Dáil debates

Wednesday, 9 December 2015

Legal Services Regulation Bill 2011: From the Seanad

 

10:50 am

Photo of Frances FitzgeraldFrances Fitzgerald (Dublin Mid West, Fine Gael) | Oireachtas source

Part 8 of the Bill deals with new business models provided for under the Bill. These are legal partnerships, which will come into effect in the second six months of next year, multidisciplinary practices, limited liability partnerships, LLPs, which are allowed for and dealt with in the Bill, and employment opportunities for barristers. The Bill as already amended in the Dáil provides for a system of regulatory oversight of such businesses by the new legal services regulatory authority. It will be recalled that amendments made to the Bill in the Dáil introduced a new research phase that must occur before multidisciplinary practices may come into existence. The essence of this aspect of the Bill's reform is that solicitors and barristers will be entitled to choose between any of a range of legal service delivery models, be they traditional solicitor or barrister models or the innovations I have just mentioned.

With regard to LLPs, I propose to introduce an option for solicitors' firms and legal partnerships to operate with the benefits of limited liability within an LLP business model, with the protection for the consumer in the form of both professional indemnity insurance and ongoing regulatory oversight by the authority.

The amendments include strong regulatory power for the legal services regulatory authority in regard to LLPs and the maintenance of a publicly available register of these. The new provisions define the circumstances in which the limited liability status is to be lost and provide for a claw-back of payments taken by partners when the liabilities of the business exceed the assets. Information is to be provided to clients and creditors in relation to the LLP, and the regulatory authority will have an enforcement power up to and including applications to the High Court to make directions on either suspension or the seizing of authorisation to operate as an LLP.

The circumstances of the major regulatory overhaul being introduced in the Bill, together with the need to ensure new business models for legal services are given a fair wind in terms of gaining a foothold in the market, justify the introduction of LLPs in this jurisdiction. This can be justified in the face of any claims by other professional partnerships that they cannot access LLP status. Also, in order to eliminate any issues relating to non-legal partners in multidisciplinary practices being able to assume limited liability through MDPs which they could not access within their own professions, it has been decided, for the time being and pending the research and public consultation to be conducted by the new authority regarding MDPs, not to include MDPs at this point in the LLP provisions.

I ask the House to support this group of amendments today. Amendment No. 1 is an amendment to section 1 of the Act which deals with the commencements of various sections and parts of the Act. It deletes the reference in section 87 in regard to multidisciplinary practices. As the House will know, it had originally been the intention to commence automatically the operation of multidisciplinary practices within a year of the consultation in this regard but it is now intended that the Minister for Justice and Equality will have the discretion to commence the operation of multidisciplinary practices at any time after the relevant consultation. This is in recognition of the fact that the consultation may bring to light some of the issues that will need to be catered for legislatively or organisationally before commencement. Therefore, an automatic commencement is not appropriate.

Amendment No. 2 sets out the date of coming into operation of the new legal partnerships model being introduced in the Bill. This is to be within six months of the completion of the relevant public consultation. This will allow for the new legal partnerships, which are barrister–barrister or barrister–solicitor partnerships, to be introduced within one year of the establishment of the new regulatory authority. I hope to see the first of these coming into existence before the end of 2016.

Amendment No. 87 inserts a definition of "limited liability partnership" into the existing section 84 as a reference point for the new Chapter 3, introducing LLPs, which is proposed to be inserted by amendment No. 196. It defines "limited liability partnership" as applicable only to a partnership of solicitors - for example, an existing solicitors' firm - or to the new legal partnerships, namely, the barrister–barrister or barrister–solicitor partnerships, being set up under the provisions of the new legislation.

