§ 3.29 p.m.
The Minister of State, Home Office (Earl Ferrers)
My Lords, I beg to move that the Criminal Justice Bill be now read a second time.
This is an important Bill, which starts its passage through Parliament in your Lordships' House and which I am sure will be welcomed by your Lordships. The Bill covers a wide range of issues. Some of the provisions implement European Community directives. The United Kingdom has played an active role in negotiating those directives. They are, therefore, ones which we welcome. They enhance our existing law. They will neither harm legitimate business practice, nor will they impose unacceptable burdens on business.
The Bill, though, deals mainly with crimes of a financial nature—so-called "white collar crime": those who, for example, make huge profits from trafficking in drugs; those who help drug traffickers and other criminals to conceal the profits of their crimes or to take them beyond the reach of the law; those who take advantage of privileged information for the purpose of dealing on the financial markets; and those who take part in serious international frauds.
Part I of the Bill will fill some gaps in our courts' jurisdiction to try various offences of dishonesty when 1348 they involve a significant foreign element. As regards Part I, I should say that we owe a considerable debt of gratitude to the Law Commission, whose 1989 Report, Jurisdiction over Offences of Fraud and Dishonesty with a Foreign Element, offered a draft Bill on which our proposals are largely based.
The courts in England and Wales exercise what is called a "territorial" jurisdiction. That means that, with very few exceptions, they are only able to try people for crimes which have been committed here in our own country. Some other countries have a much wider jurisdiction. They try their nationals for offences which they may have committed anywhere in the world. But it is not the Government's intention to follow that path, and the Bill does not do so.
The main problem, which has given rise to Part I, is the very narrow way in which the common law decides whether an offence has been committed here. Many crimes of dishonesty involve very complex operations, which are deliberately designed to conceal dishonest conduct and to make their detection and conviction as difficult as possible. These frequently take place in several different countries.
Under our present law, none of the participants can be prosecuted here unless the very last act in the sequence of events, normally the realisation of the proceeds, occurs in England or Wales. I admit that that is not an easy concept to grasp. Perhaps your Lordships would find it helpful if I were to give a hypothetical example of the kind of case which might arise. A criminal in Birmingham might place an advertisement in a local newspaper which invites people to invest in a non-existent stud farm in France by paying money into a Paris bank account. A victim responds to the advertisement and instructs his bank to transfer £1,000 to the French bank. That money is then retrieved by the ingenious advertiser, who is in turn able to return to this country and bring back and flaunt his ill-gotten gains quite openly because, although your Lordships might think that that was a blatant case of fraud, in fact no offence has been committed under English law. It is the last event which counts and, in this example, the last event is the obtaining of the proceeds, which took place in Paris.
What that means is that elaborate frauds can he perpetrated in England and Wales; but, if the criminal obtained his proceeds outside this country, then our courts are not able to try him. I think that your Lordships will agree that that is not acceptable. We believe that we must fill that gap in our law—a law which was developed at a time when the global financial marketplace and the modern, sophisticated means of transferring money just did not exist.
There is, though, a balance to be struck and we have no wish to interfere in the affairs of other countries, nor to waste valuable court time in trying cases which have only a notional connection in this country. The Bill, therefore, provides a tightly-drawn list of offences which closely follows those which the Law Commission proposed in 1989. Those offences are referred to, for the sake of convenience, as Group A offences. Our aim has been to include those offences of dishonesty which have a wide application and which experience tells us are the sort of offences which 1349 are committed by the international fraudsters at whom the measure is aimed. In case experience should show that our selection was wrong, the Bill will allow the Secretary of State to add offences to the list, or to delete them.
For a fraud to be tried here, one of the elements of the offence will have to have occurred here. For example, in order to obtain a conviction in a case of obtaining property by deception, the prosecution has to prove both that a deception has taken place and that property has been obtained as a result.
Under the new rules, our courts would have jurisdiction in the hypothetical case which I gave because, even if the property was obtained in Paris, the deception occurred in Birmingham.
As well as seeking to bring within our courts' jurisdiction those who succeed in carrying out their crimes, we think that it is right that the law should catch those who fully intend to defraud others, but who actually may fail to do so. The hypothetical advertiser, therefore, would still be guilty of an offence here if the police spotted his advertisement and nabbed him even before anyone had sent any money to France; that is, if the Bill proceeds in the way suggested.
The Bill, therefore, provides a list of Group B offences which covers those who conspire, or who attempt to incite others to commit, one of the Group A offences and those who commit the common law offence of conspiracy to defraud.
Part II of the Bill contains a number of important amendments to the confiscation provisions of the Drug Trafficking Offences Act 1986. The provisions received all-party support when they were introduced. They have been a significant weapon in the Government's fight against the evils of drug trafficking, by threatening those who indulge in such unacceptable activities with the loss of their illicit gains. Those who trade in human misery and who profit from the drug dependency of others are left in no doubt of our determination to remove their principal motivating factor—that is, the lure of quick and easy money.
The Drug Trafficking Offences Act has already proved to be successful. Confiscation orders to the value of over £35 million have been made since its implementation. Although not all of this has yet been realised, a significant proportion of it has. Most of the rest is under restraint and is, therefore, out of circulation.
The Drug Trafficking Offences Act had a number of features which were new and which were quite radical when it was introduced—such as giving the courts discretion to assume that a convicted person's assets are derived from drug trafficking, unless the person could show otherwise. It is important to be savage with drug trafficking, and it is pleasing to see how well the Act has worked in practice. Part II of the Bill, therefore, addresses the few difficulties which have arisen. It will make life even more difficult for those who participate in drug trafficking. Perhaps I could outline for your Lordships the more significant changes.
1350 Under our present legislation, the confiscation proceedings are mandatory whenever the court convicts a defendant of a drug trafficking offence. That has led to the courts becoming involved in full confiscation hearings for many small, one-off cases of drug trafficking where, at the end of the day, no order is made, often because there is no realisable property. The Bill will enable the prosecutor to filter out those cases, by providing that a confiscation hearing has to take place only when notice is given by the prosecutor. The court will, though, be able to proceed without a notice if it should think it correct to do so.
The Bill also makes clear that the standard of proof, which will apply during the confiscation hearing, will be the civil standard—the "more likely than not" standard, as opposed to the criminal standard of "beyond reasonable doubt". That was always the Government's intention. But because it was not made crystal clear in the 1986 Act, the courts have held that the criminal standard of proof—the "beyond reasonable doubt" standard—should apply, not only to the conviction of the drug trafficker, as it is right that it should, but also to what is essentially a civil process; namely, the confiscation hearing which follows conviction. The Bill seeks to put that right.
Part III of the Bill makes an identical change to the 1988 Criminal Justice Act, which deals with confiscation of the proceeds of other serious crime. The 1986 Act also requires the courts to complete a confiscation hearing before sentencing drugs of-fenders. That has caused some concern, because of the time lapse which can occur between the trial and sentencing in complex cases. Therefore, in Part II, the Bill will allow the court to postpone the confiscation hearing so that further information can be provided, while allowing it to sentence the trafficker. Again, Part III makes an identical change to the arrangements for confiscating the proceeds of non-drugs crime.
Another way, in which the Bill will make the 1986 Act more effective, is to oblige the courts to apply a set of assumptions about the origins of the offender's property and expenditure, which have the effect of reversing the burden of proof. The 1986 Act made those assumptions available to the court but their use was discretionary.
We also propose to require the prosecutor to provide the court with a statement of information when a confiscation hearing is going ahead, and to increase the court's ability to request information from the defendant. Information is vital to the proper conduct of confiscation hearings, and these proposals will ensure that the court can get what it needs within a reasonable period.
The Bill will enable the courts to confiscate the proceeds of drug trafficking in some circumstances where confiscation is not now possible. At the moment, a confiscation order which is made against a convicted trafficker cannot be increased later if it should be subsequently found that the benefit from drug trafficking was actually greater than that which the court had originally supposed. Some traffickers are, unfortunately, clever enough to disguise how well they have done out of their evil trade.
1351 At present, we are powerless to act in cases when further profits come to light. The Bill aims to put that right. It will enable the prosecutor to apply for additional profits to be confiscated for up to six years after the trafficker's conviction. Some confiscation orders are made for very large sums. As a result of that, an increasing number of drug traffickers are choosing to serve additional time in custody rather than to pay the confiscation order in full. This leaves the trafficker free to enjoy his ill-gotten gains the moment he is released. We propose, therefore, to stop that by ensuring that the mere serving of a term of imprisonment does not expunge the person's financial debt.
At present, the law does not enable a confiscation order to be made where the trafficker has died or has absconded. The Bill will, though, permit the High Court to make a confiscation order in the case of traffickers who have been convicted but who then die or abscond before being sentenced. The Bill also permits a confiscation order to be made in the case of those who abscond after being charged with an offence but before being convicted. We also propose, in order to be fair, that there should be provision to pay compensation for any loss which results from confiscation should a person who has absconded return to face trial subsequently and then be acquitted.
As well as dealing with the confiscation of drug proceeds, the Bill also deals with the laundering of them. Our existing money laundering legislation meets most of the requirements of the recent European Community directive on the prevention of the use of the financial system for the purpose of money laundering, but we have to make a number of changes and additions in order fully to implement the directive. Those changes which need primary legislation are included in the Bill. There are, in this respect, four main changes: first, there will be a new offence of knowingly acquiring, possessing or using the proceeds of drug trafficking; secondly, we will create a new offence of failing to disclose the knowledge or suspicion of money laundering which is gained in the course of employment or business; thirdly, the existing offence of "tipping-off" will be widened, so that anyone who passes on information to another person, knowing or suspecting that that would be likely to prejudice a money laundering investigation, can be prosecuted; and, fourthly, we will give wider immunity from action for breach of contract or confidentiality requirements to those who disclose suspicions or knowledge of money laundering.
We have included defences and safeguards which are necessary to protect those who are genuinely innocent, or who have a legitimate need to carry out duties which may put them in breach of the new provisions. For example, we do not want to prevent a defence lawyer from being paid by his client for the work which he does in defending his client on a drug trafficking charge. We are also keen to protect bank employees from any unreasonable risk of committing the offences during their everyday work.
Part III of the Bill extends the scope of money laundering offences to cover the proceeds of all serious 1352 crime. At the moment, money laundering prosecu-tions can be brought only if the money which is involved is the proceeds of drug trafficking. I do not think that it can be right to allow those who, for example, disguise the profits of dealing in pornography, or who convert the profits of a major fraud or a robbery, to escape with impunity.
Part IV of the Bill amends and restates the law on insider dealing and, in so doing, it implements the European Community directive on the subject. Securities markets play a vital role in all our lives, whether as providers of capital for the companies on which our prosperity ultimately depends, or as the place where our savings are invested—whether directly, or by institutions which act on our behalf.
In order to operate successfully, those markets require investors to have confidence in their fairness. Insider dealing destroys that confidence. The Government made insider dealing illegal in 1980, and the United Kingdom played a leading role in negotiating the directive which the proposals in this Bill will implement. The proposals in the Bill extend our legislation to areas of conduct which are covered by the directive, which are not currently illegal, but which are nevertheless generally accepted as being wrong.
In implementing the directive we are anxious, though, to ensure that legitimate business practices will not be jeopardised. For example, nothing in this legislation will prevent the sort of contacts between companies and investors which quite properly take place today. Nothing in this legislation will require changes to the legitimate practices of investment analysts, or modification of underwriting arrangements.
The principal offence, created by this part of the Bill, is taking advantage of inside information by dealing in securities. The new legislation is in many ways similar to our existing law. It will continue to be an offence for an insider who possesses inside information, or someone who has obtained inside information from an insider—who is somewhat colourfully called a "tippee"—to take advantage of that information by dealing in securities with the intention of making a profit or avoiding a loss.
It will also continue to be an offence for an insider, or a tippee, to encourage someone else to undertake such dealing and for them to disclose inside information. The new legislation will, though, make significant changes to the scope of our existing law.
The Bill defines securities so as to embrace all listed debt securities, including now gilts and local authority stock. The existing legislation applies to company securities only.
