Top firms and Law Society split over plan to boost competition

By Ian Fraser

The Herald

August 6th, 2007

A wedge has been driven between Scotland’s largest law firms and their regulator, the Law Society of Scotland, over whether the country’s legal services market should be opened to competition.

The rift became public following the publication last week of recommendations on lifting restrictions in the market for legal services in Scotland by the Office of Fair Trading. The OFT effectively gave the Scottish Executive until the December 2007 at the latest to come up with concrete proposals for reform of the legal services market.

Larger firms in Scotland, including Dundas & Wilson, last week told The Herald they welcomed the OFT’s recommendations – and, indeed, confirmed that they had been instrumental in shaping the consumer watchdog’s thinking.

Alan Campbell, managing partner of Dundas & Wilson – which with 600 employees and annual turnover of £60.8m, is Scotland’s largest law firm – said that he attended a high-level meeting with OFT officials alongside senior representatives from law firms McGrigors, Maclay Murray & Spens, Shepherd & Wedderburn and Pagan Osbourne six weeks ago.

He said that at the meeting, held on 13 June, there was “total unanimity” from the solicitors present. He said they supported having a level playing field between Scotland and England on deregulation of the legal profession and argued that anything else would be potentially both anti-competitive and against consumers’ interests.

“At its heart, what we want is for lawyers to be able to share profits with non-lawyers subject to suitable regulatory safeguards,” Campbell added.

Campbell went on to attack the key plank in the arguments of Roy Martin, dean of the Faculty of Advocates and Douglas Mill, chief executive of the Law Society of Scotland.

Both have said that Scotland’s legal services market is different from that in the rest of the UK and, therefore, requires different policies and structures. However, Campbell said: “Anyone who pretends that the market for legal services is substantially different in Scotland from that in England and Wales is simply kidding themselves. Jurisdiction on its own cannot define a market. If it does, it is anti-competitive.”

He added that to claim that the services provided by law firms are in any way unique and incapable of being replicated elsewhere is “a fallacy.”

Campbell questioned earlier claims from the Law Society of Scotland that a super-complaint from consumer advocate Which? was premature.

“In my view it was very timely indeed. Law firms need time to plan ahead and to mobilise,” he said referring to the argument used by some that, since reforms intended to sweep away restrictive practices in the legal profession in England and Wales, do not take effect until 2010-11, there is no need for regulators and politicians in Scotland to act now.

“We need to know what the policy is going to be in Scotland, so that we can ensure we can make appropriate plans that ensure the sustainability of our own businesses,” said Campbell. “There is already divergence between England and Scotland and each day it gets wider.”

Asked if the Law Society’s stance on deregulation smacks of protectionism, Campbell said it was, “difficult to see it otherwise”.

Colin Gray, managing partner of McGrigors, echoed some of those sentiments. He said: “McGrigors welcomes the OFT’s recommendations, which will help to create a level playing field across the UK legal market. Such liberalisation will enable providers of legal services to gain access to more capital, attract and retain talent and develop new service lines.

“What is important is that legal firms operating in the Scottish market are able to innovate and grow, as well as compete fairly with peer firms operating throughout the UK. We must avoid limiting choice for clients, which in turn may have a negative impact on the region’s economy.”

Alistair Morris, chief executive of Pagan Osbourne, also said he welcomes the OFT’s recommendations. He has already said that he believes the implementation of Clementi reforms in Scotland would revolutionise the legal profession for the better.

He said: “The law remains a cottage industry with an anachronistic culture, and it is ripe for consolidation. If law firms were permitted to raise equity from external investors, it would hasten that process.”

Campbell implied that for the Law Society to launch another “talking shop” on the issue of alternative business structures on September 28 is too little, too late. He said: “The OFT has effectively said to both the executive and the Law Society that they must up their game. However, they don’t really appear to have got the message yet.”

Mill, chief executive of the Law Society of Scotland, said: “What we must ensure is that Scotland seeks its own solutions and that access to justice and protection of the public remain core to any plans for reform.

“We are now planning a second conference in Edinburgh on September 28 to explore the opportunities which the creation of alternative business structures could bring to Scottish law firms, while also examining the regulatory issues they may present. We intend to bring forward our ideas on these issues later this year.

“We have continued our discussions with the Scottish Executive on the future of legal services in Scotland and Justice Secretary Kenny MacAskill has already spoken about Scotland’s law firms being able to compete outwith their borders as well as within’ and that change is necessary.”

MacAskill and the Executive have 90 days to outline their approach to remove restrictions in Scotland.

Sean Williams, the OFT’s executive director said: “I hope the Scottish Executive can work with the profession to remove restrictions that, in our view, are unnecessary and prevent solicitors and advocates from innovating to meet the needs of consumers.”

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