Law Firms are not Public Assets
On 31 July, The Herald published a letter by Michael Sheridan, Solicitor, Glasgow claiming that Law Firms are “public assets” that should not be allowed to be sold to shareholder companies.
Mr Sheridan was alerting the public to, in his view, the “proposed sale of public assets for private gain” that could happen if section 80 of the Regulation of Legal Services (Scotland) Bill were enacted.
Mr Sheridan thinks solicitors need to retain the monopoly they enjoy as they apparently hold this in trust for the public:
The solicitors’ profession enjoys the privilege of monopoly rights to deliver to and charge the public for certain legal services. These rights were created by public general statute and are given to solicitors in exchange for the average of about 10 years which solicitors spend in the education, training and practice required to qualify fully as solicitors. The rights are held by solicitors in trust for the public who, if they were aware of what was happening, might well wish to challenge the sale of these rights to non-solicitor companies for the private profit of the selling solicitors and of the purchasing companies and their shareholders.
He went on to suggest that any such sale would lead to increased legal costs for consumers comparing the situation to how:
Thames Water Utilities Limited cannot afford to keep sewage out of the rivers and also how the banks who charge 6% interest on loans to borrowers can only pay 2% interest to their savings customers, in both cases because of the dividends which have to be paid to company shareholders.
Thus, Mr Sheridan was of the view that:
Access to legal services and therefore to justice is likely to become even more exclusive to the well-heeled than it already is today.
Why Law Firms are not Public Assets and Should be Capable of Sale to Non-Solicitors
I obviously felt compelled to write a response, which The Herald published on 2 August under the heading ‘Why we should follow the example of England and liberalise our legal services‘. That letter is reproduced here:
I refer to the letter from Michael Sheridan (31 July) where he suggests that the Regulation of Legal Services (Scotland) Bill is a threat to solicitor service as we know it. This couldn’t be further from the truth.
Legal practices currently operate as private businesses run to generate profit for their owners. They are not, and can in no way be considered to be, “public assets”.
They do, however, as Mr Sheridan says currently enjoy a monopoly in that those owners must be practising solicitors. That is a monopoly that was correctly identified some considerable time ago as not being in the best interests of the legal practices nor consumers.
In England & Wales that monopoly was removed by the Legal Services Act 2007. The first Alternative Business Structure under that Act was licensed on October 6, 2011.
The liberalisation of legal services in England & Wales was often referred to as “Tesco Law” due to a fear that supermarkets would start providing legal services. There was fear amongst certain solicitors that they would lose their livelihoods as a result. That never transpired. Instead non-solicitor spouses become part-owners in a business they had supported as did employees. More options were now available to law firms for raising finance and for succession. Thirteen years of liberalisation of legal services in England & Wales has demonstrated that there is nothing to fear from us adopting the same approach north of the border.
However, Scotland has been very slow in the uptake. The Legal Services (Scotland) Act 2010 (enacted on October 9, 2010) introduced for the first time the concept of Alternative Business Structures in Scotland.
It took more than 11 years for appointment of the Law Society of Scotland as an approved regulator. That was announced on December 22, 2021. However, the scheme still has to launch.
Under that scheme, whenever it sees the light of day (which we are told should be soon), 51% of an Alternative Business Structure must still remain effectively in solicitor ownership.
The Regulation of Legal Services (Scotland) Bill, which Mr Sheridan refers to, simply seeks to reduce that percentage to 10%.
My view, and that of many others, is that the ownership percentage should be reduced to 0% to give Scotland parity with England & Wales. That is the view that should be given to the Scottish Parliament through their current consultation on the Regulation of Legal Services (Scotland) Bill which closes on August 9.
Blog Posts on Alternative Business Structures in Scotland
For previous posts by me specifically about Alternative Business Structures in Scotland see:
- Legal Services Regulation Reform in Scotland: Consultation Analysis Reviewed – Part 4: Business Structures
- ABS in Scotland to get Equality with England & Wales
Blog Posts on Legal Services Regulation Reform
For all blog posts on Legal Services Regulation Reform see: Legal Services Regulation Reform in Scotland
Reactions on Law Firms are not Public Assets
On LinkedIn the following comments have been made:-
Kourtellos (Lawyer | Kourtellos & Co):
Nope. Period.
Me:
Indeed Kyriacos. I thought it a very odd view for any solicitor to take.
Kyriacos Kourtellos:
Brian as a legal business owner myself I agree that’s exactly what it is – a business making profit for its owner and partners. The ‘monopoly’ of lawyers through regulation ensures a certain standard, more often than not. In comparison for instance we wouldn’t like an unregulated nor alternative medical services provider carrying out any surgery, right?
