§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peter Lloyd.]
1.39 am§ Mr. Richard Ottaway (Nottingham, North)The major international commercial and maritime frauds of the 1970s and 1980s have shown up the alarming deficiencies in the criminal codes of the countries involved. The codes were drawn up before the explosion in modern technology, especially in communications, and have proved to be woefully inadequate in bringing offenders to trial and ensuring that justice is done and seen to be done.
There is no doubt that international marine fraud has been carried out worldwide, the primary victims being less sophisticated Third world countries. It is now reaching epidemic proportions. A few years ago, Lloyd's estimated that marine frauds cost it £100 million a year. Figures released by the International Maritime Bureau this week show that the maritime nations have been defrauded of $13 billion a year — more than the cost of Trident, about which there is so much hullabaloo and the cost of which is spread over 20 years.
It has been asserted that the major reason for maritime fraud being the nearly perfect crime is its international nature. I should like to quote Mr. Eric Ellen, the chief executive of the International Maritime Bureau who has said:
The diversity in today's fraud affects virtually all parties to an international trade transaction, with the involvement of anything between four and ten countries, thus hampering investigation, extradition and prosecution of offenders.Maritime fraud takes many forms. There is documentary fraud, involving payments made on forged documents, charter party fraud, in which the fraudster disappears with freight, simple deviation of a ship to sell a cargo in a remote port and fraudulent insurance claims. International non-marine fraud is just as devious, crossing international frontiers and going through many bank accounts, often aided by new technology which makes the task of detection, let alone prosecution, more difficult.It has become blindingly obvious to me that there are extreme deficiencies in international codes for bringing the perpetrators of these frauds to trial, either through inherent limitations on national police and prosecution forces or by legal immunities nationally or internationally. Fortunately, the world has woken up to the epidemic proportions of the difficulties. In February last year, the United Nations Conference on Trade and Development convened a conference in Geneva to get to grips with the problem. After a few initial difficulties, there was an unusually harmonious meeting. The agreed final resolution called for action on a national, international and international organisation basis. Although the international organisations are taking positive steps to get to grips with the problem, I should like to concentrate on the contribution that Governments can make on the national and international front.
The first part of the UNCTAD resolution called on national Governments to tighten their legislation to ensure that effective measures are available to prevent maritime fraud, to investigate such fraudulent acts and to prosecute persons who commit such fraud. In that regard, I have three suggestions. First, the Home Office should look to greater national co-ordination of regional police forces. If a major maritime fraud is unearthed in a remote port, the 312 regional police force investigates. Without any disrespect to the regional police force, there is often too little local expertise in investigation of major frauds. There is no central co-ordination such as there is in anti-drug-running organisations. Serious consideration should be given to establishing a federal agency to fight crimes of this type.
Secondly, there are deficiencies in our prosecuting policy. Although not officially admitted, it seems to be the policy of the Director of Public Prosecutions not to bring actions against criminals engaged in fraud when they are foreign nationals and when the victims are also foreign nationals. It was reported in the press only recently that German nationals in the United Kingdom are soliciting investors in Germany, then defrauding them of their money when they invest it over here and that the DPP is not prosecuting those fraudsters, because Germans are fleecing Germans. It seems that the only steps that the police are prepared to take are those necessary to hold them for extradition purposes. With Germany, that is a possibility, but with Spain and many other countries with which we have no extradition treaties, that is impossible.
The matter boils down to a simple question, which is whether we are prepared to prosecute other people's criminals. There is one overwhelming reason why we should. The City of London is the financial service centre of the world. With the decline of our manufacturing industry, the contribution it makes to the economy in its invisible exports and earnings is now significant. I do not blame the DPP for his present attitude, because he does not have the money to investigate crimes committed overseas, as the Federal Bureau of Investigation in the United States has. However, the Government should consider using some of their mammoth earnings from the City to step up policing, in a serious attempt to eradicate from these shores those who see the United Kingdom as a haven from prosecution, whatever their nationality. I am sad to say that in the recent White Paper on investor protection the difficulty of international operations and protecting overseas investors was ignored.
There is a substantial lacuna in our law of jurisdiction. In many cases the DPP, even if he wanted to commence a prosecution and could prosecute an offender in the United Kingdom, could not bring a prosecution because of the location. If the Minister and I were to conspire to commit a crime in the United Kingdom we would be prosecuted whether we committed it or not. However, if we conspired to sink an over-insured vessel outside territorial waters and to claim against Spanish underwriters, it would not be a crime. As we do not have an extradition treaty with Spain, the Spanish authorities cannot extradite us to Spain.
