Closed Consultation

Summary

• 1.

  The Solicitors Regulation Authority (SRA) is the independent regulatory body of the Law Society of England and Wales. We protect the public by regulating law firms and individuals who provide legal services.

• 2.

  This consultation sets out how the SRA intends to approach revisions to the SRA Handbook of regulatory provisions to take account of overseas and international practice¹. It sets out specific proposals in two areas:

  • a new chapter of the Handbook , which pulls together the conduct provisions which apply when practising overseas; and
  • a new outcome in chapter 7 of the Code which will apply to individuals and firms practising in England and Wales but who are involved in overseas practice. This outcome is intended to mitigate the regulatory risks posed by the managerial and financial interdependencies which a SRA-regulated law firm in England and Wales might have with connected overseas offices and practices.

  ¹The distinction made in this paper is that 'overseas practice' takes place when the solicitor or SRA-regulated entity is established in another jurisdiction whereas 'international practice' takes place from a base in England.

• 3.

  The consultation also makes broad proposals about consequential changes that might be needed elsewhere in the Handbook in order to reflect and enable the approach to overseas conduct that we are proposing. In particular, we anticipate that substantial revisions will be needed to the Notes to the Principles, the application provisions and that we will need to amend or remove the references to overseas practice in each chapter of the Code as currently drafted. More detailed proposals will follow on these changes once we have considered stakeholder views on the broad approach proposed.

• 4.

  Finally, the consultation also draws attention to some other related work that will be dealt with separately.

• 5.

  The consultation will be live until 14 March 2013 and our goal remains to introduce any resulting changes to the Handbook by the end of 2013.

Purpose of consultation

• 6.

  The purpose of this consultation is to seek views on the proposed implementation of the SRA's intended approach to regulating overseas and international practice. In particular we are seeking views on proposed Handbook amendments which set out:

  • The requirements applying to SRA-regulated entities established in other jurisdictions.
  • The responsibilities of SRA-regulated entities in England and Wales in respect of overseas offices and any other practices which they may be 'connected to' in other jurisdictions.
  • The requirements that apply to individual solicitors and other authorised individuals when established in another jurisdiction.
  • The requirements that apply to authorised persons or SRA-regulated entities when providing services in another jurisdiction on a temporary basis.
  • The requirements that apply to authorised persons or SRA-regulated entities when providing crossborder services from England and Wales to other jurisdictions.

History

• 7.

  In preparing for the introduction of outcomes-focused regulation (OFR), the SRA had always acknowledged that the position on overseas practice set out in the first version of the Handbook would require further refinement. In November 2011 we published a Green Paper which put forward some ideas on how the SRA could implement its risk-based approach to the regulation of SRA-regulated entities overseas.

• 8.

  The Green Paper proposed an approach which reflected our recognition of the growth, both in number and complexity, of the operations of SRA-regulated entities in other jurisdictions, as well as our desire to understand better the regulatory risks arising as a result. In essence, we suggested an approach that would have required SRA-regulated entities in other jurisdictions to comply only with the Principles, disapplying the rest of the Handbook. We also suggested an approach that was intended to give us the ability to understand the risk posed by multi-jurisdictional operations to the business of an SRA-regulated entity, even if some of the overseas activity was not regulated by the SRA. Our Green Paper suggested that we might achieve this by applying the Principles 'group wide', regardless of whether separate legal businesses within the group of businesses connected to an SRA-regulated entity were themselves recognised or not.

• 9.

  The consultation period for our Green Paper concluded in February 2012 and it was clear from the responses we received that there was broad support for the idea that the SRA should be aligning its view of the business of a SRA-regulated entity with the way in which that SRA-regulated entity saw its business as a whole. However, there were concerns from those who would have been covered under this approach about how our proposed 'group approach' would work in practice; given, for example, the growth in use of Verein structures which are designed precisely to prevent the kind of cross-jurisdictional regulation we were proposing. There was support for the simplicity of adopting a Principles only approach to overseas practice, as this would help to reduce the likelihood of conflict between local and SRA rules. However, it was also pointed out by a number of consultees that some of the Principles had explicit linkages to the domestic outcomes and this might create some uncertainty about whether the outcomes might, nonetheless, apply. There were questions posed on how we would expect SRA-regulated entities to demonstrate compliance and what level of reporting we would be expecting. We were also asked to clarify the application of any proposed approach to individuals.