Dealing is defined in broad terms in order to prevent loopholes which could otherwise be exploited. Dealing, therefore, embraces agreeing to acquire and to dispose of securities as well as actually acquiring or disposing of them. It also covers situations in which an insider does not deal directly on his own behalf but does so, for example, through a company which he controls.
The Bill redefines insiders so that someone with direct access to inside information will be an insider, 1353 even if he or she is not "connected" with a company, as our present legislation requires. We think that that change, which reflects the directive, is desirable because it is quite possible for someone to have direct access to price-sensitive information without actually being connected with a company.
The new legislation embraces all transactions which involve a professional intermediary, whether they are on-market or off-market. Our existing legislation applies to on-market transactions only: those which take place on a stock exchange. But the move from the old-fashioned trading floor to the modern practice of screen-based trading makes the concept of the market much more difficult to define than was the case when the earlier legislation was passed in 1980. The Bill therefore seeks to define the market in terms of those transactions which are likely to contribute to the price of a security.
One effect of extending the range of transactions in this way is that the new legislation will apply to dealings in Eurobonds, which are generally listed within the European Community, but which are traded off-market. Two further offences are also defined: disclosing inside information to someone else; and encouraging someone else to deal.
The Bill requires a territorial link between the conduct which will be prohibited and the United Kingdom, but it is done in a way which is rather broader than the existing legislation. The insider dealing offence will be committed if someone is in the United Kingdom when he deals, or when the dealing takes place on a market which operates in the United Kingdom, or if it involves a professional intermediary who was in the United Kingdom at the time. The offences of disclosing and encouraging require the person doing them, or the recipient of the information or encouragement, to be in the United Kingdom.
We think that Part IV of the Bill is a necessary and sensible extension of our insider dealing legislation. It will not affect legitimate activities, but it should make life more difficult for the wrongdoer.
Part V deals with a number of related issues. I shall mention only the two most important. Clause 42 completes the implementation of two important directives in the banking field. The second banking co-ordination directive represents the main element of the European Community single market in banking services. It will allow European Community incorporated credit institutions—roughly speaking, banks—to offer services and to establish branches throughout the Community on the basis of a single authorisation and to be overseen by a single supervisor.
The supervision of the credit institutions directive, which is also known as the second consolidated supervision directive, extends the scope of the European Community requirements for supervising banks. Both of these directives are to be implemented mainly by secondary legislation under the European Communities Act 1972, but the maximum permitted sentence for new offences, which may be created by regulations under the 1972 Act, is three months.
This is less than the maximum sentences of six months which are at present available for certain 1354 comparable offences in Sections 39,40 and 41 of the Banking Act, and it is these sections which give powers to the Bank of England in relation to information, documents and investigations.
This clause will allow the new offences, which will be created by regulations, to attract the same penalties as do the existing Banking Act offences. They will thereby provide the necessary support for other European Community supervisors when they assume responsibility for the operation of their banks in this country. Clause 43 extends the jurisdiction of United Kingdom courts where a fraudster takes part in, or organises in this country, fraud against the European Community budget in other Community countries. By enacting the clause, we will ensure that the United Kingdom takes action against fraud which is perpetrated against the Community, and we will help to allay fears which have been expressed previously in both Houses of Parliament.
As your Lordships may have observed, this is a wide Bill and a pretty technical one. I hope that its measures will nevertheless be welcomed by your Lordships and by another place. Indeed, I hope that they will be welcomed by the public at large—except, that is, by money launderers, drug traffickers, insider dealers and fraudsters! I beg to move.
§ Moved, That the Bill be now read a second time.—(Earl Ferrers.)
§ 3.54 p.m.
§ Baroness Mallalieu
My Lords, I am grateful first that the Bill gives an opportunity to the House to hear the maiden speech of the noble Lord, Lord Williams of Mostyn. We look forward to it. His reputation precedes him here, and his legal expertise will be invaluable in dealing with pieces of legislation such as that which is proposed today.
May I at the outset begin by offering an element of support and encouragement to the noble Earl? We on these Benches welcome and support an attempt by Her Majesty's Government to clarify confusion in the existing law; to right anomalies in existing legislation; to harmonise British law with European law by implementing the two directives and to deal more effectively with crime which crosses international boundaries; and of course to prevent those who commit crime from retaining the proceeds of that crime.
However, sadly, the noble Earl has produced something of a curate's egg of a Bill: good, no doubt, in many parts—and I shall give him credit as I go through it, if I may—but in others I regret to say it is something of a botched job and a missed opportunity.
If Part I of the Bill dealing with jurisdiction stood alone, I should feel obliged to invite the Minister to change the title of the Bill from the Criminal Justice Bill to the Lawyers' Benefit Bill. I have sat long into the night poring over Clauses 1 to 6 with a selection of other lawyers. In the end, we all believed that we understood what they meant. But unfortunately we all understood different things. Until the noble Earl produced the Bill, we thought that the law on jurisdiction was quite clear. The noble and learned Lord, Lord Templeman, in a leading judgment of the 1355 Judicial Committee of the Privy Council only last year, had, it seemed, clarified the law beyond doubt. But the noble Earl now comes along, like a knight on a white charger, to the assistance of the legal profession in these hard times with a piece of legislation which is so confused and complex in its drafting that no layman could hope to understand it and few lawyers to agree on what it means.
Perhaps I may invite the noble Earl to settle a bet. It concerns what the Bill calls "Group B offences". I pause to say that a layman who wants to know whether an offence is a Group B offence and tries to look it up finds the following helpful definition under Clause 1(3) (f) of the Bill. It is, he will learn among other things,an offence which is triable by virtue of the new section IA inserted in the Criminal Attempts Act 1981 by section 5(2)".I think that that is as clear as mud.
What I need the noble Earl's help with is this. Where a Group B offence is involved, is the present defence in relation to jurisdiction still the law? In other words, is the law unchanged or does the noble Earl's new Bill mean that a Group B offence can be prosecuted here when it was committed elsewhere in the world by the citizen of another country, with no relevant event occurring in England and Wales? I take those words because they are applied in the Bill only to Group A offences. In other words, where there is no connection whatever apparently with this country, can such an offence be prosecuted here? If so, are we planning to prosecute Mexican fraudsmen in the Snaresbrook Crown Court for frauds committed wholly in Mexico? If that is the noble Earl's intention, or even a by-product of his intention, the lawyers will be deeply grateful. But I doubt whether the taxpayers or the Mexicans will.
The public surely deserves clarity in the legislation which comes from this House. It may be that Part I of the Bill performs some useful purpose. Indeed, I suspect that there is a real gap in the law in relation to frauds which ought to be capable of being prosecuted here. But surely they deserve legislation which is expressed in English and not in legal gobbledegook.
We are fortunate in this House because the noble Earl is here to explain it all to us; but I fear that his commitments will not enable him to attend the Snaresbrook Crown Court to assist the judge and members of the Bar when the Mexican defendants' case is called on. Perhaps he would care to consider amendments in ordinary English so that we may all understand the provisions before the Bill reaches the Committee stage.
One feature of the Bill which is all too clear is that it provides in effect for the creation and indeed the abolition of criminal offences under the Bill by statutory instrument in Clause 1(4) and (5). That cannot be right. Any additions to the list of offences to which the Bill applies should be subject to the scrutiny of Parliament. It cannot be right that activities can be criminalised or decriminalised at the whim of the Secretary of State or his advisers and without an Act 1356 of Parliament. I hope that the noble Earl will think again about those provisions before the next stage of this Bill.
I now turn to Part II of the Bill which concerns drug trafficking offences. We on these Benches particularly welcome Clause 8 which, as the noble Earl has explained, seeks among other things to correct a disaster area which arose out of the implementation of the previous legislation. Those who practise in the criminal courts have almost without exception direct experience of the long delays, often of many many months, which currently occur after conviction and before a defendant can be sentenced because the court has to find the time to determine the Drug Trafficking Offences Act aspects of the matter. I am grateful that it would appear that this provision will allow unfortunate individuals to be sentenced and to know their fate without waiting for the courts to find time to deal with that aspect. As a matter of both justice and humanity it must be right that, if one is convicted or pleads guilty even to an offence of this nature, one has a right to know one's sentence and one's fate as soon as possible. We welcome that clause.
I am not so sanguine about the success of the drug trafficking legislation as the noble Earl. The whole operation of the present drug trafficking legislation is, it seems to me, flawed in a number of important respects. In its operation against the small fry, who are commonly women, it is draconian. Those women are usually couriers and young. They are often pregnant or have small children and they frequently come from third world countries. The legislation contains swingeing provisions as regards prison terms and there is little discretion permitted in practice for the sentencing judge by the guideline cases from the court of appeal. Usually the defendants I have been discussing have no money and therefore confiscation is academic. Traffickers who operate on a large scale are rarely caught because the international financial system makes it difficult to track financial flow effectively. Measures which are commendable in theory are in practice likely to he directed almost entirely against defendants with little or no assets. I would welcome some indication from the noble Earl—he indicated that there were substantial frozen assets—as regards what proportion of the assets which have been ordered to be confiscated have been realised.
These provisions are therefore welcome but unhappily they are likely to be largely cosmetic. Real progress in this area requires international co-operation which goes beyond the EC and back to the drug-producing countries themselves. Some of the provisions in this part of the Bill give us real concern. Where a man is convicted of crime he should, as I have already said in relation to another aspect of the Bill, know the penalty which he faces as a matter of certainty so that, hopefully, reform and rehabilitation can ultimately take place. However, Clause 12 of this Bill allows the prosecutor to keep returning to the court again and again without limit of time or number of applications to seek further compensation orders against the same defendant. Of course it is undesirable that anyone should be able to salt away the proceeds 1357 of his crime, but there must surely also be a limit to hounding a man who has been convicted. I hope the Minister will consider restricting the right of the prosecution to return with a time limit of perhaps five years from the date of the original determination. I hope he will also consider confining that right to those cases where there has been a deliberate failure to disclose assets on the part of the defendant.
Clause 13 is monstrous. The noble Earl cannot seriously intend to impose what is in effect a double sentence. That flies in the face of both common sense and justice, yet this provision requires a defendant both to pay what has been ordered by way of confiscation and to serve a sentence for his failure to do so. As far as I am aware, in no other branch of the criminal law is imprisonment for failure to pay a fine or compensation treated as other than an alternative to payment. One cannot surely have it both ways. The present law provides for the imposition of long periods of imprisonment for failure to pay. Contrary to the noble Earl's experience, mine is that where large sums are involved there is no question of it being worth the offender's while to do the time and keep the money because the court has extensive powers and uses them. Periods of imprisonment in default are frequently longer than those that were imposed for the offence itself. However, if I am wrong and my experience about that matter is untypical, the fault lies not in the powers which are available to the courts but in the use by them of the judges in sentencing.
Clause 13 runs counter to the principles of imprisonment for debt and to the whole of the rest of the English criminal law in this respect. It also seems to us to run counter to fairness. I hope that the noble Earl will think again about that clause. There are other aspects of this Bill which also trouble us. Clause 18 which creates the offence of failing to disclose to a constable knowledge or suspicion that another person is engaged in money laundering—that provision is echoed in Clauses 19,28 and 29—goes far beyond the Theft Act provisions which require knowledge or belief. If suspicion is insufficient to convict under the Theft Act, will the Minister confirm that it is really the Government's intention to extend the law in this dangerous direction?
At a time when so many people are occupied in trying to ensure that miscarriages of justice are avoided, does not the Minister agree that a provision such as this opens up a minefield of potential for wrongful conviction? There is concern also, particularly in the legal profession, that legal professional privilege is eroded by those provisions. They are drawn so widely that it is far from clear what conduct has to be reported. If the Bill passes in this form, it seems likely that there will be widespread reporting of transactions which are ultimately found to be innocent. There is also considerable concern about what the Government propose to do with information which is passed to them. Perhaps the noble Earl will give us some undertakings about the Government's intention in relation to such matters.
