Legal Services Bill [HL]

My Lords, I begin by associating myself entirely with all noble Lords who underlined the importance of the work that the Joint Committee has done. We could not have had anything like as well informed a debate as we have had today without the work that that committee engaged in during a very short and demanding period. I also congratulate my noble friend Lord Hunt of Wirral on his outstanding chairmanship, which was recognised by noble Lords on all sides of your Lordships' House. Part 1 is very short, containing only one clause with four subsections. It sets out the regulatory objectives in paragraphs (a) to (g) of Clause 1(1). But apart from the statement of what they are, we learn nothing further about them in the rest of the Bill. Yet they are crucial to the operation of the Bill because these duties are the duties which the Legal Services Board has to address in its regulatory role. I suggest to the noble Baroness that, in order properly to define the role of the LSB, we need a lot more detail in Part 1 than we have. Three or four years ago I had the dubious honour of leading for the opposition on the Financial Services and Markets Act. Looking at the equivalent passages in that Act, one sees a much more detailed framework. The duties are set out in Section 2, but each duty in Sections 3, 4, 5 and 6 is given about half a page, in which Parliament explains in some detail exactly how it interprets those duties. It goes on to define the functions of the FSA and what it should have regard to in undertaking those functions. None of that is in this Bill. There is a real concern across the board that there will be a temptation—I put it that way—for the regulator to make up his own law as he goes along. I suggest that, between now and the Committee stage, the noble Baroness might like to glance at the Financial Services and Markets Act and compare it with Part 1 of this Bill. I give one example. Clause 1(1)(b) refers to ““improving access to justice””. That is the only instruction the Legal Services Board has on that very important area. Many noble Lords talked today about alternative business structures. The noble Baroness, Lady Henig, was rather optimistic about the ability of alternative business structures to deliver better access to justice. I listened very carefully to her and I thought that her optimism was commendable. But there is, by contrast, another view; that alternative business structures will effectively cherry pick in the legal area, going only to those areas which are most profitable. How will the Legal Services Board approach the question of improving access to justice? For example, will it have a universal service obligation rather like regulators in the world of the Post Office, the provision of gas supplies or electricity? Will it takethe view that there is a minimum requirement for the provision of legal services in all parts of the United Kingdom? What about the very large number of people who are not very well off and have housing, social security, education or family problems? How will the Legal Services Board address those problems in the context of the access to justice requirement? I think that I have made my point. In Committee we ought to look very carefully at how we can unpack these duties in such a way that we and, indeed, the Legal Services Board, understand much better how it should interpret its duties throughout the Bill. The second point I want to make is about independence. I think that almost every speaker mentioned this issue. It seems to me that there are two aspects to this question of independence. The first one is the relationship between the noble and learned Lord the Lord Chancellor and the Legal Services Board. The second is the relationship between the Legal Services Board and the authorised bodies, the authorised regulators. On the first relationship, I must say that I listened with considerable surprise to the arguments of the noble and learned Lord the Lord Chancellor about the importance of his having the kind of powers he has in the Bill in relation to appointments and dismissal. I recall that in 2004, during those long months when we discussed the Constitutional Reform Bill, the noble and learned Lord the Lord Chancellor said that while there was no evidence at all in our constitution of impropriety concerning the Lords of Appeal in Ordinary, or the noble and learned Lord himself in exercising his functions of judicial selection, there might be a perception that there is. As a result of that perception, dramatic changes were made, which included the noble and learned Lord's selfless decision to cease to make judicial appointments and hand them over to the Judicial Appointments Board. As I understood it, the principle behind all thiswas that of separation of powers; the importance of the political element being completely divorced from the judicial element. In my respectful submission to the noble and learned Lord, he is advancing completely the opposite philosophy in relation to the independence of the legal profession. I say that with great respect to the noble and learned Lord. He gets so many things right, the law of averages must dictate that he occasionally gets something wrong. I hope that during the Christmas break the noble and learned Lord will reflect on this matter. It must be perfectly clear to him from the speeches made on all sides of the House that there is deep concern about the issue of independence. In my submission that is legitimate concern. It is also a concern that goes beyond our national borders because it involves international perceptions about