Crime and Courts Act 2013 (Commencement No. 18) Order 2018
Debate between Baroness Vere of Norbiton and Lord Thomas of Gresford
Baroness Vere of Norbiton
I am afraid I cannot. We know that the first tranche of GPS tags will be coming out at the end of 2018. Full rollout is expected by summer 2019. I think that a period will have to elapse from full rollout until we can get some proper numbers, so I think it will be after that, but obviously I cannot set anything in stone.
Lord Thomas of Gresford
My Lords, there is one group of people who have not been discussed this evening, and that is the judges, magistrates and prison governors who will be concerned with making these orders. I am not sure that they will be tremendously helped by, or have much confidence in, the replies that we have received. I beg leave to withdraw the amendment.
Crime and Courts Act 2013 (Deferred Prosecution Agreements) (Amendment of Specified Offences) Order 2018
Debate between Baroness Vere of Norbiton and Lord Thomas of Gresford
Baroness Vere of Norbiton (Con)
My Lords, the order before the Committee today amends Part 2 of Schedule 17 to the Crime and Courts Act 2013. This sets out the range of offences where a deferred prosecution agreement, or DPA, may be considered. The intention of this schedule has always been clear: to allow the Crown Prosecution Service, or CPS, and the Serious Fraud Office, or SFO, to consider using a DPA to tackle serious economic crime committed by corporate entities. The order before the Committee today is simple: it corrects an anomaly with regards to making misleading statements and practices in financial transactions.
The schedule of crimes at Part 2 of Schedule 17 to the Crime and Courts Act 2013 currently includes a reference at paragraph 22(e) to Section 397 of the Financial Services and Markets Act 2000. It deals with misleading statements, practices and impressions in financial transactions. This provision was repealed and updated by the Financial Services Act 2012, which introduced new offences dealing with the same conduct under Section 89, on misleading statements; Section 90, on misleading impressions; and Section 91, on misleading statements regarding relevant benchmarks and misleading impressions as to the value of investments and interest rates that apply to a transaction. The order before the Committee today replaces the previous repealed offences under Section 397 of the Financial Services and Markets Act 2000 with the three current measures to ensure that the SFO and the CPS remain able to consider using a DPA to tackle such behaviour if they wish. At the moment, they cannot do so given the anomaly in the legislation. All of the current protections, including the need for a court to approve the order, will continue to apply in full.
As this is a matter of correcting a technical oversight, I hope it will not detain the Committee too long. But before commending the order for approval, I will set out some further details and provide the background to the deferred prosecution scheme and why the Government are taking this action.
Schedule 17 to the Crime and Courts Act 2013 sets out the scheme for deferred prosecution agreements. A DPA is a court-approved agreement between an organisation—not an individual—and a designated prosecutor who is considering prosecuting the organisation for a specific type of economic crime. These crimes are listed in Part 2 of the schedule. Under the scheme the organisation is charged with the offence, but upon a court declaration that the DPA is in the interest of justice and that its terms are fair, reasonable and proportionate, the indictment will be suspended for the duration of the agreement—usually two or three years. Upon the expiry of the DPA the proceedings are discontinued. The prosecution proceedings can be reinstated only if the DPA is terminated by the court before expiry because of a serious breach of the terms of the agreement.
There are no mandatory terms of a DPA but they are likely to include a financial penalty, disgorging any profits made from the offence, co-operating with investigations into the conduct of individuals, and the implementation and external monitoring of a compliance programme. Importantly, a DPA is not an alternative to individual criminal charges. If individual wrongdoing can be proved—for example, bribery—such charges can be pursued in addition to a DPA with the company.
DPAs are an appropriate and useful tool for addressing corporate economic and financial crime. A DPA is premised upon high levels of co-operation on the part of the offending company, which signals a willingness to address governance failures going forward. It allows companies to make redress for wrongdoing while also taking steps to safeguard against any future misconduct. DPAs are therefore a key means of encouraging the inclusion of economic and financial crime prevention as an integral part of corporate good governance. Where courts judge them appropriate, they are a means of allowing corporate entities to make full redress for crimes committed while avoiding collateral damage—for example, the company going into liquidation and laying off thousands of employees. Four DPAs have been agreed since the measures came into effect in 2014.
