Letter from... Scotland

David Evans reports on the implications of new reforms to the Scottish legal profession

The Law Society of Scotland has described its consultation paper on relaxing rules governing the legal sector as one of the most important issues to arise in the history of the Scottish legal profession. Yet, while there is clearly concern among lawyers here that opening up the legal services industry to non-lawyers could see the erosion of independent advice and the disappearance of the high street law firm, those that could benefit most from this change, including accounting firms, do not appear to be in any great hurry for reforms to be pushed through.

In the wake of the 2004 Clementi Report, which looked at how best to reform the legal profession in England and Wales, the Legal Services Act 2007 introduced a number of changes designed to open up competition within the legal profession and strip it of powers to handle complaints against its own members. This included changes to the ways law firms raise external capital, their ownership structure and the establishment of a new complaints body. The report also gave rise to the so-called 'Tesco Law' whereby supermarkets, banks, insurance and accounting firms could have lawyers on their payroll to provide commoditised legal services. The issue may well have remained south of the border were it not for prompting from the Office of Fair Trading into how, if at all, Scotland might approach any legislative change.

In the days following the Scottish National Party's victory in May last year, the new Justice Minister, Kenny MacAskill, said the Scottish Executive was prepared to implement a version of the Clementi reforms to remove ownership restrictions on law firms. However, after discussions between the Government and the Law Society of Scotland, it was felt these issues might be better addressed by the profession itself, and a consultation paper was released in November 2007. With responses from more than 90 law firms, political and consumer groups, professional bodies and the Institute of Chartered Accountants of Scotland (ICAS) already collected, practitioners will have to wait until May this year and the Law Society's Annual General Meeting before hearing any recommendations.

While ICAS supports change, particularly in the establishment of multi-disciplinary partnerships (MDP), it stressed there are regulatory and ethical hurdles to overcome and, therefore, emphasises caution. Jonathan Milne, director of corporate affairs at ICAS, described the proposals for Scotland as a 'leap in the dark for everyone', but added, 'no change is not an option'.

The biggest threat will be to those small and medium-sized law firms that typically deal with writing wills, buying a house, handling personal accident claims or divorce. Some commentators believe that allowing these services to be handled by supermarkets, insurance houses and banks, will see well-known brand names replacing those of the high street lawyer. Therefore, the only option for survival will be consolidation or incorporation into an MDP.

Among accounting firms, the attitude seems to be to let client demand drive any proposed change. While it is clearly the legal profession that has most to lose by opening up its services to non-lawyers, accountants do not appear to be champing at the bit for a slice of any new business opportunities, said Steve Cartwright, chief executive of Henderson Loggie, which has offices in four major cities in Scotland. Cartwright points out that any decision to offer legal services will be dictated by the size of the firm, the services currently on offer, its existing client base and what those clients are demanding.

Expressing his own view, he said: 'It's something I would consider doing, but there would have to be a good reason for us doing it. For instance, would it differentiate us from other firms? And unless there is a strong reason, then I'd be reluctant to do it unless I felt it was complementary to our other services.'

Among the bigger firms, the attitude appears to be similar with changes to existing structures coming about only if it offers a better service to clients, or there is value added through the sharing of back office operations. PwC currently offers legal advice through the separate entity PwC Legal. Leon Flavell, a partner with PwC Legal, believes any impact on his firm's current operations would be minimal. He counters any fears of a conflict of interest by having accountants and lawyers under one roof by pointing out that in England and Wales there is sufficient legislation in place to protect consumers.

While the Law Society of Scotland has yet to release its findings from the survey, it appears that change is inevitable, especially if there is to be a level-playing field between both the legal and accounting professions in Scotland and their counterparts in the rest of the UK.

As Richard Henderson, President of the Law Society of Scotland, suggested, pretending the issue isn't there will not mean it will go away.

David Evans is a freelance journalist who writes for publications based in Europe and Asia.