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Legal Services Bill [Lords]

Legal Services Bill [Lords]



The Committee consisted of the following Members:

Chairmen:Sir Nicholas Winterton, Frank Cook
Bailey, Mr. Adrian (West Bromwich, West) (Lab/Co-op)
Bellingham, Mr. Henry (North-West Norfolk) (Con)
Burrowes, Mr. David (Enfield, Southgate) (Con)
Djanogly, Mr. Jonathan (Huntingdon) (Con)
Ellwood, Mr. Tobias (Bournemouth, East) (Con)
Flello, Mr. Robert (Stoke-on-Trent, South) (Lab)
Foster, Mr. Michael (Worcester) (Lab)
Goodman, Helen (Bishop Auckland) (Lab)
Hemming, John (Birmingham, Yardley) (LD)
Hesford, Stephen (Wirral, West) (Lab)
Hughes, Simon (North Southwark and Bermondsey) (LD)
Jones, Mr. Kevan (North Durham) (Lab)
Kidney, Mr. David (Stafford) (Lab)
McCarthy, Kerry (Bristol, East) (Lab)
Mann, John (Bassetlaw) (Lab)
Neill, Robert (Bromley and Chislehurst) (Con)
Prentice, Bridget (Parliamentary Under-Secretary of State for Justice)
Hannah Weston, John Benger, Committee Clerks
† attended the Committee

Public Bill Committee

Thursday 21 June 2007

(Afternoon)

[Sir Nicholas Winterton in the Chair]

Legal Services Bill [Lords]

