Fears of 'ethical Esperanto'

Published on Sunday 13 December 2009 20:13

APPROPRIATELY, it was the representatives of Which? and the Office of Fair Trading who kicked off the oral evidence on the proposed Legal Services (Scotland) Bill on Tuesday.

Their appearance came more than two years after the consumer organisation's "super-complaint" to the OFT on Scotland's legal services market kicked off an evolutionary process that has culminated in the legislation being considered at Holyrood.

But even after months of debate over the proposed structures, first in the legal sector and now among the lawmakers, the same concerns still linger about firms and it was those that dominated the first scrutiny session in Holyrood last week.

Worries about the effect on access to justice in Scotland, and about precisely how the new entities that emerge from this process will be regulated, were raised.

It was left to Professor Alan Paterson of Strathclyde University to express the doubts most eloquently.

"To my mind, one of the clearest issues with alternative business structures is the fact that professional providers and, indeed, non-professional providers have different regulatory standards," he said. "In other words, how do we prevent standards being gradually watered down to the level of the grouping whose standards, one might say, are lower?"

Prof Paterson contended, in relation to conflicts of interests, solicitors' standards were higher than other professions and he expressed hope the bill would compel all practices operating under ABS to adopt the more stringent guidelines.

"The point is that we will get into a regulatory mess and have what I call ethical Esperanto," he said, adding: "What ethical code will apply to these beasts?"

By that stage regulation of the new structures had loomed large over proceedings. Kyla Brand of the Office of Fair Trading insisted: "The success of any new system depends on how robustly it is regulated." She argued that the bill offered consumers the protection they needed.

Her colleague Sue Aspinall contended that the regulatory oversight of the new arrangements should be separated from the representative function of the Law Society: "If a body were to try to further the interests of both its membership and the public, tensions – even conflict – will arise," she said. "The best way in which to avoid conflict is to have a separation of the two roles."

Prof Paterson picked up this theme, saying: "I see where the argument is coming from, but the fact that ministers are to be subject to the better regulation principles and scrutiny means that I do not have a great concern. I understand the concern, but external ownership and multidisciplinary partnerships make me worry about a threat to the independence of the profession. Those are all threats that come with the bill. Presumably, the government will be open to judicial review of anything it does as a regulator, so that could be a further protection."

But Prof Paterson said the 13,000 set aside for costs of oversight, "sounds a bit on the low side". He said: "Ministers will perform the role that the Legal Services Board performs down south. The Legal Services Board is a very lean outfit; it has a relatively small staff of 35. The government might find that it has to spend a little more than (13,000]."

Aside from the obscure, and sometimes esoteric debate on lawyers' independence, the committee heard more depressing forecasts. Prof Paterson said nobody knew what the effects on access to justice would be with the introduction of the new structures.

"We have relatively little research evidence on what will happen, but we have a lot of hypotheses," he said, predicting that smaller high street and rural firms would be squeezed out by retail giants moving into the legal services market and the provision of less attractive services – such as legal aid work – would be lowered.

"Retail analysts have done a fair amount of research into the impact of supermarkets and it is not all negative but what would be the impact of supermarkets delivering legal services?" he asked. "According to the analysts, supermarkets have led to the closing of many high street butchers, bakers and so on.

"My concern is that supermarkets will not choose to do legal aid work. I do not believe that supermarkets will see enough financial incentives in doing legal aid work, especially in rural areas. That might lead either to high street firms going under or, more likely, to high street law firms not doing work that they regard as non-remunerative."

He expressed similar concerns about banks entering the market, but things were rosier in the OFT and Which? garden, as they strove to argue the benefits ABS would bring to the Scottish consumer: "There will always be a place for the solo high street lawyer whom everyone knows and to whom they have always gone," said Julia Clarke of Which?. "However, some companies want to modernise and streamline their services and cut some associated costs. We could use a bit of competition in this area in Scotland to improve services and drive down costs a little bit. If we free up lawyers to offer services in that way, people will take advantage of it."

Kyla Brand of the OFT provided some optimism for the small law practice. "The sustainability of services is of great importance," she insisted. "Sole practitioners are having a difficult time sustaining their services. In offering new models, there is every opportunity for them to have a greater chance of being able to sustain their services."