Legal Services Bill [HL]

The noble Lord continues to keep me on my toes: I thought that these two amendments appeared separately on the groupings list but I shall deal with them together. That is not a problem as they follow each other on the Marshalled List and it makes complete sense to put them together. I do not think that Amendment No. 108DAA is necessary but I entirely agree with the sentiments behind it. It is reasonable to expect a licensing authority to be able to charge the full cost of processing licence applications. That extends to charging the full cost of each individual application, whether successful or not. Applications will generate varying amounts of work depending on the nature of the applying body, the nature of the services that it intends to offer and the size of the operation that it plans. For example, a large firm intending to open in a number of locations will need more consideration than a small firm intending to open in only one. It would be difficult for application fees to be refunded if unsuccessful. That would increase pressure on the licensing authorities to grant applications where they should not really do so. Non-refundable application fees are common and I cannot see licensing authorities differing from what I would describe as usual practice. We do not want one firm to end up subsidising another if the full cost is not charged in each case. That would create problems and it would make the authority unattractive to firms if fees for them were disproportionately high. I assure noble Lords that fee levels and their effects on legal services markets can be monitored. Fees form part of the licensing rules. Rules may specify that costs have to be recovered in full from fees or may set individual fees based on the amount of work individual applications are estimated to need. Rules have to be acceptable to the board before it will put a body forward for designation as a licensing authority. If there are concerns about effects on smaller firms or on competition, they can require changes. I hope that that reassures the noble Lord. I turn to Amendment No. 108DAB. I agree entirely with the principle of this amendment. It is right and proper that, in allowing non-lawyers to invest in law firms, we ensure that the onus is on those people to prove that they meet the standards of regulators. A licensing authority will be under no obligation to approve the holding of any particular interest merely because it has no evidence that the person is somehow not fit and proper. Instead, licensing authorities will have to be satisfied that the applicant in question has actively demonstrated that he meets the approval requirements set out in paragraph 6 of Schedule 13, but I am confident that we have achieved in the schedule what the noble Lord is seeking to do. The test for approval of an interest is set out under paragraph 6 of the schedule. In the case of every applicant, the licensing authority must be satisfied that the proposed interest will not compromise either the regulatory objectives or the ability of ABS firms and the individuals within them to comply with regulatory arrangements. In addition, the licensing authority must be satisfied that the individual or firm is fit and proper to hold the interest, having particular regard to the applicant’s probity and financial position, any associates, whether the applicant has been previously disqualified from involvement in an ABS firm or indeed any other relevant matter. Under paragraph 14 of the schedule, licensing authorities may require further information from non-lawyer investors, and under paragraph 19 they may object to the holding of the interest in question if they are not satisfied that the approval requirements are met. Licensing authorities are therefore required to consider a wide range of matters, but the burden of proof in satisfying each individual requirement rests with the individual applicant. I would in no way wish to provide for a situation where licensing authorities were somehow bound to give approval to investors about whom they had doubts because they did not have sufficient evidence to prove those doubts, but as I have stated, that is not the effect of the provisions. If the information which the applicant provides is not sufficient to satisfy the licensing authority under each and every head of the test, the licensing authority may refuse its approval. I would argue that the noble Lord’s amendment is unnecessary as the provision already achieves the desired outcome in this regard. I hope that answers the noble Lord’s questions.