Economic Crime and Corporate Transparency Bill

Lord Garnier Excerpts

2nd reading
Wednesday 8th February 2023 Lords Chamber

[Lord Garnier (Con)]

My Lords, I hope I am not going to disappoint the noble Lord, Lord Stevens, because I doubt I shall be either original or adequately brief. I will not be original because I have been saying what I am about to say for the last 15 years, and it is coming back to haunt me.

Beyond that, I congratulate my noble friend—actually he has disappeared now, lucky man—Lord Johnson on his new responsibilities. I also commiserate with my noble friend Lord Sharpe as this is the second day running that he has had to listen to me in this Chamber, and I suspect he will be looking for a longer than usual half-term.

On 11 March last year I spoke briefly in the Second Reading debate on the first economic crime Bill—there is an admission of my lack of originality. As I did then, I refer to my interests in the register and declare that as a barrister in private practice I am from time to time instructed both by the Serious Fraud Office and by companies and individuals in which the Serious Fraud Office has taken an interest. I am also a media law practitioner. Despite that, I will not get into the interesting SLAPPs debate today, much as the remarks of the noble Lords, Lord Trevethin and Oaksey, Lord Faulks and Lord Cromwell, tempt me. I will say that it is a subject that needs a proper and detailed debate. Whether or not it fits within this Bill, it is a debate that Parliament needs to have.

This comes back to the point that my noble friend Lord Gold was talking about: the Serious Fraud Office and its resourcing. If the Serious Fraud Office were adequately resourced in terms of manpower, legal brainpower, and pounds, shillings and pence, we could probably catch the burglars and bandits who currently seem to be terrorising informal and formal journalists before they had a chance to issue their proceedings, and put them in prison. Unfortunately, the Serious Fraud Office, in my view, is woefully underfunded, and as a consequence performs inadequately, for some of the reasons that my noble friend Lord Gold has already mentioned.

I shall provide just one little anecdote since it is nearly bedtime. In 2011 I went to New York as Solicitor-General to discover from the American prosecuting authorities and from private lawyers in New York City how they dealt with economic crime—what essentially was Wall Street crime. I spoke to the then Assistant Attorney-General for the state of New York in the southern district of New York City, so he was essentially the Serious Fraud Office man in Wall Street. When I told him what the Serious Fraud Office’s annual revenue budget was, he roared with laughter and said, “I spend more than that on flowers for my office.” He was joking, but behind that he had a serious point. If we underfund—if we constantly put our feet on the throat of—our investigatory and prosecuting authority, particularly in this highly complicated area of criminal activity, and then complain that it does not do that properly, we are just asking for trouble.

However, I am delighted to welcome the Bill. It is a good Bill but none the less, as all the people who have spoken before me have said, it could be improved. I will touch on two related subjects that we need to think about. I know the Government are now actively thinking about this area, not only because noble Lords have mentioned it and it has been mentioned as having been discussed fully in the other place but because I was lucky enough to have a meeting with my noble friends Lord Callanan—when he was in post on this Bill—and Lord Sharpe and their officials last week.

I have been thinking about the law on financial crime since the financial crash of 2008-09 when I was shadow Attorney-General and then the Solicitor-General in the coalition Government. It occurred to me that we ought to develop something called the deferred prosecution agreement—DPA—regime. It was enacted through the Crime and Courts Act 2013, and it is a regime that pragmatically and justly deals with corporate financial crime under the supervision of the courts. I will not go into the detail of the system now but, if I may say so, it works.

DPAs are not the end of the story. Financial crime is often thought of as the crime that does no real harm: no one gets killed, no bones are broken and there is no blood on the carpet. Equally, corporate offending is sometimes hard to visualise. But corporate crime and financial crime cause great harm to people, to communities, to the economy and to our national reputation as a safe and honest place to do business. Both are all too common and need to be investigated and dealt with effectively by the public authorities, here and abroad. Financial crime is often, by the very nature of modern financial services, both international in its scope and committed electronically through corporate structures, albeit with a human mind and will behind it.

I hope, with other noble Lords, to expand on this theme in Committee, as happened in the other place, as was mentioned by my noble friend Lord Leigh. But for present purposes I shall say only this, which may be of some assistance—perhaps not much—to my noble friend Lord Gold. Section 7 of the Bribery Act 2010 creates a corporate offence of failing to prevent bribery, a subject already touched on by a number of noble Lords. It has been deployed successfully on several occasions and bites on overseas activities. It provides a model which can and should be replicated in other areas of financial crime.

I say to my noble friend Lord Gold that there have been a number of cases under Section 7 of the 2010 Act, particularly in the area of deferred prosecution agreements, where the failure to prevent model has worked very well and, if I may say so, has brought into the Exchequer huge sums of money from errant companies. There is no difficulty in working out what an associated person is or what are, as a matter of law, adequate procedures, so the model is there.

The model is also there in the Criminal Finances Act 2017, which introduced the corporate criminal offence of failure to prevent criminal facilitation of tax evasion. I suggest that we should, by this Bill, expand the failure to prevent regime to cover at least some of the 50 or so financial or economic crimes that are available to be dealt with by DPAs, as listed in Schedule 17 to the Crime and Courts Act 2013.

Finally, I invite your Lordships to think that we must reform the law relating to corporate criminal liability. I have been writing and speaking about the need to do this for years. The concept of the directing mind and will as the basis for corporate criminal liability, which the Americans abandoned before the First World War, worked for the small family businesses of the 19th century but is now long outdated. Today, companies can operate in many different countries, with national, regional and global boards, and with hundreds of thousands of employees engaging in multijurisdictional trade in goods and services. Locating the directing mind and will of these vast conglomerates is difficult, if not impossible, and the current law does not reflect the reality of modern business life. It is an affront to common sense and to justice. As in the United States, we need to introduce vicarious liability into our corporate criminal law.

As I indicated at the outset of my remarks, I have a confession to make: almost all of what I have said is taken from the Second Reading speech that I made on the Financial Services Bill on 28 January 2021 and in several other debates, both here and in the other place. I have been making the same arguments for the last 15 years in the other place, in this Chamber, in Grand Committee and outside Parliament. Like my noble friend Lord Faulks, I have been promised much in every debate in which I have spoken and I am still waiting.

I am a little more optimistic, having heard my noble friend Lord Johnson’s opening speech and what was said in the other place by the Government—and, indeed, what was said by my noble friends Lord Sharpe and Lord Callanan at the meeting that we had the other day. But I hope that my noble friends in the Government will use this excellent but improvable Bill to good effect and expand the law on failure to prevent, if only because it will allow this cracked record to be thrown away.