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Lord Marks of Henley-on-Thames
My Lords, I shall speak also to Amendments 35, 45, 46 and 47. These amendments would broadly remove the restriction of deferred prosecution agreements—DPAs—to corporate bodies, partnerships and unincorporated associations by permitting DPAs to be entered into with individuals and would instead restrict DPAs to cases where a sentence of imprisonment would not be likely on a guilty plea. The later amendments in my name, along with the amendment in the name of the noble and learned Lord, Lord Goldsmith, would widen the offences for which DPAs might in future be permitted beyond the range of financial or economic crimes.
To put these amendments in context, I welcome the innovation represented by the introduction of DPAs into this country by this Bill for two principal reasons. First, they are an effective device to ensure that criminal behaviour—sometimes very complex criminal behaviour—is met by a sanction. The compulsory imposition of a financial penalty, which is the subject of an amendment in my name in the next group, would ensure that that was the case. They bring about a saving of trials which in this country are, and have been, notoriously uncertain of outcome, as well as extremely expensive, so that they have used up a very large part of the criminal justice system’s overall budget. Secondly, they offer an opportunity for prosecutors to agree a programme of compliance requirements with offenders, and thus offer a chance to change behaviour, so they are part of the toolkit of the rehabilitation revolution, about which we have heard so much in the context of the Bill.
DPAs are for use only in suitable cases. It is important to avoid the worst excesses of such arrangements in the United States where it has been said that they have been used as the rich man’s route to plea bargaining. I suggest that they can and should be used to achieve voluntary compliance in the future with the requirements of the law across a range of fields. The limit on that is that it should not be acceptable for DPAs to be agreed where otherwise a sentence of imprisonment would be appropriate.
It follows that Amendment 23 removes the requirement that a DPA may not be agreed with an individual. In support of that amendment, I ask rhetorically the question, why the distinction? Why should it be that a criminal offence by a corporation, a partnership or an unincorporated association should be treatable by a DPA, but not an offence by an individual? As I suggested in the Second Reading debate we had in Committee, the question is not whether an offender is an organisation or an individual but whether the nature of the offence is suitable for a DPA. The distinction has been drawn that an individual can be imprisoned and an organisation cannot. But I suggest that that distinction is artificial because it is of course possible to provide that DPAs will be entered into only in cases where imprisonment would be unlikely in the case of an individual.
At Second Reading, my noble friend Lord Phillips of Sudbury suggested to me that nothing in the Bill explicitly stated that DPAs were not appropriate for an offence warranting imprisonment. The answer is that in the Bill as it stands such a provision would be unnecessary because it applies only to corporations, partnerships and unincorporated associations. But if it were extended to individuals, I suggest that it would be necessary to make it clear that it was not to be seen as an alternative to imprisonment.
I quite take the point made by the noble and learned Lord, Lord Goldsmith, at Second Reading, that, because of the behaviour-changing arrangements that can be made in DPAs, they might in some circumstances be suitable for drugs offences and the like which would otherwise warrant a sentence of imprisonment. At this stage at any rate, with this very new procedure, I would be wary of introducing a system that could be seen as allowing offenders effectively to buy their way out of a sentence of imprisonment.
Hence, under Amendment 35, we confine DPAs to offences not warranting such a sentence even if the limit to individuals were to be lifted. That would happen at the preliminary hearing where, on the application by a prosecutor for a declaration that a DPA might be appropriate, that would not be able to be granted were a sentence for imprisonment to be appropriate.
Amendments 45, 46 and 47 in my name and Amendment 44 in the name of the noble and learned Lord, Lord Goldsmith, concern the types of offences that might be made the subject of DPAs. The noble and learned Lord’s amendment would effectively allow the addition of any offence by removing the restriction to economic and financial crime. I should make it clear that my amendments are sample amendments only. They are not intended at all to be exhaustive and I have not attempted to conduct a trawl through the statute book to look for appropriate offences. They are intended to be probing and to give examples only of the way in which categories of offences might be usefully made broader.
Amendment 45 suggests that,
“a breach of regulations which is not punishable by imprisonment”,
taken at its broadest, might be an appropriate amendment. Amendment 46 deals with environmental offences under the Protection of the Environment Act. Some of those are punishable by imprisonment as well as by fines but, were the restriction to be only to those offences which would not be likely to warrant a sentence of imprisonment, that would be appropriate.
Similarly, health and safety offences seem to me—as indeed they seemed to be to the noble and learned Lord, Lord Goldsmith, at Second Reading—to be an appropriate area for such broadening of the offences. I have some experience from practice of the way in which the Environment Agency operates in respect of cases of environmental pollution. In fact, it has been operating for some time on the basis that it will agree not to prosecute offenders in circumstances where the offenders agree to pay compensation to clean up pollution and to put in place with the Environment Agency programmes of compliance with legal requirements for the future. That system works well and I suggest that it could be extended on a formal basis, as is suggested in the schedule, far more widely.
I ask noble Lords to support these amendments, and for the Minister to consider taking them back and doing something with them.
Lord Phillips of Sudbury
I am not getting at my noble friend because he referred to my intervention last time, but I hope that he will forgive me if I am misunderstanding this. Perhaps other noble Lords are also unsure as to the impact of the removal of the words, in paragraph 4 on page 261, line 32,
“but may not be an individual”.
Does that not mean that the only persons who may enter into a DPA with a prosecutor are the ones mentioned, namely,
“a body corporate, a partnership or an unincorporated association”,
so the removal of the words in his amendment will not actually make any change?
I see that my noble friend has tabled Amendment 24, which does refer to individuals. However, I wonder whether that is not, so to speak, negatived by the removal of those words; but, as I said, I may well have got this wrong.
Lord Marks of Henley-on-Thames
My Lords, my noble friend is, as always, entirely on the ball. My amendment is wrong in exactly the way that he mentioned. It should be “or an individual” rather than,
“but may not be an individual”.
So the words that ought to go are, “but may not be”, to be replaced by the word, “or”. For that, I apologise, and I hope that I will be allowed to alter my amendment accordingly. I am not proposing to press it in any event, but we can bring it back on Report if necessary, in a better form.
Lord Goldsmith
My Lords, I will speak to Amendment 44 standing in my name, but I want to speak to Amendment 23 as well. Before I do that, and so that I do not have to repeat this on later groupings, I want to repeat the declaration of interest that I made on 30 October at col. 575. I also want to repeat my belief that this is a very useful addition to what the noble Lord, Lord Marks, has described as the armoury for prosecutors and for law enforcement agents. I think that that is absolutely right. On 30 October, I explained how I had been thinking about this when I was in office and, indeed, I introduced at the other end of the scale of offending something that was equivalent: conditional cautions. I believe that this is worth while and I think that the former Solicitor-General, Sir Edward Garnier, deserves credit for having pushed this forward. I had the benefit of talking to him about this before these amendments came forward into this Bill. So I do support them in principle. The few amendments that I have put down are designed to try to make it as workable as possible, given that the principle is there—others may take a different view about the principle—and to make it as useful as possible.
There are some technical amendments but also one or two that relate to the scope of DPAs. I want to underline the fact that I am very grateful to the noble Lord, Lord Marks of Henley-on-Thames, who has made this point. The important issue about a DPA is that it is not just punishment. It can become punishment, but it is about changing behaviour and about compliance. It is a carrot and stick approach.
