Scottish Government

8 LAW SOCIETY OF SCOTLAND

Summary

• Several suggestions were made for changes to the Society's governance arrangements. Key amongst these were proposals to reduce the size of the governing Council, and to change the Council's composition to incorporate a greater lay representation.
• Of those who commented, the majority (16 respondents or 59% of those providing a view) supported a significant non-lawyer membership on the Council. This was seen to have the advantages of promoting public confidence in the Society as fulfilling its public interest role, and adding depth to its decision-making.
• A general view was that the greater responsibility held by the Council for regulating itself, the higher should be the proportion of non-lawyer membership.
• The majority (17 respondents or 63% of those who commented) did not support the splitting of the representation and regulatory roles of the Society as proposed by the OFT. These roles were viewed by some as working well together, with a clearer segregation, if required, achievable through the modernisation of the Society's governance which is currently under review.
• However, one third of those expressing a view considered a clearer separation of the Society's representation and regulatory roles to be essential.
• Nineteen respondents (79% of those who commented) supported the proposal that the Guarantee Fund or an equivalent provision should be required for ABS. A common argument was that this would achieve parity between consumers making use of ABS and those using traditional legal services models.
• Views were relatively evenly balanced between respondents (largely law firms) who advocated capping the Guarantee Fund liability and those (largely individuals) who recommended that the Fund remain uncapped.
• Fourteen respondents (82% of those who provided a view) considered that the proposed requirements for ABS professional indemnity insurance were adequate.

Q26: Should changes be made to the Society's governance arrangements, for example, in relation to the size of the Council, frequency of meetings and decision making powers?

Background

8.1 The Council (governing body of the Society) exercises its authority itself, through a variety of Committees and through the Executive Officers of the Society. 44 members of the Council are elected by the members of the profession and up to 9 members can be co-opted by the Council. All of these members are currently solicitors. The Council's 44 elected members must come from different geographical constituencies.

8.2 The Council is required to meet no fewer than 10 times each year and in practice meets every month except July. Meetings are chaired by the president or the vice-president and a quorum of 9 members is required.

Summary of Responses

Base no. of responses = 25

NB Percentages in tables are rounded and may not always total 100%

Specific recommendations for changes

Size of Council

8.3 The current size was seen by some as cumbersome and a reduction in numbers was recommended. However, one law firm considered a decision on size should be left to the Society rather than the Government.

Number of meetings

8.4 Only 3 respondents commented specifically on the frequency of Council meetings. Of these, one individual recommended meeting only 4-5 times each year to receive reports and set future strategy; a representative body stated that they had no objection to the current number of meetings, finding no reason for reducing their frequency; and the third respondent (Individual) recommended meetings be held more frequently.

Changing the Council's composition

8.5 Although dealt with in more detail under Question 27, a few respondents urged that there should be at least an equal split of non-lawyer and lawyer representation on the Council. One individual respondent recommended an Executive Board with suitable committees established, focusing on distinct professional issues, a separation of the regulatory function, and an independent discipline tribunal.

Other comments

• The current governance arrangements reflect the interests of a membership body rather than a body which regulates in the public interest.
• Changes are required to modernise the Society's governance and streamline its structure.
• Should await the outcome of the current governance review before passing comments on possible changes.
• Is the Society needed, given that the SLCC can deal with complaints?
• Parliament should decide on the governance arrangements for the Society.

Q27: Do you agree that there should be significant non-lawyer membership on the Council of the Society?

Background

8.6 The absence of non-lawyer representation on the Council is a notable feature of the current decision making function of the Society. In response to the consultation which informed the Legal Profession and Legal Aid (Scotland) Act 2007, the Society put forward proposals which would have allowed non-solicitors to be co-opted onto the Council, but these changes were not taken forward by Parliament.

8.7 Consumer bodies have also called for greater non-lawyer participation in the Council's governance, to reflect the fact that the Society is not simply a membership organisation, but a statutory body which has the public interest as a core concern. CFS has proposed that (as is the case with bodies such as the SLCC) a significant majority of the members of the governing body should be non-lawyers. CFS advocates that there should be up to 50% independent representation, including the chair, within self-regulating schemes.

8.8 The Government is not currently persuaded that the extent of non-lawyer participation in the governance of the Society requested by CFS is justified, but accepts that a significant degree of credible non-lawyer involvement would provide reassurance that the Society is able effectively to balance public and professional interests.

