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
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
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.
As my noble friend is aware, I worked in the other way: I qualified under Scots law and then went to practise in Brussels. Under the new arrangements, what will be the reciprocal rights of those who wish to do precisely what I did after we leave the European Union?
In the event of us exiting without any deal, there will be no reciprocal rights—which was one reason why, as I indicated, these regulations are required. They are necessary in order that we can establish a position in which all third-party country lawyers will be on the same standing in the absence of a free trade agreement or other agreement with a third-party country. There will be no reciprocity—that will be a matter for the relevant EU country to consider—but clearly it is a matter that we would wish to address in future negotiations consequent on our exit from the European Union. This is dealing with the position in the United Kingdom in light of the existing regulatory regime under EU law. Clearly, and quite patently, you could not address the question of how the EU 27 are going to treat our lawyers going forward.
I just wondered if it might be helpful if it were on the face of the regulations, because this situation keeps arising on many of the other ones as well. The problem is that these things have a tendency to drift on, and in the event that there was not a no deal but there was some other kind of deal, would the regulations that we are considering at the moment have some kind of half-life or a continued life of some kind or another? That is why I put the question: I am concerned that in this and in other statutory instruments that I have been considering, there is nothing on the face of the instrument that actually says that this will fall by the wayside in the event that there is any kind of deal other than a no deal.
The terms of the instrument make it perfectly clear that it is to apply in the absence of a deal. My department is certainly well aware of the scope and application of the instrument, which is why I made it clear in opening that this instrument will apply in the event of there being no deal. However, in the event that there is a withdrawal agreement of some kind, clearly that would not be a situation in which the instrument would be required.
I do not want to cause any difficulty, but why does paragraph 1(2) refer to the transitional period? There will not be a transitional period if there is a hard Brexit and no deal.
It does not refer to the transitional period as proposed in the withdrawal agreement: it refers to a transitional period that will apply for the purposes of this particular instrument in order to ensure that there is no immediate cut-off for EU lawyers in the United Kingdom. It is for that particular purpose that this particular regulation allows that, and it is considered that that is allowable under the GATS regime as well—in other words, we are allowed a period of time to transition to a point where European lawyers registered in the United Kingdom come to find themselves in the same position as third-party country lawyers.
I am sorry to belabour the point, but I am slightly confused about why we are being so nice and kind to EU lawyers—the non-British lawyers who are working here—and we not seeking to protect the rights of British lawyers who are working in Brussels, Denmark, Sweden and other EU countries. Are we not trying to be reciprocal now?
Clearly, over time we will address the ability of the United Kingdom to agree with the EU the possibility of reciprocal rights for United Kingdom lawyers in Europe, but it is not something that we can dictate by our legislation. What we can do, however, is facilitate the position of EU-registered lawyers who are already in the United Kingdom and contributing to the legal services in the United Kingdom so that they can be secure in the knowledge of what their position will be in the event that we exit without any agreed deal.
The Minister may have said this before I came in. I apologise: I was held up at a meeting outside. He mentions the United Kingdom, but paragraph 2.1 of the Explanatory Memorandum says:
What is the position in relation to Scotland?
The noble Lord is quite right: he was not here when I began. I said that with regard to Scotland, this is a devolved issue and the Scottish Government are addressing that matter. However, in taking forward negotiations with regard to reciprocal rights in the future, we would have in mind the interests of all lawyers within the United Kingdom, wherever they qualified. But for the purposes of determining the rights of registered European lawyers in the United Kingdom, we will deal with it by way of this instrument for England and Wales and for Northern Ireland, and the Scottish Government are undertaking to address it in the context of that jurisdiction. That is where we stand. As the noble Lord is aware, this is a devolved competence.
The Minister has been particularly helpful in relation to that. I know that he knows Scots law very well, as do a number of other noble Members present. What is the current state of play in relation to this being dealt with in the Scottish Parliament? Is it running parallel with us? Is it ahead of us? Is it behind us? Will it be able to get it done in time? I know they are not very keen on no deal—in fact, they are not very keen on coming out of Europe at all—in the Scottish Parliament so I wondered what the state of play was in relation to dealing with this in the Scottish Parliament.
In relation to this particular instrument, I am not in a position to say where the Scottish Government are in processing such a proposal. That is a matter for them and it is not a matter that they would, as a matter of course, disclose to me. But, as I say, I have confidence that they are aware of the issue and they have decided that they will take it forward. If they had wanted to utilise the provisions of the Scotland Act to have the UK Parliament legislate for them in regard to this matter, they would of course have said so. The very fact that they have not is indicative that they are making progress to legislate for this on their own behalf. That is where we stand.
