Does the domestic deregulation of legal services currently being shepherded into place by the SRA (for instance, the present professional indemnity insurance (PII) consultation) and by the LSB (its approach in general) help or hinder the UK legal profession in its future trade negotiations?
As we know, the UK is one of the most successful exporters of legal services. We also know that we are entering a new world where we will have to hold an excellent negotiating hand. The old trading rules are being thrown out, to be replaced by bilateral bartering on tariffs and other barriers.
Clearly, the law constitutes a service and not a good – and so nearly all the trade rhetoric we have heard so far, whether on the customs union in our Brexit negotiations or the trade war threats in Trump tweets and bluster, have nothing to do with our sector. There has been practically no talk of services.
In our sector, tariffs are not the issue, but rather regulatory barriers. Nearly all countries have regulatory barriers of some sort to prevent foreign lawyers from practising in their jurisdiction. We in the UK have among the lowest in the world – essentially just the reserved activities are forbidden to foreign lawyers – but others have all sorts. For instance, in some countries only those qualified locally can undertake any sort of practice, or no local lawyers can be employed in the firm, or the vehicle for practice must be in a joint venture with a local firm – or whatever.
I have written before about what is likely to happen to our sector in the Brexit negotiations. In brief, our dream of having the same practice rights as we have now in the EU is unlikely to come about, mainly because the talks, stalled for months, are unlikely ever to reach that sort of detail in time before the agreement is signed. Instead, it is probable that there will be a similar clause to the one that exists in some free trade agreements (FTAs), which sets up a body to recognise the deals arrived at by professional organisations after the FTA is signed. Any deal may be years away.
The European markets are, in any case, not so much of a worry in the short term. Fly-in fly-out (or the temporary provision of services across borders) is permitted by the EU directives but forbidden by a number of EU countries to third country practitioners. But fly-in fly-out is recognised everywhere as essentially unregulatable, and so may continue under the radar whether it is formally permitted or not post-Brexit.
As for permanent establishment under home title, which is also permitted under the EU directives, most solicitors and law firms will have made their arrangements in the last couple of years. The solicitors have had ample opportunity to acquire whatever other EU nationality they are entitled to, whether of the country where they are established or another, and also to integrate into the host title, which is rather easy under the EU directives. Those who have taken this action will not be personally affected by Brexit.
It is future generations which will find it more difficult, when the current bunch of solicitors have moved on. Future solicitors will have to rely on whatever bilateral agreement will eventually be hammered out between European and UK lawyers. It is here that current deregulatory moves may have an impact.
As for the broader, Trump-shattered global trading system, we will be on our own in negotiating access to various markets. Ours are already wide open, as explained above.
Regulatory differences are obviously an issue in tough trade talks. For instance, alternative business structures are not welcome in most jurisdictions, and so will find it impossible to cross borders into those countries. Even solicitors who do not have a law degree have faced obstacles in the United States in the past because their route to qualification has been considered insufficiently rigorous for the US market. In this way, our own domestic regulation is used as an excuse to keep our solicitors out.
It is for this reason that our own regulators should be very careful about their gleeful rush to deregulation. It may go down well domestically here, with successive governments cheering them on. But not all countries have the same attitude towards the deregulation of lawyers. In fact, outside the European Commission and Australia, it is difficult to find any allies for our domestic approach.
The more we deregulate – for instance, the lowering of the PII limits, which is the current issue – the more those we negotiate with will find sticks to beat us with. Or, to put it the other way around, high regulatory standards give other negotiators less to complain about in our request to access their markets.
Does anyone at the SRA or LSB care?