Summary of Responses

Base no. of responses = 27

NB Percentages in tables are rounded and may not always total 100%

Views on why a significant non-lawyer membership on the Council is important

8.9 A few respondents highlighted why they considered it important to achieve a significant non-lawyer membership on the Council. One consumer body argued:

"It is a considerable drawback for a professional organisation which has a statutory responsibility to promote the public interest that its decision making body has no non-solicitors among its membership. The current arrangements leave the Society open to criticism that its view of what is in the public interest is not sufficiently informed by opinions from outwith the profession……there should be 50 per cent lay representation on the Society's Council in order to ensure public confidence in its regulation."

8.10 Other advantages to a significant non-lawyer membership were seen as:

• providing depth and alternative perspectives to decision-making;
• promoting objective decision-making; and
• enhancing public perception of the Society as fulfilling its public interest role.

Views on the relative balance of lawyer to non-lawyer membership

8.11 A few respondents argued that the balance of lawyers to non-lawyers on the Council should depend on the function of the Society, with a general view being that the greater the responsibility for regulating itself, the higher should be the proportion of non-lawyer membership. For example, 2 law firms specified that as a regulatory body, the Society should comprise at least 50% non-lawyers, but as a trade body it should be made up entirely of lawyers. Another recurring view was that whilst a significant non-lawyer membership could be consulted on some issues, the policy and practice of the Society should be controlled by a body of which a substantial majority or all members should be practising lawyers.

8.12 Many respondents specified more precisely their preference for the balance of non-lawyers to lawyers, ranging from 20% to 75% non-lawyers.

Views on who the non-lawyer members should be

• Should reflect the Scottish population.
• Nominations could be sought from representative bodies including consumer organisations.
• Thought should be given to the appointment process to ensure that it is seen by both the public and the professional as producing:

" demonstrably qualified and genuinely independent members from a variety of backgrounds best suited to considering the consumer and public interest.. " (Statutory Body)

• Proposed members should be approved by the Scottish Government and the Lord President.
• Members should be appointed by an independent appointments panel, ideally with the procedure overseen by the Office of the Commissioner for Public Appointments in Scotland.

Views of those opposed to a significant non-lawyer membership

8.13 Of the 3 respondents who opposed the suggestion of a significant non-lawyer membership on the Society's Council, one conceded that lay representation may have some merits, but still did not support a significant non-lawyer membership. One law firm commented that if the Government decided on a majority non-legal representation, then the same rules should apply to every other profession, such as teachers, doctors, accountants and chartered surveyors. The third respondent did not provide an argument to support their opposition.

Q28: Should the representation and regulatory roles of the Society be split as proposed by the Office of Fair Trading?

Background

8.14 The OFT, amongst others, has expressed concerns about the regulatory and representative roles of the Society. Its view is that, in the interests of consumer protection, there should be a clear separation of the regulatory function from the responsibilities for representing and promoting the interests of the profession. It is argued that, for a profession that places emphasis on the avoidance of conflicts of interest (of even the appearance of such), undertaking both roles creates such a conflict.

8.15 Should the Society be an ABS regulator, the combined roles would be harder to justify as the Society would be regulating people working in ABS who are not solicitors (indeed may be in competition with solicitors), while being required to promote the interests of solicitors.

8.16 It is the Government's view that the Society should remain as the regulator of individual solicitors, but there should be a move towards a clearer separation of its regulatory function.

Summary of Responses

Base no. of responses= 27

NB Percentages in tables are rounded and may not always total 100%

Views of those agreeing

• Essential to ensure public confidence in the legal system.
• Urgent in the light of ABS proposals.
• Recommend a new regulatory body akin to that in England and Wales.
• Follows the model in other professions:

"Securing the independence of the regulatory arm acting with demonstrable independence from representational interests would be best achieved by a completely separate regulatory body. This is the model now in dentistry and in medicine with the British Medical Association and the British Dental Association representing members and the General Medical Council and the British Dental Council regulating those professions. However, we appreciate that the formation of a new body may not immediately be feasible but it should be a long term objective." (Statutory Body)

Views of those disagreeing

• The current arrangements work well and the suggestions that the representation and regulatory roles conflict are over-stated.
• Difficult to envisage what could be the alterative arrangements if the Society did not continue to operate both functions.
• A clearer separation of roles can be achieved through the modernisation of the Society's governance which is currently under review.
• If an appropriate level of lay membership is established, the need to split the roles may not be so pressing.
• The roles are already separated in respect that complaints handling is already delegated to various committees. The SLCC plays an important role in handling complaints outwith the Society.
• A split in functions could be complicated, expensive and overly bureaucratic.

