Professor Mayson: “the case for a Single Regulator is stronger in Scotland”

Professor Stephen Mayson has published his response to the call for views on the Regulation of Legal Services (Scotland) Bill on both the UCL website and on his own website. You can download the full response as a PDF: Response by Professor Stephen Mayson on call for evidence on Regulation of Legal Services (Scotland) Bill.

His response, as expected from the Professor that carried out the Independent Review of Legal Services Regulation in England & Wales (IRLSR), is very well considered and expertly presented. He provides piercing logic at every turn which is a stark contrast to many of the responses received by the Equalities, Human Rights & Civil Justice Committee of the Scottish Parliament.

Here I will look at some of the main points presented by Professor Mayson.

Should Scotland have an Independent Regulator to Regulate Legal Professionals?

Professor Mayson did, of course, recommend in the IRLSR that, in future, there should be a single regulator for the legal services sector in England & Wales. It is therefore no surprise that he supports the equivalent recommendation for Scotland in the Roberton Review. Indeed Professor Mayson states that he believes that the case for a single regulator is stronger in Scotland. He explains:-

One of the many challenges of the regulatory settlement for England & Wales under the Legal Services Act 2007 is the multiplicity of front-line regulators (derived from pre-existing professional bodies) and the consequent need for the Legal Services Board as an oversight regulator. The relative size of the Scottish legal services sector – at around 14,000 providers, fewer than the Bar of England & Wales – would strongly suggest that a single regulator should be the most cost-effective solution.

Professor Mayson’s views on Potential Conflicts of Interest under the Proposals

When I answered this question I did so on the basis of the conflict of interest that will still exist between between the Law Society of Scotland as regulator whilst also acting as a representative body for their members.

However, Professor Mayson first took on the question of conflict of interest between the regulator and the state:

Concerns about conflicts of interest tend to emphasise the importance of independence, and for this also to focus mainly on the independence of a legal profession from governmental or political interference.

Professor Mayson takes a slightly more relaxed view on this than some of the responses we have seen from the professional bodies and the Justiciary (I will consider those responses in a future blog post). As Professor Mayson previously stated at the online conference on ‘The Scottish Legal Services Regulation Reform Bill: what’s needed and what’s next?’ these concerns are too often, in his view, overstated.

Although Professor Mayson considers these concerns to be overstated he still does share many of the detailed reservations expressed by the Law Society of Scotland in its response to the Committee.

Professor Mayson then turned to my main concern, the question of the conflict between the representative and regulatory obligations of a professional body that does both. He says:

It is further complicated by the realisation that the perception of this conflict is as important as the reality of it. Indeed, in reality the conflict might not arise, but if it is still perceived to exist by those for whose benefit and protection regulation is intended to operate, the conflict remains.

The conflict is often expressed as the need to secure the independence of regulation from representative interests. However, the objective is probably better expressed as the need to avoid ‘regulatory capture’ (or the perception of it). In this sense, regulation and the regulator must not be “consistently or repeatedly directed away from the public interest and toward the interests of the regulated industry, by the intent and action of the industry itself” (Carpenter & Moss (2014) Preventing Regulatory Capture, New York, Cambridge University Press, page 13).

I expressed the view in the IRLSR that it is impossible for the perception of regulatory capture to be avoided if there is incomplete structural separation between regulatory and representative functions. The Competition & Markets Authority also referred to the ‘intrinsic conflict’ between these functions (Legal Services in Scotland (2020), paragraphs 5.19 and 5.43). Based on this conflict alone (irrespective of the proposed role of Scottish Ministers), such a conclusion would therefore argue against the Scottish Government’s incremental approach and two categories of regulator.

In its response to the Committee, the Law Society of Scotland claims that such a conflict does not currently exist (presumably as a statement of its assessment of the reality, rather than perception). But it goes on to say that their self-regulation “ensures the profession works according to high ethical standards and delivers excellent legal services”. In my view, the true purpose of regulation is to set and enforce the minimum standards below which any provider of legal services may not fall. This means that regulation should be risk-based, targeted and apply only the minimum necessary regulation to address the assessed risk to the public or consumer interests (cf. IRLSR Recommendation 28).