the provision of our legal services. There is the second question of the Legal Services Board and the seven regulators. The noble Baroness, Lady Butler-Sloss, made an extremely good analysis of Clause 30. Essentially, what lay behind her intervention was the notion that the ability of the LSB to intervene is made too easy by the Bill. That is precisely why the noble Baroness suggested that the word ““substantial”” should be interposed. It would be very easy indeed for the LSB to claim that one of the objectives in paragraphs (a) to (g) was threatened in some way and use that as a basis for intervention. I suggest that some sort of guarantee ought to be put in the Bill to make sure that the threshold condition for intervention by the LSB is raised and that it is more difficult for it to intervene. Otherwise, we will find that a wide range of decisions that are taken, as it were on the shop floor, are interfered with by the Legal Services Board. That is the second part of the independence argument. The third point that I want to make is about appeals. This has not been touched on this afternoon. As your Lordships know, the LSB has a large number of instruments at its disposal—set out in Clauses 30 to 45—to discipline the front-line authorities. The only one that provides an appeals structure in the Bill—at Clause 38(2)—relates to financial penalties. An appeal is admissible only if what the Legal Services Board has done is not within the power of the board. The scope of the appeal is not clear. Would it entail giving the full range of judicial review options to the litigator; or is it intended to be narrower than judicial review? If it is narrower than judicial review, is judicial review also available under Clause 38(2)? I note that Clause 38(7) has the expression, "““not to be questioned by any legal proceedings whatever””." That is an ouster clause. I thought that, after the experience of the asylum Bill in 2004, the Government had at last decided to abandon ouster clauses; but it seems to me that there is an ouster clause in the Bill. What about the exercise of the powers in Clauses 30 to 45, other than those involving financial penalties, where there is no provision for appeal at all? Can we assume that, in those cases, judicial review will always be available? On the question of the OLC, the noble Lord, Lord Brennan, among others, made the point that in 70 per cent of cases it is very difficult to distinguish between service and conduct; and that many of the issues raised by complaints involve an amalgam of both. The noble Lord, Lord Neill of Bladen, made that point most eloquently as well. There is a real difficulty in trying to divide up conduct and service, especially since neither is defined in the Bill. The result is that we may find that a single complaint is, in the end, dealt with both by the OLC and by the frontline regulator. This is a problem that needs managing; it is not a political problem between the Opposition and the Government. It is a problem about the way in which the system works. In Committee, we will have to think very carefully about finding a way around this problem. In my submission, it would help if the power of the OLC to delegate to the frontline authorities was made much clearer in the Bill, and if the Bill made it much easier for the OLC to delegate. I have already talked about alternative business structures in relation to Clause 1, and the way in which the access to justice obligation might bear on decisions by the Legal Services Board to approve, or otherwise, a proposal. There are, in fact, a lot of other difficulties about alternative business structures. Many noble Lords have already mentioned the international dimension and the issue of legal privilege. There are also, as I am sure the noble Lord, Lord Borrie, would acknowledge, some important competition issues; for example, the issue of cross-subsidisation. You might get a very powerful ABS deciding to try to drive a legal firm out of a particular market by predatory pricing; by subsidising from profitable legal activities in the other part of a firm a particular section of a firm that would sell its legal services below cost to gain a competitive advantage and probably drive several of its competitors out of the market. Those are the sort of problems that will need very careful handling by the Legal Services Board if we are not to have a whole range of competition problems, which seem to me so far to have been unforeseen. Then there is the question of Chinese walls. Let us suppose that an ABS is instructed on two separate matters by the same client—a client who on the one hand wants to raise money but on the other hand wants to take over another company. Clearly, the information gained in those two separate areas has got to be kept separate. How will that be done? There are a range of technical issues on ABSs which we have not yet begun to confront. I share the view of all noble Lords who have expressed concerns about the principle of polluter pays. I simply do not believe that it is acceptable under Clause 133 that someone against whom a compliant has been lodged, had it investigated and is found to have behaved faultlessly, is vulnerable to having to contribute financially to the whole process. In my submission, it is more than valueless; it is a corrupt principle. It should not be in the Bill. Having said all that, I would not want the noble Baroness to get the impression that there are not many things in the Bill that we welcome. As an Opposition, we shall seek to table amendments and argue our corner in the most constructive manner that we can.