Criminal Justice Bill [H.L.]

HL Deb 19 November 1992 vol 540 cc721-77

3.38 p.m.

Earl Ferrers

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Earl Ferrers.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 1 [Offences to which this Part applies]:

Earl Ferrers moved Amendment No. 1:

Page 2, line 41, leave out subsection (6) and insert: ("(6) No order shall be made under subsection (4) unless a draft of it has been laid before and approved by a resolution of each House of Parliament.").

The noble Earl said: On Second Reading the noble Lord, Lord Wigoder, suggested that if it were proposed to alter the list of offences to which Part I applies, that should be done by affirmative resolution of both Houses of Parliament rather than by the negative resolution procedure, as the Bill at present proposes. I undertook to consider that. In a nice, helpful kind of way I came to the view that the noble Lord, Lord Wigoder, is right.

The noble Lords, Lord Harris of Greenwich and Lord Wigoder, have tabled Amendment No. 2; I have tabled Amendment No. 1. They have the same effect, but I am advised that mine is the better—of course. Amendment No. 1 uses conventional words whereas the amendment of the noble Lord, Lord Wigoder, omits the word "resolution", which I am assured is a vital ingredient of the effective wording of such an amendment.

I hope that the Committee will agree to incorporate my amendment into the Bill and that the noble Lords, Lord Harris and Lord Wigoder, will not move Amendment No. 2. I beg to move.

Lord Harris of Greenwich

On an occasion such as this my noble friend Lord Wigoder would not want to argue the merits of his amendment rather than that of the noble Earl. The noble Earl surprises us a great deal in saying that he prefers his amendment to ours when both have exactly the same effect. However, on this occasion we are glad to meet him more than half way and accept his amendment. At the same time we express our pleasure that he tabled it.

Baroness Mallalieu

From these Benches perhaps I can say that the amendment of the noble Earl is extremely welcome. The addition of any offence to the list covered by the Bill which in effect renders conduct liable to criminal prosecution when that would not otherwise be the case is a matter which we believe should be subject to a high degree of scrutiny by Parliament. We are grateful that the noble Earl paid heed to the anxieties expressed at Second Reading. We support his amendment.

Earl Ferrers

I am grateful to the noble Lord, Lord Harris, and the noble Baroness, Lady Mallalieu, for such happy sentiments.

On Question, amendment agreed to.

[Amendment No. 2 not moved]

3.45 p.m.

On Question, Whether Clause 1, as amended, shall stand part of the Bill?

Baroness Mallalieu

My agreement with the noble Earl comes to an end. I oppose the Question that Clause 1 shall stand part of the Bill. I do so, I hope, in order to be helpful not merely to the noble Earl, but also to those who will have to try to work with, and understand, the legislation in due course. I hope that I understand what the noble Earl is trying to do in this part of the Bill. If I correctly understand it I believe I support his intentions.

It was clear as long ago as 1986, when the fraud trials committee under the chairmanship of the noble and learned Lord, Lord Roskill, reported, that jurisdictional problems were arising from frauds committed across national boundaries. Under the present law, in the case of substantive offences—offences which are actually carried out—none of the participants can be prosecuted in this country unless the last event which makes up the crime occurs in England and Wales. At the stage of preparation—where the crime has not actually been committed but is at the attempt stage, is a conspiracy or is an incitement—and where those concerned are detected before they have completed their purpose—it is unlikely at present that they will be prosecuted where they plan to reap the benefits. At the moment they cannot be prosecuted here either because the underlying crime has not yet been committed here. I therefore fully support what the noble Earl is trying to do to improve the law in that respect. In part, in the Bill as it is presently drafted, he has achieved that object.

In relation to the substantive offences of dishonesty and blackmail—what the Bill classifies as Group A offences—I am entirely with the Minister. Such offences should be triable in this country if any part of the conduct or any of the results forbidden by such crimes take place here. In the Bill as presently drafted the Group A offences are set out with commendable clarity so that anyone, lawyer or layman, who wants to know what offences are covered by the legislation, can read them with ease in Clause 1(2) (a), (b), (c) and (d).

Clause 2 goes on to tell him, again with clarity, when the courts have jurisdiction to try such offences here in relation to those Group A offences. So far so good.

The confusion arises in the Bill as presently drafted when one comes to the Group B offences. The Bill is clear in regard to the list of Group B offences down to paragraphs (a), (b), (c) and (d) of Clause 1(3), which set out clearly the conspiracy, the attempt and the incitement offences which are covered by the legislation. The difficulty arises when one comes to paragraphs (e) and (f). Paragraph (e) states, an offence which is triable by virtue of the new section 1A inserted in the Criminal Law Act 1977 by section 5(1)". That adds to the list of Group B offences.

The Criminal Law Act, Section (1), merely defines the law of conspiracy. Subsection (1) states, Subject to the following provisions of this Part of this Act, if a person agrees with any other person or persons that a course of conduct shall he pursued which will necessarily amount to or involve the commission of any offence or offences by one or more of the parties to the agreement if the agreement is carried out in accordance with their intentions, he is guilty of conspiracy to commit the offence or offences in question". Clause 5(1) of the Bill goes on to define the circumstances where an agreement relating to a Group A offence falls within that section. Much the same thing happens in relation to paragraph (f) of Clause 1(3) in relation to the Criminal Attempts Act 1981. The Criminal Attempts Act, Section 1, simply defines an attempt to commit an offence as follows: If, with intent to commit an offence to which this section applies, a person does an act which is more than merely preparatory to the commission of the offence, he is guilty of attempting to commit the offence". Clause 5(2) of the Bill then goes on to deal with jurisdiction in relation to certain attempts.

I therefore ask the noble Earl why paragraphs (e) and (f) of Clause 1(3) appear in the Bill. What do they add except confusion? I ask him to indicate what additional offences are added to the Group B List by paragraphs (e) and (f). It appears to me that there are only two possibilities. The first is this. Notwithstanding the Title of the Bill, which claims quite specifically that it is to, make provision about the jurisdiction of courts in England and Wales in relation to certain offences of dishonesty and blackmail paragraphs (e) and (f) in fact extend the jurisdiction to all attempts and all conspiracies. With respect, that cannot be intended. Indeed, it would be a nonsense if substantial offences which are not on list A and therefore cannot be tried here are nonetheless included when they form attempts or conspiracies and in that way come under the provisions of Group B.

The alternative is that the additions in paragraphs (e) and (f) simply relate to Group A conspiracies and attempts, in which case they are already plainly covered in the existing provisions of subsection (3). The clarification of the new jurisdiction position in relation to conspiracy, to attempt and to incitement, could be neatly and clearly set out in accordance with what appears though in a jumbled form—in the later Clause 5. It is done with commendable clarity for conspiracy to defraud, though again it is tucked away in subsection (3) of the clause. There seems to be no reason why it should not be done with commendable clarity for the other Group B offences.

If it is necessary to draw attention to the existing provisions of either the Criminal Law Act 1977 or the Criminal Attempts Act 1981, that could surely be done with a single clause which simply states that in relation to the Group B offences the existing provisions of both those Acts should be extended in relation to jurisdiction.

The noble Earl is not wholly to blame, I suspect, for the jumbled wording. It is a wording which originated from the Law Commission in its draft Bill. It may be that it was included in this way in order to tie up loose ends in existing legislation. I hope that simply from a reading of the provisions Members of the Committee will see that the result is a jumbled mess. This is a lawyer's Bill, drafted for lawyers, and which can only in reality be understood—and then only with considerable difficulty by lawyers.

I ask the noble Earl to look again at these provisions, because they can be both clarified and simplified and still achieve the noble Earl's desired object without causing what will ultimately be, if this part of the Bill is not later changed, a great deal of grief and public and private expense in years to come as laymen have to seek legal advice to understand these provisions and lawyers clock up huge fees advising on what these words really mean.

Earl Ferrers

When the noble Baroness, Lady Mallalieu, said that this is a lawyers' Bill which will be considered by lawyers and that it will only be understood by them, she evoked a certain chord of sympathy with me. I am also glad she said that this is supposed to be a helpful measure. To remove Clause 1 from the Bill is an exceedingly unhelpful measure because it would completely kibosh the whole of Part I and make it inoperative. I am grateful to her for explaining the reason why she tabled her opposition to this clause. When I first saw it it caused me a great deal of concern.

If the clause were not approved, it would emasculate the whole of Part I of the Bill. That would be quite wrong. I do not believe that Part I extends our courts' jurisdiction in an unacceptable or draconian way. It simply provides that, as regards specified substantive offences of dishonesty, our courts will have jurisdiction if any necessary component of the offence took place in England and Wales, rather than just the last offence; and that, in relation to the related conspiracy, attempt or incitement which are in Group B, our courts will have jurisdiction either if the offence was aimed at the commission of an offence in England or Wales or if the conspiracy, attempt or incitement took place in this country but was aimed at the commission of an offence abroad. If there is no link with this country then it would obviously be inappropriate for our courts to have jurisdiction and this Bill would not give it to them.

The noble Baroness's alternative is clearly the correct one. Clause 5 deals with plots here and offences committed overseas. It deals only with Group A offences and not with all offences. There is a difference between a conspiracy to steal, which is covered by Clause 1(3) (a), and conspiracy to commit what would be theft if it were committed here. That is covered by Clause 1(3) (e). The noble Baroness has made a number of legal points and they were entirely justified. I would like to consider those rather than give her an off-the-cuff answer which would probably be erroneous. I shall consider her points and get in touch with her later about them.

Baroness Mallalieu

I am most grateful for that encouraging indication from the noble Earl. In those circumstances I beg leave to withdraw my objection.

Clause 1, as amended, agreed to.

Clause 2 agreed to.

Baroness Mallalieu moved Amendment No. 3:

After Clause 2, insert the following new clause:

("Jurisdiction in respect of Group B offences

. A person may be guilty of a Group B offence if any relevant event occurred in England and Wales.").

The noble Baroness said: I can take this matter shortly because it follows on from the arguments which I have already addressed to the Committee as regards Clause 1. It is essential that one should be able to look at this Bill without reference to other legislation and to read at a glance in what circumstances the courts of this country have jurisdiction. The Bill does it clearly as regards Group A offences. It may be necessary to have separate clauses relating to the other aspects that are covered by Group B; in other words, conspiracy, attempt, conspiracy to defraud and incitement.

The matters are set out, but in an unclear form and linked to other legislation, in the existing Clause 5. I invite the noble Earl, when he comes to look at not only the way in which the Group A offences are described, but also the way in which the Bill deals with the jurisdiction which it now gives as regards each of those groups' offences, to consider inserting clauses in relation to them with the same degree of clarity as that which at present appears in Clause 2 of the Bill for the Group A offences. The intention of this amendment is that there should be such a clause. It may be that Amendment No. 3, which I now move, deals rather globally with the position and that it should be dealt with in rather more detail. I invite the noble Earl to give a similar indication to that which he has already given. I beg to move.

Earl Ferrers

When I first saw the noble Baroness's amendment I was not sure whether it was intended simply to assist the Government by overcoming a problem which we in fact recognised in the new Clause 3, which misleadingly refers to the relevant event in the context of a Group B offence, but which does not define what a relevant event is; or whether it was intended to change the basis on which Part I of the Bill will give our courts jurisdiction over Group B offences.

I appreciate the noble Baroness's concern over this amendment but it would create insuperable difficulties if it were accepted by the Committee. That is because the idea of a relevant event is appropriate only in the context of a substantive Group A offence where our courts would be given jurisdiction provided that some necessary element of the completed offence occurred in England and Wales. As regards what is called an inchoate offence of the type listed in Group B, there is no completed offence but rather a conspiracy, an attempt or an incitement to commit an offence. In that kind of case the court's concern is not simply with what has actually happened, but with what might have happened if the conspiracy, attempt or incitement had achieved its object.

Part I of the Bill gives our courts jurisdiction over Group B offences which are aimed at the completion of an offence in England and Wales whether or not the Group B offence itself took place here. For those reasons, I hope that the noble Baroness will not press her amendment. I shall take into account what she has said and will read it with rather more care.

Baroness Mallalieu

In the light of that indication, I seek the leave of the Committee to withdraw the amendment. When the noble Earl has had a chance to consider the position, I hope that he will feel it right to spell out with clarity the jurisdictional position as regards each of the groups of the Group B offences so that they can be read in the same clear way which the draftsman has already achieved as regards Group A offences. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4 p.m.

Clause 3 [Questions immaterial to jurisdiction in the case of certain offences]:

Earl Ferrers moved Amendment No. 4:

Page 3, line 11, leave out ("the time of the relevant event") and insert ("any material time").

The noble Earl said: In moving this amendment I wish to speak also to Amendment No.5. These are simply drafting amendments which are not intended to affect the substance of Clause 3, but to clarify it. Some of your Lordships may have been puzzled by the reference in subsection (1) to "the relevant event" when, of course, in relation to a Group B offence there will be no relevant event, while in relation to a Group A offence there may be more than one relevant event. This amendment makes clear what this subsection really means, and that there is no time at which citizenship is relevant to jurisdiction. I beg to move.

On Question, amendment agreed to.

Earl Ferrers moved Amendment No. 5:

Page 3, line 12, leave out ("that") and insert ("any such").

On Question, amendment agreed to.

Clause 3, as amended, agreed to.

Clause 4 agreed to.

Clause 5 [Conspiracy, attempt and incitement]:

Earl Ferrers moved Amendment No. 6:

Page 5, line 7, after ("if") insert ("the incitement").

The noble Earl said: I beg to move Amendment No. 6, and to speak also to Amendments Nos. 7 and 8. I am grateful to the noble Lord, Lord Airedale, for this amendment because his Amendment No. 9 brought to my attention the drafting difficulty which appears in Clause 5. I am glad to be able to agree with the noble Lord, Lord Airedale, that the phrase "in respect of" in line 9 adds nothing to the subsection and ought to be deleted. Indeed, my own amendments go somewhat further in simplifying this subsection and will remove the need to retain even the phrase "a charge of incitement". I hope that the noble Lord will agree that my amendments do all that his does—and a bit more too. These amendments simply tighten up the drafting of subsection (4) without affecting its meaning and I commend them to your Lordships. I beg to move.

Lord Airedale

I am grateful to the noble Earl and am much obliged for what he has said.

On Question, amendment agreed to.

Earl Ferrers moved Amendments Nos. 7 and 8:

Page 5, line 8, leave out ("the incitement").

Page 5, line 9, leave out ("a charge in respect of incitement").

On Question, amendments agreed to.

[Amendment No. 9 not moved.]

Clause 5, as amended, agreed to.

Clause 6 agreed to.

Baroness Mallalieu moved Amendment No. 10:

Before Clause 7, insert the following new clause:

("Sentencing policy

After subsection (3) of section 28 of the Criminal Justice Act 1991 there shall be inserted the following subsection (3A) Where an offender has been convicted of one or more drug trafficking offences, a court sentencing the offender may exercise its discretion to mitigate the sentence by taking into account any such matters as, in the opinion of the court, are relevant in mitigation of sentence to the same extent as in the case of an offender who is convicted of one or more offences other than drug trafficking offences." ").

The noble Baroness said: As this Bill deals with a number of other aspects of criminal legislation and as Part II, to which we now come, deals with drug trafficking offences, I move this amendment to deal with the problem which has arisen in relation to the sentencing of drug trafficking offences and which is giving rise to considerable concern in a number of quarters.

The amendment deals with the question of sentencing and, in effect, underlines the court's discretion to take into account mitigating factors when sentencing a drug traffic offender to the same extent that that discretion is available in relation to other criminal sentencing. It may seem that such a provision is unnecessary because in sentencing an offender a judge has total discretion within the legislation to impose what sentence he feels fit in the light of the offender's circumstances and the circumstances of the offence. However, what has happened—no doubt as a result, quite properly, of expressions of concern about inadequate sentences and the gravity of drug trafficking offences—is that increasingly judges and courts have felt bound by guideline cases from the Court of Appeal. I suppose that it is fair to say that, in this area rather more than in almost any other, there have been a number of guideline cases which, in effect, set a clear tariff to judges of the sentences which they can impose.