To reiterate, this order effects a technical correction of an anomaly required to allow DPAs in respect of offences dealing with misleading statements and impressions in financial transactions—it replaces like with like. Without today’s order, a designated prosecutor cannot enter into, and a court cannot approve, a DPA premised upon offending involving misleading statements and misleading impressions in respect a range of financial products. By introducing today’s order, we are ensuring that the CPS and SFO could consider applying for a DPA in these cases should they so wish. I beg to move.
Lord Thomas of Gresford (LD)
My Lords, this is a perfectly acceptable amendment to the schedule to remove the anomaly that now exists. It is a moment, however, to consider the value and use of deferred prosecution agreements. As the noble Baroness pointed out, only four such agreements have so far been approved by the court, and only three of the judgments in those cases have as yet been published. However, those cases have made it possible to find some clear principles that should be applied. Sir Brian Leveson, President of the Queen’s Bench Division, put it this way: a deferred prosecution agreement,
“is a reward for openness”.
The first essential is co-operation with an investigation. The sooner a company comes in and self-reports, the more it has to be rewarded for. The SFO will look at what work has already been done to investigate, how thoroughly it has been done and how data has been dealt with—in a way that does not tip off potential suspects leading them to delete that data altogether. Secondly, the company must be committed to reform. This may mean removing senior staff responsible for the criminality and instituting changes in procedures. The SFO must be in a position to go before a judge and argue that the default position of a prosecution can be displaced in the specific case and that a deferred prosecution agreement is justified. The judge has to give his approval to this.
In the Rolls-Royce case, which is the largest of the cases so far, the judge commented that his first reaction to what was put before him had been that if the company was not to be prosecuted,
“in the context of such egregious criminality over decades, involving countries around the world, making truly vast corrupt payments and, consequently, even greater profits then it is difficult to see that any company would be prosecuted”.
Rolls-Royce had not self-reported, but it co-operated. It was its co-operation that enabled the SFO to take the matter before the court. What the company did report, when tasked with it, was far more extensive and of a different order to what may have been exposed without the co-operation that it provided. I hope that the committee of this House carrying out post-legislative scrutiny of the Bribery Act, which has just been formed, will give an opportunity to examine DPAs and how they should be used with great care.
Lord Beecham (Lab)
My Lords, four agreements in between four and five years does not strike me as a particularly impressive figure. I appreciate that the Minister may not be able to answer several questions today, but perhaps she can answer them subsequently by letter. How many cases were considered but not proceeded with? On the four cases to which she referred, what financial penalty was imposed on the relevant companies? In addition to such financial penalties, were proceedings taken against individuals, which is clearly a separate matter? On the companies that were subject to the provisions, what changes may have been made within those companies, assuming things have gone wrong not necessarily with the companies’ full understanding at the time? How many cases have been investigated and not proceeded with, and was such a decision made because there was no case to answer or for other reasons—for example, lack of financial capacity in the company to pay any penalty?
What is the present caseload of the relevant department for these arrangements? Are any cases currently under consideration and, if so, roughly how many? How long will it take for such matters to be resolved? In other words, is there likely to be rather more than an average of one a year in future? If not, are the Government satisfied that the regime is proving effective, and what further steps might be taken to make more use of the provision now that it will be brought up to date?
Crime and Courts Act 2013 (Commencement No. 18) Order 2018
Debate between Baroness Vere of Norbiton and Lord Thomas of Gresford
Baroness Vere of Norbiton (Con)
My Lords, the order will allow courts in England and Wales to impose what is called a stand-alone location monitoring requirement as part of a community sentence when it is considered to be proportionate and necessary to do so. In other words, an offender’s whereabouts could, for its own sake and for a specified duration of the sentence, be monitored through an electronic GPS tag fitted to their ankle. The offender’s location would be tracked by satellite using technology similar to that of a satnav or Google Maps. The tag will record the offender’s position and send that data at frequent intervals to a monitoring centre via a mobile network. The location data will be retrospective and monitoring will not be in real time.
