Economic Crime and Corporate Transparency Bill

Lord Trevethin and Oaksey Excerpts

2nd reading
Wednesday 8th February 2023 Lords Chamber

[Lord Trevethin and Oaksey (CB)]

My Lords, it is a great pleasure to follow the noble Baroness. I am happy to say that she has spared your Lordships some of my remarks, because I agree with everything that she said about whistleblowing and so shall say nothing about that at all. I also agree entirely with what she has said about the niche but important issue of the fees that are charged to individuals who register companies in this country.

I had a note, which I have mislaid, of the number of companies that were registered in the last 12 months. Somebody in the House may know the figure. It is quite astonishing; I think it runs to hundreds of thousands. That represents about 10% or 20% of the number of companies on the register. I refer to that because obviously the employees at Companies House who will be called on to discharge the duties that this Bill rightly places on them face a very challenging job indeed, which is nothing like the job that Companies House has been doing over the last 50 or 100 years. Funding and resources are obviously a very significant issue and it seems right that at least some of the necessary funding should be raised by a proper increase in those fees. That is one practical point that I shall get out of the way.

I declare an interest. For once it is a real interest, because I am a practising barrister, and a high proportion of my cases involve claims for compensation arising ultimately out of some form of economic crime. So, in a sense, I do pretty well out of economic crime. But I am against it, like every other speaker in this debate, even given that—I feel it is right to make that declaration.

I want to say something briefly about a matter that has not really been touched on in this debate so far, which is the wider context. This Bill contains many admirable and valuable measures. They are mostly concerned with issues relating to the fruits of economic crime and the tools that are used to perpetrate economic crime: in particular, companies which are opaquely structured so as to conceal the beneficial ownership thereof. All that is good, but the Bill says nothing much, and it probably could not say anything very valuable, about the detection of economic crime and about the proper prosecution of economic criminals.

That is not directly the subject matter of this Bill, but I will share with the House something of my experience of cases involving economic crimes over the last 10 or 20 years. I have done hundreds of cases arising out of some form of economic crime. The law moves slowly, and the case comes to trial—if it gets to trial—five, six or seven years after the relevant events. Almost invariably, the fraudster or fraudsters are still cruising around the country, apparently more or less immune to the risk of prosecution. I can think of only a very small number of cases of this type in which proper steps have been taken by the authorities to investigate the relevant frauds and to bring the fraudsters to justice.

Briefly, I will give your Lordships details of one case in which a prosecution was brought. It is a very recent case in which I had some collateral involvement. It involved a solicitor who manifestly was guilty of stealing a significant number of millions of pounds from a client. The solicitor came before a High Court judge in committal proceedings, based on breaches of undertaking, and the High Court judge was so disturbed by the evidence before the court that he jailed the solicitor for contempt for 18 months and referred the papers to the relevant prosecuting authorities.

When I was a youthful barrister, 20 or 25 years ago, if that had happened in the High Court, it would have been automatic for the prosecuting authorities to take action—and to take it fast. On this occasion, even though the fraud was patent, the matter was referred to the prosecuting authorities. They did nothing and then, after 12 months or so, they announced that it was not considered to be in the public interest to prosecute. All this is known and something that I can tell the House about because the aggrieved American client of the solicitor then brought a private prosecution, which is increasingly common in this country because the prosecutors do not do their job. The solicitor was finally brought before the court and the judge was so concerned about the facts of the case that he imposed a sentence of 12 years’ imprisonment—which is a long stretch for that sort of crime.

My noble friend Lord Macdonald of River Glaven, who is not in the Chamber and has not spoken in this debate, was speaking recently on a podcast with the distinguished criminal KC Clare Montgomery. Some of your Lordships may have seen this reported in the press. Ms Montgomery said—she would know; I know only indirectly, but I am quite sure that she is right—that the police no longer appear to have a real interest in investigating, let alone prosecuting, economic crime. I understand that economic crime amounts to 39% or 40% of all crimes. I am not sure how that percentage is calculated but it shows the size of the problem. The corresponding percentage of police resources, in terms of police officers who focus on or are devoted to the detection of economic crime, is at 0.9%. The House will see the imbalance there.

I mention those matters because they set a rather dark and troubling context for the issues that we are considering on this Bill. When amendments are brought forward to put a little more steel into the Bill, I will support them, unless they trespass on the rule of law. They are clearly needed and may have an indirect beneficial effect on the culture or climate that now obtains because, at the moment, the authorities do not seem to realise fully just how serious this problem is.

It is getting late, so I will quickly move on to one or two practical points, bearing in mind the injunction of the noble Lord, Lord Clarke, that our task when looking at and trying to improve this Bill is to try to make sure that it has a real, practical effect. I will say something briefly about SLAPPs, which have been the subject of a number of telling remarks and analyses, particularly in the speech of the noble Lord, Lord Cromwell. This is a tricky area but, I think like all noble Lords, I find these pieces of litigation, which are clearly designed to achieve a wholly illegitimate purpose, objectionable. If possible, steps should be taken to enable defendants to have the relevant pieces of litigation struck out.

How is that to be done? As the noble Lord, Lord Faulks, observed, SRA guidance emphasises the relevant obligations on solicitors in this context, in particular the obligation not to act for a client who is pursuing a claim for illegitimate collateral purposes. That is all well and good, but it is very difficult for a regulator to enforce such obligations, partly because the relevant information will be on the solicitor’s file and protected by client privilege. There are only limited circumstances in which a regulator can lift up the cloak of privilege to see what is really there. In practice, it is very difficult for regulators to enforce the proper performance of solicitors in this area.

What can be done? It may be possible, as this Bill moves forward, subject to issues of scope, for a provision to define more precisely than the current rules what constitutes abusive litigation, where the abuse consists of pursuing litigation not to restore the claimant’s reputation or to recover proper compensation for a real loss but to shut down criticism and inquiry. The provision will require exceptionally careful drafting. It may also be worth the relevant authorities considering—I doubt whether this is a matter for primary legislation— the appointment of a small body of specialist judges, probably in the Commercial Court, to consider applications to strike out for abuse of this nature. They would do so at the outset of the relevant litigation.

My only other practical point, briefly, is to take up a point made by the noble Lord, Lord Agnew, about costs and the disincentive that operates on authorities that might make civil recovery applications related to economic crime. At the moment, Section 52 of the 2022 Act creates a special costs regime for unexplained wealth orders. This means that the applicant, the prosecutor, will be liable for the costs of a successful respondent only if the applicant has acted unreasonably. A similar costs regime operates successfully in a field in which I practise, namely disciplinary and regulatory investigations and prosecutions. In that field, the regulator is normally liable for costs only if it has acted unreasonably. In due course, if not tonight, I would be interested to learn from the Minister what the Government’s view is on this. I can see no reason why that sort of costs regime should not be extended more widely, certainly to applications of any type brought under the provisions in Part 5 of the Proceeds of Crime Act.

I recognise the assistance I have had and will continue to have from a useful briefing paper prepared by Spotlight on Corruption. I have one or two further points to make, but I will not make them because I have been on my feet for far too long and others will make them better.