Graeme Johnston / 11 August 2023
Back in 2017, the Scottish government commissioned a review into regulatory reform of legal services. This was a decade after the passage of the Legal Services Act in England and Wales, and the Scottish review body (the Roberton committee) understandably had regard to what had been done there.
The English approach has two tiers: an oversight regulator, the Legal Services Board (LSB), and frontline regulators. Under the LSA, the two main frontline regulators are still the long-standing lawyer representative bodies, the Law Society and the Bar Council. However, these both created internal regulatory boards back in 2006/07 and, over time, these have, under LSB pressure, become less dependent on their parent body. On the solicitor side of the profession, the splitting-out of the Solicitors Regulation Authority (SRA) as a separate entity was finally agreed between it, the LSB and the Law Society in 2020, and implemented in 2022. Further separation of the Bar Standards Board from the Bar Council remains unresolved.
In Scotland, the position is similar to the former English one, with the Law Society of Scotland and Faculty of Advocates each having committees to address regulatory / complaint issues. There is also a separate body with certain procedural functions. But the real power still resides with the representative bodies.
The Roberton committee reported in late 2018, recommending principally a single regulator for Scottish legal services, independent of both the state and the legal professions. It considered the Scottish status quo undesirably cosy and full of conflicts of interest, and the two-tier English model as over-complicated, particularly given Scotland’s much smaller size. The UK competition regulator, the Competition and Markets Authority, strongly supported the Roberton recommendation in 2020 and 2021 responses.
Although the analysis is, of course, detailed, I would summarise the general thrust of the Roberton and CMA views of self-regulation by lawyers as reflecting Upton Sinclair’s old observation that
“it is difficult to get a man to understand something, when his salary depends on not understanding it.”
The Scottish Law Society, Faculty of Advocates and Senior Judiciary strongly opposed Roberton’s principal recommendation. The most important point they make is about independence from the state. See the Senior Judiciary’s 2019 response for a flavour of those arguments.
So, we have two competing types of independence in regulation:
- Independence of the legal profession
- Independence from the legal profession
In April 2023, the Scottish Government published a Bill which rejects the principal Roberton recommendation but makes various tweaks to the existing system, mostly on lines favoured by the Law Society and Faculty of Advocates (e.g. reforming a complaints procedure which nobody is happy with, and restricting who can call themselves lawyers).
However, the Bill has raised serious objections from both the CMA and the Law Society on issues of independence.
The CMA notes its 9 August 2023 submission that’s the Bill is problematic on independence type 2.
“In [our 2020 report], we highlighted several concerns that have arisen in practice under the current arrangements. These include several examples where this conflict of interest may have led to the Law Society of Scotland (LSS) and the Faculty of Advocates (FoA) to prioritise the interests of their members over those of consumers in setting regulation or advocating for pro-competitive measures. In addition, there are concerns about the lack of transparency and accountability of the current arrangements and a negative impact on public perception and trust.
The Scottish Government’s chosen model (as reflected in the Bill) of an enhanced accountability and transparency model which “builds on the existing framework” is not, in the CMA’s view, substantially different from the current arrangements in relation to the degree of independence it affords the regulator from the interests of the profession. For reasons set out in the CMA Response to Scottish Government consultation, this model brings with it the risks associated with the current arrangement in which the main regulators of legal services providers are also representative bodies.”
No surprise there, given the CMA’s longstanding position. But the CMA also has concerns on type 1:
“[P]reserving the profession’s independence from government is an important aspect of independence. As set out in its study into legal services in England and Wales, the CMA’s view is that an independent legal profession is important for securing various public interest considerations such as protecting the legal rights of individuals and ensuring access to justice so that individuals can participate equally in society. The CMA observes that in the regulatory arrangements proposed in the Bill the Scottish Government has a more significant role than would be the case with an independent regulator.”
The Law Society, of course, doesn’t agree with the CMA that lack of independence type 2 is a problem . On type 1, the Law Society’s 27 July 2023 press release states:
“[The Bill] could see Scottish Ministers given new powers to intervene directly in the regulation of the legal profession for the first time. The Law Society said the proposals are unlike anything seen in other western democracies. It warned the changes would undermine the rule of law and could see Scotland shunned as a jurisdiction to do business in.”
The Law Society’s concerns relate to proposed sections 19 and 20 of the Bill.
Section 19 provides for Scottish Government powers to review regulators’ performance if requested by the Scottish Parliament, the CMA or Consumer Scotland. Nothing necessarily follows from such a review, however, other than the possibility of publication or the taking of section 20 measures. But a section 19 review is not a pre-condition of section 20 measures.
What about section 20, then? This would empower the Scottish Government to take various measures in respect of a regulator:
- Imposing performance targets
- Requiring action to be taken
- Censuring
- Imposing a financial penalty
- Making changes, or taking away, regulatory functions
Except for the financial penalty power, the consent of the head of the Scottish judiciary would be required for exercise of any of those powers. Section 20 also gives the Scottish Government power to make regulations, again with the consent of the head of the Scottish judiciary, to specify other measures which the Government may take in relation to the legal services regulators, after consulting them.
The Law Society’s concern is evidently that the Government could, if it can persuade the head of the judiciary, pressure the regulators inappropriately or impose an entirely new form of regulation later on, without any real limitation To use Westminster terminology, the proposed section 20 is criticised as a ‘Henry VIII’ clause. (Side note: the H8 brand is not great in Scotland).
The CMA has different concerns about sections 19 and 20:
“[T]he most appropriate regulatory model for the legal services sector is one where the regulator is independent from both the profession and government. Notwithstanding this, we note that sections 19 and 20 are intended to provide checks and balances to ensure that the regulators exercise their regulatory functions in a way that is compatible with the regulatory objectives or in the public interest. However, the CMA considers further clarity is required about how Section 19 and Section 20 would operate in practice.”
The CMA goes on to express concern that the legislation could be interpreted as giving it a more active ‘oversight’ role than it has under its establishing (UK, rather than Scottish) legislation, but with no clarity as to what’s expected of it, and as to what its role would be in working with the Scottish government after making any request.
If I’m reading this correctly, the CMA seems to fear a situation in which the Scottish government could press the CMA to propose reform while keeping it out of the loop on what actually happens. Power without responsibility, perhaps. Or, to put it more politely, an interesting example of the complexities of the UK/Scotland devolution settlement.
So, interesting times. I wonder where this leaves the Bill. Three possibilities I can imagine are:
- Retaining the regulatory intervention powers, despite the concerns expressed on meaning 1.
- Deleting proposed sections 19 and 20, or at least significantly recasting them.
- Kicking the whole thing into the long grass.
Postscript
On a different issue altogether, one interesting detail towards the end of the CMA’s response is that it suggests that the Bill’s proposed voluntary register of unregulated legal service providers be made mandatory. The CMA has made a similar point in England & Wales, to no avail. This is quite an important topic, as the scope for unregulated services is much wider in the UK, on both sides of the Tweed, than in many other countries. The CMA and LSB are keen for mandatory registration for data-gathering purposes. I wonder, however, if it may be double-edged in creating a target for those who wish to expand the scope of regulation so as to restrain competition. State-mandated data-gathering is not necessarily a neutral act.
Photo of Glasgow by Artur Kraft on Unsplash
