Services of Lawyers and Lawyer’s Practice (Revocation etc.) (EU Exit) Regulations 2019

Lord Adonis Excerpts

Tuesday 15th January 2019 Lords Chamber

[The Advocate-General for Scotland (Lord Keen of Elie) (Con)]

My Lords, the House will be aware that the Government have been publishing a series of technical notices to outline the implications of a no-deal exit for citizens and businesses. On 12 October, the Government published a technical notice titled, Providing services including those of a qualified professional if there’s no Brexit deal. This notice set out the implications of a no-deal exit for professionals in scope of the two EU directives on lawyers’ services and lawyers’ establishment. The draft instrument that we are discussing today makes changes to the arrangements in England and Wales and in Northern Ireland relating to these directives. It remedies deficiencies in the relevant retained EU law arising from withdrawal from the EU. Scotland will be taking forward its own legislation on this matter, as it pertains to a matter of devolved competence.

I thought it would be prudent for me first to set out how these EU directives are currently applied in the United Kingdom and across the other members of the EU. The lawyers’ services directive allows specified lawyers to provide regulated legal services in a member state other than the one in which they qualified—termed a “host state”—without the need to register with a host state regulator. Lawyers provide services under their existing professional title, otherwise termed their “home state” professional title. The directive clarifies the regulatory rules applicable and the conditions for providing services in a host state.

The lawyers’ establishment directive allows specified lawyers in one member state to practise reserved legal activities on a permanent basis in another member state, under their home state professional title, and provides the conditions for doing so. It also allows lawyers who are practising in another member state to be admitted to the profession in that member state, after three years of practice in the law of that member state, without having to go through the usual qualification routes. European lawyers practising in the United Kingdom under the establishment directive must be registered with a UK regulator as registered European lawyers. As registered European lawyers, they have the right to own a legal business without a UK-qualified lawyer.

If we leave the EU without an agreement, the lawyers’ services directive and the lawyers’ establishment directive will no longer apply to the United Kingdom and there will be no system of reciprocal arrangements under which EU and European Free Trade Association lawyers can provide regulated legal services and establish on a permanent basis in the UK—and, likewise, UK lawyers in the EU. It is the deficiency in retained EU law caused by this lack of reciprocity that we are seeking to remedy.

First, EU and EFTA-qualified lawyers who have already successfully transferred into the English and Welsh or Northern Irish profession will be able to retain their qualification and related practice rights—but arrangements will be different in future. In the event that the UK leaves the EU without a deal, our services trading relationship with the EU will be governed by World Trade Organization rules. The General Agreement on Trade in Services prohibits signatory states giving preferential market access to any other signatory state in the absence of a comprehensive free trade or recognition agreement between them. We therefore need to fix the deficiencies in the relevant retained EU law caused by the lack of reciprocal arrangements with the EU, while also meeting our international law obligations. As such, we will revoke the legislation that currently implements the EU framework, and EU and EFTA lawyers will be treated in the same way as other third-country lawyers.

The draft instrument will also provide a transition period to allow registered European lawyers time to comply with the new regulatory position. The transition period will run from exit day until 31 December 2020.

[Lord Adonis (Lab)]

Can the Minister tell us how many lawyers will be affected by these arrangements?

[Lord Keen of Elie]

Yes, of course. I am obliged to the noble Lord for prompting me to go straight to that point. There are 680 European lawyers registered with the Solicitors Regulation Authority and up to 20 who are with the Bar Standards Board: far fewer in the latter case because, of course, most European lawyers who come to practise tend to find themselves practising in London’s large firms, rather than seeking to establish themselves as independent barristers at the Bar. I hope that that meets the noble Lord’s concern on that point.

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[Lord Adonis]

The impact assessment refers both to registered European lawyers, of whom it says there are 693, as of last July, which I take to be the group that the Minister referred me to a few moments ago, and to “registered foreign lawyers”, of whom there are apparently 2,406. But it is not clear to me what the impact is of these regulations on registered foreign lawyers and the 2,406 who are mentioned in the impact assessment. Perhaps he could tell the House.

