Background to this consultation
The Need for Robust Legal Regulation and Reform of the Current Regulatory Landscape
There is significant potential for "market failure" in the provision of legal services whereby consumers either receive or perceive that they have received a poor service. Consumers are less likely to make a well informed purchasing decision when consuming legal services versus a typical purchasing decision, because:
- Consumers tend to use legal services infrequently, and have limited ability to learn about legal products and service providers
- Legal services, as well as the law itself, are extremely complex
- Legal services are often purchased during traumatic or stressful circumstances.
- It is often the case that the same providers are responsible for diagnosing problems, and offering and executing solutions
In addition the Roberton report identified an absence of a comprehensive baseline survey of consumers of legal service in Scotland. These conditions are not unique to the legal services industry however. For example, medical and financial sectors also have to overcome many of these factors. While these factors have the potential to lead to a number of poor outcomes for consumers, damaging the quality of the services they receive and/or increasing the costs of those services they receive, effective regulation can guard against these and protect consumer interests.
Effective and proportionate regulation has an important role to play in ensuring that the legal profession in Scotland continues to be regarded as one of the best in the world and is able to grow and thrive. Ensuring that Scotland is able to maximise the benefits that a strong legal sector represents is a priority for the Scottish Government. The sector is worth over £1.5 billion to the Scottish economy each year and is responsible for over 20,000 high value jobs. Both the sector and the Scottish Government are working together to ensure the sector makes its maximum possible impact in a competitive global market.
Despite this, it is widely agreed that there are some elements of the current regulatory regime that could be significantly improved: current restrictions which may inhibit competition and the complex complaints system are key areas.
The need for reform is therefore well understood and supported. However, there is no clear preferred model for legal regulation agreed amongst stakeholders. A wide range of views which incorporates the views of the consumer voice and the legal profession will be an important factor in supporting the Scottish Government in its decision making around this reform.
This context explains why this consultation represents an opportunity to build consensus and help deliver important reforms that can underpin continued growth in an internationally competitive and consumer focused legal sector in Scotland.
A short history of the legal profession in Scotland
Legal professionals in Scotland have been organised in professional bodies since at least the sixteenth century. The Faculty of Advocates was established as the body for practising advocates in 1532, though its origins are thought to date from earlier than that. Other lawyers were represented by associations and faculties of procurators and solicitors. Among those that still exist, the Society of Writers to Her Majesty's Signet (the WS Society) was formally established in 1594 and the Royal Faculty of Procurators in Glasgow was incorporated before 1668.
As the legal profession expanded in line with the volume of legislation introduced in the twentieth century, it became clear that a representative body for all solicitors was required. The Legal Aid and Solicitors (Scotland) Act 1949 established the Law Society of Scotland as the governing body for solicitors. The current legislative framework, the Solicitors (Scotland) Act 1980, incorporates earlier legislation within a (at the time) modern statutory basis.
The move to a modern 21st century legal profession and the consumer focus
At the first Session of the Scottish Parliament (1999 to 2003), The Justice One Committee held an inquiry into regulation of the legal profession after significant lobbying by various public interest groups and concerns from individual MSPs on how constituents' complaints were being handled. The Committee focused on the way in which the profession handled complaints, which it perceived to be the main source of public concern. The Committee also looked at the general arrangements by which the legal profession regulated itself. The report 'The Limits of Self-Regulation in the Legal Profession' by the independent Scottish Consumer Council was influential in setting out key areas for discussion.
The Justice Committee concluded that the best option for Scotland was to retain self-regulation, as it believed that it would be more effective to maintain that system. However it did recommend that the system should be reformed to make it more acceptable to consumers and more representative of the public interest, through the additional independent regulatory mechanism of an Ombudsman. The Justice Committee made a series of recommendations aimed at building public confidence and increasing the degree of independent oversight of complaints handling by the profession.
The outcome led the then Scottish Executive to publish a consultation paper in May 2005, entitled 'Reforming Complaints Handling, Building Consumer Confidence'. This led to the Legal Profession and Legal Aid (Scotland) Act 2007 and the creation of the SLCC. The main purpose of that Act was to establish a new statutory complaints handling body, the Scottish Legal Complaints Commission, to be independent of the legal professional bodies and to reform and improve the system for the handling of complaints against lawyers.