Those sentences in themselves may well be totally justified when one is dealing with the main offenders —people who have organised large-scale importations of drugs into this country. This amendment arises in particular from the widespread concern that is being expressed by welfare organisations about the position of men and women—and particularly women—from countries such as Nigeria who are currently receiving long prison terms, often ranging from four up to 14 years, for drug smuggling. They are usually from poverty-stricken areas—people of no substance who are induced to act as couriers by the organisers of the drugs trade.

In typical cases the Court of Appeal has said, for example, that eight years is an appropriate sentence for the importation of something of the order of three kilograms of heroin. In other cases, the court has said that sentences of 10 years and more are justified. There would, of course, be widespread support for the imposition of long sentences on people who plan, direct or organise drug trafficking, but those guidelines are also applied in the sad cases when naive, often poverty-stricken people have been manipulated (often for very little reward) and have succumbed to a one-off apparent opportunity to alleviate their particular economic troubles.

The rigidity with which the courts are currently applying those guidelines means that such offenders are today routinely receiving sentences which are much longer than their personal culpability would appear to justify. What is more, the Court of Appeal has on more than one occasion indicated that the usual factors which mitigate sentencing in criminal cases—for example, the good character of the courier and any particular economic difficulties should seldom, if ever, apply in cases of this type. It seems that the thinking behind that view is that drug couriers are likely to be deterred by knowing that if caught they are likely to receive very long terms of imprisonment here. In fact, however, all the evidence shows that they are people who, on the whole, are profoundly ignorant of the British legal system or the sentences that are likely to be imposed. Indeed, they have often been assured that the only possibility if they are caught is of being returned to their own country and of the drugs being confiscated.

An extensive survey into the position has been carried out in the past two years. Research has been published by the Howard League for Penal Reform. Dr. Penny Green, a lecturer in law at Southampton University, studied some 900 imprisoned drug importers, interviewing about 50 of them in depth, of whom it appeared only five were what could be classed as professional drug smugglers with previous criminal records. The majority seemed to be people of the type that I have already described.

A further difficulty is arising in relation particularly to women. Very often the women involved are mothers either with children at home, in which case the lengthy terms of imprisonment are having a disproportionate effect both on them and on the children from whom they are separated for long periods, or they are pregnant, in which case the length of the sentences means almost inevitably that at some stage they have to be parted from their children during the sentence. The children are then either fostered or placed in local authority care.

Those involved can also be people who come to this country to carry out the courier job with their children in attendance—no doubt on occasions in order to provide a better blind for the Customs. In those circumstances, the children tend to be separated from their mothers and placed in the care of strangers, the mothers being reluctant for their families back at home to know what has happened to them. The children suffer not merely the initial separation from the parent but, at the end of the lengthy sentence, they are then removed from the foster parents with whom they may well have settled and returned to the natural mother who may be a stranger to them. It is telling that, as I understand it, in the past three years all of the children taken into care by Hillingdon social services, which covers the area of Heathrow Airport where many of the arrests take place, have been Nigerian children who have come to this country with these women.

So the purpose of the amendment is really to underline something which may be implicit but which has in a sense been lost sight of in the sentencing for these offences. Although the Bill does not as it stands at present have within it provisions in relation specifically to sentencing in this connection, dealing as it does with the confiscation order aspect of drug trafficking offences, it would seem appropriate that something of this nature should be inserted. I do not in any way intend to indicate that one wishes to be lenient with those who bring drugs into this country, but our efforts should be directed primarily at those who are chiefly responsible and who stand to gain from the organisation of this wicked traffic. I beg to move.

Lord Windlesham

The noble Baroness has done the Committee a service in bringing forward this new clause. It draws our attention to the sentencing of certain couriers who have been convicted of drug trafficking offences. We can all agree that organised drug trafficking for profit is an appalling trade and one that has devastating social consequences. Most of us, I suspect, can also agree that severe sentences are fully justified for those who plan, direct and organise the trafficking in the most harmful drugs. But what happens when we come to interpret that general proposition? We find that, although the statute law allows the courts discretion to sentence up to a prescribed maximum—the levels of penalty set by Parliament—the guideline judgments in the Court of Appeal have limited the use that is to be made of that discretion in practice in a number of particular categories of offender. The noble Baroness has explained what those are as they relate to drug trafficking offences.

Whatever the gravity of a criminal offence, a fixed sentence can lead to a wrong sentence if it does not allow for particular circumstances. Your Lordships exchanged opinions yet again earlier this afternoon on the indefensible anomalies which have arisen because of the mandatory penalty for murder, one of the very few mandatory fixed penalties—indeed possibly the only mandatory fixed penalty—on the statute book. But because of guideline judgments and the very inflexible way in which the guideline judgments by the Court of Appeal have been interpreted, these are coming very close to being fixed sentences of imprisonment.

I have been struck, as have those noble Lords who visit prisons, by the number of West African women in women's prisons. They are a very noticeable group —certainly in prisons in the south of England. Many of them have come from Nigeria. They are usually passive and uncomprehending. As the noble Baroness said, many of them do have very young children with them in prison, either because they have been pregnant at the time of their conviction or because they had young children with them. They can keep those children with them only for a few months until the age of 18 months. But since they are serving sentences of up to 10 years' imprisonment, or perhaps shorter periods of six to eight years—colossally long periods—there is very little possibility of those children remaining with their mothers throughout the sentence. So the children are removed, as they must be, and they are either fostered in this country or they are taken into the care of local authority social services.

I too have seen the report to which the noble Baroness referred. It is one of the most devastating comments that have been made that in the London borough of Hillingdon, where the local social services have the responsibility for Heathrow Airport, all the children taken into care over the past three years 100 per cent.—have been Nigerians whose mothers, in almost every case, have been convicted for this type of criminal offence. It is true that these women have often been exploited and manipulated by the real organisers of international drug smuggling. It is the ironical fact that they are likely to evoke sympathy should they be caught that may make it more desirable to the organisers to use them as couriers. So, for pitifully small sums of money, these naive and often desperate people—I speak especially of the women couriers are persuaded to carry quantities of dangerous drugs —sometimes highly dangerous drugs—usually as a solution to their own acute problems and with little appreciation of what it is that they are doing, of the risks that they are taking, of the harm which will be caused to others and the consequences to them should they be apprehended.

The noble Baroness referred to a profound ignorance on the part of couriers of this kind of the British legal system. There is no evidence whatever that these couriers are deterred by, because normally they are not even aware of, the prospect of very lengthy prison sentences in the United Kingdom and it is only too easy for the professional organisers to replace them. Therefore what the amendment proposes in the form of a new clause is that, without altering the maximum penalties which should stand on the statute book as an indication of the gravity of this kind of criminal offending, which should properly be condemned by the legal system, the courts should have a discretion to mitigate the sentence by taking account of such matters as would normally be considered to be relevant as mitigating factors where the charges do not relate to drug trafficking.

When he replies, the Minister may tell us that this is not a matter for legislation and that it is not a matter which would fit easily into the Bill. I would accept that answer. But I hope that he will also tell us that this is a serious matter relating to sentencing policy which the Home Office is aware of and which it is prepared to discuss with the higher judiciary.

Lord Ackner

The noble Baroness, as always, was perfectly right when she indicated that she wondered whether this clause added anything at all. It is my respectful submission to the Committee that it adds precisely nothing. The judges have a discretion to sentence as is appropriate. The guidelines do not, as the noble Lord, Lord Windlesham, seemed to indicate, provide a fixed sentence or any fixed sentences. They are indications to judges as to the considerations which should be taken into account in sentencing in order that sentencing should achieve the necessary consistency and precision so that persons are not treated differently by chance arising from their appearance in different courts.

The noble Baroness may have great substance in her submissions that that class of offender should be treated more leniently. I can understand another school of thought which says that the more leniently one treats that class of offender, the more one plays into the hands of the organisers of a crime which, next to terrorism, is the most serious and vicious that one can come across. If the noble Baroness has wisdom and justice behind her submissions, the proper place for the submissions to be made is the Court of Appeal.

If a judge rigidly applies sentencing guidelines that produce the wrong result, the proper avenue for dealing with that is the Court of Appeal, and, if it is considered that the guidelines go too far in a particular direction, it is for the Court of Appeal to change them. The Court of Appeal is perfectly capable of saying, "We have a new problem. We have read a new and detailed report. We have had the benefit of careful advocacy, explaining to us that we need to moderate or further explain the position". If that is justified, I have every confidence that the Court of Appeal will do so.

The new clause places no pressure on the Court of Appeal to do anything. It merely tells the Court of Appeal the obvious: that a judge has discretion in imposing sentences. I respectfully submit that the proper approach and the proper recipient of the noble Baroness's moving appeal is not the Committee, it is not the Bill; it is the Court of Appeal (Criminal Division).

Lord Hutchinson of Lullington

I strongly support the noble Baroness and the amendment and disagree as strongly as I can with what the noble and learned Lord, Lord Ackner, has just said. The reason the noble Baroness, supported so eloquently by the noble Lord, Lord Windlesham, has had to bring forth the amendment is the mischief caused by the Court of Appeal's increasing tendency to lay down tariffs for specific offences. The noble and learned Lord said that the court has complete discretion. It does not have complete discretion because the cases establish guidelines of three to six years' imprisonment for importing medium quantities of cannabis and 10 years or more for large scale importations.

Lord Justice Watkins, in a case in 1989, said that there are certain cases in which the court can act with mercy, but he did not see this as such a case. He further said that once a person knowingly acted as a courier bringing heroin into this country, there was seldom, if ever, room for mercy. With the greatest respect to the Court of Appeal, it is, is it not, here setting itself up in the role of legislator? Parliament has not said, and would never, I hope, say, that there is no room for mercy in any case which comes before the criminal courts.

As has been said, these cases involve women who are often impoverished, unsophisticated and open and vulnerable to blackmail in Nigeria. They are uneducated and unable to understand any of the court proceedings. The trouble and mischief which arise from laying down tariffs—I say this without any disrespect—result from the fact that it is the view of two or three judges in the Court of Appeal which lays down the tariffs for all courts to follow. It is an example of what the noble and learned Lord, Lord Woolf, so strongly emphasised in his report: that it is essential in this day and age for all parts of the criminal process, and those involved in it, to understand and know about the other parts.

The trouble with older members of the judiciary is that they are often unaware of the results of what they lay down in the Court of Appeal. All of us in this place who are aware of what goes on in the women's prison at Holloway, where the vast majority of those on remand are women from Nigeria who overcrowd the prison and make conditions insupportable, recognise that that is the direct result of the tariffs being laid down in the Court of Appeal by judges who—I say this with the greatest respect have no idea of the results of the tariffs they lay down. For those reasons, I sincerely hope that the noble Baroness will pursue the amendment as far as she possibly can.

Lord Boyd-Carpenter

The noble Lord, Lord Hutchinson, was franker in the grounds he gave for supporting the amendment than was the noble Baroness who moved it. He brought out with complete clarity that the purpose of the amendment is to overrule the advice and guidance which the Court of Appeal has been giving in this type of case. The noble Baroness was more tactful—perhaps a little more adroit—in that she did not spell that out. It is a serious thing to do. After all, with all respect to Members of the Committee, we do not have the knowledge of these cases which the higher judiciary has had to acquire. We are discussing the matter for a few minutes this afternoon. Members of the higher judiciary have sat on cases—many cases, I am sorry to say—when they have seen the whole situation and when, as a result, they have come to the conclusion that in general severe sentences are called for. I therefore suggest that the Committee should hesitate before seeking to overrule them, especially over offences of this nature.

It is all very well to be sympathetic with perhaps uneducated people who smuggle for reward dangerous drugs into this country; but surely one should have even more sympathy for those people in this country who become hooked on these drugs and whose whole lives are ruined. We are dealing with a subject which results in serious consequences for many people in this country—far too many at the moment —who are induced to take to these drugs and who thus ruin their lives. There again, I hesitate to support any proposal which reduces the penalties which fall upon those who cause them the trouble by importing these dangerous drugs.

This is a serious matter. If we have to balance the hardship caused to uneducated people who are induced to smuggle those drugs and the interest of those people who are foolish enough to buy them, and in many cases ruin their lives, I take the view that we should err, if we do err, on the side of severity. The habit is terribly dangerous. Earlier this afternoon, we had a discussion on murder. After murder, perhaps the sale of drugs comes almost next in heinousness. It is terrible that people should make money solely out of ruining other people's lives.

If the Court of Appeal's judgment is that severe sentences are necessary then we should be taking on a serious responsibility by approving an amendment which seeks to mitigate them. The story will get about quickly in those countries—Nigeria was quoted as an example—that the House of Lords had laid it down that the courts are to be less severe on those caught smuggling. Therefore, some of the deterrent effect of the sentences that have been imposed would be lost.

I hope therefore that on balance the Committee will decide that the interests of those whose lives will be damaged by taking drugs are the most important consideration and that we should follow the line of maintaining the severest sentences on those who bring that about.

4.30 p.m.

Lord Campbell of Alloway

Perhaps the Committee will allow me a brief intervention from my personal experience of sentencing in such cases over the years when I sat as a recorder and from my experience as an advocate, both at first instance and in the Court of Appeal.

I stress that although well intentioned—and, if I may say so, the noble Baroness does us all a great service by having put the matter before the Committee —the amendment is an attack upon the guidelines. As the noble and learned Lord, Lord Ackner, said, although in a sense it is an attack on the guidelines, in effect it does nothing because it does not affect the way in which the guidelines are applied at the moment.

I make the further point that, so far as I am aware, there is no public disquiet as to the way in which the guidelines are applied at present. I accept the point made against me that no deterrent operates on these unfortunate carriers. They suffer a desperate, sad human misery. But to me it is an insoluble problem. If we relax the rigour of the sentence too far, then we act contrary to the public interest of this country.

There is no perfect answer, but for once it is refreshing for me to be able to say that I agree—I think for the first time ever—with every word the noble and learned Lord, Lord Ackner, said. Although I accept that this is a serious problem and a well-intentioned amendment, I hope that my noble friend the Minister will not accept it.

Lord Harris of Greenwich

In any argument on sentencing policy, I tend to agree with my noble friend Lord Hutchinson of Lullington and disagree with the noble Lord, Lord Boyd-Carpenter. But on this occasion I do not find myself in that situation. Certainly, if the matter is pressed to a Division I shall abstain for one clear reason. I do not think that passing the amendment would have the slightest effect, as the noble and learned Lord, Lord Ackner, pointed out.

However, there are more substantial issues involved. I begin by saying, on the various issues raised by the noble Baroness, the noble Lord, Lord Windlesham, and my noble friend, that I agree with them. It is wholly true that a substantial number of West African women are in prison in this country. They have been induced to import large quantities of Class A drugs into the country. It is true that many of them are no doubt ignorant of the possible consequences. It is also true that their imprisonment for long periods leads to tragic circumstances arising for their children.

It is also right, as the noble Baroness, Lady Mallalieu, said, that the people we should like to get our hands on are the organisers of the trade. But those organisers go to considerable lengths to ensure that they never come within the jurisdiction of the British courts.

We are therefore left with the situation of what we do with the people who are bringing substantial quantities of Class A drugs into the country. Without going into the remarks of the noble Lords, Lord Boyd-Carpenter and Lord Windlesham, on mandatory life sentences (both of whom touched on the issue at Question Time today) I take the view that in many cases the importation of large quantities of heroin and cocaine into the country is a more serious offence than the murder of a single individual. The case of the doctor was cited by my noble friend earlier today and I wholly agree with him. That is why I disagree with mandatory life sentences.

It seems to me an absurdity that we have a situation in which at Question Time today the noble Earl said something to the effect that the offence of murder was the worst crime of all; yet that could be a loving husband who helps his wife to kill herself, exposing himself to the risk of being sent to prison for life. Contrast that with someone who brings in several hundred thousand pounds worth of heroin and cocaine which we know as a fact is likely to cause the eventual deaths of a number of young people in the country. That, bluntly, is the reality.