On the point raised by Amendment 23 about whether this should be capable of being extended to individuals, I repeat what I told the Committee on the previous occasion, that it was actually in the context of individuals that I first saw the benefit of arrangements of this sort. The noble Lord, Lord Marks, has referred to drug offences, and he is quite right. I saw in operation in the United States deferred prosecution agreements being used as a powerful tool to change the behaviour of people who were drug offenders and who seemed incapable of holding down a job and therefore living a life beneficial to themselves, their family and the general public. This was achieved by the combination of a strong statement that if they did not comply in particular ways—taking drug tests regularly, staying clean, following the advice of probation officers or the equivalent—they would suffer serious imprisonment, and the inducement that if they did comply, not only would they not go to prison but they would not have a conviction either. That could be very important to them in terms of getting jobs in the future. On more than one occasion, I watched judges who were speaking on a very direct basis to offenders, reminding them of their obligations and saying, “This is what you have got to go through. This is how you have to comply if you want to get the benefit of this arrangement”. So I think that this is potentially very valuable for individuals, and I ask the Government to think again.
The noble Lord, Lord Phillips of Sudbury, is of course right about the technical issues on the amendment, but I think that the purpose behind it is very clear and, if the principle were accepted, I am sure that the Government would sort out the precise wording to make it work. I do not think that the noble Lord can change the amendment while on his feet.
In the same context, I turn to Amendment 44 in my name.
Lord Phillips of Sudbury
I am most grateful to the noble and learned Lord for giving way. Does he not have a residual concern that if one allows individuals into this plea-bargaining regime it could give rise to the sort of scandal that my noble friend Lord Marks referred to of rich, powerful and well lawyered individuals escaping the opprobrium of prosecution and appearance in court that might otherwise be the way forward?
Lord Goldsmith
I am not concerned about that for this reason. There are two very powerful safeguards in the Bill that should prevent that. First, the DPA has to be agreed by a prosecutor and, as the debate on the previous amendment demonstrated, not just any old prosecutor but either the Director of Public Prosecutions or the director of the Serious Fraud Office—or, possibly, a person designated by the Secretary of State. I leave aside the locum tenens that might come in; the Minister will tell us at some point how likely that will be. First, the prosecutor has to decide whether it is appropriate. Having spent, as the Committee will know, a lot of time with prosecutors when I was in office, I had a high regard for their understanding of what the public interest and public reaction is. They know when people need to go to prison, if they are convicted, and they know when it is appropriate for them not to do so. We can rely a great deal on them to decide which cases are appropriate and which are not.
There is then a second safeguard. Under the Bill as it stands, it has to go to court twice, and the court has to be satisfied that it is appropriate and proportionate for such a step to be taken. Those safeguards mean that one can be much more relaxed about the risks to which the noble Lord, Lord Phillips of Sudbury, refers. Of course, I would entirely agree with him that if we had a situation in which the system operated only to the benefit of the rich it would be wholly unsatisfactory. That is one reason why I think that extending the ability of DPAs so that they cover the sort of offence that I have referred to and individuals would meet part of that concern. If anything, I am worried that by limiting this to economic crimes for companies and partnerships one sends the very message that the noble Lord, Lord Phillips of Sudbury, does not want to be sent. I invite the Government to think very hard about that.
Those are the two safeguards. My personal preference would be not to add any other barriers. I would not add the barrier of the offence being likely to carry a sentence of imprisonment. As the noble Lord, Lord Marks, recognised, if this was extended to cover the sort of case with which I have been concerned it would rule those cases out. I would leave it to the good sense, judgment and sense of public interest of the prosecutor and the court to limit the cases. For the same reason, I would leave the ambit of cases that could be covered open. I would not try to cherry pick through the statute book to find other offences that might be appropriate. I would leave that to the prosecutor and then to the court to say whether it was appropriate to use it for this sort of environmental offence or that sort of health and safety offence. I predict that fairly soon we will have a code giving guidance, and no doubt there will be debates in this House and in other places from time to time as well, and we will see the sort of offences that are appropriate. It is a very useful tool. Other dispositions are not normally limited in this way to particular offences, individuals or specified periods in prison. When I move my amendment, I will invite the Government to consider those points very carefully.
Lord Beecham
My Lords, at Second Reading I expressed misgivings about the introduction of this new concept which were shared by other Members of your Lordships’ House. However, it is clear that the proposal will go ahead. It is certainly possible for us to live with that and, indeed, to seek to improve the legislation on the way.
I listened with great care to the reference of my noble and learned friend Lord Goldsmith to the desirability of extending the DPA process to individuals. However, I am still not quite persuaded about that. I certainly would like to see how the original intentions of the Bill are carried out and what effect they have on what I take to be the basic approach of the Government, whose rationale is that in serious cases, which take an inordinate amount of time and cost an inordinate amount of money to pursue, adopting this measure might achieve a swifter resolution of the problem and, as the noble and learned Lord rightly reminded us, help to pursue the desirable objective of changing behaviour. One particularly looks to that approach being applied in the corporate field. Only today we have seen across the pages of the Guardian an apparent example of the kind of corporate misconduct that could well lead to a massive investigation. One might think that that is an ideal case for the application of this new principle. However, the new principle departs from the traditions of our jurisprudence—as do other things that we shall discuss shortly, but not in connection with this Bill—and is not something to be embarked on lightly. In particular, we need to continue to bear in mind the state of public opinion as it might develop.
I quite take the point that it is not necessary or desirable to confine the scope of this new procedure to economic and financial crime, although I suspect that that is what has triggered it. I am particularly attracted by the references of the noble Lord, Lord Marks, to environmental issues. I think of some of the cases that we have debated in other contexts that involved damage to the environment. Those cases can also be formidably expensive and, almost by definition, difficult to pursue. The noble and learned Lord, Lord Goldsmith, is right. We cannot list every conceivable item. There has to be an element of discretion. It would be sensible for this matter, and its extension, to be the subject of orders and therefore subject to parliamentary approval. I agree with the noble and learned Lord that Amendment 35 in the name of the noble Lord, Lord Marks, probably goes too far.
I want to touch briefly on Amendment 48 in my name which seeks to establish a sunset clause. This is one of three amendments which are partly designed to reassure the public that this measure is not undertaken lightly by the Government and Parliament and that, novel as it is and potentially almost offensive as it could be to some people’s sense of justice, it will be subject to very careful review which is more extensive than the post-legislative scrutiny now available. My amendment would compel a proper parliamentary review of the whole issue if, in the light of experience, it is thought appropriate to renew the provisions. I suggest a five-year period because by definition many of these cases take a long time and it will take time to see how the new system beds down.
The Minister was not oversympathetic to that suggestion on the previous occasion we discussed this matter. However, I hope that it will be given consideration because we cannot lightly embark on this massive change, with the implication that people—corporations rather than individuals—can buy their way out of difficulty. I will return to that thought in relation to other amendments. I hope that the Government will look sympathetically at some of the points that have been made, notably about the extension beyond simply economic and financial crime, and in particular at the possibility of a sunset clause as proposed in my amendment.
Lord Goldsmith
The noble Lord referred to someone buying themselves out of trouble, or whatever it may be. It is the same sort of idea that the noble Lord, Lord Phillips of Sudbury, raised. Would the noble Lord agree that as well as a financial penalty, a DPA could well provide an obligation to comply in particular ways in future? That is not the same thing as buying your way out of trouble. It is accepting a form of conduct in future that hopefully would be beneficial to the public and everyone else and is not just a matter of pounds in your back pocket.
