Chapter 4: Principles of regulation
4 This chapter sets out our view of the principles which should be in place to underpin the regulatory framework for alternative business structures ( ABS). Regulators would have a duty to promote such principles, which would be relevant to any provider of legal services. This chapter also considers how regulation can best promote access to justice.
General regulatory principles
4.1 The Better Regulation Task Force set out five principles of good regulation. 23
- Proportionality: regulators should only intervene when necessary. Remedies should be appropriate to the risk posed and costs identified and minimised.
- Accountability: regulators must be able to justify decisions and be subject to public scrutiny.
- Consistency: Government rules and standards must be joined up and implemented fairly.
- Transparency: regulators should be open and keep regulations simple and user-friendly.
- Targeting: regulation should be focused on the problem and minimise side effects.
4.2 The Better Regulation principles have been endorsed by the Regulatory Review Group which advises the Scottish Government.
4.3 These principles have informed the Government in developing our proposals for the regulatory framework, and we wish them to guide the actions of the regulators of legal services.
Legal regulation principles
4.4 We also believe it is important to set out more specific regulatory objectives which reflect the special features of the provision of legal services. These objectives would guide those regulating the provision of legal services. We propose, at this stage, that this duty would fall to Scottish Ministers with the agreement of the Lord President (paragraph 5.16 provides more detail).
4.5 This is a change from the current position. At present the objects of the Society under the 1980 Act are simply stated to include: 24
"The promotion of
(a) the interests of the solicitors' profession in Scotland; and
(b) the interests of the public in relation to that profession."
4.6 The Faculty of Advocates does not have formally stipulated regulatory objectives, although their Guide to Conduct 25 sets out the duties advocates have in relation to the Faculty, the court and to the client.
4.7 In setting out objectives, we recognise the need for balance between stipulating too few objectives with the risk of leaving features out, and too many objectives which could dilute the importance of key areas. It is also important to focus on objectives which regulation can reasonably expect to influence.
4.8 Having considered existing models, including section 1 of the LSA 2007, we propose the following regulatory objectives. 26
- Upholding the rule of law and the administration of justice.
- Protecting and promoting the public interest.
- Promoting access to justice.
- Protecting and promoting the interests of consumers.
- Promoting competition in the provision of legal services.
- Promoting and maintaining adherence to professional principles.
4.9 Subject to the views of consultees, we see merit in the approach in the LSA 2007 of setting out the considerations which should guide the actions of regulators, and stating the "professional principles" which will inform regulation and which would be common to any bodies providing legal services.
4.10 The LSA 2007 places a regulator of legal services under a statutory obligation so far as is reasonably practicable, to act in the following.
- A way which is compatible with the regulatory objectives.
- A way that the regulator considers most appropriate for the purpose of meeting those objectives.
The regulator must have regard to the following.
- The principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed.
- Any other principle appearing to it to represent the best regulatory practice.
4.11 The professional principles in the LSA 2007 are as follows.
- Authorised persons should act with independence and integrity.
- Authorised persons should maintain proper standards of work.
- Authorised persons should act in the best interests of their clients.
- Persons who exercise before any court a right of audience, or conduct litigation in relation to proceedings in any court, by virtue of being authorised persons should comply with their duty to the court to act with independence in the interests of justice.
- The affairs of clients should be kept confidential.
4.12 The professional principles would not replace the codes of individual professional bodies, but where those bodies exercise regulatory functions, such codes and their application would be expected to be compatible with the professional principles.
4.13 These principles would not seem to conflict with the core values of solicitors, as stipulated in the Society's Code of Conduct for Scottish Solicitors 2002. 27
- Guaranteed independence. Solicitors must give advice without fear or favour.
- Acting in the interests of the client. Solicitors must preserve their independence, observe the law and adhere to professional conduct.
- Avoidance of conflicts of interest. Solicitors should avoid acting for multiple parties in matters where there may be a conflict of interest.
- Client confidentiality. All discussions must be treated with the highest confidence.
- Provision of a professional service. Solicitors must be competent in matters s/he receives instruction on, carry out work in a timeous manner and communicate effectively with clients.
- Charging of fair and reasonable fees.
- Enshrining trust and integrity.
- Ensuring a proper relationship with the courts.
- Ensuring a proper relationship with other lawyers.
