Alternative business structures (ABSs) should not be introduced until stronger provisions are put in place to stop those convicted of dishonesty from taking a stake in them, a leading Conservative peer has said.
Speaking in a House of Lords debate on statutory instruments needed for the ABS regime, Lord Hunt of Wirral, the solicitor and former Tory cabinet minister, called on the government to introduce exceptions to the Rehabilitation of Offenders Act 1974 so that non-lawyer owners of ABSs have to declare all convictions to ABS licensing authorities, such as the Solicitors Regulation Authority and Council for Licensed Conveyancers.
The Act designates convictions of 30 months’ imprisonment or less as ‘spent’ after a certain period of time has elapsed, which varies according to the seriousness of the sentence received.
There are exceptions to this, and Lord Hunt – along with Labour shadow justice spokesman Lord Bach and Liberal Democrat Lord Thomas, a one-time shadow Lord Chancellor – said non-lawyer owners should be among them.
Without it, said Lord Hunt, “individuals who, for example, are imprisoned for up to two and a half years for offences of dishonesty would be able to conceal those convictions once 10 years have passed”. This would mean “the SRA and other licensing authorities would have no power to stop individuals with serious criminal convictions for dishonesty from owning law firms”.
Lord Thomas said: “I have had the experience in Hong Kong of appearing, instructed by firms which were essentially Triad-funded, with a front of a solicitor who did very little except ultimately go to jail. The warning was there: one cannot be too blasé in these alternative business structures.”
Lord Hunt sought an assurance “that the provisions of the Legal Services Act allowing the external ownership of law firms will not be implemented until the necessary revision has been made”.
However, justice minister Lord McNally did not give an assurance, saying that the issue was under review. “These are serious matters and areas that need to be tidied up as we go through the process of bringing the ABSs on board,” he said.
The minister said the government has laid a draft statutory instrument to introduce exceptions to the Act for the heads of legal practice and finance & administration at ABSs. The explanatory notes to the legislation say this is because they “may have access to vulnerable clients and client money”.
However, it says the Ministry of Justice is still considering whether this should be extended to “other positions involving the management and ownership of ABSs”.
Lord Bach quoted the current justice minister Jonathan Djanogly, who as an opposition spokesman during the Legal Services Bill debates in 2007 said: “The effectiveness of fitness-to-own provisions is a crucial element of the public protections that need to be in place before external ownership of ABS firms can safely be permitted. It is essential to avoid the spectre of law firms being owned by criminal elements.”