Chamber and committees

I note the committee’s positive response to the introduction of the SLCC’s power to investigate complaints against unregulated legal services providers. As I set out in my response to the committee’s stage 1 report, a body’s presence on the register will not affect the SLCC’s ability to consider services complaints about it or its practitioners. The SLCC will be able to consider a services complaint against any unregulated legal services practitioner, regardless of whether they or their employer are on the register. That will provide new protection for consumers, given that will writing and confirmation services can be provided by unregulated providers.

The intention behind the existence of the register is to provide what we might call a kitemark to those providers who wish to join the scheme, in recognition that those legal services providers are part of a consumer redress scheme. That would allow consumers to make an informed choice when selecting legal services.

The Scottish Government has previously considered the question whether the register should be mandatory for all unregulated legal services providers, as outlined in Tess White’s amendments 646 to 649. However, it is considered that enforcing such a measure would present significant challenges and the proposals in the bill take a proportionate approach. As highlighted, the fact that the register is voluntary will not affect whether the SLCC can consider a complaint relating to a particular unregulated provider, or their employer, and an unregulated provider who is not registered could face a higher amount of the equivalent of the complaints levy. Therefore, rather than—

Absolutely. I take on board Maggie Chapman’s comments. I think that the message should be communicated with a high profile, to ensure that anyone who seeks legal advice is aware of the register. When we move on to stage 3, I would like to discuss how we could strengthen that aspect as well.

I return to my earlier points. Rather than agree to Tess White’s amendments 646 to 649, I ask members to support the approach that the bill takes to ensure that the regulation is proportionate, risk based and agile.

Turning to the other amendments in the group, the purpose of amendment 372 is to require, rather than to allow, the commission to create a register of unregulated legal services providers. The aim of this provision is to strengthen the position following the committee’s stage 1 recommendation to create a mandatory register of unregulated legal services providers.

Amendment 373 will require the commission to use its resources to fund the register and to

“investigate, determine and review services complaints against unregulated providers of legal services.”

Amendment 374 is a minor corrective amendment. Those amendments have been shared and agreed with the Scottish Legal Complaints Commission and they align with the committee’s previous recommendations.

I therefore ask members to support amendments 372 to 374 in my name.

I ask Tess White not to press amendment 646 and not to move amendments 647 to 649. If they are pressed, I ask members not to support them.

I believe that Scottish Government amendments 273 and 642 achieve the intention behind Pam Gosal’s amendment 549 and Paul O’Kane’s amendments 555 and 641, given that our amendments relate to qualifying individuals and will also cover registered foreign lawyers where appropriate.

I know that the issue is very technical, so I am happy to have further discussions before stage 3 on how we can improve things.

Amendment 271 agreed to.

Amendment 272 moved—[Siobhian Brown]—and agreed to.

Section 38, as amended, agreed to.

Section 39—Requirement for legal businesses to be authorised to provide legal services

Amendments 47, 522 and 466 will make the necessary changes to legislation to reflect the change of name of the Association of Commercial Attorneys to the Association of Construction Attorneys. The association sought that change following the introduction of the bill, and that was approved under section 42 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990.

Schedule 1 of the bill would make a variety of changes to the Solicitors (Scotland) Act 1980 with respect to the Law Society becoming a category 1 regulator and the move to entity regulation.

Amendments 5 to 37, with the exception of amendments 15, 24 and 27, are minor or consequential modifications to part 1 of schedule 1 and relate to the Law Society’s functions.

Amendment 24 removes paragraph 22 from part 2 of schedule 1 of the bill, because it is no longer required.

Amendments 412, 413 and 507 make consequential amendments, following a change of name in the bill from the “guarantee fund” to the “client protection fund”. Amendment 11 allows the client protection fund to provide grants, as well as loans, to judicial factors appointed, in order to mitigate the risk of any further pecuniary losses being suffered by the clients of such a person by reason of dishonesty. The amendment reflects engagement with the Law Society, which sought that addition.

Paragraph 6(6) of schedule 1 inserts a new section into the 1980 act to enable the Scottish ministers to, by regulations, adjust section 43 and schedule 3 of the 1980 act in respect of the circumstances when claims can be made and the maximum amount of any grant payable, and in connection with administrative matters.

