Explanatory Note on the Multi-National Practices (MNPs) Rules
1. Introduction
Section 60A of the Solicitors (Scotland) Act 1980 ("the 1980 Act") makes provision for multi-national practices. It was inserted by section 32 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 but was not, as originally enacted, sufficient to enable proper regulation of such practices. In light of the inadequacies of section 60A, it was never fully brought into force. Over the last year, the Society has been working with the Scottish Executive in order to cure the deficiencies of section 60A.
As a result of those discussions, the Scottish Parliament has passed the Solicitors (Scotland) Act 1980 (Foreign Lawyers and Multi-National Practices) Regulations 2004 (SSI 2004 No 383), which came into force on 1 October 2004. These regulations supplement the provisions contained in section 60A of the 1980 Act so as to create a workable framework for the regulation by the Society of multi-national practices.
The Scottish Parliament also passed the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 (Commencement No 15) Order 2004 (SSI 2004 No 382). This brought fully into force section 60A of the 1980 Act with effect from 1 October 2004, and the coming into force of these two sets of Regulations has enabled the Society to draft further rules in order to regulate MNPs and the registered foreign lawyers in them. There will be four sets of rules, as explained below.
2. Solicitors (Scotland) (Foreign Lawyers) (Registration) Rules 2004
These rules came into force on 1st February 2005. These are the rules which provide for the registration of foreign lawyers, ie lawyers from jurisdictions out with Scotland (including England and Wales). It is a requirement of the 1980 Act that foreign lawyers must be registered with the Society before they can enter into MNPs with Scottish solicitors or incorporated practices.
3. Solicitors (Scotland) (Multi-National Practices) Practice Rules 2005
In summary, these Rules govern the entering into of MNPs by solicitors, firms of solicitors and incorporated practices. The Rules require solicitors, firms of solicitors and incorporated practices to seek the approval of the Council prior to entering into an MNP. In order to be able to give that approval, the Council requires to be satisfied that the applicant solicitor (or firm or incorporated practice) will become a member of an MNP as that term is defined in section 65 of the 1980 Act. The Council also has to be satisfied that the MNP of which that solicitor (or firm or incorporated practice) will be a member is or will be so regulated as to make it appropriate for solicitors to be allowed to enter it.
In order to qualify as an MNP in terms of section 65 of the 1980 Act, all of the foreign lawyers within the practice must be registered by the Society, and hence these Rules should be read along with the Solicitors (Scotland) (Foreign Lawyers) (Registration) Rules 2004. As mentioned, these provide for the registration of foreign lawyers and contain two important safeguards for the profession. The first is that anyone who wishes to become a registered foreign lawyer must satisfy the Council that he is a fit and proper person. Secondly, he must also satisfy the Council that the legal profession of which he is a member is so regulated as to make it appropriate for him to be allowed to enter into MNPs with Scottish solicitors. The registration rules also contain provisions in respect of professional indemnity insurance and guarantee fund matters.
4. Solicitors (Scotland) (MNP Principal Place of Business) Practice Rules 2005
The model of regulation which was proposed by the Society's Working Party on MNPs in January 2004 depended on the location of the principal place of business of an MNP. The Working Party's intention had been that if the principal place of business of the MNP was located out with Scotland, but with a branch in Scotland, the Society would adopt a secondary regulator role. If, however, the principal place of business was located within Scotland, but there were branches out with Scotland, then the Society would adopt a lead regulatory role.
This remains the general intention, although in respect of Scottish/English MNPs, discussions have taken place with the Law Society of England and Wales and it is likely that there will be a degree of shared regulation in this situation. The principal area which this affects is the Accounts Rules. However, as a result of discussions with LSEW, it is expected that it will be possible to issue guidance to Scottish English MNPs as to how compliance with both the Scottish and the English Accounts Rules can be achieved without requiring separate cash rooms or separate procedures.
In any event, the Principal Place of Business Rules are relevant in that they are the means of determining how many of the Society's rules are applied to registered foreign lawyers. Generally, a higher degree of regulation is imposed on registered foreign lawyers in an MNP whose principal place of business is located in Scotland.
5. Solicitors (Scotland) (Registered Foreign Lawyers) etc Practice Rules 2005
The purpose of the Rules is to set out which of the rules of the Society are to apply to registered foreign lawyers and in which circumstances. Certain rules apply to all registered foreign lawyers, while other rules apply to none. Additionally, further rules are applied to registered foreign lawyers who are members of MNPs having their principal place of business in Scotland. Similarly, certain rules are applied to the Scottish practice of any registered foreign lawyer-this is designed to deal with branches of MNPs, where the principal place of business is located out with Scotland. These branches will be subject to a higher degree of regulation than the part of the MNP which is located out with Scotland.
The relevant rules are listed in the Schedules to the draft. As a result of the application of specific rules of the Society to foreign lawyers, it is also necessary to amend a variety of rules of the Society and these amendments are also set out in a Schedule to the Rules.
Finally, in addition to specific amendments to the Admission Regulations of the Society, certain of the provisions of those Regulations are specifically applied to registered foreign lawyers. The effect of the amendments made to the Admission Regulations and the specific application of certain provisions to registered foreign lawyers is designed to ensure that there will be no problem with MNPs taking on trainee solicitors. Specific provision is necessary to apply these Regulations to registered foreign lawyers as a matter of professional practice, conduct and discipline (ie in terms of section 34 of the 1980 Act) since regulations made under section 5 of the 1980 Act (as the Admission Regulations are) are not applicable to registered foreign lawyers.
The rules summarised in notes 3, 4 and 5 came into force on 1st May 2005.
