Introduction
1.On 2 December 2020, the House agreed the Conduct Committee report, Registration of members’ foreign interests.1 The report proposed that members be required to register earnings from “governments of foreign states (including departments and agencies), organisations which may be thought by a reasonable member of the public to be foreign state-owned or controlled, and individuals with official status (whether executive, legislative or judicial) in foreign states when acting in that capacity”. These proposals arose out of a recommendation from the Intelligence and Security Committee of Parliament on Russia’s influence in the United Kingdom’s democracy, and indications in the 2019 Queen’s Speech briefing notes2 that the Government was considering legislation analogous to the US Foreign Agents Registration Act.3
2.The report also proposed that members required to register a client under this provision, or under the personal service company provision, should be able to apply to the Registrar for an exemption if they believed that they were bound by an established duty of confidentiality. We subsequently held a consultation on this issue.
Consultation
3.The consultation asked for members’ views on the following issues. We also sent the consultation questions to the key professional bodies.
(1)Are you aware of any professions or sectors which carry any kind of duty not to name clients publicly?
(2)In these professions or sectors, is this duty written down anywhere in professional guidance? If not, on what basis could such a duty be asserted?
(3)In these professions or sectors, are there any exceptions to such a duty? Is the duty discharged if the client waives the right to confidentiality or if the relationship becomes known in the public domain, e.g. in court?
(4)We are working on the assumption that the level of earnings will always need to be disclosed, even if the name of the client is not, with the public interest trumping commercial confidentiality. Do you have any comment on this?
(5)In many cases, it may be difficult for members to identify what proportion of the fees paid by a client are attributable to their own work as opposed to the work of others in their organisation. In such cases, we assume that the only option would be to register the total amount paid by the client to the organisation over the year. If you have any comments or suggestions on this, please say.
4.In total, 42 members responded to the consultation, and we had responses from the Bar Standards Board, the Faculty of Advocates, the Institute of Chartered Accountants in England and Wales, the Institute and Faculty of Actuaries and the Solicitors Regulation Authority. We are not publishing the evidence received from members, but the submissions from the professional bodies are set out in Appendix C.
Responses and analysis
Exemptions
5.The responses from members covered the full spectrum of opinion from wanting no exemptions whatsoever, to objecting to the scheme on principle.
6.Those who wanted no exemptions suggested that when it came to a member of the legislature having a professional relationship with a foreign power, the public interest in disclosure trumped any professional or commercial duty of confidentiality. As a matter of principle, it would be inappropriate for a member to enter into such a professional relationship if they were not at liberty to register the interest.
7.Members who advocated for exemptions fell largely into two categories.
(a)Those whose profession carried a duty of confidentiality, some of whom suggested that the provision would force them to take leave of absence.
(b)Those fearing that disclosing the identity of clients would make them less attractive than competitors, while disclosing fees would put them at a commercial disadvantage. This was particularly so if over time the provision were extended to cover all clients regardless of connections with foreign governments. In the case of members employed by a company, the concern was that employers would stop allocating certain clients to them or dispense with their services altogether. This was against the House’s long-expressed support for members maintaining outside careers and keeping their expertise up to date.
8.We understand these concerns, but we believe that the public interest requires absolute transparency when it comes to members of the national legislature working for a foreign power. If the interest cannot be properly disclosed, then it should not be taken on by an active member. We have no current plans to recommend the extension of this enhanced disclosure requirement to other types of client, and so any adverse professional or commercial impact on members will be limited.
9.We considered carefully the submissions made about specific professions, to assess the case for any kind of exemption. The arguments for a duty of confidentiality were strongest for medicine and law. The former is not relevant here, because the new provision could not catch a doctor treating a patient (services to an individual are only caught by the new provisions where the service is being provided to them in their official capacity, whereas medical treatment is always received in a personal capacity).
10.Law is the most difficult area. We received submissions from the Bar Standards Board, the Solicitors Regulation Authority and the Faculty of Advocates, and from members who practise or formerly practised as barristers, solicitors, arbitrators and judges.
11.Drawing on a variety of statute law, common law and professional guidance, all three professional bodies agreed that it would be a breach of the duty of confidentiality for a lawyer to reveal that they act for a particular client except (a) with the client’s consent, (b) if required by law or (c) if the information is already in the public domain. The Faculty of Advocates suggested that this duty might not apply where a client was on an ongoing retainer, but this may be different in the Scots jurisdiction.
12.Most of the lawyer members took a similar view, arguing that clients were entitled to confidentiality. Some accepted that clients should become registrable if the relationship entered the public domain (for example through a court appearance), but even then the client’s right of confidentiality required them not to disclose the fees paid.
