Equality Impact Assessment Record
Title of policy/ practice/ strategy/ legislation etc.
Regulation of Legal Services (Scotland) Bill
Siobhian Brown, Minister for Victims and Community Safety
Jamie Wilhelm / Rebecca Smith
Officials involved in the EQIA
Name / Team
Rebecca Smith - Access to Justice
Jamie Wilhelm - Access to Justice
Leanna MacLarty - SGLD
Equality Evidence - Justice Analytical Services
Directorate: Division: Team
Access to Justice
Civil Law and Legal System
Is this new policy or revision to an existing policy?
1.1. In December 2015, the Law Society of Scotland submitted a paper entitled 'The Solicitors (Scotland) Act 1980 Case for Change' to Scottish Ministers, which set out proposals for developing primary legislation that would deliver reforms to their regulatory powers. 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.
1.2. In 2016, the Scottish Legal Complaints Commission ("SLCC") published a paper setting out its priorities for reform. The SLCC raised concerns that the statute underpinning the legal complaints system is too restrictive and unable to act in a proportionate and risk-based way, adding undue cost and time for consumers and legal professionals. The SLCC sought that a 'framework' Act be introduced, which would not prescribe administrative processes in primary legislation.
1.3. To further develop views on potential reforms, the Scottish Government established an independent review of the regulation of legal services. 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.
1.4. In October 2018, 'Fit for the Future – the Report of the Independent Review of Legal Services Regulation in Scotland' was published. The 'Roberton 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.
1.5. The Roberton report took the 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.
1.6. 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."
1.7. The Chair's primary recommendation would be 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.
1.8. The Scottish Government response to the Roberton report was published in June 2019. The analysis of the Roberton report established that while many of the recommendations were widely supported, 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 a public consultation based on the recommendations made by the Roberton report, with the intention of seeking to build consensus on the way forward.
2.1. The overarching policy objective of this Bill is to provide a modern, forward-looking legal services regulation framework for Scotland that will best promote competition, innovation, and the public and consumer interest in an efficient, effective, and independent legal sector. The Bill will implement a number of key recommendations from the Roberton report.
2.2. This Bill delivers the 2022-23 Programme for Government commitment to reform legal services regulation and introduces a number of measures designed to promote competition and innovation in the legal sector while improving the transparency and accountability of legal services regulation and the legal complaints system in Scotland.
2.3. The Bill made up of five parts as follows:
Part 1 deals with the overarching regulatory framework and breaks down into three chapters—
- Chapter 1 looks at the objectives of regulating legal services, the professional principles and other overarching material,
- Chapter 2 sets rules for all regulators of legal services. In doing so, it divides regulators into two categories and imposes different conditions based on the category to which a regulator is assigned,
- Chapter 3 provides for new regulators to enter the market and their members to acquire rights to provide legal services.
Part 2 introduces a requirement for category 1 regulators (at present just the Law Society of Scotland ("Law Society") to create and apply a set of rules for the regulation of legal services at a business level (e.g. to require traditional firms of solicitors etc. to be regulated as firms as opposed to a collection of solicitors).
Part 3 reconstitutes the SLCC as the Scottish Legal Services Commission, adjusts its powers and provides for an updated complaints regime.
Part 4 makes provision in relation to a range of other matters, including—
- changing the ownership requirements for licensed legal services providers (sometimes referred to as alternative business structures) and adjusting the restrictions on their businesses,
- removing certain restrictions on charities and third sector organisations in relation to providing legal services,
- creating a range of offences in connection with people wrongly using the title of 'lawyer' or using particular titles, etc. that would infer that they are regulated in a certain way,
- conferring power on the Scottish Ministers to require more (or fewer) legal services be provided only by regulated persons.
Part 5 deals with a number of general matters.
Key measures in the Bill include:
2.4. Implementing a modern, forward-looking model for legal services regulation which will build on the existing regulatory framework. This will provide for a proportionate approach that seeks to balance and deliver the key priorities of all stakeholders. The existing regulators will retain their regulatory functions with a greater statutory requirement to incorporate independence, transparency and accountability within their regulatory approaches.
2.5. Introducing a modern set of regulatory objectives and professional principles, while incorporating key aspects of the Better Regulation, the Consumer Principles and the Human Rights (PANEL) Principles. The Better Regulation principles aim to ensure that regulation is effective, proportionate, transparent, and based on evidence. The purpose of these principles is to improve regulatory outcomes by reducing unnecessary burdens and costs associated with regulation while maintaining necessary safeguards. The purpose of the Consumer Principles are to protect and advocate for the rights of consumers. These principles aim to ensure that consumers have access to accurate information, are treated fairly and transparently, that they understand their rights and can access effective redress where appropriate, placing consumer interests at the heart of regulation.