In the past, jurisdiction laws have been found to be inadequate. As a result of certain conventions, universal jurisdiction is now claimed for crimes against international order, such as terrorism. Similar claims have been made in respect of specific crimes such as drug trafficking. In the circumstances I hope that the Minister will refer that point to the Law Commission for review. After all, to quote the words of a leading judge:
It would be of no benefit to this country if it became a sanctuary for conspirators provided only that they concluded their unlawful plots abroad.The second part of the UNCTAD resolution calls for action at intergovernmental level to examine in depth the various proposals put forward before and during the UNCTAD meeting, which included the possibilities for 313 international co-operation in the investigation of fraud and subsequent legal action. If any progress is to be made at that level, the only satisfactory solution would be an international convention on maritime fraud and a parallel international convention on jurisdiction and extradition.The United Kingdom does not have a good reputation for extradition. The difficulties and frustrations that some foreign states experience when they request surrender of a fugitive from the United Kingdom is exemplified in the case of Spain, which recently tore up a treaty entered into in 1977. Substantial improvements have been made in the extradition climate with the 1984 House of Lords decision in the Government of Denmark v. Neilson, and the Government of the United States v. McCaffery.
Despite those recent decisions, our reputation for extradition is so bad that it is the firm opinion of many leading authorities on extradition that we should sign the European convention on extradition. We stand apart with only Malta, as one of the two countries that have failed to sign and ratify it.
The United Kingdom's reluctance to sign and ratify the convention is due to the requirement of a requesting state that it does no more than submit to the requested state a statement of the offences committed, their legal descriptions, and a description of the person claimed. English extradition law has always required that a requesting state adduces evidence in support of its request of a standard that would warrant committal for trial of an accused, if his offence had been committed in the United Kingdom.
That is a commendable attitude and is in line with that of many states that are reluctant to surrender their own nationals without proper evidence and which have been able to sign the European convention. On signing the convention they take advantage of article 26 by making a reservation that the state requesting the surrender of a fugitive must submit sufficient evidence to establish a prima facie case. Countries such as Denmark, Norway, Sweden and Israel have made such a reservation and their municipal law retains the prima facie case requirement. I understand that a Green Paper on extradition will shortly be published, and I hope that that point will be recognised in the paper and that Britain will be able to sign and ratify the convention. However, signature of the European convention must only be an interim measure. We should work with UNCTAD towards a convention on jurisdiction and extradition for maritime fraud.
It is clear from what I have said that many problems exist and that the current laws on jurisdiction and extradition are inadequate to deal with international maritime fraud. Consideration should be given to linking the extradition obligations to any expanded jurisdiction capabilities so that a state must either prosecute an offender in its custody or extradite him to the requesting state. With such an alternative obligation, the risk of offenders finding refuge from prosecution for lack of jurisdiction, and extradition because of being a national of the state of custody, would be eliminated.
Although at first sight such a suggestion for an international convention on maritime fraud may appear extraordinary, clear precedents can be found in existing conventions designed to cover specific acts. For example, the spate of aeroplane hijacking in the 1960s resulted in the convention for the suppression of unlawful seizure of aircraft in 1970. Some may submit that if a convention on jurisdiction and extradition for maritime fraud is justified, 314 it cannot be developed in sufficient time to provide relief. In this respect, I draw the attention of the House to the hijacking convention, on which work began in 1969. The diplomatic conference for its adoption took place in 1970, and it came into force in October 1971.
There are many other proposals for combating maritime fraud which an international convention might embrace. The international nature of the problem must be recognised and the national police forces must work together. In this sense, the nations of the world must put together an international co-ordinating organisation. Agencies such as Interpol, while doing an excellent job, are little more than communications centres. We need an international coordinating centre which acts as a fast communications base, an international information exchange, an international register of shipowners and ship movements, and an organisation that will work with national groups towards the elimination of international maritime fraud.
Tonight I have only touched on the tip of the iceberg of this massive subject. The points that I have raised require action from the Lord Chancellor's Department on jurisdiction, from the Department of Trade and Industry on investor protection, from the Foreign and Commonwealth Office on extradition, and last, but certainly not least, from the Home Office on policing. I hope that they will all appreciate that we are fighting a worldwide problem that needs a worldwide organisation to cope with it. The United Nations Conference for Trade and Development deserves a response to its proposals, and I hope that at least the Departments can get together to discuss them.
