Recent reports and events bring fresh perspectives on Esther Roberton’s proposal for a new professional regulator, but fail to add weight to her case for reform

Esther Roberton’s review of regulation of the legal profession, Fit for the Future, has already generated many column inches in the Journal, but I hope I can be permitted a few more.

Since the replies from Stephen Gibb, Philip Rodney and Donald Reid (March 2020, 12) to Lorne Crerar’s article (January 2020, 12), there have been three significant developments, leaving aside the COVID-19 outbreak. The Competition & Markets Authority delivered its latest verdict, Legal Services in Scotland, in March; the Scottish Legal Complaints Commission issued its budget for 2020-21 in April; and in June, Professor Mayson’s final report on Reforming Legal Services (in England & Wales) was published.

The SLCC as regulator

The SLCC budget, laid before the Scottish Parliament exactly as per its draft of January 2020, took absolutely no notice, bar lip service, of COVID-19 and the economic crisis facing the legal profession along with every other sector. If ever there could be a shining example of what the Roberton reforms would mean, this was it. The regulator decides what the cost of regulation will be, and the regulated just have to keep writing the cheques. If they don’t like it, tough.

Actually, I doubt very much that Esther Roberton would agree with that proposition. Her proposals were based on the Better Regulation principles, which, let’s remind ourselves, are that regulation should be proportionate, consistent, accountable, transparent, and targeted only where needed.

For one thing, the SLCC is effectively not accountable, in the true sense of being responsible. I note that on 5 August 2014, Scottish Government representatives told the Scottish Parliament Justice Committee that the SLCC “is funded not by the Scottish Government but by a levy on the profession, giving a certain amount of accountability to the profession”. Well, not really, when the profession has no control over the amount of the levy. The SLCC isn’t accountable to the Scottish Government or Parliament either. Budgets, accounts and reports may have to be laid before Parliament, but no approval is required or disapproval possible. Audit is carried out by Deloittes on behalf of Audit Scotland, but this does not involve any qualitative assessment of its operations.

When the financial memorandum was prepared for the 2006 bill that became the Legal Profession and Legal Aid (Scotland) Act 2007, it was estimated that the annual cost of the SLCC would be £2.4 million. The proposed budget for 2020-21 may be no more than that in real terms, but this was estimated to be sufficient to handle 4,000 complaints a year. That number has never been approached.

In addition, 50% of the funding was to come from the complaints levy on a “polluter pays” principle, or at least that those against whom complaints were being made were paying for the dispute resolution service the SLCC would provide. In its 2018-19 accounts we can see that of the total income of £3.5 million, a mere £116,000 came from the complaints levy. The cost of the SLCC is therefore almost entirely borne by the profession as a whole.

If there are issues with accountability, there are also questions of proportionality.

A relevant comparison can be made between the SLCC system and the complaints system which preceded it. The old system is neatly summarised in the SPICe briefing (06/33) to the Scottish Parliament on the 2006 bill. Complaints against solicitors were handled by Law Society of Scotland committees made up of equal numbers of solicitors and lay persons. As with the present system for service complaints, clients and solicitors were encouraged to come to agreement to resolve issues. If this was not possible the committees could uphold or reject complaints and impose a range of remedies, very similar to the present SLCC remedies, when a complaint was upheld. Conduct complaints, then as now, were handled by the Society and prosecuted before the Scottish Solicitors’ Discipline Tribunal in appropriate cases.

It can reasonably be asked whether the construction of the SLCC edifice, including the rigid and convoluted processes contained in the 2007 Act, was a proportionate response to any concerns which may have existed about the independence of the Society’s complaints structure. There was no evidence of systemic failure of that structure because of its administration by the profession. On the other hand, the evidence to Esther Roberton’s inquiry on the functioning of the SLCC complaints structure showed considerable dissatisfaction from many quarters.

Simply making a regulatory organisation independent of the profession it has to regulate is obviously not a panacea for any actual problems which may be seen, or thought to exist, when the organisation was created.

Essence of professional regulation

Turning, therefore, to the case for an independent regulator, it is appropriate to consider whether the proposal itself satisfies the Better Regulation principles. Is independence a factor which overrides or should override those principles? In other words, is it more important that a regulator should be independent of those it regulates than that it is genuinely accountable? Are any questions whether or not proposed changes are proportionate, or targeted to meet any problems seen to exist, subordinate to the principle of independence?

The legal profession, as with others such as the medical, dental, veterinary, accountancy and architect, has developed over centuries as skills and specialist knowledge increased and with the organisation of education to support it. Of importance to all professions was the formation of professional bodies, membership of which became, if not a prerequisite to practice, a qualification and indication of competence. This served several purposes. First, the professional bodies laid down the levels of skill and knowledge which any aspiring member had to achieve. Secondly, any client would know that a member had satisfied the profession of his/her skills and knowledge. Thirdly, the professional bodies had no interest in lowering standards, as to do so would allow competition from persons with lesser skills than the existing membership. Professional bodies also have no interest in permitting people to remain members if they do not uphold and maintain the standards and conduct expected of them. As Donald Reid pointed out, these concepts long predated the creation of the Law Society of Scotland.

