Is the ABS Nessie in sight at last?

The Law Society of Scotland made an announcement on 10 August that would suggest the ABS Nessie may be in sight at long last! Later this year (2023) no less.

ABSs in Scotland – rarer than Nessie

Seven years ago, in 2016, the Law Society Gazette (i.e. the Gazette of the Law Society of England & Wales) looked at the question of Alternative Business Structures in Scotland with the headline ‘ABSs in Scotland – rarer than Nessie‘. They commented on the delays in implementing the Legal Services (Scotland) Act 2010:-

Since 2010 the tectonic plates of Scottish politics have not so much shifted as convulsed. The same could be said of the solicitor profession, with a succession of Scotland’s most venerable legal firms swallowed up through merger with larger English firms.

But on this particular matter, movement has been glacial.

Four years ago the Law Society of Scotland reported an upsurge in interest in law firms north of the border becoming ‘licensed providers’, but warned that new regulations enabling them to convert remained ‘some way off’.

So it has proved. The issue, then as now, was the regulatory framework, encompassing matters such as spent convictions, rules relating to investors and limited partnerships. The Law Society submitted a proposed draft outline in 2012, but this has since gone through a number of iterations.

The Society’s website discloses that in early 2014 a revised draft scheme for licensed legal services providers was submitted to the government following further revision. That bounced back once again, until 18 months later – in December last year – the Society’s submitted another revised draft. This ‘followed further amendments made in light of comments from the government and other stakeholders’.

What those amendments are is unclear. The Society told the Gazette the December draft is not available.

It gets still more involved. A government consultation on the Licensed Providers Regulatory Regime – consumer watchdogs responded to it in May this year – is now closed. The Scottish government was initially unable to supply any further information and there is nothing posted on its website – but it did issue a statement to the Gazette later, making it clear there is still no timescale.

A spokesperson said: ‘The Law Society of Scotland has applied to Scottish Ministers for approval as an approved regulator in terms of the Legal Services (Scotland) Act 2010 so that it may license entities seeking to be licensed providers of legal services.

‘Before Scottish Ministers can approve, they must consult those who have relevant interests in the Law Society’s Regulatory Scheme, and the Lord President. The targeted consultation ended in May and responses analysed. Timescales for the approval and authorisation process are being considered.’

Of course, with Scotland’s profession ticking over nicely, stakeholders in government and the profession could be forgiven for not being greatly exercised about liberalising legal services.

They went on to quote my comments at the time:

Brian Inkster, of Scottish legal firm Inksters, is one interested observer. He is a member of The ABS & NewLaw Advisory Council, a cross-jurisdictional body representing ABSs and other new-style legal practices set up in 2014 by the Managing Partners Forum.

Inkster told the Gazette he is due to update the council on progress of ABSs in Scotland at its next meeting in September.

He said: ‘The last I heard a few months ago was that something might happen before the year’s out,’ he said. ’It’s extraordinary, given the passage of time since this happened in England and Wales, that it has not happened here in Scotland. But perhaps people have forgotten about ABSs and are getting on quite well without them.’

Glacial Progress Continued – Still no sign of the ABS Nessie

Nothing happened before the year was out in 2016. The Law Society of Scotland telling us that “something might happen before the year’s out” has been a common occurrence pretty much annually since.

In January 2019 Harper Macleod organised a seminar on ABSs in the expectation that a Scheme was to be in place that month. However, it was announced at the seminar that the process had stalled again. Perhaps, it was thought, because of the publication of the Roberton Review. ABS in Scotland remained as rare as Nessie.

It took over 11 years for a scheme for licensed legal services providers to eventually be adjusted and approved and then for appointment of the Law Society of Scotland as an approved regulator. That appointment was announced on 22 December 2021. The Law Society’s press release from December 2021 stated:-

The Society is currently building the policies and processes that will support the approved regulatory scheme, which is due to launch in 2022.