Me:
Right Kyriacos. But ABS under the current proposals in Scotland will be regulated as they are in England & Wales.
Kyriacos Kourtellos:
Hope things work out well Brian. On another note, I hope I visit Scotland again. I had a fun road trip up to Loch Ness 14 years ago! Magical scenery!
Me:
It is funny Kyriacos that you should mention Loch Ness in this thread on ABSs. Because some time ago Paul Rogerson writing at the Law Society Gazette (i.e. the Gazette of the Law Society of England & Wales) said ABSs in Scotland were rarer than Nessie!
Kyriacos Kourtellos:
Brian there you go then nothing to worry about after all!
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Graeme Johnston (Software to map work – before that a lawyer):
Have just read Mr Sheridan’s letter. Hmm. Let’s just say it doesn’t match my understanding of the status quo. Sells newspaper clicks, I guess.
“Perhaps the most extreme contravention of the Treaty of Union is the proposed replacement of Scotland’s most senior law officer, the Lord President of the Court of Session, with Parliament as the head of the regulation of the solicitors’ profession. This last proposal contravenes also the doctrine of the separation of powers in arguably the most savage attack by the legislature upon the judiciary since the removal of the head of the judiciary (Charles I) by the (English) Parliament in 1649.”
😯
Me:
As I say Graeme, it is the doom and gloom approach we saw from some solicitors 13 years ago. I thought they would be over it by now!
Graeme Johnston:
Brian Inkster One thing I wonder about is, even though the SNP has evidently run out of steam and is not up for a fight on this or other structural reforms, what would the position of the Conservatives or Labour be on this topic if they were to win power in the next Scottish Parliament? It was only by a consensus on the need for big change between those two parties that things finally shifted in England and Wales via landmarks such as the 1991 Act under the Conservatives and the 2007 Act under Labour. I’ve not tracked down their positions (if any) on Roberton.
Me:
Interesting point Graeme. I have no insight on that at the moment but that may become clearer as the Bill is scrutinised through its various Parliamentary stages.
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Michael Burne (Rebel with a cause. Changing the way the legal profession works one step at a time. Like taking photos too.):
A law firm is not a public asset. Lawyers are for hire, a bit like taxi’s. Of course with the arrival of Uber taxi’s are now more modern businesses than law firms 😂.
There is certainly nothing to fear from the implementation in Scotland of a similar regime to that in operation in England & Wales. I say this not least because in 13 years not a great deal has changed…
Me:
Indeed Michael. A strange notion indeed that a law firm might be considered to be a public asset!
Fear of change is usually unfounded. As the experience in England & Wales, as you say, demonstrates given that the change has not been that dramatic.
“You don’t fear change. You fear the unknown. If you knew the future would be great, you’d welcome the change to get there. Well, the future IS great. Proceed.” – Joe Vitale
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Gary Thompson FCII Chartered Insurance Practitioner (Insurance Professional providing Expert Witness Opinion | Insurance Claims Audits | Solicitors CPD Training and Risk Management Advice | Insurance Dispute Resolution Solutions):
Simply promoting maintenance of the status quo is a stance that should be closely scrutinised and challenged. The needs of consumers of legal and associated services has changed as has the range and delivery methods of law firms. Business models should be capable of having greater flexibility and diversity. I agree it seems illogical that ownership should be constrained to solicitors. Supportive spouses, as well as those providing expertise in areas such as IT or AML should also have the capacity to participate in ownership to facilitate the development of providing consumer focused legal services.
Me:
Wholeheartedly agreed Gary.
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Joe Reevy (Retired business guy & chartered accountant. Love to make things work better. Ethical, nonconformist, rational, creative, jocular: help good people. Despise elitism: call a spade a spade. Don’t take a lot seriously):
As an ex super market man who went into the professions, I was very much a lone voice in predicting that Tesco law would never happen. The reasons were obvious…why would they give up valuable floorspace for a business with the reverse of their cash flow model, increased risk, which they had no experience of managing, potential reputational damage when they could make more money selling balsamic vinegar?
Didn’t stop the scare mongers though.
However, liberalisation hasn’t had much effect in England and the increased ‘competition’ has done little for the consumer so far and has persuaded investors who had money to burn to pay stupid money for businesses with little true inherent value.
Who cares who the owners are?
Me:
Thanks Joe. All good reasons for why we never actually saw ‘Tesco Law’. The Quality Solicitors Legal Access Points in WH Smith (remember those?) didn’t last long. The one in the Sauchiehall Street branch in Glasgow (Scotland) had English law leaflets and a telephone that rang through to a law firm in Carlisle (England)!