The move to a more competitive legal sector
In England and Wales in 2004 the review of the Regulatory Framework for Legal Services, the Clementi Review, led to the Legal Services Act 2007. This sought to liberalise and regulate the market for legal services in England and Wales to encourage more competition and to provide a new route for consumer complaints. It did this by creating a new "super-regulator", the Legal Services Board, to license the regulators of legal services, and also by establishing a comprehensive regulatory framework overseen by the LSB. A key change was the introduction of Alternative Business Structures that allowed non-lawyers to take a financial stake in, and become partners of, established law firms. Equally, new legal businesses could be founded under a shared ownership model between lawyers and non-legally trained managers. As a result English and Welsh solicitors and barristers were able to operate in a variety of business structures that their Scottish counterparts were not.
Subsequently in Scotland, the Legal Services (Scotland) Act 2010 aimed to allow the creation of ABS north of the border, and provided that there must be a degree of demarcation between the representative and regulatory roles of the Law Society of Scotland. The Scottish Government's position at that time was that this was essential for a body which may represent the interests of a single profession and may have a regulatory role over businesses which included other professionals, for example accountants, in their management and oversight. The Scottish Government position at that time was that such demarcation would be possible within the overarching framework of the Law Society and their Council, but that the protection of a separate independent regulatory role must be present and clearly expressed.
The 2010 Act provided for a Regulatory Committee to carry out the Council of the Law Society of Scotland's regulatory functions, namely to regulate solicitors, firms of solicitors, incorporated practices and licensed providers as well as to make appropriate regulatory rules. The Committee was required to be independent of any other person or interest and have at least 50% lay membership. The Committee is also required to have a lay convenor and be chaired by a lay person.
The Case for Change
In December 2015, the Law Society of Scotland submitted a paper 'The Solicitors (Scotland) Act 1980 Case for Change' to Scottish Ministers, which set out proposals for developing primary legislation that would deliver reforms to the regulatory powers of the Law Society. The stated intention behind those proposals was to support growth in the legal services sector, through a more modern and proportionate approach to regulation, and to strengthen consumer protection.
The Law Society argued that legal services are an essential part of a strong economy and that the current regulatory framework required modernisation to take account of recent developments in the way in which legal services are provided in other jurisdictions, for example ABS in England and Wales. It said that the existing regulatory framework put the legal services market in Scotland at a competitive disadvantage as provisions to allow for ABS had not been implemented in Scotland.
The Law Society's 2015 paper also made the case that the regulation of the legal services market is central to consumer protection, supported by three main principles which the Society considered a regulatory framework must contain:
- controlling entry into the profession, setting qualification standards and administering authorisation to practice
- the conduct of the profession, rules of professional conduct and monitoring these
- a complaints and redress system
The Law Society paper made the point that the Solicitors (Scotland) Act 1980 was out of date and had been amended by piecemeal legislative change since first enacted. It pointed out that the legal market had changed out of all recognition in terms of the move away from traditional high street solicitor firms (albeit that they do still exist and provide an important local service) towards cross-border firms, new business areas, internationalisation and new technology.
The Law Society also sought new powers to allow for the regulation of "entities" through a licencing system. Its paper suggested that the traditional partnership firm is largely unregulated as an entity, although the framework for the Scottish Legal Complaints Commission does regulate the profession at firm level, as do anti-money laundering rules. Their view was that the regulation powers of the Law Society seemed to be restricted to financial inspections and the requirement for firms to have professional indemnity in place. A system of licensing entities would allow for requirements such as management training, quality control systems and better complaints processes.
The Law Society's 2015 paper ultimately led to the Roberton review and in January 2018 the Law Society submitted a new paper, 'The Case for Change: Revisited' to coincide with the Roberton review. The Law Society suggested in this paper that the single gateway for complaints be abolished, with either the SLCC or the Law Society able to receive complaints and pass on complaints to the other where appropriate. Such a move would be similar to the arrangement in England and Wales between the Legal Ombudsman service and the Solicitors Regulation Authority.
