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Leaving the EU: Legal Services

Volume 638: debated on Wednesday 28 March 2018

I beg to move,

That this House has considered promotion of legal services after the UK leaves the EU.

It is a pleasure to serve under your chairmanship, Mr Davies. I am grateful for the opportunity to raise the important issue of the future of UK legal services and how they are promoted after we leave the European Union.

The best way to set out the significance of this matter is to recite some facts about the legal service sector’s contribution to the UK economy and beyond. In 2016, legal activities added £24.4 billion to the UK’s national accounts. That is around 1.4% of the UK’s total gross value added. The UK legal services sector employs about 344,000 people. Most of those jobs are outside London, but of course the City of London has a huge hub of specialist lawyers who support the financial services sector. English law is the most widely used in the world, covering some 27% of the world’s 320 legal jurisdictions. More than 200 foreign law firms from more than 40 jurisdictions—all the EU jurisdictions but also, obviously, some beyond the EU—have offices in the UK. In 2016, the UK legal services sector generated £31.5 billion in revenue, £4.9 billion in total exports and net trade of £4 billion. It is forecast to produce turnover of £30.82 billion and net exports of £4.25 billion by 2020.

I say all those things as a lawyer—I refer Members to my entry in the Register of Members’ Financial Interests—but this matter goes well beyond the law and is inextricably linked to the United Kingdom’s financial and professional services sectors. Our economy is of course overwhelmingly service-based.

My hon. Friend described the contribution of legal services as a whole, but commercial law contributes a large amount to that annual income. I wonder whether he is happy with the arrangements for mutual recognition and enforcement of judgments after we leave the EU.

My hon. Friend makes a very important point. At the moment, the UK is the jurisdiction of choice for the majority of commercial law contracts, litigation that follows from them, and commercial law arbitration, but we cannot take that for granted. A number of English language commercial courts that apply UK law have already been established elsewhere in the world. As I understand it, another is proposed in Amsterdam, which would clearly have an impact once we leave the EU. Mutual recognition of judgments is one of the UK legal sector’s key asks, and he anticipated with great timeliness that I was about to move on to what the Law Society, the Bar Council, the City of London Corporation, TheCityUK and others in the sector are looking for from the Government to maintain the position of UK legal services once we leave the EU.

The legal services sector’s key priorities are as follows. First, EU27 legal providers should be permitted to provide services in the UK, and vice versa—UK legal providers should be able to provide services in the EU27—on the basis of mutual recognition of regulatory regimes. That would enable European lawyers based in London firms and UK lawyers based in the EU27 to continue to advise and represent their clients.

Secondly, the UK and the EU27 should continue automatic mutual recognition of legal qualifications gained before and during—and after, I submit—the UK’s exit from the EU. That ought to be part of the agreement we seek. Otherwise, we would be in the perverse position that an English lawyer who, like me, is also qualified in the Republic of Ireland—I am a member of the Irish Bar—was able to continue to practise in the EU27 using their Irish qualification but not their English qualification. That is why there has been a considerable increase in the number of English solicitors being admitted to the Law Society of Ireland and English barristers seeking to be called to the Irish Bar. It would be much more sensible to retain those people in the UK as part of a mutual deal with our EU partners.

Thirdly, as my hon. Friend said, it is critical that UK court judgments can continue to be enforced in the courts of the EU27. That obviously applies to commercial law, but it also impacts maintenance payments, for example. Let us say that the partner from whom a UK national is having difficulty getting support for their child is an EU national who is living back in the EU27. Maintenance payments, like a judgment in the largest commercial litigation, can currently be enforced in any EU27 court and implemented by the authorities of any EU27 member state by virtue of our membership of the EU. One regulation covers the whole lot. It is important that we seek to preserve that arrangement. It would be extremely complicated if we had to enter into arrangements with individual EU member states, so we must try to do it en bloc.

It is also to the benefit of the EU27 to have the judgments of their courts recognised and enforced in the UK. There would be mutual advantage to preserving that arrangement, and it is most important that that is done without any break in continuity. Contracts of all manners are being entered into that, in all likelihood, will run beyond the date on which we leave the European Union. It is essential that people can enter into such contracts with sufficient certainty that they will be enforceable throughout the transition period and in the end state after we leave.

