Chamber and committees

The general approach is that it is for the approved regulators to resolve regulatory conflict, in discussion with other regulators, as appropriate. However, should that prove to be impossible or unduly complicated, this power allows the Scottish ministers the flexibility to ensure that such conflicts can be resolved. As the provisions that would be made would depend on the detailed circumstances of any particular conflict that may arise and would address an issue that would be likely to require quick resolution, the use of subordinate legislation is considered to be appropriate. As was raised with the Law Society during its evidence, it is already subject to the oversight of a number of regulatory bodies, such as the Financial Conduct Authority, for the purposes of anti-money laundering and incidental financial business.

The bill also seeks to expand the oversight of the Scottish Legal Complaints Commission to allow it to set minimum standards for the first time. In addition, the bill introduces regulation of legal entities for the first time in Scotland, and we also have a system for the regulation of licensed providers, which it is hoped will be up and running soon. The Law Society will continue to be responsible for the regulation of individual legal practitioners and for some firms that operate across the border and that have regulatory responsibilities in each area of their operation. As has been acknowledged, the system is complex, and the regulation-making powers provide reassurance that any regulatory conflicts that may arise can be rectified.

As Leanna MacLarty said, we are still working through the detail of that. Of course, we will give careful consideration to the recommendations from this committee and the lead committee.

Thank you, convener. Section 20(6) is intended to be used should it be discovered in practice that further additional measures would be helpful tools because the existing suite of powers in section 20 are found to be insufficiently robust or extreme or disproportionately severe.

The powers ensure that there are appropriate tools to tackle any poor performance on the part of regulators. The section is also intended to be used to give further details about the specifics of the measures that can be taken and the procedures involved. For example, it allows the Scottish ministers to specify the maximum amount of financial penalty that may be imposed on a regulator in accordance with paragraph 13 of schedule 2 to the bill. That power has already been written into legislation and approved by Parliament in the Legal Services (Scotland) Act 2010.

I have indicated my intention to lodge amendments that will transfer the responsibility for carrying out the review under sections 19 and 20 to the Lord President. The regulation-making powers remain necessary despite the change, but the provision already requires the Lord President’s agreement before any regulations are made. That power acts as a veto against any new measures being introduced.

I will give members an example of where that delegated power could be used. Although we consider that the measures that are already provided are sufficient, the Lord President may seek a power to remove a particular individual from a role within a regulator rather than take measures against the regulator as a whole. As an example, in certain circumstances, the Lord President may remove the chair of the Scottish Legal Complaints Commission.

No, that is not fair. Early negotiations are on-going regarding the issue, and we will take forward and consider all the recommendations of this committee and the lead committee, and those of the legal sector. Engagement on the matter is on-going.

Yes, we are engaging with all stakeholders and the legal sector as we progress the bill.

Having considered the feedback from stakeholders, we intend to lodge amendments at stage 2 that will introduce a requirement for the Lord President’s consent to be obtained before any regulations are made using that provision and which will narrow the scope so that it will be used in response to a request by a regulator or the consumer panel.

The provisions are necessary to ensure that the guarantee fund, which is established in what is now quite aged legislation, continues to be able to adapt to changes in the way in which solicitors operate.

Do any of my officials want to come in on that?

I would like to provide some context to what we are proposing by explaining how things are done in England and Wales. In England and Wales, the Legal Services Board acts as an independent regulator of the front-line regulators of solicitors, barristers and other branches of the legal profession. The LSB is accountable to the Parliament through the Lord Chancellor and is sponsored by the Ministry of Justice. The Lord Chancellor, a United Kingdom minister, has several statutory roles in relation to the Legal Services Board and the regulation of legal services within the Legal Services Act 2007. Some of those are very similar to the things that have been proposed in the bill.

I have listened to the views that the committee heard last week, and officials have been engaging with the judiciary and stakeholders.

It is considered that the newer regulators run the greatest risk of encountering circumstances that would render them unable to operate at short notice and create a need for the Scottish ministers to step in and ensure that their members continued to be authorised to provide legal services to the public while alternative arrangements are worked out. It was considered appropriate to separate those provisions from section 49, which also deals with situations of necessity in relation to any regulator, allowing the Scottish ministers to take action as a measure of last resort, while maintaining the requirement for parliamentary scrutiny and approval in advance of such steps. However, given the similarity of the measures in sections 35 and 49, we are exploring amendments that would bring them together in one provision that would maintain the power to take action in urgent situations, take it away from the Scottish ministers, and transfer it to the Lord President.

Section 41(6) has been criticised by the Law Society as preventing it from regulating legal businesses in terms of non-legal services—for example, that could involve estate agents, accountants or tax advisers. That is not the intention of the bill, and we are working with the Law Society to ensure that the introduction of entity regulation is as effective and beneficial as possible. Currently, we are exploring amendments that will make that clear.

The power in section 41(2) gives the Scottish ministers flexibility to expand on the regulatory matters that will be covered by the regulatory rules in order, for example, to add clarity or address unforeseen issues. Currently, that will apply to the Law Society alone as the only category 1 regulator. However, if there were more than one category 1 regulator in the future and different regulators applied rules inconsistently in a way that would have a negative effect on consumers or competition, it might be beneficial to make regulations so that regulators took a consistent approach.

We have listened to the concerns and intend to lodge amendments that will narrow the scope of the power so that a change would be made in response to a request from bodies such as the regulators or the consumer panel. That would introduce a requirement for the Lord President’s consent and for consultation with regulators and the other bodies in respect of regulations under section 41(2).