• 10.

  A number of respondents, whose primary concern is the protection of the consumer in England and Wales, were also supportive of the proportionate regulatory approach we were proposing for overseas practice. However, these particular stakeholders stressed the importance of the SRA ensuring that an SRA-regulated entity based overseas was not directing its services at the consumer market in England and Wales and using our overseas rules to circumvent certain provisions which would have applied to them if they were operating from a base in England and Wales.

What we considered

• 11.

  The Green Paper consultation was very useful in helping to clarify how we might refine our approach. Our conclusions from this exercise were:

  • We needed to find a mechanism other than the group approach proposed in the Green Paper in order to achieve the goal of understanding a firm's overall risk profile.
  • We needed to reflect the fact that overseas practice involves individuals as well as SRA-regulated entities and explain how we expected the Handbook to apply overseas to both.
  • We needed to reflect the fact that the application of the principles as originally proposed to a SRA-regulated entity overseas could have resulted in the application of some domestic outcomes for England and Wales to local lawyers practising in an SRA-regulated entity in their home jurisdiction (given the explicit linkage made between the principles and the outcomes in the 'notes to the principles' in the Handbook).
  • We needed to clarify the definition of 'practising overseas' to prevent circumstances arising in which a recognised body might establish itself in another jurisdiction in order to qualify for a lower level of SRA scrutiny but nonetheless predominantly be supplying services into England and Wales.
• 12.

  We undertook to consult again on more detailed proposals and we are now at the stage where this can happen. The broad outline of our detailed proposals and what we are seeking views on, are as follows:

  • i)

    We have drafted a new chapter of the Handbook for overseas practice which is intended to apply to SRA-regulated entities and individuals who are established in another jurisdiction. This is intended as a stand-alone set of provisions which would contain all of the SRA's requirements on conduct for solicitors and SRA-regulated entities overseas. We have attempted to strike a balance between providing the flexibility that is required to cover the multifarious circumstances in which SRA-regulated individuals and entities are established overseas, and providing sufficient detail and consumer protection to make the regime meaningful. Views on whether we have achieved this balance appropriately in our proposed wording and approach, as well as observations on the additional outcomes and indicative behaviours set out for overseas practice are invited.

  • ii)

    As the new chapter rests substantially on the application of the Principles alone, we recognise that the Notes to the Principles will have to be modified, or disapplied, for overseas practice. This consultation offers two options on how this might be done. Views on these options are invited.

  • iii)

    Instead of requiring compliance with the Principles by all overseas offices which are part of the business of an SRA-regulated entity, we will simply require some information about these offices which would be gathered as part of the annual information report. Secondly, we propose to clarify within Chapter 7 of the Code of Conduct (Management of your business) that entities with overseas offices are required to manage the risk of non-compliance posed by branch offices and other connected practices internationally. We feel that this would be a proportionate way in which to manage the regulatory risk posed by the fact that some international parts of an SRA-regulated entity's practice (such as a separate LLP practising wholly outside of England and Wales but owned by an SRA-regulated law firm) will not be subject to the overseas practice conduct provisions as an entity. Our proposal is to require the firm to manage risks to compliance across its whole business. We feel that this is a more proportionate means of achieving our regulatory aims than the approach encapsulated by the group proposals. We are consulting on the form of wording of this new outcome and related indicative behaviours, and invite your views.

  • iv)

    We want to clarify and modernise how we apply and disapply regulatory requirements depending upon whether a regulated person is practising in England and Wales or overseas. This would include revising certain definitions in the SRA Glossary upon which the current approach to application and disapplication relies. Our proposal is that the application of the rules will depend on whether a solicitor is flying into another jurisdiction to undertake work under the umbrella of an SRA-regulated law firm in England and Wales, or if he/she is permanently established in another jurisdiction or practising from a connected practice in another jurisdiction. We have set out in this consultation a proposed approach to revisions of the application provisions on which we would welcome comments.