2.6. Allow Scottish Ministers to investigate and, if necessary, take certain measures in the event of failure by legal services regulators to regulate in the public interest or meet the regulatory objectives.
2.7. Allowing for greater flexibility in respect of alternative business structures, the Bill will seek to liberalise licensed legal services providers by removing restrictions which currently require such legal firms to operate for 'fee, gain or reward', and which require a minimum ownership of 51% by regulated professionals. Instead, regulated professionals would require to have at least a 10% stake in the total ownership or control of the entity. This will allow greater flexibility to address concerns that Scottish legal firms are at a competitive disadvantage compared to other jurisdictions.
2.8. Enabling risk-based regulation of business areas, allowing for regulation of a legal firm as a whole, rather than solely at individual professional level as is predominantly the case.
2.9. Allowing for protection of the use of the title 'lawyer', to address concerns that unqualified persons, or persons who have been struck off, can currently use the term to describe themselves when providing legal services to the public.
2.10. Enabling risk-based and proportionate regulation of the use of LegalTech, by allowing regulators to grant waivers of targeted rules, in order to facilitate the use of regulatory sandboxes to promote innovation under regulatory scrutiny.
2.11. Reforming the legal complaints system, to address concerns that the statute underpinning it is too restrictive and prevents complaints from being dealt with in a proportionate and risk-based way, adding undue cost and time to the legal complaints process for consumers and legal professionals. The Bill reconstitutes the SLCC as the Scottish Legal Services Commission ("the Commission") and provides it with an expanded independent oversight role of complaint handling by the regulated sector, in addition to a new role in overseeing complaints about unregulated legal services.
3. The need for robust legal regulation and reform of the current regulatory landscape
3.1. The Roberton report set out that Scotland is home to a well-educated, well-respected legal profession with a high degree of public trust, of which we can be very proud. However, 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 sought during traumatic or stressful circumstances.
- It is often the case that the same providers are responsible for diagnosing problems and offering and executing solutions.
3.2. In addition, the Roberton report identified the absence of a comprehensive baseline survey of consumers of legal services in Scotland. However, these conditions are not unique to the legal services sector and other industries, for example the medical and financial sectors, also have to overcome many of the same challenges. While these conditions have the potential to lead to a number of poor outcomes for consumers, which can damage the quality of the services they receive and/or increase the costs of those services, effective regulation can guard against these and protect consumer interests.
3.3. The role of legal services are central to the protection of human rights and freedoms, playing a vital role in upholding the rule of law and providing access to justice.
3.4. Legal services contribute to the social value of Scotland. There is significant diversity in the types of legal services people access, often in times of distress or vulnerability. Legal services support an individual's wellbeing, promote their continued contribution to society and help to prevent the escalation of problems. Legal services also support a range of commercial matters affecting many different types of organisations, from small businesses to multi-national corporations.
3.5. In this regard, the Legal Services (Scotland) Act 2010 ("the 2010 Act") sets out a regulatory objective of "protecting and promoting the public interest". The public interest means 'objectives and actions for the collective benefit and good of current and future citizens in achieving and maintaining those fundamentals of society that are regarded by them as essential to their common security and well-being, and to their legitimate participation in society. There must be a public interest in ensuring that the basic needs of all citizens are satisfied'.
3.6. 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, to meet the needs of Scotland's citizens.
3.7. Ensuring that Scotland is able to maximise the benefits that a strong and independent legal sector represents is a priority for the Scottish Government. 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 in this regard.
3.8. Reform of legal services regulation will seek to modernise the existing regulatory framework and provide a proportionate approach which supports growth and competitive provision in the legal services sector whilst placing consumer interests firmly at its heart, aligning with the principles of the Roberton report. This also links with the following Scottish Government National Performance Framework outcomes:
- We grow up loved, safe and respected so that they realise their full potential.
- We live in communities that are inclusive, empowered, resilient and safe.
- We are creative and their vibrant and diverse cultures are expressed and enjoyed widely.
- We have a globally competitive, entrepreneurial, inclusive and sustainable economy.
- We are well educated, skilled and able to contribute to society.
- We have thriving and innovative businesses, with quality jobs and fair work for everyone.
- We respect, protect and fulfil human rights and live free from discrimination.
- We are open, connected and make a positive contribution internationally.
- We tackle poverty by sharing opportunities, wealth and power more equally.
3.9. Reform of legal services regulation also aligns with the aims set out in The Vision for Justice in Scotland document (2022), which sets out Justice Priorities for this parliamentary session:
- We have a society in which people feel, and are, safer in their communities.
- We have effective, modern person-centred and trauma-informed approaches to justice in which everyone can have trust, including as victims, those accused of crimes and as individuals in civil disputes.