Amendment 15 restricts the exercise of that regulation-making power only to those cases in which the Scottish ministers have received a request from either a regulator, the Lord President or the consumer panel to do so. Before making such a request, the requester must have consulted the regulatory committee, the Lord President and the consumer panel and must also have secured the Lord President’s agreement to making the request. The provision sets out what information must be provided to the Lord President when seeking their agreement and requires the requester to publish certain documents.

Amendments 461 to 465 make minor and consequential modifications to enactments in connection with regulatory objectives, professional principles and new regulators in part 1 of schedule 3 of the bill.

I move amendment 47 in my name and ask members to support the other amendments in the group.

Amendment 47 agreed to.

Amendments 48 to 50 have been lodged in response to concerns raised by the Delegated Powers and Law Reform Committee and legal stakeholders that section 8 might be used to alter the categorisation of the Law Society of Scotland or the Faculty of Advocates.

The amendments reduce the breadth of the delegated power to be conferred by section 8(5). As amended, that power will allow Scottish ministers to alter only the category of a regulator that is assigned by the bill, for example by making a significant change to a regulator’s composition or the way that it operates. The power will not capture the Law Society or the Faculty of Advocates. As an additional safeguard, the regulation-making power may only be exercised at the request of the Lord President. Amendment 49 is a technical amendment to add a more specific cross-reference to the power.

I move amendment 48 and ask members to support the other amendments in the group.

Amendment 48 agreed to.

Amendments 49 and 50 moved—[Siobhian Brown]—and agreed to.

Section 8, as amended, agreed to.

Section 9—Exercise of regulatory functions

These amendments relate to part 2 of the bill, which makes provision for category 1 regulators to authorise legal businesses to provide legal services. Amendments 273 and 642 extend the definition of an authorised legal business to include business entities that are owned by a solicitor or solicitors jointly with a person or persons who are regulated by a category 1 regulator and clarify that a business may be wholly owned either directly or through one or more other bodies, or partly directly and partly through one or more other bodies. These amendments address a concern that was raised by the Law Society that various types of business entities are not covered by the provisions.

It is an offence under section 39, liable to a £20,000 fine, for a person to own or operate a legal business that provides legal services to the public for a fee, gain or reward without that business being authorised under part 2 of the bill. The Scottish ministers have the power to change the amount of the fine by regulations, and amendment 274 requires them to consult each category 1 regulator and other persons considered appropriate before making such regulations and to publish any responses to the consultation.

Amendment 275 has the effect of treating a sole solicitor, a firm of solicitors, an incorporated practice and a multinational practice, all as defined in the Solicitors (Scotland) Act 1980, as authorised by the Law Society of Scotland to provide legal services to the public for a fee, gain or reward on the coming into force of the section. This amendment meets a request by the Law Society of Scotland for existing authorised legal businesses to be passported into authorisation when the relevant provisions of the bill commence, so that existing legal businesses are deemed to be authorised rather than all of them having to go through the authorisation process at the same time.

Section 40 introduces the offence of taking or using

“any name, title, addition or description implying that the person is an authorised legal business”

or otherwise pretending

“to be an authorised legal business”

with the “intent to deceive”. Amendment 276 removes the “intent to deceive” ground for the offence and replaces it with the words, “without reasonable excuse”. That aligns with our discussions with the Law Society in respect of the offence of pretending to be regulated.

In response to the views of the Law Society, amendment 277 imposes a new requirement on the Scottish ministers to consult each category 1 regulator and other persons considered appropriate before making regulations to increase the maximum penalty for an offence of pretending to be an authorised legal business and to publish responses.

Section 41 requires a category 1 regulator to prepare and operate a set of rules to authorise and regulate legal businesses, which are referred to in the bill as “ALB rules”. Amendment 279 expands what legal business and legal services ALB rules may relate to by including services—other than legal services—that form part of the professional practice of solicitors or individuals that are regulated by a category 1 regulator within a legal business.

Amendment 280 transfers to the Lord President—rather than the Scottish ministers—the power to approve an amendment to ALB rules. Amendment 281 restricts the requirement to consult about changes to ALB rules to apply only in cases where the change is “material”. Amendment 283 requires the consultation response to be submitted with the amendment of the rules sought by the regulator. Amendment 282 makes a consequential change.

