Clause 29

Legal Services Bill [Lords] – in a Public Bill Committee at 4:15 pm on 19th June 2007.

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Prohibition on the Board interfering with representative functions

Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice)

I beg to move amendment No. 245, in clause 29, page 14, line 26, leave out ‘prejudiced’ and insert ‘improperly constrained or influenced’.

It is vital that the representative functions of the approved regulators operate smoothly. The regulators must be proactive and imaginative, and we supportthe Clementi recommendations that the professional bodies separate their regulatory responsibilities from their representational role; that makes manifest sense. We support also the requirements in clause 30 that the board make rules on internal governance.

The amendment would ensure that the Legal Services Board interfered only with the regulatory functions of the approved regulators, not with the representative arms of those bodies. I am sure that that is Her Majesty’s Government’s intention, but I am concerned about the use of “prejudiced” in clause 29. For example, if a professional body properly provides a service to its members such as defending them in the event of disciplinary action, along similar lines to the work of the Medical Defence Union, one would hope that the regulatory arm would regard it as a perfectly proper exercise of the representative body’s role and that it would recognise the importance of properly representing people who face serious disciplinary charges.

However, the regulatory arm may take a different view, particularly if the defence service’s actions led to a number of people being cleared of disciplinary charges. In those circumstances, the regulatory board might argue that its effectiveness was being prejudiced by the representational side’s activities. For that reason, we are suggesting a better wording. The use of the word “prejudiced” in this context is too wide. It is an altogether stronger term than the phrase that we are recommending should be substituted for it: “improperly constrained or influenced”. That substitution would make a great deal of sense. We are putting in wording that more neatly and succinctly meets HMG’s requirements.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

We will support the amendment—that is, I will support the amendment for the moment, and “we” will support it if my hon. Friend the Member for North Southwark and Bermondsey turns up later.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

He will be here soon. It is not a game; I think going into the “we” is out of order.

The point in English law is that it is the perception of external influence—the perception of bias—which is the key driver. Although it has been argued that “prejudiced” is a stronger word and it may have more emotive value than other words, it is actually much easier to prove improper influence than it is to prove prejudice, which presumes that a matter has been prejudged. To that extent, the amendment would tighten up the legislation and, although it may be a probing amendment, the Minister should look on it favourably.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Ministry of Justice

A lot of consideration has gone into the use of the word “prejudiced” in the clause. It has been argued that it would not be unusual for representative bodies to seek to influence regulatory decisions, if it is in the interests of their members to do so. As the approved regulator is the body recognised in the Bill as responsible for both representative and regulatory functions, I would argue that it should accept certain responsibilities as part of that role. It might be reasonable for the representative arm to try to influence regulatory decisions, but it is important that the board is able to take appropriate action where it considers that the approved regulator is allowing representational interests to prejudice the exercise of regulatory functions.

It is important to ensure that the board is able to act where, for example, the actions of the representative side discredit the regulatory arm, resulting in damage to consumer confidence. Clause 29(2) is necessarily and deliberately wide in definition to ensure that the board is not prevented from taking such appropriate action. Therefore the use of the word “prejudiced” is correct in the context.

The hon. Member for North-West Norfolk has raised specific concerns. To suggest that the board may use its powers only where exercising the representative functions has “improperly constrained or influenced” the regulatory functions implies that there may be circumstances where it is “proper” for representative interests to constrain or influence regulatory functions.   I do not think that that is appropriate. Furthermore, the proposed formulation suggests that there must be an element of wilfulness, but again that might notbe the case. There might be no intent whatsoever on the part of the regulator, but that does not mean that the board should be prevented from acting if necessary.

I understand that these are often are very fine definitions, but “prejudiced” is more appropriate than “improperly constrained or influenced”, because the latter wording would narrow the definition just a little bit too much.

Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice)

I am grateful to the Minister. In her inimitable charming way, she has persuaded me that the use of the word “prejudiced” will not have some of the unintended consequences that I had envisaged. On that basis, therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Bellingham rose—

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

The hon. Member for Bassetlaw was a little late rising—perhaps it is to do with the heat.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

It was my left leg—the old war wound, Sir Nicholas. I beg to move amendment No. 278, in clause 29, page 14, line 30, at end add—

‘(3) When acting under subsections (1) and (2) of this section the Board must satisfy itself that approved regulators have established organisational structures and procedural practices which distinguish sufficiently clearly between their regulatory and representative functions.’.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

With this it will be convenient to discuss amendment No. 246, in clause 30, page 15, line 16, at end insert—

‘(3A) When making rules under subsections (1) to (3), the Board must satisfy itself that approved regulators have established organisational structures and procedural practices which distinguish sufficiently clearly between their regulatory and representative functions.’.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

By tabling the amendment I wished to highlight one of the major consequences of the Bill and to offer the Minister an opportunity to strengthen it mildly in the Government’s own direction of travel, with the backing of the Opposition parties and following Clementi’s recommendation that regulatory and representative functions need to be clearly distinct and separate. I wish to ask a question or two of the Minister, and to throw a wider challenge out to the Committee and to readers of Hansard.

