Regulation of legal services in Scotland: drive, park or reverse?

Automation trends notwithstanding, I think lawyers as a class are likely to have a bright future.

But sometimes I find that the stances taken by lawyers' professional organisations can be a little too defensive of their own perceived interests, with a tendency to clothe certain arguments in unconvincing public interest rhetoric. 

Such thoughts are prompted by reviewing the evidence recently published by the Scottish government’s panel to review the regulation of legal services.

As the briefest of introductions for anyone unfamiliar with the story so far - 

  • Scotland is part of the United Kingdom and has a population of 5.4 million. Its legal system differs in some respects from that of England & Wales (“E&W”) - differences of cultural and political significance.
  • It has separate legal professions from those of E&W. As in E&W, the basic split is between solicitors and advocates (akin to barristers in E&W). Some nuances of that split are different from E&W, but one similarity is that Scottish solicitors can obtain extended rights to conduct court advocacy and, upon doing so, are known as solicitor advocates. 
  • ABSs are not yet possible in Scotland: an Act to introduce these was passed by the Scottish Parliament in 2010 but with the crucial limitation that, unlike in E&W, non-lawyers can only have a minority interest. This was not brought into force immediately, but support has more recently been indicated for it from the Law Society of Scotland and on that basis I have been told that it is likely to be implemented soon.
  •  The areas of activity over which regulated lawyers have a monopoly are currently similar to those in E&W both before and after the LSA. However, lawyers remain self-regulating in Scotland, in contrast to the independent regulatory regime now in place in E&W.
  • There are clearly some concerns about whether something should be done in Scotland, not least in light of the pressure imposed by ongoing liberalisation of legal services south of the border.
  • In 2017, a panel was appointed by the Scottish government to review these issues. The panel has nine members. Three, including the chair, have backgrounds in chairing elements of the Scottish health service (one of whom also has a consumer protection background), five are lawyers and the ninth is the new chair of an official body involved in handling complaints against lawyers.

Quick(ish) win?

Looking at the evidence submitted, there seems to be a widespread acceptance, including officially, that the system for handling complaints against lawyers is byzantine, costly, long-winded, and has an anomalously high standard of proof, and is generally rather “Bleak House.” Its dominance by lawyers also gives it, as one official submission (Response 9) puts it, “the appearance of bias” or, as one non-lawyer submission asks (Response 48):

Would any football supporter believe that Ally McCoist or Neil Lennon could referee an Old Firm game impartially?

This is no small problem, as may be seen from the evidence submitted by Katrina Lovie and Gaynor Cowie about their experience of the complaints system after falling victim to some dishonest lawyering.

On the other hand, the Law Society of Scotland (more on which below) clearly has reservations as to the extent of the changes which should be made to the complaints system, seeing the problem as essentially one of speed. Nevertheless, this area would seem to be one in which some progress can be made - though it will be revealing to see whether the panel feels able to go further than the Law Society is comfortable with.

Deeper waters

However, there are some themes of larger interest in these times of great change for legal services globally.

As background, The UK Competition and Markets Authority (CMA) submission argues that the time has come for independent, risk-based regulation of legal services to be introduced in Scotland, following the E&W model. This is supported, notably, by the submission of the insurance industry, who are in a position to compare and contrast the client experience across borders.

There are also some thoughtful and constructive submissions from a number of neutral observers – those of Eva Groeneveld (of the Consumers' Association) and Professors Alan Paterson and Ken Mackinnon stood out for me.

In contrast, a number of the submissions from lawyers' organisations seek the expansion of regulation on grounds of alleged public interest.

Even the Scottish Paralegals Association (Response 5) desires to see paralegal activity regulated, though a definition is not offered. More entertaining (if you like that sort of thing) are the harsh words exchanged between the Solicitor Advocates’ Association (SSA) and the Faculty of Advocates, each of whom clearly sees the motes in the other's eye. The Faculty’s final words on the topic are at least candid (paragraph 11 of Response 51):

SSA derides Faculty’s submission as “brimming with undisclosed self-interest”, a description that is surprising: of course any submission made by Faculty is made in the interests of Faculty, that is surely self-evident. Faculty’s submission is no more “brimming with undisclosed self-interest” than is that of SSA itself. 

Whatever becomes of that inter-lawyer spat (not much, I suspect), the Law Society of Scotland (the solicitors’ representative, and self-regulatory body) seeks to open up a significant new front by arguing (Response 45 part 1) that:

The mischief is not the highly regulated, high performing and highly respected solicitor profession, it is the growing unregulated sector.

The Law Society goes on to complain that the existing scope of regulated activity is “extremely narrow” and that

Many... ‘legal’ matters, such as will writing, employment law, divorce, consumer matters, personal injury, family law and immigration, are provided by Scottish solicitors but can also be handled by unregulated firms…

The Law Society therefore wishes to see an expansion of the scope of regulated activity, at least so far as concerning consumers - a proposal which was considered, but dropped, in E&W some years back.