There is a second reality, as I attempted to point out during the Second Reading debate on the Bill. The trade is growing at an alarming rate. Year after year the quantity of Class A drugs being imported into the country rises steeply. People involved in the trade are now involved not simply in trafficking in drugs but in armed robberies and many other extremely serious criminal offences. There is an inter-relationship between the drugs industry, the armed robbery industry, and so on, which is having a profound effect on the quality of life of many of our fellow citizens and also on the lives of many people.

I do not believe that there is any easy solution to the problem; none whatever. I feel just as strongly as others who have spoken about the tragic consequences of women who find themselves in this position. But I am also aware that one does not want to have a situation where one makes things easier for those who organise the importation of the drugs into the country. If the amendment were phrased differently, no doubt one might take a different view.

I come back to the point which I made at the outset. I cannot see what the effect would be of passing the amendment. I find myself in almost complete agreement with the noble and learned Lord, Lord Ackner. It seems to me that the effect of passing it would be precisely nothing except to indicate in some form or another that we believe that a different attitude should be adopted towards people who are convicted of committing this offence.

Lord Hutchinson of Lullington

I am obliged to my noble friend for giving way. I refer to the point about the amendment having no effect. The amendment says that the court: may exercise its discretion … to the same extent as in the case of an offender who is convicted of one or more offences other than drug trafficking offences". As I pointed out, the Court of Appeal has said that discretion should not be exercised; seldom if ever should it be exercised in a case of this kind. So what the amendment is clearly doing is trying to make drug trafficking offences come into exactly the same class as all other offences as far as the discretion of the court is concerned.

Lord Harris of Greenwich

I am much obliged to my noble friend, but of course the effect is that the Court of Appeal will still set the guidelines on conviction for an offence of this character. It would still be at its discretion to determine the appropriate length of sentence. There is nothing in this form of words which leads inexorably to a situation whereby there would be shorter sentences. Quite apart from that, as I indicated, I have considerable concern at the moment about the scale of illegal drugs importation into this country. I am doubtful whether this is an appropriate or prudent moment to change our attitude towards offences of that kind.

Earl Ferrers

This has been an interesting debate and a number of different strands have emerged. The noble Baroness expressed her concern, as she did on Second Reading, about the sentencing of drug couriers and particularly women from third world countries. Some, she said, were pregnant; others were separated from their families. I would not deny that there are some pretty traumatic cases. I would not dispute that some people are duped or are driven by economic necessity to attempt to bring drugs into the country. At the same time there are the professional traffickers who are well aware of the consequences of their activities. Parliament has provided the courts with high maximum penalties for convicted drug traffickers in recognition of the seriousness with which the offence is viewed.

I am glad that my noble friends Lord Boyd-Carpenter and Lord Campbell of Alloway referred to the matter. My noble friend Lord Boyd-Carpenter described the drugs we are discussing as the most terrible and awful things, and he was right to lay that emphasis. My noble friend Lord Campbell of Alloway said that they were against the public interest, which is perfectly true. But my noble friend Lord Windlesham came on to the same tack as the noble Baroness, saying that these were pitiful people engaged in drug smuggling for small sums of money, that they little appreciated what they are doing, and therefore, I suppose, that they should be treated more lightly.

My noble friend said that in Hillingdon all the women are Nigerians. That may be, but my answer to that is, so what? If all these people have been convicted for bringing in drugs and are put into a prison, and my noble friend finds to his distaste that they are all women from one country, what is he suggesting? That the sentence should be more lenient? That cannot be right. Obviously the sentencers have to be firm and tough.

The next interesting strand was the guidelines. We witnessed the spectacle of what might be described as the double act between the noble Lord, Lord Hutchinson of Lullington, and the noble and learned Lord, Lord Ackner. It is always fascinating. Not only do they never agree; they always disagree. I believe that the noble and learned Lord, Lord Ackner, was right. He said that sentencing is a matter —at least he did not say it but I am saying what I think the noble and learned Lord would agree with—for legislation and the courts, and it is right that there should be tariffs.

Why are there tariffs? It is because in the past people have said that there is too much disparity in sentencing and therefore the Court of Appeal should lay down some tariffs. I agree with the noble and learned Lord that if the tariff is to be altered, that is a business for the Court of Appeal and those who are professionally motivated and who know about it. But the tariff is only a tariff. It is not set in tablets of stone.

We then come to the amendment itself. The noble Baroness seeks to put into the Act that, a court sentencing the offender may exercise its discretion to mitigate the sentence by taking into account any such matters as, in the opinion of the court, are relevant in mitigation of sentence". She wishes to put that into the Criminal Justice Act 1991. If she looks at the Criminal Justice Act 1991, Section 28(1), she will see: Nothing in this Part shall prevent a court from mitigating an offender's sentence by taking into account any such matters as, in the opinion of the court, are relevant in mitigation of sentence". The noble Baroness's amendment does virtually the same as what already appears. I agree with the noble Lord, Lord Harris of Greenwich, that the amendment is not necessary.

I go further—and here I agree with the noble and learned Lord, Lord Ackner—and say that because the courts have the power already to sentence and to mitigate the sentence, the onus of the problem that the Committee has been discussing is already covered. The courts can mitigate the sentence. They can take into account individual conditions and circumstances, whatever the tariff may be.

The noble Baroness has opened an interesting subject, but I think she will agree at the end of it that what she is trying to do is already covered in law.

4.45 p.m.

Baroness Mallalieu

I am sad that there was no crumb of comfort from the noble Earl. However, on some aspects of the matters that have arisen in the course of this short debate his department might feel it right to discuss concerns with senior members of the judiciary. The noble Lord, Lord Boyd-Carpenter, was wholly wrong in describing this as an amendment that in any way seeks to overrule the Court of Appeal. It does not. Guidelines clearly have an important purpose and point in avoiding disparity of sentence, but they are merely guidelines. Unfortunately, because of the way in which they have been operating in the Crown Courts and because of the way in which the Court of Appeal has reacted when test cases have come before it, they have assumed the status of tablets of stone with all but the strongest and most independent-minded judges. That applies in particular in relation to drug trafficking offences. It is not something that appears to be the approach of the courts in relation to other offences.

Nor is it right to say, as the noble Lord, Lord Campbell of Alloway, indicated, that there is no public disquiet about these matters. It may well be that most people are not aware of the large numbers, particularly of Nigerian women, who have been hit —many would say excessively—by the effect of the guidelines. They are after all in prison. They are not known or seen by the majority of members of the public. But those who do have to deal with them, those who are involved in our prisons and in the welfare organisations with their children, are deeply concerned about what is happening and what appears to be an increasing trend.

Lord Boyd-Carpenter

Would the noble Baroness allow me to intervene? She referred to my observations. Has she not in the last few moments admitted that I was right inasmuch as she indicated that there were these guidelines and that the only purpose of the amendment was to overrule them?

Baroness Mallalieu

What the noble Lord is saying precisely illustrates what has gone wrong. People are assuming that the guidelines set out a position that must be followed. Therefore, the noble Lord is assuming that the amendment is intended in some way to undermine them. The guidelines are intended to be no more than guidance to judges. They are being treated by most judges as if they are rigid rules.

The amendment simply seeks to restate the position. The noble and learned Lord, Lord Ackner, put it, I fear, correctly. It is in effect expressing the obvious or what ought to be the obvious, but an obvious that needs to be restated because we have lost sight of it. I am greatly concerned by the Government's lack of concern as expressed by the noble Earl, but I am cheered by the expressions from all sides of the Committee about the disquiet created by the present guidelines as regards the way in which they are being used and their effect on our courts. I therefore propose to test the opinion of the Committee on the amendment.

Earl Ferrers

Just before the noble Baroness does that, perhaps she would be kind enough to have a look at her amendment and the Criminal Justice Act 1991. Is not her amendment phrased in virtually the self-same words as those in the Act?

Baroness Mallalieu

I accept that the part of my amendment to which the noble Earl referred expresses what is contained in the Criminal Justice Act, but the amendment goes on to deal with the matter by stating: to the same extent as in the case of an offender who is convicted of one or more offences other than drug trafficking offences". The amendment restates that drug trafficking offences should be dealt with in precisely the same way as the Criminal Justice Act anticipated that other offences would be dealt with. The Court of Appeal has repeatedly said in guideline cases that the usual rules do not apply to drugs couriers and that it would be rare, if ever, that matters such as good character might affect sentence and that mercy might be applied to a drugs courier. The amendment restates the position; namely, that it is up to the judge, in drug cases as in other cases, to look at all the facts regarding the offender and the offence. That would take into account the anxieties about drugs that have been expressed by all sides of the Committee and would allow the judge to make a decision based on the individual aspects of the case in which he has to sentence.

Earl Ferrers

Perhaps I may make two points in response. First, do not the comments of the noble Baroness that the guidelines given by the courts are to be used in cases other than drug cases I believe that is what she said totally accord with what my noble friend Lord Boyd-Carpenter said; namely, that the amendment is designed to undermine the courts' guidelines?

Secondly, I ask the noble Baroness to consider the point—I ask the Committee also to consider this point before it divides, if that is what the noble Baroness wishes the Committee to do—that according to the law nothing in this part shall prevent a court from mitigating an offender's sentence, by taking into account any such matters as, in the opinion of the court, are relevant in mitigation of sentence". That is at present an obligation on the court and I cannot see why we need to insert almost the self-same words. I advise the Committee that that would not be desirable.

Baroness Mallalieu

The Committee hears what the noble Earl says, but the courts of this country make a clear distinction when they sentence drug offenders. The guideline cases in relation to drug offenders—there are three main cases—set down with great particularity the sentence that is to be attracted in relation to each of the particular drugs and each of the particular quantities. Those guidelines are therefore very much more specific in relation to drugs offences than they are in relation to most other criminal offences where the Court of Appeal has made such pronouncements.

Earl Ferrers

The noble Baroness therefore seeks to undermine the Court of Appeal's guidelines.

Baroness Mallalieu

The noble Earl does not appreciate what I am saying. That is clearly my fault because I am not putting it clearly enough. Those guidelines were never intended to be anything other than guidelines. They are, in effect, used as if they carry the same weight as statute. I am anxious that we should not lose the opportunity in this Bill to restate the position; namely, that a judge must sentence an offender for any offence on the basis of the facts before him and the circumstances of that particular offender. The amendment restates that position and in effect adds that drug offenders must be put in the same position as other offenders. It therefore adds in an important way to the Criminal Justice Act.

Lord Ackner

Perhaps the noble Baroness would be kind enough to say whether she is suggesting that drug offenders are not a special category. Is she saying—I refer to the words that the noble Lord, Lord Hutchinson, quoted from Lord Justice Watkins—that a person who knowingly acts as a courier and brings heroin into this country is not to be treated as a special category of offender?

Baroness Mallalieu

He or she is not to be treated in any way other than as an offender who has deliberately committed a criminal offence. The gravity of that offence will obviously be a matter for the learned judge who sentences. He will no doubt take account of the maximum penalties and of the guidelines in deciding the degree of severity of the sentence that he must impose. However, where a judge is faced with an offender, it must surely be wrong for him to be faced, as at present, not only with the guidelines which effectively set out the sentence of imprisonment that he must impose, but with guidelines which state that he must shut his ears to particular special factors which may relate to that offender. Having listened to those factors, a judge may take the view taken by the noble and learned Lord; namely, that this is an offence of such seriousness that those factors should not weigh in his sentence. The amendment simply restates the sentencing judge's right to look at those matters and make use of them if he feels that it is right.

Lord Campbell of Alloway

The noble Baroness mentioned my name and challenged my assertion by which I stand; namely, that, as far as I was aware, there was no public disquiet at the way in which the law is administered in that regard by the Court of Appeal and the courts generally. In answer to the challenge, she said that disquiet had been expressed in this Chamber. Perhaps I may respectfully ask the noble Baroness whether, apart from the disquiet that has been expressed here this afternoon, she has any other information on the subject.

Baroness Mallalieu

Indeed yes—from the welfare organisations to which reference has been made; from NACRO, which deals with the care of offenders and the prevention of crime; and from other sources which deal with those women in prison.

As the noble Lord referred to his experiences in the courts, I am bound to say that I too could draw on my personal experiences as regards my feeling that the level of sentencing imposed on some of those women is wholly disproportionate to the nature of their involvement. I believe that to be a general view among those practising at the criminal Bar in this field.

Earl Ferrers

Is the purpose of the amendment to seek to give lesser sentences to those who are involved in drug running?

Baroness Mallalieu

The amendment seeks to enable the courts to take into account the particular factors in each case so that, if the sentencing judge thinks it appropriate to depart from the guidelines, he may do so secure in the knowledge that, enshrined in statute, is his right to take that view. Further, he may do so secure in the knowledge that it is not merely enshrined in the earlier legislation but that Parliament has once again said that drug offenders are to be treated in precisely the same way as other offenders. In other words, the seriousness of their offence must be considered in the context of whatever mitigation they personally are able to produce before the court.

4.59 p.m.

On Question, Whether the said amendment (No. 10) shall he agreed to?

Their Lordships divided: Contents, 41; Not-Contents, 122.

Division No. 1
CONTENTS
Ardwick, L.	Kennet, L.
Aylestone, L.	Kilbracken, L.
Boston of Faversham, L.	Kirkwood, L.
Bruce of Donington, L.	Listowel, E.
Carmichael of Kelvingrove, L.	Longford, E.
Clinton-Davis, L.	Macaulay of Bragar, L.
Cocks of Hartcliffe, L.	Mallalieu, B.
Dean of Beswick, L.	Merlyn-Rees, L.
Diamond, L.	Mulley, L.
Donaldson of Kingsbridge, L.	Palmer, L.
Ennals, L.	Pitt of Hampstead, L.
Fitt, L.	Plant of Highfield, L.
Foot, L.	Rea, L.
Gallacher, L. [Teller.]	Richard, L.
Graham of Edmonton, L.	Robson of Kiddington, B.
Henderson of Brompton, L.	Sainsbury, L.
Hilton of Eggardon, B.	Stoddart of Swindon, L.
Hutchinson of Lullington, L. [Teller.]	Turner of Camden, B.
	Underhill, L.
Jeger, B.	Wallace of Coslany, L.
Judd, L.	Williams of Elvel, L.
NOT-CONTENTS
Aberdare, L.	Clanwilliam, E.
Ackner, L.	Clark of Kempston, L
Ailesbury, M.	Cochrane of Cults, L.
Alexander of Tunis, E.	Coleraine, L.
Astor, V.	Cork and Orrery, E.
Astor of Hever, L.	Cox, B.
Auckland, L.	Craigavon, V.
Belhaven and Stenton, L.	Cranworth, L.
Bessborough, E.	Cullen of Ashbourne, L.
Birdwood, L.	Cumberlege, B.
Blatch, B.	Darcy (de Knayth), B.
Blyth, L.	Denham, L.
Boyd-Carpenter, L.	Denton of Wakefield, B.
Brabazon of Tara, L.	Donegall, M.
Braine of Wheatley, L.	Dudley, E.
Broadbridge, L.	Eccles of Moulton, B.
Brougham and Vaux, L.	Eden of Winton, L.
Butterworth, L.	Elibank, L.
Byron, L.	Elles, B.
Cadman, L.	Elliot of Harwood, B.
Caithness, E.	Faithfull, B.
Caldecote, V.	Falkland, V.
Campbell of Alloway, L.	Ferrers, E.
Carnegy of Lour, B.	Finsberg, L.
Carnock, L.	Fraser of Carmyllie, L.
Carr of Hadley. L.	Fraser of Kilmorack, L.