Lord Beecham
I am talking about public perception, which might well be less grounded in those more fundamental objectives than we might give it credit for when debating it in this environment, dominated as it is—looking around the Chamber—by lawyers. We have to carry the public with us. The noble Earl, Lord Attlee, is aghast: unfortunately for the legal profession, perhaps, the lawyer gene apparently did not pass from his grandfather. We have to take public perception on board and it is in that sense that I use the term.
Lord Phillips of Sudbury
My Lords, forgive me for speaking after the noble Lord, Lord Beecham, but I hope to add a few words to what he said because I was slow on the uptake and did not realise that the last amendment on this schedule is in this group. I endorse 100% the argumentation of the noble Lord, Lord Beecham, for the five-year review. I think I am alone in this House in being fiercely opposed to the whole schedule on principle. I understand the extremely persuasive arguments advanced by all who have spoken tonight—shortly to be enlarged upon by my noble friend Lord McNally—but I am profoundly concerned that we are stepping into a realm that we have no past experience of and which could work out to be far from the hopes of the Government in advancing this proposed plea-bargaining regime.
There are a number of unknowns here that could, in the event, show that, overall, Schedule 17 works against the public interest. There should be a pause after five years so that that can be looked at very clinically, impartially and clearly so that we can take stock of what is a revolutionary change in our criminal law. Let us make no bones about it: this is one of the greatest revolutions in our criminal law system in 100 years. It is not a change that has been signalled well to the public. There has been extraordinarily little comment in any of the broadsheets, magazines or television programmes. In fact, I have not seen reference to this innovation anywhere. For those reasons and many others, I hope that my noble friend the Minister will accede to the amendment. After all, if the Government are right in their arguments for Schedule 17, they have nothing to fear in a five-year review.
Lord Ahmad of Wimbledon
My Lords, I welcome the broad support for the introduction of DPAs. I align myself with the words of the noble and learned Lord, Lord Goldsmith, about my honourable friend Edward Garnier in terms of the work he has done in this field.
My noble friend Lord McNally and I have listened very carefully to the arguments and discussions that have taken place on the amendments in front of us. I can assure your Lordships’ House that this Government are about listening and hearing about experiences. While the proposals are quite specific at the moment, this does not rule out returning in future to the extension of the remit of DPAs, particularly where issues beyond economic crime are concerned.
Lord Goldsmith
More than once in this debate it has been said that this is an entirely novel approach. I invite the noble Lord to consider the fact that we already have deferred sentences, under which judges say, “If you do certain things”—and they are supposed to say what they are—“over the next three or six months, I will take a different course”. We have suspended sentences. I have already referred to the fact that we have conditional cautions. I challenge the proposition that the Government’s proposal is so novel, and invite the noble Lord and his office to consider that.
Lord Phillips of Sudbury
That applies in a case that has been tried in open court and a conviction has been made. It is vastly different from the plea-bargain situation where there is no open-court hearing, no obloquy and no public shame.
Lord Ahmad of Wimbledon
I thank my noble friend for his intervention. As I said in my opening comments, it is not something that the Government are entirely ruling out, but it is the Government’s view at this stage that because this is something new to our justice system, the provision would be focused on organisations. However, I hear very clearly and my ears have not been closed to the points made by the noble and learned Lord. It is a matter that we will examine at some future point in time when this particular DPA scheme is reviewed, as I am sure it will be.
Generally speaking, the law on corporate criminal liability is such that, in order to achieve a conviction, a prosecutor must show that the “directing mind and will” of the organisation satisfies the necessary fault element for the offence. This is often difficult to show, especially in increasingly large, globalised and more sophisticated organisations. Cases can often involve lengthy and protracted investigation, with associated high financial and resourcing costs, with no guarantee of success.
Our proposals will not change the law on corporate criminal liability. However, they will offer an additional route for holding to account organisations that are willing to engage in the process and might otherwise face prosecution. These issues are not present to the same extent in relation to prosecuting individuals. However, I have noted with great interest what the noble and learned Lord, Lord Goldsmith, has said about his personal experience and the experience of the United States in this regard.
Furthermore, one of the elements that the Government considered as regards prosecuting economic crime committed by organisations is perhaps not the same as that which applies to other areas such as health and safety. Therefore, an extension of the proposals to other forms of offending does not appear necessary at this time. In particular, we are not persuaded that a DPA would be the appropriate response where direct physical harm has been caused to an individual by the organisation’s wrongdoing.
As this process is new to our criminal justice system, the Government would like to tread carefully. Our view is that a narrow, targeted approach is the best course of action to begin with. As I have already assured the House, I shall keep the points raised by my noble friend and the noble and learned Lord, Lord Goldsmith, under review. At a future time, should a case be made for applying deferred prosecution agreements to individuals, or for applying them to a broader range of offences, as the noble Lord, Lord Marks, has mentioned, it is right that we come back to Parliament with the necessary primary legislation to extend the scope of the scheme rather than seeking to do it through secondary legislation.
The noble Lord, Lord Beecham, spoke to Amendment 48. The Government’s view is that that amendment is unnecessary. We have already provided an undertaking that we will review the operation of the scheme following its introduction, which is of course essential given the novelty of DPAs in our criminal justice system. Returning to a point that was raised by my noble friend, the Government are in any event committed to reviewing all new primary legislation within five years of Royal Assent. That was the previous Government’s policy on post-legislative scrutiny. We do not need to put such a review on a statutory footing or to sunset the scheme provided for in the Bill. If, following the review, changes to the scheme are necessary or desirable, we can of course bring forward further primary legislation at that stage.
The noble Lord, Lord McNally, and I have listened very closely to the compelling arguments that have been made. With the assurances that have been given to ensure that the matter is reviewed, I would be grateful if my noble friend Lord Marks and the noble Lord, Lord Beecham, would agree to withdraw the amendment.
Lord Marks of Henley-on-Thames
My Lords, I hear the assurances that the Government are listening and I beg leave to withdraw the amendment.
“( ) A DPA must impose on P a requirement to pay to the prosecutor a financial penalty broadly comparable to the fine that a court would have imposed on P on conviction for the alleged offence following a guilty plea.”
Lord Marks of Henley-on-Thames
My Lords, I shall speak to Amendments 24, 25, 26 and 27. That suite of amendments has one purpose which is to make a financial penalty compulsory as a requirement of a DPA.
I suggest that there is an anomaly in the Bill as drafted. There is no compulsion to agree a financial penalty. It is one of a series of optional requirements. However, if a DPA contains a financial penalty, that penalty has to be broadly comparable to the fine that a court would impose on a plea of guilty. Therefore, the DPA has to have either no financial penalty at all or a full financial penalty comparable to the penalty that would be imposed by a court. The reason why I suggest that a financial penalty should be compulsory is to maintain public confidence in the new system and to prevent DPAs being seen as a soft option. That is particularly important if they are to be used only for economic and financial crime by corporations rather than more widely. At the moment, if a DPA can be agreed between an offender and a prosecutor without being subjected to the penalty that a court would impose, the innovation runs the risk of being tainted by the allegation that it amounts to no more than plea bargaining, the sort of suggestion made by my noble friend Lord Phillips of Sudbury.
I entirely accept that there might have to be an exception allowed for cases of genuine inability to pay, either at the agreement stage or at the stage when a breach or possible variation is considered under paragraphs 9 and 10, or at both stages. Subject to that qualification, I suggest that a financial penalty comparable to a court fine in lieu of prosecution should be at the heart of the new arrangements. I beg to move.
Lord Goldsmith
My Lords, I will make some observations about the noble Lord’s amendments in this group. I shall speak also to Amendments 28 and 29 in my name. It is worth reminding ourselves what the requirements of a DPA may be, as set out in paragraph 5(3). We have spoken as if the only requirement is likely to be a financial penalty. We talked about paying the price and buying one’s way out of trouble. However, a number of requirements may be included, not just the payment of a financial penalty. The words “financial penalty” appear in paragraph 5(3)(a). Paragraph 5(3)(b) refers to a requirement,
“to compensate victims of the alleged offence”.
Paragraph 5(3)(c) refers to a requirement,
“to donate money to a charity or other third party”.
Paragraph 5(3)(d) refers to a requirement,
“to disgorge any profits made by P from the alleged offence”—
no doubt to the person from whom they have been made, not to the prosecutor.
Paragraph 5(3)(e) refers to a requirement,
“to implement a compliance programme or make changes to an existing compliance programme relating to P’s policies or to the training of P’s employees or both”.
I wish to underline that that can be a very powerful tool for changing behaviour, but also an onerous tool. Frequently in cases where such a system exists, a monitor is required. The company then has to pay for an individual—the noble and learned Lord, Lord Woolf, was such a person—who will have full access to what it is doing and whose job it will be, from inside, to see that it is complying with the programme. That can be a very powerful tool for making sure that it changes its behaviour—but, as I said, also an onerous one.
Paragraph 5(3)(f) refers to a requirement,
“to co-operate in any investigation related to the alleged offence”,
and paragraph 5(3)(g) to a requirement,
“to pay any reasonable costs”.
I invite the Government to reconsider even their proposal, whether or not they accept the amendment of the noble Lord, Lord Marks. Possibly this is one of the more important amendments being considered tonight. I looked back at the Government’s response to the consultation on this offence. I noted from page 28 of the paper that more than half the respondents to the consultation did not agree that there should be a fixed minimum payment for a financial penalty. I wish to understand why, given that the majority of respondents took a different view, the Government have committed to this.
I am concerned about several things. First, if we impose this restriction, the DPA may be used in fewer cases, because it will become unattractive to agree to it. I recall that in a previous debate, in answer to a question from me, the noble Lord, Lord McNally, confirmed that the Government saw DPAs being used even in cases where the defendant did not admit guilt. In those circumstances, it becomes surreal to start talking about the financial penalty that would have been imposed on a defendant if they had pleaded guilty when they have not.
Secondly, the cost of the compliance programme—in terms not just of money but of obligation—can be sufficiently significant that it justifies saying, “No, you do not have to pay the same financial penalty”. I will also ask a question about financial penalties. That is why I read out the list. “Financial penalty” is only one requirement on it. I fear that by imposing this obligation, we may create a distorted view. For example, somebody may say: “What about the victims?” The answer may be: “I am afraid that I cannot afford to compensate them because you are making me pay a financial penalty which is commensurate with what I would have been fined, so there is no more money, or at least I am not giving you any more”. That is quite contrary to the principle in the criminal law that where financial measures are made, you treat the fine as the second thing, and if there is money for compensation, you try to get that paid first. I am concerned that this will have a counterintuitive and unsatisfactory effect.
I would avoid this sort of perverse incentive. I would avoid putting on the straitjacket. Of course I take the point about public confidence—although the more in this debate we invite the public not to have confidence, perhaps the more they will not have confidence. Perhaps we should start looking at this in a different way. My answer to this—as it was to the previous amendment—is that there is a double lock on a DPA in the form of the most senior prosecutors and the court. That is sufficient to ensure that what comes out of the DPA is satisfactory. I therefore do not support the amendment of the noble Lord, Lord Marks. My Amendment 28 is designed to have the effect that the financial penalty should not be more than the fine would have been, which is obviously perfectly reasonable.
Amendment 29 deals with a somewhat different but equally important point. It seeks to change the provision in sub-paragraph (5) that a,
“DPA may include a term setting out the consequences of a failure by P to comply with any of its terms”,
and convert it to an obligation not a permission. This is on the basis that the DPA should state what will happen to you if you do not meet its terms—that is what this is all about—in the interests of both the public and the person who is on the receiving end of the DPA. It is an amendment of a different order but I invite the Government to consider it.
Lord Beecham
My Lords, I broadly sympathise with the amendments of the noble and learned Lord, Lord Goldsmith, on this part of the Bill. In particular, it is important to recognise that there needs to be some incentive—this is the American experience—for potential defendants to come to terms, and the noble and learned Lord’s formulation is in line with that. However, given that the Bill refers to the penalty being broadly comparable to a sum that might be levied by way of a fine on conviction for an alleged offence following a guilty plea, there is an implicit assumption that there will be a one-third discount from what would be the fine after a conviction. That is the way in which the system appears to work, so we are perhaps not terribly far apart in any event.
I am less clear about the attraction of Amendment 26. I do not quite follow why the payment to the prosecutor of a financial penalty should be taken out of the Bill. The prosecutor is not personally going to pocket the money, I assume.
Lord Marks of Henley-on-Thames
Perhaps I may help. Amendment 26 is part of a suite of amendments. Amendment 24 provides for the compulsory imposition of a requirement to pay the prosecutor a financial penalty broadly comparable to the fine a court would have imposed. The amendments can only be read together. If you have Amendment 24, you do not need paragraph (3)(a).
Lord Beecham
I will not take the time to check that. I shall accept the noble Lord’s remarks and leave it to the Minister to respond.
Lord Marks of Henley-on-Thames
On this occasion I am certain that I have got the drafting right.
The Minister of State, Ministry of Justice (Lord McNally)
Dear, dear, dear. I noticed that my noble friend Lord Ahmad at one point referred to the noble and learned Lord, Lord Goldsmith, as his noble and learned friend. In some ways, both Front Benches are grateful for the noble and learned Lord’s interventions and draw on his experience in this area. In that spirit, I shall take another look at both of his amendments and take advice on them.
Paragraph 5 of Schedule 17 sets out both mandatory elements that every deferred prosecution agreement must include—namely, an agreed statement of facts and an expiry date—and a number of optional elements set out as a non-exhaustive list of potential terms.
As my noble friend Lord Marks has explained, Amendments 24 to 27 would require a financial penalty to be agreed and imposed in every case; whereas, under the Government’s proposals, that is a matter to be agreed by the parties depending on the particular circumstances. The Government have taken the view that, for the purposes of this approach to dealing with alleged criminal wrongdoing by organisations, there must be flexibility to deal with each case individually. As such, our intention has been, as far as possible, to limit the mandatory elements of a deferred prosecution agreement. I defer to the noble and learned Lord, Lord Goldsmith, on whether it is a wholly new approach. As he says, there are at least some areas of our law that are pathfinders for this. However, I think that it is a new approach to economic crime.
It is important to remember that this is a voluntary process and that the outcome will be an agreement between the prosecutor and an organisation, as distinct from court-imposed sanctions. It is essential, therefore, that the parties are able to negotiate terms in an individual case that are tailored to the particular type and extent of the alleged wrongdoing, as well as to the wider circumstances of the case and the organisation, including its financial circumstances. Ultimately, the package of terms will be the subject of judicial scrutiny and the judge will consider whether, taken as a whole, they are fair, reasonable and proportionate. If the judge is not of that view, he or she will not approve the agreement.
