A tale of two clans: ABS row divides legal profession north of the border

The Scottish legal market has long been divided on the question of alternative business structures (ABSs), with the so-called big four firms supporting them while many of their Scotland-only counterparts are against them.

Joyce Cullen
Joyce Cullen

While the Law Society of Scotland (LSS) has been in favour of the structures since ­balloting its members on the subject two years ago, an eleventh-hour intervention from the Scottish Law Agents Society (SLAS) is threatening to derail their introduction.

The Scottish government published its Legal Services Bill last year with the ­intention of enacting it this May. In February, however, the SLAS requested that the LSS hold a special general meeting (SGM) to ­reconsider the reform of the legal services market. The SLAS, whose members are mainly lawyers in high street firms, wanted to use the meeting to hold a vote to change the LSS’s ­policy of supporting ABSs to one of opposing them.

As the SLAS said: ­”Members of the Scottish Parliament have indicated that the bill has been ­produced in response to the wishes of the legal profession as demonstrated by the ­passing of a motion in favour of alternative business ­structures at the AGM in 2008. Members of our own society, in an opinion poll, have rejected the principle of ABSs by a majority in excess of 70 per cent and the authorisation of external ownership of legal practices by a majority in excess of 85 per cent.”

As the SLAS had mobilised its members to sign off on proxy votes, meaning the ballot would undoubtedly have gone in its favour, the SGM was adjourned and the LSS is now holding a ­referendum to ask its ­members again whether they are in favour of ABSs and whether the Law ­Society should ­regulate those structures.

However, partners at the firms that support ABSs claim the SLAS ­intervention is destructive and that the organisation should have made its ­feelings known before the bill had reached such an advanced stage.

McGrigors managing partner Richard Masters says: “There was a full debate in 2008 when a vote was taken and a resolution was duly passed. To find out the SLAS’s stance two years later, when the Law Society of Scotland has been ­lobbying government and when the draft ­legislation is on the statute books, is very strange.”

Maclay Murray & Spens chief executive Magnus Swanson agrees, saying: “The Law Society [of ­Scotland] hasn’t won the hearts and minds argument with the SLAS, but there’s a danger that the profession will look divided and foolish without ­achieving anything.

“This may reduce ­everything to a shambles or it may not, but it will divide the profession.”

In reality the Scottish legal profession has been divided on the ABS issue since the structures were first mooted. By and large the firms with ­operations in England, including Dundas & Wilson, Maclays, McGrigors and Shepherd & ­Wedderburn, want to be able to access the structures to put them on a level playing field with English firms once ABSs are introduced south of the border.

However, firms such as Brodies, which operates only in Scotland and has no plans to expand into England, do not support ABSs.

Brodies chairman Joyce Cullen says: “From the outset Brodies’ board has considered ABSs to be ill-advised.

“External ownership of a legal practice raises ­serious questions about the long-term independence of the profession in Scotland and the special properties such independence brings to the client-adviser relationship.

“We’ve argued throughout that, for a relatively small and distinctive jurisdiction, the rule of law, and therefore Scottish-based businesses, institutions and individuals, would not be well-served by deregulation to the extent proposed in England.”

That said, other firms with no presences outside Scotland have publicly lobbied for the structures. In an open letter ­supporting ABSs published in The Scotsman last month, 13 firms, including Anderson Strathern, Harper Macleod and Lindsays, were signatories.

Private client firm Turcan Connell, which does not operate in England, also signed the letter. The firm does not want to attract external investment, but does want its non-lawyer professionals to be able to own part of the business.

As reported by The Lawyer (30 March 2009), the firm promoted two members of staff to partner-equivalent positions, with joint senior partner Douglas Connell saying the firm favoured a model whereby 75 per cent of the firm’s ­equity would be owned by solicitors and the remainder held by “non-solicitor client-­facing partners”.

Other firms have softened their approaches to ABSs since the Scottish ­government published its first draft of the bill.

Burness chairman Philip Rodney, who was previously anti-ABSs, comments: “The SLAS’s requisition is that the status quo should remain, but that doesn’t seem a good approach considering how far down the line ABSs are. I’m not against it existing as a concept for others to adopt. Given that the game has moved on in England I
don’t think the status quo is realistic.”

The problem the ­profession now faces is that the bill has reached such a stage that the Scottish ­government will more than likely go ahead and enact it as planned. But if the SLAS is successful in getting the LSS to reverse its position on ABSs, it would be enacted without the support, or input, of the profession it relates to.