A referendum in Scotland in September could see the country break away from the UK, but would that mean more work for law firms? Anthony Harrington reports

Complex legislative change is normally good news for law firms. Reversing the two 307-year-old Acts of Union that brought Scotland and England together in 1707 might look, on the face of it, to promise a huge fee bonanza for lawyers north and south of the border, but law firms in Scotland are not holding their breath. Should Scotland end up voting for independence in the referendum on 18 September, no doubt some additional legal work will be required – though not, it appears, on a lavish scale. 

As Christine O'Neill, chairman and public law partner at Brodies, notes, whether the Scots vote yes or no, things are going to change anyway. "All the parties are committed to more devolution in the event of a 'no' vote," she says. "There will, for example, be a Scottish rate of income tax in the 2016-17 tax year." This power comes from UK legislation passed in 2012, which gives Scotland the ability to reduce personal income tax rates by 10 percentage points or to raise them as much as the Scottish parliament decides. 

Nor does O'Neill believe that there would be much initial change in criminal and civil law, beyond the differences that already exist between Scottish and English law. "In international law there is a concept of the continuity of law in these circumstances," she says. This means that it is understood that the laws that pertain the day after a vote for independence will be the same as the laws the day before. Over time, of course, the Scottish parliament could pass whatever new laws it pleased, but this is likely to be a gradual affair.

"The idea of maintaining continuity of law is also reflected in the Scottish government's draft Independence Bill, which says that the constitutional arrangements on day one of independence will be the same as the day before," she comments. Of course, a newly independent Scotland may well wish to draft a new constitution, in which case there would be work for lawyers, but not on a scale to have them popping champagne corks. 

Quids in?

What about currency, then? There has been much talk in the press of the Bank of England potentially balking at the idea of a currency union post-independence. Surely that would require some massive redrafting of commercial contracts. O'Neill thinks not: "If there is a formal currency union, then there is no change. All obligations stay the same. This will also be the case if there is no new Scottish currency but no currency union, either. In that case, Scotland will be in a similar position to Kosovo, which is not in the eurozone but uses the euro," she says. 

In such circumstances, an independent Scotland would continue to have no control over its monetary policy, which would still be set by the Bank of England. That could prove to be an unsatisfactory solution in the longer term, so there may still be some commercial contract fallout for lawyers to mop up at a later stage if Scotland opts to introduce its own currency or join the euro.

State of the nation

Laurence Ward, senior partner in Scotland at CMS Cameron McKenna, argues that the overriding factor to determine whether more work flows for law firms in Scotland after a yes vote will be the performance of the local economy. "For any commercial law firm, whether or not we have a vibrant economy is the key factor in how much business we see, and this goes to the heart of the independence debate," he notes. 

Ward adds that he does not doubt that in the short term the transition from union to independence would create some additional work across a variety of areas, from constitutional and public law to client advisory work. However, he argues that the volume of extra work would likely be limited whatever the vote result, given the main Westminster parties' commitment to additional devolution.

An independent Scotland, as the Scottish government has already made clear, would seek to follow the 'successful small state' model of the Scandinavian economies. Ward says the impact of that transition on attracting inward investment from Europe is unclear. However, the Scottish government has made a concerted push to make the country intellectual property and innovation-friendly, to attract research and development in all industries. Independence might provide even more scope in this direction.  

Interestingly, a note from property specialists Colliers International argues that, whichever way the vote goes, Scotland's property market is set for a short-term boom in the wake of the referendum. This is because uncertainty has been putting deals on hold in the run-up to the vote, it says. Either way, then, commercial property lawyers will be keen to get the referendum behind them.

Moreover, Colliers argues that a yes vote could result in a surge in occupier demand from professional services groups involved in the subsequent independence negotiations and implementation, implying that the firm expects to see a lot more work for lawyers, even if the lawyers themselves aren't so sure.

Regulatory resources

One area where Scotland would definitely struggle to find the resources, legal or otherwise, would be the need to replicate the various regulatory authorities. "A vast amount of what we do as a practice is in the realm of regulation. There is a much greater volume of regulation than there is of law," says Ward. "Having strong, highly-regarded and credible regulators is very important both for the public and for markets. You cannot operate in a regulated market as a country unless your regulators are highly regarded. 

There is therefore a real problem about where Scotland will find sufficient qualified people to enable the formation of new regulatory agencies in competition law, energy, consumer rights and so on." 

Catriona Munro, a partner in the EU, competition and regulatory department of Maclay Murray & Spens, says that while she believes Scotland could resource the requirements of an economic regulator, it would take time to bring those resources together. "It would potentially be expensive, given the salaries required to draw that talent from other regulators, law firms and economic consultancies. 

"Should the right quality and depth of resource not be assembled, there would be a danger of less-than-ideal regulatory interventions, which create their own inefficiencies with costs to business and the economy, and which, in turn, would lead to challenges before the courts." Munro concludes: "So Scotland could do this but there should be no illusions about the resource required."