Memorandum submitted by The Law Society
EXECUTIVE SUMMARY
1. The proposal to introduce an annual cap
on non-European Union economic migration will make it more difficult
for City firms to recruit the best legal talent from the global
labour market and reduce the mobility of lawyers within the international
networks of UK-based firms. Regulations that inhibit mobility
into the UK will not result in preserving jobs for EEA nationals
but will result in the movement of the centre for legal work to
a jurisdiction that will allow mobility.
2. It is imperative that proposed immigration
reforms do not hamper the competitiveness of hugely successful
global businesses seeking to regenerate after the recession.
3. Migrants brought in to work in the UK's large
international law firms are highly-qualified, well-paid individuals
who make a significant contribution to the domestic economy through
expenditure, tax revenue, and the generation of support roles
filled from the domestic labour market. Further, they bring specific
expertise and experience of foreign markets that supplements and
develops the legal talent sourced from the resident labour market.
The cap will have long-term detrimental consequences for individual
legal businesses and the UK sector as a whole.
4. Any perception that the English legal
market is becoming more closed to overseas lawyers and law firms
is likely to result in further restrictions on the ability of
UK lawyers to do business abroad.
INTRODUCTION
5. The legal services sector, with annual
international earnings of £4 billion, contributes nearly
2% of UK GDP, much of which is generated by large City firms that
operate in a global marketplace. London has 20% of the global
legal market and is home to four of the world's top six law firms.
Solicitors qualified in England and Wales work in more than 90
countries. English law and lawyers are highly valued around the
world; the openness of markets and the ability of lawyers to move
between jurisdictions are essential to their continued success
and global competitiveness.
6. The competitive position of UK exporters
of legal services in respect of international market is delicately
balanced. Any perception that the domestic legal market is becoming
more closed to overseas lawyers and law firms might result in
further restrictions on the ability of UK lawyers to do business
abroad. The opening of overseas legal markets is a priority for
the Society and an area in which it continues to work in close
cooperation with government.
7. The Society supports the view of the
Professional Services Global Competitiveness Group that, in order
to maintain a lead in multi-jurisdictional transactional work,
British law firms must be free to employ the best lawyers in the
global labour market and that these outstanding individuals complement
domestic talent.
MIGRATION IN
THE LEGAL
SECTOR
Nature of City legal work
8. City law firms advise on complex matters
spanning multiple jurisdictions. The majority of international
contracts are written in either English or US law, and England
and Wales has a well-established reputation as the jurisdiction
of choice for international dispute resolution.
9. Firms typically organise staff in industry
sector groups comprising lawyers from various practices and offices
around their international networks. Specialist teams are then
put together for specific deals, combining talent, experience
and expertise as appropriate in order to provide the best quality
advice for multinational clients. The ability to provide this
level of service is a critical element of the ability of City
firms to win business in the international marketplace.
10. Recruitment thresholds for qualification,
skills and experience are therefore necessarily high; restricting
the search for quality staff to one jurisdiction is not an option
for a firm that wishes to maintain its international market reputation.
The training, development and practice of international lawyers
requires that they live and work in a variety of locations. Regulations
that inhibit mobility into the UK will not result in preserving
jobs for European Economic Area (EEA) nationals but will result
in the movement of the centre for that work to a jurisdiction
that will allow mobility.
Emerging markets
11. In order to remain one of the world's
leading professional services organisations, a UK based international
law firm must look to emerging markets. This means planning for
the eventual opening of those markets to UK firms: fostering the
right talent within a UK office by developing skills and providing
international market and English law transaction standards experience
with a view to eventual transfer or working in key emerging markets.
This strategic imperative means that non-EEA recruits, with foreign
language skills and experience, are a vital component of a firm's
ability to remain competitive in the global marketplace.
12. The inability to hire such candidates will
significantly thwart the ability of UK firms to retain and further
their foothold in the international arena. It may also give the
transaction standards and legal systems of other jurisdictions
potential longer-term pre-eminence in those markets.