The Criminal Justice Act 2003 already allows electronic monitoring to be used as part of a community sentence to manage a curfew or compliance with another requirement of the sentence, such as an exclusion zone. In practice, it has only been used in community sentences to monitor curfews through radio frequency technology; the GPS-enabled tags that are necessary to monitor an offender’s location are not currently widely available. That will change when the new electronic monitoring service that is being developed goes live in 2019 and GPS tags and the monitoring technology become widely available. The new service will begin on a date to be confirmed in the summer, following the conclusion of commercial discussions with providers.
This order, commencing a provision in the Crime and Courts Act 2013 to allow for a stand-alone location monitoring requirement to be imposed, provides courts and probation practitioners with an additional tool to help to manage offenders in the community. The approach that we are taking has been, and is being, piloted in specific geographical areas, commenced through a no procedure statutory instrument. This allows the Ministry of Justice and, separately, the London Mayor’s Office for Policing and Crime—MOPAC—to pilot the use of location monitoring. The Ministry of Justice pilot concluded in March this year and the smaller pilot being run in London by the Mayor’s office will come to an end in September 2019.
Findings from the independent evaluation of the Ministry of Justice pilot that concluded in March will not be available until the summer. Nevertheless, feedback from probation practitioners and offenders engaged in both pilots suggest that standalone location monitoring is a valuable tool. We believe that it will provide offender managers with information that allows more insight into offender behaviour, allowing for constructive conversations to take place to reduce the risk of reoffending, aid rehabilitation and help those they supervise to lead law-abiding lives. Let us say, for example, that a probation officer is dealing with a domestic abuse case where the offending behaviour is linked to gambling or alcohol. The location information may show the offender frequenting alcohol or betting shops and this would enable the probation officer to have a sophisticated and evidence-led conversation with the offender about their behaviour and take appropriate steps to address it.
Stand-alone location monitoring may also help to deter offenders from taking part in criminal activity through the prospect of discovery or by giving the offender an excuse to distance themselves from those with whom they might commit crime. In effect, this can offer offenders a fresh start away from the influences of crime. In some cases, it could also provide enough assurance to enable courts to impose a community sentence as an alternative to custody, leading to many of the benefits of rehabilitation that offenders may get from being with their loved ones or through employment in the community. Prior to the introduction of the new electronic monitoring service, the Ministry of Justice will take into account the lessons learned from the pilots and provide information to sentencers and those that advise them, such as legal advisers and probation court teams, on how to target the new location monitoring capability.
I recognise that during the passage of the Crime and Courts Bill that led to the 2013 Act, concerns were raised in your Lordships’ House about the potential for location monitoring to infringe civil liberties. Let me reassure the Committee that before imposing a stand-alone location monitoring requirement, the court must consider issues of proportionality and necessity, including any interference with Article 8 of the European Convention on Human Rights: the right to respect for private and family life. They must also have due regard to the five statutory purposes of sentencing: punishing offenders; reduction of crime; protection of the public; reform and rehabilitation of offenders; and the making of reparation by offenders. As they do now, the courts will continue to assess the suitability of any requirements for the offender, the seriousness of the offence and whether a community disposal is justified or imprisonment is warranted.
With regard to the processing of the offenders’ data in accordance with the Crime and Courts Act 2013, when commencing the legislation, my right honourable friend the Lord Chancellor and Secretary of State for Justice is required to publish a code of practice that sets out the expectations, safeguards and broad responsibilities for the collection, retention and sharing of information gathered on such orders. The necessary code was published in February this year, prior to laying this order before Parliament and after consultation with stakeholders including the police, probation, the Information Commissioner’s Office and the Investigatory Powers Commissioner’s Office. It has been written with the provisions of the Data Protection Bill in mind and its content will be reviewed once the Bill becomes law. In addition, all offenders who are given an electronic monitoring requirement will receive an induction when they are fitted with a tag to explain what is required and a fair processing notice setting out what will happen with their data.
