Clause
71
Carrying
on of activities by licensed
bodies
Question
proposed, That the clause stand part of the
Bill.
Simon
Hughes:
I might have to revise my tacticsand sign
up to more amendments in the name of the hon. Member for Bassetlaw, who
did not move his amendment No. 282. I shall treat them with more
interest for fear that we get such surprising timidity in proposing yet
more good ideas. The idea in the amendment was a good one, but, if I
remember the rules correctly, the fact that it has gone will not
prevent me from discussing the wider issue to which it referred.
We now move to part 5,
of which clause 71 is the first clause. It is fair to say that part 5
was the most controversial part in the House of Lords. Right up to the
very end, up to the debate on Third Reading, when amendments can be
considered in the Lords, there were amendments concerning the issues
before us. Clause 71 is the first clause of a significant part, which
goes up to clause 111 and deals with the alternative business
structures—a substantially new concept.
Every member of the Committee
and many people following our proceedings will know about the
alternative business structures, so I shall not extend the explanation
at length. However, in lay terms, the basic proposition is that, in
addition to the simple and traditional legal organisations, such as
solicitors firms, it will be possible in England and Wales to create
bodies that have the rather mundane title of alternative
business structures. They will either be
multidisciplinary or involve different groups in the legal profession
coming together to offer services.
Alternative business structures
were described in a clichÃ(c)d way as the sort of business that
might be promoted by one of our larger high street
supermarkets. It is certainly true that large high street supermarkets
sell not just food and drink, as they originally did. Indeed, they sell
not just food, drink and clothes; not just food, drink, clothes and
children’s toys; not just food, drink, clothes,
children’s toys and electrics—the list could go on. If
one queues for any length of time at a checkout, one will see various
leaflets offering all sorts of other services, such as travel insurance
and holiday insurance.
The concerns are that, if part 5
is enacted andit becomes possible to licence ABSs, which is
what clause 71, the introductory clause that permits the
“Carrying on of
activities by licensed
bodies”,
is about, the new
species of bodies—multidisciplinary bodies—might be
sufficiently well resourced and supplied in capital and financial terms
to go into the traditional legal providers’ market and, because
of the macro-economic cost-benefits, offer their services at a lower
price, thus undercutting existing services, not just competing on price
but causing difficulties, and forcing some of them out of business. It
is a bit like the debate about the supermarket and the corner
shop.
Mr.
Adrian Bailey (West Bromwich, West) (Lab/Co-op): Does the
hon. Gentleman not agree that, in a competitive market environment,
organisations that can compete on price often expand the market for
their product? At the end of the day, if we are putting consumers at
the heart of the Bill, will not the provision be a logical extension of
that principle?
Simon
Hughes:
I have not yet expressed a judgment about the
issue. I have so far expressed the argument, which is why the issue is
controversial, why it was controversial in the House of Lords and why
there is a
great deal of interest in it. The answer to the hon. Gentleman’s
question, which is also the next logical issue to deal with, is that
the arguments are pro-competition, an idea to which I am
sympathetic.
The
question is whether we allow entirely deregulated competition, which
the Bill does not propose, or a form of regulated competition. With the
Competition Commission and the Office of Fair Trading, we have a
balanced position. Competition is permitted, but there is control, so
that people do not acquire too much market share and exercise undue
influence.
The issues
that arise are how we go from the present position to that which the
Bill would allow without threatening the destruction of the sort of
services that many hon. Members on both sides of the House regularly
complain about in a different context. Downstairs and in Committee,
hon. Members bemoan the fact that there are not nearly as many sub-post
offices or post offices as there were. In a competitive world, other
people are coming in and providing alternatives, such as firms from the
Netherlandsand elsewhere providing business deliveries, and
organisations such as banks dealing with
pensions.
8.30
pm
There is
competition, but that has not stopped people saying that there is a
significant reduction in service for local communities, and it has
resulted in many communities losing services. Post offices have gone
and an alternative service that people might have liked has not
replaced it. That is the debate. In this context, the debate is about
how to manage transition, if that is the right way to go, so that good,
high-quality outlets—in this case for legal services—are
not destroyed in a way that allows a predator in the market not just to
be competitive, but to be competitive in a way that destroys
alternative valued local providers. That is the issue. The hon. Member
for Bassetlaw’s amendment No. 22 addressed how we get from here
to there, and that is a proper issue to
address.