Perhaps I might ask the Minister to tidy up the point that was raised earlier. What ensures that if there is some kind of deal, the provisions of this instrument fall away? Does it require some further statutory provision to do so—in effect, revoking the instrument—or does it fall away if there has not been an exit day? But surely if there is a deal, there is still an exit day.
My Lords, in the even that we have a deal, we will repeal this instrument. It will have no further purpose in those circumstances. This is to address the issue of there being no deal—I emphasise that again.
We will have to address those instruments that are in force which no longer have an application in the event of a withdrawal agreement being entered into.
I referred to the arrangements that would be made for EU and EFTA-qualified lawyers because these arrangements include not only EU 27 lawyers but EFTA and Swiss lawyers, who are subject to similar arrangements.
In the event that the UK leaves the EU without a deal, as I said, we will be governed by the GATS provisions. Therefore, we will have to comply with them and we need to address that issue. The draft instrument will also provide, as the noble and learned Lord, Lord Hope, observed, a transition period to allow registered European lawyers time to comply with the new regulatory position. We consider that that will not be inconsistent with the GATS regime. As I said, the transition period will run until
As I have set out, there will be a deficiency in retained EU law which implements the two lawyers directives, due to a lack of reciprocity, if we leave the EU without a deal. It is the purpose of this instrument to address that deficiency and to ensure that by doing so we uphold our international obligations in this context. I emphasise the point that was brought out by the noble Baroness, Lady McIntosh. It does not—indeed, it cannot—address the issue of reciprocal rights for UK lawyers in the EU 27. It is in these circumstances that I beg to move.
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.
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.
By definition, this instrument is to be of a limited duration. Is it temporary or is it of unlimited duration? I understood my noble and learned friend to say in response to my questions that this could well be overtaken by events at such time as we have a negotiated withdrawal agreement. At what stage will the negotiations be expected to start to make sure that British-qualified EU lawyers practising in other member states will be aligned with those EU qualified non-British lawyers who are practising in this country? I understood my noble and learned friend to say that we are going to have two categories of European-qualified lawyers as of
My Lords, this is a permanent change in the law, which may be subject to defeasance in the event that we have a withdrawal agreement. It will then be rendered unnecessary. It applies to and is concerned with the position of registered European lawyers in the United Kingdom. It cannot make provision for United Kingdom lawyers in the EU 27 or EFTA countries. We have no competence to do that. It is our hope, however, that in due course, and following withdrawal, subject to the withdrawal agreement, we will in the course of negotiation be able to negotiate with the EU 27 the development of appropriate reciprocal recognition for lawyers going forward, but that is for the future. This is a permanent change in the law to address the prospect of our leaving on the
I am sorry to persist, but could my noble friend answer my second point? After
With great respect to the noble Baroness, we cannot legislate to ordain the EU 27 or any EFTA country to recognise the legal qualification of someone who has qualified in the United Kingdom. We simply cannot do that, so, after
I congratulate the Minister on his timing. This is part of the no-deal preparations along with the fake travel jam, the lorry jam in Dover and the hiring of ferries with no ships, but it is a bit late now, with about half an hour to go to the vote, to frighten the horses any further. It is extraordinary that parliamentary time should be spent in debating a statutory instrument of this nature. It is applicable only if the UK leaves the EU without reaching an agreement. The effect of that is to throw the United Kingdom on to World Trade Organization rules for general agreement on trade and services.
If that were to happen, the most-favoured-nation rules would come into operation prohibiting preferential treatment of any signatory state above another. The whole purpose of this Statutory Instrument, therefore, is to reduce EU and EFTA lawyers currently practising in this country to the level of the lawyers of third-party countries from around the world whose rights to practice and establish in England, Wales and Northern Ireland, absent a trade deal, are absolutely minimal, if they exist at all. As the noble and learned Lord said, this SI affects about 700 lawyers currently registered with the Solicitors Regulation Authority, 17 registered with the Bar Standards Board and some five EU lawyers registered in Northern Ireland. The other side of the coin, however, which would be of concern to the legal profession, is that the EU will obviously seek reciprocally to reduce the rights of United Kingdom lawyers practising in the EU to those WTO rights.
One of the most important differences between the WTO regime and the existing EU framework is the practice areas in which foreign lawyers are allowed to provide services in Europe. While the directives allow EU, EEA and Swiss lawyers to practise host member state law, including EU law, it is not possible under the current GATT schedule for commitments of the EU, which limits third-country lawyers to providing legal advice in home-country law and public international law, to practise in EC law.
While it is possible in theory for individual member states to grant higher levels of access to foreign lawyers, in practice most member states have not gone beyond these GATT commitments. It follows, therefore, that British lawyers will lose a number of significant rights: rights to provide legal advice on EU law; the right to requalify in host member states; and rights of audience in domestic and European courts. Further, according to the settled case law of the CJEU, lawyers from third countries practising in Europe cannot claim legal professional privilege to protect their clients’ interests. Legal professional privilege is not available to them.