Gainford, L.	Park of Monmouth, B.
Gardner of Parkes, B.	Pender, L.
Gisborough, L.	Pym, L.
Goschen, V.	Rankeillour, L.
Halsbury, E.	Reay, L.
Harvington, L.	Rennell, L.
Haslam, L.	Rodger, L.
Healey, L.	Romney, E.
Hesketh, L. [Teller.]	St. Davids, V.
HolmPatrick, L.	St. John of Bletso, L.
Hooper, B.	Saltoun of Abernethy, Ly.
Jenkin of Roding, L.	Sandford, L.
Kimball, L.	Seccombe, B.
Kitchener, E.	Shannon, E.
Lawrence, L.	Shrewsbury, E.
Layton, L.	Strange, B.
Liverpool, E.	Strathclyde, L.
Long, V.	Strathmore and Kinghorne, E. [Teller.]
Lyell, L.
Lytton, E.	Swansea, L.
Mackay of Ardbrecknish, L.	Swinfen, L.
Mancroft, L.	Tebbit, L.
Merrivale, L.	Terrington, L.
Mersey, V.	Teviot, L.
Milverton, L.	Thomas of Gwydir, L.
Monk Bretton, L.	Trumpington, B.
Monteagle of Brandon, L.	Tryon, L.
Morris, L.	Vaux of Harrowden, L.
Mottistone, L.	Vivian, L.
Mowbray and Stourton, L.	Wade of Chorlton, L.
Nelson, E.	Wakeham, L.
Norfolk, D.	Walton of Detchant, L.
O'Cathain, B.	Wharton, B.
Oppenheim-Barnes, B.	Wigram, L.
Orkney, E.	Wynford, L.
Orr-Ewing, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.6 p.m.

Clause 7 [Confiscation orders]:

Baroness Mallalieu moved Amendment No. 11:

Page 6, line 16, leave out subsection (2).

The noble Baroness said: In speaking to Amendment No. 11, I shall also speak to Amendment No. 20. These amendments are what I would term burden of proof amendments. Clauses 7 and 24 of the Bill amend the Drug Trafficking Offences Act 1986 and Section 71 of the Criminal Justice Act 1988, which applies to offences relating to sex establishments, video recordings of unclassified work and the use of unlicensed premises for cinema shows which require licences. Both these clauses relate to confiscation orders that come into effect once the defendant has been convicted of the offence.

Under Section 2 of the Drug Trafficking Offences Act the court, in assessing the value of proceeds from drug trafficking which the defendant may have benefited from, may make the assumption that in defined circumstances property which the defendant has is the proceeds of drug trafficking. The defendant may rebut that presumption by showing that the assumption is incorrect. Under Section 71 of the Criminal Justice Act 1988 the court may make a confiscation order against the offender if it is satisfied that the person has benefited from the commission of the offence. Both Clauses 7 and 24 of the Bill make it clear that the standard of proof on the defendant is the civil rather than the criminal standard. The purpose of these two amendments is to delete the proposed clause, which would mean that the criminal burden of proof applies.

The courts have considered this matter already in relation to the Drug Trafficking Offences Act in the case of Dickens, which was reported in 1990. That case established that in relation to confiscation orders under the 1986 Act 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. So Clause 7 in this Bill seeks in effect to reverse the decision of the Court of Appeal in Dickens.

I stress that these amendments, Amendments Nos. 11 and 20, are intended so far as the Drug Trafficking Offences Act is concerned to leave the position in law the same as it is at present following the case of Dickens and to bring the Criminal Justice Act into line with it.

I make it clear from these Benches that there is no intention on my part to make it in any way easier for a convicted drug trafficker or an offender under the Criminal Justice Act to keep his ill-gotten gains or to put any unnecessary difficulty in the way of the courts recovering the proceeds of crime. But I do not believe that these two amendments would have that effect. I do not believe that judges applying the present criminal standard are finding any difficulty in resolving that assets are indeed the proceeds of drug trafficking in appropriate cases following conviction.

What does concern those of us on these Benches is that the confiscation of assets is such a severe penalty that the use of anything less than the criminal burden of proof for this purpose is deeply disquieting. In practice it frequently involves an offender's house, in which often his wife and children are living while he is in prison serving a prison sentence.

It is a central principle of the English criminal law that it is for the Crown to prove guilt beyond reasonable doubt. Where a confiscation order is made in a criminal case, the burden should, we say, remain on the prosecution to show that property was acquired with the proceeds of drug trafficking. In practice, once there has been a conviction the courts have little difficulty in coming to the conclusion that otherwise unexplained assets are the result of an earlier successful drug transaction and thus in confiscating them.

What is troubling is that there is a real fear that legitimately acquired assets in respect of which suitable accounts or receipts may not be available—and the sort of people who are subsequently involved in drug trafficking and convicted in relation to those matters tend not to be the sort of people who keep careful accounts in relation to their income and expenditure—may well be wrongly confiscated. If this part of the Bill is permitted to stand, the law will be changed following Dickens to apply the civil standard and there is a real fear that injustice may result. I beg to move.

Lord Airedale

I should like to support the amendment. First, why does the subsection not set out what it means instead of sheltering behind the words that the standard of proof: shall be that applicable in civil proceedings"? Every person is presumed to know the law. There is a corresponding duty upon Parliament, in respect of statutory matters in particular, to make the law as nearly as possible understandable by the ordinary citizen. Ever since Lord Chancellor Gardiner arrived on the Woolsack we have made special efforts to try to make the statutes understandable to ordinary citizens. If the noble Earl went out into the street and said to somebody, "Can you tell me the standard of proof applicable in civil proceedings?" the answer would probably be, "No". But if he said, "Do you understand what is meant by the balance of probabilities?" the answer would probably be, "Yes". Therefore why does that not appear in the subsection? I suspect that it is because it would look rather naked in a Criminal Justice Bill to have the balance of probabilities appearing.

On Second Reading the noble Lord, Lord Richard, referred to Rumpole's "golden thread". The noble Lord knows that it was not Rumpole but Lord Chancellor Viscount Sankey, delivering the judgment of the House of Lords in a 1935 case, who explained the presumption of innocence in criminal cases. He described it as: Throughout the web of the English criminal law one golden thread is always to be seen". He did not say that it was always to be seen unless the Government, having, after a series of spectacular miscarriages of justice, set up a Royal Commission with wide-ranging terms of reference to delve into the administration of criminal justice—and I believe that we are on the eve of the Royal Commission report —instead of waiting for the report and digesting it, rush in and start tampering with the burden of proof. They did that in the last session in the inelegantly phrased Aggravated Vehicle-Taking Bill and now they are at it again.

If I were in a position to advise the Government on how to proceed in matters such as this, I should tell them to stop meddling with the burden of proof, to wait for the report of the Royal Commission and see what it says and then to have another look at the matter.

5.15 p.m.

Lord Boyd-Carpenter

This amendment, like its predecessor, is designed to make a little more gentle the penal provisions of the Bill in so far as they affect drug traffickers. The personal affairs of many of those drug traffickers must be very difficult to sort out. As we heard most vividly from the noble Baroness, they are often people who have come from West Africa, bringing sometimes large and sometimes small quantities of dangerous drugs with them. It must be extremely difficult to sort out whether or not their assets derive from drug trafficking.

I can therefore well understand that the Government feel that, in order to operate this provision as successfully as possible, the ordinary civil standards of evidence should suffice. Unless a much stronger argument can he brought against that, I personally shall find myself opposed to the amendment.

Lord Wigoder

I should like to support the amendment. I do so on the simple ground that, although I can see a case for making an exception to the general rule in the case of the tracing of assets from drug trafficking, I am against making exceptions to the general rule unless the case is overwhelmingly proved. Every time we make an exception we weaken the principle and before we know where we are there will be movements afoot to weaken the general standard of the burden of proof in criminal cases. I therefore suggest that we ought not to make any exceptions at all unless the case is quite overwhelming.

As to whether the case is quite overwhelming, here perhaps I may ask the noble Earl one question to which I do not know the answer. To what extent have there been representations by judges to the effect that, at the end of a case, they endeavoured to decide whether assets were the proceeds of drug trafficking and, had the burden of proof been the balance of probabilities, they could have found for the prosecution and against the defendant, but because the burden of proof happens to be the criminal standard they were unable to find against the defendant and make the order which they thought appropriate? If there is a widespread feeling among the judiciary that the present standard of proof is seriously hampering their activities, I should certainly be prepared to reconsider the position that I take at present, which is that I am opposed to what seems to me a possible thin end of a very dangerous wedge.

Lord Ackner

Much emphasis has been placed upon the general presumption and the general weight of the burden of proof. Those are directed at establishing a criminal offence. As I understand the particular amendment, we are not concerned here with the establishment of a criminal offence; that has already been established. We are concerned purely with the task of proving that the defendant has benefited from the drug trafficking, and the amount of such benefit. That seems to me to be an entirely different category of situation. I do not see why in those circumstances the ordinary principle that a crime must be proved beyond reasonable doubt, to which there are many exceptions, has any application to the matter currently under discussion.

Earl Ferrers

The noble Lord, Lord Airedale, said that he could not understand why we could not put simple words into a Bill so that everyone could understand it. I can sympathise with that. He said that if he went out and asked anyone in the street whether he knew what the standard of proof was, the answer he would get was that that person had not the slightest idea. I suppose that if one goes up to any man in the street and asks him to read a will which a lawyer has made for him and then asks him whether he understands it, he will probably say, "No, I don't understand it", because that is not his profession.

There has been no difficulty, either in the courts or with practitioners, over the way in which the standard of proof is dealt with or indeed how it is described. It is described in different ways. One can talk about the balance of probabilities, or what is more likely than not. The fact is that when these words are put into Acts of Parliament, it does not give any cause for difficulty among those who have to use the provision.

I return to the noble Lord's friend in the street whom he was going to ask what he thought. If he were to ask him this particular question, I would have thought that this would be one of the easier parts of the Bill and that his friend might be able to understand it. But if he were to pursue him and ask him to consider some of the other aspects of the Bill he would find them a good deal more complicated. Therefore I do not believe that there is any necessity to change this part of the Bill.

The noble Baroness's amendment suggests that the civil standard of proof, which is the balance of probabilities, or more likely than not, is an unacceptable erosion of the rights of defendants. The Committee should remember that Clause 7 does not affect decisions as to whether a defendant is guilty or not guilty of a drug trafficking offence. That question will continue to be decided on the criminal standard of proof: beyond reasonable doubt.

I believe it is wrong to suggest, as the noble Baroness did at Second Reading, that the Government are bending the law because the Crown does not have enough evidence to secure convictions, or to imply that we are in any way affecting innocent people's chances of being acquitted on any criminal charge which they may face. There is no question of that. This clause simply concerns the confiscation hearing which is held after the defendant has been found guilty; he will have been found guilty of one or more drug trafficking offences. This part concerns only the financial questions which arise at such a hearing.

The noble Lord, Lord Wigoder, asked whether there are any cases where there has been difficulty and the judges have said that they would prefer a different standard. All this has arisen because the provisions which we put into the Bill and which the noble Baroness, Lady Mallalieu, seeks to alter make clear what was originally intended but was not previously stated on the face of legislation. We do not believe in this context that the civil standard is unfair.

It all comes about as a result of the Court of Appeal case of Dickens to which the noble Baroness referred. In Dickens it was said that, taking into account the Act as it was, the criminal standard should be the one that is implemented. That was in fact different from that which was intended when the Act was brought in. We are simply making it perfectly clear what the standard is. In this case we believe that the standard should be the civil standard. We believe that allowing the criminal standard to remain in these provisions risks undermining the whole purpose of the 1986 Act, which was to confiscate the ill-gotten gains of those found guilty of drug trafficking.

Clause 7 seeks to reinforce Parliament's original intention that the courts should have the strongest possible powers with which to deprive those who profit from the benefits of drug trafficking. What is at issue here is not whether or not that person is guilty. He is guilty. That would have been already decided by the court—and to the criminal standard of proof. What is at issue is whether the assets which the trafficker has are the proceeds of drug trafficking. If they are, they ought to be confiscated. That should be decided by the civil standard of more likely than not, just as it is in the nature of any normal property dispute.

There may be difficulties in sorting out a person's financial affairs. There is nothing unusual in that. The person will have gone to the court and explained to the judge what he has and what he does not have, and the judge will have to come to his conclusion. But that is not a criminal offence and therefore should not have the criminal standard. It is much more a civil offence. I therefore suggest to the noble Baroness that the civil standard of proof is the correct one.

Lord Airedale

Has the noble Earl reflected that if the accused person is to be fined, the case will have to have been proved against him beyond reasonable doubt? But if his money is to be confiscated, under this Bill it can be done on the balance of probabilities. That is rather a fine distinction, is it not?

Earl Ferrers

It is a perfectly normal distinction in a civil case. The criminal aspect of this person's case will have been decided and decided on the criminal standard. How much money he has and whether or not his house in the Bahamas is a result of drug trafficking is a straightforward civil question.

Baroness Mallalieu

The noble Earl is intransigent on this matter. He has not in fact looked closely at the effects of such a provision. It is not strictly true to say that by the time these provisions come into force decisions about guilt or innocence will have been completed. Certainly the defendant will have been convicted of the drugs offence in relation to which he is currently charged. But at that point the judge who is dealing with the inquiry will have to form some assumptions about the origins of the property that he is known to have.

It may be that during the course of the trial evidence has emerged that he was paid, say, £500 for being the courier and bringing the drugs in and that £500 is found on him. In those circumstances there is little difficulty in concluding that the £500 is the proceeds of drug trafficking. But in many other cases the defendant has assets which may involve a house or lesser matters, assets for which, on the face of it, there can be no legitimate explanation. In those circumstances, in effect, the judge has to make a finding that the defendant has on previous occasions been engaged in drug trafficking, occasions when he has been successful in committing the crime, and that those are the proceeds, unless the defendant can rebut that assumption.

So the judge often has to make a further decision as to guilt or innocence in relation to often unspecified earlier transactions. That is where the danger comes in. Somebody has been convicted on the evidence and on the appropriate criminal standard of committing one offence. Once that has happened, on the basis of these provisions the burden shifts and the judge may well have to make decisions about the man's previous culpability and how he came by things that seemed to be beyond his apparent means on the basis now of a civil standard.

I find it somewhat ironic that a very short time ago a matter of less than an hour I was castigated by the noble Lord, Lord Boyd-Carpenter, for trying to overrule the Court of Appeal. That is precisely what this provision in the Bill introduced by the noble Earl proposes to do.

I notice an overt change in the Government in respect of this matter. I am grateful to the noble Lords, Lord Airedale and Lord Wigoder, who expressed their support. I propose to withdraw the amendment but I shall return to it at a later stage in the Bill.

Amendment, by leave, withdrawn.

Clause 7 agreed to.

Clauses 8 to 11 agreed to.

5.30 p.m.

Clause 12 [Revaluation of proceeds of drug trafficking and discovery of further assets]:

Baroness Mallalieu moved Amendment No. 12:

Page 11, line 24, leave out ("six") and insert ("five").

The noble Baroness said: I can deal with the amendment briefly. This provision gives us some anxiety. It deals with the ability of the Crown, following the resolution of a case, to return to it again and again if further assets which were not assessed by the court at the time of the original hearing come to light.

It must be right that, if assets were concealed and knowledge of their existence later comes to the prosecutor, the defendant should not be able to retain what I have already described as his ill-gotten gains. That important feature has to be balanced against the need for a final resolution of such matters. In other words, there must be a limit to the time during which the defendant who has already been sentenced for his offence can be brought back to the court. Surely there must be some resolution to the number of bites at the cherry which the Crown can have.

For a reason which I cannot anticipate but which I hope the Minister will explain, the clause as presently drafted fixes a period of six years during which such further applications can be made. It is important that if a prison sentence is imposed, which is almost invariably the case in such matters, there should be a final resolution so that if there is to be rehabilitation the offender can, when released, carry on with his life. There must also be a question of balance. We believe that six years is too long. If there is a good reason why that period has been chosen I shall willingly seek to withdraw the amendment. However, the amendment proposes to reduce the period to five years, which appears to be at the outer limit of what is reasonable in the circumstances. Perhaps the Minister can indicate the reason for the six-year period. I beg to move.

