Professional indemnity insurance (PII) premiums for the top 100 law firms look likely to remain flat for 2009/10 despite a slight increase in claims, insurance broker Marsh said today. Insurance bills for small firms, however, are likely to rise significantly. Marsh, which claims it brokes PII for 34% of the top 100 firms, estimated that premiums could rise by up to 5% in some cases, but that most big firms would pay the same rates as last year. Though Marsh does not as a rule insure firms of four partners or less, said Andrew Jackson, managing director in Marsh’s UK PI practice, insurers will increase premiums drastically for small firms because insurers made heavy losses last year. However, he said these increases might help the market overall. ‘It’s possible that as those [premium] rates increase, other people will want to make a profit, so new insurers could enter the market,’ he said. Sandra Neilson-Moore, European practice leader for law firms’ PI at Marsh, agreed that intense competition for larger firms’ business meant that insurers would not generally increase premiums for those firms. Jackson said insurers are asking for more information – such as in detailed questionnaires – than ever and that many were considering moving away from insuring conveyancing firms.
Insurers are beginning to challenge solicitors over the terms of their professional indemnity insurance (PII) policies amid early signs that the profession is facing a wave of negligence claims. Some 82% of major insurers predict that the number of claims on solicitors’ PII policies this year will be higher than the 2008/09 indemnity period, according to a survey of 11 insurers by insurance broker Ntegrity Insurance Solutions. Just under two-thirds predicted that the total value of these claims will increase compared with 2009. Frank Maher, partner at Liverpool risk management and professional indemnity firm Legal Risk, said that PII insurers faced with a surge in claims are beginning to dispute the terms and conditions of PII policies. He said that insurers have recently started trying to deny cover by establishing that a sham partnership exists. Maher also said that several large firms are experiencing significant increases in claims, some being driven by the economic climate. None of the insurers polled by Ntegrity expected PII premiums to fall during the 2010 renewals season, with 85% forecasting premium rises. In the indemnity year 2009/10, the cost of insuring the profession was £241m – a £15m rise on 2008/09. Gary Horswell, managing director of Ntegrity, said: ‘This picture will be a worry to solicitors already being tested by the business climate. If it transpires that claims volumes and costs increase in the way anticipated, it will have a fairly immediate impact on premiums as insurers are no longer able to rely on historic levels of investment income to balance the books. Claims will have to be covered by premiums.’ Some 18% of insurers polled by Ntegrity expected that the number of claims on solicitors’ PII policies will increase substantially, while 64% predicted a small increase in claims.
I was astonished to read the comments of Sadiq Khan MP, shadow justice secretary, in which he described the government’s proposed legal aid cuts as ‘irresponsible and inequitable’. I have no recollection of Mr Khan expressing his concerns about the cuts introduced by his own party, when in power, which decimated the legal aid system. As a struggling legal aid solicitor I welcome all genuine support in the fight against cuts, but Mr Khan’s support is unwelcome and his arrant hypocrisy should not be allowed to pass without comment. Dan O’Callaghan, Solicitor-advocate, London
There was fuss and nonsense in the press recently about the growing number of solicitors. One article compared the number of lawyers unfavourably with that of police officers. But growth in the number of lawyers is not a UK phenomenon alone, and has many reasons. In order to tease them out, and on the basis that comparison leads to knowledge, I think it is useful to contrast our position with another liberal profession similar to ours, and see how we have fared, and why. Here follows an extended riff – not an academic treatise – on some of our similarities and differences with doctors. I shall use three propositions and examine their consequences. This may seem obvious, but has led to a very different movement of the two professions across borders. Following the boom in the number of EU lawyers, the UK and other European countries have been very successful in exporting legal services around the world. It is curious that lawyers are exporters. People are always surprised at the extent of the export, because they say: ‘But the law is different in every country. How can a lawyer be exported?’ Our sophisticated societies have created legal persons in addition to natural persons. These legal persons, which have grown into mega-giants striding the planet, are – despite their roaring and gobbling – curiously timid and conservative, and prefer to have with them their own lawyers when they travel. Out of that arises the boom in legal exports. It also causes one of the profound differences between the modern fate of lawyers and doctors. Lawyers follow their clients across borders, and doctors – apart from those, say, to a handful of Hollywood stars or ageing dictators – do not follow their patients. It is bizarre, because my legal needs are different once I cross to Calais, whereas my body stays the same. It becomes more understandable, although not fully so, when you realise that few lawyers follow clients who are individuals, but many follow clients which are companies. Proposition 2: Companies need lawyers, but not doctors The number of solicitors has tripled over the last 30 years. As already indicated, this is a Europe-wide experience, with every bar reporting an enormous increase over recent decades. It is a particular problem for small bars in tiny countries where they are not able to cope easily with the growth. There are now around one million lawyers in Europe. On the other hand, there are two million European doctors. Their figures are not going up very robustly. This is largely