Economic Crime and Corporate Transparency Bill

Debate between Lord Etherton and Lord Bellamy

Report stage
Tuesday 27th June 2023 Lords Chamber

[Lord Etherton (CB)]

I tabled all the amendments in this group. I am very grateful to those who have added their names to them: the noble Lords, Lord Verdirame, Lord Pannick and Lord Anderson of Ipswich. I am also very grateful to the Minister, the noble and learned Lord, Lord Bellamy, for meeting me and senior representatives of the Law Society and of the Bar Council to discuss what is now Clause 197.

All these amendments relate to the new regulatory objective in Clause 197 that amends the Legal Services Act 2007 by inserting for the Legal Services Board a new objective:

“promoting the prevention and detection of economic crime”.

As I said in Committee, this proposed new regulatory objective is extraordinarily wide and imprecise. The meaning of the word “promoting” lacks any clarity or certainty. It raises legitimate concerns about a potential lack of proportionality and overregulation by regulators, and about a lack of evidential risk as to those sectors most likely to come into contact with economic crime—for example, advisers rather than advocates. And even in the area of advisers, it is hardly likely to involve experts in the environment or town planning.

As the MoJ’s impact assessment of the new regulatory objective makes clear, the front-line regulators of the legal profession are already implicitly under a duty to ensure that lawyers are not breaching economic crime rules. The provisions in Clause 197 are merely to make explicit what is already implicit, and it is important that the Legal Services Board and the front-line regulators understand that this is the case.

The definition of economic crime for the purposes of Clause 197 is provided in Clause 187(1) by mean of cross-reference to Schedule 10, which contains a long list of statutes. This provides no focus on what is really at issue and should be the concern of regulators. That is spelled out clearly in my Amendment 95—namely,

“the offences of fraud, false accounting, money laundering or offences under any binding sanctions regime, whether at common law or in primary or secondary legislation”.

This lack of focus could well promote overregulation and a lack of proportionality.

What is needed is a clear statement from the Minister, which I would very much welcome today, on the following. First, regulators must understand that this is not a new regulatory duty but one that states explicitly what is already implicit. Secondly, there should be a focus on the particular criminal activity which is relevant: fraud, false accounting, money laundering and offences under any binding sanctions regime. Thirdly, there is a need for evidence-based regulation according to evidence of risk in particular areas of work and practice, as I described, such as transactional work rather than contentious and court-based work, and areas of advisory work which might be relevant in which economic crime might well occur. Fourthly, there will also be a need for proportionality by regulators. Fifthly, the regulators must understand, as the Minister said before, that there is to be no interference with the principle of legal professional privilege. Finally, there is a need for consultation with the profession to ensure that the new objective successfully tackles economic crime in the proportionate and evidence-based way I have described.

I hope the Minister will be able to make those points clear to the profession to enable a proper regulatory framework to work. I beg to move.

[Lord Bellamy (Con)]

I thank the noble and learned Lord, Lord Etherton, for his engagement on this topic throughout the Bill and for his remarks today. I briefly reiterate that the definition of economic crime is deliberately widely drawn. It applies not only to the regulatory objective but to several other clauses of the Bill, including the information-sharing measures between various financial institutions at Clauses 182 and 183. The Government do not believe that restricting that definition would be right.

It is true that there is a long list of offences in Schedule 10, including the reference to theft. Sometimes it is difficult to distinguish between fraud and theft, but I am happy to acknowledge that typical forms of theft, including low-level theft such as shoplifting or street crime or similar activities, are most unlikely to be relevant to anything in the Bill. Therefore, the Government do not feel able to change the definition of economic crime specifically for the legal sector, and the regulators must be able to respond to circumstances as they develop.

I shall address in a little more detail some of the points raised by the noble and learned Lord, Lord Etherton, this afternoon. I hope to cover all those points one way or another. First, in relation to legal professional privilege, the regulatory objective already requires adherence to professional principles under the Legal Services Act. In the Government’s view, there is no need for a specific reference to legal professional privilege, but I can make it absolutely clear that the Government do not consider that the Bill makes any difference to the principle of legal professional privilege. It is in no way an assault or attack on that fundamental principle of English law. The protection of legal professional privilege, as developed in the courts, will continue to apply in this area, as in many other areas. That is the Government’s position, and I hope that it is clear

As to how the regulatory objective and the provisions of the Bill will operate in practice, and in response to the noble and learned Lord, Lord Etherton, who made various entirely fair points, the intention and purpose of the regulatory objective is to put the onus on legal services regulators to be active in promoting and upholding adherence to the economic crime regime. The new objective will put beyond doubt and clarify that securing compliance is explicitly part of the regulatory role. We expect regulators to use all the tools available to them, but their activity should be appropriately targeted and not in any sense just a box-ticking exercise. The objective does not directly place new duties on lawyers. It is directed to the legal services regulators, and existing safeguards remain.