Earl Ferrers

At Second Reading the noble Baroness warned us that she was worried about the length of time during which people can he chased for their assets. I explained that the period of six years appeared in the Bill. Perhaps that had escaped the noble Baroness's attention but it had not escaped the attention of her noble friend Lord Richard, who reminded her. I was obliged to remind her too; so she was told, as it were, from both ends.

The noble Baroness now says that six years is too long and is asking for five years. I find the situation curious because the amendment on which we voted sought to give more lenient sentences to drug traffickers. The previous amendment which the noble Baroness moved attempted to ensure that drug traffickers would be more likely to retain more of the money which they had acquired from their ill-gotten gains. Now the noble Baroness comes along and says, "We do not want to be able to chase them for six years, only for five years. After that they can keep whatever they have. If any other assets appear after five years they cannot be confiscated".

Six years is considered to be a reasonable limit on these powers because we believe that it is long enough to make the new provision worth while but not so long as to leave the offender under an indefinite threat of further assets being confiscated. Members of the Committee will note that the six-year period already plays a part in the Drug Trafficking Offences Act 1986 in the assumptions provided for in Section 2. The court may assume that any property which appears to the court to have been transferred to the offender at any time since the beginning of the period of six years ending when the proceedings were instituted against him or her is received as a payment for drug trafficking.

The noble Baroness suggests that that period is too long but that she will be happy to withdraw her amendment if there are good reasons for the provision. I have given one good reason but another is the interests of consistency as well as justice. It was decided that six years was the most appropriate limit because that period was originally decided when the 1986 Act was being discussed, as it corresponded with the provisions of the Finance Act 1985 providing that value-added-tax traders must retain their records for six years. Six years is also the ordinary period of limitation applying to most actions in tort and contract law and actions to cover arrears of rent or to enforce a judgment or a mortgage. There are good precedents and I hope that the noble Baroness will agree that, in terms of consistency, justice and fairness, six is better than five.

Baroness Mallalieu

After that explanation, I can only beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 agreed to.

Clause 13 [Effect of imprisonment for default]:

On Question, Whether Clause 13 shall stand part of the Bill?

Baroness Mallalieu

I oppose Clause 13 standing part of the Bill. I expressed anxiety about the clause at Second Reading. Under Section 6 of the Drug Trafficking Offences Act, provision is made for terms of imprisonment in default of compliance with a confiscation order. In effect, the clause enables the prosecution to have its cake and eat it. When a man has served a term of imprisonment for failing to pay the compensation order he is under this clause still obliged to pay the money. I am unaware of any precedent for such a provision in any other compensation, confiscation or fine provision. I should be grateful if the Minister could draw my attention to it. The very wording of the Bill suggests that these are alternatives. This is a sentence of imprisonment in default.

As I have said already—the noble Earl never hears me, so I repeat it—of course it is not our intention to prevent the recovery of the proceeds of drug dealing. I do not accept the noble Earl's contention, which he expressed at Second Reading, that offenders are choosing in effect to do the time and keep the money. That certainly is not my experience. Even if it were correct, the proper course would be to increase the penalties which could be imposed in default. But again in my experience they are already extensive and involve lengthy terms of imprisonment.

Where there is a conviction for an offence of this nature the likelihood is that there will be a lengthy term of imprisonment for the offence. The period in default of payment will then be added to that if confiscation is not met. As I said in relation to the previous clause, there must be an end if reform and rehabilitation are to play any part in sentencing. We contend that a provision of this nature is, in ordinary language, "plain unfair". In so far as I am aware it is also a novel departure and I ask the noble Earl to think again about it. If there is a precedent for it I should be grateful if he will draw the Committee's attention to it.

Lord Ackner

The case of Dickens has been referred to and it might be convenient if I read two or three sentences from The Law Reports 1990. It is in the second volume of the Queen's Bench Division, at page 105, dealing with the 1986 Act. The noble and learned Lord the former Lord Chief Justice, Lord Lane, said: It is plain that the object of the Act is to ensure, so far as is possible, that the convicted drug trafficker is parted from the proceeds of any drug trafficking which he has carried out. The provisions are intentionally Draconian". If that philosophy is right—and I suggest that it is —I do not see anything wrong with this provision at all. As I sought to point out on an earlier amendment, we are dealing here with what is essentially a civil situation. A person ex hypothesi has property; he will not part with it so he is sent to prison. In a civil case a person commits contempt of court if he fails to hand over property when an order directs that he should do so. If he continues contumaciously to insist on refusing to comply with the order he is sent to prison. That does not wipe out the obligation either to pay the debt or to hand over the money.

As I understand it, what has been done here is once again to apply the civil analogy and ensure that the convicted drug dealer is not in a position to say, "It would suit me better to enjoy Her Majesty's hospitality in prison with, of course, the realisation that I shall get remission and possibly parole. When I come out I can unearth my sizeable nest-egg and live happily ever after". That is not a scenario of which I hope this Committee would approve. It seems to me that, very sensibly, this clause seeks to make that not practical.

Earl Ferrers

The fact is that some convicted drug traffickers are opting to serve extra months in prison in order to avoid paying their confiscation orders. Any such extra term of imprisonment in default would also, under the rules, attract remission for good behaviour. I am glad that the noble and learned Lord, Lord Ackner, agrees with me. This cannot be right. It undermines the original intentions of the 1986 Act; namely, that illicit profits should be removed from circulation and that those convicted of drug trafficking should not keep their ill-gotten gains.

At Second Reading and again this afternoon the noble Baroness, Lady Mallalieu, opposed Clause 13 on the grounds that it runs counter to the principles of imprisonment for debt; that it runs counter to English criminal law in general; and that it runs counter to fairness. She said today that the prosecution is trying to have its cake and eat it. I thought that that was rather a curious expression. However, she went on to say that she is against drug traffickers, and I am glad to hear that.

The Government are not forcing a drug trafficker to serve a period of imprisonment in default and meet the cost of the confiscation order. The offender has a simple solution open to him: he can and should pay the confiscation order before default becomes an issue. The fact of the matter is that the court would not have made a confiscation order if it was not satisfied in the first place that the offender had enough realisable property to meet it. If the defendant believes that the value of his realisable property is lower than the court assessed it to be, it is always open to him to apply to the High Court for a downward variation order. Moreover, the courts will not commit an offender to imprisonment in default unless they are satisfied that he or she has the resources to pay the outstanding order.

What we are seeking to do is to make the offender pay up. If he does not do so, he then goes to prison for failing to do what the court has told him to do. The term in prison does not release him from the requirement to forfeit his proceeds. What we do not wish to do—but the noble Baroness does—is to give him a choice: "Either pay up or go to prison. If you go to prison you can hang on to your money". The noble and learned Lord, Lord Ackner, agrees that that is wrong. I believe it is wrong.

Contrary to what has been said by the noble Baroness, this is not an unprecedented provision, especially for a civil type debt, to which the noble and learned Lord, Lord Ackner, referred. Income tax, community charge and maintenance debts all remain in force even after a term of imprisonment is served. Confiscation is not a punishment as such. It is a debt which must be paid. The offender should not be permitted to choose whether or not to pay.

On reflection I hope that the noble Baroness will agree that Clause 13 is correct.

5.45 p.m.

Baroness Mallalieu

The noble Earl has not allayed my anxieties about the provision. He has not been able —and I am not surprised that he has not been able to draw attention to any precedent within the realms of the criminal law. Yet he is proposing to insert this provision into a Criminal Justice Bill.

It troubles me that the noble and learned Lord, Lord Ackner, considers that legislation of this type, which he described as draconian, is appropriate. I suspect that that is because the provision deals with the highly emotive matter of drug dealing about which we all-and I repeat this—feel strongly. If the object of the provisions is to make a convicted offender pay up and disgorge the money which he obtained by drug dealing, the proper means of doing so, if he does not do so willingly, is to face him with a term of imprisonment which is so long that he will pay up. Those provisions are available. If they are not being used, it is about time that the Court of Appeal issued one of its famous guideline cases in relation to this matter to make sure that the provisions are properly used.

The noble Earl says that there is evidence that people are choosing to serve a further term of imprisonment and then collect the money at the end. I can only query his evidence for that. He produced no evidence in support of his contention. It runs contrary to all that I have seen, given that any drugs offender faces an extremely substantial term for the offence itself, quite apart from what is imposed in relation to these matters. I may well return to this matter on Report.

On Question, Clause 13 agreed to.

Clauses 14 to 16 agreed to.

Clause 17 [Acquisition, possession or use of proceeds of drug trafficking: Scotland]:

Baroness Mallalieu had given notice of her intention to move Amendment No. 13:

Page 15, line 29, after ("conduct") insert ("custom of trade or profession").

The noble Baroness said: I do not move this amendment and in due course I shall not move Amendments Nos. 19, 23 and 25. They arose from anxieties which the Law Society of Scotland had about aspects of the Bill relating to Scotland. It is giving further consideration to the amendments. Therefore, I shall not move Amendment No. 13.

[Amendment No. 13 not moved.]

Clause 17 agreed to.

Clause 18 [Offences in connection with laundering money from drug trafficking]:

Baroness Mallalieu moved Amendment No. 14:

Page 16, line 34, leave out ("suspects") and insert ("believes").

The noble Baroness said: My noble friend Lord Irvine of Lairg wishes to apologise to the Committee that he is unable to be here.

In moving this amendment I shall speak also to Amendments Nos. 15, 21 and 26. In one form or another they all deal with the deletion of the words "suspicion" or "suspects" and the substitution of the words "believes" or "belief". There are essentially three reasons for replacing "suspicion" with "belief" in the Bill. First, to provide that a person is guilty of an offence if he suspects something is to legislate for an offence which is easy to prove but extremely difficult to refute. In answer to the comment, "I suspected nothing", it is easy to say, "Well, you should have done". That line of reasoning imparts an objective test when the test should be subjective. Miscarriages of justice are only too likely to result.

Suspicion sets the necessary state of mind too low for a criminal offence, which in this Bill carries a penalty of up to five years' imprisonment. Indeed, juries are told daily in our courts that suspicion is insufficient. Clearly the standard of proof is much higher.

Secondly, the proposed offence will make it difficult, for example, for the conscientious bank employee to decide whether or not he should disclose any payment into an account above a certain amount —say, £2,000. If he felt obliged to do so that might well destroy the relationship of trust which normally exists between banks and their customers.

Section 22 of the Theft Act 1968 makes it an offence to handle stolen goods "knowing or believing" them to be stolen. Juries are directed that they must be satisfied that the defendant knew or believed that the goods were stolen; suspicion is not enough. The proposed offence is analogous and the same provisions should therefore apply. I beg to move.

Lord Airedale

I note a distinction between Clauses 18 and 28. In Clause 18 the single word "suspects" appears; in Clause 28 we find the words, having reasonable grounds to suspect". I should have thought that the words in Clause 28 were the appropriate words to be used in both cases.

Clause 18 creates a criminal offence. A person who "suspects" money laundering will be under a duty to go to the police and say so. Lawyers will make play with those differences in wording and say that mere suspicion of money laundering for which one has no reasonable grounds is nevertheless an offence. They will say that if reasonable suspicion was intended under Clause 18, it would have been included as it is in Clause 28.

The result will be that people with suspicions but without reasonable grounds for them will be committing an offence if they do not go to the police and explain their unfounded suspicions. Droves of people will be arriving at police stations, wasting enormous amounts of police time to no purpose.

I urge the noble Earl to consider whether or not it is intended that the words, having reasonable grounds to suspect", should be included in Clause 18 as well as in Clause 28. Lawyers will have a field day discussing the matter unless the position is resolved.

Lord Hutchinson of Lullington

I support the amendment and the comments of my noble friend, having some knowledge of field days in this area. "Suspect" is far too dangerous a word; it depends entirely on the subjective judgment of the specific person. Policemen suspect everybody's behaviour the whole time. One person is suspicious while another is not. For instance, I am sure that the noble Earl "suspects" that I speak only when the noble and learned Lord, Lord Ackner, says something with which I can disagree. However, I am quite sure that he does not believe that, which is a completely different matter.

The question of suspicion can arise, as my noble friend said, without any basis whatever. Any self-respecting person can be asked, "Did you not suspect this? Was it not suspicious?" Suspicious behaviour to one person is not necessarily suspicious to another. It must be tied down. Experience of handling stolen property cases, as the noble Baroness said, and of the words, "knowing or believing", leads us to believe that that is what is justiciable in a court of law, whereas the word "suspicion" is far too wide.

Earl Ferrers

The noble Lord, Lord Airedale, said that lawyers would have a field day discussing the difference between "suspects" and "believes". It will not only be lawyers who have such a field day. It is difficult to understand exactly what the difference is between the two. However, it is significant. The question of the mental test which should attach to new offences invariably raises differences of opinion. It may be helpful for me to set out the background and reasons for the tests in the Bill.

In Clause 18, which makes it an offence to fail to disclose knowledge or suspicions of money laundering, the onus is on the prosecution to prove that the defendant actually suspected that money laundering was occurring. It is quite a high test, but certainly not as high as expecting the prosecution to prove that the person actually believed that money laundering was occurring, which is the effect of the amendment.

It is a difficult question for any prosecution to have to prove that a person "believes" something, and totally different to prove that he "suspects". I am sure that the Committee will appreciate that imposing such a high test would have severe implications for the reporting requirement being introduced by the clause and would seriously reduce the reports made to the enforcement authorities. As a result, detections of drug traffickers could be expected to decrease and the amounts which criminals succeeded in laundering could be expected to increase. We cannot allow that to happen.

The noble Lord, Lord Airedale, said that streams of people would go to police stations saying that they suspected people of drug trafficking or money laundering. I believe that that may be an exaggeration. Even if it were not, it would be a good thing for people to go to police stations and say, "I suspect that someone is money laundering". It would then be up to the policemen, the professionals, the investigators to decide whether or not that was true. If we say that one should only go to a police station when one "believes" that a person is money laundering, then the number of people reporting their belief will be considerably reduced.

Clause 26 is identical to Section 24 of the Drug Trafficking Offences Act 1986. It introduces an offence of assisting another to retain the proceeds of criminal conduct, as does Section 24 for drugs. The knowledge, or mens rea, test in Clause 26 therefore comes from Section 24 of the 1986 Act, which has so far worked perfectly well. We see no reason why the same test should not apply to the new all-crime money laundering offence, particularly as applying the higher test of "belief" will make it less effective and benefit those who participate in crime and those who help to launder the proceeds derived from crime.

With regard to the amendment in relation to Clause 28, I should say again that Clause 28 replicates an existing drug money laundering offence, this time one found in Section 14 of the Criminal Justice (International Co-operation) Act 1990, of concealing or transferring the proceeds of criminal conduct. Under Section 14 and the new offence in Clause 28, the prosecution is required to prove that the defendant knew or had "reasonable grounds to suspect" that the property involved was the proceeds of criminal conduct. The "reasonable grounds to suspect" test is an objective one, whereas the proposed "belief" test is a subjective one and therefore more difficult to prove.

The existing test in the Section 14 offence has worked well in practice. The lower test was used because the offence centres on the fact that the concealment or the transfer of property is done with the intention of avoiding prosecution or the making or enforcing of a confiscation order. Bank employees and other such people could not therefore fall foul of the offence unless they actually set out with the intention of helping a drug trafficker to avoid prosecution.

Were the amendments to be moved into the Bill they would severely handicap the law enforcement authorities in their task of combating money laundering. I hope therefore that the noble Baroness will not seek to press them too hard.

6 p.m.

Lord Wigoder

Perhaps I may make one comment to the noble Earl. On Amendment No. 14 as it stands, the Committee is being asked to decide between the words "suspects" and "believes". I appreciate that that is the decision before us today. My noble friend Lord Airedale raised a matter which is not at present the subject of an amendment; that is, that instead of "suspects" it would be better to use the phrase, "has reasonable grounds for suspecting", as occurs in a later clause in the Bill.