Impact of a cap on non-EU economic migration in
the legal sector
13. The ability of Britain's world-scale
law firms to retain and increase competitiveness across a range
of jurisdictions depends on the continued openness of markets
for talent and services. The success of the domestic legal services
market is essential to the resilience of the City and the ability
of the UK economy to recover from recession.
14. The interim limits introduced in July 2010
to prevent a flood of applications ahead of the permanent caps
in 2011 have caused chaos for City legal businesses. The interim
limits were set just below immigration usage levels during the
recession. Businesses now seeking to regenerate are unable to
recruit the staff they need to compete for international work.
The domestic labour market cannot offer the specialist skill set
required for particular areas of international legal businesses.
15. The economic impact of restricting the
ability of firms to recruit the best legal talent from the global
market will be felt well beyond the current recession and may
impede the recovery of the legal sector and the City more broadly.
Law firms need to develop the best legal talent from around the
world in order to secure future international business in key
markets. Preventing firms from doing so will have an impact on
productivity and profitability, ultimately weakening future career
opportunities for UK lawyers and the broader economy.
16. International law firms operate training,
secondment and internship programmes which enable firms to share
knowledge, experience and best practice with lawyers from around
the world. Limiting the ability of firms to do this by limiting
the intra-company transfer category or restricting Tier 2 to defined
shortage occupations will jeopardise the ability to facilitate
business development.
Economic losses to UK economy
17. According to one firm, for each London
lawyer hired the firm also hires approximately 0.8 headcount in
support services (such as secretarial, document production, facilities,
etc.). These resources are not typically subject to visa requirements.
The non-hiring of any lawyer in the London office would therefore
also result in a reduction in relation to these associated resources.
18. Migrant employees are high-earning individuals
who also contribute to the domestic economy by spending their
income in the UK. Partners and employees in London pay income
tax in the UK and their drawings and salaries are directly linked
to the profitability of the firm. If the firm was less successful,
the tax paid by partners and employees would reduce.
19. Individuals relocated from abroad typically
receive a generous relocation package, funded by firms, which
includes travel, accommodation and relocation expenses. Firms
often use external relocation companies to administer these arrangements.
Number of migrants affected by the proposals
20. Given the differences in size and international
structure of each of the firms it is difficult to meaningfully
compare the number of migrant lawyers brought into the UK by each
organisation. The proportion of the migrant workforce at contributing
firms ranges from approximately 7% to 12%. In one firm, approximately
40% of qualified lawyers and 10% of trainees recruited in the
last three years were migrants. Another firm equated the employment
of four work permit holders to a contribution of over £1
million in billings in the previous financial year.
21. Law firms have provided the Law Society with
case study examples profiling the type of migrants typically recruited
in the UK legal sector (including details of age, qualifications,
experience and earnings) which are available to the Committee
on request.
DISCUSSION OF
SPECIFIC PROPOSALS
Tier 1—"pool" system
22. According to the consultation documents,
a New Zealand-style "pool" system is under consideration
for Tier 1, whereby the best applicants in a pool of candidates
would be invited to apply for entry to the UK at predetermined
intervals.
23. Law Society members have indicated serious
concerns with this approach. A pool system will be complex, unpredictable
and won't provide employers with the certainty they need to manage
and plan their businesses.
24. It should be noted that the New Zealand system
applies to permanent migration, not time-limited working visas.
The time, expense, inconvenience and uncertainty associated with
such a system would be disproportionate for migrants seeking to
enter the UK for a fixed period. Further, concerns have been expressed
about whether the UK Border Agency (UKBA) has the technological
capability to operate such a system efficiently and businesses
seek assurance on this point before any such proposal can be supported.
25. In developing this policy, alternative
points criteria should be considered including points for work
experience, a job offer or specialist skills. Policy makers must
ensure, however, that raising the minimum criteria for qualification
in this way does not negatively impact on the needs of firms and
business in general. For example, more points might be allocated
for relevant experience or possession of a particular level of
qualification but these should not be made mandatory.
Tier 2—"first come, first served"
system
26. Tier 2 (General) is an important tier
for employers in the legal sector. Representatives of law firms
have emphasised that if such a system is to be introduced then
a number of factors need to be taken into account.
