Scottish solicitors reject Government's '100% Tesco Law' model

Scottish solicitors have backed a compromise motion on Alternative Business Structures (ABS) by 1,550 to 1404 votes at their Annual General Meeting; with the compromise motion securing the highest number of votes in support of any ABS motion at the Law Society of Scotland's AGM on Thursday 27 May 2010.  The compromise motion would permit ownership of law firms by non-legal professionals to a maximum of 25% of the business.

The motion was proposed by GLC's Mike Dailly, seconded by Govanhill Law Centre's Lorraine Barrie, and backed by the Scottish Law Agents Society among others. ABS has been dubbed 'Tesco Law' because it would enable supermarkets, banks, corporate investors, fund managers - and potentially even organised criminals - to own and control 100% of a law firm as an 'external investor': the Scottish Government's Legal Services (Scotland) Bill, as introduced, makes provision for a 100% external ownership model of ABS. 

The Council of the Law Society of Scotland's motion called for a reduced version of the Scottish Government's own ABS model, with no more than 49% of a firm being owned by external investors. The Council's motion was narrowly passed by 21 votes: 1486 to 1465.  At the meeting of Council following the AGM, GLC's Mike Dailly argued that the Society's policy on ABS now had no moral mandate standing the AGM, and that the will of the legal profession was clearly divided, and incapable of being said to be in favour of 49% external ownership.  Council accepted that there was now no clear consensus on ABS.   The Society's official AGM report is here (opens as PDF).

Mike's main speech proposing the compromise motion is here; for arguments explaining why 100% external ownership of Scottish law firms could result in significant consumer detriment and be contrary to the public interest in Scotland see here (2010) and also see here (2008).

GLC to move compromise ABS motion at Law Society AGM

There has been great division within Scotland's legal profession over Alternative Business Structures (ABS). For example, a large majority of solicitors at the most recent SGM voted against the principle of external, capital, ownership of law firms – while there is no denying there remains support for this form of ABS within the legal profession. Accordingly, Govan Law Centre's motion is an attempt to square the circle, heal divisions, and unite Scotland’s legal profession around an effective and reasonable compromise.

A primary policy aim of the Legal Services (Scotland) Bill (‘the Bill’) is to enable greater legal services competition, innovation and growth in Scotland. We all support those principles, notwithstanding the Justice Committee has pointed out that no evidence has been presented to show our current system is deficient.

The strength of the Scottish legal system is that legal services are provided by independent firms of solicitors within a robust and invasive regulatory regime. A system where practitioners are more than sum of their business parts; operating as members of a common profession with an ethical framework instilled as undergraduate, postgraduate, trainee solicitor; enforced through peer pressure and our Law Society. A system where practitioners provide a quasi-public service and owe their first duty to the court.

The proposed motion would safeguard those core values, while facilitating innovation, growth and greater competition. Innovative ABS arrangements and partnerships could be entered into with non-solicitors. However, the motion would help ensure that any ABS remained a Scottish law firm by capping non-solicitor ownership or control at 25%. Clients of such an ABS would continue to enjoy legal professional privilege.

From a regulatory perspective, all of the concerns associated with the ability of corporate external investors and shareholders to own and exercise control, or influence, over an ABS would be resolved by requiring non-solicitors to be natural persons providing services as part of the business: for example, as surveyors, architects, IT experts, estate agents, accountants, or other professionals.

The arguments for, and against, external capital ownership have been well discussed and there is no need to repeat them here. As presently drafted, the Bill would create a liberalised ‘light touch’ regulatory system for Scottish legal services, relying upon a weak risk management system.

This form of ABS was conceived in the era before the UK financial services meltdown. For example, while the UK Parliament was enacting the English Legal Services Act in 2007, the consequences of a liberalised financial services market were only beginning to show, with a run on Northern Rock in September of that same year. It is highly doubtful that the UK Parliament would have embraced the current English form of ABS if they had known what we know now.

Certainly, financial services regulation in the UK has since moved towards an invasive, deep search, system. The economist John Maynard Keynes famously said: ‘When the facts change, I change my mind. What do you do, sir?’ The facts on ABS have changed.

Motion proposed by Mike Dailly, Govan Law Centre and seconded by Lorraine Barrie, Govanhill Law Centre.