There was no such launch in 2022. Eighteen months after the Law Society of Scotland became an approved regulator and we still await the launch. ABS in Scotland remain as rare as Nessie.

Latest stall on the ABS Nessie

At a meeting at the Royal Faculty of Procurators in Glasgow on 13 October 2022 the Chief Executive of the Law Society of Scotland, Diane McGiffen, indicated that the Society had put a pause on the launch.

This was apparently due to the announcement by the Scottish Government on 6 September 2022 to introduce a Legal Services Regulation Reform Bill in 2022/23.

The Bill might affect ABS and the Society wanted to know what the detail was!

I pointed out how ridiculous this was. Provisions in an Act from 2010 were still not (12 years later) implemented by the Law Society of Scotland. Those provisions could and should simply be implemented as enacted.

It was not for the Law Society to pause the process to consider what effect possible future legislation may have on the existing unimplemented legislation. It was yet another example, in a long history of them, of the Law Society of Scotland dragging their heals when it comes to the introduction of ABS, which in Scotland remain as rare as Nessie.

Glimmer of hope for spotting the ABS Nessie?

However, do we now have a small glimmer of hope or is it another false promise? The Law Society of Scotland said on 10 August 2023:-

Changes to the Society’s Practice and Accounts Rules at the end of 2022, meant changes to the LP [Licensed Legal Services Providers] regulatory scheme rules were needed. The Society, as required by statute, re-submitted the scheme for approval by Scottish Ministers. It is working closely with the Scottish Government to progress matters, following their consultation on the updated scheme, prior to launching later this year.

So yet another “later this year”!

As identified by the Law Society Gazette in 2016, the Law Society of Scotland have never been very forthcoming with news about ABSs in Scotland.

The delays on the whole appear a mystery (like the existence or otherwise of Nessie). Very little is ever published by the Law Society of Scotland about it. Their members are kept in the dark.

The fact they have issued this recent press release might suggest something is actually afoot. Is the ABS Nessie in sight at last?

Embarrassed into it?

Perhaps the Law Society of Scotland realise how embarrassing it will be for them if ABSs have not been introduced by the time that the Equalities, Human Rights & Civil Justice Committee of the Scottish Parliament start fully scrutinising the Regulation of Legal Services (Scotland) Bill.

However, the Committee really must ask why there has been a 13 year long wait for something that could and should have taken no more than a year or two. After all the blueprint for it was already there in what had been put in place in England & Wales.

The Committee must seek to ensure whatever is enacted flowing on from the Regulation of Legal Services (Scotland) Bill gives no ability to the Law Society of Scotland to delay implementation. We cannot have a repeat of what they have done  with implementation of the Legal Services (Scotland) Act 2010.

The 51% Rule

Of course if the ABS Nessie does appear it will still be under the guise of the 51% rule. Where at least 51% of the ABS in effect in solicitor ownership. This really needs to be reduced to 0%. Not 10% as suggested by the Regulation of Legal Services (Scotland) Bill.

This could and should be done by Scottish Ministers by regulation. Which they can do under Section 147(1) of the Legal Services (Scotland) Act 2010. There is no need to wait for a new Regulation of Legal Services (Scotland) Act.

It would make a lot more sense to do this now before the ABS Nessie appears. But for goodness sake don’t let that be an excuse for further delay. If we have to start at 51% so be it. At least it will be a start after what looks like being at least a 13 year long wait.

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
• Law Firms are not Public Assets

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 Is the ABS Nessie in sight at last?

On LinkedIn the following comments have been made:-

Kyriacos Kourtellos (Lawyer helping private and corporate clients with their investments in Cyprus and beyond):

I recently read about a new expedition out to find her Brian!

Me:

I am concerned that this expedition may be thwarted!

 

 

 

 

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Mitch Kowalski (European/Canadian, Head of Legal and Legal Operations Advisor):

Sigh…..

Me:

Indeed. Imagine what the Regulator would say if a solicitor took 13 years to draft a document!