27. Firstly, the legal sector tends to recruit
graduates at fixed times of year, generally September and March.
A quota system is likely to make this process much more difficult.
Allowing sponsors to indicate peak recruitment periods will be
essential to ensure that well-established business planning practices
are not disrupted.
28. A related point is that graduates in
the legal sector are typically recruited at least two years before
they are scheduled to commence work with the firm. This enables
prospective trainees to complete their degree and legal practice
course before starting work. The routes to qualification vary
between jurisdictions; there is no uniform timeline which can
be applied to undergraduates in different countries determining
when they will complete the stages of their legal education and
training. Businesses need to be certain that they will be able
to honour offers made to prospective trainees requiring a work
permit.
29. In developing this policy, UKBA must
be mindful of the need for flexibility in business recruitment
requirements across the year. Applications that are unsuccessful
in one quota period should be rolled over to the next. However,
an allocation of certificates of sponsorship should be kept separate
in each period to deal with exceptional circumstance applications.
Sponsors should be required to demonstrate a clear business case
for an exception to the quota in each instance. Clear, transparent
criteria detailing how such applications will be assessed should
be published by UKBA.
INCLUSION OF
INTRA-COMPANY
TRANSFERS (ICT)
30. It is understood that the intention
of policymakers is to include ICT migrants in the overall cap.
Because it does not lead to settlement, the ICT route does not
have a long-term impact on net migration and the Society believes
it should be excluded from the annual limit on this basis. The
ICT route is an essential feature of global mobility and facilitates
the operation and growth of multinational organisations, which
in turn leads to the creation of UK jobs.
31. If it is to be included, then exemptions
should apply for very senior staff and for those individuals coming
to the UK for a very short period.
32. Firms use ICT to bring in staff from
overseas offices for training purposes, and to staff specific
deals. Relocating staff for short periods is not ideal for businesses,
and individuals are less willing to relocate for short periods.
A two-year limit would therefore be better for ICT. Further, if
a migrant is in the UK for less than a year they are not considered
"resident" for taxation purposes, which mean the UK
will miss out on the tax revenue that would otherwise be contributed
by these highly-paid individuals.
MERGING THE
RESIDENT LABOUR
MARKET TEST
AND SHORTAGE
OCCUPATION LIST
33. The Shortage Occupation List (SOL) and
Resident Labour Market Test (RLMT) routes must not be merged.
Each route services very different sectoral and business needs.
The RLMT caters for acute labour shortages and employers trying
to sponsor highly skilled migrants with specific expertise not
otherwise available in the domestic market. The SOL generally
includes lower paid skilled occupations on a sectoral basis. The
SOL uses Office for National Statistics occupation categories,
and is not sufficiently flexible to be able to deal with specialist
shortages within a particular field.
DEPENDANTS
34. The ability of a spouse or partner to
work is a factor influencing the decision of highly skilled workers
to come to the UK. If they chose not to come to the UK, this might
impact on firms being able to source the best global talent. Further,
any attempt to restrict the right of migrants to bring dependants
with them to the UK may breach their human right to family life
and result in discrimination against migrant workers with dependants.
OTHER ISSUES
OF CONCERN
35. Requiring sponsors to contribute to
the "upskilling" of the UK workforce in order to reduce
reliance on migration fundamentally misconstrues the rationale
for hiring migrants in the first place. The legal sector employs
migrants with particular skills, expertise and experience of foreign
jurisdictions that is not available in the resident labour force.
Further, the legal sector makes huge contributions to the training
and employment of UK workers, through graduate training and work
experience programmes, community investment programmes and the
creation of jobs for UK lawyers and support staff via the business
generation activities of high-level hires.
36. Firms have expressed concerns about the impact
of the proposed limit on the need for employers to consider racial
discrimination law in making employment decisions. If visa extension
applications are to be included in the limit then employers will
face difficult decisions in terms of choosing which of their migrant
employees to retain and which to terminate. This may give rise
to significant litigation risk for employers.
37. The Law Society would be happy to contribute
oral evidence to this inquiry on behalf of major national and
international law firms.
August 2010
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