- We address the on-going impact of the COVID-19 pandemic and continue to renew and transform justice.
3.10. The legal sector contributes over £1 billion to the Scottish economy each year and is responsible for over 20,000 high value jobs. It is not only an economic generator in its own right but a profession that is critical to Scotland's other key sectors – Financial Services, Oil and Gas, Renewables, Science and Technology. Both the legal services sector and the Scottish Government are working together to ensure the sector makes its maximum possible impact in a competitive global market.
4. Benefits of the proposed model
4.1. The Bill seeks to take a proportionate approach to the reform of legal services regulation, balancing and delivering the key priorities of stakeholders.
4.2. Firstly, the Bill will implement a modern, forward-looking model for legal services regulation which will build on the existing framework. This will provide for a proportionate approach that seeks to balance and deliver the key priorities of all stakeholders. The existing regulators will retain their regulatory functions with a greater statutory requirement to incorporate independence, transparency, and proportionate and risk-based accountability within regulatory approaches.
4.3. Secondly, the Bill will reform legal services regulation in key areas. It will introduce greater protections to consumers of legal services, particularly through regulation at business level and protection of legal professional titles. The Bill will reduce restrictions in respect of alternative business structures to encourage competition and innovation in the legal sector and support Scottish legal firms, to place them on an equal footing with counterparts within the UK and other jurisdictions. The Bill will provide a risk-based and proportionate system for legal complaints which will benefit legal professionals and consumers alike. These measures are intended to modernise the existing regulatory framework and provide a proportionate approach which supports growth and competitive provision in the legal services sector while improving the consumer journey and consumer choice for legal service users, by placing consumer interests at the heart of regulation. In addition, the Bill will incorporate appropriate safeguards that deliver a balance between the independence of the legal profession with their duty to work in the public interest.
Who will it affect?
5.1. The legislation will affect organisations involved in the Scottish legal services framework alongside consumer groups such as: the Law Society, the Faculty, the ACA, the SLCC, the CMA, Which?, CAS, Consumer Scotland, the SLCC's Consumer Panel. It will also affect legal firms which will become subject to 'entity regulation', and unregulated legal services providers who will become subject to the legal complaints system. The general public will also be affected by changes made to legislation, particularly in relation to making a complaint against a solicitor or law firm.
5.2. Legal services regulation has several impacts on equality, including:
- Access to justice – legal services regulation can impact individuals' ability to access justice, particularly for those who are economically disadvantaged or have historically marginalised backgrounds. Regulation may introduce entry barriers, for example by reserving certain activity to qualified individuals such as solicitors, while regulation can be helpful in ensuring the provision of quality legal services in a way that meets the needs of individuals from different backgrounds through specialist training and accreditation. This ensures appropriate consumer protection and routes to redress.
- Diversity and inclusion – regulation plays a critical role in promoting diversity and inclusion within the legal profession. Regulation can encourage better recruitment and retention of individuals from diverse ethnic and cultural backgrounds, help to implement policies to reduce communication barriers and address practices that may be exclusionary.
- Professional standards – relating to the quality and content of legal services. Legal services regulation is instrumental in setting professional standards, which helps to ensure the quality and effectiveness of legal services and increase public confidence in the legal system.
- Monitoring and oversight – legal services regulation typically involves monitoring and enforcement mechanisms to ensure legal practitioners are accountable for ethical, professional and competent delivery of legal services. This can help in identifying and correcting any discriminatory and unethical behaviour and provide a route to appropriate redress.
- Overall, the impact of legal services regulation on equality is complex and varies depending on the context and the specific regulation involved. However, ensuring access to quality legal services, promoting diversity and inclusion within the legal profession, upholding high professional standards, and providing effective monitoring and oversight, all contribute towards greater equality in the provision of legal services.
5.3. While the Roberton report identified the absence of a comprehensive baseline survey of consumers of legal services in Scotland, it did commission a User Research Report. The key findings of that report were:
- Self-organised learning – users upskill themselves to be able to deal with the legal system by consulting friends and family members or online resources.
- Cost and location – users perceive these to be the two main factors when deciding on a legal service provider.
- Building trust – users rely on recommendations from their personal network to find a suitable solicitor. Some users mentioned using websites such as "Trustpilot" to read online reviews about solicitors before hiring them.
- Simplifying language – users feel that the legal world is full of jargon and that this creates a power imbalance in the relationship where solicitors hold a stronger position.
- Silent suffering – despite being dissatisfied with their legal services providers, some users do not make a complaint, in order to avoid the emotional ordeal they may have to go through all over again.