  • v)

    We also believe that there is a strong argument for the retention of some references to practice in other jurisdictions in the 'domestic' chapters of the Handbook. This would allow us to clarify the rules applying to a regulated person when they are providing services in another jurisdiction on a temporary or fly in-fly out basis. Further explanation of why this distinction between different forms of overseas practice is necessary and how it could be achieved, are set out below. We believe that the introduction of this distinction in the Handbook, which has not previously existed, would be of benefit and that it is possible to differentiate clearly between established overseas practice and other forms of international practice, but it would be useful to know if others share our view.

• 13.

  The rest of this consultation sets out under sub-headings some additional context to the proposals on which we are consulting and flags up particular points on which we would be interested in obtaining views.

The New Overseas Chapter

• 14.

  The suggested wording of the proposed new chapter of the Handbook covering overseas practice is attached at Annex A. This sets out six outcomes which may be read as a stand-alone set of requirements for overseas practice. We did consider whether overseas practice should be governed by a different set of principles to domestic practice, or a single principle such as 'behaving in a proper and appropriate way'. However, we felt that the former approach would run the risk of reducing undermining the coherence of SRA regulation, whilst the latter approach may create uncertainty as to the extent to which the Principles apply. We felt strongly that the Principles, as set out in the Handbook, should represent the irreducible core of ethical behaviour that would be expected of any individual or body regulated by the SRA, wherever they were practising. This is therefore the starting point for the new overseas chapter and the requirement to comply with the Principles becomes outcome O(13.1).

• 15.

  However, we also recognise that SRA-regulated law firms that are established in other jurisdictions will have separate obligations under local law or regulation. Although the Principles are high level and it might on the face of it be difficult to see how practice based on using these as a guide could cause problems in other jurisdictions, we propose to provide clarity in case such circumstances arise. Outcome O(13.2) therefore allows authorised individuals and entities to take full account of local law and regulation in seeking to comply with the Principles.

• 16.

  One particular point on which we would welcome views is the proposed new outcome O(13.3). Our view is that the Principles should in practice only be set aside in order to comply with local law or regulation and then only to the extent necessary to avoid breaching local provisions. However, we are conscious of the risk of potentially complex debate about what the law of another jurisdiction requires and, an extreme scenario where a regime's local requirements would involve seriously improper conduct is at least theoretically possible. The intention of outcome O(13.3) is to provide a baseline of behaviour below which the behaviour of regulated persons should not fall. This is to avoid a situation in which an individual or entity regulated by the SRA seeks to rely upon the overseas outcome which permits the Principles to be set aside because of a clash with local legal requirements, but does so in order to continue to practise in a manner which is having a significant adverse impact upon public trust in the provision of legal services. Such a scenario would hopefully never arise, but the intention is that outcome O(13.3) would address such circumstances and make it clear that reliance on the law of another jurisdiction cannot be justified where conduct is clearly improper.

• 17.

  We feel that this additional outcome will serve as a reminder that the flexibility in the application of the Principles we are allowing overseas does have a limit. However, we invite views on this approach and in particular on the tests proposed. We feel that what is 'proper and appropriate' for a solicitor is a sensible test but would welcome views on whether alternatively the public trust principle (Principle 6) should apply at all times in overseas practice.

• 18.

  In a similar vein, we felt that we should set out our expectations that regulated persons practising overseas should seek to encourage equality and diversity wherever they are in the world, to the extent this is possible. In most cases this represents good business practice. We would however, be interested in views on whether an additional qualification, recognising the role of local culture, should also be reflected in Indicative Behaviour IB(13.1).

• 19.

  Outcome O(13.4) is intended to cover the obligations in relation to clients served from overseas offices. This replaces the current requirement to apply in full the outcomes of Chapter 3 (Conflict of Interest) and Chapter 4 (Confidentiality and disclosure) to overseas practice. However, in virtually every jurisdiction around the globe there is some requirement imposed on lawyers in both of these areas. Our shift from requiring the 'domestic' outcomes of these chapters to be met anywhere in the world where a solicitor or SRA-regulated law firm is practising, to a requirement that a client is informed of the framework under which they are purchasing legal services, represents a significant reduction in potential for the dual application of conflicting regulatory requirements. We are conscious, however, that even this minimal information requirement could, in certain circumstances, be something that certain clients regard as an unnecessary expense or annoyance. This outcome should therefore be read together with Indicative Behaviour IB(13.8), which makes this requirement non-mandatory for internationally sophisticated or local clients.