The noble Earl has already referred to Clause 16 which creates an offence of acquiring property knowing that it represents another person's proceeds 1358 of drug trafficking. He gave some reassurance to those of us at the Bar and those who practise as solicitors that we are to be exempt from prosecution for taking fees from someone who is accused of drug trafficking when, as is usually the case, they appear to have no means of support other than business profits. The noble Earl says there will be no such prosecutions, but as the Bill stands at present I can see no such defence. I would be grateful if the noble Earl could indicate where that defence is. It seems that unless a solicitor or a barrister can show that he acquired the fee for what the Bill terms "adequate consideration"—whatever that may mean—he is liable to a term of imprisonment of 14 years. Clearly that is not the noble Earl's intention but that appears to be what the Bill states as it is presently drafted.
We are even more concerned about the continuing attempts by this Government to erode the standard of proof that is required in criminal cases. That happened in legislation which was introduced in this House last summer and there is a similar attempt in this Bill in Clauses 7 and 24. The words which appear in the Bill are the following:The standard of proof … shall be that applicable in civil proceedings".In our submission those words should not properly appear in a Criminal Justice Bill of this nature. If the Crown does not have evidence to secure convictions or confiscations using the criminal standard of proof, the law should not be bent to help the Crown out. I fear that these provisions in this Bill, as in precedents—some of those were introduced in this House by the noble Earl—reflect more a capitulation by the party opposite to the law and order lobby within its ranks than a commitment to ensure that justice is done and those who have not committed offences are acquitted.
Part IV of the Bill relating to insider dealing could well stand as Part II of the "Lawyers' Benefit Act". When the chairman of the Stock Exchange, the director general of the British merchant banking association, the Chairman of the Investment Committee of the National Association of Pension Funds, the chairman of the Institutional Fund Managers' Association, the president of the Law Society and the chairman of the Bar Council—who is shortly to speak—all say that there has not been proper consultation with those who understand this field, that the proposals are so unclear that they will impede legitimate conduct and, indeed, attempts to improve standards of corporate governance, and that the proposals themselves provide endless loopholes for the fraudulent, surely even the noble Earl's characteristically robust defence of whatever legislation he is required to introduce must falter.
I do not understand, and perhaps the noble Earl will tell us, what was the rush to introduce those proposals without proper consultation. I hope that it is nevertheless not too late for the noble Earl and his advisers to seek to correct much of what is wrong in terms of clarity before yet another piece of unsatisfactory legislation hits the statute book. If it is worth introducing further provisions in this area—and everyone seems to be agreed that they are much needed—surely it should be done properly and after 1359 proper consultation. Assurances given here by the noble Earl are no substitute for clearly drafted and properly thought out legislation.
Above all else, the Bill is a missed opportunity. It is yet another Criminal Justice Bill which does not even make a pretence of addressing the real problem, which was illustrated by the recent crime figures. Recorded crime is now up 115 per cent. over the past 13 years. In the year to June this year recorded crime rose by 101/2 per cent., with particularly high increases in relation to robbery—24 per cent.—and burglary—16 per cent.—in the same area. There is no attempt in this Criminal Justice Bill to devise a national strategy to deal with crime or to co-ordinate programmes to prevent re-offending, which currently depend on isolated local initiatives and finance.
There is no attempt even to address the anomalies which are already arising as a result of last year's Criminal Justice Act. I must tell the noble Earl that confusion and resentment reign in the courts up and down England and Wales over the extent to which previous convictions may be taken into account by the judge in sentencing and the extent to which pre-sentence reports must be ordered by judges before sentence. The delays, and the consequent public expense, arising from the application of those parts of the Act are just beginning to be felt.
This is a cosmetic Bill. Its underlying principles are commendable but its form is not. Let us hope that the next Criminal Justice Bill goes to the heart of what concerns us all—namely, the reduction of crime—and does so after proper consultation, such as a White Paper. This little Bill, sadly, does not.
§ 4.13 p.m.
§ Lord Wigoder
My Lords, I, too, am grateful to the noble Earl, Lord Ferrers, for the typically lucid way in which he introduced the provisions of the Bill. I am also grateful to the noble Baroness, Lady Mallalieu, for making a coherent Second Reading speech on a Bill with as many disparate parts as this one has. I shall not follow the example of the noble Baroness in examining the steady growth in the crime rate since 1945 and endeavouring to decide whether it is all due to a Conservative or to a Labour Government. I also welcome the imminent maiden speech of the noble Lord, Lord Williams of Mostyn.
At this stage, which after all is Second Reading and not Committee, I propose only to make one or two general comments about each of the parts of the Bill and then to deal in a little more detail with Part IV, which concerns insider dealing.
So far as concerns Part I, which deals with jurisdiction, I agree with the noble Baroness that it is not the easiest of provisions to understand. However, I must confess that I did not read it as giving jurisdiction to the Crown Court at the Elephant and Castle to try Mexicans who have committed an offence in Mexico to the detriment of other Mexicans. However, it may be that I have misread the provisions of the Bill.
What perturbs me about Part I is the point which the noble Baroness made about the existence, quite 1360 properly, of two lists of offences—Group A and Group B. Those are set out in subsections (2) and (3) of Clause I, which are followed in subsection (4) by the words:The Secretary of State may be order amend subsection (2) or (3) by adding or removing any offence".On the face of it that is a remarkable power to give a Secretary of State. He would be able, by order, to include an offence in the clause which otherwise would not be there.
That is clearly a power of such significance that at the very least one would have expected it to be followed by a provision that it should be subject to the affirmative procedure. I am not one of those people who constantly harp back to the issue of affirmative or negative procedures. However, I should have thought that when the Secretary of State is being given the power in effect to create criminal offences, the power to impose jurisdiction where at the moment and after the passing of the Bill jurisdiction is not present, that power is such that at Committee stage we should consider carefully whether that is not an issue where the affirmative procedure would be appropriate.
The particular point to which I wish to draw attention in relation to Part II of the Bill, which deals with drug trafficking, is one which the noble Baroness mentioned. That is the fact that under Clause 7(2) the standard of proof is reduced from the criminal standard to the civil standard, and in Clause 9 there is a repetition of the existing position in the law relating to drug trafficking that the court may make certain assumptions to the detriment of the defendant unless the defendant is able to disprove those assumptions.
I fully recognise that there are cases—and drug trafficking may well be one of those cases—where there are certain matters so much in the defendant's knowledge that it is appropriate that the burden of proof should not be on the prosecution. All I say at this stage is that, wherever your Lordships find in a Bill a proposal in some cases to transfer the burden of proof on to the defence and in other cases to reduce the standard normally acceptable in a criminal case from being beyond reasonable doubt to the balance of probabilities, it is your Lordships' duty to consider the matter very carefully. Your Lordships should consider whether we are not encroaching, over and over again, on the principle, which I believe your Lordships would wish to maintain, that a defendant is presumed to be innocent until he is proved guilty and that in normal circumstances the burden of proof should be on the prosecution.
The other matter on which I wish to comment in relation to Part II of the Bill is Clause 18, which is repeated to some extent in subsequent clauses in Part III of the Bill. Under Clause 18 there is an obligation upon various people to disclose information to the authorities where they believe there is any question of the laundering of money which is the proceeds of drug trafficking. I do not complain about the principle, but the result is that a number of highly respectable practitioners in one trade or profession or another may come into possession of large quantities of information which it is their duty to hand over to the 1361 authorities. I do not complain about that. Much of that may be confidential information but not privileged information.
Where such information is passed over, perhaps in large quantities, what will happen to it? In particular, what is going to happen in cases where it is decided in due course that there should not be proceedings brought against the person to whom the information relates? Some authority is going to be left in possession of confidential, damaging and possibly quite inaccurate information to the serious detriment of an individual who is not being prosecuted. I hope that it is a reasonable question to ask what steps will be taken to deal with that information, and will the Government give an undertaking that it will be destroyed?
Part III of the Bill is in its way very similar to Part H. It largely extends the laundering procedures that arise from drug trafficking offences to offences of general criminal conduct. Again, a similar problem arises in the clauses—and the noble Baroness referred also to those—where there is the obligation to provide information to the authorities as to what is going to happen to that information if it is not used for the purpose for which it has been provided.
I come now to what in some ways is the most interesting part of the Bill, which is Part IV, which deals with insider dealing. I support at once what the noble Baroness said about the extraordinary lack of consultation over a highly technical subject. I can only think that the clauses would have been more clearly drafted if that consultation had taken place. As we have heard, the effect of this part of the Bill is that the present law of insider dealing in this country, which goes back to 1980, is to be repealed en bloc and the provisions are to be substituted in accordance with the European Community directive.
It is worth bearing in mind that since the 1980 Act common sense tells one—I have no evidence to prove if—that there will have been thousands of offences of insider trading or insider dealing committed in this country. In fact, in those 12 years there have been 21 people convicted of that offence, and indeed only 40 people have been charged with the offence. I suppose that there are two reasons for that. The first is that some of the wording of our existing legislation proved to be imprecise and there were loopholes through which various defendants managed to emerge.
I suppose the hope is that the wording of the new clauses will now be sufficiently precise to stop up those loopholes. I hope that that is right, though I must confess that any Act which as part of its new wording includes the creation of the word "tippee" is one which leaves me a total "fiabbergastee". I am full of gloom at the thought that in cases in which the issue is the status of the recipient of the confidential information, judges for generations to come will begin their summings up by being unable to resist the temptation to say "Members of the jury, tippee or not tippee, that is the question".
Getting the wording right is one matter, and we can seek to do that at Committee stage, but what in a sense is more fundamental is that the reason why so few prosecutions have been brought is not the wording of 1362 the present legislation; it is the realisation by the authorities of the difficulties of persuading the average juror to convict in a case of insider dealing. It is difficult to persuade them that it is a matter of gravity and that it is of sufficient gravity to warrant a conviction.
Your Lordships all know the true role of the City; the vital role which it plays in funding industry, commerce and the Government and in lubricating the wheels of international trade. Your Lordships are all aware of the intricate mechanisms that the various markets possess so that those fundamental tasks may be carried out. Your Lordships will accept without difficulty that it is highly important that there should be scrupulous honesty by all those involved in the City and in our markets. Many jurors see the matter very differently. I am sorry to have to say that many jurors think first of all of the yuppies and the discredit which they brought upon the whole of our financial system. Many people look around them and see takeover bids made not for the purpose of acquiring a company in order that it should be reconstructed and strengthened but in order that it should be destroyed in the hope that it will produce a profit on its break-up for those who have acquired it.
We all remember Black Wednesday and the activities of individuals who caused grave damage to this country, who would not for one moment claim, if they were asked, that they were acting in any sort of public interest but were simply there to line their own pockets. Many people will serve on juries in due course who believe that investors on the Stock Exchange for the most part have no interest in the activities of the companies in which they are investing; that they are simply out to make a fast buck in what people regard as largely a gaming transaction.
Where there are jurors who have that overall view of the City and its markets, it is hardly surprising if they take the view that if the people who are engaged in those activities happen to choose to score off each other by using confidential information it is all part of an elaborate game; that it is really not part of our criminal system; and that it is unreasonable to prosecute citizens of the country on that basis. This represents a very serious problem and no amount of amending the law on insider dealing will solve it. A much greater effort is required by the Government and by the City to present the true picture of the importance of the City to the general public. That is a campaign that has never really been undertaken, and it is urgently necessary.
It is equally necessary that it should be made clear that insider dealing is not a crime without a victim, as many people believe. In fact, it is very often a crime with thousands of victims. But at present there is the greatest difficulty in persuading members of the public that that is so.
I do not desire to go into any further detail about Part IV of the Bill, except to add one final comment, which is that it is right that we should seek to stamp out insider dealing. It is equally right—and we must again look at this with care at later stages in the Bill—that we should do nothing to prohibit the helpful and honest activities of, for example, analysts who are 1363 in the business of acquiring information and presenting it to the public in terms which are in the public interest.
There are many matters to be considered on this Bill. I and my colleagues on these Benches very much look forward to a constructive Committee stage.
§ 4.29 p.m.
§ Lord Alexander of Weedon
My Lords, I welcome the broad thrust of the Bill. It contains well-intentioned proposals to improve the law dealing with commercial crime. However, those proposals are as yet, I believe, far from well thought through. There is a need for considerable further improvement. I should like to concentrate on one area only, that of insider dealing.