"The members of the Law Society of Scotland in general meeting call upon the Scottish Parliament to amend the terms of the Legal Services (Scotland) Bill, presently before parliament, to the effect that at least 75% ownership and control of any entity authorised to carry out work which is reserved to persons qualified to practice as solicitors in terms of the Solicitors (Scotland) Act 1980 should (except in relation to any entity not vested in persons so qualified but which provides legal services as authorised by current law) be vested in solicitors who hold valid practising certificates free of conditions (as construed by reference to section 15(1) of the 1980 Act); and that no more than 25% of said entity should be owned or controlled by natural persons not being solicitors with a valid practising certificate, each of whom provides services which are in support of, incidental to, or complementary to the provision of legal services by the entity".

Breaking news: Alternative Business Structures rejected at Law Society's SGM ...

The Scottish Law Agents Society's motion opposing the external ownership of Scottish law firms ('Tesco Law' or ABS) has been approved at a Special General Meeting of the Law Society of Scotland (LSS)in Edinburgh this morning, reversing the pro-ABS policy of the LSS. A proposed 'ABS lite' amended motion by McGrigors was rejected by Scottish solicitors. 1,817 votes were cast against ABS, with 1,290 in favour.

Democracy shamed and silenced

More than 3,200 Scottish solicitors were disenfranchised and silenced today when the President of the Law Society of Scotland, Ian Smart, used a technicality to deny them a vote on whether to embrace or reject ‘Tesco Law’ (Alternative Business Structures or ‘ABS’).

Despite Mr Smart having previously challenged opponents of Tesco Law to ‘bring it on’, he faced a humiliating defeat today which he, Council members, and a small number of multi-millionaire big firm partners refused to face for fear of certain defeat.

Approximately, 2,300 solicitors had granted proxy votes against Tesco Law, with only around 921 in favour of the Law Society’s position. As the prospect of defeat presented itself to the Law Society’s minority elite they tried desperately to nobble the democratic will of the majority opposition.

They called for a comfort break, and asked opponents if they would agree to a restriction on external ownership whereby ABS providers would be required to have a majority of solicitors. The opposition agreed to enter into dialogue after the SGM but refused to compromise their motion, and pressed for a vote.

Facing certain defeat, Scotland’s Law Society President called for the meeting to be adjourned and seized upon a technical rule whereby only those present in the room could vote, resulting in over 3,000 proxy member votes being discounted. The net result was that 70 members of the profession – including around 50 Council members and a handful of multi-millionaires – voted to disenfranchise the democratic will of over 3,200 members.

GLC’s Principal Solicitor raised two points of order at the meeting. The first noted that given over 3,200 members had cast their vote by proxy, it would be undemocratic to deny them a voice in the future of our profession, and that the spirit of the debate required their voice to be heard and respected. This concern was rejected by Vice President, Jamie Millar of Brodies Solicitors, who chaired the SGM.

Secondly, Mike called for a vote of 'no confidence' in the Society’s President, Ian Smart, who had presided over the most undemocratic period in the Law Society of Scotland’s history, and by denying 3,200 members a voice in this debate had brought the legal profession into disrepute. This call was rejected by Mr Millar as incompetent.

GLC’s Principal Solicitor said:
“This is a dark day for Scotland’s legal profession. Democracy has been shamed, denied and abused by a small elite of 70 members, against the clear will and voice of of 2,300 members who had voted against Tesco Law. The Council of our Society has lost all credibility today. You can deny a democratic vote by filibuster or technicality, but the only loser is the reputation of our profession which now lies in tatters after this affront to democracy”.

A report on proceedings at the SGM is in The Times (Friday, 26 March 2010) here, and in The Scotsman here.

Law Society rigs referendum question

As Scottish solicitors cast their votes in the 'Tesco Law' referendum (whether to embrace or reject the external ownership of law firms by non-solicitors) the Law Society has chosen to use a ‘loaded’ question, heavily weighted in its favour.

The referendum question chosen by the Society predetermines the answer by making a value judgement that there will be ‘appropriate safeguards’ to protect the independence of solicitors' legal services to the public. But that is the very issue which is hotly contested in the Legal Services (Scotland) Bill. Also, the question as framed is tautological (‘a statement that is true of necessity or by its logical form’). The question asked is:

"Do you support in principle the introduction of Alternative Business Structures ("ABSs") to Scotland as long as there are appropriate safeguards to protect the core values of the legal profession and there is an equivalence of regulation between ABSs and traditional firms?"

