Bill splits Law Society 'up the middle'

Mr Smart's successor, Jamie Millar, welcomed the approval of the bill, saying it would "broaden access to legal services and allow the Scottish legal profession to remain competitive against a challenging economic backdrop and in an increasingly international market".

Yet the passage of the bill has not ended the split - far from it. Supporters are keen to move ahead and make the bill work in the best interests of the Scottish legal profession, but critics fear that the whole independence of the profession is at stake.

They argue that the clause saying lawyers (or other regulated professionals) must have at least 51 per cent of ownership of legal firms is insufficient.

So where do we go from here? One of the biggest supporters of ABS - Douglas Connell of Turcan Connell - explains why the new bill is a once-in-a-generation opportunity, while Michael Sheridan explains why he lobbied to the last to get the bill dropped.

FOR AND AGAINST

For: Douglas Connell

THE passing of the Legal Services (Scotland) Bill by the Scottish Parliament gives us a once in a generation opportunity to create a more flexible and innovative alternative to the traditional business structure for Scottish law firms.

The exact model which each legal business decides to adopt will depend on the needs and business plans of the solicitors involved. Current business models will continue to exist side by side with ABS models. What is essential is that there is sufficient flexibility to respond to local needs and that both the traditional models and the ABS models operate on a level playing field. Professional competencies and training, admission requirements, ongoing regulation and client protection are essential and must be evenly applied and enforced.

While Turcan Connell has a particular interest in our own form of alternative business structure, many towns throughout Scotland would benefit from the option of allowing solicitors, accountants, surveyors and approved, FSA-regulated practitioners to join together as appropriate to take advantage, not only of the economies of scale, but also the benefits to clients, of multi-disciplinary services. At the very least, a combined approach would allow investment in IT and back-office support which small, individual businesses simply cannot afford.

Our concept at Turcan Connell has long been that of multi-talented professionals providing a range of inter-disciplinary services to private clients and charities. Turcan Connell employs Scottish Solicitors, English Solicitors, Chartered Accountants and FSA-approved investment managers and financial planners. We wish to use the new alternative business structure to promote suitable non-solicitor candidates to partnership. Turcan Connell's Chief Investment Officer, Haig Bathgate, has been with us for 13 years and our Head of Financial Planning, Bob Hair, has been with us for seven years. They are both immediate candidates for full Partnership in a new alternative business structure. It seems self-evident that such highly experienced, client-facing professionals should have the same opportunities for career advancement as their solicitor colleagues.

Our flagship wealth management service, Turcan Connell Family Office, exemplifies the benefits of joined up and inter- disciplinary services for private clients. This model of advisory services draws together experts in law, financial planning, tax and investment management to serve clients throughout the UK and beyond.We now have clients in over 50 countries and the advent of the alternative business structure provides real encouragement to the development of this kind of innovative and progressive service based in Scotland.

In terms of external ownership, Turcan Connell's preferred model has always been a solicitor-controlled structure regulated by The Law Society of Scotland with up to one third or even half of the Partners as non-solicitors, but with no externally owned equity or third party ownership. There will be no "Tesco Law" in Turcan Connell. I remain of the view that the best future lies in solicitor-controlled businesses rather than in the external ownership of law firms.

Now that the legal framework has been put in place, I hope and expect that The Law Society of Scotland will move rapidly to take the lead role in creating the necessary regulatory framework. We at Turcan Connell are ready for the challenge.

• Douglas Connell is joint senior partner of Turcan Connell

Against: Michael Sheridan

Until last Wednesday the way to acquire ownership of a law practice was a rigorous, expensive ten-year programme of academic education, practical training, legal traineeship and post-qualifying legal practice, and, finally special partnership training - and satisfying a fit and proper person test. This demanding route was seen to be a vital protection of the legal profession and the public interest and was policed vigorously by the Law Society.

Since last Wednesday, however, the rules have changed and now anyone who can pass the fit and proper person test (virtually meaningless in this day of anti-discrimination and equality) and produce the requisite sum of money can buy their way into that ownership, without any requirement for legal training or ethical awareness. We are bereft of any explanation as to why this long-standing, hard-earned protection of the public interest is no longer required. Its removal gives rise to a number of questions which have to be addressed urgently.

In the first place, we have to ask whether clients of these new legal practices will sensibly be able to entrust these businesses with their private information and money, as is required for the carrying out of transactions and litigation, when these businesses may be neither owned nor controlled by qualified solicitors. The pillage by Robert Maxwell of the pension funds held in trust by the companies which he acquired give ample warning of what might happen when external agencies are enabled to acquire ownership in legal practices.The rising tide of money laundering and property fraud which depends for its existence upon access to the legal process can only be stimulated by this potential acquisition of legal practices.

In the second place, the question will inevitably arise as to whether lawyers employed by these new firms will be recognised by the courts as having sufficient professional independence as to allow them to be treated as officers of court and accorded the legal professional privilege essential to the conduct of the judicial process. In other words, will this new type of lawyer be recognised by the courts? Indications at this stage, from the European court (Akzo Nobel case) and the Australian courts (Brookfield Multiplex case) are negative.

Although the advocates and opponents of the new legislation differed on many issues, all sides were united in one finding, namely, that external capital, whether by way of banks or venture capitalists or such like, should not have control of the new legal practices. However, Parliament's attempts to avoid that consequence, by restricting the ownership management and control of these interests to 49 per cent, may be a flimsy protection. There might be many ways in which a company acquiring 49 per cent of the ownership of a business can take practical control of that business, notwithstanding that they might technically be restricted in the management and control. Potential exclusion from ownership of any qualified solicitor must promote the possibility of the non-desirable control which Parliament seeks to exclude.

The Act therefore may be holed below the water line even before its passage into law. The profession will no doubt address this legislation and seek to make it operate in the best interests of clients and of the public but it is difficult to see how the profession, the public or the judiciary will be able to repose the necessary trust in the new types of law firms.

• Michael Sheridan is Secretary of the Scottish Law Agents Society