§ The Parliamentary Under-Secretary of State for the Home Department (Mr. David Mellor)Notwithstanding the late hour, I am grateful to my hon. Friend the Member for Nottingham, North (Mr. Ottaway) for raising in such a cogent way what is plainly an important subject. Although he represents—unless my geography has wholly deserted me — a landlocked constituency, he has properly drawn our attention to problems on the high seas. Those who read his remarks will be as troubled as he is by some of the points that he made. As I have no doubt his constituents are aware, my hon. Friend is an experienced maritime lawyer, and we have good reason to be grateful to him for bringing his expertise not just to his speech but to the valuable study of maritime fraud that has been carried out under the aegis of the Society of Conservative Lawyers and under my hon. Friend's chairmanship.
My hon. Friend clearly demonstrated many of the problems and said that frauds take various forms, ranging from the purely documentary to the extreme case of scuttling a ship at sea. The illegal act may be the forging of a bill of lading, when the intending buyer of goods discovers that he has purchased a non-existent cargo. Alternatively, the cargo may simply be stolen. I understand that a familiar device is that a ship, instead of going to its destination port, is diverted and the cargo sold at another port. The ship's name is then changed, and it thus becomes untraceable. In some extreme cases, the ships involved in deviation frauds may be reported as sunk, and a further fraud is committed by making a claim on the insurance for the ship and its cargo.
Hon. Members will recall the notorious Salem incident, which was perhaps the most blatant example of that 315 practice. The ship was chartered to carry crude oil from Kuwait to Genoa on behalf of an Italian trading company which sold the entire shipment to Shell International in mid-voyage. Instead of proceeding to the Mediterranean, the cargo was sold in South Africa and was replaced by sea water to give the impression that the ship was laden. The Salem was then sunk by the crew off the coast of Senegal. It does not take much imagination to see that there is in such criminal activities the potential for very large profits indeed. Certainly when one gets into the position of scuttling a ship and claiming its full insurance value one is dealing with very large sums indeed.
Even recognising that, it still comes as something of a shock to hear, as my hon. Friend rightly reminded the House, that the International Maritime Bureau, a very responsible body, points out that known losses perhaps amounted to as much as £12 billion last year. That is a truly staggering figure. British interests are very much at risk, because particularly in the insurance industry, British interests have been among the worst victims. However, a more insidious factor that may have grave financial consequences is confidence. It has been alleged that a number of these frauds have been engineered partly through the mechanisms of the London markets. Even though in most cases British subjects are not criminally involved, we must be aware of the risk of damage to the City's international reputation.
My hon. Friend referred in particular to the contribution of UNCTAD. Maritime fraud does of course affect trade and we therefore very much welcome the interest that UNCTAD has shown in combating this problem. Its paper analysed the various forms of maritime fraud and the various means of combating it. Its paper formed the basis of a useful discussion by an intergovernmental group which unanimously agreed a number of resolutions calling on Governments and commercial interests to co-operate with each other, exchange information and review laws and law enforcement procedures. We already liaise with the industry on this problem, but the Government will do all in their power to help to provide the information that will be required for the various studies that are being undertaken by UNCTAD.
However, as the resolutions recognise, self-regulation by the commercial interests concerned must play an important and perhaps crucial role in combating fraud. I know that the industry takes this problem seriously and has done a lot of work to try to minimise maritime fraud. The setting up of the International Maritime Bureau is a case in point. I know that the bureau has already played a valuable role—I believe my hon. Friend is of the same opinion—in combating maritime fraud. I am sure it is only when all the parties concerned can get together to consider this problem that maritime fraud will be turned back. It is the provision of a forum in which such parties can meet that has been the most useful role performed by UNCTAD.
As I have said, I have looked with interest at the report of the sub-committee of the Society of Conservative Lawyers which was chaired by my hon. Friend. I have looked with particular interest at those sections directly involving Home Office responsibilities. I see that in its second proposal the sub-committee suggests that the Law Commission should review whether conspiracy in this country to commit a crime overseas should become a 316 criminal offence in this country. In fact, the Law Commission is engaged at the moment on an extensive review of the law relating to conspiracy to defraud and will present its findings in due course. I hope that the commission will take careful note of what my hon. Friend has said and of the report of his committee before giving us the benefit of its conclusions.
