The Scottish Parliament was warned this week that moves to liberalise Scotland’s legal services market could spark a takeover by English invaders. Lobby group the Scottish Law Agents Society (SLAS) told members of the justice committee at Holyrood that ‘external ownership’ of law firms makes it more likely that Scottish firms will register in England or be taken over by English firms.

However, the Edinburgh-based Law Society of Scotland claims the opposite, arguing that encroachment upon the nation’s £1bn legal market from south of the border is more likely if the Clementi-style reforms are not introduced in Scotland.

Both bodies appeared before the justice committee to give evidence on the Legal Services (Scotland) Bill, which broadly mirrors the so-called ‘Clementi’ reforms currently being implemented south of the border.

The SLAS’s Michael Scanlan voiced concern today over the move to allow ‘external ownership’ of Scottish law firms, adding: ‘It also seems to us that that makes it more likely that Scottish firms will register in England or be taken over by English firms.’

Robert Sutherland of the Scottish Legal Action Group agreed. He said: ‘We think it will simply lead to Scottish firms being taken over by English firms. What was described as Scottish firms being a representative of English firms will in fact be an inevitable consequence of this piece of legislation.’

Sutherland compared the situation with the former building societies which ‘demutualised’. He said: ‘They all pursued a particular line and they've all gone bust.’

A recent survey by the SLAS among its 1600-strong membership showed that 85% of the 400 who responded said they are against the bill. Scanlan said that firms operating alternative business structures were also likely to ‘cherry pick’ more lucrative areas of work, such as conveyancing: ‘This is going to have a substantial impact on high street services. A lot of this work is the lifeblood of high street services. Many firms in this position will find it difficult to sustain themselves,’ said Scanlan. ‘For all these reasons and many more, we’re of the opinion that this a sledgehammer to crack a nut.’

MSPs had taken evidence earlier from the Law Society of Scotland which backs the move to open up the ownership and business structures of law firms after, earlier this decade, initially opposing following in the footsteps of England and Wales.

Ian Smart, the Society’s president, said: ‘The Society broadly supports the bill but there is a danger that the existence of a liberalised legal services market in England and Wales and a restricted market in Scotland would lead to encroachment from south of the border.

‘Likewise, the big English firms could be capitalised to such an extent that they took over the marketplace of our firms. Alternatively, cross-border firms with a smaller presence south of the border could choose to be regulated from England if they believed they were at a competitive disadvantage.’

He added: ‘The bill would provide a new business model for the delivery of legal services which firms could adopt in the future, though it would not be compulsory. Having the option would ensure a level playing field in the legal services market.’