The likelihood of Scotland’s ‘big four’ law firms defecting to England appears to have risen this afternoon, following a landmark vote against the introduction of alternative business structures (ABSs) north of the border.

At a special general meeting of the Law Society of Scotland, members voted against the introduction of ABSs as proposed in the legal services bill currently going through the Scottish Parliament. Some 1,817 voted in favour of a motion from lobby group the Scottish Law Agents Society against ABSs, with 1,290 against and five abstentions.

Equally significant was the rejection of a compromise motion from Richard Masters, head of Anglo-Scottish law firm McGrigors. In a bid to heal a damaging rift over the future of Scotland’s solicitors’ profession, Masters proposed that the majority ownership of a legal business should remain with solicitors following the introduction of ABSs in Scotland. The only exception would be where solicitors are in business with other regulated professionals, such as surveyors or accountants. That would have prevented so-called ‘Tesco law’ - the prospect of supermarkets and banks taking majority stakes in law firms, as they will be able to do in England and Wales from October next year.

Scotland’s justice ministry warned earlier this month that ABSs in England threaten the long-term sustainability of the Scottish legal profession unless Scottish firms are able to operate on a level playing field. If Scottish firms enjoy less freedom to change their ownership structures and seek external investment, it is feared that the largest will shift to a model where most of their lawyers would be regulated south of the border by the Solicitors Regulation Authority.

The most likely candidates for such a switch are the so-called Big Four – McGrigors, Dundas & Wilson, Maclay Murray & Spens and Shepherd & Wedderburn.

Today’s development leaves the Scottish profession in disarray following the separate referendum on ABSs recently conducted by the society, which split the profession down the middle on a record turnout and found a tiny majority in favour.

Commenting, Law Society president Ian Smart admitted the gap between both sides in what has become an increasingly heated debate may now be ‘unbridgeable’, though the body will continue to seek a compromise. But he warned members that Holyrood would not ‘dance to the tune of the profession’ in respect of changing its legislation on ABSs.

Smart said: ‘We were hopeful that a later compromise amendment on external ownership and external funding would prove an acceptable compromise. Unfortunately, there has been no consensus, although the society will remain in discussion with all interested parties, including the Law Agents following their stated intention at the close of the meeting to work with the society.

‘It’s vital that we remain and move forward as a unified profession despite these divergent views.

‘The SGM vote opposing the introduction of ABSs will now be put to the society’s council. The council will consider both this SGM vote and the narrow vote in favour of ABSs in a referendum earlier this month. The difficult thing is not so much the differing results between the referendum and today’s vote but rather the large numbers on both sides in both votes. Obviously both sides would prefer an agreed way forward but equally it may be that the differences are unbridgeable. I however have not given up hope.

‘There has however to be some cognisance that the government and the parliament will not dance to the tune of our profession and if we are divided it simply gives them carte blanche to do as they like.

‘The council met following the SGM today to consider these issues and will meet again on April 30. We agreed today that we will continue to try to find a compromise which can be accepted by the profession at the AGM in May.’

We also agreed we will continue our dialogue with MSPs and the Scottish Government over amendments to the Bill.’