It is only comparatively recently that insider dealing has been clearly recognised as striking against the integrity of trading markets. This country and the City of London have taken the lead within Europe in prohibiting such dealings. In the 1970s the Takeover Panel, in its non-statutory code, outlawed insider dealings in connection with takeovers. The legislation of the 1980s applied that prohibition to insider dealings generally. By contrast, the record in other states of the European Community has been uneven. In some countries there has been a marked reluctance to recognise that there ought to be any specific remedy for insider dealing. So it was important that the European Community directives should impose minimum standards. I hope that it is not wholly out of fashion to say how welcome it is that the European Commission contributed to that process.
The London Stock Exchange—I should disclose that I am a non-executive director—has a particular interest. Over 90 per cent. of cross-border equity trading in Europe takes place in our own markets. The very importance of insider dealing, about which we all agree and, I am sure, would echo what was said by the noble Lord, Lord Wigoder, means that it is critical to make sure that it focuses on the right targets and that it is clear in its terms. It is here that the legislation has aroused wide-ranging concern—in the Stock Exchange, the British Bankers' Association, the Law Society, the Bar Council, the CBI and others.
One of the concerns initially voiced with considerable force was that the proposed legislation would lead to uncertainty as to the legality of essential and normal business practices, including the role of investment analysts and proper communication between companies and their major institutional investors. That was a particular fear with the draft clauses, which were initially exposed to what was described as "consultation", a process about which I should like to say a few words in a moment.
It is right to say to my noble friend, who so far has been given few plaudits for what has taken place, that in correspondence the Government have sought to give reassurance on that point. But there remain significant doubts. What troubles me about those doubts is the way in which it is said that they will be dealt with. In correspondence the Government have suggested that they will give guidance to allay doubts 1364 as to the meaning of the legislation. That may be better than nothing; but I was brought up to believe that the meaning of the legislation lay in the law laid down by Parliament as interpreted by the courts. I am very chary of the value of guidance as providing that degree of certainty to which all citizens should be entitled when they come to trade.
Therefore I ask the Government to accept that their confession that guidance is needed means that much better legislation is needed on this point. It is important that the legislation should state clearly what are recognised legitimate practices and what is unlawful conduct carrying the sanction of imprisonment, fine and loss of career and reputation for individuals.
There are a few specific areas of concern to which I should like to draw particular attention in general terms. First, it seems far from clear what will constitute what is described as "specific or precise" information. The explanatory memorandum states that information which is cast in general terms or is mere rumour is not inside information. But where is the boundary to be drawn?
Secondly, in the old legislation there is a definition of what amounts to the publication of information. That is entirely missing from the present Bill. It is apparently a concept that is too difficult to define. If it is too difficult to define, it is hard to see how those who seek to interpret the law can be sure as to how they can behave. The explanatory memorandum makes a virtue of suggesting that a definition in legislation may cause difficulty. In that case what will be caused by the absence of a definition? I believe that the concept of publication should be firmly defined. Without it, the effectiveness of the legislation could be undermined and those seeking to trade honestly would be in doubt as to what they can do.
Thirdly, the provisions with regard to the use of information during a takeover are unclear in their effect. The legislation has attempted to deal with that concern by providing a defence where someone relied only on market information and it was—I quote—"reasonable" for him to deal. I should not like to seek to deal relying on what will subsequently be defined as reasonableness or alternatively what may be decided to be unreasonable by a jury without any definition at all. We simply do not want a jurisdiction the length of the Chancellor's foot in this area. The concept of reasonableness is too shadowy. We ought to have a much clearer guideline.
Is the problem not magnified when the burden of proof of reasonableness is not imposed on the prosecution but on the person who dealt in the shares? There is a strong view that that could provide an inhibition to honest trading and proper market practices, of which I hope my noble and learned friend will take note. There ought to be detailed consultation on this part of the Bill. What the noble Baroness, Lady Mallalieu, described as a "lawyers' benefit" Bill is bad for the public, bad for the City and unfair and very expensive for those individuals who have to seek legal advice.
I have drawn attention to a few detailed points, but there are other interested bodies, such as the British 1365 Bankers' Association, who themselves have other detailed concerns about the legislation. I hope that those will be taken into consideration before the Committee stage.
I turn to two general points: first, the process of consultation; and secondly the means of enforcement. The consultation process over this Bill started, so far as concerns the Stock Exchange, at the end of July when it received the draft clauses. It was asked for comments by the end of August. So were the other bodies to whom the clauses were exposed for consultation. No doubt those who had invited the comments departed for their holidays in Olympian detachment from the fact that others too may take their holidays during the month of August. That is not a particularly user-friendly month for consultation. More seriously, it is not conducive to full consultation.
However, the Stock Exchange was privileged compared with the CBI. Some two years ago the CBI told me that it had indicated to the Government that it would welcome the opportunity to help when a Bill implementing the European directive came before Parliament. That offer was gratefully noted. But, so I am told, the draft consultation clauses were not even sent to the CBI for consultation. Given that it affects the functioning of dealings in regard to British industry, one finds that a somewhat surprising, indeed, one might almost say incredible, omission.
Surely the time has come for us all to recognise that proper consultation is the essence of good legislation. In no respect is that more true than for legislation which affects the City. To govern markets effectively needs a proper understanding of how they work and the law enacted needs to be both focused and clear. Uncertainty is had for the financial markets. That is why there is now being established in the City a financial law panel, sponsored by the Bank of England and the City of London Corporation and chaired by the noble and learned Lord, Lord Donaldson of Lymington. The primary purposes of the panel will be to identify uncertainties in the market, to give guidance of its own wherever possible and to act as a principal forum for proposing and consulting about draft legislation.
It is hoped that membership of the panel will include representatives of the Treasury and the Department of Trade and Industry, officially as observers but with full rights of participation. We believe that that will improve the quality of legislation and we hope very much that the Government will feel able to respond in the same spirit.
Perhaps I may next turn to enforcement of the law. It is very important to our financial markets that the laws governing them should set high standards. I believe that the insider dealing law has had a good deal of effectiveness. The existence of the law and the provisions relating to the regulatory regimes for compliance have meant that enforcement of the insider dealing laws has not been necessary in the way that is sometimes claimed by those who say that there have been thousands of cases. What is clear is that in general law enforcement in the City, when offences are committed, is unsatisfactory. It is widely perceived that the enforcement of the criminal law relating to 1366 commercial fraud is wholly unsatisfactory. Cases take a long time to come to trial and when they do the process is hopelessly cumbersome and expensive. The outcome is seen as being capricious and unpredictable and is no credit to the law. Indeed, in some recent cases we have seen that a fair trial was impossible.
A few years ago the Roskill Commission recommended that complex trials involving City issues should no longer take place before a judge and jury but before a skilled judge and experienced assessors. We in this country are markedly reluctant to depart from what the late Lord Devlin described as the age-old principle that jury trial is the lamp by which liberty lives. I understand that principle in most areas and would not seek to quarrel with it, but I doubt whether it is still so as regards complex commercial crime. I believe that the contrary may be so and I hope that soon we shall have a re-examination of whether there is wisdom in the recommendations of the Roskill Commission.
I turn to the specific record relating to the enforcement of the law on insider dealing. The truth is that the law has had a salutary effect in preventing most insider dealing. But during the five years, from April 1987 to April 1992, the Stock Exchange drew to the attention of the Department of Trade and Industry, as the prosecuting authority, more than 100 cases. In the same period there have been only 12 convictions and 15 acquittals. Against that background it is disappointing that the legislation does not consider other means of enforcement. One such means, which has considerable sympathy, is that an alternative remedy for insider dealing should be provided. Thereby, a City regulatory authority could have parallel jurisdiction to investigate suspected insider dealing and, if it were proved, order disgorgement of profits or possibly a multiple of profits and redress to any identified victim. That would mean that decisions on this difficult area of fact and law could be reached by an experienced tribunal imposing financial sanctions directly related to the seriousness of the case.
I do not suggest that the possibility of prosecution should be excluded. But obviously the fact that a determination and award had been made could be taken into account by the prosecuting authorities in deciding whether the rigours of the criminal law should invariably be invoked. I believe that that means of enforcement would provide a valuable additional remedy and would help to dispel the perception that the law in this area is not being adequately enforced.
Earlier, I was critical of the inadequacy of the time for consultation. However, it is right to say that in the ensuing months considerable amends for the short timetable have been made by the constructive way in which the Government have listened to, and discussed, the misgivings of the City and industry as to the initial draft legislation. I hope that that will continue. There is much scope for further improvement of the Bill. We all want a law which is fair, focused and clear.
1367 I sit down with greater pleasure because it gives the House the opportunity to hear the maiden speech of the noble Lord, Lord Williams of Mostyn.
§ 4.45 p.m.
§ Lord Williams of Mostyn
My Lords, the late Capability Brown was of the opinion that every landscape or vista had the capability of improvement. If only he were able to scan the vast panorama of this Bill he would be exceptionally gratified by his posthumous vindication.
This is a muddled Bill which lacks coherence and is unlikely to be effective. I respectfully propose that the following questions could reasonably be asked. Is the new Bill on insider dealing better than what went before? What is the true mischief complained of? What is the true extent of that mischief? Can any offence or offences be more efficiently detected and prosecuted if the Bill becomes law? Ultimately, will the public have due and proper protection from the law, which is its entitlement? Those questions asked about this Bill raise serious issues of doubt.
I shall limit myself entirely to Part IV of the Bill which deals with insider dealing. I believe there to be general unanimity that the present law is ineffective; so ineffective as to be worthless. A worthless law condemns itself. As the noble Lord, Lord Wigoder, indicated, there have been few prosecutions in past years and few convictions. I know of no one in the City, in whatever capacity they serve or work, who believes that the present law works effectively. I submit that there is a moral: that legislation on a particular problem should be considered and, above all, the subject of the fullest consultation. As regards the Bar Council, consultation on Part IV has been vestigial. I respectfully suggest that the first law of effective legislation is, "Consultation good; haste bad". All the professional bodies which were consulted remain uneasy.
In the presence of my distinguished predecessor, the noble Lord, Lord Alexander of Weedon, I am about to commit a "disbarable" offence; it is to offer legal advice for nothing. The advice is directed towards insider dealers. They are constrained and described in Clause 35. The offence there specified is punishable by no fewer than seven years' imprisonment. That offence is insider dealing. According to Clause 39, the insider is not guilty unless he is within the United Kingdom, or the regulated market is treated as regulated within the United Kingdom, or the professional intermediary is within the United Kingdom at the time of the offence. Therefore, the modestly gratuitous advice that I offer is: insider, go to Paris upon the bus; sit upon the aeroplane to Maastricht; consider a long weekend in Damascus. I mention Damascus since it is the customary preferred destination for those who wish Pauline conversions—normally described these days as U turns.
Clause 36 deals with the disclosure of information, which is also a grave offence punishable by seven years' imprisonment. No offence is committed unless the giver of the information and the recipient—the 1368 donator and "tippee"—are both within the United Kingdom. I have done my best and scratched my head and I find no sensible basis for those exclusions.
Perhaps I may say how much I agree with the noble Lord, Lord Alexander of Weedon, that there is a serious case to be made for consideration as to whether insider dealing should he subject to civil sanctions with draconian fines against the insiders; multiple fines against their corporate employers; and severe disqualification from acting on any market or being a director of any financial institution. My own belief is that it is likely to be infinitely more effective than the two dozen cases or so which have not put an end to that mischief.
My Lords, I see the time on the Clock. Of course I took advice from my noble friend Lord Graham of Edmonton who said that seven minutes is good, but five minutes is better; and I shall shortly follow his advice.
I realise that I have been gloomy, but there is one beam of light amid the encircling gloom. Neither insider dealing nor disclosure of information on an insider basis applies to any policy with respect to the conduct of exchange rates, the management of public debt or the management of foreign exchange reserves. It would be very wrong of me at this time to intrude into private grief. Therefore, I shall not ask the noble Earl to indicate the reason for those exceptions
Perhaps I may say how grateful I am for the words of welcome which have been addressed to me by noble Lords and for the welcome which the whole House has given me.