• 20.

  There are two further indicative behaviours relating to client relations that are included in this draft consultation: IB(13.3) on indemnity insurance and IB(13.2) on conflicts.

  • (i)

    As far as an indicative requirement on insurance is concerned, we invite views on whether or not this is necessary given that most firms maintain global insurance arrangements.

  • (ii)

    Our basic position is that solicitors should not act where there is a conflict or a risk of conflict between clients. We have resisted the temptation to go further in qualifying this statement or adding caveats, conscious that this is a complex area of legal regulation and that each jurisdiction has its own interpretation of what the above position means. We have therefore included this as an indicative behaviour, rather than an outcome in its own right. We consider this to provide guidance to the effect that, generally speaking, regulated persons should not act in a client conflict situation wherever they are based. However, it also provides some flexibility for firms to demonstrate, if required, that they have satisfied the Principles in light of local conditions and safeguards.

• 21.

  The remaining two outcomes in the new chapter, O(13.5) and O(13.6) relate to the running of the SRA-regulated entity overseas. Outcome O(13.5) imposes a requirement on the overseas body (and individuals in that body or in a branch office) to assist its related England and Wales practice to comply. This is the counterpart obligation to the new 'Management of your business' outcome set out below and is further reinforced by Indicative Behaviour IB(13.9). Outcome O(13.6) requires a SRA-regulated entity overseas to comply with Chapter 10 of the Handbook as far as they are able to do so, without breaching local law. Indicative Behaviours IB(13.5), IB(13.6), and IB(13.7) illustrate how the requirements would operate in practice.

• 22.

  We welcome comments on the conceptual approach of this new Chapter, set out at Annex A, as well as detailed observations and suggested alternative drafting for the new overseas Outcomes and Indicative Behaviours.

Amendments to the 'Notes to the Principles'

• 23.

  As the responses to the Green Paper consultation pointed out, any regulatory approach based on the application of the Principles alone would need to ensure that the 'domestic' outcomes would not, in effect, be reapplied by the back door through the Notes to the Principles. There are two ways in which we could achieve this goal:

  • (i)

    We could simply make it clear that the application of the Principles overseas does not include the Notes to the Principles contained in the Handbook. The advantage of this is that it is a very clear and simple approach. The disadvantages are that we would then lose some useful guidance and that there are certain 'domestic' outcomes which are implicitly applied directly through these notes (e.g. such as relations with Courts and judicial bodies in England and Wales, or land transactions in England and Wales) which should apply to any authorised individual or recognised body, regardless of the location from which they are working.

  • (ii)

    An alternative approach would be to include some qualifications to the Notes to cover overseas practice. This would be necessary for the Notes to Principles 1, 4, 7, 8 and 9 which all reference the 'domestic' outcomes. An example of how this might be achieved is included in Annex C. This further reinforces why we have chosen to include additional new outcomes and indicative behaviours in the new overseas chapter, as these replace any essential provisions that carry through from the Principles to the outcomes in the domestic code.

• 24.

  Consultees are asked to note that the introduction to the new conduct chapter on overseas practice does clarify that outcomes (other than those in the new chapter) do not apply when practising overseas.

• 25.

  We are interested in views on which of these two options respondents would prefer and why.

New Domestic Outcome relating to Connected Practices in Other Jurisdictions

• 26.

  The proposed new outcome covering the obligations of an SRA-regulated law firm in England and Wales in relation to its overseas business is set out in Annex B. The new outcome replaces our earlier proposal to apply the Principles across a law firm's 'group structure' and instead requires SRA-regulated law firms to 'identify, monitor and manage risks to your compliance with the requirements of the SRA Handbook' arising from overseas offices and connected practices.

• 27.

