Legal Services Bill [HL]

I shall certainly try; it may sound a bit more disjointed than it would otherwise, but perhaps Members of the Committee will bear with me. I am grateful to the Law Society of Scotland for suggesting these probing amendments, because it is helpful to be able to talk through them and put them on the record. I shall start with Amendment No. 108D. Licensed bodies will be obliged as a matter of course to comply with the rules of the jurisdictions in which they operate. That has always been true, as noble Lords will know, for lawyers or authorised firms conducting business abroad, and the same automatic obligations will apply to licensed bodies. The actual monitoring and enforcement of compliance with foreign laws, on the other hand, should rest with foreign regulators. While the board, approved regulators, and licensing authorities may be interested if there were breaches of foreign rules by the persons that they regulate, it would be difficult to place them under a specific statutory duty to ensure that none of those ruleswas breached. That would be disproportionately burdensome and inappropriate. Any failure to comply with any specific statutory duty to this effect could leave those bodies open to judicial review. The way in which the Bill is framed makes the primary function of approved regulators, including where they act as licensing authorities under this part, to regulate the carrying out of reserved legal activities in England and Wales. To subject licensing authorities to a duty to be aware of and monitor ABS firms’ compliance with a potentially endless range of foreign laws and rules would go far beyond this purpose and could even detract from it. Local standards are best enforced by local regulators. That is how it has worked before, and it should continue in these new forms of practice. I am aware, and we have already discussed in your Lordships’ House, that concerns have been raised that elements of our proposed ABS firms may not be acceptable to regulators overseas or elsewhere in the United Kingdom. I emphasise that that is no reason to deny a greater choice of opportunities for those providers and consumers who are in a position to benefit. The provisions are facilitative. This Bill is not for one moment seeking to encourage the legal sector to attempt to establish structures in those foreign jurisdictions where the regulatory framework does not allow it. I hope that will deal with that point for the record. Amendments Nos. 108E and 108F, spoken to by the noble Lord, Lord Kingsland, seek to extend the scope of the duties of non-authorised persons to provide that duties of Scottish and Northern Irish solicitors and barristers are treated as equivalent, for the purpose of this clause, to duties of authorised persons under this Bill. The duty that the existing Clause 88 imposes is important. It ensures that in the new forms of practice that Part 5 makes possible, non-lawyers will have to refrain from causing or substantially contributing to breaches of lawyers’ professional conduct obligations. Non-lawyers can play a greater role in the management and ownership of legal practices, but they will not be able to act in a way that jeopardises the professional obligations of authorised persons. It is an important part of our safeguards, and it is deliberately focused on the professional conduct obligations and other rules of approved regulators and licensing authorities under this Bill. I have no doubt that the spirit behind the amendment is in keeping with the spirit of these safeguards, and that the noble Lord is seeking to preserve the highest standards of ethics and quality. It should not, however, be the function of Clause 88 to extend this duty to laws and legal professional rules from other jurisdictions. That would create duties for alternative business structure employees and managers to be aware of and respect laws and rules outside the sphere of regulatory arrangements, at the risk of significant penalties; and it would put licensing authorities under the increased regulatory burden of monitoring compliance with laws and rules from other jurisdictions. Perhaps I may explain further. Unlike registered European lawyers, Scottish and Northern Irish lawyers may not conduct reserved legal activities in England and Wales simply by using the qualifications they have earned in their home jurisdiction and registering with a regulator here. They must become specifically authorised by a regulator here, as lawyers in England and Wales must, which typically means becoming qualified as a barrister or solicitor in England and Wales. In other words, Scottish and Northern Irish lawyers must become authorised persons in order to carry out reserved legal activities, and they will therefore be regulated under the Bill as authorised persons and subject to the professional conduct rules and other regulatory arrangements of approved regulators. It is true of course that Scottish and Northern Irish lawyers will be able to work in alternative business structure firms and draw on their training and experience in providing non-reserved legal services. The same would be true of other non-registered foreign lawyers, chartered tax advisers and academic lawyers, to give but a few examples. But that does not mean that any duties to which lawyers from other jurisdictions may be subject should be treated in the same way as the duties of authorised persons. The amendment would place licensing authorities under an obligation to recognise law and legal professional duties and ensure that non-lawyers within ABS firms refrain from causing breaches of these. This goes well beyond current practice. As noble Lords will know, no such statutory duty applies to existing legal services regulators or providers. This duty would present a number of difficulties—it would increase the regulatory burdens for licensing authorities and apply sanctions to employees and managers who cause or substantially contribute to non-compliance with these duties. It would increase the burden upon non-lawyers in ABS firms, who will need to be familiar with these duties in order to ensure that they do not contribute to breaches. The amendment would be onerous, burdensomeand inappropriate, especially in light of the current position. Amendment No. 108G would extend the scope of the provision at Clause 107 to apply not only to bodies formed outside UK law or relevant statutory provisions affecting those bodies, but to bodies formed outside England and Wales. Clause 107 allows for Part 5 to be adapted to differences in company structures and other foreign entities, such as differences in management and ownership structures. Since business associations are generally reserved to Westminster, this clause was drafted with only the differences in foreign law in mind. However, we are looking into whether there could be any material differences in laws deriving from devolved matters or otherwise and I would like to take that amendment away and investigate the issue further. I would be grateful if the noble Lord would withdraw the amendment, so that we can return to it when we have carried out those investigations.