§ 4.52 p.m.
§ Lord Windlesham
My Lords, we have listened to a maiden speech which was trenchant and powerful. As noble Lords would have expected, the noble Lord, Lord Williams of Mostyn, has spoken with authority, with humour, and, as I hope the Opposition Chief Whip will agree, with fitting brevity. When he was appointed as chairman of the Bar Council, a press report about the noble Lord was headed, "Neat reformer follows radical volcano." The noble Lord has already shown himself to be a vigorous and articulate spokesman for the Bar. At the same time, his reforming instincts have been apparent; for example, in such delicate matters, in this House at any rate, as urging a judicial commission to make recommendations on judicial appointments and to review the performance of the judiciary. The noble Lord's gift for presenting arguments neatly—and I use the word from the press report—and persuasively, has been demonstrated to us today and, on behalf of the whole House, I congratulate him most warmly on his maiden speech.
The Bill before us is the ninth Criminal Justice Bill to be presented to Parliament since 1947. It is probably the narrowest in nearly half a century. What has distinguished the whole sequence has been the comprehensiveness with which a range of disparate proposals, originating from a wide variety of sources, have been brought together to bear on the conduct of 1369 the criminal law; the powers and procedures of the courts; and the treatment, in the full sense of that word, of offenders.
Most of those Bills have started with a nucleus around which later additions proliferated. For example, in the legislation introduced in 1986– 87 the original intentions were to put the criminal injuries compensation scheme on to a statutory basis, and to enact the great bulk of the recommendations of the Roskill Committee on fraud trials, although not the most contentious one, which has been referred to already in this debate. In this way, criminal justice legislation has been a rolling stone which characteristically gathers many accretions as it travels down the Westminster hillside towards its final destination on the statute book.
When it finally obtained Royal Assent, the Criminal Justice Act 1988 had expanded to 173 sections, half as long again as the original Bill, allowing for the separate enactment of the provisions relating to fraud. These were early manifestations of the anxiety over white collar crime.
Onto those wide-ranging and comprehensive pieces of legislation were hitched debates on compelling aspects of criminal justice not covered in the Bills themselves; for example, the penalty for murder and life imprisonment. Such tactics have never been welcomed by governments of whatever hue, but they have been accepted as an unavoidable part of the periodic scrutiny of criminal justice by Parliament.
Noble Lords will recall the fine debates that we had in this House last year, in the summer of 1991, and the carrying, by large majorities, of amendments on murder and life imprisonment to what became the Criminal Justice Act 1991, later reversed in another place. Now, once again, a Bill on criminal justice is presented to Parliament, somewhat earlier than expected, bearing in mind that the main provisions of the 1991 Act came into effect little more than one month ago, on 1st October this year.
Once again we have a number of different strands drawn together and presented to the House under the title of a Criminal Justice Bill. As we have heard, the sources are two different European Community directives, a report of a Home Office working party on the confiscation of the proceeds of drug trafficking offences, and a Law Commission report on offences of fraud and dishonesty with a foreign element. Each of them is worthy enough as a policy objective, although we have heard strong criticism from my noble friend Lord Alexander of Weedon about the weakness of the consultative procedures.
As the list grew, it is not difficult to visualise the state of mind of the Home Office. How should such a disparate collection of topics be described? If the familiar Short Title of a Criminal Justice Bill were to be used, would it then run the risk of opening the door too wide, admitting unwanted additions by way of amendment and new clauses? That challenge to the draftsman is reflected in the carefully circumscribed wording of the Long Title of the Bill. The Minister of State will have been briefed to tell me that the Bill as drafted pre-empts any attempts to insert new provisions on murder, life imprisonment or any other 1370 matter outside the scope of the Long Title of the Bill. I accept that. But what a missed opportunity. As everyone who followed the debates last year knows, this is a nettle which must be grasped and which must be grasped before too long.
The differences in the release procedures for life sentence prisoners are already concentrating attention on the contrasting processes now applicable to mandatory and discretionary life prisoners. For the latter, including some of the highest risk cases of homicide as well as arson and the most serious sexual offences, the process incorporates the judicial characteristics required by the European Convention on Human Rights. The new procedure for discretionary life sentences came into effect on 1st October 1992. But for the mandatory cases of murder where the court has no discretion the executive branch of government, in the shape of Ministers and Home Office officials, still decides on the extent of punishment. The way that power is exercised, including the setting of the tariff in private, has been widely criticised, not least by the former Lord Chief Justice, the noble and learned Lord, Lord Lane, in a notable speech during the course of the previous Criminal Justice Bill.
The recent controversy over the defence of provocation, particularly as it applies to women abused in the home and mercy killing, has heightened the argument to return the sentencing decision in all forms of homicide to where it rightly belongs; that is, the High Court of Justice.
Before moving on to some other points I want to refer briefly to the recent case of Dr. Nigel Cox. Dr. Cox was the hospital consultant found guilty of the attempted murder of a terminally ill patient by giving her a lethal injection. He received a 12-month suspended sentence. If, on the facts, the injection had been found to be the cause of the old lady's death, the charge would have had to be murder and the sentence life imprisonment. Yet the act would have been identical; the intention the same. It cannot be right to allow discrepancy on that scale to continue.
Returning to the contents of the Bill, there are matters relating to the burden of proof, which have already been raised, maximum penalties, and the sentencing of certain couriers in the international drug trade, also mentioned by the noble Baroness, Lady Mallalieu, in her speech at the outset of the debate. All these will need to be followed up in Committee.
There is, however, one more general point upon which I would ask the Minister to reflect in all seriousness between now and the Committee stage. It occurs in Part IV of the Bill dealing with insider trading, the part which attracted the most attention in this afternoon's debate. It is the reference in Clause 34 to "tippees". A tippee is a person whose source of information is an insider—not a difficult definition. I do not argue that such people should not be brought within the ambit of the Bill. But I object to the expression. My noble friend Lord Ferrers described it as "colourful"; the noble Lord, Lord Wigoder, made a joke about it. But this is the vocabulary of P. G. Wodehouse; of Bertie Wooster and the Drones Club. It is wholly inappropriate for an Act of Parliament.
1371 In order to prepare myself more thoroughly I made inquiries of the Treasury. To the best of my knowledge, and that of my informants at short notice, the word does not appear anywhere on the statute book. We must at least be thankful for that. Nor is it derived from Euro-jargon. There is no mention of it in the EC draft directive of 1989 co-ordinating regulations on insider dealing (89/592). The status of a person receiving information from an insider is defined in Article 4, but neither the word "tippee" appears nor, if such a thing were conceivable, does any French translation of the word.
This is our Bill, as the noble Earl reminded us at the outset. It is a House of Lords Bill originating in this House, which will be sent on to the Commons for scrutiny and approval. It is not, as is more usual, a Bill sent from the Commons to this House. I doubt that I am alone in feeling that we would be able to take more pride in its contents if an expression, which has already been ridiculed by several speakers, were to be removed.
§ 5.7 p.m.
§ Baroness Macleod of Borve
My Lords, we are all grateful to my noble friend the Minister for introducing the Bill this afternoon. Some of us may be mystified by it but we are all grateful for the lucid way in which he placed it before us.
I shall speak only briefly—others have covered the ground more than adequately in my view—on something about which I care deeply; that is, the drugs situation in Part II of the Bill. In my view, traffickers in drugs do more damage to all parts of society than anything else in the Bill. I regard those evil people as the scourge of our country.
Customs and Excise officers are increasing the numbers of people they are apprehending, though I am informed that the street value of the drugs has remained constant. We are informed today by my noble friend the Minister that the value is around £35 million per year. Cocaine is still the main drug imported, though the drug Ecstasy is spreading rapidly. All the drugs which are imported in that context are killers and therefore the drug traffickers are potential murderers. Those who are caught are normally sent to prison for a long term. However, the Bill is more interested in confiscating the drugs. In future courts will be able to try cases and pass sentence before the confiscation order is made.
Because drug trafficking is such a serious offence I am anxious that severe deterrents should be made widely known both abroad and in this country. For many years I was a member of a parole board. There were many traffickers in prison and we tried to ensure that they were kept there. If the traffickers abscond or die, the courts in future will be able to confiscate the assets, presumably the financial ones and the drugs. But it seems that the courts will be able to trigger confiscation procedures which have the result of excluding minor cases. Can my noble friend tell us what is a minor case within this Bill and the law? Will he also assure the House that all confiscated drugs are destroyed? I am sure that that is the case under 1372 another Act, but it would be very helpful to the public of this country if they knew that all the drugs were destroyed.
I have said only these few words because I care very deeply indeed about the tragedies which are caused by drug traffickers. It will be apparent to all noble Lords that I am not versed in the law. I wish I were. With these few words, I wish the Bill well.
§ 5.11 p.m.
My Lords, I wish to confine my remarks this afternoon to Part II of the Bill and particularly to Clauses 12,14,15 and perhaps Clause 18. It seems only logical and in the public interest to confiscate drug proceeds wherever they can be found. If traffickers are permitted to enjoy drug proceeds, that is an encouragement to crime, adding public insult to the private injury inflicted on the victims. Moreover, proceeds are often reinvested in further drug trafficking, creating the tidal wave which is presently hitting Europe.
A few years ago who would have guessed that at the present time a tonne or more of cocaine could be seized on the European mainland? At the same time internal border controls are coming off, or at least being relaxed, which of course adds to the United Kingdom's vulnerability, particularly as some European Community countries have weaker drug enforcement regimes than we do. It is well documented, and there is no argument about it, that a large percentage of the drugs coming into this country at present are coming from other European Community countries. There is no doubt that this part of the Bill is certainly required to redress that problem.
I note with interest the provisions of Clause 12 which should help to ensure that, even if a convicted trafficker successfully deceives the court by concealing drug proceeds at the time of sentence, the mischief can be subsequently corrected if further information comes to light. However, if the convicted trafficker can still conceal the proceeds—we all know how easy it is; we were discussing money laundering and the like this afternoon—then I suggest that, if anything, we have not got this legislation quite right yet. Although she will probably not agree with what I am going to say, I believe that something of what I have to say might help with the problem which the noble Baroness, Lady Mallalieu, on the Opposition Front Bench mentioned a little while ago as regards people being pulled back time and time again over years.
For instance, why should the convicted drug trafficker be subjected to less onerous disclosures than the bankrupt? Under Section 288 of the Insolvency Act 1986 a bankrupt commits the offence of contempt of court by failing to submit a statement of affairs. The Insolvency Act also contains a wide range of criminal offences to catch the bankrupt who conceals from his statement of affairs any material information; who fails to disclose or deliver up property; or who even fails to produce any relevant books and records. For some offences the maximum penalty to which the bankrupt is liable on conviction is seven years' imprisonment.
1373 Given that, can anyone argue that the provisions appropriate for a bankrupt would not perhaps be appropriate for a convicted drug trafficker? Even after all the provisions of this Bill have been implemented the drug trafficker will still not be subjected to the rigorous regime of the bankrupt. Should we not insist that the convicted drug trafficker makes full disclosure of all his assets, with sentences which are at least as punitive for deliberate concealment? Indeed, would Clause 12, as presently drafted, be really necessary if we were not apparently allowing the trafficker the right to conceal his illegal activities? In part that applies also to Clause 7.
As regards Clause 14, I believe that the provisions are drawn too narrowly as they fail to catch the drug proceeds of a defendant who dies before proceedings commence or who dies between the commencement of proceedings and conviction. The drug proceeds of a trafficker who has already been convicted and imprisoned abroad or those of a defendant who is unfit to stand trial also seem to elude confiscation under this clause. If we do not forgo the right to seize their drugs, why should we do so with the drug proceeds? There seems no reason why confiscation would be unreasonable in that case. Again, what about the trafficker who dies after absconding? I am sure that these points merit some further consideration.