Upon digging into the Law Society's submissions, there is an absence of evidence that there is a problem of significant magnitude that the sledgehammer of extended regulatory scope should be brought down upon it. Indeed, despite the claim of a “growing unregulated sector” the Law Society admits elsewhere in its submission that

We are not aware of any recent research which details the scale of the unregulated sector in Scotland.

In reading such special pleading, one is tempted to wonder whether a gentleman from Kirkcaldy was not right to observe, long ago, that  

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

Or, as one of the non-lawyer submissions puts it (Response 48 again): old habits die hard.

I don’t know what it is precisely that has led the Law Society of Scotland down such a via smarrita but it does seem worth shining some sunlight on it.

A few thoughts - 

  • The first is that, as the CMA submission notes, regulation imposes real costs and in considering it there should be an assessment that balances benefits against those costs. I can't find any real evidence of the big problem which the Law Society asserts, let alone of the kind of assessment which the CMA suggests. Where there is evidence of a real problem, regulation can be targeted against it specifically – claims management companies are a current example of clear abuses where some specific regulatory targeting is under way in Scotland (prompted by an earlier initiative in E&W).
  • The second point is that it's not that hard to see how the kind of broad regulation the Law Society is advocating would be harmful by impeding responsible existing unregulated providers, who appear well-incentivised to maintain standards despite the lack of regulation.
  • The third point is that all sorts of future innovations would be inhibited by the kind of regulation which is suggested. 
  • The fourth is that, if wider powers to regulate are to be considered, the regulatory system as a whole can only sensibly be entrusted to a truly independent body of non-lawyers, given the conflicts of interest which will otherwise exist.
  • Fifth, the attitude of trying to regulate competition away is, in the long run, likely to be harmful not only to broader society but also to the interests of lawyers as a class. The fact that the names of the leading Scottish law firms of today are very different from those of 20 years ago already illustrates the dangers of standing against the tide. And the tide is still rising - if anything, it seems likely to do so faster over the next 20 years than over the last.

Perspective

When I was a young lawyer in London in the late 1990s, the Law Society of E&W had, in my view, lost credibility by its extremely partisan approach in favour of solicitors' special interests. That was an approach which certainly wasn't representative of all its members - indeed, it was a bit of an embarrassment to me and, I know, others.

The Law Society of E&W's past approach became so transparently self-serving that my impression is that it made it easier to achieve significant reforms when the political will existed to do so in government. Since those days, I've noticed that it seems to be the case in more than one jurisdiction that lawyers who wish to pursue a protectionist, guild-like agenda appear for some reason to be disproportionately attracted to shaping the public stance of the representative body.  

Certainly, a number of Scottish-qualified lawyers I've spoken with see the Law Society's defensive approach as short-sighted, though I can appreciate why it's awkward to put one's head above the parapet and say so publicly.

Since the 1990s, I've also spent more of my time than is healthy involved in legal contexts in which familiar tactics include things like (i) undermining the thrust of proposals by detailed amendment and objection, (ii) asserting grand principles without a clear plan for ensuring their application, (iii) defending almost every last trench, (iv) asserting imaginative reasons for why what has worked elsewhere cannot work here, and (v) making diversionary requests which are not expected to succeed but which nevertheless take time and effort to rebut, and therefore distract from attempts to do anything positive.

Reading the Law Society of Scotland's proposals feels eerily reminiscent of all that, coupled with the revealing rhetorical habit of giving an artificial meaning to words - in this case, use of the phrase "independent regulator" to mean simply "independent of government" rather than "independent of those who are regulated" - see Response 45 part 3

The Law Society of E&W, in its current representative, non-regulatory incarnation, nowadays seems to recognise, despite some remaining blips, that it's just one stakeholder voice among many and needs to contribute something more substantive to the future of the legal profession. So, for example it has commissioned some research into the ethical risks of "AI and law" and is jointly sponsoring a legaltech incubator. This contrasts with the Law Society of Scotland's evidence-free call for "the regulation of legal services provided remotely by artificial intelligence" - whatever that may mean.

I've no idea whether the political will exists within the Scottish government in 2018 to do anything remotely comparable to what has been done in E&W, but there is clearly an ambition to develop the Scottish economy and I would suggest that an old school regulatory regime may not help with that, particularly with such a different approach being taken nearby.

Less is more

I don't know what the current panel is likely to be able to deliver - its mandate is rather vague (as grumpily but accurately noted in the judicial submission), suggesting a lack of political direction, and its composition feels, if I may very respectfully say so, a little lawyer-heavy (and economist-light).

My main hope is that the panel's attitude to the cry for "more regulation" without compelling evidence will be to reject it robustly, perhaps inspired by a maxim from the world of healthcare - "first, do no harm".

If, beyond that, it can sort out the complaints system, and perhaps even contribute to opening minds to the idea that an independent regulatory system (independent from those regulated, as well as from government) might not be such a bad thing, that would certainly be nice. 

 

 

Graeme Johnston