Economic Crime and Corporate Transparency Bill

Baroness Stowell of Beeston Excerpts

2nd reading
Wednesday 8th February 2023 Lords Chamber

[Baroness Stowell of Beeston (Con)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Cromwell. I will pick up on quite a bit of what he has just said but, like other noble Lords, I will attempt not to be repetitive—certainly not unhelpfully so. I should say from the outset that I recognise that this is a very important Bill and my noble friends on the Front Bench will have my full support in getting it on to the statute book.

I feel a little bit like an interloper. As noble Lords who have observed my interventions in this Chamber over the years will know, I would not normally be found participating in a deep dive into economic crime and issues of corporate transparency law. However, I come to this Bill with my role as chair of the Communications and Digital Select Committee very much to the fore, because of the topic the noble Lord, Lord Cromwell, clearly and ably gave us an account of, which is SLAPPs—in full, strategic lawsuits against public participation. I will not go through a detailed description of what this means because the noble Lord has already done that, but I will add a couple of things to what he said.

Although this practice came to public attention last year when it became apparent that it was often deployed by oligarchs, it is important to bear in mind that it is not just something that rich Russians use. It is widespread and used by powerful and wealthy individuals but also by institutions. They reach for it as a defence when they do not like legitimate scrutiny or have something to hide.

When my committee first looked into this matter a year ago, we established that what we were aware of about this practice represented just the tip of the iceberg. In fact, the deployment of SLAPPs or very aggressive lawfare is so successful in deterring scrutiny that many cases never get anywhere near a court. I should add, as a former chair of the Charity Commission, that this practice of aggressive lawfare is also sometimes deployed against regulatory bodies, not just journalists.

The Communications and Digital Select Committee recently held a follow-up session on SLAPPs and took evidence from the regulator, the Solicitors Regulation Authority, to find out what it is doing to identify, deter and punish British law firms that profit from facilitating these abuses of our legal system. I am pleased to say that the committee heard that it is now taking the issue seriously, but I was concerned to find that there are completely inadequate deterrents against lawyers taking on SLAPP cases. In a moment I will comment on what the noble Lord, Lord Cromwell, said as a more expansive solution to this issue, but two specific points stood out to me that are directly relevant to the Bill whether or not the Government support the noble Lord’s proposal to use the Bill to address the matter more comprehensively.

First, the regulator can fine wrongdoers up to £25,000. This has just been increased from £2,000. Noble Lords do not need me to point out just how ludicrously small that sum is; it probably amounts to a few hours in legal fees for the top law firms. I cannot imagine that many lawyers working for billionaire oligarchs or any other rich and powerful figure would live in fear of such a punishment.

The Bill provides a crucial opportunity to change that. It will give the regulator unlimited fining powers in relation to economic crime. That is welcome, but most lawfare cases would fall outside of that scope. I therefore recommend changing Clause 181 to allow the regulator to fine solicitors up to £250 million for pursuing SLAPP cases, whether they relate to economic crime or not. This amount is in line with what the SRA can fine other types of organisations, such as alternative business structures. To be clear, ABSs are law firms that are run by non-lawyers or whose partners are a mix of lawyers and non-lawyers. That means that the big accountancy firms qualify for this status, so in theory the SRA could fine those big accountancy firms that provide legal services up to £250 million but not the majority of law firms. I do not know about other noble Lords, but that strikes me as rather odd. In correspondence with me following my committee’s public hearing, the regulator confirmed that it supported this suggestion. The money this would generate could go into a defence fund for journalists and others facing such SLAPPs.

Secondly, I learned that payment for legal advice is not subject to the same type of money laundering regulation checks as other legal services. In addition, key parts of the Proceeds of Crime Act, which should require solicitors to report suspicious activity to the National Crime Agency, apparently do not apply to the conduct of litigation by lawyers. I accept that lawyers will need to represent individuals from all walks of life, including criminals, but that does not mean they should profit from dirty money. Again, this loophole is odd, to say the least, because it suggests a risk that dirty money can be used to pay lawyers to pursue abusive lawsuits aiming to silence journalists. That is particularly ironic, given that money laundering tends to be a key topic of interest for investigative journalists. Indeed, one of our witnesses made explicit allegations that the law firm pursuing a SLAPP case against her was working for someone using illegitimate funds. I recommend taking this opportunity to close that loophole and send a message that law firms should be doing everything in their power to uphold proper standards of due diligence.