Section 41(2)(c) confers power on the Scottish ministers to specify in regulations such other regulatory matters that ALB rules are to deal with. Amendments 284 and 285 provide that the Scottish ministers may exercise that power only when requested to do so by the Lord President, the consumer panel or a category 1 regulator. The provisions also specify the process in respect of consultation and for obtaining the Lord President’s approval.

Amendment 288 provides that regulator rules for authorising legal businesses may make provision about imposing or varying the conditions or restrictions that apply to existing authorisations.

Amendment 291 adds to the list of things that authorisation rules can be about, to include

“circumstances in which an authorised legal business may surrender its authorisation”.

Amendment 289 means that

“renewal of a legal business’s authorisation”

is no longer one of the particular matters that the authorisation rules must include. Amendments 293 and 298 are consequential to that.

Amendment 292 removes examples of particular fees that may be covered by authorisation rules, such as a fee for renewal, leaving a general provision, which states that authorisation rules can be about chargeable fees.

Amendment 295 provides that authorisation rules can include

“rules or arrangements relating to the continued authorisation ... of a legal business that is a partnership other than a limited liability partnership if ... a person ceases to be a partner ... or ... a person is admitted as a partner”.

The purpose of amendment 295 is to provide clarity regarding such arrangements, following a request by the Law Society.

Both amendments 296 and 297 amend section 43 to recognise a right of appeal to the sheriff by an authorised legal business against a regulator’s decision after an internal review. Amendment 299 provides that the sheriff may

“impose, vary or revoke conditions or restrictions”

in relation to that appeal.

Section 45 allows practice rules under section 44 to provide for the imposition of a financial penalty. Amendments 301 and 302 provide for

“the withdrawal of the imposition of a financial penalty”

where the regulator considers that it is not reasonable to seek payment of it.

Amendment 303 provides that the regulator can recover from the authorised legal business the reasonable cost of collecting any financial penalty that is imposed on the business. The purpose of amendment 303 is to allow the regulator to recover the costs that they incur when collecting any financial penalty from an authorised legal business.

Section 45(2) of the bill allows the Scottish ministers to specify, by regulations, the maximum amount that the financial penalty can be. Amendment 304 requires the Scottish ministers, before making such regulations, to consult the category 1 regulator—and other persons or bodies that they “consider appropriate”—and to publish the responses.

Amendment 305 provides that the Scottish ministers can make such regulations in respect of reconciling different sets of regulatory rules only if they have received a request from the Lord President, a category 1 regulator or the consumer panel, which has undertaken a period of consultation and has included with the request information about the consultation responses that have been received. Following the request, the requester must publish the documents that are included in the request.

Amendment 308 requires the Law Society to seek approval for its first ALB rules under the bill.

Amendment 309 removes section 49, which would have allowed Scottish ministers to intervene to establish a body

“with a view to it becoming a category 1 regulator”

or allow for direct authorisation by ministers. I wrote to the committee in January last year, accepting that the

“risk of the Law Society of Scotland being unable to operate its regulatory functions as a category 1 regulator is ... low”,

and again in April, undertaking to

“lodge an amendment at Stage 2 to remove section 49.”

Amendments 271, 272, 278, 286, 287, 290, 294, 300, 306 and 307 are on minor technical and consequential points.

As I mentioned when speaking to group 7, on special rule changes, Paul O’Kane’s amendment 556 in the current group is not a full replacement for the special measures approach to be taken, as it would apply only to legal businesses and not to all legal services providers. As I said previously, that would leave a gap with regard to the Faculty of Advocates and the Association of Construction Attorneys, so unfortunately I cannot support it.

With regard to what Pam Gosal and Paul O’Kane seek to do through amendments 549 to 556 and amendment 641, amendments 273 and 642 in my name will cover a mixture of a legal business as wholly owned by either solicitors or qualifying individuals and will cover registered foreign lawyers where appropriate. My amendment 275 will also address the concerns by confirming the approach in respect of any such multinational practice. That is subject to alternative provision made by rules approved under section 41.

