including by John Swinney MSP who rose to become deputy first minister. So far the bodies, which wield considerable power in Scottish civil society, have succeeded in their aim. This marks a stark contrast with their counterparts in England and Wales, where the representative and regulatory functions were formally split more than 15 years ago.
The Scottish government’s chosen model contains new safeguards, including bolstering the independence of the Society’s regulatory committee. But the CMA says today: 'The experience in England and Wales illustrates that any incomplete separation has the potential to give rise to an inherent conflict between the responsibility to regulate in the consumer interest and the responsibility to represent the interest of their members. That has the potential to affect regulatory outcomes.’
The bill also proposes relaxing ownership rules to allow for greater introduction of alternative business structures in Scotland. Firms are currently required to have a minimum ownership of 51% by regulated professionals - a threshold which the bill would reduce to 10%. The CMA backs liberalisation but sees ‘little justification’ for any threshold at all.
ABSs - or licensed legal services providers in Scotland - were actually approved by the Scottish Parliament as long ago as 2010. But little has been done since to introduce the required regulatory framework.
The CMA is also unconvinced by a proposal for title regulation of the term ‘lawyer’ in Scotland. It questions whether the benefits of protecting the term 'outweigh the possible negative consequences' for competition.
Sheila Webster, president of the Law Society of Scotland, told the Gazette: 'We disagreed fundamentally with the proposal in the 2018 Roberton report for a new, politically appointed body regulating the legal sector. We believe the Scottish Government was right to reject this.
'Here in Scotland, architects, accountants and teachers are all regulated by single professional bodies. Further afield, law societies and bar associations around the world have a role in regulation and professional support of their respective legal professions. These include the law societies of Ireland and Northern Ireland, law societies and bar associations in the provinces of Canada and states of Australia, as well as bar associations in many US states. Scotland is not unusual and Esther Roberton herself concluded there was little evidence of significant wrongdoing in the current system.
'Rather than creating complicated and expensive new bodies, we need to get on with improving the processes of regulation, many of which are outdated and need reform.'
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