Regulatory reform in Scotland has been a slow process. In the home of Adam Smith, the greatest moral philosopher, the provider of the deepest insights into how our economies work, we have seen professional control of regulation for what seems like forever and that has led to stasis. Reform has been discussed throughout this century but there has been little progress. Back in 2017 the Scottish Government asked Esther Roberton to review the regulation of legal services. Her
report, published in October 2018, offered a way forward that Adam Smith would have been proud of: independent regulation, consumer focused and designed to stimulate growth for the benefit of the public.
Government
responded in June 2019. It promised: "any new system of regulation should incorporate the competitive provision of legal services, the public and consumer interest; and the promotion of a flourishing legal sector in Scotland; whilst encompassing the Rule of Law."
But it also noted the absence of consensus and that there was strong professional resistance to fundamental change. The Government then embarked upon a period of dialogue with the legal profession to create a consensus. I wonder if it would have taken that approach with financial services providers, drug companies, or big tech? Of course they have to listen to producers but Adam Smith, writing
The Wealth of Nations in Edinburgh nearly 250 years ago, noted that:
"Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer."
This year the Scottish Government finally bought forward its own
consultation. It remains high level and ministers still
appear to
be seeking a consensus. I ask them to pause and consider which industry monopolies have ever willingly given that monopoly up? Which professional bodies have ever invited liberalisation, competition and the placing of consumer and public interests above those of the profession? I can hear the howls of the legal profession: they do put the public interest and client interest first and it is core to their ethical rules. But it strikes me just how much the legal profession as a whole tends to think that the public interest perfectly aligns with their own economic interests. How remarkable.
For a profession famed for its critical thinking we might expect them to pause and ask if perhaps they are misrepresenting the public interest. After all, how can the absolute failure of the legal market to meet the needs of the poorest and most vulnerable members of our community; its failure to provide affordable services to middle class citizens; its failure to offer predictable pricing and relevant services to small business; and, the shift of corporate counsel towards alternative providers ever be evidence that the current legal market is working properly?
And a commentator doesn't need to spend long reading
Lawyer Watch to conclude that the current system of regulation is not really protecting ethics and the Rule of Law as well as it might.
The Government's consultation offers three models of regulatory architecture to choose from. A single independent regulator for legal services as proposed by Roberton; a market regulator overseeing the professional bodies, similar to in England & Wales; and the status quo with some minor window dressing. In my
response to the consultation I make the case for the 'full Roberton'.
The model in England & Wales has led to a near 15 year battle between regulators and professional bodies that at times has been the regulatory equivalent of trench warfare. Threats of litigation from at least one professional body to the Legal Services Board preceded even it getting staff in place and that set the tone. Far too much time has been spent fighting off the Law Society and Bar Council from misusing their position in the architecture and not enough on reforming the regulatory system so that it works well for consumers. It even reached the stage of the Law Society being
publicly censured and having to provide
undertakings to the Legal Services Board following the very critical
investigation and findings about its relationship and behaviours towards the SRA.
In fact, more than ten years on from the start of the LSB many commentators think it has served its purpose and should be abolished. As part of the founding leadership of the LSB, we said that it should exist for only five years - by then it would have succeeded in making regulators fully independent or it would have failed. The evidence is clear that the battles continue and England & Wales should move towards a single legal regulator - as suggested by a recent
independent review led by Professor Mayson.
In fact, as we see yet more
research suggesting that SRA reforms have been successful, we should pause again to hold the Law Society to account for its resistance at every step of the journey. The Scottish Government should learn from that: any role for professional bodies in regulation will be used to frustrate reform and the delivery of a simple, coherent and consumer facing regulatory system.
Government is a seeking a consensus, but as noted above that will never include the professional bodies. We can predict that the Law Society of Scotland and Faculty of Advocates will warn of unintended consequences, will stress how competitive the market already is (every monopolist starts with that), call for more regulation of currently unregulated legal services, and argue for more efficient complaints handling. The Faculty will seek to separate themselves from the mischief being addressed and stress their role in providing the judiciary of the future - and reform will threaten that supply of high quality judges. I hope I am wrong on all of this and that they welcome full scale reform.
However, there is actually a broad consensus. Many lawyers and traditional law firms embrace reform - the imagination of Scottish lawyers that I work with is as remarkable as across as the globe and they want to be set free to try new things without the dead weight of professional bodies tied to old forms of practice. Start-ups, alternative providers, law tech businesses and investors want reform. The Competition and Markets Authority has
called for reform, as has the
Scottish Legal Complaints Service. I understand that consumer bodies want reform too and it will be interesting to see their written submissions.
Scotland has shown that young administrations and devolved Government can sometimes cut through issues more clinically than is possible in the ossified world of old governments and professional bodies. The Scottish legal profession is a proud one with a powerful history. But it is facing difficult changes post financial crisis as global law firms emerge and powerful professional global hubs dominate. Previous attempts at consensual reform have given Scotland legislation on ABS that is unworkable - it is time for clear thinking. Scotland can steal a march by moving directly to a modern regulatory system that fosters innovation, growth and a robust consumer focus. Scotland's Government can be pro-competition instead of pro-business - putting even professional producers where Adam Smith told us they belong: subservient to consumers.