A financial penalty is just one of the potential terms of a deferred prosecution agreement, and is one of five of the suggested terms which are monetary in nature. While the illustrative terms in paragraph 5 are not listed in order of priority, it is the view of the Government that any terms of an agreement relating to compensating or making reparation to victims should take priority over the other monetary terms, including any financial penalty. Not all of the suggested monetary terms would be appropriate or desirable in all cases. In addition to, or instead of, monetary terms, an agreement may include obligations to improve corporate governance and compliance and to provide for implementation of the agreement’s terms to be monitored, the cost of which would fall on the organisation, or indeed anything else which the parties can agree is an appropriate response to the alleged wrongdoing. It will be for the parties to negotiate, and ultimately for the courts to approve, a range of terms that are fair, reasonable and proportionate. While a financial penalty is very likely to be imposed in the majority of cases, we do not consider it necessary or desirable to require a financial penalty to be agreed and imposed in every case.
Amendment 28 concerns the level of financial penalty payable under the terms of a deferred prosecution agreement. Where such terms are to be included in an agreement, the sum payable should be broadly based on the fine that would have been imposed for the alleged offence on a conviction following a guilty plea. Where available, the court would follow relevant offence-specific sentencing guidelines, as well as guidelines on general principles of sentencing, including the reductions in sentence for a guilty plea, as the noble Lord, Lord Beecham, pointed out. When considering a financial penalty term of a DPA, it is expected that both the parties and the court would have regard to the same guidelines, as well as the balance of other monetary terms of the DPA. This is to ensure as far as possible that any financial penalty under a deferred prosecution agreement would be broadly comparable to a fine likely to be imposed by a court following a guilty plea.
The effect of Amendment 28 would be to place a cap on the maximum financial penalty that could be negotiated under a deferred prosecution agreement. Given that it will be impossible in any particular case to estimate accurately the likely fine the court would impose, it would in practice be undesirable to seek to limit the freedom of the parties to negotiate the amount of a penalty in this way. In any event, the amount arrived at will have to be agreed by both parties before seeking the court’s approval and the court would need to be satisfied that any financial penalty is fair, reasonable and proportionate, such that we do not think specific further provision is necessary. But as I said to the noble and learned Lord, Lord Goldsmith, I will look at both of his amendments.
Amendment 29 relates to the provisions we have made enabling the parties to negotiate a term specifying the consequences of non-compliance with a deferred prosecution agreement. We have included this provision as a way of dealing with non-compliance capable of being objectively determined by the parties, for example, where the organisation has made a late penalty payment. The aim is for the parties to remedy the non-compliance without recourse to the court, for example, by way of punitive interest in relation to the late payment. Such a term would be negotiated alongside all of the other terms of an agreement and approved by the judge. We do not envisage that such a term will be appropriate in all cases. Whether or not a deferred prosecution agreement includes such a term, paragraph 9 provides a formal procedure for breach and non-compliance which will be the most appropriate way for most instances of non-compliance to be dealt with.
I hope that the Committee will agree that it is desirable to ensure that agreements are tailored to individual cases, with judicial scrutiny of all of the proposed terms to ensure that they are fair, reasonable and proportionate, and that it would be inappropriate to make any of the terms of deferred prosecution agreements mandatory in all cases. And as regards setting the amount of a financial penalty term and inclusion of a consequences term, I trust that my explanation has reassured noble Lords. But I shall read in Hansard what the noble and learned Lord, Lord Goldsmith, has said, and perhaps he will look at what I have said. We can see how they match up or where we should move.
Lord Goldsmith
Perhaps I may say a sentence because it may help the noble Lord and his officials. I had in mind in Amendment 29 that the DPA should say, “And if you fail to comply with this, then the prosecution can take place and you may be proceeded against”. That is the sort of consequence I am thinking of. I understand that the noble Lord is talking about something else. So with that expansion of my meaning, I am grateful that it will be looked at again.
Lord McNally
That is extremely helpful. With my advisers, I will look at the points that the noble and learned Lord has made. We do not go behind the Chair in this House, but he knows what I mean. I shall see if we can match up. I have found his remarks very helpful.
Lord Marks of Henley-on-Thames
In relation to my amendments, I understand what the Minister has said. The only point I would make is that it is possible to take the middle position, which is really the position that the noble and learned Lord, Lord Goldsmith, has put and which my noble friend has said he will look at. As the noble and learned Lord suggests, the anomaly is where you can have an all-or-nothing financial penalty that still exists, so it must be sensible to have a variable penalty if the noble Lord does not accept my Amendment 24.
Lord Beecham
“( ) Prior to the implementation of the provisions under Schedule 17, the Sentencing Council shall lay before Parliament its proposals for the setting of financial penalties, which must be approved by each House of Parliament.”
Lord Beecham
My Lords, I am of course short, and I will now be brief. The amendment echoes the concerns that some of us have about the introduction of this new concept and the public reaction to it. It is designed to reassure the public that financial penalties, which as the Minister has just reminded us will not apply in every case, and nor should they, will nevertheless be a salient feature of the new regime and, I suspect, the one that will attract the most media attention. In contrast with subsequent amendments, the suggestion here is that there should be only one occasion on which the proposed financial penalty guidelines should have to be approved by Parliament. In his letter to me the Minister confirmed that guidelines will be laid before Parliament. That does not imply a vote, although it might imply a discussion. But on this first occasion, and only this first occasion, given the novelty of the concept it would be sensible and would help to ease the transition into the new system and reassure the public if there were specific parliamentary approval of the guidelines—not, of course, for specific penalties for particular cases, but the broad parameters of how matters might be taken forward.
In respect of other matters, which we will come on to later, I will be arguing for a more regular system. Parliament does not normally intervene in the workings of the Sentencing Council, and nor should we, but these are special circumstances. On that basis, I beg leave to move the amendment.
Lord Ahmad of Wimbledon
My Lords, I thank the noble Lord for his opening remarks where he said he was short so would be brief. I suppose I can replicate those comments. This amendment seeks to provide for parliamentary scrutiny, as the noble Lord, Lord Beecham, said, for Sentencing Council guidelines in setting financial penalties.
Schedule 17 provides that the amount of any financial penalty payable under a DPA must be comparable to that which a court would have been likely to impose on conviction. In determining that amount, sentencing guidelines will be relevant. The Sentencing Council, as the Committee may already know, has already indicated that it will produce sentencing guidelines to cover the offences likely to be encompassed by DPAs when committed by an organisation, including fraud, money laundering and bribery offences.
The Sentencing Council is responsible for preparing and monitoring sentencing guidelines with the aim of ensuring greater consistency in sentencing and is of course under a statutory obligation to consult a number of parties when preparing draft guidelines. In response to the noble Lord, Lord Beecham, this of course includes, as he may well know, the Justice Select Committee. As such, the Government do not think it necessary to introduce a further requirement for parliamentary scrutiny of any guidelines that may be relevant to DPAs in this way. I therefore invite the noble Lord, Lord Beecham, to withdraw his amendment.
Lord Beecham
I am disappointed with the Minister’s response, although it was commendably brief, as he promised. I do not think the response will go in any way to allay what I anticipate will be public concern over this. However, in the circumstances, I beg leave to withdraw the amendment but reserve the right to return to it on Report.
Baroness Hamwee
Baroness Hamwee
My Lords, in moving Amendment 30, I will also speak to Amendment 32. Amendment 30 deals with the code to be issued and proposes that it should give guidance on the circumstances prosecutors should consider rather than the general principles to be applied. On first reading the paragraph, I thought there should be parliamentary oversight, but then realised that the paragraph is about the application of the general principles not about the principles themselves. However, it seems to be not wholly clear and I invite the Minister to confirm that the words in paragraph 6(1)(a) are intended to be about the circumstances that the prosecutor should consider. The Prosecution of Offences Act 1985 provides for the DPP, in other matters, to issue a code,
“giving guidance on general principles”.