[Lord Keen of Elie]

Yes, I am most obliged to the noble Lord. Registered foreign lawyers are those lawyers of third-party countries who are registered in the United Kingdom. We have lawyers from many jurisdictions—for example, the United States of America—who practise under their foreign lawyer qualification in the United Kingdom. As the noble Lord will appreciate, London is an international legal centre as well as an international finance centre. This instrument has no impact at all on those foreign lawyers but it aligns registered European lawyers with registered foreign lawyers for the reasons that I have indicated.

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[Lord Beith]

My Lords, before the Minister rises to respond to the debate, I wanted to seek a little further clarification on the fact that this instrument will have to be repealed if there is any kind of deal. We ought to know what we are doing, and in this case we are perhaps being asked to pass a statutory instrument which does not within it contain the suicide pill which it would require to cope with the situation in which there was a deal. That has implications for the timetable and for all the things we have to do before 29 March, one of which might be to repeal not only this but a whole series of other statutory instruments, presumably either by a stack of single positive or perhaps negative instruments to achieve the repeal or by one omnibus statutory instrument. We have not been told enough about what this procedure would be, and it casts further doubt on the wisdom of proceeding at this stage with a statutory instrument which, of course, has all the problems that my noble friend and the noble Lord, Lord Beecham, referred to. My objective was to clarify what the mechanism would be; I think it would be the bringing forth of a further statutory instrument to repeal this one.

[Lord Adonis]

Before the Minister rises, I noted in his opening remarks that he did not refer to the consultation that had taken place. This is a big theme in the way that the House is seeking to scrutinise these statutory instruments, since there has been very rushed consultation or almost no consultation. Can he tell the House in his response what the consultation has been and what the response has been?

I observe, from a brief search of responses to these regulations, that they have not been particularly positive. I notice that the President of the Law Society, Christina Blacklaws, is quoted as saying that these regulations,

“will cause firms a significant amount of expense to find work arounds and, with tight margins, small and medium sized firms that employ EEA lawyers will struggle most to adapt”.

I think the House will be particularly concerned about the small and medium-sized firms. The larger firms can take care of themselves and can pay a lot of the costs and associated expenses, but small and medium-sized firms under pressure should be of concern to us. Can the Minister tell us more about the engagement there has been with such firms, how the costs might be mitigated, and tell us more about the response to the consultation at large?

I also make a general point, which is that I know that in a sense, everything we are doing in response to no deal is utterly deplorable; I do not want to repeat all the remarks I made earlier, although they apply here too, about how it is almost unthinkable that we should be making these arrangements for a cliff edge and all that goes with it. What is becoming clear again, in case after case, is not just that no deal will be deplorable but that the effects for this country over the medium term of withdrawing from the European Union will also be deplorable.

The noble Lord, Lord Beecham, quite rightly referred to the very large European market in legal services. We have fantastic lawyers, some of the best law firms in the world, and as the Minister said, we are a major centre for international legal firms. I do not remember whether it was the Minister or my noble friend who referred to the proportion of the largest firms that do work across the European Union, but it was a high proportion. Essentially, we are engaging in an act of self-mutilation. We are deliberately choosing to restrict the markets in which our legal firms can work and deliberately choosing to restrict the opportunities for the next generation of lawyers to be able to practise. That is, on any reading, deplorable.

Maybe the Minister, who is such a distinguished member of his profession, might rise to the occasion and say that he regrets that and wishes that we were not limiting the opportunities for our lawyers and our country in the way that we are. When the next generation of lawyers looks back and sees that their opportunities have been stunted and that the opportunities they have to practise in European markets have been withdrawn and that if they wish to do so they will need to move to the EU, maybe some of them will look back and say that the leaders of the profession who had responsibility at this period should have had a much closer regard for the interests of the next generation than they have had.

[Lord Keen of Elie]

My Lords, I shall begin with the observation from the noble Lord, Lord Beith, because I omitted to identify the location of the suicide pill. I am advised that the intention is that, in the event of an agreement, it will be incorporated in the withdrawal agreement Bill, and that is the mechanism that it intend to employ’s for those purposes. I apologise for not having appreciated that when the question was first raised.