Mr.
Bailey:
With the greatest respect, I do not feel that the
hon. Gentleman’s comparison is valid in terms of the perception
that elderly and deprived peopleare queuing outside their
lawyers as a result of competition. To suggest that those facilities
are being removed is far from the truth. The irony is that although
competition is causing difficulties for post offices, for law firms and
solicitors it provides the opportunity to open up new
markets.
Simon
Hughes:
The hon. Gentleman is entitled to take an
absolutist view and may be entirely supportive of the
Government’s proposals, but that was not the view of the
pre-legislative scrutiny Committee, which was concerned about the move
from A to B, as he knows. It is not the view of many other people, not
all of them lawyers, as he also
knows.
I accept that
the situation for post offices and lawyers may not be parallel, but in
small towns there may be only one legal firm of general competence that
has been there for a long time, or a couple of firms that have a good
reputation and are well regarded by the community. Of course there will
not be queues as there
are outside post offices, but there will be a regular procession of
clients, who are local people and often without much money, going to
see their lawyer if there is a dispute with a neighbour, or a
commercial dispute concerning conveyancing, wills, contracts,
complaints about holidays that went wrong, and so on. The question is:
what is the risk to those
firms?
Robert
Neill:
I do not want to prolong our proceedings, but does
the hon. Gentleman accept that his concern is reinforced by the
Government’s proposals elsewhere to restructure legal aid
contracts, which will have the effect of creating monopoly contracts in
some areas? If the Government choose to create monopoly suppliers in
geographic or sector-specific areas, it is all the more important to
provide some
protection.
The
Chairman:
Order. I allowed the hon. Gentleman to make his
point, but I trust that the debate will not expand into legal
aid.
Simon
Hughes:
I shall try not to be led far down that road, Sir
Nicholas.
The
competition issue, which is central toclause 71—I was
rebuked for not having an exact parallel when I talked about post
offices—has a better comparison, as the hon. Member for Bromley
and Chislehurst reminded us, in the context of legal aid. I will leave
it at that, but there are parallels and there is an interlinking
between the two.
As we
go through the following clauses and look at the licensed bodies that
will be defined in clause 72, and when we consider the
Minister’s amendments—her largest batch so far—I
hope that all members of the Committee, no matter what their starting
point is, will remember the wisdom of the pre-legislative scrutiny
Committee’s advice. We say that we like that part of the process
and that it is important. In that case, we should listen to what it
recommends. It was very cautious about going helter-skelter down this
road. It was not happy with the speed and the pace which the Government
propose.
There will be
other amendments such as the one originally tabled in this context for
a graduated, gentle, considered, cautious, delayed implementation. I
hope that the Committee will be sympathetic to them. Obviously, in
Committee one cannot and should not seek to take out a whole part of a
Bill. We deal with it clause by clause. I will not seek to remove one
of the clauses in the next group of 40, or 10 of the clauses as we come
to each of them. That would be an unjustified use of the processes open
to me. If the Government are to have their way, it is far better to ask
whether the clauses are the right ones and are well written. However, I
reserve the right, as do my colleagues, to say either that this part of
the Bill is inappropriate, or that it is inappropriate if it is amended
as the Government wish and is put back into the position it was in
before the amendments were passed by the
Lords.
Mr.
Jonathan Djanogly (Huntingdon) (Con): It would be fair to
say that in the other place the Liberal Democrats and the Conservatives
supported each other on most aspects of the Bill. It was perhaps on
part 5
where we to some extent parted company. Having heard the hon. Gentleman
just say what he said, I think that it is likely to be the case here.
As he said, part 5 is about alternative business structures. Our
debates over the following clauses will be slightly complicated by the
fact that many of the concepts at the lower end of the risk
scale—LDPs and Legal Practice Plus—have already been
reviewed at clause 18. Therefore, it will be quite difficult not to
repeat arguments, but I will try my absolute
best.
