Legal services regulation reform: consultation analysis

Part 3(B) Definition of Legal Services and Reserved Activities

Introduction

The Roberton Report recommended that:

• The definition of legal services, the regulatory objectives and the professional principles should be set out in primary legislation;
• There should be no substantial change at this stage to bring more activities within the scope of those activities "reserved" to solicitors or to remove activities i.e. will writing should not be reserved. Entities licensed by the regulator should be able to undertake confirmation as an activity; and
• It should be for the regulator to propose to the Scottish Government which activities to reserve to legal professionals in the future and which should be regulated.

The consultation document sought feedback on each of these elements.

Question 34

Q34. To what extent do you agree or disagree that there should be a definition of legal services?

Base: 93

Most respondents (88%, n=82) who provided a rating agreed that there should be a definition of legal services, while 12% (n=11) disagreed.

Those who agreed that a definition of legal services was needed argued that this would provide greater clarity, transparency and consumer protection. However, several caveated that such a definition (and thus regulation) would be difficult to achieve, with one legal service provider noting that legal services can be informal and unpaid as well as professional and paid, and can involve 'considerable overlap' between legal, tax and financial advice, for example;: "you cannot regulate what you cannot define" (Individual). It was also felt that the current (2010) Act was out of date, too loose, and needed to be wider to incorporate all legal services/providers as well as the rapidly developing services:

"The current definition is out of date… is very narrow (section 32 of the Solicitors (Scotland) Act 1980) and great areas of actual 'legal practice' carried out by Scottish solicitors do not fall within that definition." (Individual)

"Legal services are constantly developing and any definition must not be so prescriptive to exclude development of new innovative services." (Individual)

Similarly, some respondents felt that, provided the definition was flexible and wide enough, this could help to address issues with the currently unregulated sector, allowing them to brought under regulation and providing a 'level playing field':

"We note that there is currently thinking underway in England and Wales about how to bring the 'unregulated' market into the definition of legal services, and therefore under some form of regulation (e.g. redress available from the Legal Ombudsman). In his review of regulation in England and Wales, Professor Stephen Mayson noted that 'the regulatory framework should better reflect the legitimate needs and expectations of the more than 90% of the population who face a legal issue and for whom it is not currently designed'." (Consumer Organisation, Public Body/Sector)

A few also felt such a revised definition would avoid unqualified or disqualified people from practising.

Those who disagreed with, or were non-committal about, developing a definition argued that the English concept of 'reserved practice' should be used for qualified lawyers or the 'paid-for' sector only, and that to be too flexible in definition would be 'pointless':

"Given the constantly evolving nature of legal services, it is unlikely that a precise definition would have the necessary capacity to evolve and a vague definition is unlikely to add to legal certainty. Defining reserved an/or regulated activities is a much more sensible approach." (Individual)

Question 35

Q35. To what extent do you agree or disagree that the definition of legal services should be set out in primary legislation?

Base: 90

Again, most respondents who provided a rating agreed (82%, n=74) that the definition of legal services should be set out in primary legislation.

Again, the majority of responses (and mainly from organisations) were in favour of primary legislation to change the definition, largely because this would provide clarity, transparency and accountability. It was stressed that anyone providing services needed to be regulated:

"Setting out the definition within primary legislation would assist in the regulation of the currently unregulated legal services market by making it a requirement that any person providing services as defined within the legislation would be required to be regulated." (Organisation, Professional Body, Law Society of Scotland)

As the existing definition was in primary legislation, there was seen to be no reason to deviate from this, were a newer, more future-oriented legal services framework developed. However, it was again argued that the legislation needed to be broad and flexible enough so as not present a barrier to new market entrants, or stifle or constrain either service providers or any regulatory body. The Scottish Regulators' Strategic Code of Practice was seen by one organisation as a good example:

"A regulatory framework for legal services should be sufficiently flexible to adapt to market changes. It may be difficult for regulation to account for new market dynamics or new services if any future changes to the definition of legal services require changes to primary legislation… the Scottish Regulators' Strategic Code of Practice sets out how regulatory principles are to be applied. This code might represent a useful starting point for examining which elements of the framework should be statutory and what left to the regulator." (Consumer Organisation, Public Body/Sector)

A few who disagreed with the definition being in primary legislation argued that such legislation was not as flexible as secondary legislation for fast-moving developments, that primary legislation would not improve accessibility, and that 'legal services' were impossible to define coherently.