Govan Law Centre’s Principal Solicitor, Mike Dailly, said:

"At the heart of the Tesco Law debate is the concern there would be inappropriate safeguards to prevent solicitors being influenced by a vested corporate agenda to the detriment of the public. For the Law Society to phrase its question to assume there would be safeguards is nothing more than a shameless attempt to procure a yes vote."

"The international and UK established practice in referenda is for questions to be framed as neutral, simple and unconditional, and for both sides of the argument to have a fair and level playing field when it comes to campaigning. That hasn’t happened as the Society has deployed all its staff and resources to campaign for a Tesco Law 'yes' vote. But now the referendum itself has been rigged by a loaded question".

"The Law Society’s President Ian Smart should hang his head in shame. The question should be reset in neutral terms, and Mr Smart should resign forthwith for presiding over the most unfair and undemocratic process in the history of the Law Society of Scotland".

GLC suggests the question should be framed in simple, neutral and unbiased terms:

Question: Do you support the introduction of Alternative Business Structures to Scotland?"

YES

NO

Go, and go quickly

Call for the President of the Law Society of Scotland to resign, from GLC's Principal Solicitor.

Referenda are a powerful means to provide certainty on important issues. But the democratic authority of any vote depends upon whether it has been conducted fairly and transparently.

The UK Parliament recognised this in enacting the Political Parties, Elections and Referendums Act 2000. Part VII of that Act ensures that any UK referendum is conducted fairly, with both sides of an issue having equivalent financial resources, and equal routes of access to influence the plebiscite with their literature or voting message.

The current Scottish debate on Alternative Business Structures or ‘Tesco Law’ is subject to two forthcoming votes: a Special General Meeting on 25 March, and a referendum thereafter. The body responsible for conducting these votes is the Law Society of Scotland.

The Law Society of Scotland is the Returning Officer, charged with operating and conducting the ballot of its members, and counting the votes cast at the SGM and referendum on Tesco Law. The electorate are 10,500 Scottish solicitors, who are members of the Law Society of Scotland.

Yet, have you ever heard of a Returning Officer deploying all of their financial resources and staff to influence a vote? Actually, not just influencing a vote, but aggressively and overtly campaigning for a particular outcome in that vote?

No? Well, incredibly this is what the Law Society of Scotland is doing. It even has a Scottish Government Minister speaking on its platform today to tell us why we must support the Law Society’s and the Scottish Government’s desire to allow external ownership of Scots legal firms by financial institutions and other non-solicitor bodies.

Now, I have no problem with Ian Smart travelling around Scotland to preach the false virtues of Tesco Law to Scottish solicitors. That’s his personal right as a solicitor, but not as President of the body which is conducting the poll of its members on this issue. On his own time and expense only.

Likewise, why is Lorna Jack, the chief executive of our Society, travelling around Scotland to encourage solicitors to vote for Tesco Law? Ms Jack is a paid official, she is not a Scottish solicitor. She has no vote. Why should she use her official position to influence the outcome of a democratic vote?

The Law Society’s view on Tesco Law is what its members tell it; not what the President, Council, or the chief executive think. Otherwise, what’s the point of holding of a democratic plebiscite?

Likewise, I have no problem with Janet Hood promulgating the benefits of Tesco Law to in-house solicitors. But not as Chairman of the Law Society of Scotland’s In-House Lawyers Group, using the Law Society’s resources and confidential membership data to influence the vote of members. Data which is not available to those solicitors who disagree with Tesco Law.

The Law Society of Scotland is presiding over a polling exercise whereby it is also the chief campaigner and PR agent for ‘Tesco Law’. It’s the judge, jury and executioner of the independence of our profession.

Our Office Bearers and officials should be neutral in this debate: they should permit their members to advocate for, or against, Tesco Law. They have failed to do so. Worst still, they have taken it upon themselves to dictate to members how they should vote. This democratic deficit can only be described as Mugabesque. It’s thoroughly unfair and brings our profession into serious disrepute here at home, and internationally.

