Legal Services Bill [HL]

Unsurprisingly, I am not inclined to accept this amendment. I want to explain the basis on which we have organised how firms will be regulated. The principle behind the amendment is that legal practices could offer partnership or equivalent status to non-lawyers who work internally within the business—such as IT or human resources directors—and would not need to be licensed as an alternative business structure. In the alternative business structures discussed by Sir David Clementi in Chapter F of his report, a firm of this type is a legal disciplinary partner practice. Non-lawyers could become partners or directors, but for the purposes of assisting the business in the development of legal services. I know that there is widespread interest among existing firms in adapting their management structures in this way, as the noble and learned Lord referred to. I would not be surprised if this arrangement were one of the first to emerge under the new alternative business structure licensing arrangements. But I am not persuaded to exclude them altogether from Part 5. The safeguards within the Bill take a flexible approach to new opportunities for practices owned and managed by different combinations of lawyers. We have provided that firms with small numbers of non-lawyer managers can qualify as what we have called low-risk bodies, under Clause 106. This provision was created with exactly this type of arrangement in mind. I am not sure that by exempting them I could be confident that we had any form of regulation over the managers in question. In particular, we need to make sure that there is proper protection for legal services, which in an alternative business structure is the function of the head of legal practice. In principle, I entirely agree that non-lawyer managers can make a real contribution. In most cases their influence is a positive one. Yet as managers they are in an undeniably important position to influence the business, as head of resources or head of business development. It is for that reason that Sir David Clementi recommended that they should be properly accountable to the regulator. As a function of Part 5 of the Bill, if a firm is a licensed body all people in positions of control, whether lawyers or not, are subject to this supervision, bound by specific statutory duties and sanctioned for non-compliance. These safeguards should apply to all managers whether they provide services to consumers or not. We cannot necessarily make a realistic distinction between these cases. Being a partner or director in a firm brings with it influence and responsibility. Where legal services are concerned, it is right that anyone in a position of great influence should be effectively regulated. Effective regulation in Part 5 may be applied flexibly in practice. The provisions in the Bill for low-risk bodies strike the right balance, so I ask that the amendment be withdrawn.