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Gould of Potternewton, B.
Graham of Edmonton, L.
Grocott, L. [Teller]
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haworth, L.
Hilton of Eggardon, B.
Howells of St. Davids, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Irvine of Lairg, L.
Jay of Paddington, B.
Jones, L.
Jones of Whitchurch, B.
Kerr of Kinlochard, L.
King of West Bromwich, L.
Kingsmill, B.
Kinnock, L.
Kirkhill, L.
Layard, L.
Lea of Crondall, L.
Lipsey, L.
Lockwood, B.
Lofthouse of Pontefract, L.
McDonagh, B.
Macdonald of Tradeston, L.
McIntosh of Haringey, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Mason of Barnsley, L.
Massey of Darwen, B.
Maxton, L.
Mitchell, L.
Moonie, L.
Morgan of Drefelin, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morris of Manchester, L.
Morris of Yardley, B.
Moser, L.
Ouseley, L.
Paul, L.
Pendry, L.
Pitkeathley, B.
Plant of Highfield, L.
Prashar, B.
Quin, B.
Radice, L.
Ramsay of Cartvale, B.
Rea, L.
Rendell of Babergh, B.
Rogan, L.
Rooker, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Sawyer, L.
Scotland of Asthal, B.
Sewel, L.
Sheldon, L.
Simon, V.
Smith of Leigh, L.
Snape, L.
Soley, L.
Stevens of Kirkwhelpington, L.
Stone of Blackheath, L.
Strabolgi, L.
Symons of Vernham Dean, B.
Taylor of Bolton, B.
Temple-Morris, L.
Thomas of Macclesfield, L.
Thornton, B.
Truscott, L.
Tunnicliffe, L.
Turnberg, L.
Turner of Camden, B.
Varley, L.
Wall of New Barnet, B.
6 Feb 2007 : Column 615
Williams of Elvel, L.
Williamson of Horton, L.
Young of Norwood Green, L.
Resolved in the negative, and amendment disagreed to accordingly.
Schedule 6 [Estate Agents' Redress Schemes]:
3.55 pm
Lord Dubs moved Amendment No. 7:
The noble Lord said: My Lords, Amendment No. 7 would raise the penalty on an estate agent from £500 to £1,000. This was discussed in Grand Committee and again on Report, when an amendment was tabled to increase the penalty. I understand that there would be difficulties with the higher amount because it is normal practice to go before the courts to increase the penalty. However, given the sums of money at stake for estate agents and the profit that they can make on a single transaction, it seems reasonable to say that £500 is too small a penalty to deter anyone. I do not say that a £1,000 penalty will act as a major deterrent either, but it is better than £500. The Minister made sympathetic noises when we discussed this on Report, so I hope that the arguments are well understood; there should be no difficulty about them. My only concern is whether a £1,000 penalty will have more of a deterrent effect than a £500 one, but it is a little better. I beg to move.
Lord Lee of Trafford: My Lords, I support the noble Lord, Lord Dubs, on Amendment No. 7. Previously, we moved an amendment to increase the penalty from £500 to £3,000, which would be considerably nearer the average one-off commission apparently earned by estate agents and similar for each transaction. We would obviously prefer a £3,000 fine; nevertheless, if the noble Lord, Lord Dubs, has achieved any advance on £500, at least he has made progress. We support him in that endeavour.
The Earl of Caithness: My Lords, I, too, support the noble Lord, Lord Dubs, whom I supported at an earlier stage. He has made a little more progress than I have. I fear that even my noble friend on the Front Bench will continue to sit on her hands, so from this side we are very supportive of the noble Lord, Lord Dubs.
Lord Truscott: My Lords, Amendment No. 7, tabled by my noble friend Lord Dubs, seeks to increase the maximum amount of a penalty charge notice from £500 to £1,000 and is supported by the noble Lord, Lord Lee of Trafford, and the noble Earl, Lord Caithness. The Government have listened carefully to the arguments made in Grand Committee, on Report and today. As I said on Report, the objective is to find a sensible balance between the rights of estate agents not to be given a large fine without any due process and ensuring that the penalty charge is not an insignificant amount. Given the views expressed, we believe that setting the maximum level of the fine at £1,000 is a sensible compromise. Although the actual level will be set by
6 Feb 2007 : Column 616
Lord Dubs: My Lords, I am grateful to my noble friend. I am delighted.
On Question, amendment agreed to.
An amendment (privilege) made.
Lord Truscott: My Lords, I beg to move that this Bill do now pass.
Moved accordingly, and, on Question, Bill passed, and sent to the Commons.
Legal Services Bill [HL]
4 pm
The Parliamentary Under-Secretary of State, Department for Constitutional Affairs (Baroness Ashton of Upholland): My Lords, on behalf of my noble and learned friend Lord Falconer of Thoroton I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved accordingly, and, on Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES (Lord Brabazon of Tara) in the Chair.]
Clause 71 [“Licensable body”]:
Lord Kingsland moved Amendment No. 108ZA:
“( ) A body is not a “licensable body” if it is regulated under section 9(A) of the Administration of Justice Act 1985 (c. 61).”