On the general question of conspiracy to commit a crime overseas, and without wanting to pre-empt the Law Commission's findings in any way, I wish to make two points. First, there are considerable evidential difficulties involved in detecting any conspiracy, because clever plots are not hatched in meticulously kept records. Secondly, the law already provides that a conspiracy is indictable in this country when conspirators in England agree to do an unlawful act in England with intent to defraud persons abroad. To that extent, there is not a hiatus in the law. At least, that is my understanding of the case of Regina v. Hornett in 1975, although I appreciate that there is still some difference of view between the committee and Hornett on the ambit of the law and that the committee would wish the law to go further.
I want to take up three other points that were raised by my hon. Friend. Perhaps I should properly begin with police action. It may help if I set out briefly the arrangements for the investigation of fraud by the police and the liaison which exists to assist them. Often there is an interest in the United Kingdom in the investigation of a suspected maritime fraud because of the insurance aspect. Both commissioners of police for the City of London and the metropolis take most seriously indeed their personal responsibility to investigate fraud affecting London's financial institutions. There exists in London a joint fraud squad for the two forces, under the command of a metropolitan police commander. This commercial fraud department has a strength of 204 officers, of whom the 56 City police officers represent nearly half the City police criminal investigation department. This reflects the importance attached in the City to the investigation of fraud where fraud squad officers can be expected to serve in the squad for a seven to eight year period and thus maximise the experience they gain.
One of the difficulties in the successful investigation of fraud—this does not apply just to maritime fraud—is the often complicated nature of the offences. This results in long and resource-consuming investigations, with cases often taking years to come to trial. The House will see the disadvantage of this not only in terms of deterrence but in the difficulties of presenting a successful prosecution case if the evidence is stale and witnesses' recollections are not what they would have been earlier.
To counter this, fraud investigation groups were set up in 1981 on an ad hoc basis in London only, because the majority of commercial frauds occur in the capital. As one of the measures intended to combat commercial fraud, fraud investigation groups were put on a permanent basis and extended to cover the whole of England and Wales with effect from the beginning of the year.
The essential characteristics of fraud investigation groups are simple. Based in the department of the Director of Public Prosecutions, fraud investigation groups have available senior officials from that department, together with those from the Department of Trade and Industry who are concerned with the investigation of offences under companies legislation. They work in co-operation with the police who will be made available as necessary by their 317 chief officer. Their independence from the main body of FIG provides an operational advantage to the police, in that they retain their full powers as officers under the Crown.
By means of early and continuing liaison between the DPP, DTI and police interests, FIG enables an investigation to be concentrated on the direction which appears most likely to lead to evidence which will meet the needs of the court instead of, as often happened before, each body continuing parallel but separate investigations. With FIG, lines of investigation which are considered to be less likely to succeed are, therefore, better able to be identified at an early stage, dismissed and the investigation concentrated on those lines which appear most likely to produce a manageable and speedily resolved case.
Notwithstanding this development, I think that my hon. Friend may be underestimating the capability of individual forces to respond to maritime frauds reported to them. Our understanding from our contacts with forces around the country is that reports of maritime fraud involving ships physically at United Kingdom ports are fortunately very few: the emphasis is rather on City institutions where insurance is arranged or involving the presentation of false bills of lading. As I have already said the fraud department has a considerable wealth of experience in dealing with such cases, but even if a fraud occurs in a provincial force area we have to recognise that our police forces today are sizeable organisations, most of which have their own fraud squad and who are well aware that it is always open to them to consult the DPP through that office's FIG and fraud divisions for early advice and assistance in the investigation of fraud.
The internationalism of all fraud and particularly of maritime fraud is an acknowledged feature and close liaison on co-operation internationally between police forces is crucial. The International Maritime Bureau and the Commonwealth Secretariat Fraud Unit are two bodies which have a particular interest in such liaison. I am sure that these are valuable initiatives and the self-help which the shipping trade can provide is reflected in the support and success of the International Maritime Bureau; equally the Commonwealth Secretariat Unit can, by virtue of its Commonwealth-wide remit, give assistance through a wide range of countries.
I should also mention the role of Interpol, which has a valuable contribution to make, not only because its membership covers 140 countries throughout the world, but its communication links through its headquarters in Paris to all member countries and the tradition of police to police co-operation on criminal investigation matters which it has over the years built up give the potential for virtually world-wide assistance. Interpol additionally holds regular conferences and working seminars where trends in fraud and the means whereby police action can be improved are discussed and disseminated to all member countries.
