TheCityUK responds to the Regulation of Legal Services (Scotland) Bill 2023

15 August 2023

TheCityUK’s Legal Services Group brings together industry leaders to provide thought leadership on the development of legal sector policy and regulation for the UK legal services sector.

Legal services form an integral part of the financial and related professional services ecosystem and underpin business stability and growth across the economy. The general counsel, law firms and professional bodies in our membership make a huge contribution to the UK’s standing as the world’s preferred destination for businesses to resolve international commercial disputes, which we underline in our annual Legal Services Report. Our Legal Services Group includes representatives from firms headquartered in Scotland, as well as other UK and international law firms with offices in Scotland.

Scotland has a distinguished history in financial services that dates back over 300 years. It is one of Europe’s leading financial centres and the second largest international financial hub in the UK. As a result, our industry sustains around 145,000 jobs in Scotland - about 6 per cent of national employment – and delivers 9.6 per cent of national Gross Value Added to the country.

The UK is currently a world leader in legal services, but the sector operates in a competitive global environment. Our reputation and standing, which has taken centuries to build, must not be taken for granted. It is important that legislative and regulatory changes do not, and are not perceived to, undermine the certainty and stability provided by the laws of the different jurisdictions of the UK, the UK’s ongoing commitment to the rule of law, or the effectiveness and independence of the UK’s courts, judiciary and lawyers.

Fundamental tenets of the rule of law are the principles of the independence of justice and the separation of powers between the justice sector and the executive. Our primary concerns about this legislation relate to these fundamental principles. While we understand that there are devolved powers involved here, these are constitutional issues for the entire UK. We do not believe that the proponents of the changes outlined in this Bill have fully appreciated the fundamental rule of law principles at hand, nor the damaging constitutional precedent their adoption would create.

Similar proposals were previously rejected in England and Wales, after deep and careful consideration and consultation. Indeed, England and Wales’ current regulatory regime, established under the Legal Services Act 2007, was constructed precisely to address these separation of powers and rule of law concerns. It would therefore be damaging to Scotland’s reputation for democracy and rule of law to make such sweeping changes, particularly without due consideration and consultation so that the wider implications are fully debated and understood.

Moreover, given the UK’s international position as a leading proponent of the rule of law and as a global legal centre, it would be extremely damaging to Scotland’s, and the UK’s, international reputation if these measures were adopted.

TheCityUK has engaged with members of its Legal Services Group, the Law Society of Scotland and Scottish Financial Enterprise in developing this response.

Key concerns with the Regulation of Legal Services (Scotland) Bill

TheCityUK is deeply concerned about several provisions in the Regulation of Legal Services (Scotland) Bill, currently before the Scottish Parliament, which threaten to seriously undermine the independence of Scotland’s legal profession from the state.

Sections 19 and 20 of the Bill introduce sweeping levels of ministerial intervention into the regulation of the legal profession, including who can be admitted to the profession and regarding the professional requirements placed upon solicitors.

Section 41 would give Scottish ministers a direct role in approving rules on the way law firms operate, while Section 49 would allow the Scottish Government to directly regulate law firms.

If enacted, these measures would represent an unprecedented level of political intervention in the independence of the modern legal profession, either in Scotland or the rest of the UK.

TheCityUK is strongly opposed to these measures as a matter of fundamental legal principle. They undermine the separation and independence of justice from the executive and legislature and would make Scotland (doubtless unintentionally) look as if it no longer respects rule of law principles. It would make Scotland an outlier compared to other democratic nations.

In addition, TheCityUK has concerns around Section 60 of the Bill which seeks to define legal privilege. The definition proposed is narrower than the common law definition and does not include legal advice privilege.  This could undermine the fundamental right to have privileged legal communication with a solicitor for legal advice.

Taken together, these measures could have a seriously detrimental impact on the international competitiveness of Scotland’s legal and financial services sector and could, over time, threaten jobs and economic investment.

For example, should legal professional bodies and regulators in the USA or EU (and other key economies) deem that Scotland’s legal profession was no longer independent from government and/or that it does not have legal privilege, they may deem Scottish lawyers unable to represent clients in international legal proceedings. It may also result in international companies being advised not to invest in Scotland and/or to move their operations to other parts of the UK (or elsewhere), and/or not to use Scottish law or resolve their disputes in Scotland. This would cause long-term damage to international trade with, and investment in, Scotland (and indeed trade and investment with and from other parts of the UK).

TheCityUK strongly urges the Scottish Parliament to seriously reconsider the measures discussed above, and to ensure that the Scottish Government continues to respect the fundamental constitutional principles of separation of powers, rule of law, and the independence of the legal profession.

For further information and any enquiries, contact us.