The noble Lord said: The aim of this amendment, together with Amendments Nos. 150A, 150B and 150C, is to enable legal disciplinary practices, that do not have external ownership, do not seek to provide multidisciplinary services and offer only the services that an ordinary firm of solicitors can provide, to be regulated under the Law Society’s mainstream regulatory amendments. We emphasise that even if these amendments were accepted, multidisciplinary practices and firms in which there was external capital investment would still be regulated under Part 5; that is, under those provisions which deal with alternative business structures.
These amendments develop the approach of those discussed right at the end of the third day of Committee: to permit those who play a significant part in running a firm, such as the finance director, to be recognised with the status of a partner even though they are not qualified lawyers. Under the Bill, it will be possible to make non-lawyers partners in solicitors’ firms, but the price of doing so is that those firms will be regulated under Part 5. In our submission, that is bound to cause a substantial but unnecessary regulatory burden.
6 Feb 2007 : Column 617
Sir David Clementi’s report identified the additional challenges for regulation that would arise from either external ownership or the provision of multidisciplinary services, and we have no argument with that. But in dealing exclusively with practices that have neither of these characteristics, Sir David makes no sharp distinction between firms all of whose partners are solicitors and those with some legally qualified partners and some who are non-lawyers. In his report he said:
“Legal disciplinary practices (LDPs) are law practices which permit lawyers from different professional bodies, for example solicitors and barristers, to work together on an equal footing to provide legal services to third parties. They may permit others ... to be Managers, but these others are there to enhance the services of the law practice, not to provide other services to the public”.
Sir David concluded that the majority of the partners should be lawyers. These amendments, therefore, are designed to secure precisely that. The Law Society would establish a register for permitted non-lawyer partners and set requirements for eligibility on the register. The requirements would include a character and suitability test so that individuals who could not, by virtue of previous misconduct, become solicitors would not be permitted to become non-lawyer partners. Moreover, potential partners would have to demonstrate familiarity with the Law Society’s principles of professional conduct, as all managers and partners of a firm share a responsibility for ensuring that the firm complies with its regulatory responsibilities. In our view, this would respond to the hesitations expressed by the Minister at a rather late hour. There is no reason to assume that the Law Society’s regulations would be any less rigorous than those under Part 5.
This approach is wholly consistent with our view, shared by Sir David Clementi, that the ABS arrangements should be introduced incrementally. These follow on from the previous set of amendments. In our submission, they contain the necessary guarantees that the Government are seeking and ought to be accepted. I beg to move.
Lord Hunt of Wirral: I strongly agree with my noble friend. This subject exercised the Joint Committee on the draft Legal Services Bill. In our report, at paragraph 291 on page 84, we urged the Government to use less haste and more care, and on page 85 we referred to table 5 and the staging of the introduction of ABS firms. My noble friend’s amendment would comply with stage one, which we described as LDPs involving existing recognised bodies. That, of course, falls very neatly with what my noble friend has said.
I declare an interest as a partner in a national commercial firm of solicitors, Beachcroft LLP. I am a subscriber to the Gazette, whose front page features a very attractive picture of the noble and learned Lord the Lord Chancellor, Lord Falconer, with his mouth wide open, saying:
That has come as very good news to everyone. The article stated:
“Lord Falconer said legal disciplinary partnerships (LDPs)—with no non-lawyer managers or owners—will not be alternative business structures (ABSs) envisaged by the legislation and so need not wait for the legal services board (LSB) and the ABS licensing system to be set up. Instead, LDPs will be available once the Act is enacted, which could be in summer 2007”.
6 Feb 2007 : Column 618
“Lord Falconer said ‘the fact that we are allowing [LDPs] to emerge in advance of alternative business structures answers a key recommendation’ from the joint parliamentary committee which examined the draft Bill”.
Three cheers for that. We heard that at Second Reading and we now want to hear what the Minister proposes. This amendment gives her the opportunity to put LDPs into action straight away. In many firms a comparatively small number of people who deserve to become partners are not at present permitted to do so. The Law Society has well known procedures; in fact, it refers to the operation of legal disciplinary practices as “legal practice plus”. The society has been involved in this type of regulation for a number of years.
So, step by step, can we please entice the Minister to say, “Yes, I accept these amendments”?
Baroness Ashton of Upholland: The noble Lord, Lord Hunt, loves to entice me to do things. I try very hard, as he knows, to resist his enticements, though occasionally I succumb. I do not plan to succumb today on this amendment, but I shall say a little about the approach I have sought to adopt in this part of the Bill.
One of the critical concerns when considering regulation and how to make alternative business structures work has been consistency. Consistency is very important in how Part 5 will work. I had the privilege of meeting the trademark attorneys yesterday and talking to them about their concerns regarding some organisations.
I do not dispute for a minute that there are different types of alternative business structure firms, and that some will involve lower or higher risks. We have already had some conversations on the third day in Committee, and no doubt we will have more today, about those issues. However, I do not accept the principle that, even where a majority of lawyers control the firm, there is less influence or less potential for influence from non-lawyers. Noble Lords will know that, in the legal profession as much as elsewhere, even one individual can have a huge impact on any kind of company.