What about the interests of the public in general, or of the individual client? It is in the public interest that there exists a body of expertise available to provide services necessary for the functioning of society. That interest extends to seeing that standards of competence, skill and conduct are maintained. This includes the need for professionals to develop in response to advances or changes in their fields of expertise and, so far as conduct is concerned, to changes in society’s expectations of behaviour. It is also in the public’s and clients’ interests that there are recognisable professions with identifiable members who have the competence and skill to provide whichever service is required. However, there is an interest to have external involvement to provide a wider perspective on the organisation of the profession.

One thing is clear: the only people who can adequately define what competencies and skills are required of a professional are professionals themselves. An electrical engineer cannot define what a doctor needs to know, nor can an architect prescribe what a lawyer should be able to do. On the other hand, professions cannot be insular. Beyond the pure issues of skill and knowledge, professions must be able to adapt and learn. They must also be open and transparent. This is where lay input is vital. A system of regulation which includes both professionals and lay people ought to be the answer.

Of course, for the solicitor profession that is precisely what exists at the present time. The current system, with the Regulatory Committee of the Law Society of Scotland having a 50/50 lay/solicitor membership, a lay chair and the statutory responsibility to carry out the Society’s regulatory functions, satisfies the Better Regulation principles. The Legal Services (Scotland) Act 2010, which provided for this system, was passed specifically with these principles in view. The creation of an entirely new and independent regulator was not considered proportionate. Lay representation on the Regulatory Committee and on the Society’s Council provided transparency and targeted reform to the pre-existing structure. The present structure therefore provides accountability both to the public and to the profession. In addition, it has been the consistent policy of the Scottish Government to avoid creating new public bodies wherever possible.

Consumer interests

One would be forgiven for thinking that Esther Roberton’s recommendation that, nonetheless, the Scottish Government should go ahead and create a new independent regulator for the legal professions, resulted from some obvious failure or defect of the system set up so recently and with the same principles behind it. However, no examples are cited demonstrating, for example, that ill-qualified people are being admitted to the profession, or that there is a systematic lack of skill being exercised in any facet of practice, or a decline in the standards of conduct. On the contrary, Roberton went out of her way to state that her recommendation “should not be taken to imply any criticism of the existing bodies currently involved in regulation”. All that could be said was that “professional bodies providing both regulatory and representative functions can lead to the perception that the two roles are in conflict. It is this perception that risks compromising public trust”.

Nothing has occurred which gives any cause for loss of public trust. No conflict has occurred between the Regulatory Committee and the Society’s Council. On the other hand, public trust in the complaints structure under the SLCC has been compromised even though it is independent of the profession.

Perhaps the most persuasive factor for Roberton was the position of the Competition & Markets Authority, based on conclusions it reached from its 2016 examination of the legal services market in England & Wales (where regulation was already independent of the professions), that regulators should be independent from the markets they regulate. There are a number of points to be made on this, which are equally relevant to the CMA’s most recent intervention, its report into legal services in Scotland in March 2020.

To begin with, the role of the CMA is “to promote competition for the benefit of consumers” (Enterprise and Regulatory Reform Act 2013, s 25(3)). “Consumer” is defined as a person “who does not receive or seek to receive… goods or services in the course of a business carried on by him”. Accordingly, the interests of business clients, the public sector, the wider public interest or the interests of the profession itself are at best secondary considerations. The ambit of the CMA’s 2020 report is, not surprisingly, entirely concerned with legal services provided to consumers.

The work of solicitors in practice extends far beyond such provision. Is it appropriate to impose a new regulatory framework simply to satisfy the interests of consumers? An independent framework may in any event still fail to meet those interests, as the CMA’s 2016 report for England & Wales argues. The discussion of the CMA’s position in the Roberton report, and what is said in its 2020 report, both suggest a preference on its part for a domination of the market by a far smaller number of providers able to cut prices by using economies of scale. At the same time, confusingly, the 2020 report also criticises different providers for different levels of pricing for similar services – which actually suggests price competition already exists in a wider market place.

The Scottish Parliament has just passed the Consumer Scotland Act 2020. There has been a void in Scottish public life since the UK Government abolished Consumer Focus (formerly the Scottish Consumer Council) in 2014. If there is a need for a greater reflection of consumer interests in the regulation of the legal profession, one possibility might be to provide for representation of the new Consumer Scotland on the Society’s Regulatory Committee. This would seem a far more proportionate step.

The changing Scottish market

In his Journal article Lorne Crerar argued forcefully in favour of the Roberton proposals. He cited increasing choice of English law in transactions, the invasion of the Scottish legal market place by English-headquartered firms, and the continuing restrictions on business models available to Scottish solicitors. He also agreed with Roberton’s conclusion that all legal services providers in Scotland should be regulated by a single regulator. With respect, these do not appear to be convincing reasons for the Roberton proposals.