The Independent Review
In response, the Scottish Government listened and acted on the concerns raised by the Law Society of Scotland and others. This was highlighted in the 2016 Programme for Government commitment:
"Independent reviews of legal aid and the regulation of legal services are underway to consider how best to reform the legal aid system and what regulation is necessary. We will consider the recommendations and engage with the legal profession and users of legal services to ensure that arrangements for the regulation of legal services support the needs of those who rely on them."
To further develop views on potential reforms, the Scottish Government established an independent review of the regulation of legal services in April 2017. That review was taken forward by an independent panel chaired by Esther Roberton with the following remit:
- to consider what regulatory framework would best promote competition, innovation and the public and consumer interest in an efficient, effective and independent legal sector;
- to recommend a framework which will protect the public and consumer interest, promote the principles of accountability, consistency, flexibility, transparency, cost-effectiveness and proportionality;
- to ensure that the regulatory framework retains the confidence of the profession and the general public;
- to undertake specific research into the extent of the unregulated legal services market in Scotland and investigate any impacts on consumers, as well as developing a better understanding of the structure of the legal services market.
In October 2018 the review's report 'Fit for the Future – Report of the Independent Review of Legal Services Regulation in Scotland' was published, a culmination of 18 months of research and evidence gathering by the independent panel and its Chair, Esther Roberton. This report made 40 recommendations intended to reform and modernise the current regulatory framework to ensure a proportionate approach, supporting growth and competitive provision in the legal services sector, whilst placing consumer interests at its heart.
The Roberton report accepted a view that the current framework of legal services regulation operating in Scotland is dated and in need of reform to ensure that it is fit for the 21st Century. The report also accepted that the legal complaints system could be improved and the legislative structure streamlined.
The Chair of the review set out early in the report that the recommendations contained in the report were hers, and that although all of the panel members agreed with some of the recommendations, some members did not agree with all recommendations. A minority of panel members expressed significant disagreement with the primary recommendation:
"There should be a single regulator for all providers of legal services in Scotland. It should be independent of both government and those it regulates. It should be responsible for the whole system of regulation including entry, standards and monitoring, complaints and redress. Regulation should cover individuals, entities and activities and the single regulator should be a body accountable to the Scottish Parliament and subject to scrutiny by Audit Scotland."
The Chair's primary recommendation is a departure from the current model which may be described as co-regulation but which can sometimes be perceived from a lay perspective as self-regulation.
The primary recommendation would be a move to a framework wholly independent of those regulated, where a new independent body would regulate all legal professionals. The professional bodies would no longer carry out a regulatory function but would continue to be professional and representative membership bodies who support and promote their professions. In doing so the Chair sought to deliver a risk-based regulatory regime aimed at providing independent regulation within a context of clear accountability for the delivery of the key principle of public interest, whilst also having a degree of accountability to the professions it serves.
The Roberton model is not dissimilar to the regulatory frameworks in Victoria in Australia, and in the U.S. state of California. The Victorian Legal Services Board and Commissioner are independent statutory authorities responsible for the regulation of the legal profession in Victoria, accountable to the Victorian Parliament. The State Bar of California is directly responsible to the Supreme Court of California, however its Trustees are appointed by the Supreme Court, the California Legislature and Governor of California. Following recent reform the State Bar of California retained regulatory functions, while voluntary trade association activities now exist via the separate non-profit California Lawyers Association.
In developing the proposals for change the Roberton report considered that it should enable and support a vibrant, high quality legal services sector in Scotland which:
- upholds the rule of law
- provides access to justice
- protects the public and consumer interest has a high degree of public confidence and trust
- maximises the opportunity for the sector to increase its contribution to the Scottish economy
The Chair of the review also put forward the primary recommendation aimed at ensuring compliance with the Better Regulation Principles set out in the Regulatory Reform (Scotland) Act 2014, being:
However, the Chair also considered the following additional points as crucial:
- Prevention and improvement
The report also recommended that the complaints handling process should be based on well-established consumer principles:
The Consumer Principles
- Access: Can people get the goods, services or information they need?