It is not surprising, then, that in 2016 the Law Society of Ireland received nearly 1,400 applications from practitioners to requalify in Ireland. Those were British lawyers, mostly from antitrust, competition or trade law practitioners, based in London or Brussels. Last week the Irish Taoiseach specifically said that they were looking at Ireland taking business in legal services away from the United Kingdom. This statutory instrument, therefore, risks unnecessary conflict with the EU legal profession. There will be no reciprocity. Even if there were a no-deal withdrawal from Europe, surely there would have to be an agreement to retain an open market for legal services allowing mutual rights to practise across the borders. You will see no trace of that in the political statement that accompanies the withdrawal agreement. As the noble and learned Lord, Lord Thomas of Cwmgiedd, pointed out last week, we are in a competitive position. Commercial courts where the proceedings are conducted entirely in English have opened up already in Paris and Amsterdam. The noble and learned Lord said that they are being actively promoted as a much better alternative to the United Kingdom because their judgments will be recognised and enforceable across the EU and because of the certainty of their position.
If the EU does unto us what we are doing to it by this statutory instrument, British lawyers will have no rights of audience in these new English-speaking courts. That is a most curious result. Instead of spending time abolishing the rights of European lawyers to practise in this country, the Government might spend time in negotiating mutual rights to practise to replicate the current position. There is nothing, as I have said, in the political declaration that points to such negotiations. I ask the noble and learned Lord: where are we? Have there been any talks on this issue?
My Lords, I refer to my professional interests, although my firm has not been engaging in EU law. I want to thank in particular the Law Society and the Bar Council for very helpful briefings on an important and complex issue. The provisions of the statutory instrument appear to be acceptable, inasmuch as it will still be possible for EU-registered lawyers to be admitted to the solicitor’s profession or to practise under their home title. Can the noble Lord give any indication of the numbers—the proportion of those whom we have heard are already practising in this country who would be likely to continue under this new regime? Is there any estimate of the impact of the change on the likely numbers of those who will be able to continue? What estimate have the Government made of the impact on UK lawyers currently practising in the EU? Is there any information about the likely impact on them? Can the Minister clarify what is meant by the reference in the Explanatory Memorandum to the,
“alternative examination routes open to third country qualified lawyers”, and indicate how many applicants are expected to take that course of action? What will be the position of EU lawyers currently engaged in litigation in the UK who do not choose to be admitted to the UK professions by the end of the transitional arrangements on
These regulations deal with the impact of Brexit on the practice of law in the UK but there is, naturally, another side of the coin: namely, the effect of leaving the EU on UK providers of legal services to clients in the EU, as the noble Lord just mentioned. There is currently in effect a single market in legal services across the EU, with 36 of the top 50 UK law firms—among which my old firm does not feature—practising in 26 EU countries and contributing significantly to the £4 billion a year net contribution to our economy of these legal services. Have the Government made any assessment of the impact of Brexit on this front?
Further, the Law Society has expressed concerns about the impact of a no-deal Brexit, which would necessitate the application, as we have heard, of World Trade Organization rules, where, I understand, progress on developing rules on services has apparently been very slow. Currently, the Law Society is expressing concerns that a no-deal scenario would have a major impact on the legal profession’s future in providing services in the remaining 27 EU states. It warns that lawyers would have to navigate more than 30 different regimes in EU and EFTA states, many of which restrict practice rights for third-country lawyers, which they will then be. These include a requirement to hold local qualifications, without which UK lawyers could not advise or act on matters such as competition, internal market and trade law. In most countries, third-country lawyers would be unable to act for clients in the domestic courts.
Another problem is that most EU states do not allow so-called fly-in, fly-out services by third-country members, so that it would be impossible for UK lawyers to advise EU clients, represent them in cases involving more than one EU state, or play a leading role in global investigations. Some EU states require membership of their professional bodies, while others, such as Spain and Sweden, go as far as banning their lawyers from partnership with non-EU lawyers, and most EU states do not allow non-EU nationals even to seek admission to their national legal professions. The Explanatory Notes, in paragraph 12.1, make light of these issues, but what steps have the Government taken to clarify the EU’s intentions, either collectively or at a national level, in these matters, which have a significant potential effect on the profession and indeed, therefore, on the financial return to this country?
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
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.
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 is intended to employ those purposes. I apologise for not having appreciated that when the question was first raised.
My understanding is that that is the mechanism that will be employed.
A number of noble Lords raised the question about the access of UK lawyers to the EU 27 and EFTA. That is not the purpose of this instrument, but I do not wish to ignore it. Clearly, we would like to see a withdrawal agreement that leads on, pursuant to that, to negotiations that can ensure that we have as wide a form of access to the EU 27 and EFTA countries for legal services, like other services.
