|Previous Section||Back to Table of Contents||Lords Hansard Home Page|
I raise one other matter with the noble Baroness. She may recall that on 8 May we had a debate about an amendment which I tabled concerning the relationship between the regulatory obligations in Part 5 and the obligations that any ABS might have to its shareholders. The noble Baroness will recall that we tabled an amendment which said in clear terms that where there is a conflict between what the shareholders regarded as their obligations under company law and what the regulator regarded as his obligations under Part 5, the obligations of the regulator would be paramount.
At the end of her response, the noble Baroness and I had an exchange about the appropriateness of my insisting on the amendment. The noble Baroness said that she was advised by the Department of Trade and Industry that if the amendment appeared in the Bill, it could produce certain conflictual situations. Thereafter, she undertook to furnish me with the DTIs advice before Third Reading. She said:
I am more than happy to set out in writing the concerns of the Department of Trade and Industry ... If I set that out in writing, there will be plenty of time before Third Reading for the noble Lord to look at it.[Official Report, 8/5/07; col. 1334.]
I have not had that in writing. I recognise that I have not tabled an amendment on the matter now but I should be content if the noble Baroness could give an undertaking to your Lordships House that if the matter cannot be settled now, it will be one to which whoever deals with the Bill in another place will direct their minds.
Baroness Ashton of Upholland: My Lords, I am grateful to the noble Lord. In a letter to him this week, I said that my officials were in touch with officials at the Department of Trade and Industry and that I hoped to be in a position to comment further at Third Reading, but that if that were not possible, I would write to him again on the issue and that I would be happy to ensure that his concern was dealt with. I have just been given a summary of the DTIs concerns regarding his previous Amendment No. 435. I could read them out, but I am not sure that it would be of benefit to noble Lords.
Lord Kingsland: My Lords, this is an important issue, because we are on the threshold of these alternative business structures. Is it clear in Part 5 that if there is a conflict between what the shareholders want and what the regulator wants, the regulator will always prevail? At Report stage, the noble Baroness for the first time appeared to raise doubts that the DTI had, in turn, raised with her regarding the outcome of any conflict. There would be extremely serious implications for the operation of the ABS system if there were circumstances in which shareholders could override regulators. Indeed, that would undermine the basis on which the Government and the Opposition parties had been dealing with the Bill.
Baroness Ashton of Upholland: My Lords, I am happy to try to clarify this matter. I am not sure how it fits into what we are doing, but it is important to put it on the record, as the noble Lord said. We were considering an amendment to Clause 169, if noble Lords need to look back at that. That amendment sought to ensure that, in the context of ABS firms, lawyers duties to comply with their professional conduct obligations would override any other obligations, including their directors duties to shareholders. We have made it clear that an override provision is unnecessary as long as lawyers and licensed bodies have a statutory obligation to comply with their professional conduct rules. Those statutory obligations are contained in Clause 169 and are reinforced by Clause 88. They provide that non-lawyers in licensed alternative business structure companies or firms cannot do anything that causes or substantially contributes to a breach by lawyers or the licensed body of their professional conduct duties. The duties cannot be compromised by other obligations, just as companies and company employees have different kinds of statutory obligations and directors cannot cause breaches of those obligations in the name of their duties to shareholders.
I understand the concern regarding directors duties to a company and its shareholders, yet we emphasise that those duties are intended to be cumulative with any other duties to which the director may be subject, not in conflict with them. The duties owed by directors in Part 10 of the 2006 Act do not require directors to break the law and could never form a defence to a breach of another legal obligation. Instead, they must be understood in the context of the wider legal framework. Section 172 of that Act, which requires directors to promote the success of the company for the benefit of the members as a whole, is flexible enough to allow for directors duties and the duties arising under other law to operate harmoniously without any need for specific provision in other legislation.
As noble Lords will know, we have just completed a codification of company law, including directors duties, in the Companies Act 2006. The DTI is concerned that an override provision in relation to lawyers duties, such as that proposed by the noble Lord, would risk creating uncertainty in company law and other law to which companies are subject, because it would be unclear as to how directors duties would interact with regulatory obligations in areas other than legal services.