as a result of cost-containment measures during the 1980s and 1990s which reduced the number of new doctors by limiting medical school intakes. From 1990 to 2005, the annual number of medical students graduating declined in France, Germany, Italy, and Spain, which are among the largest EU member states. The European Commission estimates that the gap in supply of human resources in health by 2020 will be about 1,000,000 health workers, of which 230,000 will be doctors. Many countries will have to rely increasingly on foreign-trained doctors as the baby-boom generation of doctors retires from the profession. These countries are sucking in qualified doctors, first from the central and eastern European member states, and then from outside the EU. This is a social problem for exporting countries, because they see no return on expensive medical training. It is also a different movement to that of lawyers, since lawyers from the richer countries are going to richer and poorer countries alike to provide legal services. Proposition 1: It is cheaper to train lawyers than doctors Within Europe, the process of crossing borders is different for the two professions. Lawyers are able to cross EU borders very easily as a result of our own directives. I can temporarily cross a border and appear in another member state’s court without notifying the local bar at all. I can establish myself in another member state very simply by registering with the bar, and can then obtain that state’s legal qualification after three years. English law firms have been successful in taking advantage of these laws, and you will find them established in many member states. Doctors are much more nervous. For the provision of temporary services across borders, for instance, a doctor has to lodge a declaration in advance with the competent authorities and also a pro forma registration with the local professional body. Doctors are currently dealing with the difficult issues thrown up by the case of Dr Urbani, the German doctor whose negligence caused the death of a UK patient. The European system – for doctors and lawyers – does not allow language tests for professionals coming from another member state, other than indirectly through oral examinations in substantive topics, but questions are now being asked about languages within the medical profession. Further propositions could be developed, too. There have doubtless been changing social and economic needs for doctors, but the growth in lawyers has been able to be absorbed because of the change in the UK’s – and the EU’s – economy from one of manufacturing to one of services. Manufacturing needs walls to protect goods; services need lawyers to write and monitor contracts which have the same effect as virtual walls. Then the growth in social protections – for instance, in the field of employment and immigration – has led to the need for lawyers in new areas. Where does the comparison leave us? We all know that doctors and lawyers are different. So what? Maybe one should not devote energy to combat ill-informed conclusions about the legal profession in the tabloid press. But there are complex and good reasons why the number of lawyers has grown, leading to the UK being an important exporter of legal services. Comparison with the medical profession is a way of highlighting how our profession has taken advantage of a changing environment. Proposition 3: Lawyers’ advice and activities cannot kill their clients Jonathan Goldsmith is secretary general of the Council of Bars and Law Societies of Europe, which represents about one million European lawyers through its member bars and law societies. He blogs weekly for the Gazette on European affairs
lFA (Iraq) v Secretary of State for the Home Department: SC (Lord Phillips (president), Lord Hope (deputy president), Justices of the Supreme Court Lord Brown, Lord Kerr, Lord Dyson): 25 May 2011 The claimant was an Iraqi national who arrived in the UK in August 2007. He was aged 15 and was unaccompanied. He applied for asylum. In October, the defendant secretary of state refused the application, finding that the evidence that the claimant supplied in support of his application was not credible. The secretary of state went on to consider whether the claimant qualified for humanitarian protection and/or discretionary leave to remain in the UK. In that context, humanitarian protection was the domestic means of providing ‘subsidiary protection’ to certain third country nationals or stateless persons as required by Council Directive (EC) 2004/83 (on minimum standards for the qualification and status of third country nationals or stateless persons as refugees or as persons who otherwise need international protection and the content of the protection granted) (the Qualification Directive). It was decided that the claimant did not qualify for such humanitarian protection but he was granted discretionary leave to remain until he reached 17 years and six months of age. The claimant appealed against the refusal of his asylum claim. He alleged that his rights under articles 2, 3 and 5 of the European Convention on Human Rights would be contravened if he were removed to Iraq and that he might suffer serious harm as defined in the Qualification Directive. The appeal was dismissed on both asylum and humanitarian protection grounds. The claimant applied for a reconsideration of his appeal. The senior immigration judge ordered that there would not be a reconsideration of his appeal on asylum grounds, but that reconsideration would be given to the issue of whether there would be a ‘serious and individual threat to his life by reason of indiscriminate violence during internal armed conflict’ under the Qualification Directive and paragraph 339 of the Immigration Rules (HC395) (the Rules). Paragraph 339 of the rules incorporated into domestic law the subsidiary protection provisions of the Qualification Directive. The asylum and immigration tribunal held that the original appeal should have been confined to the refusal of the asylum claim as no appeal had been available to the claimant in relation to human rights claims or humanitarian protection grounds under section 83 of the