13.One former holder of high judicial office took a different view, agreeing with those calling for no exemptions to the new provisions. They argued that “the public interest ultimately must override the issue of client confidentiality” and that, since the proposed new rule is prospective, the client could be told in advance and decide whether a disclosure at some future point in time is a reason why it does not want to go forward with using that lawyer. In their view, not many clients would be so deterred.
14.They further proposed a compromise, whereby the identity need not be disclosed until the relationship becomes public or the lawyer is first paid (which will often be after the case has been concluded), whichever comes first.
15.We also considered the position of arbitrators. The same former judge argued that the same should apply: that the identity of the parties and the fees would be registrable after the arbitration becomes public or the arbitrator is paid, whichever comes first. In many cases only one of the parties to the arbitration would be registrable, and in every case the contents of the arbitration would remain confidential.
16.This view was strongly contested by a practising arbitrator. Quite apart from the fact that the parties were not clients and it was implausible to suggest that any member would seek to advance the interests of a party to an arbitration in the House, there was (with some limited exceptions) a clear duty of confidentiality. Requiring members to depart from this duty would make them unattractive as arbitrators and could risk damaging London’s reputation as a leading centre of arbitration.
17.Our main conclusion is that the public interest demands that there should be no exemptions to the scheme for registering certain foreign interests which the House agreed in December.
18.In recognition of the sensitivity of some legal proceedings we propose that lawyers should be required to disclose the identity of clients only once the relationship has entered the public domain or they have been paid (wholly or in part) for the work, whichever comes first. As with any interest, they would need to make the disclosure within one month of it becoming registrable, but they would have longer to register their fees, as set out in our last report.
19.We believe that the scheme for lawyers, as described above, should also apply to arbitrators with respect to registrable parties.
20.We have also considered whether any fields other than the law should be covered by this modified system, but we have concluded that the case has not been made out.
Intergovernmental organisations
21.One member asked whether it is intended that work for intergovernmental organisations should be covered by the new provisions. It is our intention that such organisations would fall within the definition of being “thought by a reasonable member of the public to be foreign state-owned or controlled” unless the United Kingdom was a full member. We ask the House to note that the new provision covers intergovernmental organisations of which the United Kingdom is not a full member.
Pre-existing relationships
22.Our proposals are prospective, so the new requirements do not apply to work which had already been completed by 1 January 2021. Members taking on new work are able to explain the House’s disclosure requirements to potential clients from the outset. We are aware, however, that our proposals may cause difficulties in respect of some members’ pre-existing professional relationships. It therefore makes sense to provide a period of grace during which members can complete the work in question, obtain the client’s agreement to disclosure, or if necessary end the relationship. During this period, the details of relationships which were already in existence when our original report was agreed (2 December 2020) would not need to be disclosed. It would make sense for the period of grace to expire on 31 December 2021. After this date, all such relationships still in existence, and the associated earnings, would become registrable.
23.We propose a period of grace lasting until 31 December 2021, during which the new provisions will not apply to professional relationships which already existed on 2 December 2020.
Apportionment of earnings
24.The consultation asked how members should disclose earnings where their “portion” of a company’s total earnings for the work could not easily be separated out. The suggestion was that in such circumstances the company’s total earnings from the client should be disclosed, presumably with an explanatory note.
25.A number of members said that it would be impossible to apportion fees between individuals who have carried out work for a client, and inappropriate to reveal the total fees paid to the company, because of both client and commercial confidentiality.
26.We believe that it is reasonable to ask members in such a situation to make a best guess at the value of their contribution to the work, thus avoiding the apparent difficulties of disclosing the overall fees paid (which would nonetheless be available as a fallback).
27.We recommend that members should be required to estimate the value of their individual work for a client or, failing that, to disclose the overall fees paid to the firm instead.
Drafting change
28.Several members raised an ambiguity in the changes to the Guide to the Code agreed by the House in December. The relevant passage reads as follows.
55. While clients of companies in which members hold a directorship must be declared in relevant circumstances (see paragraph 97), they do not need to be registered except where:
(a) the company is the member’s own intermediary (most commonly a limited company that they control); or
(b) the client is (i) a government of a foreign state (including departments and agencies), (ii) an organisation which may be thought by a reasonable member of the public to be foreign state-owned or controlled, or (iii) an individual with official status (whether executive, legislative or judicial) in a foreign state when acting in that capacity, to which the member personally provides services.
Some members felt that it was unclear whether the words “to which the member personally provides services” applied to all three categories in the paragraph or just the last. It is intended to apply to all three, and a revised form of words is in Appendix A.
1 Conduct Committee, Registration of members’ foreign interests (7th Report, Session 2019–21, HL Paper 182)
2 HM Government, ‘Queen’s Speech December 2019: background briefing notes’ (19 December 2019): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/853886/Queen_s_Speech_December_2019_-_background_briefing_notes.pdf
3 United States Department of Justice, ‘Foreign Agents Registration Act’: https://www.justice.gov/nsd-fara