LIT UP by spotlights against the dark winter sky, the Law Society of Scotland's stately headquarters in Edinburgh's Drumsheugh Gardens look like something from a postcard.
But while things appear scenic and serene on the outside, behind the tall sash windows a debate is raging that has the power to turn the legal sector in Scotland on its head.
The Society's president, Richard Henderson, is under pressure to decide
whether the market in Scotland should be opened up to allow solicitors to go into business with accountants, chartered surveyors and other financial services professionals, effectively paving the way for "one-stop shop" companies offering everything under one roof.
Henderson has been instructed to submit proposals to the Government within weeks on so-called "multi-disciplinary practices" (MDPs), which some predict will be the first step towards 'Virgin Law' or 'Tesco Law' with even supermarkets expected to start offering basic legal services in the future.
The idea has proved divisive among Scottish lawyers and tempers have flared ever since the Office of Fair Trading (OFT) recommended last summer that the profession in Scotland should be opened up to greater competition. The OFT move was prompted by a 'supercomplaint' by Which?, the consumer group, which argued that the restrictive market in Scotland limited consumer choice and might even have led to higher prices.
Henderson and his colleagues on the Society's council face a tough few weeks ahead as they pore over responses to a consultation on the issue, which closes next week. The heat is on for them to come out by the end of February with a definitive position which will inform the Government's response to the OFT.
Those with long enough memories will recall that Scotland has been here before. In 1997, Dundas & Wilson rocked the legal world when it decided to team up with the now defunct Arthur Andersen to form Andersen Legal, while KPMG and the London office of McGrigors made a similar attempt at convergence in 2001, when they set up KLegal.
Both models disappeared almost as quickly as they were created – Arthur Andersen imploded in the wake of the Enron scandal in 2001. KLegal discreetly closed its doors in 2003, just two years after it began. The failure of the KLegal experiment in particular has left some open wounds. A spokesman for KPMG Scotland said the firm did not want to talk about its experiences, and John Griffiths-Jones, KPMG Europe chairman,
said of the MDP route last year: "We've been there, we tried it. There are plenty of things for us to do now as accountants."
So if MDPs have already been tried and failed why is the idea back in the mix?
In recent months, several of Scotland's most respected legal figures, including Magnus Swanson, chief executive of Maclay Murray & Spens, have thrown aside concerns that existed at the turn of the decade about how these alternative business structures could lead to the loss of lawyers' independence, and have come out in favour of the move.
According to Douglas Connell, joint senior partner at Turcan Connell solicitors, the failure of MDPs the first time around was not down to a faulty concept, but the Enron scandal.
He said: "What we have in all of this is the Arthur Andersen legacy, because the big MDP was created when Arthur Andersen in effect took over Dundas & Wilson… That was probably a good idea – I was a partner in D&W at the time and was supportive of the concept. The reason that failed had nothing to do with the concept but the fall-out of Enron."
He added: "I think it has adversely affected the debate. The idea of bringing together what I would call 'multi-talented professionals' seems very smart indeed."
Another leading lawyer, who asked not to be named, said the downfall of Andersen Legal probably had a knock-on effect. "KLegal entered the market just as Andersen Legal was going out. It had a massive effect on them," he said.
Others say the bottom fell out of the market for MDPs in the UK when, in the wake of the Enron disaster, US regulators stipulated that a company listed on the US stock exchange could not appoint an auditing firm that also had other advisory functions in case there was a conflict of interest. One source said: "There was a loss of appetite for it over here because of the new regulations."
Although concerns about conflicts of interest remain, sources close to the situation say that this time law firms have very little choice but to support a move to open up the market, as it is likely that the OFT, which also has the support of the Scottish Consumer Council, will get its way.
Competition with firms in England and Wales is another significant factor. Following Sir David Clementi's review of the legal services market south of the border in 2004, MDPs are likely to be introduced in England and Wales within the next four to five years.
At a recent conference on MDPs, Scotland's Justice Minister Kenny MacAskill urged Scottish firms to move quickly and pip their English counterparts to the post. He said: "I am determined not to see our major Scottish law firms at a competitive disadvantage. Indeed, if we act quickly, I believe we can get ahead of the game. England is legislating now, but it may be 2011 before new business structures emerge. Rather than spending five years building up to a big bang, it would be perfectly possibly for us to test out some new mixes before the English have completed their wholesale reforms."
There are even hints that Dundas & Wilson might consider the MDP model again if firms south of the border take it up. Alan Campbell, managing partner at D&W, said: "Law firms based in Scotland should have the opportunity to compete on a level playing field with the rest of the UK."
But others fear that MDPs could create a "legal desert", where large MDP firms squeeze out not only small law firms, but local accountants and chartered surveyors as well.
Philip Rodney, chairman of Burness, said: "I'm not sure that the world has changed so substantially. That's not to say it can't be made to work but we haven't yet seen a successful model."
However, as lawyers from Edinburgh to Inverness await the Law Society's recommendations, one thing is certain: the legal profession is in for one hell of a ride over the next few weeks.