When a complaint is made to the Law Society and is passed to its regulatory arm to examine, it may well—individually or generically—also be a complaint to the Bar Standards Board. For example, there was the case of Hobson and others v. AMS and others, which was adjudicated by the Law Society. In that case, counsel’s opinion was fundamental. The complaint was made against the solicitor, but it could have been made against the barrister had the complainants had known counsel’s opinion and who the barrister involved was.

Similarly, the myriad complaints concerning hearing loss cases that are beginning to arrive at the Law Society could also go to the Bar Standards Board, as happened last week. There is a suggestion that there is  unhealthy collusion between firms of solicitors and barristers on how counsel’s opinion affects consumers. In a lot of cases involving industrial deafness, a solicitor might tell someone, “You have a case,” and the case goes all the way, but the employer defends the case and resists the claim. Before the case goes to court, the firm might get counsel’s opinion at the request of the solicitor, which is usually a requirement built into a small clause of the insurance policy. The solicitor then says, “Oh no, there’s no case—absolutely no case whatsoever.” On that basis, insurance funding is withdrawn and the case does not go to court.

If there were many such cases and a pattern emerged, the matter might be deemed worthy of investigation, but by whom? The regulatory arms covering solicitors and barristers should look at such issues together and work through both policy and remedy, but my experience suggests that that does not happen. Although solicitors’ regulatory and representative arms are close, as are those of barristers, there is a distance in the relationship between the two regulatory arms and they do not come together as regulators. That coming together is essential if the consumer is to be protected, particularly in the more complex and insidious cases in which patterns of potential consumer disquiet emerge. Mildly strengthening such measures in the Bill might well be within the ambit of the Government’s intent, so I politely invite the Minister to consider the amendment.

Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice) 4:30 pm, 19th June 2007

Amendment No. 246, which stands in my name and that of my hon. Friends, including the shadow Secretary of State, as well as the name of the shadow Minister in the Liberal Democrats, is very similar to the lead amendment. The amendment moved by the hon. Member for Bassetlaw would insert anew subsection (3) in clause 29, which is headed, “Prohibition on the Board interfering with representative functions” Our amendment would insert a new subsection (3A) in clause 30, which is headed, “Rules relating to the exercise of regulatory functions”.

Our aim is very straightforward: to reinforce the point that there must be a separation between representative and regulatory roles. We are requesting that proper separation be included in the Bill. Obviously, some approved regulators will have a separate building and be a separate team of people—there will be a manifest separation from the representative function. However, some of the smaller organisations, such as the Chartered Institute of Patent Attorneys and the Institute of Trade Mark Attorneys, will find it quite difficult to have a separate building or arm to the operation, and they will be looking at something more like a Chinese wall, which operates very effectively in many City organisations.

What we are proposing is common sense. I will not elaborate further because the hon. Member for Bassetlaw has put a very strong case. I am delighted that we are on the same side of the argument.

Photo of David Burrowes David Burrowes Conservative, Enfield, Southgate

Is not the argument strengthened by Sir David Clementi, not only in his intention but in his comments and evidence to the Joint Committee, and by the Joint  Committee’s own response and recommendations? The separation between the representative and regulatory bodies should be more explicit in the Bill, notwithstanding the fact that existing bodies, such as the Law Society and Bar Council, have already put their own house in order.

Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice)

Indeed. It is quite interesting that the Baroness Ashton of Upholland noted that very point in the debate in the other place. Unfortunately, she did not accept a very similar amendment in the House of Lords that was proposed by our noble and learned Friend Lord Kingsland. We are trying to make progress. The Minister is in a good mood this afternoon. I hope that she will accept our amendment.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

My name is on one of the amendments. Watching how the General Medical Council regulates the medical profession, it is very obvious to me that it does not investigate certain things that it finds too embarrassing. That illustrates the importance of separating regulatory and representative roles. We need procedures that create something more substantial than a Chinese wall.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Ministry of Justice

If I am in a good mood this afternoon, it is because we are all on the same side on the issue of separation between regulatory and representative functions. It is absolutely fundamental to the B+ model of regulation proposed by Sir David Clementi. Since the draft Bill was published, we have strengthened the legislation in this area. I am very persuaded by the arguments put forward by all sides, but clause 30 ensures that there is separation between regulatory and representative functions. Among other things, the rules require that the approved regulators adequately resource their regulatory arms and that the people exercising the regulatory functions can make representations to the board, the consumer panel, the Office for Legal Complaints and other regulators.

The clause takes into account the recommendations of the Joint Committee, and makes it clear that once the board is established, it will need to set out more detailed criteria for the separation of regulatory and representative functions of approved regulators.

My small “but” relates to the point made by the hon. Member for North-West Norfolk. The small regulators would need Chinese walls because their functions would not quite be separated. I want to consider whether the additions suggested by the h G and my hon. Friend the Member for Bassetlaw would make life easier for the small regulators yet still ensure that the regulatory and representative functions of the bigger boys in the playground were clearly separated.

I ask my hon. Friend to withdraw the amendment, but I am happy to consider the matter further.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

I hear a strong echo of my suggestion that the regulatory arms, particularly of barristers and solicitors, should indeed work closely together, and not hide away in their new and distinct buildings. On that basis, I trust the Minister—on this and all matters, future as well as past. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 29 ordered to stand part of the Bill.