Regulation of Legal Services (Scotland) Act 2025

13 Compensation funds

(1) A category 1 regulator must establish and maintain a fund for the purpose of making grants to compensate persons who suffer financial loss by reason of dishonesty by a legal services provider regulated by the regulator (or a provider it regulated at the time the dishonesty occurred).

(2) Where section 8(2) applies, the fund must be under the management and control of the regulatory committee.

(3) It is for the category 1 regulator or, where section 8(2) applies, its regulatory committee, to determine whether to make payments from the fund.

(4) A category 1 regulator or, where section 8(2) applies, its regulatory committee must have rules in relation to the fund which—

(a) state the minimum monetary amount to be contained in the fund,

(b) describe the way in which the fund is administered,

(c) specify the criteria for a grant being made from the fund, which may include—

(i) limiting the claims that may be made by a person in respect of an act of dishonesty by a legal services provider,

(ii) making payments from the fund to other persons (such as judicial factors) in connection with mitigating risks to the clients of a provider arising through the actions of the provider,

(d) provide the procedures for making and determining a claim,

(e) require the making of contributions to that fund by the legal services providers it regulates,

(f) make provision for the destination or distribution of the fund in the event that the regulator ceases to operate.

(5) The rules for the fund may also include such further provision as the category 1 regulator or, where section 8(2) applies, its regulatory committee considers necessary or expedient for the operation of the fund.

(6) Before making or amending rules in pursuance of subsection (4), the category 1 regulator, or where section 8(2) applies, its regulatory committee must consult the independent advisory panel of the Commission.

(7) Where section 8(2) applies, when making or amending rules in pursuance of subsection (4), the regulatory committee of a category 1 regulator must have regard to the views of the governing body of the regulator.

(8) The Scottish Ministers may by regulations make further provision in connection with funds established under this section and the rules a category 1 regulator or, where section 8(2) applies, its regulatory committee, must have for such funds.

(9) The Scottish Ministers may exercise the power to make regulations under subsection (8) only if they have received a request to exercise the power from—

(a) the Lord President,

(b) the regulatory committee of a category 1 regulator,

(c) a category 1 regulator that has no functions other than regulatory functions, or

(d) the independent advisory panel of the Commission.

(10) Before making a request under subsection (9), the person making the request (“the requester”) must—

(a) consult—

(i) the regulatory committee (if any) of each category 1 regulator,

(ii) each category 1 regulator that has no functions other than regulatory functions,

(iii) the independent advisory panel of the Commission, and

(iv) such other person or body as the requester considers appropriate, and

(b) except where the requester is the Lord President, secure the Lord President’s agreement to the making of the request.

(11) But a body mentioned in subsection (10)(a)(i) to (iii) does not need to be consulted if the body is the requester.

(12) For the purpose of seeking the Lord President’s agreement under subsection (10)(b), the requester must provide to the Lord President—

(a) a document setting out—

(i) an explanation of the change sought by the proposed exercise of the power, and

(ii) the reasons for seeking the change, and

(b) copies of any written representations received in response to the consultation under subsection (10)(a).

(13) A request under subsection (9) must include—

(a) a document setting out—

(i) an explanation of the change sought by the proposed exercise of the power, and

(ii) the reasons for seeking the change,

(b) copies of any written representations received in response to the consultation under subsection (10)(a), and

(c) except where the requester is the Lord President, written confirmation of the Lord President’s agreement to the making of the request.

(14) As soon as reasonably practicable after making a request under subsection (9), the requester must publish the documents included with the request in such manner as the requester considers appropriate (having regard to the desirability of the documents being accessible to those likely to have an interest in them).

(15) Regulations under subsection (8) are subject to the affirmative procedure.