In this context, securing high ethical standards and excellent services should not be the role of a regulator – though it can remain as the aspiration of a professional body – and therefore the representative and regulatory positions are in conflict. This is because such an aspirational approach to regulation cannot be risk-based or proportionate: consumers do not, in every situation and at all times, need excellence (or need to bear the costs associated with it).

Unnecessary or burdensome regulation – whether driven by statutory requirements or professional aspiration – has a cost, initially borne by practitioners but eventually passed on to consumers. By seeking the highest possible standards of professional performance, the current approach to regulation does contain elements of misdirected obligations and restrictions that add cost to regulation and, ultimately, to legal services. That is why regulation should in my view instead focus on the minimum necessary standards to assure competence and service relative to the risks to the public interest.

It is, to my mind, telling that the Law Society of Scotland – contrary to the view of the CMA and current regulatory theory and best practice – denies the intrinsic conflict in embodying both regulatory and representative roles. Indeed, in its response to the Committee, it goes much further and asserts that there is “a coincidence of interest”. At the same time, it professes the ‘clear separation’ and ‘independence’ of its Regulatory Committee, while still welcoming the Bill’s proposals for even greater independence, transparency and accountability. And yet, throughout its submission to the Committee, it refers to ‘we’ and ‘us’ in relation to its position on the proposals in the Bill without ever separating the focus of its response into its respectively separate and independent positions as regulator and representative body.

This clear conflation of positions does indeed reinforce the ‘coincidence of interest’, but in a way that strongly suggests that, in submitting the Law Society’s response as a representative body and drawing no clear distinction between its regulatory and representative positions, the regulation of solicitors in Scotland is very much captured by and directed towards membership interests.

This logical and well set out argument is nigh on impossible for any lawyer to argue against. The best that the Dean of the Faculty of Advocates, Roddy Dunlop KC, could come up with was that “Turkeys don’t usually vote for Christmas”. If the Equalities, Human Rights & Civil Justice Committee set these two arguments side by side there can only be one clear winner and it cannot possibly be the Turkeys.

Review of the Performance of Regulators by the Scottish Ministers

Professor Mayson returns to the the thorny topic of the independence of a legal profession from governmental or political interference. He states:

It seems to me that the existence of these provisions arises from the absence of a single regulator or an oversight regulator.

And I will stop there. That is the simple answer to the concerns raised by the professional bodies and the Justiciary. The Scottish Parliament should amend the Regulation of Legal Services (Scotland) Bill to adopt the principal recommendation of the Roberton Review. Then those concerns recede. You are left only with the “Turkeys don’t usually vote for Christmas” argument. One that can very easily be disposed of.

Professor Mayson knows the Experience of other Jurisdictions

Professor Mayson highlights what we all know but that the professional bodies in Scotland would rather ignore:

There is no evidence that the international standing of law firms and lawyers in England & Wales has diminished as a result of an oversight regulator whose members are appointed by the government. Nor is there any suggestion that the constitutional principle of the rule of law, or the administration of justice, have been compromised under the structure and requirements of the 2007 Act.

The Complaints System

Professor Mayson thinks we are a step ahead of England & Wales in Scotland with one of the Bill’s proposals. That must be a first when it comes to regulatory reform of legal services! He says:

There is, however, one important part of the draft Bill that I welcome enthusiastically. One of my principal criticisms of the English Legal Services Act 2007 is the continuing central role played in regulation and its consequences by the ‘reserved legal activities’ (see IRLSR paragraphs 3.4, 3.5, 3.9, 5.2 and Recommendation 22). This has created a ‘regulatory gap’ through which a provider who is not otherwise regulated for the provision of legal services and who provides only non-reserved legal services can escape regulatory authorisation and enforcement, to the potential detriment of consumers.