That means that the Law Society of Scotland will be able to make rules, but the starting position is that multinational practices that are wholly owned by solicitors enrolled in Scotland, or qualifying individuals, or a mixture of both, will be treated as authorised businesses under the controls in part 2 of the bill, unless or until the Law Society makes alternative provision in rules. The amendments in my name will therefore achieve the stated aim, while providing a proportionate level of flexibility.

I believe that we all share the same intention in this area, and I am happy to consider working with Pam Gosal and Paul O’Kane again at stage 3 to see how we can adjust the explanatory notes to the bill to ensure that the position is clear.

I ask members to support each of my amendments in the group. In particular, I ask members to support my amendments 273 and 642, and not amendments 549 to 555, and 641, from Pam Gosal and Paul O’Kane. I also ask Paul O’Kane not to move his amendment 556 on special rules for legal business, in favour of the approach that is taken in the bill to special rules changes for all legal services providers. If he moves that amendment, I would ask members not to support it.

I move amendment 271.

The sections on special rule changes relate to the practice rules and provide regulators with the powers to waive practice rules in defined circumstances for the purpose of promoting innovation or avoiding a regulatory conflict by removing an unnecessary rule or making a rule less onerous, where a regulator considers that to be necessary or appropriate. The waivers are not intended to be permanent, so the bill incorporates transparency and accountability to the Lord President in the process.

The intention of my amendments in the group is to retain the system of special rule changes that are set out in the bill as introduced, but to remove some elements, including the requirement to produce a dedicated report every year, and to introduce more flexibility in other areas in response to concerns that have been raised by the Law Society. The proposals for changes were reached following engagement with the Law Society, which feels that some provisions in sections 21 to 24 do not allow for enough flexibility in relation to the granting of waivers.

Amendment 179 will add to the conditions that are already set out in section 21 a condition that a regulator can give a direction to its member or members “only if” the regulator

“is satisfied the direction is compatible with the regulatory objectives.”

Amendments 180 and 181 will add additional circumstances in which a direction may be given—that is, where the regulator considers that a direction is

“necessary or appropriate in the circumstances.”

Amendment 182 provides that a direction may not disapply or modify a requirement under the bill “or any other enactment”. That will ensure that regulators will continue to meet their obligations in respect of the provisions in the bill or any other enactment.

Amendments 185 and 186 will add to the list of things that a direction must specify, including the period of time for which the direction is to have effect. Amendment 188 will remove the requirement that a direction ceases to have effect after five years.

Amendment 183 will limit the duty of a regulator to consult the Competition and Markets Authority before giving a direction that could restrict, distort or prevent competition to a significant extent to circumstances where the direction that is being given is for the purpose of enabling a new or alternative way of providing or regulating legal services to be piloted.

Amendment 184 will make changes to the bodies to which a copy of a direction is to be given and in what circumstances.

Amendment 187 will place a new requirement on a legal services provider to whom a direction relates to inform the regulator of any changes in circumstances.

Amendment 189 will limit the circumstances in which the Lord President may revoke a direction to the directions that have been given by a regulator, on the basis that it was desirable for the purpose of enabling new or different ways of providing or regulating legal services to be piloted. Amendment 190 will remove the duty to give notice of doing so to the Scottish ministers.

Amendment 191 will remove section 23 of the bill, with the effect that the regulator’s duty to prepare a report on each direction will be removed. Amendment 194 will make a consequential change to section 24. Section 24 of the bill requires a regulator to establish and

“maintain a register of ... Directions”

given under section 21 and sets out what documents the register must contain.

Amendments 192 and 193 will remove the need to include a copy of the application for, or application to amend, the direction.

Amendment 196 will add a requirement to specify

“whether the direction is to have effect for an indefinite period.”

Amendment 195 will make a technical change to denote the placement of the new subparagraphs of section 24(2)(b).

Amendments 197, 198 and 199 will make minor technical changes.

Paul O’Kane’s amendments 543, 544 and 545 would remove most of the special rule changes provisions—sections 21, 22 and 24—from the bill. Unfortunately, I cannot support them. Mr O’Kane’s amendment 556, which is to be debated with group 12, would not be a full replacement for the special measures approach that will be taken through sections 21 to 24, because it would apply only in relation to legal businesses, and not to all legal services providers. That would leave a gap in respect of the Faculty of Advocates and the Association of Construction Attorneys.