- Civil professionalism. Seek improvements in the law and legal system and act as a guardian of national liberties.
- Discrimination. Solicitors must not discriminate on the grounds of race, sex, religion or disability.
4.14 Similarly, the general principles guiding the conduct of an advocate of independence, trust and personal integrity, and confidentiality, appear compatible with the professional principles as stated above. 28
Access to justice
4.15 One of the proposed regulatory objectives would place a duty on regulators to promote access to justice. Access to justice is a key aim of the Government, and the proposals of both the Faculty of Advocates and the Society place great emphasis on the issue.
4.16 Regulation is not the only or even main route to securing access to justice - it forms part of the Government's wider approach to improving access. Key to that approach is ensuring the supply of legal advice and representation.
4.17 The Government's view is that,access to justice should primarily be secured through legal professionals operating in the private and in some cases not for profit sectors. However, where such a supply is not available, or there are policy reasons to support a mixed model of provision, we will supplement that provision by targeted, publicly run or commissioned services. For example, the Government has recently committed an additional £1.5m a year to improve advice and representation in areas such as debt and housing in response to the economic downturn.
4.18 The Government is seeking to improve the availability of legal aid where that is feasible and affordable. The Cabinet Secretary for Justice announced on 7 November 2008 plans to extend financial eligibility for civil legal aid to those with disposable incomes up to £25,000 a year (the current limit is £10,306). 29 The Government is also working with the Law Society of Scotland and the Scottish Legal Aid Board to consider what may need to be done to ensure that solicitors entering the profession in the future continue to undertake legal aid work.
4.19 We are also taking forward a range of initiatives 30 to help courts, tribunals and other dispute resolution mechanisms to be more efficient, speedier and more responsive to the needs of those who use them.
4.20 We believe that our legislative proposals will support access to justice by opening up the possibilities for new ways to provide legal services, but there are risks which need to be managed as far as possible by effective regulation. Regulation cannot, by itself, guarantee access to justice, but it can play a positive or negative role.
4.21 In areas where there is a well functioning and competitive legal services market, a positive effect is likely to be achieved primarily by ensuring that regulatory provisions or licence conditions do not distort or reduce competition.
4.22 In areas of under-supply or publicly funded provision, different issues arise. There are concerns that concentration of supply could reduce competition and that there will be a focus on more profitable areas of business, potentially at the expense of the traditional small to medium sized "High Street" practice. 31
4.23 Such firms are the core of the profession offering personal and accessible services to local communities across Scotland - although, as the Society notes, the trend towards consolidation of practices is already evident in some areas.
4.24 We considered whether the regulators should impose explicit access to justice requirements on providers of legal services - either on all providers, on those operating an ABS, or in particular cases where a risk to access is present.
4.25 This could be done through conditions of licence, for example by requiring a provider to offer services in less remunerative areas of law, or to provide support in some way to other services operating in areas such as social welfare law (for example, by training, pro bono work, or technical assistance).
4.26 We have concluded that such provisions would be very difficult to operate fairly and effectively in a competitive private market, and are not the best vehicle for securing access. While it will be possible for a regulator of ABS to grant conditions of licence, these are only likely to apply in exceptional cases.
4.27 However we do believe that it should be possible for the regulator to refuse to issue a licence where there is demonstrable evidence that the business will have a wider negative effect on supply.
4.28 We anticipate such provisions being used very sparingly and in accordance with regulatory principles of fairness and transparency.
4.29 It would also be the responsibility of regulators to monitor issues of supply, and report to the Government any issues of concern calling for wider Government action.
9 Do you agree that there should be a statement of regulatory objectives for providing legal services in ABS as proposed in paragraph 4.8?
10 Do you agree that regulatory objectives should be supplemented by considerations which should guide the actions of regulators, as proposed in paragraphs 4.9 and 4.10?
11 Do you agree that there should be a statement of professional principles for those providing legal services in ABS as proposed in paragraph 4.11?
12 Are there any amendments which should be made to the Government's proposed listings at paragraphs 4.8, 4.10 and 4.11?
13 Do you agree that it should be possible for regulators to grant conditions of licence or to refuse a licence to operate an ABS where there is demonstrable evidence of a risk to access to justice (as proposed at paragraph 4.27)?
14 Do you have any other suggestions as to how the regulatory objective of promoting access to justice can best be achieved?