Legal Services Bill [HL]

moved AmendmentNo. 637A: 637A: Clause 201, page 110, line 39, at end insert ““provided always that no order may be made by the Secretary of State bringing into force Part 5 of this Act and the related Schedules 10 to 14 until after— (a) consideration by both Houses of Parliament of a comprehensive report to be commissioned by the Lord Chancellor from an independent source analyzing— (i) the advantages or disadvantages (or both) which may be realistically expected to flow from the implementation of Part 5, including the benefits or risks (or both) to consumers; (ii) the potential enhancement or curtailment (or both) of access to justice; and (iii) the threats actual or internationally perceived to the independence of lawyers practising in England and Wales; and (b) the laying of the draft of a statutory instrument designed to bring into force the whole or part of Part 5 and the related Schedules before each House of Parliament and approval thereof by resolution of each House. (3) In this section an ““independent source”” means a source (such as a research organisation) which is independent of Government, free of connections with any political party and free of connections with any individual or body representing consumer interests or lawyers.”” The noble Lord said: My Lords, I declare an interest as a practising member of the Bar, a former member of the Bar Council and sometime chairman of the Bar. This is a plea by me with support from other Members of the House that we should be told more by Government about Part 5 and about alternative business structures before we allow it to be put into operation or before we allow the Legal Services Board to take steps to implement those provisions. My plea is based on the degree of ignorance we have about the alternative business structures. My primary concern is about access to justice: what is going to happen to the small firms of solicitors; and what will be the consequences on the ground of implementing Part 5 in the real world? Secondly, I have a deep query about who is going to invest in the big partnerships and what their motivation will be. Thirdly, I am concerned about the degree of our ignorance about what is happening in other countries in this area. What about the common law countries and the civil law countries, particularly in the European Union? Are we going to find ourselves in a pariah status as lawyers? At the moment the legal profession is widely admired for its integrity and independence and we need to reflect and have information before we move forward. I will keep this discussion as brief as possible; the hour is late, but it is a serious matter. I turn to access to justice. When I spoke on the sixth day in Committee I went through the testimony that had gradually been built up in earlier debates to show how worried senior lawyers were about the state of solicitors, by which I mean the economic stability and their chances of survival in various parts of the country. The starkest warning was from the former Lord Chief Justice, the noble and learned Lord, Lord Woolf. I shall not read out again what he said, but it was particularly striking, because he said he was in the position of someone whose duty it was to travel around the United Kingdom and take note of what was happening to legal practices and the state of solicitors. He found that concern was expressed countrywide, as your Lordships will find in Hansard on 23 January this year at col. 1057. On the same day the noble Lord, Lord Thomas of Gresford, expressed his concern about Wales and the position of solicitors there, from close personal knowledge—his earlier practice in law was there, of course. With regard to Yorkshire and Cumbria, the noble Lord, Lord Carlile, spoke of his worry and his knowledge of the anxieties in those areas on 6 February, and on the same day the noble and learned Baroness, Lady Butler-Sloss, spoke about the West Country, with which she is very familiar. On an earlier occasion—I have not recorded the date here—the noble Lord, Lord Whitty, stated that he was particularly concerned about the position in rural areas. There is a feeling of concern about just how strong and stable these medium, small and very small solicitors’ firms throughout the country are, and we are interested in finding out what the effect will be of the establishment of these new forms of practice. That needs to be looked at. We want to have some evidence-based conclusions that are up to date. Merely citing what Sir John Vickers may have written in 2001 in the Office of Fair Trading report will not do; in my submission, we have to have a serious study now. In a moment I will mention the literature the Minister sent me, but I have not found that it directly addresses the concerns I have in this field. My second point, which is perhaps smaller, is the astonishing lack of information we have about who will come forward and fund these big partnerships. I should have mentioned that I was on the Joint Committee under the excellent chairmanship of the noble Lord, Lord Hunt of Wirral. I think I am right in saying that the Co-operative Legal Services said they were enthusiastic about going down this route and supporting law firms by putting a financial stake in, but I believe that is the only bit of evidence we had. I have asked this question before, but I shall repeat it: are we going to have law firms bought and sold like football clubs? Will they end up being quoted on the Stock Exchange? I believe that is just about to be developed in New South Wales. What is happening in other countries? Do we find models for these proposals working in other countries? I stated last time, and no one has contradicted me, that the United States of America has been firmly against this sort of financial participation, the ownership of firms by outside interests. The only Commonwealth area about which the Minister has supplied evidence is New South Wales. I shall say a word about that because this is new material that I have not seen before. I base this all on an article written by the Legal Services Commissioner in New South Wales, a Mr Steven Mark, and his co-author, Georgina Cowdroy, the senior legal and policy officer in the commission. It appeared on page 671 of the Penn State International Law Review in volume 22, part 4, in 2004, and I am indebted to the Minister for kindly letting me see the article. The current position is that there are now in New South Wales some 300 incorporated legal practices. I am unable to say how many of those are multi-disciplinary, because we are not told that. The commissioner makes a rather interesting statement: "““The Law Society’s records indicate that at present, there are almost 300 ILPs in NSW. The vast majority of these ILPs were previously sole practitioners or small partnerships, which changed their ownership structures to obtain the perceived benefits of incorporation. However, aside from having to comply with the ILP legislation, such practices have experienced little change in their daily management and operation””." So they have taken on a corporate structure to derive a benefit for themselves with no thought of what good it will confer on consumers. The commissioner says elsewhere in the article that this may be disadvantageous because the limited liability obtained by the partners means that not so many purses can be pursued by the dissatisfied claimant. As I say, there are 300 of these bodies, none of which has yet become a public listed company. It is open to them to do that. Under the Legal Profession Act the solicitor’s duty is paramount and duties to shareholders come second. However, it is pretty clear that the commissioner,who has had experience of these incorporated partnerships, does not really believe that. He says that despite the assurances that the legal duty to maintain professional standards is paramount, "““my tentative view is that where an ILP becomes publicly listed, the duty of an ILP solicitor director to the court and to clients will inevitably conflict with the duty of a solicitor director to the ILP and its shareholders. Furthermore, I believe that such conflict is irreconcilable. While the perceived conflict between professional ethics and profit is an ongoing concern in the regulation of at least some present partnerships, in publicly listed ILPs, shareholder pressure for commercial gain will introduce a dynamic for solicitor directors which was non-existent in partnership structures””." In other words, the profit motive is likely to become dominant and possibly irresistible, notwithstanding the fine words in the statute. The other aspect that I mentioned briefly previously is that we are still in the same state of ignorance about the position regarding the civil law in European countries. The only country that we know anything about is Germany. All the members of its association equivalent of a combined Bar Council and Law Society belong to an organisation, the abbreviation of which is BRAK. It is quite obvious from the evidence that it sent to our committee that it regards our proposals as an abomination because in Germany the independence of the lawyer is enshrined in constitutional provisions of law and the notions that we are considering here would be completely impossible. In the type of structure that is contemplated here you could not have a German partner coming in as a shareholder and owning a firm. A German lawyer can have a stake but he has to be part of the firm and subject to the professional ethic. What about the position in other countries in Europe? We do not have the faintest idea what is happening in France, Sweden or Ireland. As I thought about this today it struck me what an incredibly insular approach we are taking. We are ploughing on with these proposals without making any inquiry about what happens in the rest of the world. My amendment would require the Government to put before us proper targeted information. I do not believe that would cause any delay. Nothing will come into force immediately. A document I was sent by one of the interested parties stated that we are looking at 2010 before the Legal Services Board will really get into action. That leaves plenty of time for a bit of decent research to come back to us within 12 months. I beg to move.