Economic Crime and Corporate Transparency Bill

Lord Faulks Excerpts

Consideration of Commons amendments
Monday 11th September 2023 Lords Chamber

[Lord Eatwell (Lab)]

My Lords, I strongly support the amendment from the noble Lord, Lord Agnew. I do this as a former chair of the Jersey Financial Services Commission. In Jersey we made a major effort to increase the transparency of trust information so that beneficial ownership could be accurately identified. One of the inhibitions for cleaning up, if you like, the register in Jersey was the behaviour of the Government in the United Kingdom, and their persistent obfuscation of the way in which trusts were to be treated.

The amendment from the noble Lord, Lord Agnew, contains exactly the process that needs to be dealt with in a consultation. I understand the assurances he may have received and that he may feel it appropriate to withdraw his amendment, but I hope he proves as dogged as we know him to be in pursuing this. I assure him of my continuing support.

[Lord Faulks (Non-Afl)]

My Lords, I also support what the noble Lord, Lord Agnew, has said and done. I am very sorry that the Government did not accept the amendment in relation to trusts. It was entirely in keeping with the purpose of the Bill, and more specifically with the purpose of the introduction of the register of overseas entities.

Some of us have been advancing the cause of this register—some would say banging on about it—for some considerable time. I had the privilege of chairing the Joint Committee on a draft Bill. We recommended legislation as soon as possible. Unfortunately, it took the invasion of Ukraine for the Government to incorporate the necessary legislation into the last economic crime Bill.

During the taking of evidence by the committee in 2019, the need to avoid trusts being used to avoid the identification of the true owner of property was specifically brought to our attention. It then became part of our recommendations that the legislation, when it came before your Lordships’ House, should cater for this obvious loophole. The Government ignored the recommendation then and have now resisted the amendment passed by your Lordships’ House.

If there is concern about minors and keeping them ignorant about their status as beneficiaries, this could have been catered for by an appropriate provision. Instead, the Government, against whom the former Lord Chancellor voted in the other place on this issue, have resorted to “financial privilege” as a means of blocking the amendment.

Trust lawyers are going to be very busy, as foreign owners will set about frustrating the purpose of the register and the aspirations that we all share for this and related legislation. I hope the Government bear that in mind.

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I gently submit that the argument I make is not anti-Conservative. Indeed, this whole discussion is not a party-political argument, but one about making good, coherent and sustainable criminal law in a pragmatic way. After all, it was a Conservative-led Government who enacted Section 7 of the Bribery Act and a Conservative Government who enacted the 2017 Act. Surprising as it may seem to my noble friends, I am not a socialist dedicated to the downfall of capitalism, but a Tory interested in the growth of good and honest business. I therefore urge my noble friends on my own government Front Bench to recognise the compromises that I have spoken to and to accept them with the willingness with which they are offered. I beg to move.

[Lord Faulks (Non-Afl)]

My Lords, I will take this opportunity to speak to my Motion H1 in the same group, which proposes, as an amendment to Motion H, to

“leave out from ‘161’ to end and insert ‘, do disagree with the Commons in their Amendment 161A in lieu, and do propose”

the amendment listed at page 24 of the Marshalled List.

However, I should explain that there is a mistake in this amendment, which is no doubt my fault. There were various communications between me and the Public Bill Office on Friday afternoon, in order to get the amendment in the appropriate shape, and a “not” features in the wrong place. I will explain where the omission is and why I submit that it does not ultimately matter.

The intention behind this amendment, under “Civil recovery: costs of proceedings”, was to try to give some protection to the agencies in the case of adverse costs orders made against them. This amendment was passed by your Lordships’ House; it went back to the House of Commons last Monday and was rejected.

My amendment is a softening of the original amendment put down by the noble Lord, Lord Agnew, and me—softening because it had to be softened somewhat to comply with the rules. Proposed new subsection (2) should read:

“The court should not normally make an order that any costs of proceedings relating to a case to which this section applies … are payable by an enforcement authority to a respondent or a specified responsible officer in respect of the involvement of the respondent or the officer in those proceedings, unless it would be in the interests of justice”.


So the “not” should be inserted earlier and removed later on.

The amendment that was drawn to my attention today did not entirely reflect my intention. I have been in communication with the Public Bill Office as to whether it was possible to amend it. Although it is possible to table a manuscript amendment—see paragraph 8.172 of the Companion—it is inelegant and I am told that the better course is to explain the purpose of the amendment. Were the House to be in favour of the amendment, the matter can be amended at the House of Commons stage. That appears to be the position.