Nationality, Immigrations and Asylum Act 2002. Consequently, the tribunal substituted the original decision with a dismissal of the appeal on asylum grounds only. The claimant appealed the decision of the tribunal. The claimant’s appeal involved issues of construction of sections 82 to 84 of the 2002 act and the question of whether the decision of the tribunal had deprived him of an effective judicial remedy against an adverse act of the administration contrary to general principles of EU law. He further submitted that the principle of equivalence required that claims based on EU law should not be subject to rules that were less favourable than those based on claims which had national law as their source. The Court of Appeal accepted that the principle of equivalence required that a right of appeal against the humanitarian protection decision be recognised since the lack of an appeal would mean that the claim, based as it was on EU law, had been subjected to rules which were less favourable than those which applied to the asylum claim, where that claim was based on national law. It held that section 113(1) of the 2002 act, which provided that ‘asylum claim’ meant ‘a claim made by a person that to remove him from or require him to leave the UK would breach the UK’s obligations under the Refugee Convention’ would have to have the words ‘and/or Qualification Directive’ added to it. A similar addition to section 84(3) was also required so as to enlarge the grounds on which the appeal might be brought. The secretary of state appealed. The issue to be determined was whether the equivalence principle required that a right to appeal had to be available against the decision to dismiss the claimant’s application for humanitarian protection. That depended upon whether the claimant could demonstrate that there was a comparable domestic right, namely his asylum claim, which was subject to more favourable rules than was his humanitarian protection right. The secretary of state submitted that there was no purely domestic measure against which a comparison of the rules applicable to claims for humanitarian protection could be made and that such claims had far closer similarities to those that were made under the Human Rights Act 1998. She further submitted that the mooted comparators, the asylum claim and the humanitarian protection claims, both had their origin in Chapter VII of the Qualification Directive. Therefore, as both were rooted in EU law and not from different sources, and since that was the essential requirement for the activation of the equivalence principle, it could not be prayed in aid in the instant case. The court ruled that a number of issues had arisen in the instant proceedings that required a preliminary ruling by the Court of Justice of the European Union under article 267 of the Treaty on the Functioning of the European Union. Questions, once formulated, would accordingly be submitted (see  of the judgment). Raza Husain QC, Takis Tridimas and Nick Armstrong (instructed by Immigration Advisory Service) for the claimant; Tim Eicke QC and Alan Payne (instructed by the Treasury Solicitor) for the secretary of state. Asylum – Humanitarian protection grounds – Equivalency principle
The advice ‘never believe everything you read in the papers’ was as true as ever recently when it came to what used to be called Fleet Street’s powers of prediction of the contents of the chancellor’s autumn statement. In particular, what the press, in the context of property transactions, still quaintly refers to as stamp duty – more correctly stamp duty land tax (SDLT) – received lavish front page coverage in a number of newspapers. There would be a ‘crackdown’ on ‘loopholes’ with the confident anticipation being that there would be an imposition of a charge to SDLT on the sale of shares in companies whose sole or main assets are real property. Instead, the autumn statement and the consequential draft legislation published on 6 December produced: the withdrawal of first-time buyer’s relief; some enabling legislation for the SDLT disclosure of tax avoidance schemes regime and some changes to the NHS bodies which can acquire property interests without a charge to SDLT. It is hardly the stuff to quicken the pulse. So, lapsing into newspaper speak, Oligarchs (or, indeed, anyone else with the requisite financial resources) can still buy and sell offshore companies whose sole asset is a prime piece of central London residential real estate without any SDLT or even stamp duty on the shares. Why might this still be the case? When SDLT was first going through its gestation process, in 2002/2003, a charge to SDLT on transfers of shares in so-called property rich companies was considered and there was consultation on this. There are examples of such a tax in a number of other jurisdictions. However, by the time the legislation appeared, such a SDLT charge was noticeable by its absence. Imposing a charge to SDLT on transfers of shares in such companies is less straightforward than newspaper editors might think. If the level of property assets is set at, say, 75% would this catch a wider category of company than intended, such as property investment companies or house builders? The charge could be restricted to companies owing residential property but could the limits be manipulated? If someone resident in a Gulf state sells to someone resident in a former Soviet republic all of the shares in a Panamanian company owning a Belgravia town house, how would HM Revenue and Customs police this? There would be no change in registered owner at the Land Registry. Would HMRC impose a charge on property on entry into a company only lifting it on payment of the appropriate SDLT? Perhaps more cynically, the ability to acquire property free of SDLT in this manner, might be thought to lend buoyancy to one of the few parts of the UK property market which is prospering. Of course, it could be said: how does the company acquire the property without SDLT? The answer is cross the palm of an adviser with appropriate amounts of silver. Anthony Hennessy is a tax specialist and consultant at niche property firm Brecher Solicitors
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