Perhaps I may ask the noble Earl to consider that matter or comment upon it. We appear to be creating the same offence whether he "suspects" or "has reasonable grounds for suspecting", but putting it in a form which is intelligible to a jury. If a jury is asked, "Did the defendant suspect?", and the defendant says, "I did not suspect", what is the jury to decide? It will be asked by the judge, "Should he have suspected? If he should have suspected, why should he have done so?". The answer would be, "Because of the following grounds on which the prosecution say he should therefore have suspected". As I say, at the moment I accept that this is not a matter for immediate consideration as an amendment. As my noble friend has put it forward, would the noble Earl care to comment on its feasibility?

Earl Ferrers

I would prefer not to comment on it now, but I shall certainly look at the matter. These words are very much a matter of fine tuning. One wants to see their effect, but I shall certainly look at the point.

Baroness Mallalieu

I am unhappy particularly with the illustration which the noble Earl gave as regards a person having to know before he can go to a police station to make a report of suspicious conduct. The offence with which we are dealing makes a person guilty if he knows or suspects that another person is engaged in drug money laundering and does not make such a report. Here we are not talking about information being given to the police or information which might assist the authorities in the ordinary course of events. We are talking about people being guilty of a criminal offence if they do not make such a report.

In the light of the answer which the noble Earl has given to the noble Lord, Lord Wigoder, I hope that the noble Earl will also look at the totality of the wording in these provisions. It is deeply troubling that the concept of suspicion should be imported into the criminal law in the way in which it is in these measures. In the light of the noble Earl's indication, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 15 not moved.]

Baroness Mallalieu moved Amendment No. 16:

Page 16, line 41. after ("constable") insert ("or, in case of a person in employment, to the appropriate person,").

The noble Baroness said: In moving this amendment I shall speak also to Amendments Nos. 17 and 18. The reason for deleting Clause 18(5) and putting the substance of it in subsection (6) in the form of a definition of "appropriate person" is that the failure to disclose on the part of the employee should be part of the offence; in other words, the prosecution would have the burden of proof rather than the defence where the burden would fall on the employee. It seems wrong that the employee should bear the burden of proving that he did disclose something when the essence of the offence is a failure to disclose. Accordingly, the purpose of these amendments is to ensure that the prosecution bears the burden of proof in relation to the proposed offence. I beg to move.

Earl Ferrers

I am grateful to the noble Baroness for explaining the purposes of these amendments. If we were to accept them they would alter the very nature of the new offence which we are creating of failing to report knowledge or suspicion of money laundering. We are doing that in order to implement an EC directive. As drafted, the clause makes it an offence not to report to a constable a knowledge or a suspicion of money laundering which is gained in the course of trade, business or profession.

A key defence to this offence is having a reasonable excuse for failing to make a report. After we had representations from the banking community a further defence was added of making a report to the appropriate person in accordance with the procedure laid down by the defendant's employer. As Members of the Committee will know, the banking community has already established fairly effective systems for the internal reporting of suspicions to supervisors. That has happened with the support and co-operation of the police.

These amendments would make it more difficult for the prosecution to prove that the offence had been committed. It would be for the prosecution to prove to the criminal standard of proof that the person who held the knowledge or suspicion had not disclosed that either to a constable or, as it were, up the line. It is very difficult for the prosecution to prove that. However, the Bill as drafted would allow for the defence to prove on the balance of probabilities that the person did so disclose.

The Bill already requires the prosecution to prove that the person knew or suspected another person's involvement in drug money laundering, that this information came to notice in the course of trade, business or profession and that the person with the knowledge or suspicion did not disclose that information to a constable as soon as reasonably practicable. In those circumstances I hope that the noble Baroness will agree that it would not be right to compromise our armoury in the battle against drug trafficking by requiring the prosecution to prove yet more matters which are fundamentally within the knowledge of the defendant. It is difficult for the prosecution to be able to prove that, whereas, as the Bill is drafted at the moment there is both the possibility for the prosecution to prove an easier matter and for the defendant to show that that was not the case.

Baroness Mallalieu

I sometimes despair of the noble Earl's replies. He appears to base the justification for much of the legislation which he is introducing on the argument that it is important not to make things difficult for the prosecution. If the intention of legislation is to make it easy for the prosecution to obtain convictions, then one might as well abandon the whole principle of the burden and standard of proof.

The noble Earl says that this is a particularly difficult instance because these are matters which are peculiarly within the knowledge of the defence. That is so as regards countless criminal offences; for example, all those where the prosecution is required to prove intention. I believe that there is no suggestion, even from the noble Earl, that in cases where intention has to be proved the law should be altered to make it easier for the prosecution to establish guilt.

As regards this legislation—particularly when one is dealing with emotive matters such as the noble Earl has placed before us in his answers to almost every matter that we have dealt with—it is important that we should not lose sight of the fact that this statute is creating criminal offences and it should abide by the usual rules of the burden of proof. As regards matters such as the amendment that we are now dealing with, it should be made clear that the burden lies throughout on the Crown. I do not detect any sign that the noble Earl will approach this matter with an open mind and look at it again in the interval between now and Report stage. At this stage I ask leave to withdraw the amendment, but it may well be one to which I shall return later.

Earl Ferrers

Perhaps I may help the noble Baroness a little because she said that she despairs of me. That is a very traumatic and disagreeable thought. Of course I shall consider everything that she has said. When the noble Baroness tables an amendment I believe that this one was tabled only last night so we were not given that much time—one has to consider what it means and its effect. I give the noble Baroness what is our considered view. But that does not mean to say that our minds are closed, although by saying that I am not inviting her to raise her expectations too greatly.

Of course I shall consider anything that the noble Baroness says between now and the next stage. I do not believe it is very likely that I shall come round to her point of view for the reasons I have tried to explain, but I shall consider what she said.

Baroness Mallalieu

I am very grateful to the noble Earl for those crumbs of comfort and I shall make what use I can of them.

Amendment, by leave, withdrawn.

[Amendments Nos. 17 and 18 not moved.]

Clause 18 agreed to.

Clause 19 [Offences in connection with laundering money from drug trafficking: Scotland]:

[Amendment No. 19 not moved.]

Clause 19 agreed to.

Clauses 20 to 23 agreed to.

Clause 24 [Confiscation orders]:

[Amendment No. 20 not moved.]

Clause 24 agreed to.

Clause 25 agreed to.

Clause 26 [Assisting another to retain the benefit of criminal conduct]:

Baroness Mallalieu moved Amendment No. 21:

Page 28, line 18, leave out ("suspecting") and insert ("believing").

The noble Baroness said: In moving Amendment No. 21, perhaps I may speak also to Amendment No. 22. I have already addressed some arguments to noble Lords on the matter of suspecting and believing, but in relation to Clause 26 I should like to add just this: the clause as drafted provides a defence in subsection (4) (a)—in other words, that the defendant did not know that the arrangement related to the proceeds of crime. The effect here is to reverse the normal onus of proof. Under the existing provision, the defendant would have to prove that he did not know.

I am perhaps repeating matters, but I shall do so briefly. The usual rule is that the prosecution should prove all matters relating to the defendant's guilty knowledge. I can see no justification for departing from the principle in this case. The effect of the amendment would clearly be to put the burden on the prosecution. I beg to move.

Earl Ferrers

The offence created by Clause 26 reproduces in all its elements the offence found in Section 24 of the Drug Trafficking Offences Act 1986 —the offence of assisting another to retain the proceeds of drug trafficking. Section 24 has worked perfectly well and has proved to be a well drafted and well balanced provision. To have one offence of laundering the proceeds of drug trafficking and a materially different one of laundering the proceeds of criminal conduct would be rather odd, to say the least, as well as confusing to the courts.

The amendments proposed by the noble Baroness would have the effect of making the job of the prosecution far harder—I know that she does not want to do that, but that would be one of the effects —in proceedings which are brought under this provision. An adequate defence of neither knowing nor suspecting that the arrangements related to the proceeds of criminal conduct is provided by subsection 4(a). As in any other defence, the onus is on the defendant to prove to the civil standard of proof (about which we have already heard a great deal today) that he had such a defence.

The amendments would mean that the knowledge or suspicion that the arrangement related to the proceeds of criminal conduct would become part of the offence and the prosecution would therefore have to prove to the criminal standard that that was the case. I am sure that the noble Baroness would agree that this would be an unnecessary additional burden to place on the prosecution. Under the clause as drafted, the prosecution already has to prove that the retention or control of a person's proceeds of criminal conduct was facilitated by the arrangement, that the defendant actually participated in the arrangement and that the defendant knew or suspected that the person owning the proceeds had been or was engaged in criminal conduct or had benefited from such conduct.

The intention of this clause is to criminalise the laundering of criminal proceeds. The amendments would severely restrict the effectiveness of a provision that has proved its worth in cases where the laundered money is the proceeds of drug trafficking and would make life much safer for those who launder the proceeds of crime. I do not think that the noble Baroness would wish that to be the case, but I think that that is how it would turn out in fact.

Baroness Mallalieu

I propose to ask the leave of the Committee to withdraw Amendment No. 21, as I did earlier with similar amendments relating to this subject. As with those amendments, I shall in all probability return to this matter at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 22 to 24 not moved.]

Clause 26 agreed to.

Clause 27 [Acquisition, possession or use of proceeds of criminal conduct]:

[Amendment No. 25 not moved.]

Clause 27 agreed to.

Clause 28 [Concealing or transferring proceeds of criminal conduct]:

[Amendment No. 26 not moved.]

Clause 28 agreed to.

Clauses 29 and 30 agreed to.

6.15 p.m.

Clause 31 [Meaning of "securities", "issuer" and related expressions]:

Lord Mottistone moved Amendment No. 27:

Page 34, line 19, after ("local") insert ("government").

The noble Lord said: In rising to speak to a series of amendments which, as I have already advised my noble friend the Minister, are probing amendments, I have to declare an interest, in that I have been advised on them by the Confederation of British Industry. I must apologise to my noble friend the Minister and to the Committee for not having taken part in the Second Reading, but my noble friend Lord Alexander of Weedon did and substantially put forward the views that the CBI agreed with.

Amendments Nos. 27 and 28 seek simply to improve the wording of the clause. In the case of Amendment No. 27, I propose that the clause should read: a local government authority in the United Kingdom or elsewhere".

This is really because of the "or elsewhere". This may be a small point, but perhaps I may suggest to my noble friend the Minister that the term local authority in the United Kingdom is well known but it could well be that when one is talking about "or elsewhere" it would be more appropriate to say "a local government authority". I hope that my noble friend will see that there is some point in this and that he may be able to give some thought to it between now and the next stage of the Bill.

With regard to Amendment No. 28, I am suggesting that it may be necessary over time to have other definitions for public sector bodies, especially those outside the United Kingdom, and that the extra flexibility that will be ensured by giving authority to the Treasury to designate additional bodies may be found useful. I beg to move.

The Minister of State, Department of Transport (The Earl of Caithness)

We now have a change of batting the first batsman having retired with, I am glad to say, his wicket totally intact.

I should like to take my noble friend's two amendments in succession. I turn first to Amendment No. 27, which seeks to insert the word "government" after the word "local". I must advise him that the term "local authority" is used in the EC treaty and in many Community institutions. It is a well understood phrase and is free from ambiguity. I must advise my noble friend that it is not apparent at this stage that his proposed amendment would add to the clarity of the legislation.

I find myself in an unusual position with regard to Amendment No. 28. It is usually I who from this Dispatch Box am asking for these very words to be inserted and who is having to battle with your Lordships. This time I am on the defending end. We believe that we have covered all the necessary institutions which the amendment embraces: the Government of the United Kingdom and other governments, local authorities, international organisations, the Bank of England and central banks. Therefore, we do not believe that it is necessary to provide the power to extend this definition, and I imagine that that will be welcomed by some of your Lordships. There is no point in putting an "asking power" into an Act if we do not believe that we are going to make use of it.

Lord Mottistone

I thank my noble friend, especially for his first point that the European Community uses the phrase "local government" in the same way as the British. Of course, as time goes on other people who are not within the Community may creep into insider dealing. That is not a very strong point, however.

With regard to Amendment No. 28, I am delighted that the CBI thought the Treasury would like the provision. I do not know whether it was trying to butter up the Treasury. Whatever it may be, I take the point. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 28 not moved.]

On Question, Whether Clause 31 shall stand part of the Bill?

Lord Mottistone

I have given notice of my intention to oppose the Question that Clause 31 stand part of the Bill because I want to raise a general question. In fact I had prepared a whole series of amendments on this point but I decided not to put them down. It seemed to the CBI and to me that although Clause 31 defines "person" pretty thoroughly in relation to a public body as a person, subsequent clauses of this part of the Bill do not identify where it is referring to an individual human being as a person. The general line of the amendments which I did not put down was to change in those places the word from "person" to "individual". I did not put down those amendments partly because an enormous number of amendments would have been needed and also because I have a feeling that I have seen before in other legislation that there is not any doubt about this point. However, in the case of insider dealing, it seems that in some cases, in the narrow sense where it refers to a human individual who commits, or is alleged to have committed, an offence, it would be worth making sure that it is not muddled with a body doing the same kind of thing.

I should be grateful to hear whether my noble friend can unequivocally say that there is not a place for this. If there is, I should be very happy to put down the amendments at the next stage of the Bill. If my noble friend agrees, perhaps he may like to put them down and change the relevant persons into individuals where that is appropriate.

The Earl of Caithness

I have to admit to my noble friend that I was a little surprised to see that he intended to oppose the Question but I am grateful to him for letting me know his purpose in doing so. The paper which he was able to submit allowed me to focus on the particular point of his concern.

The word "person" as used in the Bill can apply both to natural persons individuals—and to legal persons, such as companies. At different places the Bill needs to refer to individuals because the offences can only be committed by them. But it also needs to refer to persons, legal and natural, to ensure, for example, that an insider cannot deal through a legal person and evade the legislation.

It may be helpful to my noble friend to illustrate this by example. To remove "person" from Clause 32 would require it to be amended to read: an individual deals in securities if he procures … an acquisition or disposal of the securities by any other". The effect of replacing the first person in Clause 32 would be to blow a hole in Clause 36(2), which relates to encouraging another to deal. If Clause 32 were restricted to dealing by individuals, it would allow an insider to encourage a company or other legal person to deal without there being an offence. Again, that would create an enormous loophole in the legislation which could readily be exploited. Further, in Clause 32, who would be "any other" if the amendment were made? It is not clear but it is certainly arguable that it must be any other individual. That is not an effect that would be desirable. It would leave an insider free to deal through a company he controls. There would of course be no ambiguity if the reference to "any person" were retained.

That is why the word "person" can refer to both individuals and companies. I have been advised, because I did ask exactly this question, that lawyers would not find it difficult to determine the difference between the two.

Lord Mottistone

I thank my noble friend very much for that full explanation which I hope will set at rest the minds of those who were worried about reference in the Bill to "person".

On Question, Clause 31 agreed to.

Schedule 1 agreed to.

Clause 32 [Meaning of "dealing"]:

Lord Mottistone moved Amendment No. 29:

Page 35, line 3, at end insert: ("() A person is not to be regarded as procuring an acquisition or a disposal of securities by another merely because he refrains from prohibiting that other from acquiring or disposing of the securities. () For the purposes of this Part, a person does not deal in securities if the acquisition or disposal of the securities is carried out by another on his behalf acting under discretionary investment authority in the course of carrying out or exercising that authority.").

The noble Lord said: With Amendment No. 29 I am trying to bring out a particular point I am trying to bring it out in relation to other clauses—on the definition of key phrases relating to insider dealing. The CBI is uneasy that individuals who deal professionally and honestly in securities in accordance with accepted practice may be inadvertently caught by the Bill unless the definitions are expanded in appropriate cases. Amendment No. 29 is an example of that. It provides specifically for two situations when an individual is not to be considered as dealing for the purposes of this part of the Bill. I beg to move.

The Earl of Caithness

Both situations referred to in my noble friend's amendment relate to situations where someone possesses inside information, but there is no legitimate use by him of the inside information. I can say to my noble friend that there would be no breach of the law in either case.