The provisions apply not only to the Law Society but to all current and future regulators of legal services in Scotland. The provisions would allow rules to be disregarded where that could bring innovation that could benefit consumers or make a rule less onerous for a legal services provider. The Lord President and the Law Society have been consulted on the Scottish Government amendments. I have listened to the Law Society’s comments and I have sought to address its concerns.

I also consider it important to retain transparency and oversight by the Lord President, following engagement with the senior judiciary. The senior judiciary consider that it is appropriate for the Lord President to have oversight of special rules changes and to have powers to revoke certain types of directions.

I will move amendment 179 and I ask members to support my other amendments in this group. I ask Mr O’Kane not to move his amendments 543 to 545. If he does, I urge members not to support them in favour of retaining the special rule changes arrangements in the bill.

I move amendment 179.

Sections 25 to 27 of the bill would allow a body to apply to the Lord President and the Scottish ministers together to become a new regulator of legal services, being accredited to authorise persons to acquire the right to conduct litigation, the rights of audience in courts and the right to provide other types of legal services. The provisions will replace and modernise similar provisions that are contained in the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990.

Following engagement with the Lord President about the concerns that have been raised by the senior judiciary at stage 1 on the role of the Scottish ministers in the regulation of legal services, I gave an undertaking to the committee that I would lodge an amendment to the effect that it would be the responsibility of the Lord President acting alone to consider any application by a body wishing to enter the legal services sector as a new regulator. Amendment 200 will do just that and amendments 211, 212 and 213 will make consequential amendments.

Amendment 209 will insert proposed new section 26A into the bill to give Scottish ministers the power to specify in regulations the additional regulatory matters that must be dealt with in a draft regulatory scheme. However, Scottish ministers will be able to exercise that power only if they have received a request to do so from the Lord President, an accredited regulator or the consumer panel, following a period of consultation with the specified bodies. Except where the Lord President is the requester, the Lord President’s agreement to the request must be obtained.

To address concerns that were raised by the senior judiciary, amendments 201, 203, 206, 207 and 210 will make changes to the application requirements in respect of the draft regulatory scheme that must accompany an application for accreditation. Amendments 202, 204, 205 and 208 are consequential amendments.

The purpose of amendments 214 to 224 and 227 is to remove the involvement of Scottish ministers from consideration of an application and the accompanying draft regulatory scheme, which will leave it to the Lord President alone. The amendments will also introduce additional requirements for consultation and transparency.

Amendments 225 and 226 will place an additional duty on the Lord President, when considering a draft regulatory scheme, to consult the Scottish ministers as well as the Competition and Markets Authority, the consumer panel and other persons who are considered to be appropriate. Amendments 228 to 231 are consequential amendments.

Amendment 232 will impose a new requirement, in proposed new subsections 29(2A) and (2B), on the Lord President to publish the decision on an application under section 25 by a prospective regulator seeking accreditation.

Amendment 233 will remove the requirement for Scottish ministers to make regulations to give effect to the draft regulatory scheme.

Amendment 234 will require an applicant to give effect to and publish an approved regulatory scheme. Amendment 235 will make a consequential amendment. The committee will be aware from correspondence with the Lord President and the Law Society that the amendments are welcomed by the senior judiciary and the legal profession.

I ask members to support my other amendments in the group, and I move amendment 200.

Amendment 200 agreed to.

Amendment 201 moved—[Siobhian Brown]—and agreed to.

Section 25, as amended, agreed to.

Section 26—Regulatory scheme

Amendments 202 to 205 moved—[Siobhian Brown]—and agreed to.

Amendments 546 and 547 not moved.

No thank you, convener.

Amendment 250 agreed to.

Section 32, as amended, agreed to.

Before section 33

I thank Paul O’Kane and Tess White for their amendments, which I am happy to support. However, as I said, we will have to ensure at stage 3 that the revised provisions work within the wider legislation.

Amendment 27, by agreement, withdrawn.

Amendments 28 to 37 moved—[Siobhian Brown]—and agreed to.

Schedule 1, as amended, agreed to.

Section 49—Powers of the Scottish Ministers to intervene

Amendment 309 moved—[Siobhian Brown]—and agreed to.

Section 50 agreed to.