The noble Lord, Lord Thomas, made a number of perfectly good and valid points about where we are without a deal and the impact it will have upon the provision of legal services. This is a matter over which I have been in discourse with the legal profession for the past two years, and I have visited with a number of firms in jurisdictions outside the United Kingdom to discuss with them where they stand with regard to these matters, in particular in Paris. Of course, as the noble Lord, Lord Beecham has observed, this is not for the larger firms. It tends to be the very large firms—generally City-based—who are engaged in practice outside the United Kingdom, particularly in Europe.
The noble Lord, Lord Adonis, asked about small firms and the impact on them. To a very large extent, it is the City firms who are employing European lawyers for a particular form of expertise. One has to bear in mind that small firms do not tend to have non-UK qualified European lawyers practising.
It is perhaps worth noticing—lawyers will appreciate this, but others may not—that, in England and Wales any natural person may deliver legal services for pay, except in the defined, reserved areas, of which there are six. They cannot call themselves solicitors or barristers, but they are only prohibited from practising in the reserved areas, unless they are subject to appropriate regulation. In the event, EU lawyers who have not requalified—and I will come back to this point—tend only to be here in order to show expertise within the law of their own particular jurisdiction. To try to put it in context, this applies not only to EU lawyers but also, for example, to American lawyers, so that, when they are doing international transactions they have available to them expertise in another jurisdiction’s law.
In addition, we have to bear in mind the mutual recognition of professional qualifications. After three years in the United Kingdom, an EU lawyer is in a position to apply to become a lawyer under the host state’s regulation—in other words, a solicitor or barrister. Generally speaking—and this is a point emphasised in the Bar’s briefing—those who intend to be engaged in reserved matters will take that qualification. That is why, when engaging with the profession on this matter, we have allowed for a transition period so that, by 2020, people who are intent on remaining in the United Kingdom to practise in reserved areas will have had the opportunity to move over under the three-year rule in order to have the host qualification to continue. The Bar’s briefing said that, in the experience of the Bar Council, most EU practitioners who are interested in delivering reserved legal activities, obtain one of the home titles in order to be more successful in our legal market. I hope that addresses this point.
On the issue of consultation and negotiation, the question of professional legal qualifications was raised with the EU at a very early stage on the basis that it was an adjunct to citizen rights. At that stage, the EU was not prepared to negotiate on that issue as distinct from what they regarded as citizen rights. It was, therefore, not taken forward in the context of the withdrawal agreement. In the context of the political declaration, it is directed principally to goods, although others elsewhere will discuss the distinction between goods and services. At the present time, it is our present intention to engage, if we have an agreement with the EU, on the question of reciprocity and recognition going forward. We understand the importance of this.
I might add that we have discussed the matter with those firms that generally operate in the EU and outside the United Kingdom. They have been aware of these issues for some time and very many of the lawyers whom they engage in their offices—for example in Paris and Hamburg—are now locally qualified or are qualified nationals of the host state. That is the way in which these practices are carried on.
I take the point made by the noble Lord, Lord Adonis, that some restructuring has been required to allow for this, and that has to be accepted. It is restructuring that would not otherwise have been engaged in, but these firms have undertaken it in preparation for the possibility of a no-deal Brexit. However, these tend to be the major City firms. You do not get the high street conveyancing lawyer trying to open offices in Paris—if they do, I suspect it is not terribly successful.
I recognise the development of courts in other jurisdictions and, in particular, the point made with regard to potential developments in Ireland. I am well aware of many of my fellow barristers who have checked their ancestry just to ensure that they can secure an Irish passport. Lacking that, they have sought to secure a place at the Bar of Ireland. It may be apocryphal, but I understand that the fee for registration as a solicitor in Dublin went up rapidly from €300 to about €3,000. I may be doing the solicitors’ branch of the profession a disservice in relying on that story, but these developments are taking place. Let us remember that, at the level of international litigation, the real competitors are Singapore, Hong Kong and New York, which are all places outwith the EU, albeit that there are specialist centres—Stockholm being one, in the context of shipping and arbitration; and Hamburg being another. We recognise that as well.
I come back to the instrument itself. We are required to pass it because, otherwise, we will be in breach of our international law obligations under the WTO and, in particular, the GATTs. So it is necessary for this purpose. I hope that it will not be required. I express this view without qualification. It is only appropriate and sensible that the Government make provision for what could be an eventuality. I am not going to revisit ground that the House has already covered in the context of earlier statutory instruments which were before it. I hope that it will not be required, but it is only proper and appropriate that we should engage with the profession in order to ensure that we are prepared for any foreseeable eventuality, however unpleasant and unrewarding it may be. I beg to move.