It is suggested that, as well as seeking the broadest possible deal with the European Union on that, the UK should consider re-signing The Hague convention as an independent party. I suggest that the two are complementary—it is not either/or. We are currently a party to that convention by virtue of our membership of the EU, but that will no longer be the case once we leave. I ask the Minister to take on board the concern that, in the negotiations, we should seek a waiver from the EU to allow us to re-sign as an independent party prior to Brexit so that there is no delay in ratification.

My hon. Friend is making a powerful case, and I entirely agree with him about The Hague convention, but does he agree that the great prize would be replicating the provisions of the recast Brussels I regulation, which derives from EU regulation 1215/2012? That is the gold standard. It is the best option, and The Hague convention is very much a fall-back provision.

My hon. Friend is absolutely right—he and my hon. Friend the Member for Henley (John Howell) will be aware of the work that the Select Committee on Justice has done in this respect—which is why the first option should be to get a deal for continued mutual recognition. The Hague convention is, in a sense, a fall-back. It is not either/or—we could do the two in parallel, in the same way that we are seeking a generous agreement in relation to Euratom but also looking at the fall-back position of making our own regulatory arrangements if need be—but it would be much better if we maintained the existing mutual recognition. The Select Committee stressed that clearly in the report we published towards the end of the last Parliament on the impact of Brexit for the justice system, including legal services.

There are other key matters to stress, including the need for a system that deals with the ability of the UK to attract talent, which applies to the legal services sector. It applies to all the professions, but in the service economy our great strength is the quality of the personnel we are able to attract to the UK. Any immigration regime should therefore be so organised as to make it possible for firms easily to move staff between offices in the EU27 and the UK, and vice versa. It is also important that, as I have indicated, as well as recognition of qualifications, all existing UK lawyers practising EU law in the European Union should be able to continue to do so, and vice versa. Those are essential matters.

It is also important that we avoid any barriers and friction, to use a popular phrase, that might arise by virtue of any regulatory difficulties. Depending on our arrangements, if we do not have a comprehensive agreement and a proper partnership with mutual recognition and access, UK law firms could face restrictive regulations, preventing them from providing services and involving about 30 different regimes. We can see the complexity for firms if we do not get that solution. That is why it is important that the Government make it clear to the legal services sector that it is a priority in the negotiations.

When we talk about services, we sometimes understandably pay a lot of attention to the financial services sector, which is the biggest and most valuable part of our service economy, but the legal services sector is the critical underpinner of that sector. People come to the UK because our banks are sound and dependable, our regulatory system is perceived internationally as sound and dependable, and our legal system is seen as being second-to-none sound and dependable. It is a place where people want to litigate, and want to have their contracts written in English law. We cannot take any of that for granted.

None of that precludes us from using the opportunities that come as we leave the EU to seek to expand British legal services elsewhere in the world. It is important that the Government build on the “GREAT” campaign, with which the Ministry of Justice was associated last year. I hope it will be made clear that legal services, as a key British specialism and area of British excellence, will be a central part of the drive we make going forward. That is not always easy. In fact, even in common law jurisdictions adopting broadly similar laws to ours, including many Commonwealth countries, considerable restrictive practices get in the way of British law firms and lawyers operating. For example, the British Bar and the Law Society have been fighting extremely hard to get access to the legal markets in India.

India is talked of as one of the great potential commercial prizes for a free trade agreement post-Brexit, but it is by no means easy. India currently has protective regulatory structures. Progress is being made in parts of the financial services sector, but India has been reluctant to open up its legal services. When we negotiate trade deals, we should not be thinking purely in terms of manufactures or financial services—it is most desirable that legal services can be sold as part of a package that goes with the other services, and sometimes with manufactures. For example, many people will have bought a car with an attached insurance policy. When something is exported, it may have an insurance policy attached. It makes sense if lawyers who specialise in that field can advise their clients in those new markets.

There are opportunities, but a joined-up approach is required, particularly between the Ministry and the Department for Exiting the European Union. I am delighted to see my hon. and learned Friend the Minister in her place, who I know understands this well, having had distinguished practice at the Bar in the UK, but there is sometimes concern that other Departments are not as well sighted on the needs of the legal services sector, which sometimes perceives that it takes a fight to get itself heard in the broader Brexit negotiations discussion.