The problem is
that it is easy in many ways to lump all ABS structures together. Our
position is that both LDPs and Legal Practice Plus—that is,
partnerships with non-client-facing professions—should not be
treated as ABSs. There is then the question of the timing of expanding
the concept to include non-legal support professionals who act for
clients. That would leave the ABS rules finally to cater for
involvement by non-professionals in the provision of legal services.
That is clearly where the greatest risk lies and where caution and
therefore delay is most required and
justified.
We shall
come on to the safeguards, which we shall be defending against the
Government amendments. I suspect that we shall tread together with the
Liberal Democrats on that one. However, by building in delay for the
simplest low-risk structures between well-regulated professionals, we
are missing a unique opportunity to realise early benefits for
consumers and business in certain markets. One example is the market
for advice to small business.
In 2006, the Institute of
Chartered Accountants found that 58 per cent. of small businesses went
separately to both lawyers and accountants for general business advice.
It is important to appreciate that we are not just talking about very
large law and accountancy firms. We are talking about smaller firms as
well. There will certainly be smaller firms that could benefit, such as
the high street solicitor that is struggling now, but that could become
more efficient, customer-friendly and stable, by joining up with a
small accounting
practice.
Allowing such
professionals to come together more easily could cut costs, increase
choice and competition and reduce the time needed to forge
relationships with different advisers. To the extent that it offers new
business opportunities for small or rural legal practices, it will
support rather than undermine access to justice. Another example in the
individual consumer market is allowing chartered surveyor and legal
practices to come together to reduce delays and transaction costs. I
have said all that I want to say at this stage, but I hope that the
tone that I have set reflects where my party is coming from on this
part.
Bridget
Prentice:
I promise my hon. Friends that I shall not speak
for very long on this part. The alternative business structure is an
important part of the Bill. It offers innovation, creativity and
greater choice for the consumer. I hope that the Committee will welcome
it. It is the part that the consumer panel in my Department and
consumer organisations are keen to see implemented, although that will
not happen until 2010-11. We had a bit of a debate earlier about
possible opportunities between now and then for other professionals to
work with lawyers, and I am looking
into whether there is any scope for that to happen without undermining
part 5 of the Bill.
I
understand what the hon. Member for North Southwark and Bermondsey says
about ensuring that people do not cherry-pick activities. That will be
part of the board’s remit when it decides who will be licensed
under this part of the Bill. There will be opportunities throughout the
debate on this section for us to consider some of the issues in more
detail. Suffice it to say that clause 71 provides for the licensing of
bodies as alternative business structures.
I hope that the debate will
cover some of the details and reassure hon. Members who are concerned
about whether certain organisations will come in and distort the
market. We certainly do not want the market to be distorted; that will
not allow for the sort of consumer choice that is at the heart of this
part of the Bill.
Question put and agreed
to.
Clause 71
ordered to stand part of the Bill.
The
Chairman:
Before we move on to the debate on clause 72,
which will involve a large number of Government amendments, I can tell
the Committee that I understand that the usual channels have indicated
that they wish to get to the end of clause 82 this evening. I am
advised that there might be a Division at about 9 o’clock. I
merely provide that information for the benefit of the Committee. I am
prepared to stay here all night; I take my job seriously, and I believe
that the Committee has done, is doing and will do throughout its
remaining sittings onthe Bill.
Clause
72
“Licensable
body”
Bridget
Prentice:
I beg to move amendment No. 111, in
clause 72, page 41, line 10, leave
out subsections (1) and (2) and
insert—
‘(1) A body
(“B”) is a licensable body if a non-authorised
person—
(a) is a manager
of B, or
(b) has an interest in
B.
(2) A body
(“B”) is also a licensable body
if—
(a) another body
(“A”) is a manager of B, or has an interest in B,
and
(b) non-authorised persons
are entitled to exercise, or control the exercise of, at least 10% of
the voting rights in A.
(2A)
For the purposes of this Act, a person has an interest in a body
if—
(a) the person holds
shares in the body, or
(b) the
person is entitled to exercise, or control the exercise of, voting
rights in the body.