Amendments Nos. 168 and 170 relate to sections 85 and 87 of the Bill as passed by the Dáil, which are very similar. They currently provide that no professional code that is a code of practice drawn up by a legal professional body such as the Law Society of Ireland or the Bar Council shall prevent a legal practitioner from providing legal services within a legal partnership or a multidisciplinary practice. Deputies will be aware that a legal partnership is a partnership between either solicitors and barristers or between barristers only. It is a new creature of this Bill that has been prohibited up to now under professional rules. Multidisciplinary practices are firms that will be able to provide both legal and other services together under one roof. These are currently prohibited under professional rules, and the Bill provides for their introduction, subject to the outcome of research and a formal public consultation process under Part 8.

I was advised by the Attorney General, whose advice I will paraphrase in general terms only, that the approach in the Bill, as published, which seeks to interfere directly with the professional codes of the legal professional bodies, is at high risk being vulnerable to legal challenge on the grounds of undue interference with the professional bodies’ constitutional rights of association. The original sections would, in effect, dictate to the legal professional bodies the parties they may include and exclude from their membership. It is this, in particular, that opens up the provisions to the possibility of successful legal challenge. In fact, it raises constitutional issues. This is the advice I was given and which I brought to the Cabinet. The Cabinet supported the approach I was taking in the Bill.

In the interest of having the new regulatory and complaints structures up and running early and of introducing consumer choice through getting new legal partnerships up and running now, I introduced these amendments in the Seanad. I have chosen to provide that, as a matter of law, barristers and solicitors may provide their services through one of the new business models. They will have a statutory right to do so.

Irrespective of the stance taken by any professional body, this right will exist as a matter of law.

The second part of the new section sets down a marker that such bodies may not in any way restrict their members from doing business with those who choose to operate through the new models. This is to ensure that progress will be as seamless as possible as far as consumers are concerned, whether they are dealing with legal practitioners who operate out of the Law Library through legal partnerships or multidisciplinary partnerships. It also makes clear that there can be no under-the-radar actions by the professional bodies which could have the effect of undermining the fair wind we are seeking to put behind the start-up of legal partnerships. It sets down a marker that the new authority will carefully monitor developments in the marketplace and will, if it finds any evidence that the start-up of new business models is being held back in any way, make recommendations to the Minister for further legislative change based on the evidence collected.

One of the amendments I introduced in the Seanad provides for a review of the legislation after 18 months. I also introduced amendments to make certain that the Consumer and Competition Authority is involved in this review and consumer interests will be taken into account. This will mean that, as a result of the innovations in the Bill, consumers will no longer be forced to deal with solicitors' firms, with only secondary, indirect access to Law Library barristers. Instead, competition in the market will be opened up, with consumers being able to immediately access mixed-discipline legal partnerships, limited liability partnerships, ordinary solicitors' firms and traditional Law Library barristers, both directly on non-contentious matters - an issue we discussed in the Seanad - and indirectly on contentious matters.

Another of the amendments provides that employers will be able to immediately hire barristers to work for them and represent in them court. The Bill also lays the groundwork for consumers to access legal and other services via multidisciplinary practices, as well as accessing barristers directly on contentious matters, subject to the relevant consultations. We must be conscious that the legal services regulatory authority is a new body. The previous Minister, Deputy Shatter, made certain decisions on which matters were to remain with the Law Society. If all matters were to be transferred to the new authority, it would be a much larger organisation with many more staff. What we have provided is a regulatory oversight mechanism, the legal services regulatory authority, which we are asking to do a large body of work. It must be feasible for the authority to do this work, which means we must provide it with a reasonable work programme that can be managed in the timeframes provided. A new body will not be able to deal with every single issue. In its first phase, which commences on 1 January 2016, the authority must get up and running and establish its own practices. Its board, chief executive officer and chairperson will have a significant task in establishing this new, independent regulatory authority.

I do not propose to discuss in detail all the amendments in the group. However, if Deputies have any questions concerning amendments, I will be pleased to provide more detail. Amendment No. 172 proposes to ensure that where a notice of commencement or cessation is made by a legal partnership to the legal services regulatory authority under the relevant provisions of Part 8, it may be subject to a fee by the authority. As Deputies are aware, the authority will be in a position to set fees.