My hon. Friend raised important questions of prosecution and enforcement. On prosecution policy, allegations have been made about the reluctance of the Director of Public Prosecutions to bring actions against criminals in this country if the person engaged in fraud is a foreign national and his victims are also foreign nationals. This means that the offender may escape any risk of prosecution in the country where his victims live, because that country may not have any jurisdiction to deal with crimes committed in this country. The DPP's policy 318 is a matter for him and not for me, but such criticisms do not take full account of the extreme practical and legal difficulties encountered in international crime.
To prosecute in such cases, it is usually necessary to obtain statements from foreign nationals or foreign banks. There is no form of international subpoena by which witnesses may be required to travel to this country to give evidence and it is an extremely difficult task to secure the attendance as a witness in this country of a foreign banker. When there is no loser in this country, it is difficult to secure the evidence here. This does not mean that the DPP is reluctant to act, but it does mean that the difficulties must not be underestimated and the presence of a clear public interest justification for prosecution does not make the director's task any easier.
My hon. Friend rightly spent a great deal of time on the subject of extradition, which is causing us considerable interest at the moment. As he said, international crime has to be tackled internationally, and extradition is an important weapon. It is true that our older extradition treaties are framed in terms that implicitly acknowledge only offences that are committed within the territorial boundaries of countries that are party to the agreements. Our more recent treaties, however, are framed in terms of the respective jurisdiction of the judicial authorities of the parties. As I have endeavoured to explain, the concept of extraterritorial jurisdiction causes difficulties in our law, but our general lack of such jurisdiction does not inevitably make for an enforcement loophole, because in this country we have no objection to extraditing our own nationals, provided that the normal extradition arrangements are met. For the most part, our extradition arrangements are based on bilateral treaties that set out in detail the conditions governing surrender to and from the United Kingdom. At present, there are 43 bilateral treaties in force.
My hon. Friend has pointed out a number of difficulties about our extradition arrangements. He is not alone in his criticisms. He knows that we are taking them seriously, and that is why we shall be publishing a Green Paper shortly. He will be pleased when he sees it, because it canvasses fully and invites opinions, including opinions from himself, and some of the people with whom he has been collaborating on this venture, and he will let us know his views on some of the points at issue.
Plainly, it all centres around the prima facie requirement. It is interesting that my hon. Friend thinks, not that this requirement should be dropped but that we should adopt an alternative way by means of a derogation to sign the European convention. The arrangements reflected in such treaties must be put into effect by application of our law, and the principal statute is the Extradition Act 1870. One of its requirements is that the requesting state has to produce evidence of a standard that would justify the committal for trial of the accused if the alleged crime had been committed in England. This is the centrepiece of the 1870 Act, but its continuation on the statute book causes difficulties in relation to countries such as Spain, which abrogated its treaty with us a few years ago because of frustration at not being able to get extradition of criminals wanted from Spain.
It was said that our standards of proof are too high when not only the nature of the charge is based on Spanish law but the whole means of preparing a case for trial is quite different from our own. That matter will have to be looked 319 at carefully, not only in the Green Paper but in consideration of representations that will be made as a result of it.
My hon. Friend made an important point about the European convention that he said we should ratify. As he pointed out, we have to consider whether the prima facie requirement is an obstacle to ratification. I know that my hon. Friend considers that ratification would enhance the international community's ability to deal with serious international fraud by bringing London—an important centre for this type of fraud — within the uniform arrangements of a multilateral treaty. My hon. Friend explained his case well, and we shall want to examine that aspect. Although we have not signed the convention, we have taken an active part in its negotiation. The main 320 obstacle to our accession has been the difficulty of reconciling our criminal law procedures with those of continental countries. To draw closer to foreign practice would entail some fundamental changes in our law. I can offer my hon. Friend the encouragement that a forthcoming Green Paper will discuss the scope for and implications of such changes.
I could say a good deal more. I regret that I have not been able to delve as fully as I would wish into some of my hon. Friend's interesting points. This has been a worthwhile debate, and I hope that some of the points will be taken up in due course, especially those in relation to extradition which will be the subject of intense public debate in the months ahead.
§ Question put and agreed to.
§ Adjourned accordingly at nine minutes past Two o'clock.