By Jim Fitzpatrick: A top British law firm that was accused in Parliament of profiting from the harassment of journalists has been slammed by MPs for keeping its cashflow secret using a legal “loophole”.
Carter-Ruck was one of a handful of leading UK law firms to be named and shamed before the UK’s foreign affairs committee in March for being “involved in harassment suits against journalists” on behalf of wealthy clients trying to silence newspapers. It was also cited in a parliamentary debate where firms were accused of pursuing an “incredibly profitable niche” that was turning London into the capital of the “global lawfare industry”.
Labour MP Liam Byrne told Parliament earlier this year that law firms were “making millions from the misuse of our courts”, and called for a windfall tax on such businesses’ profits to fund the defence of those under attack. But it is not clear whether Carter-Ruck would be eligible to pay such a tax – as it does not declare profits because of its particular business structure.
Conservative MP David Davis told openDemocracy: “Given the huge amounts of money involved in some litigation in London… there is a powerful public interest argument for all law firms to be required to publish detailed accounts as a condition of their practising licence.”
Labour MP Margaret Hodge added that financial transparency standards should be brought into line with other sectors and that “law firms shouldn’t be able to hide behind loopholes”.
Carter-Ruck was one of a handful of leading UK law firms to be named and shamed before the UK foreign affairs committee in March for being “involved in harassment suits against journalists” on behalf of wealthy clients trying to silence newspapers. It was also cited in a parliamentary debate where firms were accused of pursuing an “incredibly profitable niche” that was turning London into the capital of the “global lawfare industry”.
An analysis of company accounts shows that business is booming for a number of the firms named – CMS, Harbottle & Lewis and Schillings – with profits up by an average of 30% in the last four years.
Carter-Ruck, however, is not a company and does not declare profits. The firm is a ‘partnership’ between different practising solicitors.
The arrangement, which is entirely legal, means Carter-Ruck does not publish accounts or list any information on the UK’s company register, because it is not a company. The name ‘Carter-Ruck’ is, instead, a registered trademark.
This leaves members open to personal liability if the firm goes bust, but it also allows their finances to be kept entirely secret from everyone except the tax authorities.
Susan Hawley from campaign group Spotlight on Corruption told openDemocracy: “Given the outsized role that firms like Carter-Ruck play in determining what information gets into the public domain, it is somewhat alarming that there is so little transparency about their operations.”
Profits on the rise
The biggest of the firms named in parliament as involved in “harassment suits”, CMS, is a large and diverse international practice headquartered in London. It was criticised for past work on behalf of a Russian official linked to fraud and murder.
Like both Harbottle & Lewis and Schillings, CMS is a Limited Liability Partnership (LLP). It means profits are shared among partners rather than shareholders, and it must file information with Companies House.
CMS has seen its profits rise by more than 40% in the last four years, topping £178m last year. Profits at Harbottle & Lewis have jumped 36% in the same period, reaching more than £26m last year. And Schillings has enjoyed a rise of 18% in profits to more than £3m last year.
Each of the firms covers multiple areas of work, meaning that the profits come from a wide variety of legal cases. The published information, however, does give an indication of the scale and financial firepower of the businesses in question.
Under ‘areas of law’, which is supposed to detail the sort of work undertaken by a firm, Carter-Ruck simply states ‘litigation – other’
This is not the case for Carter-Ruck, whose finances remain a mystery.
In keeping its financial affairs secret, Carter-Ruck is unique among those prominent firms criticised in Parliament. But it is not alone in the wider legal profession. Figures from the Solicitors Regulation Authority (SRA) show that 13% of all law firms in England and Wales are partnerships, meaning they don’t file accounts or any other information with Companies House.
All law firms in England and Wales are required to register with the SRA. Carter-Ruck’s listing reveals 23 regulated solicitors at the firm, but provides little information on its work. Under “areas of law”, which is supposed to detail the sort of work undertaken by a firm, Carter-Ruck simply states “litigation – other”.
‘Putin’s People’ book
Carter-Ruck drew particular criticism from MPs and journalists earlier this year for its role in representing an oligarch and Russian company who were unhappy with their portrayal in the book ‘Putin’s People’ by Catherine Belton. She told the foreign affairs committee in March that Carter-Ruck was “famous for protecting the reputations of people who have been close to Vladimir Putin”.
Her publisher, Arabella Pike of HarperCollins, described a legal onslaught that was marked by “exaggerated language and claims’’. They faced £1.5m in combined legal bills from five separate legal actions launched shortly after Belton’s book was praised by jailed Russian opposition leader Alexei Navalny. The legal threats came via London firms, including Carter-Ruck, on behalf of different Russian individuals and companies.
The two cases involving Carter-Ruck were settled with minor amendments made to Belton’s book.
The government has promised legislation to tackle the problem identified by MPs of abusive cases against journalists and others, known as SLAPPs (strategic lawfare against public participation). Last month, regulatory body – the SRA issued a rare “warning notice” to its members on the issue, demonstrating its strength of feeling on the subject.
“We are concerned, alongside increasing public concern, that some solicitors in England and Wales are using SLAPPs on behalf of their clients,” the SRA said in a statement as it outlined what behaviour it would no longer tolerate from solicitors.
Two of the law firms contacted by openDemocracy – Harbottle & Lewis and Schillings – did not respond to requests for comment. Carter-Ruck sent an email headed “Private and confidential. Not for publication”.
A spokesperson for CMS said the firm “strongly reject[s] the allegations of impropriety”, adding that, since the invasion of Ukraine, it was “no longer accepting new instructions from Russian-based entities or from any individuals with connections to the Russian government”.
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