Q29: Should the Guarantee Fund or an equivalent provision be required for ABS?

Background

8.17 The Society administers the Scottish Solicitors Guarantee Fund which is a unique consumer protection. The fund, to which all solicitors who are partners in private practice and who handle clients' money contribute annually, can be used to reimburse any persons who have suffered monetary loss as a result of the dishonesty of a solicitor or their staff.

Summary of Responses

Base no. of responses = 24

NB Percentages in tables are rounded and may not always total 100%

Views of those in favour

• Will achieve parity between consumers making use of ABS and those using traditional legal services models.
• In favour of the proposal so long as ABS have legal services at their core.
• Will act as a safety mechanism in case of any unforeseen complications with the implementation of the new structure.

Views of those against

• The Guarantee Fund should not be opened up to ABS as there is no evidence yet of their risk profile, and a higher risk will have implications for costs to traditional businesses.
• It is inconceivable that solicitors will wish to join in such a guarantee with the owners of ABS who are not solicitors.
• It is inconceivable that those interested in investing in ABS will wish to offer such an unlimited guarantee to their customers.
• A more appropriate way forward for ABS than extending the Guarantee Fund will be to require transparent and effective mandatory professional indemnity insurance as a condition of operating an ABS.

Other comments

• Additional contributions to the Guarantee Fund should be made by non-lawyer stakeholders.
• Funding could be " amended, fixed and capped for all those with practicing certificates offering legal services to the public irrespective of status or employment position" (Law Firm).

Q30: Should the liability under the Guarantee Fund be capped, either for individual claims, or the overall liability?

Background

8.18 The Society is of the view that the current unlimited liability of the Guarantee Fund across the whole profession is inconsistent with encouraging greater enterprise and the attraction of third party capital to alternative business structures. However, it may be felt desirable that the owners of an individual business remain liable to fully compensate victims of dishonesty within that business so far as not covered by insurance.

8.19 It also believes that irrespective of the introduction of ABS, a cap on the value of individual claims should be introduced. The question of whether the overall liability of the Fund should also be limited is still being considered, although the Society is not aware of any equivalent commitment within any other legal jurisdiction nor, indeed, any other profession or sector.

Summary of Responses

Base no. of responses = 27

NB Percentages in tables are rounded and may not always total 100%

8.20 Those in favour of capping were largely law firms. Those against capping were largely individual respondents.

Views of those favouring capping

• Capping reflects a modern approach.
• As other businesses providing legal services will not be subject to regulation, it is appropriate for the liability under the Guarantee Fund to be capped.
• Even if an individual's claim is not capped, it may be sensible to cap the value of a claim made by a business.

Views of those opposing capping

• In the interests of public protection, there should be no capping of the Guarantee Fund for individuals or the overall liability.
• Under the new arrangements in which non-legal professionals might venture into legal service provision, there could be a demand for increased protection rather than capping the Fund.
• Consumers should be able to rely on the ability of the owners of individual businesses to fully compensate them.

Other comments

8.21 One pragmatic view was that what should be regarded as a suitable capping level for individual claims depends on factors such as the money available, and how the Fund it set up, for example, who should be expected to contribute.

Q31: Are there any particular provisions which are required in relation to professional indemnity insurance for ABS, beyond what is set out?

Background

8.22 The Government considers that it should be a licensing condition for ABS to take out appropriate professional indemnity insurance. Such insurance would require to be at least equivalent to the Master Policy (a compulsory professional indemnity insurance arrangement which covers all Scottish solicitors working in private practice) in order to ensure proper public protection as well as guaranteeing consistency between ABS and the traditional business model for a legal practice.

Summary of Responses

Base no. of responses = 17

NB Percentages in tables are rounded and may not always total 100%

8.23 Very little commentary was provided in relation to this question. One law firm emphasised their view that the professional indemnity requirements of ABS and traditional law firms should be identical. A statutory body welcomed the proposal that ABS will be able to choose their own providers of professional indemnity insurance. However, 2 respondents cautioned that insurers may not be willing to provide indemnity insurance arrangements for ABS due to the varied disciplines adding to risk.

8.24 The view of one consumer body was that the Master Policy provides at least the appearance of, or possibility of, a conflict of interest for some consumers and it might be better if different, more transparent arrangements are set out to provide legal practitioners with indemnity insurance.