(2B) A body
may be licensable by virtue of both subsection (1) and subsection
(2).
(2C) For the purposes of
this Act, a non-authorised person has an indirect interest in a
licensable body if the body is licensable by virtue of subsection (2)
and the non-authorised person is entitled to exercise, or control the
exercise of, voting rights in
A.’.
The
Chairman:
With this it will be convenient to discuss the
following Government amendments: Nos. 112, 134 to 137, 139 to 143, 113,
144 to 183, 114, 118 to 125, 185 to 190, 192 to 201, 203, 204 and
191.
Bridget
Prentice:
I agree with you absolutely,Sir
Nicholas. I shall be happy to stay here all night if necessary. Only a
few of us remember the times when we sat through the night in
Committee. Those were the days, and good fun was had by all.
This is a fearsome list of
amendments, but they are relatively straightforward. They refine the
ownership provisions in part 5 and schedules 16 and 17 to provide more
clarity on how firms and companies with complex ownership structures
will fit into the ABS or recognised body regimes, as well as on whether
non-lawyer owners and managers will be subject to the fitness-to-own
tests. They also contain a number of related and consequential changes
to other provisions. They do not depart from existing policy on
non-lawyer ownership, but they do provide essential refinements to
ensure clarity in complex corporate
structures.
8.45
pm
The group
contains amendments to the non-lawyer ownership and related provisions
in part 5; to the ownership provisions in schedule 13, which contains
the fitness-to-own test, and to the ownership and related regulatory
provisions for recognised bodies in schedules 16 and 17 to ensure that
there is no overlap with part 5.
The principal change to which
the other amendments relate is the revised clause 72 proposed by
amendment No. 111. The clause provides that a body will be a licensable
body if it has any managers who are non-authorised persons, but it will
now contain a refined ownership test that clarifies how the test will
apply to complex corporate structures. Proposed subsections (1)(b) and
(2A) provide that a body will be licensable if any non-authorised
person holds shares in it or is entitled to control voting rights in
it. As before, the concept of shares is wide enough to cover
notonly companies but limited liability partnerships,
partnerships and other unincorporated bodies. Proposed subsection (2)
provides that a body shall be licensable if one of its managers,
shareholders or persons with voting rights is itself a body and one or
more non-authorised persons hold 10 per cent. or more of the shares or
voting rights in that second-tier
body.
The new
formulation provides greater clarity and consumer protection than the
existing clause 72 in relation to the many and varied types of
structure that may be used to deliver legal services. In particular, it
will ensure that loopholes do not arise because of complex structures,
for example in bodies with multiple corporate tiers. A number of
related and consequential amendments, including those to schedules 11
and 12, are necessary to reflect that change. That includes provisions
that refer to or impose obligations on non-lawyer owners, such as the
low-risk body provisions in clauses 106 and 108, and to the provisions
in clause 90 setting out the duties of non-authorised persons. In
addition, the definition of a “non-authorised person” in
clause 111 is amended to ensure that the treatment of foreign lawyers
and international
legal services firms, particularly those with complex
corporate structures, is consistent with the
amendments to clause
72. There are a number
of related amendments to schedule 13, which deals specifically with the
regulation of non-lawyer owners. Many of them reflect our changes to
the concept of interest in a body and the distinction between voting
rights and the wider concept of voting power, which is defined in
paragraph 5 of the
schedule.
The third
main area of change is amendments to the terms of the ownership test
for recognised bodies regulated by the Law Society and the Council for
Licensed Conveyancers, as well as related regulatory provisions. The
amendments to the definitions of terms such as “licensable
body” and “shares” reflect the changes to clause
72. They maintain our policy that the categories of licensable bodies
in part 5 and bodies that may be recognised by the Law Society and the
CLC are mutually
exclusive.
The
amendments will create greater certainty and identify the boundaries
between regulatory regimes for ABS firms and other authorised bodies.
They will also provide greater clarity in setting out how and when the
different provisions in the Bill regulating owners will apply to
specific individuals and firms. On that basis, I recommend them to the
Committee.
Mr.
Djanogly:
Clause 72 tells us what is a licensable body.
