Halfway House for Legal Services Regulation Reform in Scotland Confirmed
A halfway house for Legal Services Regulation Reform in Scotland was confirmed this past week by the Equalities, Human Rights and Civil Justice Committee of the Scottish Parliament when they published, on 8 February 2024, their Stage 1 Report on the Regulation of Legal Services (Scotland) Bill [PDF] (“The Report”). They perhaps did so with some reservations when they said:
On the issue of an independent regulator, we acknowledge that there are polarised views and that the Scottish Government has attempted to find a compromise. We are not convinced that such a compromise is possible between the competing positions nor that it has been achieved in this Bill as drafted. However, we recognise that there are several other benefits this Bill will bring to both regulators, consumers and others particularly in relation to the complaints process and in setting up alternative business structures. We welcome those benefits.
Small Majority approve the Halfway House for Legal Services Regulation Reform in Scotland
However, this support of the general principles of the Bill came from a small majority of the Committee. It was 4:3.
The majority who support the general principles of the Bill are Kaukab Stewart (SNP), Maggie Chapman (Scottish Green Party), Karen Adam (SNP) and Fulton MacGregor (SNP). The minority who do not support the general principles of the Bill are Meghan Gallacher (Scottish Conservative and Unionist Party), Paul O’Kane (Scottish Labour) and Annie Wells (Scottish Conservative and Unionist Party).
So, the Government line was followed by those in the political parties that make up the Scottish Government. No big surprise there then.
Parliamentary Questions
The Report highlighted Parliamentary questions raised by Michelle Thomson MSP:
Michelle Thomson asked question S6O-02726 35 in the Chamber on 15 November 2023 on whether the Bill will “meet the original objectives of the Roberton review regarding consumer complaints”.
The Minister responded stating that the Bill is “designed to deliver the objectives of the Roberton review to provide a modern regulatory framework…”, adding:
“The Bill embeds consumer principles into the regulatory framework and introduces a more flexible approach to complaints while expanding independent oversight of complaint handling.”
That, of course, does not answer the question which can only really be answered with a simple “No”!
The Report goes on to say:
In her supplementary question, Ms Thomson noted that the Roberton review “concluded that the optimum regulatory model must be independent of regulatory bodies” and others shared this position. She said “[T]here is a clear and fundamental conflict of interest in having consumer complaints processed by bodies that exist to protect the interests of the profession” and asked the Minister to look again at how consumer complaints are best dealt with.
The Minister said the Bill would require the Law Society of Scotland to exercise its regulatory functions “independently of its other functions” and that:
“The Scottish Legal Complaints Commission will retain oversight of complaint handling and continue to have a role in monitoring trends in legal complaints. In addition, the commission will have a role in setting minimum standards as to how legal practitioners and legal regulators handle complaints, thereby providing independent oversight.”
Again a fudge by the Minister in an attempt to justify the halfway house approach to Legal Services Regulation Reform in Scotland.
The Elephant Remains in the Room as Halfway House of Legal Services Regulation Reform Confirmed
All evidence points towards the fact that the Law Society of Scotland cannot properly exercise its regulatory functions “independently of its other functions”. The Bill does not change that fundamental fact.
After the Roberton Review was debated at the Royal Faculty for Procurators in Glasgow back in 2019 someone tweeted:
No real rebuttal around the point that good regulation should be independent of those it regulates, which seems to be the elephant in the room.
That has continued to be the case ever since and remains the case.
Stephen Mayson on Independence of Regulation
As Professor Stephen Mayson, in his very well reasoned and expertly presented submission to the Equalities, Human Rights and Civil Justice Committee, put it:
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.
I previously stated, of Professor Mayson’s submission, that:
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.
However, sadly but perhaps not surprisingly the Turkeys have now been declared the winners despite the Equalities, Human Rights and Civil Justice Committee acknowledging:
We are not convinced that such a compromise is possible between the competing positions nor that it has been achieved in this Bill as drafted.