Taking the part of the amendment which relates to procuring, the concern is that someone may possess inside information about a company which he has kept to himself but may nonetheless find himself guilty of an offence if, without his knowledge, someone else dealt in the shares for his benefit. There is no question that he would commit an offence in those circumstances. In order for there to be an offence there would have to be a positive act. Without it —and there is no doubt that there is no positive act in the example my noble friend gave—there is no offence.

Likewise, a client under a discretionary management agreement who possesses inside information about a stock in which the manager deals would not in any sense be intending to make a profit or avoid a loss from the information he possesses. It is difficult to see how it could be argued that this was not the case given that the person who made the investment decision—the fund manager—did not possess the inside information. Clause 37 makes it quite clear that there is no offence in such circumstances.

Further, the situation stressed by the amendment could arise under our existing legislation—the Company Securities (Insider Dealing) Act 1985—but there has in practice been no difficulty. I hope that that is of reassurance to my noble friend. Part IV carries forward the approach taken in that legislation. This should provide additional reassurance that there will not be problems in those areas in future.

Lord Mottistone

I thank my noble friend for that very full explanation. I shall need to read it with some care to see whether it meets all the worries that have been suggested to me. There is a possibility that I may come back at the next stage of the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 agreed to.

Clause 33 [Meaning of "inside information"]:

Lord Mottistone moved Amendment No. 30:

Page 35, line 10, leave out paragraph (c).

The noble Lord said: In moving this amendment I wish to speak also to Amendment No. 31. It seems that subsection (1) (c), which I am seeking to remove, is too brief. More explanation is required of the circumstances when the information is to be regarded as having been made public, on the one hand, and not made public on the other. I propose the introduction of the concept that information is not to be regarded as inside information if the information is publicly and readily available to members of the public in the United Kingdom. However, information which is only available overseas should be regarded as inside information. It should be made clear that publication by a regulated market in the United Kingdom makes the information public and is not inside information. It should also be made clear that, to be inside information, information should be true and not mere rumour or speculation. I beg to move.

6.30 p.m.

The Earl of Caithness

As my noble friend explained, the amendment seeks to make two changes to the definition of "inside information". Let me take the two elements of the amendment in turn. The first would itself contain two distinct elements: that the information is true and, a different matter, that the information is not rumour or speculation. It is not the case that information has to be true to be capable of being used for insider dealing. What matters is not whether it is true but whether the market will believe it to be true. Thus, it would be possible for there to be insider dealing on the basis of a company's unaudited figures which subsequently had to be revised.

There is no requirement in the directive that information be true, so this is not an area where there can be discretion in our legislation if it were considered desirable.

The prohibitions do not apply to actions based on rumour and speculation on two counts. First, information has to be precise or specific: that excludes mere rumour. Secondly, there can be an offence only if an insider or tippee knows that he has inside information; someone cannot be in that position if all he knows is a rumour. There is therefore no need to include an additional reference to rumour into the clauses.

The second element of the amendment—that is, new subsection (f)—relates to what is in many ways the most difficult single element of the part. It seeks to replace with a narrower definition the provision in the directive that for information to be inside information it must not have been made public, in the hope of providing more certainty than does the directive.

The amendment would, if adopted, render illegal actions which are properly regarded as being quite legitimate. For example, what about the position of a diligent research analyst who makes a recommendation based upon disclosure in an obscure Japanese journal which is not available in the United Kingdom? That is an obvious criticism of the amendment.

More fundamentally—here I put another example to my noble friend—what about the position of an analyst who makes a recommendation based on his combination of expert knowledge of a sector and a research report which was only available at great expense? The information in such a report could hardly be said to be readily available to the public. Is the analyst to be liable to prosecution? That is surely not the intention behind the proposal but it could well be the result.

Those problems arise because the amendment does not make clear when information is readily available to the public, nor what is meant by members of the public: all the public, actual or potential investors or a narrower section of the public and, if so, what?

The amendment includes a single example of when information is to be deemed to be made public: when it has been disclosed in accordance with the requirements of the relevant market on which the securities are traded and the trading takes place after the information has been published in accordance with its rules. That example does not take matters any further forward. It is inconceivable that information which has been disclosed in that way would not be considered to have been made public.

Those comments help explain why the Government have not provided in the Bill an explicit definition of when information has or has not been made public. Any attempt to do so would serve either to address situations where there can be no real doubt that information has been made public or would impinge upon legitimate activities of analysts and the like.

There is a third possibility. The publication will be defined in a narrower way, perhaps in terms of it being available to only some but not all potential investors in a security. However, that would run the risk of undermining completely the effect of insider dealing legislation because it would allow those with access to the information to deal to the disadvantage of those who are not in such a privileged position.

I have given my noble friend a full explanation because he has put his finger on an important point. I thought it only right to explain why the Government have drafted the Bill in the way that they have.

Lord Mottistone

I am grateful to my noble friend for that full explanation which I am sure will be read with great care by the people concerned. He made a point about an analyst, which I hesitated to do. I was talking to a friend in the City, independently of the CBI, on that point. The points that my noble friend said the Bill, unamended, would protect with regard to an analyst who has special knowledge were the ones that my friend in the City thought that it did not cover. However, neither did he believe that the CBI's proposed amendments did so. It is a tricky area. I am grateful to my noble friend for dealing with it so fully. If I return to it, it will be because we have found a loophole which we hope to close at the next stage. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 31 not moved.]

Clause 33 agreed to.

Clause 34 ["Insiders" and "Tippees"]:

Lord Windlesham moved Amendment No. 32:

Page 35, line 23, leave out ("a tippee") and insert ("as one who received or obtained it directly or indirectly from an insider").

The noble Lord said: On Second Reading the expression "tippee" contained in Clause 34 found little favour. Indeed, it attracted some ridicule. It was pointed out that the word was unknown to the statute book; that it did not appear in the European Community draft directive co-ordinating regulations on insider trading which are implemented by the Bill; and that it was unnecessary anyway since a tippee was no more than a person who received or obtained information from an insider.

My pleasure in seeing my noble friend Lord Caithness at the Dispatch Box speaking for the Government on a Criminal Justice Bill which he has done in the past when he was at the Home Office is, I must confess, mitigating to some extent the absence of my noble friend Lord Ferrers. In reply to the debate on Second Reading my noble friend Lord Ferrers was candid enough to reveal that he too had originally thought the word "tippee" to be "a perfectly awful word". He had questioned whether it was a good or suitable name. He had been given some justifications by officials, but they did not seem to be compelling justifications. He did not say whether he had been persuaded by those arguments.

My noble friend undertook to take those anxieties into account before the next stage, and those Members of the Committee who took part in the Second Reading debate and who are here today will be waiting with keen anticipation to see whether that anxiety has been transmitted through the Whitehall network from the Home Office to the Treasury.

The word "tippee" has attracted a clutch of amendments from different parts of the Chamber, as my noble friend Lord Caithness will have seen. My noble friend Lord Renton drafted the amendment which stands in his name and in mine. He asked me to apologise on his behalf for his inability to be here tonight to move it himself.

Each of the amendments provides an alternative form of wording which would enable the Government to dispense with the word "tippee", described, we must not forget, by no less a figure than my noble friend Lord Ferrers as "a perfectly awful word". I should be happy to accept any of the other formulations if the Government were prepared to dispense with the word "tippee". I beg to move.

Lord Brightman

Perhaps I may speak to Amendment No. 33 which is grouped with Amendment No. 32. My suggestion is to substitute "secondary insider" for "tippee". It is short, it is self-explanatory, and it has the virtue of being English. I do not mind what word or expression is substituted for "tippee" so long as "tippee" is shot stone dead. There is no such word. It is not English and, in my respectful submission, it would be undignified to send to the other place a Bill containing such a monstrosity.

Lord Wigoder

Now that we have reached the real crux of the Bill, I wish to add some comments in speaking to Amendment No. 34 and also Amendments Nos. 38, 40 and 42 which are part of this group. Amendment No. 40, which I have tabled, deals with Clause 34(3), the definition clause. At the moment, it reads: A person has information as a tippee if he has received or obtained it from a person who is an insider; or whose direct or indirect source of information was an insider". In order to remove any doubt, I propose that the subsection should begin with the words, "For the purposes of this Part", or "For the purposes of this Act", whichever is more appropriate, in order to make it clear that whatever word we use has a definition which only relates to the Act.

We are then left with a definition subsection which is perfectly clear. I tried to explain to the noble Earl, Lord Ferrers—it caused him, I am afraid, to be not very well when I tried to do so just after Second Reading—that provided there is a clear definition subsection, it does not matter what word we use. Instead of "tippee", we could use the word "elephant", "umbrella", or whatever. Provided we say, "For the purposes of this part, this is what the word means", the actual word is not of great importance.

The reason I propose the word "recipient" instead of "tippee" throughout is threefold. First, whatever the word used it ought to be in the English language. That eliminates "tippee" straightaway. Secondly, it ought to be a word or phrase which is not entirely inelegant. That certainly eliminates "tippee" again. I am not sure that one would call the phrase "secondary insider" entirely elegant, although I appreciate that it is clear in concept.

The third consideration I suggest is that the word we choose should have some conceptual relationship to its meaning. That is why the words "elephant" or "umbrella" would be highly unsuitable, whereas the words "secondary insider" or "recipient" are totally suitable because they relate to the meaning being given to the words by the definition subsection.

In those circumstances I venture to suggest that provided the definition subsection is clear and it is made plain that the word we are defining in that definition is limited to this Bill and cannot be used in construing any other statute, then all we need is a suitable word to replace "tippee". I suggest that either "secondary insider" or "recipient" qualifies for that privilege.

Baroness Mallalieu

From these Benches, we are in agreement with all Members of the Committee who have spoken in saying that "tippee" has got to go. I hope that under the great pressure of numbers and the weight of argument, the noble Earl will see the force of that. From these Benches, we respectfully support the suggestion that the noble Lord, Lord Wigoder, has just made. Surely the shorter English word must be the better and the meaning is then clear.

The Earl of Caithness

It may be that I am the only defender of "tippee" left in the Chamber. I was rather surprised by what the noble Lord, Lord Wigoder, said about "tippee". Perhaps I may refer him to the Oxford English Dictionary which defines "tippee" as, one who receives inside information about a company or business and uses it to trade profitably in stocks and shares". That is an elegant turn of phrase to define a word that has a certain ring to it. I do not hold the same objection as my noble friend Lord Ferrers to it. Indeed, the word is not new. Its first recorded use was in 1897, although it was then used to describe the recipient of a gratuity. Its first use in the context of insider dealing dates from 1961. Nor is the word one which is used infrequently. If the noble and learned Lord, Lord Brightman, has a spare moment this weekend, perhaps I may ask him to peruse Gower's Principles of Modern Company Law, or perhaps Palmer's Company Law. I refer the noble Lord, Lord Wigoder, to Gore-Brown on Companies; and my noble friend Lord Windlesham to Boyle and Bird's Company Law; Mayson Frence and Ryan on Company Law; and Pennington's Company Law. All of them have this delightful little word readily available.

The word is also used in books which relate specifically to insider dealing such as Hopt and Wymeersch's European Insider Dealing; Hannigan's Insider Dealing; Ashe and Counsel's Insider Trading; and Rider's Insider Trading. That list is by no means exhaustive. I should have thought it was a word that all Members of the Committee would welcome in the Bill. It is a word of long standing and aptly describes what we seek to describe.

However, the weight of objection rests heavily on my shoulders. The noble and learned Lord, Lord Brightman, did not like it at all; the noble Baroness, Lady Mallalieu, said that the word "has got to go." If "tippee" has got to go, I think we had better think it out again and come back to it.

Lord Windlesham

It is for me to thank the noble Earl for his good-natured reply. Clearly, an enormous amount of work has been done in the Treasury on the origins and provenance of the word "tippee", which is still inelegant. We are grateful for the reply. The noble Earl has taken the mood of the Committee. There are various ways of redrafting the clause: the government draftsman needs to look at it. Perhaps one of the two alternative words could be inserted or maybe there is a third. Or we could use the device of the noble Lord, Lord Renton, of simply omitting it altogether.

However, if the noble Earl, in the light of the reply he gave us, can see what he is able to do and come back at Report stage, I shall have great pleasure in withdrawing the amendment of the noble Lord, Lord Renton, and myself.

Amendment, by leave, withdrawn.

6.45 p.m.

[Amendment No. 33 not moved.]

Lord Wigoder had given notice of his intention to move Amendment No. 34:

Page 35, line 23, leave out ("tippee") and insert ("recipient").

The noble Lord said: I do not wish to move the amendment. I merely wish to say that most ordinary people, asked what they thought a "tippee" was, would volunteer that it was the supervisor of a rubbish dump.

[Amendment No. 34 not moved.]

Lord Mottistone moved Amendment No. 35:

Page 35, line 25, leave out ("director, employee or shareholder") and insert ("shareholder, director, servant or employee, or being engaged under a contract for services").

The noble Lord said: I have no views about "tippee"; my amendment deals with a different subject. I am speaking also to Amendment No. 36. These are simple little amendments to improve the Bill and make it clear that self-employed persons and those who acquire inside information by virtue of business contact or relationship are included in the definition of an insider. I beg to move.

The Earl of Caithness

The short answer to my noble friend is: yes, they are included. Perhaps I should expand on that. Someone engaged by an issuer under a contract for services will have access to information because of his employment, profession, office or duties. Someone who has access to information by virtue of a business relationship with a company will have it because of his employment by another company. The same would be true of someone who was undertaking business negotiations with a company or working for it under contract. The same is true of the other examples addressed in the amendments. I hope that my noble friend can rest assured of that.

Lord Mottistone

I must confess that I suggested that that might be so, but I was not given chapter and verse as to why what my noble friend said was covered by the Bill. I do not think he was either. So, grateful though I am to him, I shall have to look further at the matter and I may come back at another stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 36 not moved.]

The Deputy Chairman of Committees (Baroness Cox)

I should point out that if Amendment No. 37 is agreed to, I cannot call Amendments Nos. 38 to 40.

[Amendment No. 37 not moved.]

[Amendments Nos. 38 to 40 not moved.]

Clause 34 agreed to.

Clause 35 [Dealing in securities]:

[Amendments Nos. 41 and 42 not moved.]

Lord Mottistone moved Amendment No. 43:

Page 36, line 10, after ("the") insert ("inside").

The noble Lord said: In speaking to Amendment No. 43 I speak also to Amendments Nos. 44, 45, 47, 48, 50, 54 and 55. The purpose of these amendments is to make sure that where the Bill means specifically to refer to inside information and not to information in a general sense it should say so; except, of course, in Clause 33 where "inside information" has been defined in the first place. It seems to me that this is a sensible improvement because "information" has a wider sense than just this specific one in other parts of the Bill, and indeed in other parts of this part. I beg to move.

The Earl of Caithness

Before answering my noble friend it might be worth pointing out for the benefit of the Committee that in his Amendment No. 45, to which he is also speaking, I believe the word "information" should have read "inside".

Lord Mottistone

That is quite right. I am afraid it is a typing error. It was not there in the original.

The Earl of Caithness

I am grateful to my noble friend for explaining the raison d'être behind these amendments, which seek to improve the clarity of the legislation. It is not apparent that these amendments are necessary. For example, the amendments seek to change two references to "information" in Clause 35(5) by references to inside information. But it is already clear at the beginning of the subsection, at page 35 line 35, that the information being referred to is inside information, and the same argument applies to Clause 36. I agree with my noble friend that it would be a different matter if there were ambiguity about the fact that the information being referred to is inside information, but I am advised that there is not. The amendments, therefore, would only seem to lengthen the Bill without improving its clarity.

Lord Mottistone

I thank my noble friend for his explanation. We shall look at it most carefully and might come back at another stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 44 not moved]

Clause 35 agreed to.