Amendment No. 173 replaces the existing section 89 with regard to the requirement for a legal partnership to have indemnity insurance. The Bill makes amendments to the Solicitors Acts, which involved highly detailed work over a long period. We were not in a position to complete this work until the shape of the Bill, if one likes, had been settled. Detailed work was done on the amendments that make changes to the Solicitors Acts. These were necessary because we are establishing a new legal services regulatory authority. Deputies will note that the amendments do not introduce policy changes but reflect the need to represent the policy we are discussing in the Solicitors Acts. I have no doubt a consolidated solicitors Bill will be introduced in the near future.

We have defined the functions and obligations of the managing legal practitioner, MLP, in a multidisciplinary practice. Section 92(4) imposes an obligation on the managing legal practitioner to take all reasonable action to rectify a matter where he or she believes the practice is operating in breach of requirements under the legislation. The amendment seeks to impose a time limit on this obligation by requiring him or her to take rectification action within 14 days. The purpose of the change is to tighten up the oversight that the managing legal practitioner will have in practice and strengthen his or her hand in ensuring the rectification of any problem. We have therefore addressed the various issues that would affect multidisciplinary practices and provided detail on a range of obligations that will be in place, subject to the timeframe we have provided for their introduction.

Amendment No. 188 makes new provisions regarding the obligations of a managing legal practitioner. It sets out the stages for rectifying a particular problem and is straightforward. The amendments also oblige multidisciplinary practices to take out professional indemnity insurance. A significant number of sections address the issue of professional indemnity insurance and its import.

Amendment No. 197 inserts a new section that makes the core provision limiting the liability of partners in a limited liability partnership, LLP. It proposes to limit the personal liability of individual partners of a firm for its debts, obligations and liabilities. This is in line with precedent in several other comparable common law jurisdictions in which partnership law has been changed to allow for limited liability partnerships. The limited liability granted to a partner falls in a number of circumstances - namely, where there is fraud or dishonesty leading to a criminal conviction or where a finding of misconduct is made. The term "misconduct" is defined later in the Bill. The limitation of liability does not affect liability incurred for purposes not connected with the business and cannot be used, for example, for avoiding any tax liability. In addition, the limited liability is prospective only and does not cover any act or omission that occurred prior to the assumption of limited liability. Section 107 also provides that the original Partnership Act 1890 concept will apply to the new limited liability partnerships, maintaining them as partnerships and not any new type of quasi-corporate entity, for example.

Amendment No. 198 ensures the availability of the property of the partnership to meet obligations and liabilities of the partnership and protects creditors from any attempts to take money out of the business with the intention to defraud creditors - for example, in the event of a bankruptcy. Subsequent amendments make detailed provisions on authorisation and registration, appropriate fees and the various procedures that would operate in the event of the ending of a limited liability partnership.

The following amendments go into detail on the various provisions of authorisation and registration, actions subject to appropriate fees and the various procedures that would operate in the event of a limited liability partnership ending. Obviously, we also have to give the authority power to make regulations for oversight of new LLPs, including the regulation of the provision of information by them to creditors and clients of the authority.

There are a number of other details relating to the various obligations on an LLP that is registered with the authority. For example, amendment No. 265 deals with the point I made about barristers in employment. Section 151 provides, as a matter of law, that employee barristers will be able to act on behalf of their employer in court. Many people might have assumed that was the position at present, but it is not. The section also provides that the legal profession representative bodies will not be able to prevent their members from working with such employee barristers. The essence of the proposed new section has not changed. Instead, it has been reworked to ensure it is clear, as a matter of law, that barrister employees may provide legal services as practising barristers to their employers. The approach to amending the section is similar to that already set out in the amendments to sections 85 and 87. It creates a legal right for barristers to provide legal services through the new legal partnerships or multidisciplinary practices.

I hope I have given Deputies the type of detail they want on the amendments that come under the first grouping. If there are any questions on a particular amendment, I can address it.

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