- Understanding emotions – some legal journeys are very emotional experiences, such as those related to bereavement, and users' decisions can be influenced by how they might be feeling within that context at certain times of the journey.
- Making sense – users cannot always make sense of the services they receive from their solicitors even after the outcome has been received.
- Straightforwardness – users feel that for certain standard tasks such as conveyancing, solicitors should have a consistent pricing model, and they should be able to advise of the costs upfront.
- Leveraging DIY – users showed an inclination towards trying a Do-It-Yourself (DIY) approach but some users were more comfortable doing that than others. Also, certain DIY processes don't take into account users' emotional state at that stage of the user journey.
5.4. This study highlights how legal services currently interact with and affect consumers. The proposals in the Bill seek to place the public and consumer interests at the heart of legal services regulation so that it may learn from these user experiences.
6. The Scottish Legal Aid Board's monitoring role
6.1. The 2010 Act introduced to the Scottish Legal Aid Board (SLAB) the function of monitoring the availability and accessibility of legal services in Scotland, with reference to relevant factors relating particularly to urban and rural areas. SLAB have arrangements in place to monitor legal services by:
- Analysing the organisation's data on trends in legal assistance and supply.
- Supplementing this with other sources of data about legal services including information that may be requested of the Law Society, the Faculty and the Scottish Courts and Tribunals Service.
- Seeking the views of stakeholders, including service providers and users.
6.2. The majority of civil legal aid clients said they found it very or quite easy to find a solicitor to help them (72%), while a further 18% (66 people) said they found it very or quite difficult and the remaining 10% found it neither easy nor difficult. Similarly, 78% of Advice and Assistance survey respondents said they found it very or quite easy to find a solicitor to help them, 15% (23 people) found it very or quite difficult and the remaining 6% found it neither easy nor difficult.
6.3. Ten people (5% of those who gave an opinion) experienced difficulty finding a solicitor to help them. This is identical to the 2018 private practice criminal client survey. The most common difficulty was not having many solicitors in their local area (five people).
7. Scottish Crime and Justice Survey
The Scottish Crime and Justice Survey 2019/20 finds the volume of crime in Scotland, including incidents not reported to the police, has fallen by 46% over the last decade or so – from an estimated 1,045,000 incidents in 2008/09 to 563,000 in 2019/20.
8. Civil justice statistics in Scotland
8.1. The Scottish Crime and Justice Survey 2019-20 estimates that around three-in-ten adults experienced civil law problems in the three years prior to interview.
8.2. Some groups in the population were more likely to experience civil law problems than the general population. For example, an estimated 36% of those who are disabled experienced a civil law problem compared with 26% of those who are not disabled. Those aged 60 years and over were less likely to experience civil law problems compared with other age categories (17%, compared with 34% for both 16-24 and 25-44 age categories and 32% for those aged 45-59). Victims of crime suffered a higher prevalence of civil law problems (40%) compared with non-victims (26%).
8.3. Among the problem areas listed above, 17% of adults had experienced problems with home or family living arrangements, 10% had experienced problems with money, finances or anything they had paid for, 7% had been treated unfairly in some respect and 5% had experienced health or well-being problems. In line with previous years, the most common single problem was with neighbours, experienced by 11% of adults.
8.4. The volume of residential property sales in 2021 was 117,370, the highest annual volume in the last 5 years.
9. Bill measures
The regulatory objectives and professional principles
9.1. The Bill introduces a modern set of regulatory objectives and professional principles which will support an increased focus on quality improvement and proportionate risk-based regulation, while incorporating the Better Regulation, the Consumer Principles and the Human Rights (PANEL) Principles. These can be found in section 2(1)(b) to (d) (as read with section 3(2) to (4)). This approach will seek to ensure regulation of legal services benefits from learning, and places consumers at its heart.
9.2. The regulators of legal services must exercise their regulatory functions in a manner which is compatible with the regulatory objectives and the Bill provides for measures which may be taken by the Scottish Ministers in the event that a regulator fails in that regard. The Bill also introduces a duty for authorised legal businesses to adhere to the professional principles and licensed legal services providers are under an equivalent duty by virtue of the 2010 Act. Individual practitioners (e.g. solicitors) will be under a similar duty and non-compliance could have an impact on authorisation to provide legal services in all cases.
9.3. For the purpose of section 2(1)(b) and (c), the regulators must take into account the principles that:
- a consumer should have access to a range of legal services that are affordable and suited to the consumer's needs,
- a consumer should receive sufficient information about the consumer's rights and the services that are available,
- a consumer should be treated fairly at all times,
- a consumer should be able to access a means of redress when services are not of a suitable standard, and
- the views of consumers should be understood and taken into account.