  This new outcome would apply to an SRA-regulated law firm that had a branch office or a 'connected practice(s)' in another jurisdiction. These 'connected practice(s)' might be other SRA-regulated law firms or entirely separate legal practices in which there were no solicitors but where there was a financial or managerial association or interdependence. This would not include membership of law firm networks or best friend relationships which are arms-length. We feel that this is a more proportionate means of achieving the regulatory aims set out in the group proposals than applying SRA-regulatory provisions to a wider category of entities.

• 28.

  We have not yet defined in detail what reporting and notification requirements might be associated with this outcome but these would most likely be in the form of a single annual return made by the SRA-regulated entity in England and Wales, simply setting out some basic information on the structure of its entire group of 'connected practices'. The SRA's interest in so-called 'connected practices' is not in the minutiae of how those entities, which may be entirely separate law practices, are run; but rather in the risk that their operations might pose to the business of the firm in England and Wales.

• 29.

  Similarly, we feel we can simplify the requirements of the reporting that might be required of a connected group of SRA-regulated entities (i.e. those to whom the overseas chapter applies). In this case it may make sense for a single return to be made on behalf of all overseas regulated entities by the practice in England and Wales. The new outcome O(13.5) would assist both the SRA and the responsible SRA-regulated entity in making this possible. We would not expect to go into this level of detail in any rule changes but this is an indicator of our intention to keep any reporting or notification requirements to the essential minimum for overseas practices.

• 30.

  We would be interested, in particular, in views on our proposed definition of 'connected practices' set out in Annex B.

Our Proposed Approach on Application Provisions

• 31.

  As the discussion above illustrates, there are a number of glossary changes that we will need to make to existing terms or new terms that we will need to define. The most important of these are probably 'overseas practice' and 'practice from..'.

Making use of WTO terminology

• 32.

  One approach would be to draw on the World Trade Organisation (WTO) definitions of how services, such as legal services, may be delivered. In the WTO, four modes of trade in services are defined, which can be applied to legal services as follows:

  • (i)

    Mode 1 – in which a service is provided across borders, in other words by a solicitor or from a SRA-regulated entity based in England and Wales to a client in another jurisdiction.

  • (ii)

    Mode 2 – in which a client from another jurisdiction visits England and Wales to purchase a legal service.

  • (iii)

    Mode 3 – in which a SRA-regulated entity from England and Wales establishes in another jurisdiction.

  • (iv)

    Mode 4 – in which an individual solicitor crosses borders to deliver a legal service in another jurisdiction, either on a permanent 'established' basis or on a temporary basis.

• 33.

  It is clear that in mode 2 circumstances, the SRA Handbook would always apply.

• 34.

  Our view is that the new chapter would apply in circumstances of permanent establishment, which is Mode 3 practice in the case of entities and Mode 4 in the case of individuals. Establishment is clearly easier to determine for an entity rather than for an individual, since even if formal licensing requirements are not required for the establishment of an authorised body in another jurisdiction, some other registration requirements (e.g. company registration) are highly likely.

• 35.

  Individual solicitors moving to practise in other jurisdictions may or may not be required to obtain a licence of some sort to practise locally and, if so, this might be one indicator of establishment. But a simpler definition might be to take the solicitor's place of establishment as the practising address nominated in the annual renewal exercise, unless the SRA has been notified of a change. There are obviously some more complex examples where further qualification may be needed, such as, the senior practitioner with practising responsibilities both in England and Wales and in another jurisdiction, or the solicitor who is seconded for a short time to a client or office in another jurisdiction, or the solicitor from the same firm who is normally based in England and Wales but who has flown to another office to undertake client work.

• 36.

  In seeking to define the appropriate application of the new overseas chapter to individuals, we are minded to adopt an approach which applies it in circumstances in which there is a recognised body in another jurisdiction which is taking responsibility for the practice of these individuals. In other words, the overseas chapter could apply in the following circumstances:

  • (i)

    Your registered practising address with the SRA is in another jurisdiction; or

  • (ii)

    You are physically 'practising in' a 'connected' body in another jurisdiction, regardless of the length of time you have spent there, or you are 'practising from' a 'connected' body in another jurisdiction into a third jurisdiction other than England and Wales.