The SRA has said it will write to lawyers about money laundering but, in all likelihood, the lawyers carrying out these cases know exactly what they are doing and how to game the system. The only way to stop them is with meaningful deterrents and sanctions. On that topic I have written to the Lord Chancellor and the Chancellor of the Exchequer. I hope my noble friends the Ministers will agree that these changes would be a valuable and proportionate contribution to the Government’s commitment to stamping out abuses of our legal system.

As the noble Lord, Lord Cromwell, said, we need to do more to stamp out the practice of SLAPPs and end London’s disreputable status as the best place for wealthy and powerful bad people to hide from legitimate scrutiny. If the noble Lord, Lord Cromwell, seeks to use this legislation to bring forward wider measures to tackle this—and I very much urge the Government to seize this opportunity to deal with this practice—it is possible that we will be able to achieve more than I had hoped we might in what I have covered today, which is quite modest and precise, in amendments that I propose to the Bill.

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[Lord Wallace of Saltaire (LD)]

My Lords, it is a pleasure to follow that fascinating speech. I think I need to read it again before I fully understand it. I had not heard it on the five previous occasions on which the noble and learned Lord, Lord Garnier, made it. Halfway through this debate, the noble Lord, Lord Agnew, commented that there seemed to be an extraordinary amount of consensus. That carried on through the rest of the debate. The question behind all the speeches is how serious are the Government about making sure that this Bill becomes an Act which successfully tackles economic crime, rather than one making another tiny step—a shuffle perhaps—in the direction of saying that it will, but not actually managing to implement it?

We have heard a range of arguments that the Government should accept amendments on several issues to strengthen the Bill, in so far as they can be fitted within its remit: SLAPPs, whistleblowers, greater transparency, asset seizures for reparations, tighter enforcement of the register of overseas entities and penalties for failure to prevent fraud or for assisting fraud actors and activities.

On the question of fees, we do not need that in the Bill, as the noble Lord, Lord Leigh, remarked. I disagree with him on whether Companies House needs more powers. It needs more powers, and for that it needs more resources. What we want is an assurance from the Government that they will substantially raise the fees. I sat thinking with amazement that the fees for Companies House are the way they are. With my wife, I am working through the process of downsizing our house after 45 years in one place. I gather that this is in line with the Government’s preferences and policy. They would like people our age to move out of their large houses into smaller flats so that housing problems are moderated. Yesterday, I sorted out how much it will cost me in stamp duty, conveyancing fees et cetera. In comparison with the fee for registering a company, there is rather a large gap.

We all know—I say this to our Conservative friends—that over the past 12 years a number of regulatory bodies have had their budgets slashed. The Environment Agency’s budget has been slashed by 80% and—surprise, surprise—it does not seem to have kept up with discharges of sewage by water companies. The Charity Commission, as the noble Baroness, Lady Stowell, will know, had its budget severely cut, and that badly affected some of the things it had previously done to regulate and advise charities.

[Baroness Stowell of Beeston (Con)]

Forgive me for interrupting. I am grateful to the noble Lord for giving way. I ought to make the point that the Charity Commission’s budget was very severely cut, but it has been increased. Its operating budget is now pretty healthy. It might not be healthy compared with a lot of other regulators, such as Ofcom, when you look at what is required of the Charity Commission, but it had a quite dramatic reversal of its fortunes in terms of its operating costs.

[Lord Wallace of Saltaire (LD)]

I take that correction happily. I was the Lords Minister responsible for charities from 2012 to 2015 and remember these arguments very painfully.

I hope that the Conservatives will say to those in their party, like our last Prime Minister, who say that the answer to every question is tax cuts and for that you have to cut spending wherever you can that there are some areas in which sufficient resources from whatever means—whether fees or taxes—provide very substantial public benefits and sometimes economic advantages as well. This is clearly one of them.

The noble Lord, Lord Clarke, added that greater accountability for Companies House is an important factor that we need to get into this Bill if we can. My career was in dealing with international issues. When I look at a Bill, I always start by asking where the international dimension is dealt with. The international dimension in this Bill is remarkably thin. I said to the noble Lord, Lord Clarke, that I could challenge him on Clause 190 when we get to it. The extent clause is always the one you have to start by looking at.

As the noble Lord, Lord Gold, said, a lot of economic crime is extraterritorial. When I briefly dealt with some police matters at the beginning of the coalition, I recall being taken around Yorkshire to discuss organised crime. The first statement that the chief constable made was, “There is no domestic organised crime”. All organised crime is cross-border—it is international—and, for that, one clearly needs international co-operation. The Conservative Peer who said in a debate here two years ago that we did not need Europol because we had Interpol and that that provided everything we needed did not understand the complexity of the co-operation one needs among national authorities. I, and I think many of us, would appreciate a briefing from the team on how the pursuit of economic crime will be managed in co-operation with other countries if the Government are going to be more serious about this. There is a brief reference to the Financial Action Task Force in the Explanatory Memorandum, but the whole ethos of coping with a massive transnational problem is almost absent from the Bill.

