Consequences of amendment of rule 205

The old rule that prohibited barristers (other than employed barristers) from supplying legal services through or on behalf of another person has now been revoked. In its place, the new rule permits barristers to practice in three different ways: see paragraph 1 above. Currently, the permitted modes of practice are those identified in the new rule: self-employment, employment, and as manager or employee of a recognized body (regulated by an approved regulator other than the Board).

The revocation of the old rule should not, however, be taken as an indication that practice through or on behalf of other persons is now generally permitted. Barristers cannot therefore practice in partnership together or through an entity controlled by them. If such a firm or entity is itself supplying restricted legal services (such as advocacy and the conduct of litigation), it must be regulated under the Act. Any supply of restricted legal services where the supplier is not regulated is a criminal offence under section 14 of the Act, which comes into force on January 1, 2010.

The Bar Council (nominally the approved regulator for the Bar) does not currently have the power to regulate firms or entities, and the SRA will not regulate such firms and entities comprised only of barristers. The Board will be consulting in 2010 on whether or not the Bar Council should acquire the power itself to regulate barrister-only entities, or entities comprising a mix of lawyers and non-lawyers, and if so what kinds of entity and under what regulatory regime. Significant constitutional and rule changes and administrative arrangements will be required before it can do so.

European Union Direct Taxes

Permanent Establishment is a vital concept in international taxation. While for direct taxes, it is mainly defined by the OECD Model Convention, the European VAT Directive and its implementing Regulation provide an EU-wide approach for VAT.
Difficulties arise as terminology and definitions in indirect and direct tax diverge. Moreover, countries have implemented and interpreted the EU and OECD rules in a different way, impacting on issues like cross-border reorganisations, transfer pricing, taxation of dividends and interest and royalties, tax residence, temporary and permanent transfer of assets, place of supply and VAT liability.
In both direct and indirect tax, the concept of Permanent Establishment has undergone very recent changes: The 2010 changes to the OECD Model Convention and Commentary, and in particular the new Art. 7, will be adopted in national law, as speakers from the Netherlands and Germany will report. The effect of the new definition on treaties with other countries will also be considered.
Some of this topic is addressed in the new book "European Union Direct Taxes", by the International Tax Professor Salvador Trinxet Llorca.
In indirect tax, the current more important issue is the practical consequences of the adoption of the Regulation implementing the EU VAT Directive in January 2011.

Conflict of interest and duty

If a barrister has a more than trivial ownership interest in an LDP, then, as explained above, there is scope for a conflict or potential conflict to arise between a barrister and his client, where the LDP is acting for another party or for a person with a conflicting interest. Save in exceptional circumstances, a barrister must not act or continue to act where there is a conflict or possible conflict between his interests and those of his client or his duty to his client.

Where the barrister has only a relatively small interest in the LDP, it is unlikely to be realistic for the barrister to agree a protocol with the LDP in the way that an employee or manager of the LDP can and should do (see para 12(2) above). It is the responsibility of the barrister to ensure that conflicts are avoided. However, if the barrister is a significant shareholder, it may be appropriate for such a written agreement to be made, to ensure that any conflicts of interest and duty that arise can be resolved easily and without prejudicing either client. It is the barrister’s responsibility, if he is considering owning a significant shareholding in an LDP, to take appropriate steps to prevent any conflict arising that prejudices the interests of his client. In a case where a later conflict was known to be a real possibility, that would require the barrister to disclose his interest in the LDP (and where material the extent or nature of the interest) and advise the client of his right to instruct another barrister, so that the client can decide at an early stage whether or not to instruct (or continue to instruct) the barrister. Any shareholding of over 10% or which constitutes more than 5% of the barrister’s portfolio is always likely to be regarded as significant. For these purposes, a significant shareholding is a holding of such an amount, or with such rights, that a reasonable person with knowledge of the facts would be likely to conclude that there was a real risk of the barrister not being able wholly to disregard his interest in acting for his client.

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Notification of the ownership

The fact of an ownership interest must be notified to the Board in writing. The interest must be notified as soon as practicable after the interest is acquired or the barrister ceases to be an employee or manager of the LDP in question, as the case may be. At present, the rules do not require the extent or nature of the ownership interest to be disclosed to the Board. If the extent or nature of the interest is material to any client of the barrister, however, that does not mean that the extent or nature need not be disclosed to the client, as explained below. The Board intends to keep that matter under review and the rules may change in future.