Lord Beecham
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Crime and Courts Bill [HL]
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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 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 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.
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.
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.
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.