I therefore recommended that this gap should be closed as soon as possible by allowing the Legal Services Board to create a public register of such currently unregulated providers, and to extend the jurisdiction of the Legal Ombudsman to unresolved service complaints made by consumers against registrants: IRLSR Recommendations 14, S1 and S2.

I therefore commend the Scottish Government for incorporating provisions into the draft Bill in clauses 62 and 65 which would place the Scottish Legal Services Commission in a position to achieve the outcomes that effectively close the equivalent regulatory gap in Scotland.

However, for reasons that I set out in IRLSR paragraphs 4.7.4, 4.8.2, and 4.8.3, I would strongly encourage the Scottish Government to reconsider its position on voluntary registration. Mandatory registration would allow regulation to deal with providers who pose a risk to consumers and who choose not to register voluntarily. It would also apply to those previously regulated practitioners (also referred to in the response of the Law Society of Scotland) who have retired, been struck off or otherwise restructured their provision of services deliberately to move from the regulated to the unregulated sphere.

Alternative Business Structures

As we have seen elsewhere on this blog the original proposals for Alternative Business Structures, first hatched in 2010 but still to be implemented, have a rule for effective 51% ownership by solicitors. The Bill proposes reducing this to 10%. I think the reduction should be to 0%.

Professor Mayson is in agreement with me:

It is right that the 51% majority stake rule for licensed legal services providers should be removed. It is not clear, however, why the required stake should be reduced to 10% rather than removed entirely. There is no evidence that the public interest or consumer protection requires a limit on ‘non-lawyer’ involvement, and the practical experience of alternative business structures in England & Wales bears this out.

Entity Regulation

Professor Mayson is in favour of entity regulation. He says:

I strongly support entity regulation being a feature of legal services regulation. With the possible exception of advocacy, most consumers and others will commission legal services through a business model or organisation that is, to them, an ‘entity’.

Regulation of the term “Lawyer”

Professor Mayson is against the proposal to regulate the term ‘lawyer’. He says:

I do not support the title ‘lawyer’ being protected and given the same current protections as ‘solicitor’. The expression ‘lawyer’ can be used legitimately in many different circumstances, including by those who are not professionally qualified as well as those who are but who use the title with a modifying adjective (such as academic, retired, or non-practising). Although not regulated to practise, their use of the title is not inappropriate – and, indeed, in a more risk-based regulatory environment, their ability to offer some legal advice to consumers might be something to restrict and manage rather than prohibit outright (as, in particular, under the Bill’s proposals, they could be subject to registration and the oversight of the Scottish Legal Services Commission).

I originally didn’t see much harm in the regulation of the term ‘lawyer’. However, the more I read other views the more it does seem like a hammer to crack a nut. I’m now with Professors Mayson and Flint on this one.

Professor Mayson’s Conclusion

Professor Mayson concludes his response with the following statement:

This Bill will shift ‘the legal sector’ further beyond ‘the legal profession’. The sector and the profession are already not coterminous, and with each year that goes by the difference grows. In truth, this is necessary if currently unmet legal needs are to be addressed effectively and economically. But these developments will then inevitably increase the pressure and momentum towards a single regulator of that broader sector – if not now (as Esther Roberton and I have advocated), then certainly in the not-too-distant future.

However, should we have to wait for the not-too-distant future to get what we should and could be getting now?

There is clearly no justification for a fudged Regulation of Legal Services (Scotland) Bill. One that attempts to pacify everyone but fails to even do that.

We have waited 13 years to see the Legal Services (Scotland) Act 2010 come to fruition and are still waiting. Regulatory reform of legal services in Scotland has been a slow burn already. It is time to speed it up a bit.

The opportunity now exists for the Equalities, Human Rights & Civil Justice Committee of the Scottish Parliament to really scrutinise why the Scottish Government have not adopted the principal recommendation of the Roberton Review. Hopefully, it is not too late to turn the tide.

Blog Posts on Legal Services Regulation Reform

For all blog posts on Legal Services Regulation Reform see: Legal Services Regulation Reform in Scotland