Lawyers attack failure to modernise legal services market in Scotland

A QC and solicitor advocate have claimed consumers in Scotland have been let down by a failure to modernise the legal profession nine years after the then Office of Fair Trading backed a “supercomplaint” by consumer watchdog Which?.

Last week the Competition and Markets Authority (CMA) began an investigation into “long-standing concerns about the affordability of legal services and standards of service” by lawyers, though it did not include Scotland because of earlier work it undertook here in 2007.

Sheila Scobie, the CMA’s Scotland representative, said: “When we were the OFT we made a recommendation that there should be some opening up of the regulatory system, and that has not been taken forward. Our position hasn’t changed.”

She added: “We are conscious of the consumer aspect of this in Scotland and when we are doing the work we will be thinking about the system in Scotland.”

But John Campbell QC and John Carruthers, solicitor advocate, of Oraclelaw in Glasgow, asked the CMA to “launch an investigation into the Scottish legal services market following the longstanding failure of the Scottish government to act in the interests of Scottish consumers”.

Mr Carruthers said: “Since the OFT upheld the Which? supercomplaint in 2007 there have been no positive measures taken by the Scottish government to respond to that complaint. The legal services market in Scotland remains stagnant. It remains restricted to new ideas and entrants, while the English legal services market has been transformed.

“As we can see every week, English law firms have entered the Scottish legal services market and purchased Scottish firms. I have no difficulty at all with competition, but it is a one way street. Scottish legal firms are hamstrung by a regulatory system which is at present not fit for purpose.”

Mr Campbell meanwhile said the regulatory system this side of the border “remains based on a 19th century construct, which has the advocate in an ivory tower, legally unconnected to his client” and said the entire market requires review.

He said: “Advocates cannot form an ABS (alternative business structure), nor can they sue for the recovery of unpaid fees. They cannot incorporate, like any other small business, nor can they team up with other professionals (or indeed anyone) to offer a better service. The bar resolutely insists that the preservation of intellectual and professional independence can only be maintained by requiring its members to practise only as sole practitioners.

“There are those who disagree. Aside from the tax disadvantages of such a business model, the cost to the client-consumer is increased, since he must necessarily pay two people – a solicitor and an advocate – to secure the services of skilled counsel. The impression of remoteness and distance from the client is enhanced.”

Lorna Jack, chief executive of the Law Society of Scotland, said: “It is true that Scotland has been slower than England and Wales to open up the legal services market to new types of business structure, however we submitted a revised model for a regulatory framework for ABS to the Scottish government just last month.

“We believe that now is the time to get this completed to provide some of the freedoms available to law firms elsewhere in the UK, so that Scottish-based firms can restructure their businesses within what is permissible by Scottish legislation and as they see fit to meet the changing demands of clients.”

A spokeswoman for the Scottish government said: “We have been working closely with the Law Society of Scotland to develop a suitable regulatory scheme and we continue to have positive engagement with the society on these matters.

“The Law Society recently submitted its scheme and we are taking the application through the approval process as set out in the Act which requires the consent of the Lord President to any application. We will engage with interested parties before the application is sent to the Lord President’s office for his consideration.”

However, Chris Harte, chief executive of Morton Fraser, said: “Comparing the Scottish legal market today with how it was in, say, 2010, I’d struggle to characterise it as having been stagnant. Rather, it has borne many of the features of a properly functioning market for services – new entrants, stiff competition, downward pressure on fees combining with higher client expectations (the more for less challenge) and ultimately a clearer distinction (amongst providers) between winners and losers.

“Whilst I can understand why some may express frustration around the delay in the provisions of the 2010 Legal Services Act being implemented, we are nonetheless continuing to see examples of new and innovative services being delivered by legal businesses in order to meet these market challenges.”

A Which? spokesman said: “In 2007 Which? identified a number of problems that were impeding competition and harming consumers in the Scottish legal services market. The government accepted that changes were needed and we hope to see the reforms necessary to ensure improvements for consumers in this market.”