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Sir David did, however, argue that lawyers should be a majority by numbers on the management group. These amendments are designed to reinforce that by requiring at least three-quarters of the managers to be lawyers.

In Committee, the Minister—and I have read and re-read her contribution—expressed concern that the non-lawyers would not be regulated and that that would create a risk to the public and to the public interest. That is emphatically not the intention, nor was it the intention of Sir David Clementi.

Under the approach of these amendments, the Law Society would need power to establish a register of permitted non-lawyer partner-managers of firms and to set requirements for eligibility to the register. The requirements would be likely to include a character and suitability test, so that individuals who could not by virtue of previous convictions or other misconduct become solicitors would not be permitted to become non-lawyer partner-managers. There might also be a requirement to demonstrate familiarity with the Law Society’s principles of professional conduct, since all managers of a firm share responsibility for ensuring that the firm complies with its regulatory responsibilities.

I concede to the Minister that consequential amendments are likely to be needed to ensure that the Law Society has the necessary powers and to make it clear that partners or managers who are not authorised persons will be fully subject to the Law Society’s regulatory regime, including prosecution before the Solicitors Disciplinary Tribunal.

Finally, the Government have already said that LDPs will be able to operate very soon after Royal Assent. Under the Bill as currently drafted, that is only partly correct, because it will apply only to LDPs where the management group consists entirely of lawyers. These amendments would enable true LDPs, as envisaged by Sir David Clementi, to operate promptly.

Lastly, I refer to the Joint Committee’s recommendation that ABSs should be introduced on an incremental basis. That, in turn, maximises the likelihood that any unanticipated difficulties can be resolved well before the more challenging regulatory issue, such as that on externally owned law firms, needs to be tackled. I beg to move.

Baroness Ashton of Upholland: My Lords, perhaps I may make it absolutely clear at the outset that the comment that I made while the noble Lord was speaking

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was that he could not possibly be old enough to have been a partner for 40 years. Did the noble Lord say that? I do not accuse him of telling porkies, if I may use that terminology, but it is impossible.

Lord Kingsland: My Lords, he was a child prodigy.

Baroness Ashton of Upholland: My Lords, that is flattery of a particular kind.

Lord Carlile of Berriew: My Lords, that is the end of the flattery.

Baroness Ashton of Upholland: My Lords, exactly. As the noble Lord, Lord Carlile, said, that is the end of the flattery—but it was, none the less, heartfelt.

The noble Lord, Lord Hunt, eloquently returned to an issue that we looked at in Committee. The question is the Law Society’s ability to regulate practices with up to 25 per cent non-lawyer control without the need for those practices to be licensed under Part 5, and he has set out why he thinks that this is important. Amendments Nos. 311A, 311B, 311C and 632A, tabled with the support of the Institute of Chartered Accountants in England and Wales, would make similar provision for bodies with 25 per cent non-lawyer professionals, albeit that they would be low-risk bodies under the alternative business structure framework, rather than exempt from the framework.

The amendments would also provide that firms with non-lawyer partners or members who do not provide services to clients should not require those licences. I hope that by this stage in our deliberations noble Lords will accept that I support the creation of practices that have non-lawyers as managers, or which combine the expertise of different professionals in the provision of services. I welcome very much both the Law Society and the Institute of Chartered Accountants facilitating and regulating such practices. I have said on many occasions that increased opportunities to leverage non-lawyer expertise into the legal services market is certain to create advantages both for consumers and for providers.

What I cannot accept is exemption from Part 5 altogether for regulated practices within the proposed boundaries, which would go against a key principle of the Legal Services Bill and our proposals for alternative business structures. Our policy is to create, as far as is possible, a level playing field between regulators, offering all the potential to become licensing authorities. We could risk the opposite outcome. I know that that is not the intention of the noble Lord, but I do not wish to endorse a provision that gives one regulator a potential competitive advantage, first, by virtue of reaching part of the alternative business structure market before other regulators and, secondly, by avoiding the additional statutory requirements that would otherwise apply to these practices.

I also do not want to endorse a proposal that gives a competitive advantage to non-lawyers who are regulated professionals, particularly given the concern that conflicts between professional rules may be one of the most complex challenges for those involved in alternative business structures. So I am opposed in principle to

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exemptions and carve-outs from the Part 5 regime. Certain forms of exemption may, arguably, facilitate an incremental approach in the short term; in the longer term, however, we run the risk of creating loopholes and possible confusion.

We have tried in the Bill to make a clear, principled distinction between two types of practice. A body either has non-lawyers in positions of control or it does not. Consequently, it is either a licensable body or it is not. As I have stated, in the framework we have already provided for flexibility as far as low-risk bodies and other special bodies are concerned, but we have set 10 per cent as a maximum level on the basis that we think that control above that level becomes too significant to benefit from lesser scrutiny.

