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Legal Services Bill [HL]

My Lords, I hope that Hansard will record that comment. Throughout that time, I have been aware that the status of a partner in a solicitor’s firm is something greatly to be envied by those who are not partners. It is a significant status symbol. It is tied up in the shadows of history that someone who is highly competent, who is an accountant and who is running the legal practice is not allowed to be a partner.Sir David Clementi saw that straightaway, and he thought, ““Let us now recognise the status of these individuals as partners, even if they are not qualified lawyers?. Under the provisions in the Bill—the Government are to be commended for this, although I did not vote in the last Division—there is certainly scope for trying to evolve a system that will work. It will now become possible for firms to make non-lawyers partners. But if that is to happen, suddenly the whole panoply of alternative business structures and their licensing regime comes into play. Therefore, the only way in which it will be possible for the finance director, or someone allied to that finance director, to become a partner is if the whole panoply, the separate ABS licensing regime, comes into force. I have contended on several occasions, as the Minister will know, that we should not really have this enormous unnecessary, administrative, regulatory burden coming into effect for legal disciplinary practices. I can just see what will happen. The finance director will become a partner; immediately the firm has to become an alternative business structure, and one day the finance director will leave and immediately the poor firm, if it then has a lawyer taking on that position, will cease to qualify as an alternative business structure, when all that will have happened is that the finance director has been replaced by someone who does not fulfil the requirements of the ABS. Sir David Clementi’s analysis of the issues involved with the various forms of alternative business structures identified that significant additional considerations would arise with, for instance, external ownership. Also, if services were provided that could not be provided by an ordinary law firm, we would have to move step by step in the direction of alternative business structures. However, regarding LDPs that do not have external ownership, he made no sharp distinction between firms in which all the partners were qualified lawyers and firms in which a minority of the partners were non-lawyers. I quote again from Sir David’s report. He said: "““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 (e.g. HR professionals, accountants) 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 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.