Esther Roberton: “There is no Halfway House” for Legal Services Regulation in Scotland
The Minister for Victims and Community Safety, Siobhian Brown told the Committee that, in her view, the Bill:
Struck the right balance for stakeholders and for consumers. She explained the reasons the Scottish Government did not adopt the principal recommendation of the Roberton review. She said “It was simply due to both sides, the legal profession and the consumers having polarised views on the recommendation for an independent regulator that the decision was made not to go down that track”. She did not accept that the Bill was making both sides unhappy and said it “tried to find a compromise.”
However, Esther Roberton did not accept this:
In her view, “there is no compromise. Either you believe in independent regulation as I do, or you do not. There is no halfway house.”
The Report goes on to tell us that, despite this view, Esther Roberton:
suggested a possible route towards independence could involve a transitory body which become the overarching regulator in the longer term as it drew functions from the two professional bodies with overarching responsibility remaining with the Lord President. She said:
“It is perfectly possible to give the Lord President a responsibility that makes him the ultimate regulator but in a very hands-off way that keeps him free of potential conflict and of politicisation. Nowhere is it very clearly codified what the Lord President’s role is. One of the opportunities of the Bill would be to make that much more explicit and have it agreed and in the public domain.”
More logic and common sense from Esther Roberton. If only the Scottish Government and The Scottish Parliament would actually listen to her and not be derailed by the Turkeys.
The Halfway House Image
The image that accompanies this blog post is the Halfway House, Sandwater, Shetland. It sits on its own in the middle of nowhere, approximately halfway between Lerwick and Voe. Regulation of Legal Services in Scotland is likewise set to sit on its own in the middle of nowhere. This is compared to other more enlightened legal jurisdictions around the world who have moved towards independent regulation.
Image Credit: Halfway House, Sandwater, Shetland cc-by-sa/2.0 – © Robert Sandison – geograph.org.uk/p/637083
More Views on The Report
I will comment on other aspects of the Stage 1 Report on the Regulation of Legal Services (Scotland) Bill in future blog posts.
Reactions to Halfway House for Legal Services Regulation Reform in Scotland Confirmed
On LinkedIn the following comments have been made:-
Michelle Thomson (Scottish National Party – Member of Scottish Parliament for Falkirk East):
I agree with Esther Roberton. An opportunity missed IMHO.
Me:
Indeed Michelle. We are already 10+ years behind England & Wales on legal services regulation reform. This will set us back in Scotland by at least another 10 years. A huge opportunity missed, again.
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Graeme Johnston (Software to map work – before that a lawyer):
It is rather tragic. I have little hope in anything now from the current governments in Westminster and Holyrood. Perhaps if Labour become the leading party in the 2026 SP election they’ll be able to do something sensible. It was Labour in Westminster who finally cracked this in E&W with the LSA 2007, though to be fair the Conservatives laid the groundwork with the CLSA 1991. Maybe some SNP people can come on board as well. Who knows, but worth continuing the discussion over the next few years ago even if this particular Bill ends up going nowhere important.
p.s. last year’s E&W Bar Council chair seems to have tried quite hard to roll back the position there, but it sounds like it failed. At least judging from the lack of any indication of them having got what they wanted. So I assume the bipartisan position on this between Con and Lab holds down south.
See e.g. this piece from a year ago – https://www.legalfutures.co.uk/latest-news/new-bar-chair-calls-on-ministry-of-justice-to-review-lsb
The new Bar Council chair seems focused – more sensibly in my view – on court funding and facilities, at least in his initial statements.
Me:
Thanks Graeme. Rather tragic indeed. Why commission an independent review just to ignore its findings?!
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Darren Murdoch (Legal Director, Solicitor and Notary Public at Waddell & Mackintosh Solicitors):
Brian, I also gave evidence before the committee. I can’t thank you enough for bringing to the attention of the committee the current issue concerning the manner in which prescription is treated in relation to complaints.
Me:
Thanks Darren. It was clear at the time that the Committee appeared concerned by the time I was spending on the topic of complaint procedures. But I persisted and hopefully managed to get all of my points across!
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Crispin Passmore (Consultant to legal market):
Not just ten years behind E&W – more like 20 as it takes time to implement change. And rest of world is moving too. Private equity and other investment pouring into US, Canada and rest of world through ABS and other structural and financial mechanisms. Catch up be irrelevant is message to law society and bars around the world – just like ancient guilds.
Me:
Indeed Crispin. Good point.
