Legal Services Bill [HL]

I am grateful to the noble Lord. I shall reiterate the duties in Part 5 designed to protect lawyers’ professional obligations. Clause 88 protects Clause 169, in that Clause 169 places a duty on regulated persons to comply with regulatory arrangements applying to them, including practice rules and rules of professional conduct, many designed for client protection. For licensed bodies, regulatory arrangements will include licensing rules and all the safeguards that they contain. Regulated persons are authorised persons, and managers and employees of authorised bodies. Clause 88 deals with non-authorised employees, and managers must do nothing that causes or substantially contributes to a breach by a body or authorised person of the Clause 169 duty, the point referred to by the noble Lord, Lord Kingsland. We have made it clear that compliance with Clause 88 is one of the main responsibilities of the head of legal practice. Those who breach Clause 88 duties can be disqualified under Clause 97 from employment in any licensed body. These are important protections. They ensure that authorised persons’ professional obligations and alternative business structures’ safeguards are protected from undue influence within the firm. They answer concerns about allowing non-lawyers to be involved in the management and ownership of law firms. I would be nervous of supporting an amendment that could create a huge loophole in that. I understand the desire to remove obligations on non-professional members of staff and perhaps to replicate the position of solicitors’ firms, where employees are under no specific obligations and managers are all authorised persons. However, these firms will be different and the provision is not applicable to them. There will be new mixes of authorised and non-authorised persons. Traditional structures will not be universal, and we must recognise potential new risks in the safeguards we create. Removing employees would remove a key safeguard that the Bill places on them to ensure that they do not cause or contribute to breaches of firms’ and lawyers’ professional conduct obligations. We are not obliging employees to ensure that lawyers respect their professional conduct rules; that is one of the head of legal practice’s responsibilities. Clause 88 only puts them under a duty to refrain from exercising adverse influence or otherwise causing, or substantially contributing to, breaches of rules. The noble Lord may think that is unnecessary because many employees are not in a position to influence the firm’s performance of its obligations. That may be so, but some employees will be. Some will be in decision-making positions and other positions with considerable direction or supervision. If an employee’s job would not allow him or her to contribute to a breach of Clause 169 there should be no problem, but we cannot assume that all employees will be in that position. The Clause 88 duty should, in practice, catch only those who are in a position to exert influence or otherwise substantially contribute to breaches. It would also remove an important element of licensing authorities’ direct regulatory control over non-authorised employees. Where they did cause or contribute to a breach of Clause 169, direct action could not be taken against them but there would have to be action against the firm instead. That could be unfair and disproportionate, especially if the employee acted outside the firm’s control. Most importantly, perhaps, the amendment makes it easier for non-authorised employees to interfere improperly in the licensed bodies’ operation. That goes against our view of the safeguards, and the need for them as expressed in your Lordships’ House. I hope that answers the noble Lord’s question of why the provision is written in that way, and that he feels able to withdraw his amendment.