The Government’s amendments to it are technical in nature and
are intended to ensure that the controls on the fitness to own are
fully effective, particularly in relation to what constitutes an
interest in a body. That is acceptable to
us.
Will the Minister
confirm that in amendmentNo. 111, for the purposes of the
proposed subsection (2A), the
words
“holds shares in the
body”
will include the
holding of a beneficial interest as well as a legal one? Where is that
defined?
Simon
Hughes:
There seems to be a move in the right direction,
but I have two general questions and one specific one.
First, what prompted the tabling
of the amendments at this stage? Was it debates in the Lords,
particular representations, or an awareness that there was a technical
defect in the drafting in respect of interest? I can see that an
attempt is being made to be more precise.
Secondly, what was the
justification or reason for the decision that a 10 per cent. rule
should effectively determine whether there is a relevant interest? Is
that based on what is accepted as common precedent, either in European
Union countries or elsewhere?
Thirdly, amendment No. 191,
which stands alone even though it is in the group, appears to broaden
the remit of the Bill by expanding the definition of the phrase
“relevant legal services” so that where it
reads
“where authorised
persons, other than solicitors or registered European lawyers, are
managers of,”
the words
“or employees of” are added. What is the logic and the
reasoning behind that expansion? It is welcome—I am not being
critical, as it seems to me to
be a logical move in right direction, but I wondered what triggered the
change at this stage. There is clearly a difference between considering
a firm because the managers do certain jobs and considering all the
employees down to whatever level.
Bridget
Prentice:
On the question about beneficial interest, no,
that is not included unless voting rights are attached. Amendment No.
191 was reflected in some of the things that I said earlier in the day,
but it is intended to ensure that employees who are authorised persons
are in the same position as managers who are authorised persons so that
there is a consistency across the piece. Horribly, I have forgotten the
hon. Gentleman’s other question.
Simon
Hughes:
Why was a limit of 10 per cent. set? Is it
because that is what is done generally across Europe? What was the main
reason for spotting that we needed to insert this raft of redefinitions
relating to interests and checks at this
stage?
Bridget
Prentice:
The main reason was that we had further
discussions with the Law Society, the DTI and counsel. As a result of
those discussions, we felt that it was important to make the
amendments.
Mr.
Djanogly:
To return to the question of beneficial holding,
is the Minister saying that if an owner does not appear on the share
register as a beneficial owner and has not had voting rights
transferred to themas part of the beneficial ownership, anyone
could effectively own an
ABS?
Bridget
Prentice:
I am not saying that anyone could effectively
own an ABS, because a raft of other issues are included in the
fitness-to-own test. However, the hon. Gentleman is ahead of me on the
issue of a beneficial owner who is not on the list, so to speak. I
shall have to consider that in more detail and get back to him, in
order to ensure that I can reassure him on that.
The 10 per cent. figure was
decided on because that was what the Financial Services and Markets Act
2000 used. We used it to be consistent.
Finally, it is important that
recognised bodies are not restricted to legal services that only the
partners of the firm provide but can cover the services provided by the
employees, who carry out much of the firm’s services to clients.
That is why employees and managers all had to be defined in a similar
fashion.
I hope that
that covers the issues raised by the hon. Gentlemen. When I look at
Hansard, if I see that there are points that I have not covered
I will write to the Committee.
Question put and agreed
to.
Amendment
made: No. 112, page 41, line 26, at end
insert
‘, and references
to the holding of shares, or to a shareholding, are to be construed
accordingly.’.—[Bridget
Prentice.]
Question
proposed, That the clause, as amended, stand part of the
Bill.
The
Chairman:
With this it will be convenient to discuss new
clause 16— Patent and trade mark
agents—
‘A
body—
(a) existing at
the date this Act comes into force and entitled to use the description
“Registered Trade Mark Agents” or “Registered
Patent Agents”; and
(b)
which through the operation of section 72(1)(b) of this Act would
otherwise be a licensable
body,
shall not be a licensable
body unless it ceases to be entitled to use the said
descriptions.’
Mr.