Question 36

Q36. To what extent do you agree or disagree that there should be no substantial change at this stage to bring more activities within the scope of those activities "reserved" to solicitors or to remove activities?

Base: 86

Of those who provided a rating, around three quarters (76%, n=65) agreed that there should be no substantial change at this stage to bring more activities within the scope of those activities 'reserved' to solicitors or to remove activities.

Respondents tended to agree that there was no need for more activities to be 'reserved' to solicitors, other than to ensure that the 2010 legislation - which included the writing of wills and other testamentary documents - was fully enacted. Some feared changing the activities currently noted as reserved would delay changes to the primary legislation, impact on the third and not-for-profit sectors, restrict access to justice for those who cannot afford a solicitor, and restrict consumer choice. However, some respondents gave the caveat that 'reserved activities' needed first to be defined and better understood.

Of those who disagreed and wanted to change the number of reserved activities, several argued that there was a need for more activities to become reserved in order to tackle the risk associated with unregulated sectors, while others felt there was a need to reduce the number of reserved activities and encourage more competition. A few also felt that the system more generally needed to change, not least to reduce the risks to consumers, as one individual commented:

"I would prefer to see either a reduction of the reserved activities to reflect only the public good activities of conducting litigation and exercising rights of audience or, better still, a fundamental shift to regulation based on risk to the public interest, with the power for the regulator to require before-the-event authorisation only for the highest-risk activities." (Individual)

Question 37

Q37. To what extent do you agree or disagree that it should be for the regulator(s) to propose to the Scottish Government which activities to reserve to legal professionals in the future and which should be regulated?

Base: 89

Just under three quarters (72%, n=64) agreed that it should be for the regulator(s) to propose to the Scottish Government which activities to reserve to legal professionals in the future and which should be regulated.

Several noted that this proposal would only work if the regulators were independent, or indicated that they would only support such powers for an independent regulator (under Option 1: the Roberton Model). Indeed, one respondent highlighted that this proposal would work in Options 1 and 2, but they were unclear how this could be achieved in Option 3, where the regulators would only have responsibility for their own branch of the profession. Others felt that the profession should be involved or consulted on such matters, either as regulators or in conjunction with an independent regulator. Most, however, agreed that the regulator would be best placed to identify and react to trends and areas of concern and to recommend how these may be addressed and rectified. It was also felt that the proposal would protect the public/consumer:

"The regulator should be best placed to recommend any necessary changes and so should have the power, through primary legislation, to propose any changes to those activities which are currently reserved. As we have said, it is a matter of concern that only a relatively small proportion of legal services require to be undertaken by a qualified and regulated legal professional. The unregulated provision of legal services seems to us to be of significant risk to the consumer." (Organisation, Legal Services Provider)

It was felt by one respondent, however, that there was a need to balance the benefits to consumers with the cost of regulation, given that regulators were best placed to identify and resolve the concerns of consumers.

Those who disagreed with the proposal tended to argue that the regulator would have too narrow a focus (through the lens of the consumer) to make such decisions. Rather it was felt that a wider set of stakeholders, and particularly those in the profession, should be involved in driving such decision. One respondent felt this should be decided on merit, i.e. driven by the number of complaints around a particular issue.

It was also felt that the legal profession should not be privileged "over other competent providers of legal services who should be equally capable of achieving regulated authorisation" (Individual), and that all legal services should be regulated.

More generally, the Law Society of Scotland highlighted confusion within the consultation document between 'unreserved' and 'unregulated' activities, and stressed that the distinction between these was crucial. They also expressed disappointment that the consultation did not appear to tackle the issue of unregulated service providers, an area which they (and others) noted as problematic for the sector and consumers, and considered this to be a missed opportunity:

"We are disappointed to note that the consultation does not appear to directly address the issue of unregulated service providers, nor the risks associated with the delivery of legal services by unregulated providers. The 'unregulated legal sector' is not defined within legislation." (Organisation, Professional Body, Law Society of Scotland)