When I was on a recent Human Rights mission in West Central Africa, the British High Commissioner explained to me how certain vested interests paid for votes by slapping a 5000 CFA note on a voter’s forehead. Such undemocratic practices were utterly deplorable and repugnant, but how different are they to some people who should be impartial using their positions as Office Bearers and officers to sway the vote on the future of Scotland’s legal profession?

Scotland’s solicitors have been placed in a deplorable position. Cometh the hour, cometh the man or woman. Leadership is vital in critical moments. I sincerely believe that our President has sold the purse; he has failed to provide leadership; he has failed to promote and safeguard the interests of our profession. He has been responsible for an undemocratic and unfair voting process. I believe that our President, Ian Smart should go, and go quickly.

Royal Faculty debates the Legal Services (Scotland) Bill

Tonight, Glasgow's Royal Faculty of Procurators hosted an informative and passionate debate on the future of Scotland's legal profession in relation to the Legal Services (Scotland) Bill.

Chaired by the Dean of the Faculty, Paul Carnan, the audience of experienced practitioners heard from Alan Campbell, Managing Partner, Dundas & Wilson LLP; Mike Dailly, Principal Solicitor, GLC; John McGovern, Solicitor-Advocate and President of the Glasgow Bar Association; and Ian Smart, President of the Law Society of Scotland. A wide ranging debate took place with excellent contributions from the audience.

Representatives from the Scottish Law Agents Society advised participants that the Parliament's Justice Committee had announced the Stage 1 report on the Bill would be delayed to allow the SGM on the ABS (Tesco Law) aspects of the Bill to take place.

The contribution from GLC's Mike Dailly is available here.

Referendum: time to protect the independence of Scotland's solicitors

The President of the Law Society of Scotland, Ian Smart, confirmed to BBC 1's Politics Show yesterday that an urgent secret ballot of every solicitor would take place, to determine whether the Society should continue to support the 'Tesco Law' provisions of the Legal Services (Scotland) Bill. The Bill would enable non-solicitors to own and control firms of solicitors, and give the Scottish Government the ability to set the number of non-solicitors, and criteria for appointment, on the Society's ruling Council.

GLC's Principal Solicitor challenged the case for Tesco law with Mr Smart on the Politics Show, and argued that the Bill would effectively end over 500 years of solicitor and legal profession independence. Mr Smart's dismissed fears upon the basis that 27% of all solicitors were already employed by banks, companies, and local authorities, and insisted that 'no one would suggest these solicitors were not independent'.

However, GLC's position is that the 27% of solicitors who are already employed by businesses or councils, do not provide advice to the public. They are in-house lawyers providing a specialist service to one client only, the entity that employs them, and therefore, this defence misses the point. The concern is that if the Bill is passed vested corporate interests would be able to provide solicitor services direcly to the public, and those services would not be independent. You cannot have 99% independence, and allowing businesses with track records in unethical and immoral practices to control access to justice is a receipe for moral hazard and disaster.

The debate on the BBC Politics Show can be watched here (105 mins in)

Today's The Scotsman article on this issue is available online here.

Royal Faculty debate on Scotland's legal profession

The Royal Faculty of Procurators in Glasgow is to hold an open debate - Tuesday 9 March @5.45pm - led by leading members of the profession, with contributions from the floor encouraged on Scotland's Legal Services Bill and the future of our legal profession.

The Legal Services Bill is at stage 1 of the parliamentary process. Its proposed changes, such as the introduction of Alternative Business Structures (ABS), could make it difficult for Scots to secure access to independent legal firms, restrict access to justice, and ultimately undermine competition in the Scottish 'legal market'.

GLC's Mike Dailly will speak on the issue of ABS, its threat to competition and access to justice generally; and its commodification of justice. In addition, a debate on whether the Law Society of Scotland can continue in its dual role as regulator and representative of the profession will take place, with a contribution from John McGovern, the President of the Glasgow Bar Association. Speakers representing the Law Society of Scotland, and the 'big four' corporate firms in Scotland will present an alternative viewpoint.

This discussion is made all the more important as the Scottish Law Agents Society (SLAS)have called a Special General Meeting of the Law Society of Scotland to ascertain the profession's views on these fundamentally important issues. Please visit the Royal Faculty for more information - if you are a solicitor and cannot attend you can give a Mandate to SLAS to ensure that access to justice in Scotland does not become a commodity, at the morally bereft caprice of the UK's banks or vested corporate interests.

