Regulation of authorised legal businesses
Section 41 – Rules for authorised legal business
111.This section requires a category 1 regulator to prepare and operate a set of rules to authorise and regulate legal businesses. For the purposes of the Act they are called, collectively, the ALB rules. The ALB rules may relate to one or more types of legal business, and some or all legal services. They must contain authorisation rules and practice rules, include provision for reconciling different sets of regulatory rules, and deal with such other matters as the Scottish Ministers may by regulations specify (but only if requested to do so by the Lord President, a category 1 regulator or the independent advisory panel of the Commission). Before making a request, the requestor must first consult each category 1 regulator, the independent advisory panel of the Commission and other persons considered appropriate) and, except where the requester is the Lord President, secure the Lord President’s agreement to the making of the request. Subsections (10) to (12) set out the documents that must accompany a request and that they must be published.
112.A regulator may amend its ALB rules with the prior approval of the Lord President. Where a regulator is making its ALB rules or making a material amendment to those rules, it must consult its members, the Competition and Markets Authority, the Commission, the independent advisory panel of the Commission, Consumer Scotland and any other persons or bodies considered appropriate.
Section 42 – Authorisation rules
113.This section sets out what authorisation rules under section 41 are generally to make provision about and sets out some particular matters that they must include (such as grounds for suspension or withdrawal of authorisation where the provider is breaching the regulatory scheme(6) of the regulator). For the purposes of Part 2, a legal business that is authorised under any such rules is referred to as an authorised legal business.
Section 43 – Appeals in relation to authorisation decisions
114.This section allows for appeals to a sheriff against a decision taken under authorisation rules (made in pursuance of Part 2) to—
refuse an application for authorisation of a legal business,
impose, vary or revoke conditions or restrictions in relation to its authorisation (for example, which may limit the services that can be provided in some way), or
suspend or withdraw its authorisation.
115.An appeal may be made by an applicant for authorisation, or by a legal business that has been authorised, under any such rules.
Section 44 – Practice rules
116.This section states what practice rules under section 41 are about and sets out some particular matters that they must include, such as the operation and administration of authorised legal businesses, the standards they must meet and operational positions within them. The practice rules must also include rules on accounting and auditing, professional indemnity and the making and handling of complaints. They must set out the measures that a category 1 regulator may take where an authorised legal business has breached the regulatory scheme or a complaint against it is upheld.
117.The rules must also require authorised legal businesses to adhere to the professional principles.
Section 45 – Financial sanctions
118.This section allows practice rules under section 44 to provide for the imposition of a financial penalty and for its withdrawal where the regulator considers it would not be reasonable to seek (or to continue) to seek payment. It also allows the regulator to recover the reasonable costs incurred in collecting the penalty. The Scottish Ministers may by regulations (subject to the negative procedure) specify the maximum amount, but they can only make such regulations with the agreement of the Lord President. Before making regulations, the Scottish Ministers must consult each category 1 regulator and any other persons or bodies they consider appropriate and publish any representations received.
119.An authorised legal business may appeal to a sheriff against any such financial penalty (or the amount of it).
Section 46 – Reconciling different rules
120.This section sets out what the rules under section 41 must include as regards provision for reconciling different sets of regulatory rules. The Scottish Ministers may by regulations make further provision about such regulatory conflicts (but only if requested to do so by the Lord President, a category 1 regulator or the independent advisory panel of the Commission). Before making a request, the requestor must first consult each category 1 regulator, the independent advisory panel of the Commission and any other persons or bodies it considers appropriate). Except where the Lord President is the requester, the requester must secure the Lord President’s agreement to the making of the request, Subsections (8) and (9) set out the documents that must accompany a request, which the requester must publish as soon as practicable after making a request.
121.This section (which should be read with the regulatory objectives) places an obligation on category 1 regulators to minimise duplication or unnecessary difference in the rules it makes. For example, many authorised legal businesses are already regulated by the Law Society as incorporated practices(7) in terms of section 34 of the 1980 Act. While a wider range of legal businesses will now require to be regulated, in making ALB rules, the Law Society will be required to consider how best to avoid duplicating those rules unnecessarily in relation to incorporated practices. To assist them in that regard, section 48 gives the Law Society discretion as to which powers it uses to create the rules in question and schedule 1 adjusts section 34 of the 1980 Act to facilitate that.
Section 47 – Monitoring of performance of authorised legal businesses
122.This section deals with how a category 1 regulator is to monitor and investigate the performance of authorised legal businesses. A category 1 regulator must review the performance of each of its authorised legal businesses as it considers appropriate, or when requested to do so by the Lord President. Following a review, the regulator must prepare a report on its review and send a copy of its report to the authorised legal business to which it relates. If the review was requested, the regulator must also send a copy of its report to the Lord President.
The regulatory scheme of a regulator may be wider than just its ALB rules.
An incorporated practice is defined in section 34(1A) of the 1980 Act. It relates to bodies corporate (e.g. companies).