I hope the Minister will reassure us and take from the debate the message that there needs to be a specific taskforce for dealing with legal services. Many people in British law firms are ready and willing to supplement the Government’s in-house lawyers on policy advice. Established organisations such as the Financial Markets Law Committee, chaired by the noble Lord Thomas of Cwmgiedd, have made a number of suggestions to the Government on technical but important regulatory changes that will be necessary to protect the position of financial law.

There is expertise, but I have a suspicion that it is not always obvious to look outside the traditional civil service ranks for advice—perhaps it is sometimes the nature of Government—I remember this from when I was a Minister. I hope the Government do that right across the piece on Brexit, because we have great expertise. The Bar European Group has equal levels of great expertise.

I hope that, in this short debate, I have flagged up some of the key needs of British legal services, their legal service providers and their clients—not just commercial clients but the little people who benefit from access to European markets. I know that the Minister is engaged and will respond positively, but the more specific detail she can give on how the Government will address those specific items, the better that will reassure the sector and its clients.

It is a pleasure to serve under your chairmanship, Mr Davies. It is also a pleasure to hear the debate brought about by my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) and the contributions made by the other members of the Justice Committee. That Committee is doing a huge amount of work to ensure that the issues that matter in our justice system are brought to the forefront and to Ministers to ensure that we have the best possible justice system going forward.

Today, as always, my hon. Friend highlighted important issues that affect us in relation to Brexit. Like him, I acknowledge the important work done by our legal services sector. By reference to points similar to his, there are four key points. The first is jobs, and the legal services sector is the source of many jobs. As he rightly mentioned, it employs well over 300,000 people.

Secondly, the sector contributes significantly to our economy: £24 billion every year. As my hon. Friend highlighted, that money is brought in by not just the legal services sector but its interdependency and relationship with the financial services sector. He mentioned TheCityUK, whose CEO, Miles Celic, highlighted that very point. He said:

“The UK-based legal services sector forms an integral and crucial part of the wider financial and related professional services ecosystem which makes the UK a truly globally-leading international financial centre.”

The legal services sector does not only those things but so much more. It supports people when they are most vulnerable. Many lawyers give up their time to support others for free through the Bar Pro Bono Unit and LawWorks, and I was pleased to see the launch in 2014 of the UK collaborative plan for pro bono, with more than 40 firms committing 325,000 hours a year to support the most vulnerable.

Our sector is so successful because we have outstanding professionals. We have a well-established system of law and a first-class judiciary, whose expertise and impartiality is recognised throughout the world. For those reasons, my hon. Friend is right to say that we need to protect this sector post Brexit, and we are doing that in a number of ways.

My hon. Friends the Members for Henley (John Howell), for Cheltenham (Alex Chalk), and for Bromley and Chislehurst referred to the importance of mutual recognition and the enforcement of judgments. I hope that in our withdrawal agreement we will soon reach an agreement on the protection of and mutual recognition of judgments, and on separation for cases that are pending and currently before the courts.

I am encouraged to hear that. Some of the evidence presented to the inquiry stressed that if we get such an agreement right, there is a great opportunity for a springboard, particularly in east Asia, where there is a lot of work that British lawyers can seek to win. However, that will require that sound foundation of mutual recognition of judgments, and mutual enforceability.

I am grateful to my hon. Friend, and it is important to give certainty to the legal services sector, so that they can advise their clients accordingly. My point was about the withdrawal agreement and what will happen to cases that are already pending before the court. The second stage of our negotiation was about implementation, and we have given businesses legal certainty by ensuring that our current arrangements will continue to apply during the implementation period. We are starting to negotiate and come to an arrangement on what will happen in future after we leave the EU.

My hon. Friend the Member for Cheltenham was right when he mentioned the gold standard and the Brussels regulation, and my hon. Friend the Member for Henley was correct to identify the importance of the Hague convention. Both those things are important, and we hope to secure the Hague convention as a minimum. It is right to ensure that there will be no gap before we rejoin that convention, and we are pressing to secure that. Our ambition and aim is to negotiate as hard as possible and ensure arrangements and protections in future that are similar to those we currently have.

My hon. Friend the Member for Bromley and Chislehurst raised the important question of legal services, the right of citizens to practise here and abroad, and the mutual recognition of qualifications. Again, on separation, as part of the withdrawal agreement we have agreed that any lawyers within the scope of the citizens’ rights agreement who have become part of the host profession in the member state should remain recognised and able to practise. Last week we agreed the terms of the implementation period, in which we will have the same rules as now. Therefore, rules on market access will continue, including on the provision of services and establishments for lawyers. The Government are keen to ensure a good deal for the legal services sector in future.