Solicitors poised to derail ‘Tesco law’

The Times reports that the Scottish government’s flagship reform of the legal profession was in jeopardy last night after a powerful association of solicitors announced that it was seeking to reverse a decision of the Law Society of Scotland (LSS) to support key aspects of the legislation.

The Scottish Law Agents Society – representing 1,500 solicitors — will this morning “requisition” a meeting of the LSS, and call for a vote on the issue of “external ownership” of law practices by companies such as banks or supermarkets. A controversial LSS vote in 2008 in favour of external ownership – often known as “Tesco law” — has become a key part of the Legal Services (Scotland) Bill, and is set to become law later this year.

However, galvanised by the introduction of the Bill in October, which introduced external ownership along with other unpopular reforms known as ABS (Alternative Business Structures) opponents are now confident they have the numbers to overturn the proposed changes.

“After taking soundings among our membership, we are certain there is an appetite for a challenge,” said Ian Ferguson, a board member of the Scottish Law Agents Society. “The vote in 2008 in favour of ABS, came after consistent opposition. We have a substantial number of votes, and think we will reverse the decision within a month.”

Mike Dailly, principal solicitor at the Govan Law Centre said a U-turn by the LSS would torpedo the government’s legislation. “The Bill is only progressing on the understanding that it is supported by the legal profession,” said Mr Dailly. “If that position is completely turned round, MSPs would have to reconsider their position.”

Last night, Ian Smart, the president of the LSS, indicated the society would abide by the decision of the general meeting, which must be held within 28 days of the requisition. “The debate will set the profession and so the society’s policy on external ownership of ABS,” he said.

High street solicitors fear annihilation by ‘Tesco law’ giants

The Times reports today that hundreds of small independent solicitors across Scotland could be forced out of business after four of the biggest law firms in the country voted through reforms that will enable supermarkets and banks to provide cut-price legal advice on services such as house purchases and small claims.

Yesterday, opponents of the reforms, including the Scottish Law Agents Society, which represents independent firms, and the Faculty of Procurators of Dumfriesshire, expressed anger at the scope of the new measures, which they said would introduce a “Tesco Law,” and change the face of the high street.

GLC's Principal Solicitor accused the bigger practices of “railroading” the changes through the Law Society of Scotland. Mike said: “This was the senior partners in the big firms who wanted to protect their vested interest. The rest of us were asleep. There are thousands of solicitors in Scotland — the difficulty has been in conveying to the profession how significant a change this is.”

Critics fear that the vote will threaten the independence of solicitors and inhibit the constitutional right of the consumer to access justice. The full story in available on the TimesOnline.

Call for solicitors to back Scottish Law Agents Society's stance on ABS

Govan Law Centre is calling on all Scottish solicitors to back the Scottish Law Agents Society's proposal to call a Special General Meeting of the Law Society of Scotland to address the significant consumer detriment that is presented by the 'Alternative Business Structures' provisions (ABS)within the Legal Services (Scotland) Bill.

GLC's Mike Dailly said: "It is understood that the Law Society's support for ABS and the Bill was largely the product of Scotland's four big firms procuring mandates in support of ABS from their own solicitors. There is nothing wrong in marshalling support, but it's hardly representative. Furthermore, when support equates to pecuniary self-interest its public interest value is almost meaningless".

"Everyone knows that ABS is an English law solution to an English law problem. In Scotland, it means a few very large legal firms getting together with chartered accountants and bankers, to the benefit of a tiny handful of people. And those people aren't consumers. The independence and integrity of the legal profession is at stake here, as is access to justice and the public interest".

"There is no empirical evidence of the need for ABS in Scotland. What evidence there is points to Scottish consumers losing choice, and access to independent legal advice. While most Scottish solicitors are busy coping with casework demands, we all need to make an effort to support the SLAS. I would ask colleagues to downloadthe SLAS proxy form and back the call for a proper discussion of what the Legal Services (Scotland) Bill means for Scottish consumers and our profession".

Further background information is available on the SLAS site here. Read Mike's blog on this issue on The Firm.