Standalone location monitoring will provide courts with one more tool to help manage the risk of offenders in the community. The pilots have indicated the operational value that can be derived from location monitoring. When targeted appropriately, it should help rehabilitate offenders, reduce the risk of reoffending, protect the public and, in some cases, provide enough assurance to the court to impose a community sentence as an alternative to immediate imprisonment. I therefore commend the draft order to the Committee and beg to move.
Lord Thomas of Gresford (LD)
My Lords, I suggest that it is unwise to introduce this commencement order before the result of the pilots is known. I gather from what the Minister just said that the first pilot ended in March but its findings will not be available until the summer and that there is still a pilot operating within the City of London.
We are familiar with electronic monitoring. It has been used to date to ensure compliance by an offender with the terms of a community order, a suspended sentence or a licence to enable a prisoner to be released. Standalone monitoring of this sort is a significant step further. The proposal is to use GPS tracking to monitor an individual’s movements, not against the prohibitions that will be set out in a court order or on release on parole, but generally. It is therefore highly intrusive, as I think the Minister acknowledged in what she said. It goes beyond what is necessary for rehabilitation or the protection of the public.
That point is perhaps emphasised even more by what we were told: that the monitoring will not be in real time—I think I understood that—but be retrospective. In other words, it is not an immediate form of surveillance but means that a probation officer will look back to see what his client has been doing rather than keep a watch over him. It is perhaps less objectionable if it is not immediate surveillance, but it may be rather more effective to use the resources that will be involved in this new system for rehabilitation rather than for tracking offenders in this way.
If this statutory instrument were brought forward after completion, evaluation and publication of the pilot projects—because we have no idea of the results of those pilot projects—it would be possible to assess whether the right balance has been struck. What are the Government going to do to bring those results before Parliament and give us notice of them? Will they give an undertaking not to seek the approval of both Houses before that is done? Otherwise we are faced with the verdict first and the trial afterwards. We want to know what the trial says so that we can comment on it and see whether this statutory instrument should be opposed when it is brought before the House.
Legal Services Act 2007 (Appeals from Licensing Authority Decisions) (General Council of the Bar) Order 2018
Debate between Baroness Vere of Norbiton and Lord Thomas of Gresford
Baroness Vere of Norbiton (Con)
My Lords, while these statutory instruments are in the name of the General Council of the Bar, they relate to the functioning of the Bar Standards Board. In accordance with the Legal Services Act 2007, the Bar Council has delegated its regulatory responsibilities to the BSB. At their heart, the statutory instruments are designed to ensure that the BSB can regulate more effectively and efficiently. I confirm to the House that the Legal Services Board has consulted on and considered the proposals and made formal recommendations to the Lord Chancellor that these orders are made.
The first order is being made under Section 80 of the Legal Services Act 2007 and makes provision enabling the First-tier Tribunal to hear and determine appeals in relation to decisions made by the BSB in its role as a licensing authority. This is a straightforward matter. The BSB was made a licensing authority in February 2017, and on a temporary basis an appeal route to the High Court was established. However, it is accepted by all interested parties that it is more appropriate that the First-tier Tribunal determines any appeals against the BSB in its role as a licensing authority. The First-tier Tribunal has a jurisdiction in the General Regulatory Chamber and judges with experience in considering regulatory appeals. Similar orders have been made in the past in respect of the Council for Licensed Conveyancers, the Chartered Institute of Patent Attorneys, the Chartered Institute of Trade Mark Attorneys and many more.
The second order is being made under Section 69 of the 2007 Act and modifies the functions of the BSB in six main ways. It gives the BSB the power to make regulations or rules allowing for appeals to the First-tier Tribunal; this is in effect the counterpart to the Section 80 order already discussed. It gives the BSB, in its role as an approved regulator, the same intervention powers that it has as a licensing authority. And it gives the BSB powers to make rules in relation to information gathering; disciplinary arrangements, practice rules on engaging disqualified individuals; and compensation arrangements. These provisions will place the BSB’s regulation of barristers on a statutory footing. Currently there is no statutory basis for much of the regulation of individual barristers or entities by the BSB. Barristers are regulated under a non-statutory regulatory regime, with barristers in effect consenting to be bound by the BSB’s rules, thus establishing a contract between them. This arrangement is underpinned by a series of agreements between the Bar Council, the Inns of Court, the Bar Tribunal and Adjudication Service and the BSB.