9.4. Section 3(4) incorporates the Better Regulation Principles which require systems to be proportionate, consistent, accountable, transparent, and targeted only where needed. In particular, better regulation does not mean disproportionately heavy regulation but right-touch regulation.
9.5. The Bill requires the category 1 and 2 regulators to prepare a report on the exercise of its regulatory functions as soon as practicable after the end of each reporting year and demonstrate how the regulator is complying with the regulatory objectives.
9.6. Section 4 of the Bill sets out, as professional principles, that persons providing legal services should:
- support the proper administration of justice,
- act with independence (in the interests of justice),
- act with integrity,
- act in the best interests of their clients (and keep clients' affairs confidential),
- maintain good standards of work,
- where exercising a right of audience before any court or conducting litigation in relation to proceedings in any court, comply with such duties as are normally owed to the court by such persons,
- meet the person's obligations under any relevant professional rules,
- act in conformity with professional ethics.
9.7. Section 3(3) of the Bill also sets out that regulators must encourage equal opportunities (as defined in Section L2 of Part 2 of schedule 5 of the Scotland Act 1998).
9.8. Regulation is used for a variety of different purposes, such as to protect and benefit people, businesses and the environment, and to support economic growth. Current good practice in regulation includes a focus on embedding the public, consumer and market interest in regulatory frameworks, and provides a flexible and responsive approach though proportionate and risk based objectives and principles.
The legal services regulatory framework
9.9. The Lord President and the Court of Session will ensure independent oversight over the regulation of legal services.
9.10. A proportionate framework will support increased independence and provide for an increased focus on consumers. There will be specific duties placed on the legal services regulators in respect of how each branch of the profession will be regulated and to provide for increased transparency and accountability.
9.11. The Bill places a duty on regulators to publish a register of their members, the requirement on regulators to provide a practitioner's contact details to the Commission and a duty on disciplinary tribunals to publish their findings. These requirements can be justified and are proportionate on the basis of the public interest in the proper regulation and accountability of legal services and protection of the rights of those accessing legal services.
9.12. Section 17 of the Bill requires category 1 and 2 regulators to publish a register of their members online, however the Bill does not prevent regulators from making such information accessible in other ways.
9.13. The register of regulated members will help consumers access information before entering into an agreement with a legal professional. The publication of disciplinary findings will provide transparency and help consumers ensure they are accessing legal services appropriately. The provision of information to the Commission will help ensure the commission can fulfil its duty to the legal consumers in terms of investigating complaints.
Standards, monitoring & reporting
9.14. The Bill provides for mechanisms for the Scottish Ministers to intervene should a regulator fail to regulate in the public interest or meet the regulatory objectives. The approach in the Bill allows for measures to be placed on regulators, including performance targets and financial penalties, and seeks to provide an appropriate mechanism to make improvements should they be required or appropriate. The measures incorporate appropriate safeguards which protect the independence of the legal profession while reinforcing the duty to operate in the public interest.
9.15. As set out, the Bill incorporate the Consumer Principles within the regulatory objectives and so the measures provide protections to legal services consumers. In addition, the requirement to encourage equal opportunities supports diversity in the legal profession and seeks to ensure legal services meet the needs of those of all backgrounds.
9.16. Measures could have cost implications on regulators but are intended to increase transparency and accountability and are aspects of good governance.
Definition of legal services
9.17. The Bill will provide for a definition of legal services to provide for clarity and consistency in respect of regulation and complaints handling. The Bill introduces the ability for the Commission to consider complaints about the provision of legal services, using this definition, by a person providing legal services to the public for a fee, whether or not they are regulated. This means that unregulated legal services providers can be held to account by the Commission for the first time. This seeks to provide greater protections to the most vulnerable consumers of legal services and provide a level playing field in terms of the redress available.
Alternative business structures
9.18. The Bill seeks to liberalise licensed legal services providers by removing restrictions which currently require such businesses to operate for 'fee, gain or reward', and which require to have a minimum ownership of 51% by regulated professionals. Instead, regulated professionals would require to have at least a 10% stake in the total ownership or control of the entity. This will allow greater flexibility to address concerns that Scottish legal firms are at a competitive disadvantage compared to other jurisdictions. This will make it easier for legal firms to go into partnership with other types of professionals such as accountants to provide shared services.
9.19. The Bill will also allow third sector organisations to directly employ solicitors to provide advice and representation to clients (without having to go through a separate legal firm). This measure may benefit the most vulnerable users of legal services who may disengage with the system due to 'referral fatigue', where they require to repeat the matter affecting them to multiple persons.
9.20. These measures are intended to benefit the sector, drive competition and inovation, and provide consumers with greater choice.
Rights for new regulators to provide legal services
9.21. The Bill will future proof the regulatory framework allowing it to adapt to changes in the legal services market, providing consistency for existing and any potential future legal services regulators and their members.