All those regulators will still be bound by public law principles, which will ensure that any regulation of legal services is proportionate and fair. Proportionality is particularly important. Section 3 of the Legal Services Act already requires the Legal Services Board to have regard to the principle that regulatory activity should be transparent, accountable, proportionate, consistent and targeted only for cases where action is required. The new regulatory objective on economic crime fits within this framework and existing objectives, such as supporting the rule of law, promoting the public interest and improving access to justice.

It is understood and expected that the Legal Services Board will work closely with the professions in developing guidance to support the new objective. This will include a public consultation on any necessary policy statement or guidance to ensure that the regulatory objective is implemented in a targeted and proportionate way. This will allow the LSB to capture and analyse any concerns that professional bodies or others may have, or continue to have, in relation to the new objective.

Retained EU Law (Revocation and Reform) Bill

Debate between Lord Etherton and Lord Bellamy

Committee stage
Monday 6th March 2023 Lords Chamber

[Lord Bellamy (Con)]

My Lords, the Government’s position is that this is not a straitjacket. The courts are required to look at three things: the fact that the retained EU case law is made by a different court, whether there has been a relevant change of circumstances, and how the proper development of the common law should continue in future.

As to why we have not included other considerations—notably, legal certainty—the Government’s position, which noble Lords may or may not agree with but this is the explanation, is that once you write down the importance of legal certainty, that is potentially a recipe for passively doing nothing and continuing to be a rule taker for 20 years to come. That is not the consequence of withdrawing from the EU. The courts can continue to look at it, but that is the reason why the Government have drafted Clause 7 as it is.

I hope I have dealt with most of the issues raised about Clause 7 one way or another. There is the reference procedure, and noble Lords, and noble and learned Lords, have made the point that higher courts always have the discretion whether to take a case, and they should be able to decline it. I completely understand that point. The Government had thought that the ability of those superior courts—the higher courts or the Supreme Court—to decide whether what they were being asked to do was relevant and whether the point raised was of general public importance was sufficient protection and would enable them to decline to hear the case if that were so. I must say that the circumstances in which a lower court actually gets as far as making a reference and identifying a point of public importance that a superior court feels it should not hear seem to me, if I may say so, somewhat remote, but we can have another look at the drafting if there is a need for further reassurance. I cannot commit to changing it, but I can commit to looking at it and discussing it with the relevant persons.

[Lord Etherton (CB)]

My Lords, will the Minister please reply to the point I made? The situation may be such, as we know from bitter experience, that you can identify an important point of law in a case but, unless it is dispositive of the whole of it, it will lead to further expense and time. That may apply equally to this point of law as to any other. There is no special feature regarding points of law relating to retained law, as opposed to points of law in any case.

[Lord Bellamy (Con)]

That might raise the question of whether indeed it was relevant. You could say, “That’s not relevant here because it’s not dispositive”, or “It’s only one point among several”. However, I say to the noble and learned Lord that the Government will have another look at this. There is no point in having provisions that are not satisfactory in this regard.

That takes me to the law officer reference and intervention powers. On the essential points made by my noble friend Lady McIntosh about the position of the Lord Advocate, I hope she will bear with me. My understanding of the exact position of the Lord Advocate is probably not as good as hers and that of other noble Lords in the Committee. Essentially, the law officer reference power provides another mechanism for resolving these various points, and it gives the UK law officers and the relevant officers of the devolved Governments a statutory right to be considered and so forth. It does not extend the Lord Advocate’s powers to anything outside the devolved competence of the Scottish Government, any more than it does for the Counsel General for Wales or the Attorney-General for Northern Ireland. The Government’s view on this point is that the other law officers in the devolved Governments should be involved in matters that affect the devolved Governments and not matters that are retained UK law. That is the Government’s position.