• 37.

  There is one very important, if rare, circumstance in which we might not permit the overseas chapter to apply to a SRA-regulated entity. This could arise if a SRA-regulated entity was established, but not regulated locally, in another jurisdiction and the business of this body principally involved the supply of legal services to the public from that jurisdiction into England and Wales. In these circumstances it is entirely appropriate that the full domestic provisions of the Handbook should apply.

Current approach to applying provisions overseas

• 38.

  Depending upon the extent to which our approach to application is revised, existing glossary definitions and the constructions currently used to apply or disapply rules would still benefit from substantial review. Currently, the way in which the SRA Code of Conduct is applied to lawyers and firms practising overseas is very complicated. Our hope is that, however we proceed in respect of application, a simplified and Principles focused chapter on overseas practice will allow for greater simplicity in how the Code is applied overseas.

• 39.

  For example, the Code of Conduct is currently only applied to the overseas branch offices of a law firm of England and Wales if the majority of the managers are solicitors of England and Wales (broadly speaking). This was to avoid a scenario where comparatively prescriptive provisions are applied to the whole of a law firm which is primarily based overseas. However, it makes the application provisions difficult to apply in practice and applies differing levels of regulation in a manner which is not risk-based. We would welcome your views on whether the proposals made in respect of the new overseas conduct chapter would allow for wider application of the overseas chapter to overseas offices, while remaining proportionate to the risks posed.

• 40.

  Another complexity in respect of the existing application of the Code of Conduct is how it applies to managers (i.e. partners in a partnership, members in an LLP and directors in a company). Currently, a manager of a law firm of England and Wales is deemed to be practising in England and Wales (even if he or she, or the firm if it is a corporate manager, is based wholly overseas) and therefore responsible for the overall compliance with regulatory requirements by the firm. While we consider that the principle of managers taking responsibility collectively for compliance by the firm is correct, the means of achieving this is currently very convoluted. We propose that the application of the domestic aspects of the Code of Conduct to managers overseas be simplified and greater clarity be provided in the Code as to what domestic provisions apply to a manager of a firm based overseas. In particular, we are considering whether:

  • an outcome in chapter 13 should be created which specifically applies the obligations in 8.1(a) (to ensure compliance in the law firm generally) to managers and owners of firms, even if practising overseas; or
  • if the draft new outcome 13.5 would be sufficient for this purpose.
• 41.

  While we feel strongly that managers should continue to take responsibility for firm wide compliance wherever they are based, we welcome views on this issue generally as well as our proposals for increasing clarity and simplicity in how this is achieved.

• 42.

  Finally, we also need to review the application of the Code of Conduct as it applies to Registered European Lawyers (RELs) and Registered Foreign Lawyers (RFLs) as this will vary depending upon whether they are based in England and Wales, or in another UK jurisdiction, or outside of the UK. We will address this in our review of the application provisions, however, some degree of complexity will inevitably remain.

• 43.

  Once we have finalised our overseas conduct chapter, set the context for overseas regulation in the future and gathered stakeholder views, we will seek views on our more detailed proposals to reform the application provisions. In the meantime, your views on the approach described above are invited.

Other consequential changes in the 'domestic' code

• 44.

  There are obviously changes that will need to be made in the domestic code to ensure that any references to 'overseas practice' are removed in order to avoid confusion with the new Chapter.

• 45.

  However, we do think there is an argument for retaining some international references in the other 'domestic' chapters of the Handbook in order to cover cross-border (mode 1) and temporary practice (mode 4 – temporary, or fly-in fly-out practice). This would deal with circumstances in which a solicitor is conducting work in another jurisdiction from England and Wales, but without the cover of an established office in another jurisdiction. The need to set out a separate set of rules for this purpose would be to deal with the fact that solicitors working in mode 4 on a temporary basis should be aware of and comply with local law and regulation in the jurisdiction into which they have flown. Indeed in some jurisdictions, notably in the US, foreign lawyers are required to register even for temporary practice. Currently, the SRA Handbook only contains specific rules governing temporary and crossborder European practice, which are contained in the section on Specialist services. These will continue to apply. We could however deal with the need to clarify the rules being followed by solicitors working in this way in non-EU or EEA jurisdictions, by amending the overseas application referred to in each domestic chapter to 'temporary practice overseas'.