Clause 36 [Disclosing inside information, etc]:

[Amendment No. 45 not moved]

Lord Mottistone moved Amendment No. 46:

Page 36, line 17, after ("profession") insert (", agency or the performance of his contract of services").

The noble Lord said: This is a small amendment to make the clause more comprehensible and I think improve its clarity. I beg to move.

The Earl of Caithness

My answer to my noble friend will be similar to the one I gave for Amendments 35 and 36. Someone working as an agent for another person, or who is working under a contract for services, will be performing a duty, and accordingly will not be covered by the prohibition on disclosure as it is already drafted. I hope that that will satisfy my noble friend.

Lord Mottistone

Yes, I think it does. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 47 and 48 not moved]

Clause 36 agreed to.

Clause 37 [Defences]:

Lord Mottistone moved Amendment No. 49:

Page 36, line 30, after ("if") insert ("(a)").

The noble Lord said: This amendment, with which I shall also be speaking to Amendment No. 51, provides a necessary protection to persons who have to effect a dealing in securities in order to complete or fulfil an outstanding contractual obligation. It also establishes a defence similar to that contained in the 1985 Act, to which my noble friend on the Front Bench referred, at Section 3(2). I beg to move.

The Earl of Caithness

The amendment moved by my noble friend and its consequential Amendment No. 51 seek to import into the part provisions in the existing insider dealing legislation under which there is no offence where someone acts to facilitate the carrying out or completion of the transaction. In our existing law this provision only applies in limited circumstances such as where someone connected with a company only has price sensitive information, which relates to information about a transaction involving two companies or a company and the securities of another company.

The amendment does not carry forward any such limitation and it would therefore legitimise dealing by an insider who has inside information and uses it to make a profit, because the inside information would undoubtedly relate to his transaction and the dealing would clearly facilitate its completion. Although this cannot be the intention behind the amendment it is hard, as I am sure my noble friend will agree, to imagine a more damaging amendment.

It is perhaps appropriate to say a few words on why the provision in our existing law has not been carried forward. In some respects it is not wide enough. For example, it is not apparent that it would protect the position of a person who took a very large number of a company's shares and sought to hedge the position by dealing in a separate transaction in related futures. That would not involve any mischief, but it is not clear that the provision in our current law is wide enough. Accordingly, rather than carry forward the provision in our existing legislation, this Bill contains the exemption in Schedule 2 for legitimate use of market information.

Lord Mottistone

I thank my noble friend for that explanation. I shall read it with great care. At first sight it appears to me to be convincing and I shall not need to carry it any further. At this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 50 and 51 not moved]

Lord Mottistone moved Amendment No. 52:

Page 36, line 34, leave out ("if").

The noble Lord said: With Amendment No. 52 I shall speak also to Amendment No. 53. In subsection (3) of Clause 37 the word "if" appears at the end of the lead in to paragraphs (a) and (b). It does not appear after (a), but there is an "if" after (b). It seems to me that the word "if" should appear after (a), as it does after (b), in order to match the English in paragraph (a) to that of paragraph (b). That is the point of these two amendments. I beg to move.

The Earl of Caithness

I agree with my noble friend that the clause as drafted looks odd, but I have to say to him that it is correctly drafted. There is no mistake. The "if" in line 34 relates to both paragraphs (a) and (b). Although there is another "if" in (b) that is part of a sub-phrase. In other words, if we accept this amendment a second "if" would have to be inserted in paragraph (b) so that it would read, a person lacks the necessary intent if he has such an expectation, if he does not intend". However, I think my noble friend is on to a point about drafting. I hope he will permit me to take this away to see whether it can be improved.

Lord Mottistone

I am most grateful to my noble friend for that reply. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 53 to 55 not moved.]

On Question, Whether Clause 37 shall stand part of the Bill?

7 p.m.

Lord Mottistone

This is rather a longer point. As the Bill stands at present, my advisers and I believe that much clearer explanation and guidance are required, either in Clause 37 or perhaps in Schedule 2, as to the circumstances in which an individual is and is not to be guilty of the offences set out in Clauses 35 and 36 and as to the defences available to an individual as set out in Clause 37.

First, clearer explanation and guidance are required as to when an individual is to be regarded as taking advantage or not taking advantage, as the case may be, of inside information and when an individual is to be considered as lacking or not lacking, as the case may be, the necessary intent. Secondly, greater clarity and explanation are required as to what information does and does not constitute "inside information" for the purposes of Clause 33. Thirdly, the meaning and effect of the exemptions for, dealers whose information is market information". referred to in Schedule 2 and incorporated in Clause 37 by subsection (5) is also far from clear.

In order to deal with this I tabled amendments to Clause 37 to introduce us to examples set out in Schedule 2. Although there are cases of legislation which include examples in schedules, I was advised that, because the examples that I put forward were not precise enough, they could not be accepted for inclusion as an amendment. Hence my speech now in protest, as it were, against Clause 37.

If for the record I could give some illustration of the kind of examples that I believe should not be regarded as constituting an offence for the purpose of this part of the Bill, they would be as follows. First, the exemption for market information should include individuals engaged in or concerned with underwriting or agreeing to underwrite issues of securities. Secondly, there should be legitimate communications between directors of a company and its shareholders, including institutional shareholders and investors, and legitimate communications between directors and investment analysts and institutional fund managers. Thirdly, employees of a bank or finance company involved in a debt-for-equity swap in the course of a rescue operation may be held liable as their company will be acquiring shares while also holding inside information about the company to be rescued. Fourthly, information gathered about a take-over target should not be regarded as inside information. Fifthly, an individual's knowledge of his company's intention to launch a take-over and the company's dealings in the target company's shares prior to launch of a take-over should not he regarded as insider dealing. Sixthly, the position of solicitors, trustees, liquidators and insolvency practitioners requires attention. They could well be guilty of insider dealing while carrying out their legitimate and lawful duties and responsibilities.

Those are just six of very many situations in which individuals might fall foul of the provisions in the Bill as it stands and be guilty of the offences of insider dealing without there being an appropriate or valid defence or exemption available to them. I therefore submit that the Bill should be amended to incorporate examples of the meanings of the main terms, phrases and concepts used in the Bill for clarity, certainty and the innocent person's peace of mind. It is not sufficient for the Treasury to offer guidelines, as I believe it has, particularly when breaches of the criminal law are involved and a person's career and livelihood are at stake.

The Bill must be amended and I should be grateful if my noble friend the Minister would consider whether examples along the lines of those that I have suggested could be inserted in either a new schedule or perhaps in a third part of Schedule 2, which seems to be a possible suitable repository for these examples. I beg to move.

The Earl of Caithness

I am grateful to my noble friend for spelling out so clearly the reason why he does not want Clause 37 to stand part of the Bill. In implementing the directive the Government have gone to considerable lengths to set out in our legislation the circumstances in which someone does not take advantage of inside information. Part IV provides a general defence where someone does not intend to make a profit or avoid a loss and specific defences relating to market making, price stabilisation and circumstances in which someone possesses market information.

I must tell my noble friend that it is not practical to incorporate into the legislation particular examples of behaviour which is and is not prohibited to deal with every possible circumstance. No such attempt to do so could ever be comprehensive. There are simply too many different types of information and courses of conduct for that to be possible. Providing illustrative examples in a Bill would be unprecedented and with good reason. Either the examples provided would have to fall clearly on one side or the other of the dividing line between what is and is not prohibited, in which case they would not serve any useful purpose, or they would confuse the boundary between what is and what is not prohibited.

Nor is an approach which seeks to illustrate the difference between what is and what is not prohibited by way of examples necessary. The proposals being discussed today are in many ways similar to our existing legislation. That has worked without including examples, and I believe that the Committee will wish the new legislation to continue in the same mode.

However, the Government have said that in one area where they do not believe it is possible to provide a detailed definition in the legislation as to when information has and has not been made public, without making illegal perfectly legitimate activities or risking creating loopholes which could be readily exploited, they are considering issuing guidance, as my noble friend said, about how they believe the term "made public" is to be properly interpreted.

That is a different matter from incorporating definitive examples in to legislation which, as I have said, would either be of little practical use or would cast doubt on the definitive provisions which they seek to illustrate. However, guidance should help to soothe concerns about the effects of the legislation in practice.

I know that my noble friend will agree that insider dealing will always be a difficult area in which to legislate. The Government have said that they will listen to representations very carefully and make amendments to improve clarity where necessary. I shall write to my noble friend about the detailed points that he has raised in his example, but it would be totally wrong and inappropriate to insert practical examples into the Bill.

Lord Mottistone

I thank my noble friend for his full reply and for his promise to write to me about the examples that I produced. I fully understand the points that he makes.

Clause 37 agreed to.

Schedule 2 [Professional Intermediaries and Exemptions]:

Lord Mottistone moved Amendment No. 56:

Page 46, line 10, after ("employed") insert ("or engaged").

The noble Lord said: In moving this amendment I shall speak also to Amendments Nos. 57 and 58. These are purely drafting improvements and I hope that my noble friend will see them in the same light. I beg to move.

The Earl of Caithness

The market-maker defence in Part IV of the Bill carries forward the defence in our existing insider dealing legislation. This refers only to someone whose business is being a market maker or who is employed by a market maker. The Government have received no representations which suggest that there is a need to extend the defence to persons who are engaged but not employed by market makers. Nor have there been any representations from market makers that the provisions in the schedule need extending in this respect. Although I listened carefully to my noble friend, I did not feel that he made a convincing case and I do not think that adding the words he wants would in any way clarify what we are seeking to achieve.

Lord Mottistone

I thank my noble friend and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 57 and 58 not moved.]

Lord Mottistone moved Amendment No. 59:

Page 47, line 13, at end insert: ("(4) It is not to be regarded as unreasonable for a person to deal in securities having market information at the time of dealing if the information is about one or more of the following

1. (a) his own intentions;
2. (b) the intentions of others in relation to transactions in which he and those others are jointly concerned;
3. (c) the intentions of someone or some body under whose instructions he is acting.").

The noble Lord said: I propose this amendment as a necessary protection for, for example, the director of a company in connection with a takeover transaction that his company is undertaking or contemplating, and to other persons and agents acting on behalf of a company in such a situation. It seems to me that at this stage there is room for this addition to Schedule 2. I beg to move.

The Earl of Caithness

My noble friend's amendment is an interesting attempt to specify circumstances in which it is reasonable for someone to deal when he is in possession of inside information. I have to say to him that the amendment illustrates the difficulties associated with doing this, as the following example shows. The amendment would make it possible for someone acting for a person who was making a large purchase of shares to deal on his own behalf in advance of the purchase and then sell his holding at a profit after the market had reacted to the major transaction. In other words, the consequence of my noble friend's amendment would be to legalise "front running". The directive requires such conduct to be prohibited even if, for some reason, we wished it to be allowed—but that is not the case.

Lord Mottistone

It seems to me that I was asking for something which was terribly wicked. I am grateful to my noble friend for what he said, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2 agreed to.

Clause 38 agreed to.

Clause 39 [Territorial scope of offence of insider dealing]:

7.15 p.m.

Lord Mottistone moved Amendment No. 60:

Page 37, line 24, at end insert ("or if he was not within the United Kingdom at such time he was nevertheless at such time regularly or ordinarily resident in the United Kingdom").

The noble Lord said: In speaking to Amendment No. 60, I should like to speak also to Amendments Nos. 61 and 62. I am proposing these amendments so that individuals who have a connection with the United Kingdom through residence cannot escape liability by carrying out their insider dealing on a foreign stock exchange through a foreign professional intermediary. The shares of many large companies are quoted not just on the London Stock Exchange but on a number of stock exchanges around the world. Under the wording of the present clause individuals are guilty only if they carry out their insider dealing when in the United Kingdom or through a professional United Kingdom intermediary. This will leave considerable scope for abuse, which my proposed amendments seek to rectify. I beg to move.

The Earl of Caithness

The approach taken by Amendment No. 60 and the other amendments to which my noble friend talked, Nos. 61 and 62, claiming jurisdiction over an offence on the basis that a person is normally resident in the United Kingdom, is inconsistent with the approach which the United Kingdom takes to jurisdiction over offences both generally and elsewhere in this Bill.

It was made clear in the Second Reading debate that the approach the Government proposed to take in relation to jurisdiction over insider dealing offences is a territorial one. This accords with the approach we have agreed with other members of the Community in negotiating the directive which Part IV implements. The proposals in the Bill provide a framework for preventing insider dealing in the United Kingdom. So far as acquiring and disposing of securities is concerned, for example, they will catch insiders in the United Kingdom who deal on markets which operate here or through professional intermediaries who are based here.

This territorial approach to jurisdiction over offences also underlies Part I of the Bill, which amends jurisdiction over such criminal offences as theft, false accounting, blackmail and forgery. It reflects the approach which is taken to jurisdiction over offences in this country. For there to be an offence in this country you have to do something wrong here.

In her speech on Second Reading, the noble Baroness, Lady Mallalieu, wrongly suggested that Part I of the Bill would lead United Kingdom law to apply to Mexican fraudsmen for frauds committed wholly in Mexico. The amendment appears to be suggesting that, so far as insider dealing is concerned, we should adopt such an approach. The amendments would make it an offence under United Kingdom law for a Frenchman in France with inside information about a company listed only on the Paris Bourse to deal in a company's shares through a French stockbroker simply because he worked in London and was thus normally resident in the United Kingdom. I am sure that my noble friend would agree on reflection that that cannot be right. It must be for French law to address such wrongdoing, as it is obliged to do under the directive. Indeed, if the amendment were adopted, it might well turn out to be a unique form of jurisdictional claim. Although some countries make jurisdictional claims on the basis of nationality our researches have not revealed any examples of criminal offences which are based on residence.

That was a long answer to my noble friend but it was an important point to get across. I should like at this point to thank my noble friend for tabling all his amendments and for probing this very important area. Perhaps I may say to him that, if he wishes to discuss any matter between now and a later stage of the Bill, my door is always open to him.

Lord Mottistone

I thank my noble friend particularly for those closing remarks. As regards what he has said here, for the first time I am not entirely sure that it covers the ground. The modern world is very mobile. People get about terribly quickly and communications are frightfully good. I think we may he forced to consider the position of somebody who lives here and periodically goes abroad—several of my own relations have jobs which allow them to live with their families here and then spend a great deal of time in Europe, America or elsewhere. There is so much mobility now that I am not sure that the area which I have touched upon in this last set of amendments does not need further study, but I shall he very interested to hear what my advisers tell me when they read what my noble friend has said. I very much take the point about my noble friend's open door, and I may come knocking on it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 61 and 62 not moved.]

Clause 39 agreed to.

On Question, Whether Clause 40 shall stand part of the Bill?

Baroness Mallalieu

I oppose the Question, That Clause 40 stand part of the Bill, really because I seek enlightenment as to the use to which it is intended to put Clause 40. Clause 35, as your Lordships have seen, prohibits insider dealing in securities. Clause 36 prohibits the disclosing of inside information and Clause 40 in effect gives immunity in relation to either of those activities to those acting on behalf of the Bank of England and other public sector bodies. It would be helpful to know from the Minister why officials of the Bank of England and other public sector bodies are exempt from those charges if they are using information to manage public debt.

It would seem to me that it could mean that a local authority officer could with impunity deal in shares in a company which had won a local authority contract to decrease the council tax or a Bank of England official could sell shares in order to reduce the PSBR. I wonder whether the noble Earl will tell us whether this position is included in the Bill to cover some specific circumstances and in particular whether he can give us an example of circumstances in which someone in this position might be in breach of Clauses 35 or 36 in circumstances where he should have immunity from prosecution. I should be grateful for his help.

Lord Harris of Greenwich

So would I. I raised this matter during the Second Reading debate on the Bill. Although the noble Earl, who responded for the Government, dealt, as always, very thoroughly with all the points which had been raised during our debate I am not sure that he touched on this particular issue.

Like the noble Baroness, I find this public sector immunity rather strange. This Government, in so far as they have any doctrinaire obsession, tend to be in favour of the private sector as against the public sector. Curiously, here for some mysterious reason the roles are reversed. