Solicitors and their regulator have found themselves in the crosshairs of MPs and peers this week over strategic lawsuits against public participation (SLAPPs) and economic crime.
The Solicitors Regulation Authority (SRA) was told it had to demonstrate “greater boldness in holding law firms to account” if it wanted to improve confidence in its work.
In the wake of evidence taken earlier this week from SRA chief executive Paul Philip and others, the House of Lords select committee on communications and digital yesterday wrote to Lord Chancellor Dominic Raab to urge him to increase the SRA’s fining powers.
While the regulator can fine alternative business structures (ABSs) £250m and the individuals within them £50m, it is limited to £25,000 for ‘traditional’ firms and their staff – a figure only increased last year from £2,000.
The committee described the new level as “so inadequate that we struggle to understand why it was proposed”.
The Economic Crime and Corporate Transparency Bill, if passed in its current form, would remove the upper limit in cases related to economic crime and the committee recommend increasing SRA’s fining powers to deter SLAPP cases in line with its ABS powers “as a matter of urgency”.
The committee said there was “scope for more action” by the SRA: “It is evident that its actions to date have not provided a sufficient deterrent against SLAPPs.”
Mr Philip told peers that it was investigating about 40 SLAPPs cases. The letter said: “We appreciate that investigations take time but it is noteworthy that none of these investigations have so far resulted in sanctions against solicitors or firms.”
The committee also called on the Ministry of Justice and Department for Culture, Media and Sport to create a SLAPPs defence fund, paid for in part by those pursuing SLAPP cases. This could involve using fines levied by the SRA or enabling a court to order SLAPP claimants to contribute to the fund.
The letter, also sent to culture secretary Michelle Donelan, went on to call on the government to “explore the extent to which some solicitors engage in unscrupulous practices with PR firms and private intelligence agencies to monitor and intimidate journalists”.
It said: “We note the sensitivities in this area but urge you to work with the SRA to develop options to ensure appropriate oversight of solicitors’ engagement with such practices when working on cases relating to public interest as defined by the SRA’s guidance on SLAPPs.”
Committee chair Baroness Stowell of Beeston commented: “The current level of activity to tackle SLAPPs is wholly inadequate. The regulator is not properly equipped with the powers necessary to deter law firms against abusive practices.
“But it needs to demonstrate greater boldness in holding law firms to account to inspire greater confidence. The decent law firms will stand to gain from a strong regulator and should support the SRA in being much more proactive and open in their investigations and penalties.”
The committee was also concerned that anti-money laundering regulations have “limited application” to legal advice.
The letter explained: “The SRA informed us that law firms did not have the same due diligence duties in relation to the payment of legal fees. This is ironic, as money laundering is often a subject of investigative journalism.
“The limits of money laundering regulations suggest a risk that the proceeds of laundered money can be used to pay law firms to pursue SLAPP cases to silence journalists’ investigations… We recommend that you work with the appropriate government departments and agencies to address this loophole as a matter of urgency.”
The committee made the same recommendation in a separate letter sent to Chancellor Jeremy Hunt, which also raised the story that came to light this week that the Office of Financial Sanctions Implementation (OFSI) in HM Treasury granted a licence so that Yevgeny Prigozhin, the sanctioned owner of the Wagner Group of mercenaries, could pay solicitors to sue UK investigative journalist Eliot Higgins of the Bellingcat website.
“There are really questions that need to be asked about how that process happened, and given we’ve got a lot more sanctioned individuals now in light of the Russian invasion of Ukraine, what would happen in a similar circumstance,” the committee said.
Responding on Wednesday to an urgent question about the issue, Treasury minister James Cartlidge told MPs that “within the sanctions regime broadly, because everyone has a right to legal representation, it is possible for frozen assets to be used to pay for that legal representation”.
He continued: “As the UK is a country with checks and balances, it is right that the relevant court, rather than the government, should decide the outcome of a case on the substantive merits.
“However, I can confirm that in the light of recent cases, and related to this question, the Treasury is now considering whether this approach is the right one and whether changes can be made without the Treasury assuming unacceptable legal risk, while ensuring that we adhere to the rule of law.”
MPs were highly critical of the OFSI officials who approved the licence. Labour’s Dame Margaret Hodge said: “I have to say that I had never seen such a case of lack of professionalism, lack of integrity and lack of accountability as this one. It absolutely astounded me: I thought it was unbelievable.”
Meanwhile, in a speech about SLAPPs in the chamber on Tuesday, Conservative Bob Seely – who has been an active campaigner over them and the wider debate over ‘lawfare’ – named various law firms that had brought “noxious lawsuits” which were “almost entirely motivated by the oligarchs’ wish to curry favour with President Vladimir Putin”.
Separately, the House of Commons this week approved adding to the Economic Crime and Corporate Transparency Bill new powers for the SRA to demand information from solicitors and firms beyond money laundering matters to economic crime more generally.
The bill is now heading to the House of Lords for scrutiny.