• 46.

  There is only one circumstance in which we would see any need to modify the application of the domestic chapter in relation to cross-border (mode 1) practice. This would be to ensure that Outcome O(8.1), which is currently applied to 'overseas practice', would apply to 'cross-border practice'. O(8.1) requires that 'publicity intended for a jurisdiction outside England and Wales must comply with any applicable law or rules regarding lawyers' publicity in the jurisdiction…for which the publicity is intended'.

• 47.

  At first sight this overall approach, drawing on WTO definitions, might appear complex, but it would simply require the definition of three modes of practice in the glossary:

  • Overseas practice (i.e. establishment, dealt with above)
  • Temporary practice – which could, for example, be defined as a physical practising presence in another jurisdiction on the basis only of a practising address in England and Wales
  • Cross-border practice which could, for example, be defined as practice directed at another jurisdiction from a practising address in England and Wales.
• 48.

  Overseas practice would obviously be covered by the new chapter. Any nuances which might be needed to reflect the demands of temporary and cross-border practice would be dealt with in the domestic code because the individuals and entities covered in these circumstances would be substantially practising in England and Wales.

• 49.

  We recognise this is a new idea but we feel it is worth further thought as it deals with growing forms of international practice which are not currently dealt with by the SRA Handbook. We would welcome views on the concept as well as the definition of the terms.

Other Issues

• 50.

  There are some Handbook issues which impact on overseas practice but which are not covered in this consultation. We nonetheless think that it is useful to flag that we are intending to deal with these:

  • We are aware that there is scope for amendments to the overseas application of the SRA Accounts Rules in order to bring them into line with our risk based approach to regulation. This will figure in our future work plans.
  • The SRA is currently undertaking a root and branch review of the compensation fund and as part of this separate review we will address the application of the compensation fund rules to practice by solicitors in other jurisdictions. Nonetheless, any observations on those rules, which respondents wish to make at this stage and in the context of this overseas practice consultation, will be useful for the wider exercise.
  • We have already flagged earlier in this consultation our intention to address the application provisions. Any changes will clearly need to read across to the Practice Framework Rules.
• 51.

  If there are other Handbook issues which respondents feel that we should address beyond those outlined above, then we would welcome suggestions.

Next steps

• 52.

  We would welcome views on any aspect of this consultation and particularly on the specific drafting amendments proposed. How to respond.

Annex A: Draft new chapter for Code of Conduct

Chapter 13 – Overseas practice

This chapter applies to overseas practice and does not apply to your practice in England and Wales. The SRA primarily regulates the provision of legal services by solicitors, firms and other regulated persons in England and Wales. However, the SRA does expect and require you to behave in a way which is proper and appropriate for a person authorised by the SRA, wherever services are provided. A failure to do so may result in the SRA taking regulatory action. Such action may include limiting or removing your right to practice as an individual or entity regulated by the SRA.

When practising overseas you are not required to achieve the outcomes set out in other chapters of the SRA Code of Conduct. In many circumstances, however, the outcomes set out in the other chapters will be indicative of the standard of behaviour expected.

Outcomes

When practising overseas, you must achieve these outcomes:

• O(13.1)

  subject to Outcome 13.2, you comply with the Principles;

• O(13.2)

  if compliance with the Principles would give rise to a breach of local law or regulations, you comply with the Principles to the fullest extent possible without breaching local law or regulations;

• O(13.3)

  you behave in a way which is proper and appropriate for a person authorised by the SRA to provide legal services;

• O(13.4)

  clients are aware:

  • who regulates the legal services being provided;
  • the client protections which are in place in relation to the services being provided;
  • the insurance or other indemnity in relation to professional liabilities which is available for the benefit of the client; and
  • how confidentiality will be maintained by you;
• O(13.5)

  you do not cause, contribute to or facilitate a failure to comply with the SRA's regulatory arrangements by persons practising in England and Wales;

• O(13.6)

  you comply with chapter 10 of the SRA Code of Conduct (you and your regulator) to the fullest extent possible without breaching local law or regulations.

