Can self-regulation be carried out with sufficient independent oversight? The author proposes a model that he believes would resolve the issues that were the subject of the recent consultation

Every decade or so, I find myself grappling with how best to regulate the Scottish legal profession. 

First, in 1990, the Government I was working for introduced solicitor advocates and gave the system its first shakeup in a long time. In 2004, as head of the then Justice Department, I struggled to think what to do in the wake of the Clementi review for England, and so bear some of the responsibility for the present arrangements. It was partly in expiation for their flaws that I’ve spent much of the last 10 years on the Law Society of Scotland’s Council, and then its Regulatory Committee, as a lay member.

Now that the Government is looking at this again, in the wake of the Roberton review, it’s time to get it right.

Does the present system work?

Most of the present system of regulation works quite well in practice, and the profession is, in my view, in general properly regulated. Much good work is done by the Society in relation to admissions, advice and guidance, standard setting and so on. The (non-statutory) work which the Society does on the financial stability of firms identifies problems and occasional instances of misconduct which otherwise might well not come to light. Moreover the Society, as both a representative and regulatory organisation, makes a particularly strong contribution to legislation and legal policy and so to Scottish democracy.

Two problems however need fixing. The first is glaring. The legal complaints system is not working well. Having a separate Legal Complaints Commission for service complaints against solicitors has proved slow, expensive and ineffective. It was clearly a strategic error to split complaints into those concerning service and those potentially involving professional conduct. The unhelpful Court of Session ruling which said – against all experience – that complaints could be only one or the other added to the difficulties.

At the minimum, a single complaints gateway is needed, in the interests of consumers, but there should also in substance be a single process for dealing with complaints. It is absurd, as well as slow and expensive, to have two bodies dealing with the same issue and potentially reaching contradictory conclusions. I return below to what that body ought to be.

The second problem is presentational as much as real: how can self-regulation be, and be seen to be, not self-interested? The present system tries to address this by including an independent element in the regulatory process, but that is not yet sufficiently powerful, or evident.

External regulation v self-regulation

Ministers commissioned the Roberton review, but its analysis was weak. It started from the conclusion that self-regulation was intrinsically wrong, rather than from evidence of problems in the working of the system. Clearly self-regulation carries risks both of substance and perception, discussed below, but wholly external regulation carries risks too. Instead of a profession or businesses taking ownership of the principles and objectives of the regulatory system, there may develop a culture of compliance with rules, and an ever deepening thicket of rules, as loopholes exploited are closed off.

It is striking to compare the regulation of legal services with that of financial services (where I also work). There, regulators are increasingly shifting from a rules based culture to a principles based one, which involves personal responsibility for individuals with a particular status. Sounds a bit like professional regulation…

Self-regulation has potential strengths: notably bringing to bear the knowledge of professionals in daily practice to the issues of regulation that arise. First of all, they are likely to understand the nature and detail of legal services and the legal issues which come up in individual cases, and also to have an understanding of good practice and propriety from their own experience, rather than simply a reading of the rules.

Additionally, the system operated by the Law Society of Scotland mobilises substantial quantities of voluntary effort into regulation, bringing this expertise and these insights to bear without charge. This is not a trivial point: a wholly external regulator would have to employ or contract individuals to do this, and in a small jurisdiction like Scotland that would be potentially a substantial overhead which ultimately the users of legal services would bear. The cost of the SLCC would seem to bear this out.

But self-regulation does carry risks. Consciously or unconsciously, professionals do not always find it easy to distinguish properly the profession’s interests and those of clients, e.g. in setting out good practice in complex issues where interests could conflict. At least as important is perception: any system of regulation must be seen to be fair, and there is an understandable reluctance to let any profession just “mark its own homework”.

The key question

This is the issue: is it possible to retain the strengths of self-regulation while managing its risks? Clementi struggled with this; the present Scottish arrangements try to address it. Roberton simply ignored it.

In my view, after rather too long looking at the question, the answer is yes, provided there is effective independent oversight of the work of regulation, and assurance that it is properly conducted.

The present system achieves some of this. There are independent, lay, members on the Society’s Regulatory Committee and its subcommittees, and the Regulatory Committee operates with a degree of independence. So regulatory decisions all have independent lay input (whether in relation to individual cases, complaints etc, or policy development). This is an important way of ensuring that the public interest, not just the profession’s interest, is taken into account in regulatory matters, and gives independent oversight at a very detailed level.

The system is however deficient in a number of respects:

  • The Regulatory Committee is a committee of the Society’s Council and therefore perceived to be subordinate to it, including by the Council itself and the Society staff. It has no budget, no staff of its own and in my experience insufficient authority within the Society: less than the SRA in England appears to have. This is not oversight, nor is it independent enough.
  • The committee is also appointed by the Society: this does not demonstrate its independence.
  • The committee and its subcommittees work diligently to regulate in the public interest, but there is no process to give assurance to the public, the courts or to the Parliament that the Society’s regulatory work achieves that result.

Get it right this time?

We may now have a chance to get this right. Third time lucky. Here is how it should be done.

Regulation of solicitors should remain the responsibility of the Law Society of Scotland. The Society should appoint, as now, a regulatory body and subcommittees, with a mix of lay and professional members.

Its regulatory work should be overseen, however, by an independent oversight regulator whose task would be to give assurance that the regulatory responsibilities of the Society were exercised in the public interest:

  • This oversight body would be creature of statute, with members appointed by the Lord President of the Court of Session.
  • The Society would be required to produce evidence to this body demonstrating the propriety of the regulatory processes.
  • The new oversight regulator would have complete visibility of all regulatory processes and decisions inside the Society (able to view papers, records and sit in on meetings).
  • It would be able to seek other sources of information also (e.g. surveys or research).
  • It would be expected to give the Society a periodic opinion on the quality and effectiveness of regulation, and the scope for improvement, to be submitted to the Lord President and laid before the Parliament.
  • If, however, it was unable to give the necessary assurance, or able to give only limited assurance, it would have power to direct the Society to make improvements.

This institutional architecture would also allow for the unification of complaint handling, again subject to the oversight regulator:

  • The Society should once again be made responsible for dealing with all complaints, whether raising issues of misconduct or service.
  • The oversight regulator should have the same powers in relation to complaints as in other regulatory matters, but should in addition be able to select and deal with any complaint itself.

This article looks at these issues through the lens of regulating the solicitor branch of the profession, but the new oversight regulator could discharge essentially the same functions in relation to the Faculty of Advocates.

These proposals represent the right balance between getting the strength of self-regulation and the assurance of independent oversight, so that the public interest is and can be seen to be secured without creating a potentially expensive and ineffective wholly external regulator. Indeed, since they imply abolition of the Scottish Legal Complaints Commission, the number of public bodies will not be increased.

We should have seen this more clearly in 2004, and Roberton should have recommended it. The Scottish Government now has the opportunity to implement a structure like this, offering effective but relatively light touch external regulation, ensuring that the Law of Scotland can serve, and be seen to serve, both the interests of the profession and the interests of the public – as it is obliged by law to do.

I do hope I don’t have to come back to this again in another 15 or 20 years to get it right.  

The Author

Professor Jim Gallagher CB, FRSE, Institute of Constitutional & Legal Studies, University of St Andrews. This article is based on his submission in response to the Scottish Government consultation on legal services regulation.

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