Economic Crime and Corporate Transparency Bill

Lord Bellamy Excerpts

Report stage
Tuesday 27th June 2023 Lords Chamber

[The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bellamy) (Con)]

My Lords, I am very grateful to the House and to all noble Lords who have spoken in today’s debate and in earlier debates. If I may say so, I think we have collectively changed our minds, or developed our thoughts, in various respects as a result of a collective effort, for which the Government are grateful. I am particularly grateful to those noble Lords who have engaged outside the Chamber: the noble Lords, Lord Faulks, Lord Ponsonby and Lord Cromwell, the noble and learned Lord, Lord Thomas, the noble Baroness, Lady Stowell, and others, have all contributed most constructively to the debate. There is clearly a great deal of strength of feeling on the issue of SLAPPs. It is therefore with some optimism that I hope the amendments I am about to move formally will be accepted: Amendments 102, 103, 137, 141, 142 and 143.

I will first make a general remark. In civil litigation generally, parties are not necessarily evenly matched. One may have more private resources than the other; one may be legally aided while the other is not. That is a fact of life, but one relies on the rules of procedure and the good sense of the judge to see fair play, bearing also in mind the inherent power of the court to strike out a claim for abuse of process. But when we come to SLAPPS—short for strategic litigation against public participation, a rather unwieldy phrase—two additional factors come into play. This is probably common ground in this House. In addition to the possible imbalance of power between the parties, the two additional factors are, first, the right to free speech, which is essentially what this legislation protects, and secondly the public interest in full and frank disclosure of wrongdoing.

Effectively, to use the courts or the threat of litigation as a means of preventing free speech and possibly covering up wrongdoing is a particular kind of abuse of process. It may well be that the power to control such behaviour already exists under the inherent direct jurisdiction of the courts—as I think my noble and learned friend Lord Garnier may have observed earlier—but the Government wish to put that issue beyond doubt and to put a stop to SLAPP-type tactics. We cannot allow the misuse of our legal system to suppress public interest investigations and reports. On the other hand, we have to safeguard access to justice in the measures that we take, so there is a balance to be struck here. The Government respectfully suggest that this Bill finds that balance.

I will first take the definition of SLAPPs. What is a SLAPP claim? It has a number of components. First, it will be one where the complainant has acted, or intended to act, to restrain the defendant’s exercise of their right to freedom of speech. The defendant will typically be a journalist. Secondly, the exercise of that right is a matter relating to economic crime—this is necessarily limited at the moment to economic crime because of the scope of the Bill—and for a purpose related to the pursuit of the public interest in combating such economic crime. Lastly, the claimant will have misused the litigation to cause harm to the defendant, in the circumstances defined in the clause.

For such SLAPP claims there will be several protections. First, there is the early dismissal test. The claimant will have to establish that they are more likely than not to succeed at trial. Normally, if you try to strike something out, it is you who has to establish that, but if it is a SLAPP claim, the burden is reversed and the claimant must establish that they are more likely than not to succeed at trial. That is an important change in the onus.

Secondly, there is the costs protection of the defendant, who will not have to pay the costs, even if there is eventually an adverse outcome at trial. On pre-litigation tactics, raised on a number of occasions by the noble and learned Lord, Lord Thomas, and others—it is a very fair point—in the Government’s view the costs protection and the reversal of the burden of proof very largely draw the sting of those threats. The journalist can sit back and say, “Well, do your worst. I’m protected on costs and by the change of the onus”, so the teeth are drawn from the attempt to suppress the publication of wrongdoing.

In addition—I will come to this in a moment—there are the powers of the Solicitors Regulation Authority to pursue the solicitors through its disciplinary procedures. With those protections, there is a very substantial assault by this legislation on SLAPPs. The Government’s view is that the courts will have the necessary tools and guidance from Parliament to deal with SLAPP lawsuits aimed at stifling freedom of speech and preventing journalists exposing economic crime.

As to the points rightly raised by the noble Lord, Lord Cromwell, that we should have gone further and so forth, the Government’s view is that we can always improve the shining hour—of course we can—but here we have, to use the words of the noble Lord, a good chunk of what is necessary. The Government’s view is that, at the moment, these provisions go far enough. As far as Scotland is concerned, discussions are continuing with our Scottish counterparts—it is a separate legal jurisdiction—and the same is true in Northern Ireland, so those matters will be pursued in due course. But the Government ask the House to accept that the provisions of this Bill as framed cut the mustard, if I may use the expression.