I could not find whether there is any parliamentary oversight of that. I think the answer is probably that it is included in the DPP’s annual report. Something novel and major is being brought into our law and there should be no room for doubt as to the extent of the remit of the DPP and the Director of the Serious Fraud Office in this.
Amendment 32 would substitute the provision that prosecutors must “take account of” the code with “have regard to”. I want to understand whereabouts in the hierarchy—or perhaps on the spectrum—this is intended to be. I could not find in the legislation whether prosecutors are to take account of the current code under the 1985 Act, have regard to it or do something entirely different. The Minister may well be about to tell me that the words used here replicate words used elsewhere on the code. I beg to move.
Lord Goldsmith
I have a short but important point to make on Amendment 31 which stands in my name. As it stands, paragraph 5(2) requires that there should be an expiry date in any DPA but gives no guidance as to what its length should be. There needs to be some end point. This should not hang on for ever—in any event, it is unlikely that it would do so—but it is difficult to specify what that length should be. It could be different depending on the circumstances. The point of my amendment is simply to say that some consideration should be given to how one determines the length of the DPA. The best way of trying to get some guidance about that seemed to be to suggest that it should be included in the proposed code. There may be other ways to do it. I am completely open to what the mechanism is. My concern is that it is undesirable to leave it as it stands with apparently infinite or perpetual DPAs in existence.
Lord Beecham
My Lords, I certainly endorse my noble and learned friend’s remarks and support his amendment. I also support Amendment 32 standing in the name of the noble Baroness, Lady Hamwee. I shall speak to Amendments 31A and 31B, which again would provide effectively parliamentary oversight and approval of the code of practice to be drawn up by the Director of Public Prosecutions and the director of the Serious Fraud Office.
In his letter to me that other noble Lords may have seen, the noble Lord, Lord McNally, indicated that of course the Government believe in,
“the fundamental principle of prosecutorial independence”.
We certainly affirm that. The Minister went on to say that it is therefore appropriate for the code to be issued by the DPP and the director of the Serious Fraud Office,
“rather than it being put on a statutory footing in regulations laid by a Government minister”.
In my judgment, prosecutorial independence merely applies to the way in which a case can proceed, whether it should proceed and the like, but not necessarily the framework.
This is a novel framework being established for this purpose and, I reiterate, it will need to command public support. I do not refer to the individuals currently holding those offices or necessarily to those previously holding them, but neither of those departments has, shall we say, an unblemished reputation among the public over a series of quite different matters over the years. I have every respect for the current holders of those offices. As it happens, they both seem to be doing a very good job but the history is somewhat difficult in both cases. After a consultation process, the holders of those offices would have effectively the final word without any real intervention or guidance by Parliament. That is inappropriate in the particular circumstances of this case. What I propose would not interfere with their prosecutorial discretion, but it would allow the public to have confidence that the framework being established, within which prosecutorial independence would be exercised and maintained, is one that has Parliament’s support. It would not simply be left to Parliament to debate, without being able to influence it, following consultation carried out under the provisions of the Bill. For what it is worth, I have the support of the noble and absent Lord, Lord Phillips. The noble Lord, Lord McNally, looks to the heavens in gratitude. I shall direct the noble Lord, Lord Phillips, to Hansard tomorrow. There is a serious point here and I ask the Government to reflect upon it.
Lord Ahmad of Wimbledon
My Lords, in providing for a code of practice for prosecutors in relation to deferred prosecution agreements, the Government have sought to ensure consistency with other statutory provisions relating to guidance for prosecutors on operational matters. As I have said before, the scheme for DPAs is a new concept for our criminal justice system and as such does not fall within the scope of any existing guidance for prosecutors.
I will turn to specific amendments and refer first to Amendment 30. The Government consider that there should be a code for DPAs comparable to the code for Crown prosecutors issued by the DPP under Section 10 of the Prosecution of Offences Act 1985. The code for Crown prosecutors sets out the general principles that prosecutors should follow when undertaking their functions. My noble friend Lady Hamwee referred to paragraph 6(1)(a) of Schedule 17, which reflects Section 10 of the Prosecution of Offences Act 1985 as to the general nature of the guidance to be set out in the code of practice for DPAs. However, unlike Section 10 of the Prosecution of Offences Act, paragraph 6 of Schedule 17 sets out in further detail the matters that must be covered in the code of practice for DPAs. Let me be clear: the key elements of DPAs are clearly set out in the Bill. The code of practice will provide guidance to prosecutors on the exercise of their discretion on operational matters. As such, the code is fundamentally an operational document and seeks to preserve prosecutorial discretion in operational matters. This approach will ensure that the code provides guidance in relation to key procedural matters for DPAs and decisions to be made by prosecutors.
Amendment 31 would add to paragraph 6 a further matter on which the code of practice may give guidance by adding to the list, as the noble and learned Lord, Lord Goldsmith, said,
“the choice of expiry date for a DPA”.
The Government’s view is that paragraph 6(2) is already clear that the code may give guidance on any relevant matter. If prosecutors consider it necessary and desirable to have guidance on the duration and expiry of an agreement, they would have the power to issue such guidance under that paragraph. We do not therefore see any particular or specific need to highlight this issue, although, again, the points of the noble and learned Lord, Lord Goldsmith, have been noted on this matter.
Amendments 31A and 31B seek to make the DPA code of practice for prosecutors subject to the affirmative resolution procedure. The noble Lord, Lord Beecham, referred to the letter issued by my noble friend Lord McNally. He is correct that the fundamental principle of prosecutorial independence means that it is appropriate for the code to be issued by the DPP and the director of the Serious Fraud Office. The code is an operational document, as I have already said. As such, we do not consider that it is either necessary or appropriate to make this code subject to parliamentary scrutiny. This approach is consistent with that under Section 10 of the Prosecution of Offences Act 1985 in respect of the code for Crown prosecutors. I should add that a supplementary delegated powers memorandum has been provided to the Delegated Powers and Regulatory Reform Committee, which has not raised any concerns about the approach taken in Schedule 17.
Amendment 32, referred to by my noble friend Lady Hamwee, relates to the duty on prosecutors to take account of the code of practice for DPAs when exercising functions under Schedule 17. It is essential that there is transparency and consistency in the way DPAs operate. The code of practice will play an important part in meeting these requirements. Requiring prosecutors to “take account of” the code throughout the deferred prosecution agreement process will ensure that it is considered and applied in relation to making decisions and exercising functions. Parties to the agreement, the judge and the public can be confident that each agreement will be approached and made in a consistent manner. We do not consider that requiring a prosecutor to “have regard to” rather than “take account of” the code would make any material difference to the extent of its use by the prosecutor.
In conclusion, there is a strong case for ensuring parity between the legislation providing for the deferred prosecution agreement code of practice and the code of practice for Crown prosecutors issued under the Prosecution of Offences Act 1985. I hope that, in light of the explanations I have given, my noble friend Lady Hamwee, the noble and learned Lord, Lord Goldsmith, and the noble Lord, Lord Beecham, will agree not to press their amendments at this time.
Baroness Hamwee
My Lords, I thank the Minister for that. In view of the hour, I beg leave to withdraw the amendment.
Lord Goldsmith
Lord Goldsmith
I will also speak to Amendments 34, 36, 37, 39 and 40, which are all in my name. This group covers three topics and I will deal with them shortly. Amendment 33 is really a probing amendment, relating to why there is a double court approval. I have previously talked about the importance of the court approval and nothing that I say now takes away from that. A court approval is important. I was looking forward to explaining to a packed Chamber how the Bill is structured. Sadly, we seem to have reached a moment when it is not as full as I was hoping.
Lord Goldsmith
The quality, as my noble friend says, is however very high. The way the Bill is structured is that there are two court approvals. Under paragraph 7, there has to be a court approval before a DPA is entered into and then a court approval, described as a final hearing under paragraph 8, afterwards. My question is: why is it necessary to have both? I am really not clear what the advantages are because it is plain, under paragraph 8, that a DPA does not come into effect and cannot be entered into unless there is the court’s approval. Why does one need the prior approval under paragraph 7? I do not see the advantages; that is why it is a probing amendment.
I also see disadvantages. There are costs and court time, both of which are precious commodities—particularly for the ministry that the Ministers represent. I am concerned that it is also unnecessarily cumbersome. May it also distort the negotiating process? Might a defendant who is a potential agreer to a DPA say, “I know you want more, Mr Prosecutor, but let us go and ask the judge whether what I have offered so far is enough”. I am not very happy with that proposal. Above all, why is it necessary to have a double process? That is the question. Amendments 37 and 39 are consequential to that amendment.
The next point, which I imagine can be dealt with very quickly, is in Amendments 34 and 36. These amendments are designed to ensure that whatever process there is, whether it is preliminary or final, it is clear that the defendant is to be present when that takes place. I have little doubt that that is what is intended but I would like reassurance on it, and that there is not to be any form of ex parte application by the prosecutor to the court—something to which the defendant is not a party.
Amendment 40 raises a more substantial point. As it stands under the scheme of the Bill, when a DPA comes to an end certain things are to happen. Paragraph 11(8), to which this amendment applies, requires that at that stage there should be details of the compliance. It says that:
“Where proceedings are discontinued under sub-paragraph (1)”,
which I apprehend is when the DPA has come to an end,
“the prosecutor must publish … the fact that the proceedings have been discontinued, and … details of P’s compliance with the DPA”.
I am rather concerned about why that is necessary. It cannot be for the purpose of checking whether there has been compliance because that must be for the prosecutor to do. Indeed, if the public say, “We don’t like this compliance”, there is no procedure for the DPA somehow to come back into existence, so I do not see why it is necessary. If, to take a different case, a prison sentence is reduced for good behaviour, the behaviour that has led to the reduction is not published.
I am concerned for one reason in particular. If there is a lengthy DPA, and the company, which it seems it is simply going to be, has complied and done what was necessary, the publication of the details of its compliance—and I do not know how detailed that will be—would result in the whole thing being revived. That is a little against the spirit of the idea that you make an agreement, it is sanctioned by the court, you comply with its terms, and then your record does not get sullied again. I am concerned that the consequence of this may be to raise the matter again to the disadvantage of the defendant who has done all that was required of him or her. If it is necessary because there is a real point in publicising the details of compliance, that may be one thing, but because I cannot, at the moment, see the benefit of it in the scheme of the provision, I question its desirability. I look forward to hearing what whichever noble Lord responds will say about it. I beg to move.
The Lord Speaker (Baroness D'Souza)
I must advise your Lordships that if this amendment is agreed to, I cannot call Amendments 34 and 35 by reason of pre-emption.
Lord Marks of Henley-on-Thames
I shall speak briefly to Amendments 38 and 41. Amendment 38 is about public final hearings. Just as there are absolutely sound reasons for the preliminary hearing considering a DPA to be in private to avoid prejudicing any subsequent prosecution, if no DPA is entered into, and to avoid prejudicing negotiations for a DPA, so the final hearing should generally be in public unless there is still at that stage a substantial risk of prejudice. I suggest that that is essential for the public administration of justice and to build and maintain public confidence in these new arrangements. That is the point of Amendment 38.
Amendment 41 is on a similar theme. Under paragraph 12, the court may postpone publication of the terms of a DPA or of a decision on a breach, variation or discontinuance of a DPA if it appears to the court that postponement is necessary to avoid a substantial risk of prejudice to the administration of justice in any legal proceedings. This amendment limits any such postponement to the period of such continuing risk, so that as soon as the risk disappeared, publication would follow. Again, I suggest that that must be in the interests of the public administration of justice.
Lord Beecham
I have a good deal of sympathy with the amendments in this group tabled by my noble and learned friend and the noble Lord, Lord Marks, and I will be interested to hear the Government’s response. Both aspects seem to be matters that they should consider before Report.
Lord Ahmad of Wimbledon
Transparency and openness are key to the operation of the new deferred prosecution agreement process. In designing this process the Government have sought to strike a balance between the need for the parties to be able to negotiate without prejudice and to discuss a proposed agreement with a judge openly, with the imperative to avoid the perception that this is justice behind closed doors. Certainly, it is not to give the impression of cosy deals being struck in private.
Amendments 33, 37 and 39, in the name of the noble and learned Lord, Lord Goldsmith, would remove the preliminary hearing element from the process for entering into deferred prosecution agreements. The Government’s strongly held view is that the preliminary hearing is an essential feature of the process for entering into a DPA. It is at this stage that the prosecutor and the organisation are able to discuss the potential for an agreement and its outline terms openly with the judge.
Judicial scrutiny at this early stage is very important to determine whether an agreement, first, is likely, in principle, to be in the interests of justice, and, secondly, whether its proposed terms are fair, reasonable, and proportionate. More importantly, the preliminary hearing allows greater judicial involvement and judicial influence on the outcome, which critics say perhaps is lacking in the model used in the United States. After all, it is the doctrine of UK law that not only should justice be done but it is seen to be done.
Participation by organisations in the DPA process will be voluntary, as has been said previously. Some 93% of respondents to our consultation agreed that the preliminary hearing should be held in private in order to limit any potential prejudice to an organisation’s commercial interests and to prevent jeopardising a future prosecution.
Amendments 34 and 36, also proposed by the noble and learned Lord, Lord Goldsmith, probe the requirement that at the preliminary hearing and the final hearing the prosecutor must apply to the Crown Court for a declaration that entering into a DPA is in the interests of justice and that the proposed terms are fair, reasonable and proportionate.
It is clear from the legislation as drafted that the hearing and the declaration sought will relate to an agreement which both parties have been negotiating. While the schedule does not state explicitly that the organisation can or will take part in the proceedings we think that this is very much implied. We are clear that while the prosecutor is the party to initiate the court process leading to the declaration, the organisation will be entitled to take part, as a separate party, in those proceedings. The detail of the criminal procedure relating to such hearings will be set out in criminal procedure rules. Adding the suggested words will not in our view clarify either the purpose of the hearing or the organisation’s role in it and we do not, therefore, think that they are necessary.
Amendment 38, in the name of my noble friend Lord Marks, relates to provisions setting out the approval process of an agreement at a final hearing. During a preliminary hearing held in private, the judge will have indicated whether an agreement is likely to be in the interests of justice and whether the proposed terms are fair, reasonable and proportionate.
Before the final hearing. there will be further scope for the parties to refine the agreement, such that the agreement may not be identical to that before the court at the preliminary hearing. The provisions in paragraph 8 of Schedule 17 therefore allow for the final hearing to start in private to give the parties and the judge a final opportunity to ensure in a confidential setting that everything is as it should be before the agreement is approved in an open court.
