Legal Services Bill [Lords]

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Clause 98

Referral of employees etc to appropriate regulator
Question proposed, That the clause stand part of the Bill.
Simon Hughes: This clause is the first of a set of linked clauses to which my comments are relevant, so I shall make my comments substantively on this clause, but they apply to clauses 99 to 102 and to schedule 14. That way, I need not trouble the Committee to debate each of those measures.
I want to make a straightforward, general point on behalf of the people whose professional careers might be affected as a result of an investigation and disciplinary sanction, such as the employees referred to in clause 98, the people who might be disqualified under clauses 99 and 100, and the people who might be affected by a suspension or revocation of their licence under clause 101 or by an intervention under clause 102 or schedule 14.
My experience of dealing with the regime for people in the legal profession, particularly solicitors, is that the most common type of complaint is from members of the public who feel that a grievance has not been dealt with adequately by the regulatory or complaints authorities. We shall discuss the complaints mechanisms in part 6. However, complaints from members of the profession have, periodically, been justified, such as that the process is very slow, which means that they have had a cloud hanging over them for a long time, and that the procedures are opaque, which has denied them natural justice in putting their side of the argument.
Whatever my view or the views of other hon. Members about alternative business structures, if we are to have some or all the systems, perhaps starting with a pilot or delayed scheme before they are all introduced, we need to ensure not only that the people who work within them can be dealt with toughly and without any nonsense if they behave improperly, but that the systems are reasonable.
The structures set out in the clauses are fine. It is perfectly proper to have a referral process about an individual employee and to have disqualification, and it is important to publish lists of people who have been disqualified, so that people do not find that they are dealing with someone who is no longer eligible. It is also perfectly proper for licences to be suspended or revoked and for there to be interventions. None the less, there must be fairness on both sides. Will the Minister assure us that the Government intend that the rules, as they are set up by the Legal Services Board and as they apply down the pyramid, will ensure that the new systems are better, fairer, more transparent and more user-friendly both for the people who work in the relevant businesses and for the consumers who buy the services?
It has not been a happy story. I can cite chapter and verse when it comes to perfectly reasonable complaints from aggrieved practitioners who feel that the system has not been fair to them. The greatest complaint on both sides is delay. Customers say, “This is a ridiculously long investigation,” and solicitors say, “It has taken ridiculously long for you to tell me whether I did anything wrong.” It will be helpful if the Minister can assure me that she understands the need for a system that is just on both sides and better than the previous one.
1.45 pm
The Chairman: Order. Before I invite the Minister to reply, may I suggest that the hon. Member for Stafford take the place of the Parliamentary Private Secretary so that if the Minister needs information from her civil servants, they can legitimately pass it to her via the Parliamentary Private Secretary, rather than directly?
Bridget Prentice: Thank you, Sir Nicholas, for that clear explanation of the quaint but important rules of Committee. It means promotion for my hon. Friend the Member for Stafford, and rightly so—[Hon. Members: “Hear hear.”]— a week early, in this case.
I need not delay the Committee. The hon. Member for North Southwark and Bermondsey is right. Fairness on both sides is crucial. The board and the approved regulators must act fairly and proportionately, and that applies to employees within the system as well as to consumers. Those working within the system are consumers, too, but in a slightly different sense. I can give him the assurance that the regulatory objectives and the duties under clauses 3 and 28 should ensure that the board and the authorities behave fairly towards everybody with whom they interact.
Question put and agreed to.
Clause 98 ordered to stand part of the Bill.
Clauses 99 to 102 ordered to stand part of the Bill.

Schedule 14

Licensing authority’s powers of intervention
Bridget Prentice: I beg to move amendment No. 184, in schedule 14, page 214, line 35, leave out paragraph (b).
I shall be brief. This is a technical amendment to delete wording that is superfluous because its effect is achieved elsewhere in the schedule. In order to make the provision outlined in paragraph 1 consistent with the same provisions in schedules 16 and 17—in relation to the intervention powers of both the Law Society and the Council for Licensed Conveyancers—I have deleted paragraph 1(2)(b), because that is covered by paragraph 1(2)(c), which relates to insolvency. It is unnecessary to have both of them.
Mr. David Burrowes (Enfield, Southgate) (Con): I appreciate that this is a technical matter. However, whether it is technical or substantive, it has to be right. I am concerned as to whether sub-paragraph (2)(b) is indeed superfluous. The reason for my concern stems from the definition of an insolvency event. For the purposes of sub-paragraph (2), paragraph 1(3)(c) states:
“an administrative receiver within the meaning of section 251 of that Act is appointed.”
I am concerned about the mention of an administrative receiver. Such a receiver is used for a different type of insolvency event from what the normal receiver would deal with, as mentioned in sub-paragraph (2)(b). Is the Minister confident that sub-paragraph (2)(b) is superfluous given that there is a distinction as set out in paragraph (3)?
Bridget Prentice: I hope that I can reassure the hon. Gentleman. The phrase “a relevant insolvency event” covers the wider aspect to which he is referring. The important thing about this technical amendment is that it brings things into line with the Law Society’s powers that are set out in relation to recognised bodies as they are amended in paragraph 113 of schedule 16; I do not want to be absolutely quoted on that. The measures under that schedule make schedule 14 consistent with Law Society powers. I hope that that gives the hon. Gentleman some reassurance.
Schedule 14, as amended, agreed to.
Clause 103 ordered to stand part of the Bill.