- Choice: Can consumers affect the way goods and services are provided through the choices they make in the marketplace?
- Information: Is information available, is it easy to understand, and does it help consumers to make informed choices?
- Quality and Safety: Do goods and services meet acceptable standards?
- Redress: Is there a simple, cheap, quick and fair system for dealing with complaints and disputes if things go wrong?
- Representation: Are consumers' views properly represented in services where there is little or no choice? And is the process of decision-making transparent?
- Fairness and Equity: Are some, or all, consumers unfairly discriminated against?
The Scottish Government Response to the Independent Review
The Scottish Government response to the Roberton report was published in June 2019. Our analysis of the report established that the primary recommendation largely polarised the views of those in the legal and consumer landscape. As a result the Scottish Government made the commitment to issue this consultation, intended to build consensus where possible on the way forward.
The Scottish Government response supports the introduction of a new framework for legal services regulation that encompasses the principles set out in the review but is clear that a strong independent legal profession is a cornerstone of the rule of law and modern democracy.
The response also set out that we would work with the Law Society of Scotland, the Faculty of Advocates and the Scottish Legal Complaints Commission to identify and bring forward improvements to complaints under the existing legislative framework. A consultation seeking views on potential improvements to the system for legal complaints ran between December 2020 and February 2021. Our response to that consultation advised that based on the responses to that consultation the Scottish Government believes that there is support to bring forward those proposals, albeit with consideration of further reforms set out in this paper. We will seek to introduce secondary legislation in year one of this parliamentary session to that effect, designed to bring about improvement to the legal complaints system in the interim ahead of wider reform.
Next steps in reform
The responses to this consultation will be instrumental in assisting Scottish Ministers in their deliberations as to the form that any substantive reform will take. That will be used to develop primary legislation for introduction to the Scottish Parliament.
However, before such reforms may be undertaken, it will be necessary for the Scottish Government to develop a position on the primary recommendation of the Roberton report in order to set the context for who will take forward these actions, and how they will do so.
This consultation presents varying levels of potential reform of the regulatory landscape based on the recommendations in the Roberton report. It sets out different regulatory models that could be pursued, ranging from light-touch regulatory reform to a complete overhaul of the current regulatory system and introduction of a new single regulator, as recommended in the Roberton report.
This consultation includes alternative options to the primary recommendation of the Roberton report. These alternative options are aimed at achieving outcomes aligned to the principles set out in the report, of:
- supporting the constitutional principle of the rule of law
- promoting an independent legal profession and maintaining adherence to the professional principles
- improving access to justice including choice, accessibility and affordability
- protecting and promoting the public interest including the interests of users of legal services
- embedding a modern culture of prevention, quality assurance and compliance
- embedding better regulation principles throughout
- promoting innovation, diversity and competition in the provision of legal services
The current regulatory landscape
In the current Scottish landscape of legal service regulation, the following organisations have regulatory roles: the Law Society of Scotland, Faculty of Advocates and the Association of Commercial Attorneys also have representative roles for their members. The Scottish Legal Complaints Commission acts as a single gateway for all legal complaints relating to professionals regulated by those bodies.
In general terms, regulation includes setting education and entry requirements into the professions, along with setting and monitoring compliance of professional conduct standards. In general regulation is financed by the profession paying fees to their professional/regulatory bodies. In addition the complaints system, administered by the SLCC, is financed by a levy on members of the legal profession.
The Lord President of the Court of Session
The Lord President of the Court of Session is the head of the Judiciary in Scotland. The Lord President has responsibilities in relation to the regulation of the legal profession and has a regulatory function in relation to the Scottish Legal Complaints Commission. This role is set out in more detail in Part 2 B of this consultation.
The Law Society of Scotland
The Law Society of Scotland comprises largely of solicitors and solicitor-advocates – some paralegals choose to be regulated by the Law Society but it is not compulsory. The independent Regulatory Committee of the Law Society of Scotland is accountable to, but independent of the Law Society Council. The Committee was created as part of the Legal Services (Scotland) Act 2010 and exercises the Law Society Council's regulatory functions as set out in section 3F of the Solicitors (Scotland) Act 1980. Its core purpose is to ensure these functions are exercised independently, properly and with a view to achieving public confidence.