In other words, the Companies Act recognises that in fulfilling their duties to shareholders, directors of companies must have the flexibility to have regard to a wide range of objectives and to act in furtherance of purposes other than the benefit of the company members, where applicable. It may be taken as read that directors are required to comply with other legal obligations. We do not wish to state that explicitly, because we risk negative inferences for other regulatory legislation.
I am content with that explanation, which I am happy to ensure the noble Lord has in writing. I will also ensure that copies are placed in the Library of your Lordships House and sent to other noble Lords who have spoken on that amendment and on the Bill. It deals with the fact that there is not an issue of concern; rather, it explains why adding anything further to the Bill could create uncertainty, which I am sure the noble Lord does not want.
Lord Kingsland: My Lords, I shall not take this matter further, other than adding a few words in conclusion. I remain bewildered that, on the one hand, the noble Baroness can say that there is no conflict and that the provisions in the Bill are entirely consistent with the regulators hegemony; but that, on the other hand, she is reluctant to say that in the Bill. If the underlying facts confirm the regulators hegemony, I see no reason why on Earth that cannot be said in the Bill for the sake of certainty. However, I think that this is now a matter for another place.
The noble Lord said: My Lords, those of your Lordships who have followed the Bill closelyand I am delighted to see that many are still here after the passage of so much timewill know that we have been engaged in a debate with the Government about access to justice in relation to the licensing provisions under Part 5 of the Bill. Our initial amendment in Committee was softened on Report but we still failed to ensnare the noble Baroness. Despite the period of reflection between Report and Third Reading, we have seen no movement from the Government and so we have retabled our Report amendment.
As your Lordships are well aware, the concerns to which the amendment seeks to respond have preoccupied all your Lordships who have taken an interest in Part 5. Indeed, even the noble Lord, Lord Whitty, at one memorable moment, indicated his support.
Part 5, indisputably, takes us into new territory. We simply do not know what the impact of alternative business structures will be on access to justice, and the amendment seeks to ensure that a proper investigation is conducted into the likely impact. The noble Baroness does not like that because, she asserts, it would give too much weight in the decision-making process to one of the eight objectives to which all the regulators must have regard.
My response to that is twofold. First, all the amendment obliges the licensing authority to do is to conduct a thorough investigation into the access to justice implications of the proposal. The obligation is for the licensor to put itself in the picture as thoroughly as possible before testing the proposal against all eight objectives. Within the scope of the amendment, the licensor is perfectly entitled to investigate in as much detail as it thinks appropriate any of the other seven objectives.
Secondly, even ifI am wrong about my understanding of my own amendment, there is, in my submission, nothing wrong or unprecedented in Governments requiring decision-makers to give particular or significant weight to a relevant consideration, and, in this case, there is a powerful a priori reason for doing so. I beg to move.
Lord Neill of Bladen: My Lords, I wish to speak to Amendment No. 13 which stands in my name and touches on access to justice. Noble Lords will recall that lying behind the proposal is the fear that some of the new business structures will be powerful economic players. I am thinking in particular of larger, better-resourced firms of solicitors, possibly amalgamated with other professions, which will in effect wipe out the small firms of solicitors, operating perhaps in difficult circumstances, in the high street or in rural areas.
We have had evidence from noble Lords about the anxieties on this topic of solicitors in various parts of the country. The noble Lord, Lord Thomas of Gresford, spoke about Wales; the noble Lord, Lord Carlile of Berriew, spoke about Yorkshire and Cumbria; the noble and learned Baroness, Lady Butler-Sloss, spoke about the anxieties in the West Country; and the noble Lord, Lord Whitty, said that he was particularly concerned about rural areas. There is no doubt about this. Perhaps the most compelling evidence came from the former Lord Chief Justice, the noble and learned Lord, Lord Woolf. In his capacity as Lord Chief Justice, he travelled the land and became well aware of anxieties among solicitors throughout the country. The fact that there is such anxiety has not been challenged and we have not had proper evidence of the likely economic outcome.