I am glad to hear the Minister say that, and I am sure she will recognise that for the legal services sector, a CETA-type deal simply is no good. For legal services, a CETA-type deal is no deal. When we seek an ambitious deal, we must go beyond that which has been posited by some as a solution, because CETA would be just as bad as the cliff edge, which I think the Minister and I, and the Government, do not wish for under any circumstances.

My hon. Friend makes an important point, but we can see how the Prime Minister is approaching this. In her Mansion House speech she specifically said that it makes sense for us to continue to recognise qualifications in future, and she identified the importance of civil and judicial co-operation. She specifically identified a few areas where the UK and EU economies are linked, and one of those was law.

As my hon. Friend rightly identified, our opportunity to expand our legal services extends not just to the EU, and we also have the opportunity to develop free trade agreements with third countries, which may cover legal services. He was right, however, to say that protectionism already exists in other countries, and although few FTAs currently cover legal services, we hope and are ambitious to change that in the future.

It is not only in the Brexit discussions that we continue to support our legal profession, and considering LawTech, technology, and innovation in legal services is key to ensuring that the United Kingdom retains its world-leading status. That is why the Government, building on success in the FinTech sector, are ensuring that new and innovative legal technologies are embraced and supported. We are fully supportive of LawTech innovation, which is now gathering pace. The number of LawTech start-ups in the UK is increasing each year, from three in 2010, to more than 60 in 2016. We are committed to ensuring that the UK becomes a world leader in smart contracts, and we are keen to bring together work that is being done to make those contracts a reality.

We are doing other significant work beyond the UK to support and promote legal services abroad. We are joining up with the judiciary and legal services sector, helping it to gain footholds in new markets, and proactively spreading the message about why English law, and the legal offering in the UK, is so strong. My hon. Friend rightly referred to the GREAT campaign, and the “Legal Services are GREAT” campaign was launched by Lord Keen in Singapore last year. The campaign targets stronger links with emerging and established markets across the world, and it aims to cement the UK’s reputation as the world’s pre-eminent legal centre. It is showcasing the very best of what the UK’s legal services sector has to offer, bringing business to the UK and our legal firms, chambers and courts.

We are also working with partners to target the countries that matter to the UK. In April we will deliver an English law summit in Kazakhstan, alongside the Law Society and the Bar Council in England and Wales. In May, our campaign will feature in the UK pavilion of the Silk Road Expo in Xi’an, China. We are working bilaterally with our key allies on areas of mutual interest. Legal services feature prominently in the regular programme of bilateral ministerial meetings that we organise, including last year with Ministers from Singapore, India, Australia and China.

My hon. Friend made a number of important points, and we must recognise the importance of talent, and the mutual recognition of qualifications and judgments. He rightly said that there is a wealth of knowledge in the legal services sector, and the Department is using that. I greatly welcome the expertise that that sector brings to ensuring not just a good justice system, but the right deal on Brexit in the future. My hon. Friend also mentioned intergovernmental Department contributions, and the importance of other Departments appreciating the significance of the legal sector. I assure him that I am already talking to my counterparts in the Department for Exiting the European Union and the Treasury to identify the importance of the legal services sector. Yesterday I gave evidence with a legally qualified Minister, the Under-Secretary of State for Exiting the European Union (Suella Fernandes), and having heard her give that evidence, I am confident that she is very much aware of the importance of our legal sector.

In conclusion, our overall message is simple: the UK is, and will continue to be, one of the pre-eminent legal centres in the world. We will continue to be a leading player, and I am determined to ensure that English law remains the law of choice, and that the UK continues to be the jurisdiction of choice.

I welcome the Minister’s positive remarks. On work within Government, can she assure us that maximum effort will be made to join up the work of the legal services working group, which exists within the Ministry of Justice, and the Brexit Law Committee, which reports to the Department for Business, Energy and Industrial Strategy? The profession is concerned that there should be no disjuncture between the two. It sounds as if the Minister and the Under-Secretary of State for Exiting the European Union have been talking, but it is important that that happens consistently at official and professional level.

That is a good point that I am happy to take forward. It has been helpful for me to air these points today, and once again I congratulate my hon. Friend on securing this important debate, and indeed all hon. Members on their contributions today.

Question put and agreed to.

Sitting suspended.