Schedule 13

Ownership of licensed bodies
Amendment proposed [this day]: No. 212, in schedule 13, page 197, line 11, at end insert
‘Licensing rules must provide that, in determining whether the requirements of sub-paragraph 1 are met, the burden of proof rests on the person who wishes to hold the restricted interest.’.—[Mr. Djanogly.]
1 pm
Question again proposed, That the amendment be made.
The Chairman: Before we adjourned, I understood that the hon. Member for Huntingdon was about to ask the permission of the Committee to withdraw his amendment but, sadly, as he cannot be here, I must put the question.
Question put, That the amendment be made:—
The Committee divided: Ayes 3, Noes 8.
Division No. 21 ]
AYES
Bellingham, Mr. Henry
Burrowes, Mr. David
Hughes, Simon
NOES
Flello, Mr. Robert
Foster, Mr. Michael (Worcester)
Goodman, Helen
Hesford, Stephen
Kidney, Mr. David
McCarthy, Kerry
Mann, John
Prentice, Bridget
Question accordingly negatived.
Amendments made: No. 158, in schedule 13, page 197, line 15, leave out ‘an interest in’ and insert ‘holding’.
No. 159, in schedule 13, page 197, line 18, leave out ‘power’ and insert ‘rights’.
No. 160, in schedule 13, page 197, line 24, leave out ‘an interest in’ and insert ‘holding’.
No. 161, in schedule 13, page 197, line 27, leave out ‘power’ and insert ‘rights’.
No. 162, in schedule 13, page 208, line 29, leave out ‘an interest in shares in a licensed body’ and insert
‘a shareholding in a licensed body, or in a parent undertaking of a licensed body,’.
No. 163, in schedule 13, page 208, line 31, at end insert—
‘(aa) a non-authorised person may not have an entitlement to exercise, or control the exercise of, voting rights in a licensable body, or a parent undertaking of a licensable body, which exceeds a limit specified in the rules (“the voting limit”);’.
No. 164, in schedule 13, page 208, line 32, leave out ‘in which non-authorised persons have an interest’ and insert
‘, or a parent undertaking of a licensed body, held by non-authorised persons’.
No. 165, in schedule 13, page 208, line 34, at end insert—
‘(c) the total proportion of voting rights in a licensed body, or a parent undertaking of a licensed body, which non-authorised persons are entitled to exercise or control the exercise of, may not exceed a limit specified in the rules.
( ) Rules made under any paragraph of sub-paragraph (1) in relation to a licensed body and a parent undertaking may specify different limits in relation to the licensed body and the parent undertaking.’.
No. 166, in schedule 13, page 208, line 35, leave out from ‘(1)(a)’ to end of line 37 and insert
‘or (aa) may provide that references in those rules to a person, in relation to a person’s shareholding or entitlement to exercise or control the exercise of voting rights, are to—
(a) the person,
(b) any of the person’s associates, or
(c) the person and any of the person’s associates taken together.’.
No. 167, in schedule 13, page 209, line 2, after ‘body’, insert
‘, or a parent undertaking of a licensed body,’.
No. 168, in schedule 13, page 209, line 4, at end insert
‘or (aa) in relation to the body.’.
No. 169, in schedule 13, page 209, line 5, leave out from ‘acquires’ to ‘and’ in line 6 and insert ‘—
(a) a shareholding in the body which exceeds the share limit, or
(b) an entitlement to exercise, or control the exercise of, voting rights in the body which exceeds the voting limit,
must notify the body (and, if the body is a parent undertaking of a licensed body, the licensed body)’.
No. 170, in schedule 13, page 209, line 21, leave out ‘licensed body’ and insert
‘body (and, if the body is a parent undertaking of a licensed body, the licensed body)’.
No. 171, in schedule 13, page 209, line 33, leave out paragraph 41.
No. 172, in schedule 13, page 209, line 38, leave out ‘relevant’.
No. 173, in schedule 13, page 210, line 2, leave out ‘interest in shares in any body’ and insert
‘shareholding in a body corporate with a share capital’.
No. 174, in schedule 13, page 210, line 12, leave out sub-paragraph (3) and insert—
‘( ) In sub-paragraph (1)(b), references to a person’s shareholding are to be read in accordance with paragraph 3(3) or 4(2) (as the case may be).’.
No. 175, in schedule 13, page 210, line 15, after ‘38(1)(a)’, insert ‘or (aa)’.
No. 176, in schedule 13, page 210, line 16, leave out from ‘a’ to end of line 17 and insert ‘licensed body if—
(a) the person’s shareholding in the body, or a parent undertaking of the body, exceeds the share limit, and the body or parent undertaking (as the case may be) is a body corporate with a share capital, or
(b) the person’s entitlement to exercise or control the exercise of voting rights in the body, or a parent undertaking of the body, exceeds the voting limit by virtue of the person holding shares in a body corporate with a share capital.’.
No. 177, in schedule 13, page 210, line 18, leave out from ‘means’ to end of line 19 and insert—
‘(a) in a case within sub-paragraph (1)(a), the number of shares by which the person’s shareholding exceeds the share limit, and
(b) in a case within sub-paragraph (1)(b), the number of shares held by the person in excess of the number of shares the person could hold without the person’s entitlement to exercise, or control the exercise of, voting rights exceeding the voting limit.’.
No. 178, in schedule 13, page 210, line 20, leave out sub-paragraph (3) and insert—
‘( ) References in this paragraph to a person’s shareholding (or holding of shares) or entitlement are to be read in accordance with any applicable licensing rules made under paragraph 38(2).’.
No. 179, in schedule 13, page 210, line 25, leave out ‘relevant’.
No. 180, in schedule 13, page 213, line 20, at end insert ‘or (aa).’.
No. 181, in schedule 13, page 213, line 22, leave out from ‘where’ to end of line 24 and insert ‘a non-authorised person acquires—
(a) a shareholding in a licensed body or parent undertaking of a licensed body which exceeds the share limit, or
(b) an entitlement to exercise, or control the exercise of, voting rights in a licensed body or parent undertaking of a licensed body which exceeds the voting limit.’.
No. 182, in schedule 13, page 213, line 36, at end insert—
‘( ) If the share limit or voting limit is breached in relation to a parent undertaking of a licensed body, references in sub-paragraphs (3) and (6) to the licensed body include the parent undertaking.’.
No. 183, in schedule 13, page 214, line 7, at end insert—
‘( ) If the share limit or voting limit is breached in relation to a parent undertaking of a licensed body, references in sub-paragraphs (1) and (5) to the licensed body include the parent undertaking.’.—[Bridget Prentice.]
Question proposed, That this schedule, as amended, be the Thirteenth schedule to the Bill.
Simon Hughes (North Southwark and Bermondsey) (LD): I wish to ask a general question about the operation of the schedule, for which clause 89 is the trigger clause. The schedule sets out the possibility of non-authorised people holding interests in licensed bodies and it is about the activities of non-legal people and professionals in the new business structures.
Consumers would be interested in commenting on a prospective application, as with a planning application. The Minister will know as well as any of us that when there is a controversial planning application, public interest might arise because people have been watching a particular site like hawks. Anyone with an interest knows as soon as a planning application is submitted to a council and they will be geared up to make their representations. Interest might also arise from a local authority-led consultation in which people participate, or simply because they hear a rumour—often, the interest arises because there is a rumour that something is about to happen.
