Legal Services Bill [HL]
Lord Kingsland (Shadow Minister, Justice; Conservative)
My Lords, I agree with the noble Lords, Lord Neill of Bladen and Lord Thomas of Gresford, that, by a very large margin, the most important factor that ought to be taken into account in relation to Part 5 is the potentially adverse social consequence of its implementation without very close monitoring of the geographical impact of the arrangements. I know that the Government understand that, but I am not confident—I may be after the noble Lord speaks—that they have made sufficient provision for that, although their acceptance of the amendment on access to justice is very important.
The wider picture is equally troublesome. The noble Lord, Lord Neill of Bladen, made an observation about the international consequences of Part 5. He has rightly quoted the serious concerns expressed by the German equivalent of the Law Society. I know, as many others do, that there are also serious concerns about this in the American Bar Association. We face a possibility—to put it no higher—that firms licensed under Part 5 may not be able to sell their services out of the United Kingdom into these countries.
There are particular considerations about outside share ownership and multi-disciplinary partnerships which have been severely under-researched by the Government. For example, the measures to identify who owns or who might own a particular firm of solicitors need to comprise much more sophisticated ways of identification. It may be that the ultimate owner of a legal services firm will be someone against whom that firm is at that moment litigating. It may be the intention of this, as yet, unknown owner to compromise that litigation in the favour of another interest. Is the Minister really confident that the ownership provisions can satisfactorily identify someone who buys a solicitor's firm with that intention?
What about the manner in which a solicitor's firm is bought? From reading our newspapers, we know about the private equity industry. Quite often, private equity companies buy other firms, largely by the issue of debt against the assets of the target. Supposing a private equity firm comes along and buys a solicitor's firm issuing 90 per cent plus of debt to buy the firm. The future performance of that solicitor's firm will depend enormously on its cash flow. What pressures will the outside shareholder exercise on the lawyers in that firm to make sure that that cash flow is forthcoming to pay off the debt? There seems to be nothing to control the way in which the financial structures of these firms ought to be regulated. For example, should the licensing authority have rules about the debt equity ratio of solicitor's companies that are bought?
I see no evidence that the Government seriously considered the Enron factor in relation to multi-disciplinary practices or cross-selling by different professions which form part of one firm. I know that the noble Lord will be familiar with the problem; it has been talked about to a considerable degree in the proceedings on this Bill in your Lordships' House and I do not intend to elaborate on it.
To some extent, I am reassured that we have until 1911 before these—