Of course, SLAPPs are broader than just economic crime. In answer to the question of the noble Baroness, Lady Blake, and others, the Government will come forward with completing the jigsaw as soon as a suitable legislative vehicle appears. At the moment, we are engaged in what, in another context, is called horizon scanning, to see when we can find a legislative vehicle that will do the job. This is not something the Government are going to forget about, and nor would this House allow us to do so. As soon as we can do it, we will get on to it.

It is entirely true that we now need the Civil Procedure Rules to back this up. The Civil Procedure Rule Committee will no doubt proceed as fast as it can; it is well-versed in ensuring that there are appropriate rules to make sure that legislation can have its proper effect in the courts. I have no control over the timetable of the Civil Procedure Rule Committee, but the message from this House is to get on with this as fast as we can. Indeed, if I may quickly refer to the comments of the noble and learned Lord, Lord Thomas, of course we need, as he suggests, quick, cheap and flexible procedures. One would hope that those will be developed judicially by senior judges, and that this legislation will have the desired effect. The Government have every confidence in the ability of the courts to put into effect what is the clear will of Parliament.

I turn to Amendment 94, in the name of the noble Lord, Lord Faulks. With regret, the Government, although sympathetic to the amendment’s objectives, do not feel that it would be right to criminalise access to justice in the way proposed. As the noble and learned Lord, Lord Garnier, pointed out, we have got rid of criminal libel. We have a balance to strike here. It would be very strong to say that it is, or is potentially, a criminal offence to commence proceedings in the courts. The courts have to be open. In the Government’s view, the balance to be struck here is civil, not criminal. Creating a criminal offence with such a broad application to tackle what is, in essence, a civil matter would be inappropriate. We do not have the evidence to support such a development. It would be entirely inappropriate to create a criminal offence that would not be very clearly defined and would potentially prevent access to justice—apart from, of course, establishing the criminal instead of the civil standard, which we are essentially dealing with here.

The creation of a criminal offence would go far beyond the Government’s measures and, I think, would mark a departure from other jurisdictions, to which some reference has been made. I might be wrong, but I do not know of one that has made this kind of activity a criminal offence. In the light of those comments, I invite the noble Lord to withdraw the amendment.

Amendments 125H and 125J were tabled by my noble friend Lady Stowell. I thank her again for her constructive engagement on the Bill. These amendments seek to allow the Solicitors Regulation Authority to set its own fining limit for cases of professional misconduct relating to abusive litigation brought forward to suppress reporting on economic crime.

Clause 195 removes the statutory limit on the level of financial penalty that the Law Society, which delegates the matter to the SRA, may impose, and a similar provision applies to the Scottish Solicitors’ Discipline Tribunal. The intention that my noble friend expresses is shared by the Bill, but the Government’s view is that the current drafting of these clauses, which already captures disciplinary matters relating to economic crime, covers the matters to which my noble friend referred. If the SRA can demonstrate that an abusive litigation case breached a rule specifically for economic crime or

“purposes relating to the prevention or detection of economic crime”,

that should permit it to use its new fining powers, so my noble friend’s amendments are, in the Government’s view, unnecessary.

I assure my noble friend that the Government’s intention is that this measure allows the SRA to impose fines above £25,000 against solicitors and law firms that fail to comply with the rule by taking part in or facilitating abusive litigation, whether or not such cases reach court or are struck out, provided that the SRA can establish a link between this type of misconduct and the prevention or detection of economic crime. This legislation is directed not just to cases that come to court but to pre-action threats and actions to deal with attempts to intimidate.

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[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.

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Moved by

[Lord Bellamy]

102: After Clause 187, insert the following new Clause—
“Power to strike out certain claimsStrategic litigation against public participation: requirement to make rules of court
(1) The power to make Civil Procedure Rules must be exercised so as to secure that Civil Procedure Rules include provision for ensuring that a claim may be struck out before trial where the court determines—(a) that the claim is a SLAPP claim (see section (Meaning of “SLAPP claim”), and (b) that the claimant has failed to show that it is more likely than not that the claim would succeed at trial.(2) Rules made in compliance with subsection (1) may include rules about how a determination under that subsection is to be made, including (in particular)—(a) rules for determining the nature and extent of the evidence that may or must be considered;(b) rules about the extent to which evidence may or must be tested;(c) rules permitting or requiring the court to determine matters of fact by way of presumptions.(3) Rules made in compliance with subsection (1) must include rules under which the court may make a determination under that subsection of its own motion.(4) The power to make Civil Procedure Rules must be exercised so as to secure that Civil Procedure Rules include provision for securing that, in respect of a SLAPP claim, a court may not order a defendant to pay the claimant’s costs except where, in the court’s view, misconduct of the defendant in relation to the claim justifies such an order.(5) The Lord Chancellor may by regulations provide for subsections (1) to (4) to apply in relation to any rules of court that may be specified in the regulations as those subsections apply in relation to Civil Procedure Rules.(6) In this section—“court” includes a tribunal;“rules of court” means rules relating to the practice and procedure of a court or tribunal.”Member’s explanatory statement
This new clause, new clause (Meaning of “SLAPP claim”) and my amendments at page 191, line 37, page 192 at line 33 and 192, line 38 provide for the making of rules of court with a view to preventing claimants from improperly using civil proceedings to restrain certain disclosures of information relating to economic crime.