9.22. There is potential for any new regulator who acquires such rights to increase competition and diversity in the market, and potentially also increasing the choice available to consumers.
Regulation of legal businesses
9.23. The Bill will enable risk-based regulation of legal businesses as a whole, rather than regulation solely at individual professional level (e.g. individual solicitors) as is predominantly the case. Legal firms whose owners are individually regulated by a category 1 regulator will require to be authorised to operate. This change will provide regulation centred on the public interest and protection of the consumer, providing the opportunity for greater oversight which will enable the regulators and the legal profession to identify and address deficiencies early, taking the necessary preventative action affording better protection to consumers.
9.24. This new type of regulation focused on legal businesses is aimed at providing regulators with the ability to oversee more consistency in legal services provision and the standards which may be expected by consumers, and also with more power to tackle any pervasive culture leading to bullying or harassment in legal firms.
9.25. Introducing regulation of legal businesses will allow category 1 regulators to introduce a hybrid fee structure, based on the current practicing certificate fee and in addition include a fee on legal businesses based on their turnover. This is intended to allow for a fairer system of funding the regulatory framework. This may place a greater onus on the regulation of legal services being funded predominately at a business level rather than an individual level and support equality by providing more scope for a fee structure which recognises part-time staff , supporting those with caring responsibilities.
Protection of professional titles
9.26. It is a criminal offence for any person to pretend, wilfully and falsely, to be a 'solicitor' but there are no such restrictions around the use of the term 'lawyer'. The expectation of the consumer is that anyone who refers to themselves as a 'lawyer' should be suitably qualified and regulated to do so. This is reflected in Law Society public polling, which indicates that 86% of respondents believe that there should be restrictions on who can call themselves, or advertise as, a lawyer.
9.27. The Bill will provide greater consumer protection and address concerns that unqualified persons or persons struck off from the legal profession can currently use such terms to describe themselves. This will affect those who provide legal services to the public for financial gain using the title of lawyer but who are not subject to regulation. The intention is to allow consumers to be better informed about the legal services they purchase, and protect consumers from those who are not appropriate to provide legal services.
9.28. The Bill will enable risk-based and proportionate regulation of the use of LegalTech, by allowing regulators to grant waivers of targeted rules, in order to facilitate the use of regulatory sandboxes to promote innovation under regulatory scrutiny. There is potential to benefit the sector and consumers through improved productivity, reduced costs and increased competitiveness. An example of how this measure may support equality objectives may include waivers being granted which allow for exemptions from continuous, professional development requirements to those with caring responsibilities.
Compensation funds and professional indemnity insurance
9.29. The Bill will require all category 1 regulators to introduce and maintain a compensation fund and professional indemnity arrangements. This would provide a risk-based approach to consumer redress and professional indemnity insurance. Category 2 regulators would require professional indemnity insurance as a minimum requirement.
9.30. The SLCC has an oversight role in connection with the compensation funds and professional indemnity rules of the Law Society and other legal services regulators. This oversight power was in response to concerns expressed at that time about delays in receiving settlement under the two schemes.
9.31. The consultation following the Roberton report indicated a broad consensus that the Guarantee Fund currently works well. However, in considering its role in providing consumer redress, the Bill retains the SLCC's function to monitor the effectiveness of the compensation funds of category 1 regulators. The SLCC will be able to issue guidance which may set minimum standards in respect of the operation and effectiveness of the compensation funds. The Bill also maintains the SLCC's ability to make recommendations in relation to regulators' rules around professional indemnity.
9.32. The intention is that by requiring all category 1 regulators to establish a compensation fund this will benefit consumers who may have who have lost money because of the dishonesty of a legal professional. The requirement for all regulators to establish professional indemnity insurance for their members is intended to protect consumers as a result of the impact of any negligent advice or services, and also offer an appropriate degree of protection to legal professionals.
The legal complaints system
9.33. Legal services regulation provides redress to consumers in several ways. It ensures that legal practitioners are competent and ethical in their dealings with clients. This means that vulnerable consumers are less likely to be exploited or mistreated by legal practitioners. Secondly it establishes procedures for handling complaints and disputes between clients and legal practitioners. This allows vulnerable consumers to seek redress if they are dissatisfied with the services provided or feel they have been treated unfairly. Thirdly, it may provide financial protection to vulnerable consumers in other ways, for example, through compensation. Legal practitioners also require to have professional indemnity insurance, which means that clients can claim if they suffer financial losses due to the practitioner's negligence or misconduct. Overall, legal services regulation plays an important role in protecting vulnerable consumers by ensuring that legal practitioners are competent, ethical, and accountable.
9.34. The Bill reconstitutes the SLCC as the Scottish Legal Services Commission ("the Commission") and provides it with an expanded independent oversight role of complaint handling by the regulated sector, in addition to a new role in overseeing complaints about unregulated legal services.
9.35. The Bill will reform the legal complaints system, to address concerns that the statute underpinning it is too restrictive and prevents complaints from being dealt with in a proportionate and risk-based way, adding undue cost and time to the legal complaints process for consumers and legal professionals. The Bill will seek to address these concerns by introducing a new flexible and proportionate legal complaints system, which benefits consumers and legal professionals in terms of seeking to allow prompt resolution of complaints and reduce the overall cost of the system, which is funded by a levy on the profession and has an impact of the cost of legal services to consumers.
9.36. The Bill seeks to promote collaboration between the Commission and the legal services regulators and places a greater duty on consultation between these bodies in relation to the complaints system.
9.37. The Commission will have an ability to set minimum standards for regulators in relation to their complaints handling and their oversight of how practitioners handle complaints in their first stage, before they reach the Commission. The Commission will also be able to direct legal practitioners as to minimum standards in complaints handling. It is envisaged that this would follow the model set by the Scottish Public Service Ombudsman (SPSO) (for example, one of the SPSO's responsibilities is to set and monitor complaints handling standards for the public sector in Scotland). These standards are published as the Model Complaints Handling Procedures and define how the SPSO expect each public service sector to handle complaints.
9.38. An SLCC report published in March 2023 showed that the majority of complaints investigations take longer than the Law Society's published average timescale of 12 months to complete. The report concluded that delays in the investigation of conduct complaints carry a number of risks, including public protection issues associated with solicitors continuing to practice whilst under investigation, and complainers concluding that their complaint is not being taken seriously, which may impact public confidence in the complaints process. The Commission's ability to set minimum standards introduced by the Bill, may have the potential to inform better practices that are designed to better serve consumers of legal services and reduce the number of complaints raised.
9.39. The current ability to appeal any decision of the SLCC at any stage can cause long delays in the time it takes to process a complaint. The majority (79%) of respondents to the consultation support a simplified and more accessible appeals process for legal complaints. The analysis found that the Court of Session is considered to be too expensive, for both consumers and legal professionals, limiting accessibility. It is the intention that the Commission be the final arbiter in respect of service issue complaints. Appeals about service complaints would be considered by a Review Committee of the Commission comprised of legal and non-legal members. The intention is to make the appeals system for complaints more affordable and accessible. This is similar to the position in respect of other ombudsmen for services complaints including the Legal Ombudsman (for England & Wales), the Financial Ombudsman Service and the Scottish Public Services Ombudsman. However, as with other public bodies, decisions would remain open to judicial review.
9.40. The Bill will also allow the Commission to investigate and determine complaints against unregulated legal service providers. It will be for the Commission to set the rules for how complaints will be considered eligible and how they will be determined. This will provide regulation centred on the public interest and introduce new protections for consumers of legal services from unregulated providers.
What might prevent the desired outcomes being achieved?
10. Significant amendments to the Bill which contradict the policy intention to promote competition and innovation in the legal sector while improving the transparency and accountability of legal services regulation and the legal complaints system, or amendments which undo the policy intention to provide a proportionate and risk-based regulatory framework and complaints system, would prevent the desired outcomes being achieved.
11. The Scottish Government response to the Roberton report recognised the differing views to the report's primary recommendation, and the implications this may have on the existing legal landscape in Scotland.
11.1. Our response set out that we would seek to find common ground and agreement on the Roberton report's recommendations where possible. The Scottish Government has worked collaboratively with a wide range of stakeholders in the form of a working group to build consensus around issues for consultation.
11.2. A number of bodies and organisations were engaged in the development of the consultation proposals, prior to publication of the consultation, throughout the 12-week consultation process and after. These included:
- The Law Society of Scotland (the Law Society)
- The Scottish Legal Complaints Commission (SLCC)
- The Faculty of Advocates (the Faculty)
- The Association of Commercial Attorneys (ACA)
- The Competition and Markets Authority (CMA)
- Citizens Advice Scotland (CAS)
- The SLCC Consumer Panel
11.3. There has been extensive consultation and engagement with key stakeholders, alongside the public consultation exercise. Our consideration of the Roberton report recommendations has been based on this stakeholder and public engagement.
11.4. A number of Scottish Government departments, non-departmental public bodies and organisations were engaged in the development of the policy proposals, prior to publication of the consultation, throughout the 12 week consultation process and after. These included:
- Civil Law and Legal System Division (Scottish Government) on the impact of proposals.
- Justice Analytical Services Division (Scottish Government) for modelling, evidence and analysis surrounding proposals.
- Scottish Government Legal Directorate (SGLD - Scottish Government) on legal basis for legislation.
- The Judiciary
- The Competition and Markets Authority (CMA)
- Financial Conduct Authority (FCA)
11.5. The Scottish Government worked collaboratively with stakeholders from the legal and the consumer perspective to design the consultation. In seeking to build agreement around proposals for reform the consultation contained two alternative viable models of regulation, in addition to the first model proposed by the Roberton report. The additional models on which views were sought included:
- Model 1: the Roberton Model, as recommended by the Roberton report. This would introduce a single, independent regulator that would be responsible for entry, standards, monitoring, complaints and redress in respect of the legal profession.
- Model 2: a Market Regulator Model. This would introduce an independent market regulator, who would oversee the work of the current 'authorised regulators', each having distinct roles and purpose.
- Model 3: an Enhanced Accountability and Transparency Model. In this model, the current regulators would continue to regulate their respective professions. There would be a focus on enhanced accountability and transparency, and a simplification of the current framework. The regulators would also be required to ensure that they embed a consumer voice in their organisation to provide advice, represent the views of consumers and organise research.
11.6. All options focus on the way in which legal services are regulated in Scotland, and the operation of the complaints process. The consultation was open for 12 weeks, running from 1 October to 24 December 2021. A series of eight online focus group events were also conducted to gather feedback.
11.7. The engagement strategy was designed to raise awareness and encourage participation in the consultation. This included asking stakeholders to share the consultation. A summary consultation accompanied the main consultation to allow stakeholders without detailed knowledge to share their views and priorities for reform. In addition to a number of virtual focus groups engaged with existing stakeholder networks.
11.8. The focus groups were highlighted at publication to individuals who had responded to a previous consultation in respect of legal complaints, but were open to anyone. The focus groups took place over MS Teams and consisted of a mix of those from the profession and members of the public with an interest in legal services regulation (our target audience). The SLCC, CAS, and Scottish Women's Aid were asked to promote the focus groups to users with lived experience of legal services or the complaints system. We initially set out specific dates, and then adopted a more flexible approach to support stakeholders to join.
11.9. Eight focus groups took place, however no pre-existing number was set and had there been further interest we would have sought to accommodate. A total of 33 individuals attended the focus groups, around 50% of attendees were lay persons and 50% were from within the profession.
11.10. A shorter, summarised version of the consultation paper was also published alongside the main consultation, intended to be free of technical jargon and covering the key areas that may be of most interest to consumers of legal services and the wider public. This was intended to make it easier and quicker to respond to the consultation for those who wished to.
11.11. Following the publication of the Roberton report, Scottish Government Ministers and officials met with representatives of a number of private legal firms and in-house legal teams. In addition, the professional bodies the Law Society, the Faculty and the ACA have been engaged in the development of the consultation and in promoting it to their members.
11.12. The independent consultation analysis was published on 8 July 2022. A total of 158 substantive responses were included in the data analysis. Overall, 101 individuals and 57 organisations responded to the written consultation. In addition, views from the focus groups were included in the analysis.
11.13. The responses to the consultation have been invaluable in supporting the Scottish Government in considering this reform.
11.14. Organisational responses were coded by sector, with 47 (82%) identified as representing the legal services profession, and 10 (18%) represented consumers. The number of respondents by organisational sector is outlined in the table below (note: this has not been disaggregated by profession/consumer categorisation due to the small numbers in some categories which might risk identifying respondents).
|Legal services provider||29||51%|
|Legal services regulatory body||1||2%|
11.15. The analysis of the consultation responses shows that views were evenly split between support and opposition to the primary recommendation. However, there are many areas where there is broad agreement between stakeholders.
11.16. The analysis highlighted that all respondents, regardless of affiliation, shared as a common aspiration, the need for any future model to be transparent, open to public scrutiny and efficient to ensure that justice remains accessible to all.
Stage 1: Framing
Results of framing exercise
In developing this EQIA the Scottish Government is mindful of the three needs of the Public Sector Equality Duty – eliminate unlawful discrimination, harassment and victimisation, advance equality of opportunity between people who share a protected characteristic and those who do not and foster good relations between people who share a protected characteristic and those who do not.
The framing exercise has identified some potential minor negative impacts upon consumers and those within the legal profession.
The policy aims to improve the overall experience for users of legal services and those who have a role within the legal profession. This will have a positive impact on access to justice.
Extent/Level of EQIA required.
Given the equality impacts of the Bill an Equality Impact Assessment is required. This assessment will consider the potential impacts of the Bill that might disproportionately affect certain groups of people, and opportunities that the policy might present to advance equality and foster good relations.
There is a problem
Thanks for your feedback