Indicative behaviours

Acting in the following way(s) may tend to show that you have achieved these outcomes.

• IB(13.1)

  running your business or carrying out your role in the business in a way that encourages equality of opportunity and respect for diversity to the extent permitted by local law or regulations;

• IB(13.2)

  not acting if there is a client conflict, or a significant risk of a client conflict;

• IB(13.3)

  ensuring clients have the benefit of insurance or other indemnity in relation to professional liabilities which takes account of:

  • a) the nature and extent of the risks you incur in your overseas practice;
  • b) the local conditions in the jurisdiction in which you are practising; and
  • c) the terms upon which insurance is available;
• IB(13.4)

  if you are an employee of a firm, a manager of an authorised body or a sole practitioner, providing information to your firm to allow them to meet the reporting and notification requirements in the SRA Handbook;

• IB(13.5)

  notifying the SRA if you are convicted of a criminal offence or become subject to disciplinary action overseas;

• IB(13.6)

  if you are an employee of a firm, a manager of an authorised body or a sole practitioner, informing the SRA immediately if you believe that your firm is in serious financial difficulty;

• IB(13.7)

  providing the SRA with documents held by you and any necessary permissions to access information as soon as possible following a notice from the SRA to do so;

Acting in the following way(s) may tend to show that you have not achieved these outcomes.

• IB(13.8)

  failing to explain to a client, who is not a sophisticated user of legal services internationally or in the local jurisdiction, how the legal services you provide are regulated locally or what other protections are available to them;

• IB(13.9)

  entering into an arrangement which restricts your ability to provide information to the SRA.

Annex B: Draft addition to Chapter 7 of Code of Conduct

New Indicative Behaviour for Chapter 7 (Management of your business)

• O(7.11)

  you identify, monitor and manage risks to your compliance with the requirements of the SRA Handbook which may arise in connection with your overseas offices and connected practices.

• IB(7.4)

  you maintain systems and controls for monitoring the financial stability of your overseas offices and connected practices and managing the risks posed by any financial inter-dependence which exists.

Glossary additions:

'connected practice' means a legal practice outside England and Wales which:

• is a parent undertaking of your firm;
• is a subsidiary undertaking of your firm;
• is managed on a joint basis with your firm; or
• is subject to some level of managerial, operational or strategic control by you.

'parent undertaking' has the meaning given in section 420 of the Financial Services and Markets Act 2000;

'subsidiary undertaking' has the meaning given in section 420 of the Financial Services and Markets Act 2000;

Annex C: Example of possible amendments to the Notes to the Principles to take account of overseas practice

The following suggests possible amendments for the Notes to the Principles that could be applied to international practice, the principles not covered here have notes that do not reference the 'domestic' outcomes and which can therefore stand alone.

Principle 1: You must uphold the rule of law and the proper administration of justice.

Your obligations to the courts of England and Wales apply regardless of where you practise and the key aspect of Chapter 5 of the Code, that you have an overriding duty to the public interest and the proper administration of justice, should be interpreted as applying equally to any other jurisdiction.

Your obligations in relation to third parties, set out in Chapter 11 of the Code, only apply if you act for a client in relation to the purchase or sale of land in England and Wales O(11.3).

Principle 4: You must act in the best interests of your client

The reference to Chapters 3 and 4 of the Code (Conflicts of Interest and Confidentiality and Disclosure) in this note is replaced for overseas practice by O(13.4).

Principle 7: You must comply with your legal and regulatory obligations and deal with your regulators and ombudsmen in an open, timely and co-operative manner

The reference to Chapter 10 of the Code (You and your regulator) in this note does apply to overseas practice subject to the qualifications in O(13.6).

Principle 8: You must run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles

The note relating to principle 8 and its reference to the outcomes set out in Chapter 7 of the Code (Management of your business) do not apply to overseas practice.

Principle 9: You must run your business or carry out your role in the business in a way that encourages equality of opportunity and respect for diversity

The note relating to principle 9 and its reference to Chapter 2 of the Code (Your clients and equality and diversity) do not apply to overseas practice.