In an ever-changing legal services market, a contractual mechanism of regulation is not sustainable in the long term. The legal services market continues to evolve with innovative businesses—with different and novel business models—entering the market at a rapid rate. Since February 2017, the BSB has been able to license alternative business structures, in addition to regulating barrister entities and individual barristers. As of today, the BSB regulates 80 barrister entities and seven alternative business structures. The LSB and BSB believe that the interests of consumers and the public would be better protected if many of the BSB’s arrangements for regulation were placed on a statutory basis, as it would enable the BSB to react more effectively and efficiently to the rapidly changing nature of the market.
Furthermore, the LSB has concluded that, while a contractual basis for regulation may be appropriate for arrangements where the regulator and the regulated person are in alignment, it may not be appropriate in other areas, such as when enforcement action is needed. Remedies exist in the current contractual arrangements, but they may be difficult to enforce and may become increasingly difficult as new business models emerge.
I am aware that, when the LSB consulted on the draft Section 69 order in 2016, concerns were expressed by the Council of the Inns of Court, the Institute of Barristers’ Clerks and the Bar Council. The BSB has taken time to consider these concerns carefully and has committed to working with interested parties to ensure that regulations are proportionate and in keeping with the eight statutory objectives in the Legal Services Act 2007. I note that, while the Section 69 order enables the BSB to make rules and regulations in a number of important areas, the BSB cannot make changes to its regulatory arrangements without first obtaining the approval of the LSB. The LSB has strict criteria under which it considers applications for amendments to regulatory arrangements, including an expectation that appropriate consultation has been undertaken. As the LSB has demonstrated previously, it will not approve changes unless it is satisfied that the changes are necessary and will promote the regulatory objectives. In summary, the powers sought are proportionate and there are appropriate checks in place.
In conclusion, these statutory instruments are necessary to enable the BSB to carry out its role as a regulator more effectively and efficiently, and to better regulate in the consumer and public interest. I commend them to the House.
Lord Thomas of Gresford (LD)
My Lords, I really have no objection to the first statutory instrument; it seems quite appropriate that, where there are appeals relating to licensing authority decisions, they should be made to the First-tier Tribunal. I note that, when there was a consultation on these provisions, the only response was from the Bar Council, which agreed that the draft order was appropriate. Another point is that the number of appeals is very low—it is planning for appeal volumes of less than 10 cases per year, which is a very small part of the work for the First-tier Tribunal.
The order on modification of functions, however, is of a very different nature. We were discussing yesterday—and will be discussing for the next couple of months—the problems of delegated legislation and, in particular, the ability to have tertiary, not secondary, legislation; that is, the power to make rules and regulations delegated to a body outside the ambit of parliamentary scrutiny. The Bar Services Board in particular will, I believe, be outside statutory oversight by this Parliament. Therefore, one has to look very carefully at what it proposes to do. Will the Minister confirm that the Bar Standards Board has said that it wants these powers but is not going to exercise them? That appears to be the nature of what is said in the policy background and in the papers supplied in connection with this application.
The powers granted to the Bar Standards Board to make rules and regulations—tertiary legislation—are very extensive. Article 3 of the order deals with appeals. Article 4 is concerned with intervention powers that would permit the Bar Standards Board to enter premises, seize relevant papers and prevent a person practising. These are significant powers. Article 5 allows the Bar Standards Board to introduce rules and regulations that will require an authorised person—an individual barrister—to provide information and documents for the purpose of ascertaining whether any rules, regulations or code issued by the Bar Council are being complied with. In other words, it is a power to seize documents and to make a person respond to questioning about the nature of those documents. Article 6 is just out of this world. It gives the Bar Standards Board power to make disciplinary arrangements, which include the possibility of imposing fines not exceeding £50 million. Could an individual barrister have to pay a fine of £50 million? What sort of world is the Ministry of Justice living in? After the cuts it has inflicted on the Bar over many years, it is now lashing out £50-million fines and fines not exceeding £250 million for entities. These are just ridiculous figures.
