Key improvements to the Legal Services (Scotland) Bill were backed by the Justice Committee at this week's sitting, including a compromise on the type of alternative business structures allowed in the legislation.

In other changes promoted by the Society, committee members agreed an enhanced role for the Lord President to safeguard the independence of the legal profession. During a constructive and well-informed debate, Scottish Government plans to open up the Scottish Solicitors’ Guarantee Fund to new legal services providers were rejected. Further Guarantee Fund amendments are expected in future sessions.

The business model amendment approved by the committee would allow ABSs at least 51% owned, managed and controlled by solicitors or other regulated professionals, with no more than 49% non-lawyer or regulated professional ownership and investment. The amendment, which was passed in preference to the Government’s position of permitting 100% external ownership and investment, reflects the position adopted by the Society after its Annual General Meeting last month.

Introducing the issue of the ownership of licensed legal services providers, committee convener Bill Aitken acknowledged that it had attracted considerable controversy and created a division within the legal profession. The proposer of the successful amendment, Robert Brown, said it would “put a brake on the extent to which law firms can be taken over by outside interests”, and also provide “common ground on which the profession can regroup”.

While arguing that the amendment would impose restrictions on the business models available to firms, Fergus Ewing, the Minister for Community Safety, said he understood the concerns of those who disagreed. He added: “It is important that we continue to work together to find a way forward that is acceptable to all concerned.”

During the debate on the compensation scheme for clients, the minister argued that all new legal services providers should have access to the Guarantee Fund. He said the regulators of new providers might not have the resources to set up an equivalent fund. As a result, the clients of new providers would not be offered the same protection as those of law firms. However, Mr Brown expressed strong concerns that other regulators would be able to “tap into” the fund. He said they should be required to establish their own fund or an equivalent.

The committee agreed that no new providers should have access to the fund, though this position may change with future amendments. Currently, solicitors’ firms contribute to the fund, which reimburses clients who have suffered monetary loss because of the dishonesty of a solicitor or their staff, if the circumstances are not covered by professional indemnity insurance under the Master Policy. The Society believes the fund should only be opened up to include new providers regulated by the Society.

Amid concerns that the bill vested too much power in Scottish ministers, the role of the Lord President in the approval of regulators was enhanced. In relation to Government amendments, Mr Ewing said: “Effectively, that would give the Lord President a veto over who can become an approved regulator.”
Mr Brown said it was important that there should be a “constitutional buffer” between Government and regulators of those who provide legal services.

Michael Clancy is the Society’s Director of Law Reform