The Economic Crime and Corporate Transparency Bill now going through parliament has provoked a response from the Law Society, principally around the provisions regarding the additional fining powers given to the SRA.
It proposes that the statutory fining limit for the SRA be removed, allowing it to set its own limits on financial penalties imposed for economic crime disciplinary matters. Among other criticisms, the Society points out that the new fining regime will include many more serious or significant cases that currently go before the Solicitors Disciplinary Tribunal, and should continue to go there.
The capacious bill has many other provisions, such as to broaden the powers of Companies House to make it a more active gatekeeper over company creation and a custodian of more reliable company data.
However, there is one provision regarding solicitors which has been described but not much commented on. That is Section 155, which proposes to add a new regulatory objective to the Legal Services Act 2007, to govern lawyer regulation.
As a reminder, the current regulatory objectives are:
(a) protecting and promoting the public interest;
(b) supporting the constitutional principle of the rule of law;
(c) improving access to justice;
(d) protecting and promoting the interests of consumers;
(e) promoting competition in the provision of services within subsection (2);
(f) encouraging an independent, strong, diverse and effective legal profession;
(g) increasing public understanding of the citizen’s legal rights and duties;
(h) promoting and maintaining adherence to the professional principles.
The Bill proposes that, after (h), the following should be inserted:
(i) promoting the prevention and detection of economic crime.
Can you spot the difference? All the others are general public interest objectives, widely accepted to be appropriate to overall regulation of the legal profession, while the new provision deals with specific areas of legal practice and a specific crime. It stands out by a mile. (By the way, if you are wondering what it means, ‘economic crime’ has the meaning given by Section 153(1) of the Economic Crime and Corporate Transparency Act 2022.)
I have various objections to this proposed new objective.
First, if we are to have specifics in the regulatory objectives, rather than broader public interest objectives, then why is economic crime picked out? Why not all crime? Why not murder? Is economic crime the worst crime in the world, so much worse than genocide, murder, rape (or whatever) that it deserves special mention in the regulatory objectives? I don’t think so.
Second, if the word ‘economic’ were deleted from the new regulatory objective, its inappropriateness would immediately be obvious: ‘promoting the prevention and detection of crime’. Everyone would immediately agree that that is not the role of solicitors – it is the role of the police. Putting ‘economic’ before ‘crime’ does not change anything in that respect.
Third, once specifics not related to the overall public interest objectives of the legal profession are included, then presumably anything can be substituted for ‘economic crime’ and added to the list at the whim of future governments: promoting the prevention and detection of activities that damage the climate, promoting the prevention and detection of tax avoidance, promoting the prevention and detection of activities that assist illegal immigrants. Why stop at economic crime?
It is for this reason that I believe this new addition to the regulatory objectives should be resisted. It has nothing to do with the widely accepted public interest objectives of the legal profession, and is an attempt to advance specific government policy through regulatory manipulation.
Indeed, it is only happening because of government failure. Decades of legislation, increasing burdens on the legal profession at each turn, have failed to stop the problem of economic crime.
We have known that for years about the well-known investments by corrupt money in the London property market, which continued regardless of economic crime legislation. There have been endless reports, from respected thinktanks and from parliament itself, highlighting such failures. Still no legislation has stopped it.
It took the Russian invasion of Ukraine for the government to take action against individuals who had been linked to allegations of corruption and some of their family members. Until 2022, some had enjoyed high-level social and political access. Our current framework does not work, but the government has not learned the lessons. It just thinks that the framework needs to be applied more harshly. No – please stop digging. Think of a new way.
The new regulatory objective will change nothing, but it will corrupt the current objectives by being tainted by political manipulation. I believe it needs to be resisted for that and other reasons.
Jonathan Goldsmith is Law Society Council member for EU & International, chair of the Law Society’s Policy & Regulatory Affairs Committee and a member of its board. All views expressed are personal and are not made in his capacity as a Law Society Council member, nor on behalf of the Law Society
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