Djanogly:
New clause 16 has been tabled on a probing basis
by my hon. Friends and me, with information provided by the Chartered
Institute of Patent Agents and the Institute of Trade Mark Attorneys. I
should make it clear that both institutes agree with proposals in the
Bill to remove restrictions from the type of business structures that
can provide legal services. Their experience has demonstrated that
external ownership in existing mixed-practice firms has neither been
problematic nor posed a threat to consumers in relation to conflicts of
interest or anything else. The new clause mirrors one that was tabled
by Lord Kingsland in the other place when he pointed out
that
“It arises
specifically out of the unusual position in which the patent and trade
mark agents find themselves in comparison with other approved
regulators. Patent and trade mark attorneys have never been restricted
as to their ownership. As I understand it, a number of firms—at
least one major firm and several smaller ones—have external
owners, and have done so for a long time. I should emphasise that this
situation is perfectly
legal.”
That is true. The
two institutes informed me that the ownership of patent and trade mark
agents has never been restricted. A number of firms have external
owners and have done so perfectly legally without any known consumer or
conflict risk.
Patent
and trade mark attorneys are directors of one firm that is listed on
the alternative investment market, Murgitroyd & Company. There are
attorneys of both types in either single or multidisciplinary
practices, including partnerships, limited liability partnerships and
limited companies. In other words, in private practice several bodies
already fall within the definition of an alternative business
structure. That fact was not recognised during the debate on 23
January, whenthe other place discussed a gradual approach to
introducing ABSs or the possibility of piloting them. Therefore, as
Lord Kingsland said, we believe that
“there has never been any
suggestion of a risk to a consumer, nor indeed any risk of conflict of
interest. To us it seems inequitable to regulate a business practice
that has so far been perfectly legal and where no risks have been
identified.” —[Official Report, House of Lords, 6
February 2007; Vol. 689, c.
621.]
In addition, many
providers—patent attorneys, trade mark attorneys, solicitors,
barristers and probably legal executives and licensed
conveyancers—are employed in-house. Their employing
companies—each usually a subsidiary within a group of
companies—might also fall within the definition of an ABS if the
in-house practitioner in question continues to provide services to a
member of the public, which might be the case if a subsidiary company
is hived off but continues to use the patent or trade mark services of
its old parent company. In that scenario, the parent company would need
to be licensed under the proposed scheme. That type of working practice
is well known to the
Chartered Institute of Patent Agents, as are circumstances in which the
subsidiary is not only owned by the employing company. That
demonstrates another form of regulation to be borne by some UK
industries. The
proposal in the Bill will require mixed practices with external
ownership to seek authorisation as ABSs and to undertake a
fitness-to-own test within a transitional period. That would cause
considerable cost and disruption, not only to existing firms, who would
be forced to restructure, but to the two institutesthat would
be obliged to be the licensing authorityfor ABSs. For that
reason we have tabled the new clause, which proposes an exemption from
licensing requirements.
Despite an assertion from the
Lord Chancellor in his speech to the Law Society on 13 October 2006
that ABS proposals are not intended to put pressure on lawyers to
change their working arrangements, the institutes are concerned about
the effect that the requirement to be licensed will have on their
members. They do not feel that the perceived risk that ABSs pose to
consumers relates to the type of business service that intellectual
property mixed practices provide. They have argued for an exemption of
existing practices for any corporate structure, but have also discussed
with the Bill team a compromise under which subsequent voluntary
structural changes might trigger ABS status. That would put the
institutes’ member firms in the same position as new entrants to
the ABS market and give them a similar degree of
choice.
9
pm
Sitting
suspended for a Division in the
House.
9.15
pm
On
resuming—
The
Chairman:
Order. The hon. Member for Huntingdon was on his
feet, giving the Committee the benefit of his advice and knowledge. I
ask him to
continue.
Mr.
Djanogly:
It is my great pleasure to do so, Sir Nicholas,
even at this late
hour.