A similar logic may apply to Clause 15 as regards the compensation provisions. Criminals are more likely to abscond where the evidence is overwhelming and return when their crime is no longer open to prosecution. If the evidence is sufficiently strong for an order to be made in their absence, then there is no more apparent logic in returning such confiscated proceeds than there would be in returning the drugs. It is more logical that compensation decisions should be based on a review of the evidence, with the onus on the applicant to produce additional or rebuttal evidence to support his claim.
Perhaps I may turn now to Clause 18. I have read certain articles in the press in which members of banks and financial services were expressing certain reservations about making Clause 18 mandatory as regards reporting to the authorities. I contacted the police, who would be dealing with this part of the business, to see what their reaction was. I was told that they are pretty satisfied with the way things are running now that the Bank of England is dealing with the matter and that in-house training is taking place at various banks and financial institutions.
I was told that in 1987 about 500 offences a year were being reported and that this year the figure is likely to be 12,000. That is without any mandatory legislation. I realise that there are certain people who are not pulling their weight on this matter and I assume that is why Clause 18 has been put into the Bill. If the banks and the financial institutions that are now playing ball and doing everything they can suddenly have mandatory legislation pushed at them, to cover themselves are they not going to report every single thing that happens, and, as a consequence, is not the system, which is working well at present, going to be swamped?
1374 I know that there are certain people or institutions who are not doing things in the right way, but I am sure that that is an issue more for an educational programme than a mandatory one. I also realise that some of the points which I have brought up this afternoon are perhaps a little radical. I do not expect the Minister to be able to reply to them this afternoon. I ask that he bears them in mind in order to see where we can go from here.
§ 5.19 p.m.
§ Lord Harris of Greenwich
My Lords. I should like to join other Members of the House in congratulating the noble Lord, Lord Williams of Mostyn, on his maiden speech. It was a speech of brevity and wit. He analysed one particular part of the Bill admirably and raised a number of fundamental questions to which we very much look forward to hearing the reply of the noble Earl, Lord Ferrers.
The Bill that we are discussing is a criminal justice miscellaneous provisions Bill. One part of it is the property of the Home Office and the other part is the property of the Treasury. In terms of consultation, one part of the Bill has, in my view, been done well while the other part has been done extremely poorly. Most of us would have no difficulty about the Bill's central purposes, which are to deal more effectively with insider dealing and to improve the legislative framework of the criminal law as it applies to money launderers.
I should like to deal first with the question of insider trading and the Government's proposals. The Bill creates, as I understand it, for the first time an offence of trading as an insider in bonds, gilts and gilts futures. Given the rest of this part of the Bill, that seems entirely reasonable. However, Clause 40 excludes from the scope of the insider dealing provisions,anything done—(a) in pursuit of monetary policies or policies with respect to exchange rates or management of public debt or foreign exchange reserves".Like the noble Lord, Lord Williams of Mostyn, I find that a little odd. As I am sure the noble Earl, Lord Ferrers, will appreciate, a leak of the trade or reserve figures can have the most direct implications in the foreign exchange and gilt markets. I can recall from my own days in the Treasury the very substantial adverse effects when there was speculation in the press, let alone hard information, about those figures. Why then, in these circumstances, and given the other provisions of this part of the Bill, is public sector information excluded? No explanation so far has been given, but I very much hope that we shall hear something from the noble Earl.
There appear to be other concerns about this part of the Bill, to which the noble Baroness, Lady Mallalieu, the noble Lord, Lord Alexander of Weedon, and my noble friend Lord Wigoder have referred. I read in the Financial Times of 29th October a report of an interview that had been given to Reuters by the Economic Secretary to the Treasury, Mr. Nelson. This indicated that, following protests from bankers, the Bill might be amended. Mr. Nelson said that, 1375the Government did not want to undermine financial services in London".Well, coming from the Economic Secretary to the Treasury, it would be remarkable if the reverse was true.
Mr. Nelson went on to say that the consultation period leading up to the introduction of the Bill, which had been published only a few days before, had been too short to respond to all concerns. I am bound to ask the noble Earl, Lord Ferrers: what was the tremendous rush? Why were the various institutions and professional bodies not given adequate time to respond to the Government's proposals? Frankly, I do not think that this reflects a great deal of credit on the way in which this matter has been handled in the Treasury. I welcome what the noble Lord, Lord Alexander of Weedon, said and the fact that the consultations, which should have taken place many months ago, are now taking place. No doubt amendments will be tabled in Committee.
But there is another reason for my concern—and that is that Mr. Nelson's interview with Reuters also dealt with the issue of money laundering. I very much hope that the Home Office will not allow this part of the Bill substantially to be weakened as a result of any pressure from the Treasury. I am not referring now to the various matters of substance that were raised by the noble Baroness but I very much hope that that will not take place.
The reason for my concern and, I am sure, that of others is obvious. The drugs trade in this country is expanding even more rapidly than the rest of the economy is contracting. In 1980 the Customs and Excise seized 35 kilos of cocaine and 38 kilos of heroin. The street value was £10 million. By 1985 the value of the drugs seized by the Customs and Excise had more than quadrupled from £10 million to £43 million. Last year—1991—the seizures rose to 1,088 kilos of cocaine and 373 kilos of heroin. Their value was not £10 million, not £43 million, but over £200 million. In other words, in a period of just 11 years the value of drugs seized has multiplied by a factor of 20.
However, that is by no means the end of the story. The United States customs has told me that it estimates that it seizes somewhere in the region of 10 per cent. of the drugs destined for the United States market. Frankly, there is not much reason for us to believe that we are any more successful than the Americans. So we are probably talking about a situation in which last year drugs with a street value of up to £2 billion entered the United Kingdom.
I say that not because I believe that any legislation is now justified in these circumstances, however ferocious its effects and however damaging its secondary consequences—we certainly do not want panic legislation—but because we must recognise the dimensions of the problem that is now confronting us. Excluding terrorist action, drug trafficking is by far the most serious class of crime being experienced in this country. It can devastate the lives of tens of thousands of our fellow citizens.
The problem of the drug trafficker is an obvious one. He has to find some means of injecting huge sums 1376 of cash into the banking system. In Miami not so many years ago, long queues used to form outside the banks before they opened, with large men carrying even larger suitcases holding vast numbers of dollar bills. As a result of action by the federal authorities that no longer occurs, but very large sums still find their way into the international banking system.
Our experience in this country was summarised in a report by the House of Commons Select Committee on Home Affairs. Paragraph 20 of its seventh report stated:The National Drugs Intelligence Co-ordinator (NDIC) estimated that there is at least £1,800 million derived from drug trafficking in the United Kingdom. In its written memorandum, the NDIC noted that such vast amounts of money circulating within the legitimate banking system may have a destabilising effect on smaller financial institutions. The NDIC also indicated that, despite the Drug Trafficking Offences Act 1986, the United Kingdom continued to be a major centre for money laundering. Indeed, he said that the United Kingdom was 'regarded by the United States, Canada and some others as an offshore banking system'".That is pretty disturbing stuff, coming from the most senior police officer at that time with responsibility for dealing with the threat posed by the international drug traffickers. I fear that our problems in this respect have not been made a great deal easier as a result of the general approach of the Bank of England. I shall reserve for a future occasion the unsatisfactory response of the Bank of England to the convictions of BCCI on money laundering charges in the federal court in Tampa. That matter has been dealt with in some detail in the report of Lord Justice Bingham and I am sure that we shall have an early opportunity to debate that report.
But it is today, given the Bill now before us, probably worth recalling the views of the Home Affairs Select Committee of the House of Commons in the same report when commenting on the report of the Bank. Paragraph 8 of the report states:The difficulties in securing convictions for money laundering offences raise the question of whether changes to the law are required. In the light of the dangers in Britain being perceived in North America as 'an offshore banking system' referred to by the NDIC, we asked the Bank of England and the Committee of London and Scottish Bankers how they believed the law against money laundering could be strengthened. We were extremely concerned that neither body, with their considerable combined expertise of the financial world, were able to propose any changes to the law in response to the scale of the threat facing the financial system. If bodies such as the Bank of England and the Committee of London and Scottish Bankers are as passive as appears to be the case in responding to the significant threat facing financial institutions from money laundering, the Government must take the initiative".Rather more than two years later the Government have now done so. I find many of the proposals in this part of the Bill both reasonable and justified. The concerns of the noble Baroness, Lady Mallalieu, to which I have already referred can of course be discussed at the Committee stage. However, I think it is right, for instance, to compel a defendant to co-operate and provide information in a confiscation inquiry with inferences to be drawn in default and for confiscation orders to be imposed in the absence of the convicted defendant who absconds or from the estate of such a person if he dies.
1377 On one matter I did not agree with the noble Baroness, Lady Mallalieu. I refer to the question of whether the debt should be continued notwithstand-ing the fact that the defendant had served a period of imprisonment. In my view the noble Earl, Lord Ferrers, was entirely right. In a number of cases of which I am aware a defendant who had an order made against him for large sums of money chose to remain in prison and was then able to leave prison and derive substantial advantage from the money which had not been effectively confiscated. It seems to me that that is not acceptable. I would be concerned were these and some other important proposals in the Bill to be weakened. And I would strongly object if this was done as a result of any pressure from the Treasury. I make that point only because of the reference by Mr. Nelson in his interview published in the Financial Times to the fact that some of the issues relating to insider dealing were going to be looked at again and that this would also apply to the money laundering clauses of the Bill. If substantial government amendments are tabled to those clauses, we very much hope that we will be able to get one clear answer from the noble Earl, Lord Ferrers. That is all the more important given the fact that these matters have now been discussed between the Home Office and a large number of other organisations for a significant period of time. The question is whether the law enforcement authorities—the Customs and Excise, the National Criminal Intelligence Service and the Metropolitan Police—have agreed that any such amendment represents no significant weakening of the money laundering provisions of the Bill. To make my point a little more explicit I shall be asking not whether they have been consulted—we all know what consultation amounts to in many cases—but whether they agree that the impact of the new money laundering procedures has not been significantly affected.
I do not believe that the Customs or the police should have any right of veto on any proposed changes in the Bill. It would be an absurdity to make any such proposal. But we have a right to be told fully and in the clearest terms what their views are if amendments of substance to these clauses are brought forward. I have no doubt that the Bill will have some far-reaching effects on the criminal law. It is addressed to issues of high public importance, the integrity of our financial system and the campaign against the money launderers. It deserves both at Second Reading and the most careful scrutiny during its Committee stage.
§ 5.35 p.m.
§ Lord Richard
My Lords, I start with the very pleasant task of welcoming my noble friend Lord Williams of Mostyn and congratulating him on his maiden speech to us today. It was lucid and penetrating and offered a powerful analysis. I hope that the Government listened very hard. As we share a country, a profession and a political allegiance it will not be any great surprise to the House to know that I sincerely hope that we shall often hear him expressing himself in the forthright way he did today.
1378 Much of what I want to say in winding up the debate was said by my noble friend Lady Mallalieu in her powerful and impressive opening speech. I share many of her reservations as to the precise terms of the Bill and the drafting and complexity of some of its provisions. Yet again this is one of those pieces of legislation where we can discern as through a glass darkly what it is the Government are trying to achieve, but because of the opaqueness of the glass it is difficult to give them more than one and a half cheers as they set out on this legislative path.
Let us take Clauses 1 and 2 of the Bill. In a Criminal Justice Bill it always seems to be Clauses I and 2 that cause the greatest trouble. In the most recent Criminal Justice Bill we spent a great deal of time, as the noble Lord, Lord Windlesham, will no doubt remember, trying to decipher the drafting. We went through three amendments in Committee before the drafting finally emerged in a form which was acceptable to the House. I am bound to say that I found it as difficult at the end as I had at the beginning. I put these two clauses in the same class.
There is a division of offences into Group A offences and Group B offences. There is then an attempt to deal with the jurisdiction in respect of Group A offences. The defence which is available now that a court may not have jurisdiction to try a particular offence in relation to Group A offences is removed. That should be read in conjunction with Clause 3:A person may be guilty of a Group A or a Group B offence whether or not—And so far as one can tell, in relation to Group B offences, whether or not any relevant event at all took place in England and Wales. If that is right, the example given by my noble friend of Snaresbrook Crown Court trying a conspiracy between Mexicans which took place in Mexico is not too fanciful. I cannot believe that the Government ever intended that that should be the effect. I hope that the noble Earl will be able to tell us that that is not the effect and that once again those on this side of the House have misread the legislation which the Government are so benevolently bringing forward.
