Further questions

What is a licensed legal services provider?

As set out in the Act, LPs will be business entities which, through the designated and other persons within it, provide legal services to the general public for a fee and do so under licence issued by an approved regulator.

What are the possible benefits - I don't see any for my firm?

The legislation aims to increase options for firms in an increasingly competitive marketplace. Firms, big and small, are already diversifying, offering online legal services and other niche market services and there is already an element of cherry-picking going on, with many firms having ceased to do civil legal aid.

There may be motivational advantages in allowing an enhanced role for non-solicitors already working in firms and providing client facing advice or in administration roles. In England and Wales, the first phase of the Legal Services Act has been adopted and non-solicitor managers have become partners or members.

Are there going to be any takers?

This is already happening in practice within estate agency, wealth management and tax work where accountants, financial advisers and others already work with solicitors.

I don't want to change. Do I have to?

No. The Act is permissive legislation and does not require firms to change their structure but it creates options. If the traditional partnership model is the most effective for that business, that is the one which should remain. Not to allow change could lead to a drain of talent in Scotland and potentially lead to a downturn and demise of the Scottish legal sector to lasting effect, not only to the profession but to the Scottish economy as a whole. We want talent to remain in Scotland. The legal sector contributes an estimated £1.2 billion to the Scottish economy annually.

Why can't traditional firms (partnerships or LLPs) become LPs but retain all solicitor partner/members?

This is what the Act says. Given that there is intended to be no advantage or disadvantage for the traditional firms v LPs then it is hard to see why a traditional firm would want to become a LP and make no other changes to its structure.

What changes will the Act bring?

The Act will permit law firms to restructure if they choose and for new providers to provide legal services in Scotland. There will be a new regulatory framework for LPs.

What will it mean for the profession?

In all likelihood, many solicitors will choose to retain the solicitor partnership model in order to provide their clients with the legal services they require. However the Act would allow non-solicitor ownership of LPs. It will also allow solicitors to set up in partnership with other professionals, such as surveyors, accountants or architects, and promote existing senior but non-solicitor staff to partner level and allow LPs to seek external capital. All new LPs would require at least one solicitor to be employed in the business and to have a solicitor as head of legal services. We do anticipate demand from our members to create some forms of ABS.

What role will the Society play?

The Society will continue to act as the governing body for the solicitors' profession in Scotland. The Society intends to apply to be an approved regulator of LPs, to meet the anticipated demand from members.

Does the Act mean the government will have a bigger influence over the Society?

No. The Society is accountable to its membership. It will continue to represent the solicitors' profession while carrying out its regulatory duties and maintaining its obligation to the public interest, which work to ensure the reputation of the profession among its clients, the wider public and other stakeholders, including MSPs and ministers. The Society will continue to represent the Scottish profession and its members whether they are part of a solicitor practice, an in-house team, or those who may become part of a LP.     

The Council believes that the four non-lawyer Council observers and non-lawyers who account for 50% of regulatory committees and Scottish Solicitors' Discipline Tribunal membership currently contribute substantially to the quality and accountability of decision-making. The Society proposes to revise its Council structure to allow up to 20% non-lawyer membership.

How can the Society properly represent its members if it is to have non-solicitors on its Council?

Most similar organisations have lay members on their boards and councils. They not only meet any obligations there are to the public interest, but bring additional skills, talent and knowledge to the workings of the organisation and to its membership. Any future non-solicitor members of the Council will be appointed through a recruitment process which would seek to comply with the spirit of the Nolan principles.

What will the Act mean for clients?

The intention of the Act is to address both the interests of consumers as well as wider, public interest issues. Clients would expect to have wider access to legal services and will be able to expect the same standards of service, advice and consumer protection from LPs as from solicitor practices.

How will professional principles and core values be safeguarded?

All solicitors will be expected to work to their professional principles and the profession's core values. The Act provides a set of professional principles to which LPs must adhere. They must:

  • support the proper administration of justice
  • act with independence and integrity
  • act in the best interests of their clients
  • maintain good standards of work
  • comply with duties normally owed to the court when i) exercising a right of audience, or ii) conducting litigation in relation to proceedings in any court

Furthermore, the Act requires both regulators and LPs to act in a way that is compatible with the regulatory objectives which are set out in section 1. These include:

  • supporting the constitutional principle of the rule of law
  • protecting and promoting both the interests of consumers and the public interest more generally
  • promoting an independent, strong, varied and effective legal profession
  • promoting adherence to the professional principles

How will standards be maintained?

Scottish solicitors must adhere to a set of core values, as well as to standards of conduct rules which are set by the Society. To ensure that LPs adhere to the same standards, the Act provides a set of regulatory objectives, with which all LPs must act compatibly; and professional principles to which all LPs must adhere. Approved regulators, who are obliged to act compatibly with the regulatory objectives, must create a regulatory scheme to which the legal services providers that they licence have to adhere.

In practice, it is the responsibility of the LP's head of legal services to ensure compliance with the regulatory objectives, professional principles and the approved regulator's scheme. Under the Act, every LP is obliged to appoint a head of legal services who must be a qualified solicitor in possession of a current practising certificate. It is his or her duty to ensure that the firm meets all of its obligations.

Will there be the same level of client protection?

The Act allows that regulators can opt to use the existing Guarantee Fund for their LPs or they are required to set up an equivalent fund. There are safeguards for the Society as the operator of the fund in respect of the ability to require regulators to inform the Society of any breaches of the equivalent of the accounts rules and an ultimate power for the Society to carry out its own inspection.

How does the Act guard against corrupt influences on the legal profession?

In general terms, the Act guards against corrupt influences by setting out very stringent criteria for each stage of authorisation that must be met before a LP can operate. These stages include:

  • authorisation of approved regulators
  • approval of regulatory scheme, including examination of licensing and practice rules
  • eligibility criteria of licensed providers
  • approval of appointment of head of legal services, head of practice or member of practice committee
  • determination of fitness of outside investors

Scottish ministers may monitor the performance of approved regulators and, in turn, the approved regulators would require LPs to submit an annual performance report. This level of scrutiny reduces the potential for undesirable influences on the legal profession.

The Act also addresses the question of external ownership and/or control of law firms, which is of most concern among those who fear that the Act might result in the corruption of the legal profession. Under the Act, approved regulators must first determine the fitness of outside investors before issuing a licence to a LP. There is a list of relevant factors as to fitness, which includes details about the background, finances and probity of potential investors. Some of these factors would, if met, automatically result in a presumption of unfitness. These include:

For individuals:

  • if the investor is subject to a trust deed
  • if the investor has been adjudged bankrupt and has not been discharged from bankruptcy
  • if the investor is disqualified from holding, or has been removed by a court from, a position of business responsibility (eg director of a charity)
  • if the investor has been convicted of an offence involving dishonesty (and has either been sentenced to 12 months or more in prison, or has been fined at least the maximum level four amount on the standard scale)

For corporate investors:

An outside investor must not act in a way that is incompatible with the regulatory objectives. The role of the head of legal services is important here, as he or she (who must be a qualified solicitor in possession of a practising certificate free of conditions) must report any failure of the LP to fulfil its duties under the Act or any other enactment to the approved regulator. This would include anti-terrorism legislation, proceeds of crime legislation and the serious organised crime provisions of the Criminal Justice and Licensing (Scotland) Bill.

How does the Act deal with the prospect of LPs cherry-picking profitable areas of business and having an adverse impact on access to justice?

It is stipulated in the Act's regulatory objectives that access to justice must be promoted, making it the first time that there has been a statutory duty to have regard to access to justice issues. Moreover, an approved regulator must provide in its licensing rules how it will deal with a licence application where it believes that granting it would cause (directly or indirectly) a material and adverse effect on the provision of legal services.

It should be remembered that this is an issue which already exists in Scotland. While the Act would make consideration of access to justice a statutory duty, such a complex issue cannot be wholly solved by this piece of legislation and must be addressed at a number of levels.

Could law firms be listed on the stock exchange?

This may be possible, although whether this will happen is unclear. In New South Wales, Australia, there is at least one listed firm (Slater & Gordon).

Would listing create or increase tension between investors and clients and court duties of the firm?

Again looking at Slater & Gordon, its original prospectus stated:

"Where an inconsistency or conflict arises between the duties if the company (and the duties of the lawyers employed by the company) the company's duty to the court will prevail over all other duties and the company's duty to its clients will prevail over duties to shareholders."

The primacy of a lawyer's duties to the court as stated in the prospectus are also reflected in Slater & Gordon's constituent documents and shareholder agreements.