Trade and Investment

Lord Clement-Jones Excerpts

Monday 15th June 2015 Lords Chamber

[Lord Clement-Jones (LD)]

My Lords, I declare an interest as London managing partner of DLA Piper and a member and City ambassador of the Law Society. I, too, very warmly welcome the Minister to his membership here and his new role, and congratulate him on his excellent free-trader maiden speech. I was tempted to talk about our trade with China and other overseas destinations, as well as the potential in our tech and creative industries, particularly in the light of the very apposite remarks made by the noble Lord, Lord Risby. But I am going to follow some thoughts that were introduced by my noble friend Lord Stoneham, given that today we are celebrating the 800th anniversary of Magna Carta.

The rule of law in the English legal system is not only a major source of British influence abroad but a key reason for choosing the UK as a place to do business. English law is the most commonly used system in dispute resolution and in international business more generally. A key factor is the integrity and independence of the judiciary. We have a long and well-respected tradition of excellent legal services based on trust and performance. Legal services are a cornerstone of the broader financial and related services cluster which makes the UK the leading international finance and business hub. Major global businesses come to the UK to access this unrivalled breadth of services, seek advice from world-class legal and advisory firms, raise finance, and insure their businesses. The rule of law is now one of Britain’s great exports, with a surplus on legal services of more than £3 billion in 2013, now forecast to have risen to £3.6 billion this year. Our professional and legal services are critical to our success in attracting trade and investment.

The noble Lord, Lord Livingston of Parkhead, our previous Trade Minister, in response to a question from me in the previous Parliament, confirmed his view that,

“the legal services sector is one of the most important sectors for the UK … not just as an export in its own right but as a reason for FDI into the UK”.—[Official Report, 11/12/13; col. 782.]

The sector employs almost 314,000 people in the UK and the wider professional services sector employs more than 2 million people, with growth particularly strong this year outside London. Like all other sectors, however, we need to remain competitive.

An important reason for the UK’s position as a leading legal services hub rests upon its participation in the EU. TheCityUK’s competitiveness report found:

“Decision makers specifically cited access to markets in the EU as a core reason for choosing the UK over other financial centres”.

Another benefit from the EU for the legal sector is the freedom of establishment, under the establishment directive. No wonder that, according to a CBI survey last year, two-thirds of law firms think that leaving the EU will have serious negative consequences.

Part of maintaining the UK’s competitiveness is ensuring that it has a properly skilled workforce, with immigration policies that support business needs. Last week, we heard that demand for visas under the tier 2 cap outstripped supply for the very first time since 2011— and in huge number, too. The Home Office has confirmed that the monthly allocation of tier 2 visas has been filled for June already. Businesses looking for certificates of sponsorship for graduate programmes and managerial posts were refused them, I understand, at a salary level of £46,000 or less. Last Thursday, the Prime Minister announced plans to make it harder to bring in skilled staff from outside the EU but non-European skilled migrants account for 0.066% of the British labour market. This is a crucial issue for trade and investment. The Home Office, as ever, seems to be working counter to the interests of our economy. I hope that the Minister can say something about this.

Then there are the TTIP negotiations between the EU and the US. I am in principle strongly in favour of TTIP, provided that we have the ability under the investor state dispute settlement provisions to make exceptions for public policy reasons—for example, to deliver our public services in the way that we want. There is no doubt that a great deal of the confusion and misunderstanding surrounding TTIP has been generated by very untransparent negotiating processes. Even now, we seem to have the EU position published on only two-thirds of the draft treaty.

I hope in particular that regulatory co-operation under TTIP will deliver improved trade in financial services, with common regulatory standards, and in legal services between the EU and the US so that there is improved market access and practice rights for solicitors and UK law firms in the US, including mutual recognition of qualifications. The UK is the world’s most international market for legal services. It is very open in allowing virtually unrestricted access for foreign firms but this is not the case in the US. Even a US attorney does not have freedom of establishment; it very much varies on a state-by-state basis. Legal services regulation is not a federal matter in the US, in contrast to the EU regime. It is actually illegal for an English solicitor to fly to most US states to give advice on English law, so I hope that we will see US states remove the minimum practice requirements for eligibility. Solicitors should be eligible for the Bar exam in all 50 states, regardless of their route to qualification. I also hope that TTIP negotiators will be ambitious in seeking liberalisation on all modes of practice, on all types of legal work and in all US states.

Then there is UKTI, whose role is crucial. I very much endorse everything that the noble Lord, Lord Risby, said about it in a positive way. In the past few years it has collaborated with the MoJ, the Law Society, the Bar Council and TheCityUK, among others, in promoting the legal services sector, with the original Plan for Growth in 2011 followed by UK Legal Services on the International Stage in 2013. In the sudden and unexpected cuts to this year’s public expenditure, however, UKTI seems to be a major potential victim. How much will the cuts or savings amount to, and how will they affect UKTI? Does it intend to produce a progress report and updated plan for the legal services sector? Indeed, will it have the resource to do so?

The challenges we face to ensure that the UK remains the world leader in the rule of law, in our standards of justice, in the provision of legal services and in the opportunities that exist in international jurisdictions are significant. However, we can meet them only if the issues that I have raised today are addressed. I have a straightforward question to the Minister. Does he recognise the importance of our legal services to trade and investment and will he, as the noble Lord, Lord Livingston, did, pledge to champion the legal sector? I very much look forward to the Minister’s reply.