The Law Society of Scotland and the Scottish Solicitors' Discipline Tribunal (SSDT) were established by statute in 1949. The Solicitors (Scotland) Act 1980 underpins and is central to the regulation of the Solicitors' profession in Scotland. It is a consolidation Act, which brought together a number of pieces of legislation dating back to 1949. The 1980 Act itself has been subject to amendments introduced by various pieces of legislation.
The Solicitors (Scotland) Act 1980 sets out that the Law Society of Scotland has statutory responsibility for the promotion of the interests of the solicitor profession in Scotland and the interests of the public in relation to that profession. In carrying out its functions the Law Society must not only have regard to the interests of the solicitors' profession but also to the interests of the public in relation to that profession.
The Scottish Solicitors' Discipline Tribunal
The Scottish Solicitors' Discipline Tribunal is an independent body which mainly deals with serious disciplinary issues that arise within the Scottish legal profession. As a formal judicial body, the Tribunal is constituted under the provisions of sections 50 – 54 and schedule 4 of the Solicitors (Scotland) Act 1980 as amended. Complaints against solicitors in Scotland are channelled first through the Scottish Legal Complaints Commission who will refer conduct matters to the Law Society of Scotland. The Law Society will then carry out an initial investigation and can decide to prosecute more serious cases before the SSDT.
The Faculty of Advocates
The Faculty of Advocates is comprised of advocates with the responsibility for the regulation of advocates having been delegated by the Court of Session to the Faculty. Professional rules for advocates must be approved by the Lord President of the Court of Session and cannot be revoked unless the Lord President has given approval. The Lord President retains an important role in connection with the Faculty's disciplinary procedures. In addition to his responsibility of approving the Faculty's disciplinary rules, it is also incumbent upon the Lord President to appoint the Chair of the Faculty's Disciplinary Tribunal.
The Faculty of Advocates Complaints Committee and Disciplinary Tribunal comprises both Members of Faculty and Lay Members. A panel of Lay members are nominated by Scottish Ministers and from which lay persons are drawn to make up a committee or tribunal. Complaints about the conduct of Members of Faculty are made in the first instance to the Scottish Legal Complaints Commission. If the SLCC considers that the complaint concerns the conduct rather than professional services of a Member of Faculty then it is remitted to the Faculty for investigation and determination. Such complaints are dealt with firstly by the Faculty Complaints Committee and then, where appropriate, the Faculty Disciplinary Tribunal.
The Association of Commercial Attorneys
In terms of sections 25 to 27 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990, a body may apply to acquire and exercise rights to conduct litigation on behalf of the public and rights of audience. The Association of Commercial Attorneys are, to date, the only body to have done so. Any application for such rights must be made to the Scottish Ministers and the Lord President. It falls to the Lord President either to grant, or to refuse, the application.
The ACA is comprised of and responsible for the regulation of commercial attorneys. Members of the ACA must have a legal qualification and a professional or construction qualification. Members are required to have relevant construction and litigation experience as an Architect, Quantity Surveyor or Engineer. Members of the ACA are officers of the court and can appear in the Sheriff Court in matters relating to construction and building law. They are subject to the regulatory oversight of the Scottish Legal Complaints Commission in the same way as other legal professionals.
The Association of Commercial Attorneys scheme was approved in 2009.
The Scottish Legal Complaints Commission
The Scottish Legal Complaints Commission acts as a single gateway for all complaints against legal professionals in Scotland. It investigates and resolves complaints about inadequate professional service, refers complaints about the conduct of lawyers to the relevant professional organisation and has oversight of complaint handling across the profession. Serious disciplinary issues relating to the conduct of legal professionals may also be heard before their Discipline Tribunal, via the relevant professional regulatory body.
The SLCC is a neutral body and operates independently of the Scottish Government and of the legal profession. The SLCC is accountable to the Scottish Parliament and the Lord President. The SLCC requires to consult the legal profession each year as to the amount of the levy on the profession, which is used to fund the SLCC and the legal complaints process.