Friday, September 28, 2007

OFT calls for Scottish legal services market reform at lawyers debate

The OFT are due today, Friday, to call for legal services market reforms at the Law Society of Scotland's "Public Interest" debate at the National Gallery of Scotland.

Rumour has it that anyone critical of the legal profession attending the so-called 'public interest debate' might have to wear body armour, for fear of flying objects from the protectionist minded audience of lawyers ...

The Herald reports :

Scotland urged to ‘sweep away’ closed shop in legal services


The Office of Fair Trading will today urge Scotland's 10,000 lawyers to embrace greater competition in the nation's legal services market or face being "left behind" by English competitors.

Sean Williams, executive director markets and projects, will tell a landmark conference in Edinburgh that the watchdog is determined to sweep away the "closed shop" which prevents organisations such as banks and supermarkets from offering legal services in Scotland.

He will dismiss the arguments of those who claim "alternative business structures" (ABSs) will wipe out small law firms and leave Scottish legal practices vulnerable to infiltration by organised crime.

The OFT believes a "fit-to-own" test would safeguard the integrity of legal services delivery and claims many small firms and sole practitioners will actually benefit from outside investment.

In England and Wales, reforms collectively dubbed "Tesco Law" are set to take effect in 2010. External investors such as supermarkets and banks are being allowed to own and run law firms for the first time. Practices will also be able to float and appoint non-lawyer partners including accountants, while English barristers and solicitors will be able to form partnerships.

North of the border, there has been limited appetite for implementing alternative ways of doing business. "MacClementi", a working party report on Scotland's legal services market commissioned by the Scottish Executive and published in early 2006 after much prevarication, was widely viewed as a damp squib. That split the profession, with some eminent Scots lawyers in favour of the new freedoms and others hostile.

Before this year's Holyrood elections, the then SNP justice spokesman Kenny MacAskill said Tesco Law was "to be avoided" as "it would not suit Scottish society", while conceding there should be "some opportunity for successful Scottish firms to compete globally".

Now Justice Secretary, MacAskill is under pressure to act after the OFT upheld calls by consumer watchdog Which? for reform of Scotland's legal services market. A "super complaint" lodged with the OFT in May by Which? had recommended the watchdog address fears that the current regulation of Scottish legal firms is hindering competition in the market, restricting choice and pushing up the price.

The Scottish Government must respond to the OFT within 90 days, by early December. MacAskill will tell today's conference that the "status quo is not an option", while warning that he has no intention of "blindly following an English approach, or adopting a model which is unsuited to (Scotland's) needs as a country".

The Justice Secretary will pledge to do all he can to maintain viable legal practices in local communities, suggesting that new business structures may help this by enabling law firms to offer a wider range of business services. But he will warn of the dangers of moving to a wholly open market "at one step" and underline the need for proper regulation of entrants.

MacAskill will concede that law firms may need access to external capital to compete, and will suggest that Scotland could steal a march on England and Wales by piloting new capital-raising models over the next three years.

Today's event at the National Gallery of Scotland, "The Public Interest, Delivering Scottish Legal Services", has been organised by solicitors' governing body the Law Society of Scotland. Billed as a "platform for debate", the event takes place as some lawyers are becoming increasingly frustrated at the absence of concrete reform proposals.

Magnus Swanson, chief executive of Big Four law firm Maclay Murray & Spens, is among those who says there is little point in the profession continuing to prevaricate on ABSs.

He warned earlier this month that it would be a "real shame" if Scotland's larger firms, which had struggled to transform themselves into UK players, were forced to become English-domiciled because of intransigence from the Scottish Government or law society.

Kyla Brand, OFT representative in Scotland, warned yesterday that Scotland's legal sector could soon find English tanks parked on the lawn if it fails to reform. "It would certainly not be beyond the wit of London-based organisations, for example, to recruit Scottish solicitors and user their wider reach to compete in Scotland," she said.

"These issues have been discussed (here) for quite some time and it is now over 18 months since the Executive's working group reported. It is time to look at how the changes can be made to work in Scotland."

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