This leads me on to the question of the Crown dependencies and the overseas territories, which the noble Lord, Lord Faulks, raised. I have been interested in this for many years. The frustration is that they fall between the domestic and the international. One is usually assured that one does not have to legislate for them—indeed, that it is improper to do so—but we ask them to follow British domestic legislation. Three years later, we are told that most of them have not got round to doing so yet, but they will, soon. I recall going to one Crown dependency many years ago and gathering from the chief Minister’s enthusiastic briefing that their chief message to me was, “We are so much better than the other two”. That is not a good area. I strongly suggest that this House needs to consider a sessional committee to look at the relationship between the Crown dependencies, the overseas territories and the United Kingdom. It is always being pushed to one side. It is dealt with by a junior Minister in the Ministry of Justice or the FCDO, but some very knotty issues come with it.

The noble Lord, Lord Stevens, remarked that half the registered overseas entities come from the BVI. The largest numbers among the others, adding up to more than three-quarters, came from Jersey, the Isle of Man and Guernsey, and then, I think, Luxembourg. This leads me on to the other point made by the noble Lord, Lord Faulks: Luxembourg is of course also a tax haven and it has its own interests. I must look at that ECJ judgment. I am certainly for transparency against privacy when one draws the balance, and it sounds as though the ECJ has been persuaded on this occasion to support privacy against transparency. It seems to me that corporate privacy should be valued a great deal less than personal privacy, but I will look at the case. International co-operation is clearly an essential part of where we need to have this. The British Government’s deep reluctance to assert sovereignty over the overseas territories and Crown dependencies is very odd for a Government who have spent a lot of time saying that they want to take back control.

A number of noble Lords have talked about the role of enablers within our system, and I am a bit partisan on that issue. Liz Truss talked about the liberal establishment that blocked her radical reforms, but if one is to talk about the enablers who have assisted oligarchs and others—the Intelligence and Security Committee’s Russia report had some extremely strong language on that—one must acknowledge that they were at the heart of our financial, accountancy and legal establishment in the City and that they successfully penetrated the Conservative Party. That is a real problem for us, and we must do something much more strongly about it. When I criticised sleaze within the Government the other week, the noble Lord, Lord Clarke, said to me, “This is a different Government.” I say to him: to demonstrate that we now have a different Government, we need now to take some stronger action, with the Bill, on that problem.

The noble Lords, Lord Leigh and Lord Browne of Ladyton, my noble friend Lord Fox and others all praised the quality of debate on the Bill in the Commons, adding that the Ministers there were clearly listening to concerns and criticisms. I hope that the Ministers here will take very much the same attitude and accept that the Bill can be improved and strengthened, as everyone here has asked. I found it dispiriting, as others have, that on several Bills over the last two Sessions, Ministers here have been told to resist amendments as vigorously as they can. On one recent occasion, a Lords Minister told me that they had to go back on a concession made in the Lords because there was resistance to it from her party in the Commons.

This is a debate in which we have had remarkable consensus on all Benches. We are concerned with the quality and reputation of this country, and we think that the Bill can make a significant difference on that in a number of areas. Let us all pursue the further progress of the Bill with that in mind. I look forward to the conversations which I hope that the Ministers will offer us before we reach Committee, and then again between Committee and Report. Let us see what we can do to put on the statute book a strengthened and improved Act on economic crime and transparency.

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[Lord Sharpe of Epsom (Con)]

Yes, I can. I do not think that deregulating legitimate financial operations and going after economic crime deserve to be talked about in the same sentence. They are very different things.

I have endeavoured to address all the contributions made by noble Lords today. I look forward to further debate and discussion in Committee as the Bill continues its passage. I very much welcome the grit and determination of the noble Baroness, Lady Blake, and am very happy to continue engagement as we go forward.

[Baroness Stowell of Beeston (Con)]

My Lords, may I just take this opportunity briefly to ask the noble Lord, Lord Ponsonby, to relay to his noble friend Lord Sikka the House’s displeasure at his discourtesy, particularly if, as my noble friend Lord Leigh said, this is not the first time that he has not stayed until the end of a debate, and since his was the longest of the Back-Bench speeches in this debate? He took advantage of a full 15 minutes.

[Lord Ponsonby of Shulbrede (Lab)]

I assure the noble Baroness that I will refer the matter to our Chief Whip.