In principle, the Government’s policy is that bodies with non-lawyer ownership or management should be subject to the safeguards of Part 5. Therefore, if we were to make an exception for Law Society practices, such practices could emerge without any need for the Legal Services Board to designate the Law Society as a licensing authority. It would not be required to fulfil the relevant obligations. That is not to say that the Law Society would or could not create similar safeguards, but we would have no guarantees in statute. We would run the risk of exposing consumers to inconsistent levels of regulatory protection and we would not have, at least for several years, any board of supervision. I have similar objections to any exemption for bodies with non-lawyer partners, client-facing or otherwise.

I hope that the noble Lords will agree that it is crucial that we get this right from the outset. The incremental approach suggested by the noble Lord, Lord Hunt of Wirral, would be of little value if it could not be monitored and supervised by the board and if it proceeded with none of the safeguards that we have identified as essential to support alternative business structures. With the greatest respect to the noble Lord, I do not think that what he suggests quite fulfils the objectives set out by Sir David Clementi.

Lord Hunt of Wirral: My Lords, on that point, the Government have said that legal disciplinary practices can come into place soon after Royal Assent. Perhaps the Minister could clarify exactly what the Government mean by that, because I do not think that the LDPs, as defined by Sir David Clementi—for example, where just one person, perhaps the finance or human resource director, is allowed to become part of the management structure and a partner in the firm—can happen until at least 2010, or even 2011. That point causes me some concern. Would the Minister be prepared to have a look at the sorts of examples that Sir David has given, just to ensure that we can have some fast-track procedure to allow that to happen without the great panoply and delay involved in awaiting the full structure?

Baroness Ashton of Upholland: My Lords, I could not agree more with the sentiment behind what the noble Lord is saying. It is important, not least in the debate on how alternative business structures will evolve and develop, to enable LDPs, as we have learnt to call them, to come into being as soon as possible. I need to get advice on the exact timetable as soon as possible to be sure about that, but I agree with the noble Lord wholeheartedly.

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I want to ensure that noble Lords recognise that I do not disagree with Sir David Clementi’s judgment. He supported, as I do, the development of the types of practices that the Law Society is seeking to regulate, but he recommended that we put in safeguards around these practices. In particular, he talked about the head of legal practice and the fitness-to-own tests. He also recommended that those should be subject to oversight by the board under the B+ model.

We believe that, in Part 5, we are guaranteeing that we have these safeguards in statute and that they can be relied on across the regulatory framework, while making it clear precisely to whom they should apply. Taking on board the noble Lord’s point about wishing to move forward with this, which I endorse completely, I hope that he will feel able to withdraw his amendment.

Lord Hunt of Wirral: My Lords, this has been a very helpful debate, because I sense that the Minister and many of us are ad idem and want to achieve the same objective. I hope that, if there is time before the Third Reading, the Minister will look again at Sir David Clementi’s report, as he spoke about the first step, which would facilitate the emergence of MDPs or alternative business structures at a subsequent date. I suppose that I am just talking about that first step, but, in the light of the comforting words that the Minister has uttered and the comments that she made at the outset of her speech, I shall be quixotically chivalrous and acknowledge how grateful I am to her for all that she has said tonight. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 205 not moved.]

Clause 72 [Licensing authorities and relevant licensing authorities]:

[Amendment No. 206 not moved.]

Clause 73 [Designation of approved regulator as licensing authority]:

[Amendment No. 207 not moved.]

Clause 74 [Automatic cancellation of designation as licensing authority]:

Baroness Ashton of Upholland moved Amendment No. 208:

On Question, amendment agreed to.

[Amendment No. 209 not moved.]

Clause 75 [Cancellation of designation as licensing authority by order]:

Baroness Ashton of Upholland moved Amendments Nos. 210 to 215:

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On Question, amendments agreed to.

[Amendment No. 216 not moved.]

Schedule 10 [Designation of approved regulators as licensing authorities]:

Baroness Ashton of Upholland moved Amendments Nos. 217 to 232:

On Question, amendments agreed to.

Clause 76 [Cancellation of designation: further provision]:

Baroness Ashton of Upholland moved Amendments Nos. 233 to 236:

On Question, amendments agreed to.

[Amendment No. 237 not moved.]

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Clause 77 [The Board’s power to recommend orders made under section 76]:

Baroness Ashton of Upholland moved Amendment No. 238:

On Question, amendment agreed to.

[Amendment No. 239 not moved.]

Clause 78 [Cancellation of designation: powers of entry etc]:

Baroness Ashton of Upholland moved Amendments Nos. 240 to 242:

On Question, amendments agreed to.

[Amendment No. 243 not moved.]

Clause 79 [Functions of appellate bodies]:

Baroness Ashton of Upholland moved Amendments Nos. 244 and 245:

On Question, amendments agreed to.

[Amendment No. 246 not moved.]

Clause 80 [Procedural requirements relating to recommendations under section 79]:

[Amendment No. 247 not moved.]

8.45 pm

Baroness Ashton of Upholland moved Amendment No. 248:

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