There has been a new development of which your Lordships should be aware. On 9 May, the day after we previously spoke about the matter, the Ministry of Justice came into lifeit sprung fully formed from the helmetand immediately published a manifesto entitled Justicea new approach. That is relevant because, throughout, it advocates the fact that in setting up the new department the Government are adopting as one of their principles the importance of access to justice.I will give brief citations from pages 11, 15, 16 and 20.
An effective justice system is not just about the courts and the judges; it concerns the extent to which the public has access to that system. Access depends on understanding ones rights and knowing how to go about enforcing them ... Access to justice means making sure that people, and particularly the most vulnerable and disadvantaged in society, are able to get the help, advice and support that they need.
None of that can be compatible with a separate government policy which, if implemented, is likely to have the consequence of wiping out a lot of local solicitors who could give advice. This would appear to be a case in which the Lord Chancellor, wearing his hat as Secretary of State for Justice, wishes to have a unified approachnot one department doing one thing and another bit of the system doing something else. On page 27, the department states:
Working closely with the other key departments, the Ministry of Justice provides the opportunity to look at the system as a whole; not as a set of constituent parts, but as a consistent, coherent whole.
The other piece of fresh information that your Lordships should have relates to Germany. We have touched on this subject on two or three earlier occasions. The Joint CommitteeI apologise to the House because I should have declared that I was a member of the Joint Committee under the chairmanship of the noble Lord, Lord Hunt of Wirral, I am a member of the legal profession, I was on the Bar Council and I was once chairman of the Bar. The Joint Committee had evidence from the German equivalent of the Bar Council and the Law Society rolled into one. Its evidence brought to our notice that, on the continent, what we were doing would be regarded as unacceptable. It would not be possible for a German lawyera Rechtsanwaltto be a member of one of these new bodies, particularly if it had outside funding.
Noble Lords talked about the German BRAK. On a recent overseas visit, I heard that the German Parliament is looking to legislate in this direction. The relationship between the reaction of the German BRAK and what is happening in Germany may be relevant to our deliberations, but it looks as if Germany may be heading in the same direction. We will have to find more information because that was new to me, but it appears to be the case.[Official Report, 8/5/07; col. 1410.]
I thought the sensible thing to do was to write to BRAKthe Minister has my letterto ask what is happening and what legislation the German Parliament is looking at. The answer has come back, and there are three relevant points. First, a legal services Bill is before the Bundestag; secondly, there is a controversial clause about adding new professions to the list of three with which lawyers may unite; and thirdly, on the point we have been talking about, the external funding, the relevant paragraph in the letter from Dr Dombek, the president of BRAKwhich I immediately copied to the Ministeris:
Regarding the Alternative Business Structures envisaged by Part 5 of the Legal Services Bill it is our understanding that firms authorised to provide legal services could have shareholders from outside the profession like banks and insurance companies. It is further our understanding that the management of such firms must not necessarily be in the hands of a majority of lawyers. The German draft bill ... does not include legislative proposals in this direction. On the contrary, interested parties in Germany have lobbied the government and the political parties to allow third party investments into law firms. However both the Government and the politicians have rejected these proposals as, in their opinion third party investment would be a threat to the independence of the lawyer. Nobody should have the possibility to be able to determine a lawyers advice following economic interests. As the BRAK shares these concerns I took the liberty of writing my letter of 26 June 2006 to you and pointing out the difficulties that will arise for Anglo-German law firms in Germany if the firm or the lawyer decides to opt for third party investment.
On the basis of this information to the House, there is no indication whatever that the German Parliament is moving in a similar manner, and there is evidence that it is thought to be totally unacceptable to move in any such direction.
Lord Thomas of Gresford: My Lords, these Benches fully support the amendments moved by the noble Lords, Lord Kingsland and Lord Neill of Bladen. From the very beginning of the Bill, I have expressed my opposition to the alternative business structure, drawing, as I do, upon my experience in a small high street firm of solicitors for some five or six years in my youth and my knowledge of these firms while practising at the Bar ever since.
