A MORTAL BLOW TO MEMBERS RIGHTS

The draft constitution which the Council of the Law Society of Scotland (the Society) will propose at its AGM will irretrievably damage the rights of the members in their Society.

Section 1(2) of the Solicitors (Scotland) Act 1980 (the 1980 Act) declares that the object of the Society shall include the promotion of the interest of the solicitors’ profession in Scotland and the interests of the public in relation to that profession. The Legal Services Scotland Act 2010 (the 2010 Act) section 131, adds a new section 1A to the 1980 Act by giving the Society power to act as regulator of Licensed Legal Services Providers under Part 2 of the 1980 Act. It is a power, not an object, of the Society. It does not amend section 1(2).

Under section 48 (4) of the 2010 Act an entity is not eligible to be a Licensed Provider (LP) if it is a solicitor, a firm of solicitors, an incorporated practice or a law centre. LPs will thus not be members of the solicitors’ profession. If the Society exercises its power to act as regulator of LPs, it may only do so within its statutory object. Regulation of non solicitors is not referred to.

The new section 1A of the 1980 Act was introduced by amendment to the Legal Services Bill when this fundamental conflict of interest was pointed out. However section 1A does not resolve the conflict. On the contrary it compounds the conflict. A basic issue for the Society is whether it should exercise its new power. The Council has decided to do so following a non binding referendum which it carried out before the final form of the 2010 Act was known. Before deciding to act as regulator of LPs, the Society should seek an express mandate in general meeting from its members to do so, now that the 2010 Act has been passed.

Regulation for solicitors and LPs is different in principle. Under section 1 of the 2010 Act dealing with the regulatory objectives for LPs, the objective of supporting the rule of law and the interests of justice are given equal priority to the objective of protecting and promoting the interests of consumers. For solicitors the principle of supporting the rule of law and the interests of justice is paramount.

By using the device of Standing Orders the constitution at 16.1.3. would deny the members any right to be consulted in general meeting regarding Practice Rules for LPs.

This affects for example the Guarantee Fund. Sections 128 and 129 of the 2010 Act will place the Guarantee Fund at the disposal of LPs. As a result solicitors will underwrite the effects of dishonesty on the part of LPs who have no legal training or requirement to have legal training. This is potentially catastrophic. Accounts Rules for solicitors need to be consulted on with the members in general meeting. Under the draft constitution Accounts Rules made for LPs would not require consultation with members. This is wrong.

Section 18 of the 2010 Act allows for Practice Rules dealing with professional indemnity (PI) insurance for LPs. Section 23 requires LPs to keep in place PI insurance arrangements equivalent to those which apply to solicitors. The Society’s Council is arranging for LPs to join the Master Policy - contrary to the response to the pre-2010 Act consultation. A fundamental factor in the considerable success of the Master Policy is training the profession in risk management. LPs have no requirement to obtain legal training. If the Master Policy is to provide PI insurance for LPs, the proposals of the Council involve a significant increase in risk for the profession. Members of the Society are entitled to be asked whether they agree to engage in this additional risk. They are also entitled to be asked to agree to any Practice Rules for PI insurance which apply to LPs. The draft constitution would not require this.

The regulatory function of the Council as regards solicitors will be carried out by a Regulatory Committee under section 133 of the 2010 Act. One half of its members and its convener must not be members of the Society. The convener will have a casting vote as its chairperson under section 10 of the Society’s proposed Standing Orders. The Council must not interfere unduly in the business of the Regulatory Committee. In consequence the Council will no longer control regulation of solicitors but will retain responsibility. Indeed the power of the Council to regulate the profession having been removed, its residual power seems negligible. It will be regulator in name only.

Members of the Society are entitled to expect that the complex issues arising from regulation of LPs by the Society be properly identified and explained before they are asked to agree to the changes proposed in 16.1.3. of the draft constitution.

Separately, paragraph 12.10 of the draft constitution provides that any members’ motion which lacked Council support would need to be passed by a two thirds majority to bind the Society. In practice this would probably amount to a veto. Paragraph 16.1.4 would give the Council an unprecedented power to decide any matter which it thinks would facilitate the business of the Society subject to the provisions of the Constitution. Once members concede these powers, they will not be recovered.

Unless and until a separate regulatory body is set up, members should not concede any powers. The draft constitution which the Council will move at the Annual General Meeting should be rejected.

Walter Semple

Solicitor

Member of Council for Glasgow

24^th February 2010.