In the financial services market, control beyond 10 per cent is treated as significant. I do not see why we have to consider legal firms differently in that context. In Part 5 we have provided that any person or body who controls 10 per cent or more has to be individually approved by the licensing authority. We have given flexibility to low-risk bodies—those whose total control by non-lawyers is less than 10 per cent—but we do not exempt them from the regulations in Part 5.
It is also important to remind ourselves that in Part 5, whatever the level of influence or control of non-lawyer managers or owners, they can personally be held liable for breaches of professional rules. They are accountable to regulators in the same way as lawyers and, equally, may be disciplined for misconduct. That is an important safeguard in the context of some of the concerns raised in your Lordships’ House and beyond.
6 Feb 2007 : Column 619
Above all, we want to ensure consistency—the classic “level playing field”—and appropriate regulation, hence the “low risk” status of companies whose total control by non-lawyers is less than 10 per cent and a clear regulatory framework for those whose non-lawyer control is above 10 per cent. As I recall saying during the passage of the Compensation Act, regulation need not be heavy-handed or seen in a negative way. Quite the opposite; this is a very positive measure, which we hope organisations will embrace. I accept that we need to think carefully about how regulation works and ensure that firms feel able to participate in ensuring its effectiveness. The Law Society and others will be critical players in that, but I do not accept that we should make exemptions or have differences in how it is done. That is not to say that I do not think that the Law Society would make good rules, I hasten to add.
4.15 pm
Lord Hunt of Wirral: I am listening with great interest to the Minister. These amendments would still mean that these firms would be regulated. I pay tribute to the Minister for her work in bringing forward the Compensation Act 2006; her light touch is legendary. But given that we have the Law Society with its existing regulatory requirements, why cannot we allow LDPs to continue under that particular regulator and regulatory regime rather than wait for a much more onerous and difficult-to-understand regime, which no doubt we shall discuss under later amendments?
Baroness Ashton of Upholland: It is not onerous and difficult to understand—far from it. I am grateful for the noble Lord’s comments about my light touch. We have talked a lot about the partnership between the front-line regulators and the Legal Services Board; we have had some very interesting and satisfactory debates about how that might work. It is important that we continue with that theme, but we are not minded to have different sets of regulatory framework. It is much better to be consistent. With no discredit at all to the work of the Law Society or its abilities in this regard, we believe that it is better to do this as we have set it out in the Bill, to be clear about the role that Part 5 plays and to be clear with all those involved in alternative business structures about their responsibilities and their liabilities. But we hope that we will allay some of those concerns in the way in which the system is set up and taken forward—and I am sure that we shall return to that particular point at length and between stages of the Bill.
Lord Kingsland: I am of course most grateful to the Minister for her reply. I can only conclude from her responses that she disagrees with the judgment of Sir David Clementi—and I must say that I share the surprise of my noble friend Lord Hunt of Wirral.
The provisions under Part 5 will not come into effect for some considerable time; by contrast, once this Bill gains Royal Assent, it will be possible to start immediately with legal disciplinary practices under
6 Feb 2007 : Column 620
Given that we all seemed to agree during the previous day in Committee that an incremental approach to alternative business structures was highly desirable, here is a golden opportunity for the Government to put that philosophy into practice. Where is the danger? The Minister can always intervene and say to the Law Society that its regulatory system is not up to scratch and that they want something tougher and more penetrating. But it would provide the Government with a marvellous opportunity for a dry run for what they hope to achieve in future with the provision of external finance and multidisciplinary practices.
The Minister is nodding but demonstrating no inclination to rise again to her feet.
Baroness Ashton of Upholland: I am always happy to rise to my feet, but I did not want to interrupt the noble Lord.
I do not see anything in the Bill being at odds with what Sir David Clementi said. As I understand it, he said that we need to have certain safeguards for all types of alternative business structures. Those are built into the approach we have taken. We think that it is better to have the consistency of regulation; it is just a different point of view.
I was nodding as I was thinking of our desire to approach noble Lords’ concerns about alternative business structures with an open mind on how they develop and with a recognition that we shall take time to get this right, which is important. The noble Lord, Lord Kingsland, has some interesting ideas on other things that we might consider in that regard when we discuss later amendments. I was nodding at all that, but I believe that the way we have set out the measure is better and reflects a consistent approach. I say that with no disrespect to the Law Society.
Lord Kingsland: In the light of what the noble Baroness has said, I do not think that I can take this amendment much further today. Therefore, with a degree of regret, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Kingsland moved Amendment No. 108A:
(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 71(1)(b) of this Act would otherwise be a licensable body,6 Feb 2007 : Column 621
The noble Lord said: This is another amendment which comes from the patent and trade mark agents. I was delighted to hear from the noble Baroness that she has met representatives of the trade mark and the patent bodies, as, indeed, she undertook to do on the previous Committee day. I am extremely grateful to her for taking that trouble.
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