The Government may try to portray the stance of lawyers who believe in the small firm as reactionary, conservative or in their own private interests. That is not the case. Over the decades there has been strong competition between local firms for business. They compete with each other in terms of cost and fees, in efficiency and in providing a service to the communities from which they spring. All that is undermined by the Governments approach here that we introduce marketing forces; that price is the only thing that matters; and the fact than there may be conflicts of interests within large concerns, whether insurance companies, motoring services of whatever, which can be ignored.
We do not believe that that is the right approach. The public are better served by lawyers, who are absolutely independent and who stand against the legislation that may be put forward or government departments where people are seeking to secure their rights to social security, and so on. We are very much concerned that alternative business structures will see this service disappear to be replaced by something that is very much less of utility to the people of this country. I am amazed that this comes from a so-called Labour Government. I am reminded they are new Labour. That is even worse. It is astonishing that it should come from that source. Perhaps it is not so astonishing because I have commented on the authoritarian streak of this Government.
The lawyer stands independent of government to protect the citizen. This Bill, with its suggestion of alternative business structures, without any examination of whether it is necessary or appropriate in a particular area, such as my own area in north-east Wales, undermines the principle of access to justice.
Lord Elystan-Morgan: My Lords, I rise very briefly to support the principle enshrined in these amendments. I do not disagree with the case put forward by the noble Lord, Lord Thomas of Gresford. Before becoming a judge I had, like him, the immense privilege of being for many years a solicitor, and thereafter a member of the Bar. That gives one some insight into the immense worth of these two independent professions. Their independence is tied up with their integrity, which is tied up with their reputation for competence, which I think is second to none in the world.
It may be a coincidence that in all countries with comparable situations to England and Wales there have as yet been no moves towards the ABS system. The House I am sure is indebted to the noble Lord, Lord Neill, for the information concerning the situation at the Bundestag.
However, the case does not rest of necessity on the argument put forward with such clear articulation by the noble Lord, Lord Thomas of Gresford. I do not dispute that case, but it can be put effectively at a much lower level. It is this: business and professional life are entirely different worlds. There are situations where they coalesce and situations where they compete.
Part 5 creates a massive new experiment. That experiment may have the capacity for good, or it may have the capacity for evil, damage and injury to institutions that we hold dear. No one in this House or elsewhere can foresee exactly where it will lead. The amendment of the noble Lord, Lord Neill, takes the principle much further than that of the noble Lord, Lord Kingsland, but the case for the two amendments is that Parliament can do one of two things. It can allow Part 5 of the legislation to proceed into the unknown by taking this huge and potentially dangerous step, knowing that the day may come when it may have to reconsider most drastically exactly what has been brought about. The other alternative is prudence and a cautious preceptto place the onus where it belongs; on the advocates of this drastic change. Those advocates should indeed prove their case before Part 5 is implemented. The possibilities are enormous. The potential for evil could be very, very great. Prudence demands the acceptance of the principle of these amendments.
Lord Campbell of Alloway: My Lords, I shall be brief. I wholly support the amendment of the noble Lord, Lord Neill of Bladen, for all the reasons given. Those reasons have been so very well expressed that it would be quite unnecessary to improve on them. Indeed, I do not think that I could. I also very much support the amendment of my noble friend Lord Kingsland. Within the concept of justice in these circumstances, it must be accepted that a decision must be taken on the proportionate balance of the Clause 1 regulatory objectives considered as a whole. That is the judicial process that has commended itself to your Lordships, as the amendments of my noble friend Lord Kingsland in effect establish a new regime of overarching importance. An amendment to this effect was tabled in my name and supported by my noble friend Lord Hunt of Wirral. It was removed from the Marshalled List on the advice of the Public Bill Office. I have been asked why my amendments were not moved. They could not have been spoken to other than on Third Reading. They would have implemented the new regime proposed by my noble friend Lord Kingsland. I thought that I had better explain why they were put on the list and why they were taken off it.
That is virtually the amendment that my noble friend Lord Kingsland has tabled. In their response, the Government said that they agreed with the committee, so I have been awaiting an amendment to implement our recommendation. Sadly, it did not arrive on the Marshalled List. The fact that it is here is due wholly to my noble friend, for which I am very grateful.
|Next Section||Back to Table of Contents||Lords Hansard Home Page|