- (a) he was a British citizen at the time of the relevant event;
- (b) he was in England and Wales at that time".
There are other aspects of the first part of the Bill about which I have considerable reservations. Clause 6 is an attempt to deal with a situation in which the defence wishes to raise the issue of whether or not the relevance of an external law point is applicable. That is a rare provision in the British Bill. Subsection (4) says,a condition … shall be taken to be satisfied"—that is, that the prosecution can be taken to be all right and continue as it should do in accordance with all the rules without that defence being raised—unless, not later than rules of court may provide, the defence serve on the prosecution a notice—(a) stating that, on the facts as alleged with respect to the relevant conduct, the condition is not in their opinion satisfied".In other words, the defence now has the obligation in those instances to disclose to the prosecution in advance of the trial what the defence might be if the 1379 issue proceeds. I am bound to say that that goes somewhat too far. We shall return to the matter in Committee.
I turn now to the burden of proof. It seems to me that Rumpole's "golden thread" is being strained rather unduly by the Government, especially in Clauses 7 and 24. It requires the civil burden of proof only—that is, proof on the balance of probabilities, rather than proof beyond reasonable doubt—to be satisfied in determining questions as to the benefit which offenders have received from the proceeds of crime for the purpose of making confiscation orders.
We had thought that that issue had been settled by the case of Dickens in 1990 which established that, in relation to confiscation orders under the Drug Trafficking Offences Act 1986, an item must not be included as one of the offender's assets which is subject to confiscation unless the judge is satisfied beyond reasonable doubt that the item is indeed part of the proceeds of drug trafficking. Although the Explanatory and Financial Memorandum says that the Bill puts beyond doubt the fact that the standard of proof required is a civil one, the real effect of the clauses is to reverse the decision in Dickens. I believe that the House should seriously consider whether the confiscation of assets in such a case is really not such a severe penalty that the use of anything less than the criminal burden of proof is acceptable. Those provisions are indeed somewhat disquieting.
However, if I am disquieted by that, I must say that I am even more disquieted by Clauses 12 and 13, both of which were mentioned by my noble friend Lady Mallalieu. Clause 12 (in relation to drug trafficking offences provisions) provides that, having had one bite of the cherry immediately after the man is convicted in deciding what are his assets as a result of trafficking, the prosecution can come back and decide,"Well, we got it wrong the first time, but we'll have another go and see if we can't up the figure a little". Indeed, if the prosecution decides after the second go that there is scope for a third try, it can come back for a third time. The only limitation that I can see is that,No application shall be entertained by the court … if it is made after the end of the period of six years beginning with the date on which the defendant was convicted.It is possible that there is scope for some flexibility in the way in which the provisions of the Drug Trafficking Offences Act are being used. But to have a period of six years within which the prosecution can come back on more than one occasion is, with respect, going a little too far than the interests of justice or the interests of dealing with crime require.
If I have a question mark over Clause 12, I have an even bigger one as regards Clause 13, which again was raised by my noble friend Lady Mallalieu. Clause 13 says that where "the defendant" elects to serve a term of imprisonment in lieu of paying the amount that he has been ordered to pay under the Drug Trafficking Offences Act, (that sentence having been fixed by the judge in lieu of payment) and he decides for very good reasons—or no reasons at all, or perhaps he would rather be in prison than have his house sold—that he 1380 will serve the extra term, that does not seem to have much effect under the provisions of the clause upon the confiscation order. The clause says:Where the defendant serves a term of imprisonment or detention in default of paying … that term does not prevent the confiscation order from continuing to have effect, so far as any other method of enforcement is concerned".In that case, the defendant is caught not once but at least twice. First, he receives a sentence; secondly, he has a compensation order made against him and a term of imprisonment imposed in lieu of it: thirdly, he then serves the term of imprisonment in lieu of confiscation, but nevertheless finds himself in a situation where the confiscation order can be enforced. Again, I have to say that that goes a little too far. It is possible that in Committee one will be able to look at the provisions in the Act and perhaps modify them in a way which will make them more acceptable.
Clause 14 gives the authorities the right to chase the defendant even after his death. I suppose that there is an argument which says that if he dies possessed of money or assets which are the results of drug trafficking then, nevertheless, his estate should be deprived of those sums. We need to look at that proposition quite seriously. The detail of the wording is certainly something which I should like to concentrate upon in Committee.
We then have the offences in connection with money laundering in Clause 18. I do not object to those sections; indeed, I think that they make a great deal of sense in principle. But, on the other hand, there are certain ways in which words are used in the sections which again I think will cause us difficulty. The concept of a person suspecting someone is introduced:A person is to be guilty of an offence if—he … suspects that another person is engaged in drug laundering … [or] he does not disclose the information or other matter to a constable as soon as is reasonably practicable".I also observe—and I would be most grateful if the noble Earl can tell me why—that the offence seems to be committed only if the information or other matter on which that suspicion is based,came to his attention in the course of his trade, profession, business or employment".So I suppose that if an estate agent comes into possession of information which makes his suspect that the money which is being used to purchase a house represents the proceeds of drug trafficking he is under an obligation under the section to report it and, if he does not do so, he commits an offence. But if such information comes to him socially, or because he suddenly observes that his neighbour looks rather richer than he did before and he suspects that he may be a drug trafficker, does he or does he not commit an offence if he does not report it? It really cannot be suggested that one degree of suspicion is any the less culpable than another. Once again, it is a point to which we shall return in Committee.
There is no doubting the fact that Parts II and III which introduce the legislation to implement the Community directive on money laundering are causing disquiet and concern. New offences are being created which will oblige institutions, undertakings and professions to disclose to the police suspicions of the laundering of both the proceeds of drug trafficking 1381 and the proceeds of other criminal conduct. No guidance will be given by the Government as to what circumstances would give rise to a suspicion of money laundering. There is likely to be widespread reporting of transactions in an effort by institutions to avoid falling foul of the legislation.
So far as concerns the solicitors' profession, the Law Society is most worried about the provisions. The society says that it is an extremely unsatisfactory state of affairs and that solicitors will be brought into conflict with their duty to keep confidential their clients' affairs in many instances where, upon investigation, no criminal activity will be found to be involved. That is the thrust of the Government's legislation as we perceive it. On the whole we support it. The details of it as expressed in the Bill we find to be ill drafted. Considerable concentration, some of it lengthy, may be necessary in Committee.
I should like to say a few words about Part IV of the Bill on insider dealing. I have been furnished with a letter from the Stock Exchange. Perhaps the simplest way to make my point would be for the House to permit me to read two or three sentences therefrom. It states:Our first reaction is one of disappointment; the provisions may bring UK legislation in line with the EC directive on insider trading; the opportunity has not been taken to revisit the issue of how this and other abuses such as market manipulation can best he pursued and miscreants effectively penalised. The operation of the present insider trading law has thrown up numerous instances where attempts to bring cases to Court have been frustrated by ambiguity in the legislation and the problems of satisfying the high standard of proof required in criminal trials. The Exchange believes that the Government would have been well advised, in the period between the passage of the Directive in 1989 and the presentation of this legislation to the House, to investigate whether a different approach, perhaps using a special tribunal, would have provided a more effective means of combating this abuse".The Stock Exchange then makes the complaint made by my noble friend about the absence of consultation by the Government on this important issue.
To sum up the attitude of this side of the House to the Bill, we perceive and welcome its thrust but find great difficulty in accepting some of the details and we shall return to them in Committee. I question whether the Government have given Part IV sufficient consideration before bringing its precise terms before the House. That will be something to which we shall have to return.
§ 5.51 p.m.
My Lords, this has been an interesting debate in so far as it has covered the great many complicated and detailed problems contained in the Bill. The debate was enhanced by the speech of the noble Lord, Lord Williams of Mostyn. He brings to the House a formidable reputation, not least, his ability as a lawyer. We heard that this afternoon. He spoke quietly, gently and most incisively. The Government might have preferred it to have been not so incisive, nevertheless he made well the points he wished to make. As a distinguished chairman of the Bar Council, he carries and will carry great weight in your Lordships' House.
1382 The noble Baroness, Lady Mallalieu, was, of course, in great form this afternoon. I thought that the Bill would be accepted by your Lordships, and that all your Lordships would think it to be an excellent Bill because it deals with wicked things such as drug trafficking and insider dealing. However, the noble Baroness fair set about it. She said that she would give it an element of welcome. She referred to it as a curate's egg and as a cosmetic Bill. She described me, in a most glamorous way, as a knight on a white charger making the law completely impossible to understand. She said that we were giving in to the law and order section of our party. I do not know whether that was a compliment or an insult. We are trying to make the law against drug traffickers, insider dealers and so forth a good deal harsher than it now is.
My noble friend Lord Alexander said that by the time he spoke the Government had not received many plaudits. He evoked a chord of sympathy. He then proceeded to give the Bill a good roasting in some respects. He said that if the Bill was a lawyers' benefit Bill it would be had for the bankers, bad for the City and had for members of the public. The whole point of the Bill is that it is supposed to be good for the hankers, good for the City and good for members of the public. I hope that in Committee we shall be able to persuade him that that is the case.
The noble Lord, Lord Williams of Mostyn, will note that we have some fairly loose rules of procedure in your Lordships' House. I was fascinated to hear my noble friend Lord Windlesham devote a large proportion of his speech to murder and life imprisonment. He acknowledged that that has nothing to do with the Bill, but just happens to come under criminal justice. He wanted me to confirm that if he did put down an amendment relating to murder and life imprisonment it would be without the Long Title. I believe that he knew the answer, but I shall just confirm that it would be outside the Long Title. I do not recommend that he do so, but of course he is a free agent and can do what he likes.
I was grateful to the noble Baroness, Lady Mallalieu, for welcoming Clause 8. I was grateful for any nuggets which fell from her lips on this occasion. Clause 8 allows the court to proceed to sentence and defer the confiscation hearing. I was intrigued when she said that she spent a great deal of time with her legal friends beavering away until midnight, trying to understand what the Bill meant. She then came out with the astonishing suggestion that the Bill would catch Mexicans trading in drugs in Mexico. We should be able to take them to court in some obscure place which she mentioned, which I wrote down but cannot remember. If that was the quality of the advice from her legal friends, I hope that she will find some other legal friends.
I was surprised when the noble Lord, Lord Richard, followed that point. He cannot have read the Bill that well. Had the noble Baroness done so—I am sure she must have done; it is merely her interpretation that I find so astonishing—she would have found that no Mexican would be prosecuted in the United Kingdom unless the case had some physical connection with the United Kingdom. The necessary 1383 connection is defined in various clauses: Clause 2(1) gives the relevant event; Clause 5(1) contains the test for conspiracy; Clause 5(2) lays down that the attempt must take place in England and Wales. I tell the noble Baroness now so that when she reads those provisions she will see the correct side of the argument.
Clause 5(2) provides:An agreement falls within this section if—The noble Baroness is well versed in the law. I have a great admiration for her ability, but even my modest, non-legal mind understands that one would not catch a Mexican dealing in drugs in Mexico and be able to prosecute him in England, if there was no connection with England. Perhaps we can leave that red herring which she, followed by her noble friend Lord Richard, tried to draw across the Bill.
- (a) party to it, or a party's agent, did anything in England and Wales in relation to it before its formation, or
- (b) a part to it became a party in England and Wales (by joining it either in person or through an agent), or
- (c) a party to it, or a party's agent, did or omitted anything in England and Wales".
The noble Baroness and my noble friend Lady MacLeod were worried about the amount of money realised from confiscation orders. I said that £35 million had been ordered to be confiscated under the Drug Trafficking Offences Act 1986. Up to May 1992, £15 million had been realised or was subject to receivership. The realisation of confiscation orders is a necessarily lengthy and complex business.