Clause 104

Prevention of regulatory conflict: accounts rules
Robert Neill (Bromley and Chislehurst) (Con): I beg to move amendment No. 296, in clause 104, page 56, line 30, after ‘body’, insert
‘which is not licensed by the Law Society’.
The Chairman: With this it will be convenient to discuss amendment No. 297, in clause 104, page 56, line 33, after ‘body’, insert
‘which is not licensed by the Council for Licensed Conveyancers’.
Robert Neill: Thank you, Sir Nicholas. It is a pleasure to serve under your chairmanship again.
The amendments are intended to avoid ambiguity. They will give better and proper effect to the intention behind the section, which is to prevent the regulatory conflicts that can occur in relation to accounts. We think that the regulatory system can be simplified without compromising public protection, which is the principle behind the Bill.
The intention of the provisions relating to alternative business structures is that the rules of the licensing authority are for the business rather than for any individuals who work in the ABS, and they should apply to all the activities. That seems sensible. We do not have any quibble with that. Clause 104 is intended to reinforce that by ensuring that the accounts rules of the licensing authority apply rather than those of any professional body to which particular members of the ABS may belong. For example, a solicitor working in an ABS authorised by the Council for Licensed Conveyancers would be subject to the accounts rules of the CLC rather than the Law Society. We do not have any problem with that.
Under the Bill, a firm of solicitors would become an ABS by, for example, making a finance director who was an accountant a partner of the firm. However, the finance director might quite properly decide to move on, perhaps having got a better offer elsewhere. The firm might replace him with a lawyer rather than an another non-lawyer—but still someone with the relevant expertise. At that point, it seems to us that the firm would cease to be an ABS; it would resort to being a “traditional” solicitors firm, although it could recruit a third person, a finance director who was an accountant, and become an ABS again. To have different sets of accounts rules applying to such a firm does not seem sensible. It is a needless bureaucratic burden, and it could cause extra cost and confusion—for the consumer as well as for the firm.
The SRA is concerned that clause 104 will notpermit the Law Society to make identical rules under paragraph 20 of schedule 11 and sections 32 and 34 of the Solicitors Act 1974; yet that is what they would wish to do, as it would overcome some of those difficulties. That is exactly what concerns the Council for Licensed Conveyancers. If they were able to do that, the problem would be resolved. We therefore hope that the amendment commends itself to the Government, as it is intended to make the Bill work better.
I hope, Sir Nicholas, that I may make one more point on an important matter of principle. It is convenient to make it now, and I hope that the Minister can reply to all my questions in one go. The Bill provides for a distinct regulatory regime for ABSs. That is sensible, as it allows for the creation of new licensing authorities; and the Legal Services Board can become a licensing authority if necessary and appropriate. Should an existing approved regulator such as the SRA apply to become a licensing authority, we anticipate that the application would be made on the basis of the SRA using largely the same set of statutory powers that it uses to regulate traditional solicitors firms and legal disciplinary partnerships. That is sensible, as it would maintain a proportional approach and avoid confusion. It would also avoid having gaps in the regulatory framework—a risk that we all want to avoid.
It would be for the Legal Services Board to decide whether to accept that approach, but we understand that the discussions between the SRA and the Ministry of Justice were on the basis that the Bill would allow the SRA to make application in that way. It seems that the transitional provisions set out in schedule 22 anticipate, at least in part, that existing regulators might need to amend their statutory powers as part of their application to become an ABS. I should be grateful if the Minister confirmed that our understanding, and that of the various professional bodies, is correct. Such clarity would help everyone. For the reasons that I have advanced, I hope also that the amendments commend themselves to the Minister.
2 pm
Bridget Prentice: I hope that I can reassure the hon. Gentleman that the SRA’s position is as he outlined his understanding of it, thereby giving both him and the SRA some reassurance. The amendments are intended to clarify whether the trumping effect of the rules made under part 5, over existing rules applicable to solicitors and licensed conveyancers, will operate only where those professionals are working in bodies regulated by authorities other than the Law Society and the Council for Licensed Conveyancers, and to determine whether those rules do not attempt to alter the position of solicitors and licensed conveyancers working in firms regulated by other authorities.
I understand the underlying objective, which is, as the hon. Gentleman said, to avoid duplication through applying two different sets of accounts rules to ABS and existing practices. I appreciate the rationale behind that. Like the hon. Gentleman, I want to facilitate efficiency where possible, and clause 104 is consistent with that; it is intended to operate only to resolve situations where rules conflict, putting a solicitor or licensed conveyancer in a difficult position. I presume that, where the Law Society is the licensing authority for a body, its rules would not create a conflict for a solicitor within that body, and that the same would be true for the CLC and licensed conveyancers. I am happy to consider whether we need to make any further provision, just to reinforce that conflict-resolution point.
I assure the Committee that both the Law Society and the CLC will be able to apply for orders under schedule 22 or to seek board recommendations under clause 69 for amendments to their existing powers, so long as that does not conflict with the requirements of part 5. I cannot go any further than that at the moment and speculate about what the board might take into account in its recommendations or what the Lord Chancellor might decide. However, I hope that my remarks go some way towards reassuring the hon. Gentleman, the Law Society and the CLC that I understand their position.
Robert Neill: I am grateful to the Minister for replying to both points that I made and for dealing constructively and helpfully with the issue that we raised. It is clear that she, and those who advise her, are well seized of those legitimate points, so on the basis of her undertakings, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 104 ordered to stand part of the Bill.
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