Article 8 allows the Bar Standards Board, under the aegis of the Bar Council, to make practice rules requiring the formulation of a list of disqualified persons. The order allows the Bar Council, through the Bar Standards Board, to make compensation arrangements. It simply disregards the fact that members of the Bar are not allowed to hold clients’ money in any way at all, yet there are extensive compensation provisions in Article 9 of this proposed order. It seems to me that these powers are way over the top. If the Bar Standards Board is just saying, “We would like these powers but do not intend to use them”, the whole exercise is complete nonsense.
Baroness Vere of Norbiton
I thank both noble Lords who contributed to the debate today for their questions. It is helpful to consider the issues that have been raised. Of course I completely understand the position of the noble Lord, Lord Thomas, and his concerns, which I hope to be able to allay this afternoon.
He began by talking about the nature of the delegated powers, so to speak, that will be created in due course under these orders. I suppose that to some extent he is right, but of course these powers will not be unique; in many instances barristers and other similar organisations will just be falling into line with what happens with other legal services organisations. The LSB—this relates to comments made by the noble Lord, Lord Beecham, as well—is an independent body from the Ministry of Justice. As with these sorts of bodies, the board members and the chair are appointed by the Lord Chancellor in consultation with the Lord Chief Justice. These are ministerial appointments and, as noble Lords would expect, these public appointments go through the process that is regulated by the Commissioner for Public Appointments.
The Legal Standards Board is of course tasked with looking at the rules and regulations of all the organisations in its field of responsibility. In these circumstances, any rules and regulations that are put in place by the Bar Standards Board will have to go to the LSB for approval, which is very important in making sure that the process is robust. The LSB has strict criteria on what the regulations and rules can set out for all its organisations. This is definitely not a rubber-stamping exercise. For example, in 2014 the LSB rejected a request from the Solicitors Regulation Authority to reduce its professional indemnity insurance limit—so there are still more than adequate safeguards to ensure that the rules are proportionate.
On intervention powers, which, again, the noble Lord, Lord Thomas, raised, under Schedule 14 to the Legal Services Act 2002 the BSB already has intervention powers in its role as a licensing authority that licenses alternative business structures. This order simply gives the BSB the same powers in regulating barristers and barrister entities. I am very keen that we understand that this simply also creates a level playing field as the innovative nature of legal services moves on and the number and type of organisations increase.
The BSB would intervene only in very rare circumstances if it were necessary to protect consumer and public interest—for example, if an entity were about to go bankrupt. The powers include seizing papers and closing down an entity. Of course, there is a right for the person affected to appeal to the High Court. We are very clear that the intervention powers will be used as a last resort, and after other sanctions, where there is an urgent need for protection.
The noble Lord, Lord Thomas, also asked why the BSB is seeking these powers if it is apparently not going to use them. To a certain extent we have to look at the types of organisation that we have at the moment but we also have to future-proof our regulatory regime against what might happen in the future. The regulated legal services market is evolving very rapidly at the moment and we must be prepared for what may come in the future. For example, where there might currently be no need for compensation arrangements, this may change in the future. The draft order enables the BSB to take a proportionate and, importantly, consistent approach to regulation by being able to decide to whom the obligations should apply.
The noble Lord, Lord Thomas, raised a point about fines. The maximum levels of fines may appear to noble Lords to be very high, as indeed they do to me—I cannot conceive of having that much money—but we must understand that some of the alternative business structures in particular will contain significant amounts of capital and may grow quite large, involving not just legal services but other types of businesses. It is important that we have the right incentives to make sure that people do not contravene the rules. The amounts are absolute maximums and it will be for the BSB to consider and consult on what fining regime and fine levels it should have in the future. As with all proposed rules, the fining regime will need to be approved by the Legal Standards Board. This safeguard keeps coming back: the Legal Standards Board has to approve the issues that we are talking about today.
Lord Thomas of Gresford
My point is that nobody other than the Legal Services Board will ever look at the possibility of effectively an offence being introduced by the Bar Standards Board with a maximum fine of £50 million—or £250 million if it is an alternative business structure. What is the need for that?