Let me take an example given on Second Reading by the hon. Member for Banbury (Tony Baldry). He said that Banbury is a town with a couple of solicitors firms whose work is well regarded and respected. A licence application for an alternative business structure that could affect provisional legal services might be made. Let us imagine, for example, that one of the large insurance companies has an office in Oxford and decides to provide services around the country, but that it particularly wants to start in Oxfordshire. The head office could be in Oxford or elsewhere. I am thinking of a company such as Axa or another large claims company that does a great deal of work. Such a company would obviously be able to offer certain services at a low price because of the volume of work that it does. What is the process by which the public would come to know who was applying for a licence and about their other interests, and at what stage?
For my second example, I shall draw on the evidence given yesterday to the Treasury Committee about private equity companies, which was widely reported. Some of the new organisations are not well known by their private equity name, but are instead known if one discovers what businesses they run. I discovered yesterday that one such company runs the AA. Who owns those organisations is relevant to local consumers, citizens advice bureaux, consumer councils, consumers’ associations, town or parish councils and all sorts of other people who have an interest in knowing. If there was a share buy-out of such an organisation, how would people be brought up to date with the relevant information? My question is a general one about how the public and those with an interest would come to know who was really behind an application. There may be a name on a plate, but people might not know who is behind the organisation.
Stephen Hesford (Wirral, West) (Lab): Has the hon. Gentleman been following the Bill, as we have? What does he imagine the consumer panel might be for and might want to involve itself in if it is not a public consultation on these issues? That might answer his question.
Simon Hughes: Yes, but only as far as a national view of these things goes. It does not answer my question from an Oxfordshire or a Banbury perspective unless there is a guarantee that before any such licence was considered, let alone granted, the local community would be informed and consulted.
To take the controversial examples cited by the hon. Member for Bassetlaw, someone who had had a bad track record in a particular part of the country might emerge under a different guise with other partners. How will local people and local organisations know what is going on? How will they know who the applicant is and who controls the interest? How will they be able to make representations before any decision is made?
The Parliamentary Under-Secretary of State for Justice (Bridget Prentice): I am not sure that I can directly answer the hon. Gentleman’s question. If sensitive personal information about private investors were available to individual members of the public, there would be a danger of breaches of confidentiality or property rights. As my hon. Friend the Member for Wirral, West mentioned, there is the consumer panel, which is an innovation. It would be representative of the public.
I am not sure that it would be appropriate to go down the road, either in the Bill or elsewhere, of granting the public wide access to that kind of information. Some of this has to be based on normal legislative practice. We rely on the board and the licensing authorities to be very thorough in the way that they investigate potential applicants.
Finally, the hon. Gentleman prayed in aid the example used by my hon. Friend the Member for Bassetlaw. As we discussed earlier, the licensing authority would have the opportunity to investigate someone who tried to pop up under a different guise. It would not be possible in normal circumstances to provide that information to the public. On the other hand, it would be possible for the licensing authority, under its rules, to make some provision for that. No doubt when the licensing authorities read the Hansard of these debates they might want to take that into consideration.
Simon Hughes: That is really unsatisfactory. I am going to go back to my example. It is not met by the consumer panel point made by the hon. Member for Wirral, West. In Oxfordshire, to take the vested interest group first, there is the Oxfordshire branch of the Law Society. There will then be other Oxfordshire organisations—the Oxfordshire citizens advice bureau and other bodies such as the women’s institute, the Townswomen’s Guild, the rotary club and all the local organisations that have an interest in business and commerce. There may be a chamber of commerce.
I see nothing in the Bill—perhaps the Minister can show me that I have missed something—to providethat where an application is made for a licence under clause 84, any consultation is necessary with anyone directly affected in the area.
1.15 pm
There is an opportunity for consultation at national level. When a major application that would fundamentally change the nature of provision is made, the licensing authority may dutifully perform what is set out in the Bill, and decide what is to be done under the rules under clause 83, or examine policy documents. I should be grateful, however, if the Minister told me whether AXA, for example, made an application to provide the relevant services across Oxfordshire, any provision would guarantee that the people of Oxfordshire would know what had happened, or what might happen, before it went ahead. If that is not the case, the Bill is significantly defective.
Bridget Prentice: I am not sure that I shall be able to satisfy the hon. Gentleman on this matter. It is not common practice for such information to be readily available to the public. However, I draw his attention to clause 87, on registration, under which the register of licensed bodies must be available. It must contain
“the names and places of business of all bodies which hold or have held licences granted by the licensing authority.”
That does not, of course, include applicants. However, clause 87(3) states that
“information contained in the entries in its register”
must be
“available for inspection by any person during office hours and without payment.”
That does not go as far as the hon. Gentleman would like. However, regarding the example that he gave, in granting a licence the authority must take into account all the regulatory objectives that we have discussed at length, and I imagine that in so doing it would take into account the situation in particular communities. It would be for the licensing authority, if it so wished, to consult on and discuss some of those issues with those communities. The matter is not explicit in the Bill; I do not think that that would be appropriate. However, if the arrangement is to work properly, the licensing authority, which has duties under clause 87 on the granting of applications and adherence to regulatory objectives, will protect the consumer. I think that that is as far as I can go in helping the hon. Gentleman.
Simon Hughes: I hear what the Minister says and I accept that clause 87 imposes a duty to maintain a register showing who is licensed and what they have done. That is clearly a different point, and the Bill is unsatisfactory in that respect.
The Minister has confirmed that there is a gap in the Bill in the matter of the consumers’ interest—that is her phrase. Consumers will be given a new system, without necessarily knowing that it is coming down the track, or knowing anything about the decision. I intend to table an appropriate amendment to make sure, in the case of any significant licensing application that would have an impact on the relevant community, that there is a duty to provide appropriate consultation with the community before any decision is made. Without that, and without an opportunity to respond, the system will not be consumer-led. It will be a market-led system; it will probably be led by the big boys and girls, rather than the little ones—by those with the financial clout to come into the market. It might be to the detriment of the consumer, rather than their benefit, and it would be brought about while they were kept in ignorance of what was happening. I am grateful for the Minister’s answers, which confirm my suspicions about the Bill. I shall certainly return to the matter on Report.
Question put and agreed to.
Schedule 13, as amended, agreed to.
 
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