The level of
regulation required under licensing and authorisation proposals for
ABSs is substantially greater than for other bodies. As the licensing
authority for ABSs, the institutes would have to bear
considerable costs to provide that level of regulation. That in turn
would mean sizeable fees for ABSs, over and above current regulatory
fees. The feedback that has been received from the institutes’
members in response to the proposals in the Bill suggests that the idea
of setting up as an ABS may not be as attractive as envisaged to those
in private practice, with the licensing system being seen as such an
unwanted burden that some firms are considering restructuring to avoid
the need for a
licence.
In-house
practitioners are worried about the ABS requirements being loaded upon
them. It may be that so few private practices of patent and trade mark
attorneys wish to becomes ABSs under the new system that it will be
unsustainable for the institutes to apply to be licensing bodies. The
proposals for ABSs could then have the opposite effect to that
intended, acting as
a disincentive to practices wishing to continue to provide a mixed
practice, rather than effectively removing restrictions, in order to
allow more flexible business models in the legal services
market.
Bridget
Prentice:
Since the Clementi review, we have demonstrated,
I hope, our commitment to ensuring that the new opportunities for
external control and investment are balanced by robust safeguards. It
is important that ABS firms are protected by the very same statutory
safeguards. It is clear throughout the Bill that significant non-lawyer
owners must be approved by regulators as fit and proper persons.
Providing exemptions to that would create a risk of inconsistency in
both standards and the protection of the
consumer.
In addition,
competition in the legal services market could be distorted by giving
some existing trade mark and patent practices a competitive advantage
over new practices offering services in the same area. If we allowed
those exemptions, as the hon. Gentleman has suggested, we would create
even more complexitiesin the framework, albeit without very
many real additional benefits for either firms or consumers.
There is sufficient flexibility
in the Bill to allow for proportionate regulation, without creating
specific exemptions for any category of legal services. I am absolutely
confident that the current provisions in the Bill would allow existing
trade mark and patent attorney practices, such as those that do not
have external ownership, to continue without necessarily requiring an
ABS licence. We have provided that firms with small numbers of
non-lawyer managers may qualify for flexible regulation as low-risk
bodies under clause 108. That means that they may qualify for licensing
rules that are not subject to this part ofthe Bill.
I hope that the hon. Gentleman
will withdraw the amendment. I understand why he has tabled it, but the
Bill is sufficiently flexible to allow trade mark and patent practices
to work successfully under the new
arrangements.
The
Chairman:
Order. The Minister was slightly inaccurate in
asking the hon. Gentleman who leads for the Opposition to withdraw his
amendment, because we are not discussing an amendment. We are debating
clause stand part, with which we are discussing new clause 16, which
will be voted upon formally, as and when we reach
it.
Mr.
Djanogly:
Thank you, Sir Nicholas, I take your
point.
Having heard
the Minister, I wish to make three general points. The first point is
that, as the Minister knows full well, there are different sizes of
regulators. Bodies like the trade mark and patent institutes are much
smaller than some of the other regulators, and they have specific
issues, which have come up now and again during our debates on this
Bill. The Minister has acknowledged those issues, but does not seem to
have done much about
them.
My second point
is that those institutes are not closed professions. That means that
people who practise in patents or trade marks do not have to be
regulated. The implications of getting the provisions of the Bill wrong
will mean that more people who practise in patents and trade marks will
not move towards regulation. The institutes may fold and the Government
may therefore have an opposite effect to what they would want. The
Minister just said that regulation should apply to everyone; I am
afraid that it simply does not apply in the context of professions that
are not closed professions. Thirdly, if representatives of
those institutes were here, they would stand up and say,
“Minister, you have been warned”. I just hope that the
approach that the Minister has taken is right. Serious concerns have
been raised that what she has said is, in fact, not right. I suppose it
will be a case of sucking it and seeing. None the less, we have our
concerns.
Question
put and agreed
to.
Clause
72
, as amended,
ordered to stand part of the
Bill.
Clauses 73
to 76 ordered to stand part of the
Bill.
Schedule
10 agreed
to.
Simon
Hughes:
On a point of order, Sir Nicholas. Of the
remaining clauses up to and including clause 82, the only one that I
would be grateful for havinga moment to ask the Minister a
question about is clause 80.
The
Chairman:
I note that request.
Clauses 77 to 79 ordered to
stand part of the Bill.
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