The erosion of Scots law has been a concern for decades, if not centuries. I’m sure Professors Matheson and Wilkinson and others discussed this in the Scots law lectures I attended at Dundee University in the mid-1970s. It is arguable that Scots law has influenced English law to just as much an extent, and will continue to as long as two Scottish Justices remain in the Supreme Court. Lord Reid in the post-war period and, more recently, Lords Hope, Rodger, Reed and Hodge have been outstanding, not forgetting Lord Mackay of Clashfern’s spell as Lord Chancellor.

Just because their regulatory system ensures that a country’s courts and lawyers are regarded as upright and competent does not necessarily make the laws of that country an obvious or automatic choice for business to adopt. Ownership and headquartering of clients is much more likely to play a part in the selection of governing law or the prorogation of a court in any contract. English law has benefitted from London’s history as the centre for business and finance since the days of the Empire. Scotland has suffered from the demutualisation of its financial sector, de-industrialisation, and the sale abroad of much of its remaining industry, none of which has to do with the regulation of the legal profession.

I would also argue that the increasing presence of English or international law firms in the Scottish market has little or nothing to do with the regulatory structure. In the 1990s in particular, a significant number of Scottish law firms took the plunge and opened offices in London, with varying degrees of success, but it was not one-way traffic. North Sea oil had encouraged a number of firms to venture north of the border. Robin Thompson & Partners, the trade union law firm, came in 1979. Some of the other firms listed by Crerar have been around the Scottish market since well before the Clementi reforms.

Ultimately what has led to the more recent expansion of English and other law firms into Scotland was their size and scale in comparison with even the largest Scottish firms. The “invaders” have been able to make offers to equity partners of Scottish firms which those partners were happy to accept, or felt unable to refuse. Client pressure in some instances will have tipped the scales. Whatever business model Scottish firms had been operating under would have made no significant difference. The owners of those businesses, solicitors or otherwise, would have been under exactly the same pressures.

As to the restriction on business models, the Legal Services (Scotland) Act 2010 has now been on the statute book for 10 years. It is not the Law Society of Scotland’s fault that the Scottish Government has failed to bring its own legislation into effect. The Roberton review came about, not because of any fundamental problem in principle with the present regulatory structure, or with the ABS structure which the 2010 Act set out, but because the Society asked the Scottish Government to deal with other features of the Solicitors (Scotland) Act 1980 which were out of date, and because the complaints system under the 2007 Act was too prescriptive and cumbersome. It seems highly improbable that ABS will arrive in the Scottish legal market place more quickly if we must await the design, incorporation and formation of an entirely new regulator.

Beyond Clementi

Finally, there is the question of who the providers of legal services might be, and who should regulate them. On the face of it, having a single regulator independent of any providers looks good, but what would this actually mean in practice? Leaving aside the Faculty of Advocates and the SLCC, there is to all intents and purposes a single regulator in Scotland at the present time – the Law Society of Scotland. What in effect is not regulated is any legal work not reserved under s 32 of the 1980 Act. “Lawyer” is also not a regulated term. This was graphically illustrated just before the Roberton review when a prominent Glasgow solicitor, having been struck off the roll, promptly reopened for business as a “lawyer”. Even a risk-based approach to regulation might spot that this may not be in the public interest.

Roberton accepted that the use of “lawyer” by an unregulated person was liable to be confusing to consumers, but was unwilling to recommend the expansion of the reserved areas of work, or, at least initially, the supervision of claims management companies by her regulator. Section 3 of the 2010 Act sets out a broader definition of legal services, but in the absence of the ABS structures coming into effect, does not proscribe the carrying out of those services by unregulated persons.

The answer, according to Professor Mayson’s review, is to focus on the regulation of legal services and not of lawyers. He recommends sweeping away all the regulatory structures created in England & Wales after the Clementi reforms and the creation of a single body to regulate all legal services in the public interest. “[We know that] risks, vulnerabilities, threats and insidious impacts arising from technology and alternative or unregulated providers are already ‘out there’ in the legal services sector,” he states at para 4.3.5. “Allowing them to increase and spread, unchecked, will in the end improve neither access to legal services nor public confidence in the provision and regulation [of] those services.”

This statement could be applied as much to Scotland as to England & Wales, but his answer would mean the creation of a far bigger drawing board than anything envisaged by the Roberton review or by the Scottish Government in setting it up.

The carrying out of legal services by unregulated persons appears to me a far greater hazard to the public or consumer interest than any potential (as opposed to actual) conflict of interest in the Society as between its functions as regulator and representative of the solicitor profession. Scots law is at far greater risk of erosion the more legal services are provided by less qualified, and lightly regulated persons. The standing of the solicitor profession in Scotland is also more likely to diminish the more its members are relegated to the back seat in the ownership and management of legal service providers.

Accordingly, the Scottish Government should reject Roberton’s principal recommendation. There is no case for a brand new regulator. The current system of regulation of the solicitor profession has independence built in and satisfies the Better Regulation principles. The examples of the SLCC and the English regulatory system inspire no confidence that a new regulator could appropriately balance the interests of justice, the public interest, business, consumers and the profession and be genuinely accountable.

The Author

Tom Marshall is a member of the Council of the Law Society of Scotland, representing solicitor advocates

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