It must be remembered that there is always the possibility that even at this late stage, either party can decide whether the process should not go forward, or the judge may not be satisfied that the agreement should be concluded. If the agreement is not made, the confidentiality of discussions between the parties should be protected to protect any potential jeopardy to the organisation’s interests and to avoid potential prejudice to any other prosecutions. Restricting the ability to hear the case in private only to situations where there could be a substantial risk of prejudice to the administration of justice is, therefore, too restrictive. It is not expected that the final hearing would need to start in private for all cases, but we make provision for those presumably limited cases where this may be deemed to be necessary.
Importantly, where a DPA is made and approved the prosecutor must publish any declarations and reasons, including any initial decisions not to approve the DPA, so that there will be transparency once the DPA has been made. I hope that the Committee will agree that it is desirable for the parties to have a final opportunity for further discussion with a judge, should they consider this necessary, about an agreement in private, ahead of moving into open court for an agreement to be formally approved. I suggest that it is neither necessary nor desirable for a judge to determine whether the first part of a final hearing should be in private, solely based on the criteria suggested by Amendment 38.
On Amendment 40, if the terms of a deferred prosecution agreement are complied with, the agreement will expire on the expiry date set therein. Under paragraph 11 of the schedule, the criminal proceedings that were instituted and suspended will then be discontinued by the prosecutor by application to the court. The purpose of this is to bring the criminal proceedings to an end clearly and transparently.
Once the proceedings have been discontinued, the prosecutor will publish that fact and will additionally publish details of how the agreement was complied with. Amendment 40, as tabled by the noble and learned Lord, Lord Goldsmith, seeks perhaps to probe further as to why it is necessary to publish this.
Lord Goldsmith
My Lords, I am grateful to the noble Lord for that detailed reply. I want to study carefully in Hansard what he said, as I want to study what was said by him previously on other amendments and by the noble Lord, Lord McNally, and then decide what I would like to bring back on Report. Nevertheless, I am grateful for his reply, as I was grateful for the detailed letter that came from the noble Lord, Lord McNally, which dealt with questions that I raised on the previous occasion. Subject to that, and given the hour, I beg leave to withdraw the amendment.
Baroness Hamwee
Baroness Hamwee
My Lords, paragraph 13 of the schedule provides for the use of material in criminal proceedings. Sub-paragraph (4) states that certain material,
“may only be used in evidence … on a prosecution”,
either for the same offence or for an offence as it says in the paragraph—I will not take up the Committee’s time in reading it. The material in question is,
“material that shows that P entered into negotiations for a DPA, including in particular”.
I was concerned by the phrase “in particular”. The way I have dealt with that in the amendment to probe this is to insert “any” so that it is “any material”,
“that shows that P entered into negotiations for a DPA”.
I hope that the Minister can assure me that the items listed are merely the most obvious examples and that this is not an exhaustive list. It seems to me that it could be interpreted that way. I beg to move.
Lord Ahmad of Wimbledon
My Lords, this amendment relates to paragraph 13 of Schedule 17, which deals with the use of material arising from DPAs. In particular, it seeks clarification about what can be relied upon by a prosecutor in future criminal proceedings when a DPA has not been approved by the court and made. The Government’s intention is to provide necessary protections and safeguards as regards organisations voluntarily entering into the process towards the making of a DPA in the event, for whatever reason, that an agreement is not finalised. Without these safeguards, some organisations might not voluntarily engage and co-operate with the prosecution.
On the point raised by my noble friend Lady Hamwee, I can give her the assurance that paragraph 13(6)(a) is a non-exhaustive list of materials that are likely to be produced during the process towards the making of an agreement, which would show that negotiations had been entered into. They are the most obvious documents, and the use of the words “including in particular” makes it clear that they may not be the only materials that might show that negotiations had taken place and would not be capable of being used other than in the limited circumstances referred to in paragraph 13(4). I suggest that inserting “any” at the start of, or removing “in particular” from, paragraph 13(6)(a) would not make the position any clearer.
I trust that with the assurance that I have given to my noble friend she will feel able to withdraw her amendment.
Baroness Hamwee
My Lords, I think that that amounted to a yes in response to my request for assurance. I beg leave to withdraw the amendment.
Baroness Hamwee
“Treatment of money paid under a DPA14A Money paid to satisfy a requirement under paragraph (a), (b), (c) or (g) of paragraph 5(3) shall not be treated as a deductible expense for the purposes of taxation.”
Baroness Hamwee
My Lords, a number of requirements may be made under paragraph 5, including imposing a fine or asking for compensation, a donation of money to a charity and reasonable costs. I was particularly concerned that the donation to a charity should not be treated by P as a deductable expense for tax purposes. In normal circumstances it probably would be, but that seemed to me to be offensive.
The HMRC has confirmed on its website that a fine is not,
“incurred wholly and exclusively for the purposes of the trade”,
but I do not think that it would do any harm to confirm this in the legislation. I have not included disgorging profits because, presumably, tax was paid on them in the first instance, so I can see an argument that they should be deductable. But I am interested in particular in hearing what the Minister has to say about payments to charity. I beg to move.
Lord Ahmad of Wimbledon
My Lords, I thank my noble friend Lady Hamwee for drawing the Committee’s attention to this issue. The Government firmly believe that wrongdoers should not be able to profit or otherwise benefit from their offending behaviour; that is why DPAs will require organisations to comply with tough terms and conditions. These terms may include financial elements such as requirements to pay compensation to victims, a financial penalty, and the reasonable costs of the prosecutor, as well as a requirement on the organisation to disgorge the proceeds of criminal wrongdoing. However, it should also be remembered—as it was in discussions on a previous amendment, as pointed out by the noble and learned Lord, Lord Goldsmith—that DPAs can include other non-financial requirements, such as updating anti-corruption or fraud policies and retraining staff. Those are important attributes.
Deferred prosecution agreements are intended to ensure that organisations recognise and are held to account for their wrongdoing and take steps to mend their ways. Fulfilling the terms of an agreement should not be seen as simple entries in an organisation’s financial book-keeping records. The harm inflicted on the victims of economic crime and innocent third parties should not be seen simply as a cost of doing business.
It will come as no surprise to your Lordships that my noble friend referred to tax. The tax obligations of organisations relating to financial penalties and compensation payments can be, and are, complicated. These obligations have been very carefully developed over many years to ensure the right balance is struck. Although I welcome my noble friend’s efforts to clarify taxation arrangements under a DPA, the question of whether and which financial elements might be tax deductible is, and should continue to be, determined by finance legislation so that all relevant matters and consequences can be taken into consideration. That also avoids a piecemeal and haphazard approach to tax matters which might set an unhelpful precedent or have unintended consequences. Matters in respect of taxation are properly a matter for the Finance Acts and not for legislation such as this.
In light of these points, I would be grateful if my noble friend Lady Hamwee would agree to withdraw her amendment. In conclusion, I say to the Committee, and in particular to the noble and learned Lord, Lord Goldsmith, that I think it would be beneficial to arrange a meeting with officials so that we can address some of the issues more specifically in advance of Report stage. But for now, I hope that my noble friend Lady Hamwee will agree to withdraw her amendment.
Baroness Hamwee
My Lords, of course I will withdraw the amendment. I understand that tax is complicated and that the Government prefer to deal with it in specific legislation. Nevertheless, I think that at the moment there is the very real possibility that a donation to charity made under this provision would be treated as deductible. I hope that the Minister will arrange for that to be confirmed to me or otherwise so that I can consider what to do on the next occasion. I beg leave to withdraw the amendment.