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[Lord Ponsonby of Shulbrede (Lab)]

My Lords, if the noble Lord chooses to move to a vote, we will support him. This amendment would build on last year’s Bill, which introduced similar changes to unexplained wealth orders. It is a welcome development, and I hope that the noble Lord presses his amendment to a vote.

[Lord Bellamy (Con)]

My Lords, unfortunately, the Government are not able to accept this amendment, although we are sympathetic to the points made by my noble friend Lord Agnew. The amendment is designed to protect public authorities from having costs awarded against them if they fail to recover the proceeds of economic crime under the Proceeds of Crime Act.

First, the Government are not persuaded that public authorities that lose their case should be protected in this way. Secondly, this is a major breach of the general principle applied in civil litigation in the High Court that the loser pays.

Thirdly, it is a major interference with the discretion of the court on the question of costs. Fourthly, if such a change were to be contemplated, it should be a matter for the Civil Procedure Rules and not something inserted without detailed reflection on Report in your Lordships’ House. Fifthly, it would produce even more inconsistency than allegedly we have already. I do not accept that there is material inconsistency, but you would have one rule for some POCA cases and another rule for other POCA cases, because not all POCA cases are economic crime cases.

However, the Government are prepared actively to consider a consultation to properly consider this matter and the evidence with a view to ensuring that there is a correct balance of justice and the proper consideration of the pros and cons. That, very briefly, is the Government’s position.

I will briefly deal with one or two points. This is not like unexplained wealth orders, which have been mentioned. Those are an investigative procedure and not determinative of civil rights and obligations. In some respects, the UWO procedure is closer to a search warrant than to a recovery of money in civil litigation. It does not provide an analogy to the present case.

It is true that there are various costs regimes in various cases. It is probably not useful to weary your Lordships with particular decisions, but it is not without interest that in the case of Pfizer and Flynn, which involved the Competition and Markets Authority, the authority lost at first instance and was ordered to pay some of the costs. The Court of Appeal overturned that on the basis that it did not want to have the “chilling effect” of public authorities having to pay the costs when they lose litigation. However, the Supreme Court restored the original judgment and said, “This so-called chilling effect is only one factor”. In other words, it is not decisive. You must consider in that jurisdiction all the factors. The Government draw from that case that the so-called chilling effect is not necessarily decisive, and that one must have a regime that enables the court to balance all the relevant effects.

With all respect for the motives behind it and the concerns that have been expressed, this amendment is too blunt an instrument to be a proper exercise of primary legislation in an area which very much calls for balanced consideration under the Civil Procedure Rules. As I said at the outset, the Government are perfectly prepared actively to consider reform of the Civil Procedure Rules with that aim in mind.

I hope that I have persuaded your Lordships that this is not an occasion to make an exception to the well-established rule that has stood for hundreds of years, whether it applies to HMRC, the National Crime Agency or the FCA. If they make a complete Horlicks of a case, there is no reason to let them off the costs. That is the Government’s position.

[Lord Agnew of Oulton (Con)]

I thank my noble and learned friend the Minister for his answer. He has always been entirely consistent, and I respect that. We have a genuine difference of views. English law has plenty of exceptions to the landscape which my noble and learned friend has set out—for example, when local authorities bring cases following the Booth case, law enforcement bodies when they bring cases in the magistrates’ court, the Law Society when it brings disciplinary action, its prosecutions that fail following the Baxendale-Walker case, and the Competition and Markets Authority, where the Competition Appeal Tribunal can rule in its favour when it is unsuccessful in bringing a case.

There are plenty of examples. I am not seeking to make the perfect the enemy of the good. We can bring this in with this Bill. It would send a very powerful signal. I seek to test the opinion of the House.