The noble Baroness referred also to the standard of proof. I can assure your Lordships that we are not seeking to change the standard of proof when determining guilt for the offence. That will remain the criminal standard (beyond reasonable doubt), but it was always the intention that the standard of proof for the confiscation procedure, which is not a criminal proceeding, should he the civil one (the balance of probability). Some confusion has arisen over that point as a result of a Court of Appeal case. We are seeking to correct that in the Bill.
When talking about the civil standard of proof, the noble Lord, Lord Richard, referred to the decision in Dickens. I can confirm that the Bill reverses that decision. Dickens interpreted the Drug Trafficking Offences Act 1986 in a way that was not intended. When the Bill was going through, the Government explained that the civil standard was the one that was meant to apply.
The noble Baroness was also worried that the Bill would catch the small fish only and not the big ones. She said that the big fish would get away. I disagree with her over that. The purpose of Clause 7 is to enable the prosecutor to refer to the court to make a confiscation order only where it is clear that the profits from the drug trafficking are substantial. This should result in orders being made only against the bigger fish.
The noble Baroness and the noble Lord, Lord Richard, were worried about Clause 12 relating to the discovery of further assets. The noble Baroness asked whether we could have a time limit of five years. Perhaps she omitted to read that part of the Bill also in the middle of the night, because there is a time limit 1384 of six years from the date of conviction, as the noble Lord, Lord Richard, discovered. By definition, the offender will have failed to disclose the existence of the proceeds, otherwise the courts would have been aware of them. Therefore, when the noble Lord, Lord Richard, said that we were having three bites at the cherry, I do not believe that that is so. Where a fresh determination is made, the court will only be taking away assets which it would have taken anyway, had it known of them when the original confiscation order was made, or assets which related to the drug trafficking up to the time of the conviction.
The noble Baroness, Lady Mallalieu, also waxed lyrical about Clause 13 which she said was iniquitous. The noble Lord, Lord Richard, went down the same path but he used more modified language. On this clause the noble Baroness said that the offender should not go to prison as well as being made to pay the debt. However, if the offender pays the confiscation order, he will not have to serve a term of imprisonment on default because there will have been no default; he would have paid up. Nevertheless, he must have had the proceeds in the first place for a confiscation order to have been made.
On Clause 16, the noble Baroness was worried about the liability of lawyers to prosecution. If a lawyer receives the market fee for his services, then he should have nothing to fear. He would only have to fear if the assistance which he gives the defendant is free or is in such a way that the drug trafficking is assisted. If that were so, it would be quite right that questions should be asked.
The noble Baroness was also worried about the Group B offences and asked whether the present law would apply. To convict a defendant, the law has not altered, but the Bill changes the law as regards making the case triable. That is where subsections (1) and (2) of Clause 5 apply, both of which extend the jurisdiction.
The noble Baroness and the noble Lord, Lord Wigoder, were worried about the statutory instruments procedure allowing the list of offences to be amended. At the moment, this is by negative resolution which I know always causes people anxiety. I shall consider the points made by both the noble Baroness and the noble Lord, Lord Wigoder, before we come to a later stage. Again, both the noble Baroness and the noble Lord were worried about Clause 13 relating to imprisonment and default. Some offenders who have very large amounts of money put away choose to serve the extra term in default rather than pay up. I was glad that the noble Lord, Lord Harris, agreed with the Government on that. The clause will not result in an offender being able to go to prison and then come out and live on the benefits of his drug trafficking earnings.
A number of noble Lords expressed anxiety about the consultation on insider dealings. We consulted on the general principles way back in 1989. We consulted on the draft clauses over the summer and the proposals which were put before the House reflect the valuable comments made by many people, including the Stock Exchange, the Law Society and others. Some noble Lords asked what was the hurry. We have 1385 to bring forward the legislation now because the EC directive should have been implemented by 1st June. Pressure on parliamentary time resulted in action not being possible before now and we therefore thought it important to do this.
The noble Lord, Lord Harris, and others were also worried about the consultation. My noble friend Lord Alexander said that the CBI had offered to help when the directives were going to be drawn up. He said that the offer was noted and nothing happened. I can only say to my noble friend that I apologise for it. I shall look into the matter because obviously if an undertaking is given, it should be considered. I am not sure whether an undertaking was given but I shall certainly look into the matter.
The noble Lords, Lord Wigoder and Lord Windlesham, were worried about the word "tippee". The former was quite amusing in saying that he would be a "flabbergastee". I think it was the noble Lord, Lord Williams of Mostyn, who said that it was a debarable offence to give free legal advice. I do not wish to be guilty of a debarable offence or even of a sacking offence. I have a certain amount of sympathy with my noble friend Lord Williams; I believe that "tippee" is a perfectly awful word and I questioned whether it was a good or suitable name. I was told that it was a normal name which was used; everyone knew it. There is a distinguished American who wrote a seminal book and who used the word "tippee". However, I shall take your Lordships' anxieties into account.
The noble Lord, Lord Wigoder, was also worried about the assumptions on the proceeds of drug trafficking going against natural justice. When the 1986 Act was debated, Parliament agreed that the application of the assumption was a necessary weapon with which to attack drug traffickers. Because drug trafficking is often a lifestyle offence, information about the benefits from drug trafficking is in many cases known only to the defendant. Removing profits from trafficking is an important element of the Government's strategy. Experience has shown that there is a need to make a full use of the assumption in order to ensure that the proceeds of drug trafficking do not remain within the drug trafficking system.
The noble Lord, Lord Wigoder, was also worried about confidential information. Information about suspicious transactions is passed by banks to a special unit in the National Criminal Intelligence Service. All information which it receives is regarded as confidential. Where an investigation takes places and there is no evidence of a criminal offence, the police will destroy the information which has been passed to them by the banks. This amounts to about 25 per cent. of the total of 12,000 reports per year. If the police are unsure whether a criminal act has taken place, the information is retained, reviewed and weeded out as and where appropriate.
My noble friend Lord Alexander was concerned about insider dealings. He suggested that a number of terms used in the Bill such as "precise" and "made public" should be defined. There are difficulties because those terms arc used in the directive and there 1386 would be a serious risk of incorrect implementation of the directive if the terms were defined. However, I shall be happy to consider the point in Committee.
My noble friend Lord Alexander was also worried about the special insider dealing tribunal. It is not clear what advantages it would bring. Insider dealing will always be difficult to prove because it essentially concerns the intentional misuse of information. I do not believe that establishing a special tribunal will change that. For example, it is not clear whether it would be appropriate for a tribunal like that to operate with anything other than the normal criminal standard of proof requirements if it were handing out what are in effect punishments. Anyway, it is not clear that altering the burden of proof to the civil standard would significantly increase the number of insiders successfully brought to book.
My noble friend Lord Alexander was also concerned about insider dealing takeovers. He said that the exemption for takeovers was not good enough. The provision does not set out to give a complete exemption of all dealing connected with a takeover. It depends on the circumstances of a case; in particular, the capacity in which a person deals will be significant. It would not be reasonable for an employee who knows that his employer intends to conduct a takeover then to deal in the securities if he deals in a private capacity and not for his employer. The legislation obviously could not spell out each and every circumstance when dealing is or is not a proper market transaction.
The noble Lord, Lord Williams of Mostyn, referred to territorial scope as regards insider dealing. He said an insider dealer could escape legislation by leaving the country. I do not believe that that is the case. If such a person wishes to deal in the United Kingdom on the United Kingdom stock exchange or through a United Kingdom broker, he will be caught even if he gives the dealing instructions when he is outside the United Kingdom. The noble Lord was also concerned about the civil sanctions against insider dealing. In our reply to the report of the Trade and Industry Select Committee and its accompanying investigations we made it clear in August 1990 what the Government's view was. Our view is that the regulator's action would be to impose a sanction on the basis that it was in the public interest to penalise individuals who conducted themselves in a particular way. That is the classic reason for creating a criminal offence. The Government accordingly believe that the criminal law remains appropriate. That is our view today.
My noble friend Lady Macleod of Borve asked what constituted a minor case of trafficking. The Bill does not let off all minor traffickers. They will be subject to the same stiff penalties as are major traffickers when they are convicted. However, the Bill will relieve the courts from the cumbersome procedure of making a confiscation order when there is no or very little benefit from trafficking. They will use their powers to fine instead. My noble friend was also concerned about the destruction of drugs. Section 27 of the Misuse of Drugs Act 1971 enables the courts to order that drugs can be forfeited after conviction. The 1387 court may direct how they are to be disposed of. Normally they are ordered to be destroyed. That is the usual course.
My noble friend Lord Nelson asked why we did not line up the trafficking procedures with the bankruptcy requirements. The Bill already gives the court new powers to make the defendant give the court such information as it thinks fit which will help the court to make a confiscation order. Clause 10 refers to that matter. My noble friend also asked why we did not confiscate proceeds in more cases of dead and "abscondee" traffickers. My noble friend made some valuable suggestions in that regard that I shall reflect upon before the next stage of the Bill. My noble friend also asked whether the reporting of suspicious transactions had to be mandatory. Institutions disclose information to protect themselves from existing money laundering offences. Only a small change is necessary to meet the terms of the directive; in other words to introduce a special offence of failing to disclose knowledge or suspicion of money laundering.
The noble Lord, Lord Harris of Greenwich, referred to the exclusion of monetary policies. It is essential to allow official dealings because Her Majesty's Government necessarily possess information which cannot be made public. Private dealings are not excluded. The noble Lord also referred to the report of the Home Affairs Select Committee. In response to that report the Home Office established an interdepartmental working group to examine confiscation legislation. The working group's first report was published in May 1991 and many of the proposals in this Bill stem from that report. The noble Lord, Lord Richard, asked why a money laundering offence was committed only in the course of trade or business. The new offence is structured this way because that is the requirement of the European Community money laundering directive.
I am grateful to all those who have taken part in this debate for their contributions. Those contribu-tions have been detailed and I have tried to reply to some of the points in detail. Clearly I shall take into account all the matters which have been raised. Some noble Lords may have doubts about the fine tuning of the Bill as it were but on the whole, despite what the noble Lord, Lord Richard, and the noble Baroness, Lady Mallalieu, have said, I believe they approve of the Government's determination to crack down on this matter. If the noble Baroness, Lady Mallalieu, cares to introduce any amendments which make any of the provisions of the Bill simpler to understand in legal language, I will gladly discuss those. However, those amendments must be well argued.
§ Lord Wilberforce
My Lords, before the noble Earl sits down, I hope I may ask him one question as regards the future progress of the Bill. Does he intend that the Bill should be committed to a Committee of the Whole House, or does he believe that some other procedure might be appropriate for part of it? When I heard the speech of the noble Baroness, Lady Mallalieu, particularly as regards Part I of the Bill, it occurred to me that that part at any rate might be 1388 suitable for disposal by a separate and special procedure. The noble Baroness made it clear that Part I is legally dense. Whether it is a lawyer's paradise, purgatory or hell I do not know, but it certainly calls for detailed legal discussion in the light of the Law Commission's report and in the light of a number of decided cases. I view with some dismay the prospect of that provision being debated in a full Committee at midnight perhaps. It may be better disposed of in some other way. I merely ask the noble Earl whether he will be good enough to consider that possibility, no doubt in consultation with the other side of the House, and not necessarily assume that the whole Bill should be dealt with in the ordinary way on the Floor of the House.
My Lords, I am grateful to the noble and learned Lord, Lord Wilberforce, for his suggestion. However, I am bound to tell him that it was our intention that the Bill should proceed to a Committee stage on the Floor of the House, as is normal. Obviously any proposals or anything that the noble and learned Lord says will be considered. There might be some objections to the course he proposes but I am certainly prepared to consider it.
§ Lord Boyd-Carpenter
My Lords, before my noble friend finally sits down, will he also bear in mind that the view of the noble and learned Lord, Lord Wilberforce, is not shared by others?
My Lords, that is rather what I thought might be the case. I shall certainly consider the suggestion of my noble friend Lord Boyd-Carpenter too. However, if this Bill is considered at 12 o'clock at night I hope that there will not be too many of the noble and learned Law Lords present to add to the controversy surrounding this complicated issue. They will, nevertheless, add to the excitement.
On Question, Bill read a second time, and committed to a Committee of the Whole House.