Now perhaps I can come on to the merits, as I see them, of the amendment. The Minister says that my amendment—which is really not much more than a nudge; it does not compel the court to do anything in relation to costs—is intended to prevent any disincentive being provided to the agencies, who may seek to recover the proceeds of crime, often against very well-resourced defendants. Unexplained wealth orders, brought in by the Criminal Finances Act, were to be a powerful weapon in seeking to obtain recovery, ultimately, from those whose wealth was not easily explicable. The agency tried on one occasion to do that and was unable to surmount the hurdle the court said was appropriate in these cases—and, indeed, which Parliament said was appropriate. The result was an order of £1.5 million-worth of costs against the agency.

Perhaps unsurprisingly, there has not been great enthusiasm to take up unexplained wealth orders on the part of the Serious Fraud Office. So your Lordships’ House, during the last economic crime Bill proceedings, very sensibly produced an amendment that, broadly speaking, reflected the amendment we are now discussing in relation to unexplained wealth orders, so as not to provide such a disincentive to the authorities seeking to obtain one of these orders. The rationale behind my amendment is precisely the same. The Minister says that this offends the “loser pays” principle. He is right that the starting point in most civil cases is that the loser pays—for very good reason. If A brings a claim against B that proves to be unjustified, and B has been put to expense thereby, why should B not recover his or her or its costs from A?

However, that rule is subject to many exceptions, as all those who are familiar with the law will know. For example, on some occasions the court orders each side to bear its own costs, having regard to the facts. Sometimes there will be no orders as to costs; sometimes there will be issue-based costs. There will be a variety of different orders to meet the justice of a particular case. Sometimes Parliament even specifically weights the cost in one particular direction. An egregious example is Section 40 of the Crime and Courts Act, which is a controversial issue but shows that Parliament is perfectly capable of deciding who should pay the costs in particular circumstances.

What will happen if this particular provision becomes part of our law? I suggest what will happen is that a judge looking at the end of a case will see that Parliament has decided that normally there should not be an order that the agency pays the costs. However, if the agency quite unreasonably, without proper evidence, seeks to pursue somebody for the proceeds of crime, there is of course the saving provision—“in the interests of justice”—which is part of our amendment. So a court is perfectly able, as it will always do, to look at the particular circumstances of the case and decide that, in this case, the agency has been inappropriately pursuing somebody, seeking a remedy when they should not have done. But this is a nudge towards the judge, and a very qualified exception to the “loser pays” principle.

It is, however, an important amendment. Those giving evidence towards the Bill Committee included Bill Browder, who may be well known to your Lordships for his particularly vigorous pursuit of justice in this particular area, and representatives of the Serious Fraud Office. I would be interested to know from the Minister what the approach of the agencies is to this. If he tells me firmly that they do not want this power, that is of course a powerful argument. It would be somewhat at odds with the evidence and the information I have, but I do not have a complete and total understanding of what their approach should be.

It seems to me that someone running the Serious Fraud Office or the NCA, when deciding whether or not to pursue somebody, would bear very much in mind their budget and the cost consequences of taking a particular course of action. If they knew that there was a degree of protection—and that is all this is, a degree of protection—provided in this, it would act as much less of a disincentive. If they thought that, should they fail to recover what they thought they were entitled to, there would be a very heavy hit on their budget, it might mean that they would not do so, which might be contrary to the interests of justice.

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Moved by

[Lord Faulks]

Leave out from “161” to end and insert “, do disagree with the Commons in their Amendment 161A in lieu, and do propose Amendment 161B in lieu—

161B: After Clause 187, insert the following new Clause—
“Civil recovery of proceeds of crime: costs of proceedings
Civil recovery: costs of proceedings
After section 313 of the Proceeds of Crime Act 2002 insert—
“313A Costs orders
(1) This section applies to proceedings brought by an enforcement authority under Part 5 of the Proceeds of Crime Act 2002 where the property in respect of which the proceedings have been brought has been obtained through economic crime.
(2) The court should normally make an order that any costs of proceedings relating to a case to which this section applies (including appeal proceedings) are payable by an enforcement authority to a respondent or a specified responsible officer in respect of the involvement of the respondent or the officer in those proceedings, unless it would not be in the interests of justice.”””

[Lord Faulks (Non-Afl)]

My Lords, I wish to test the opinion of the House.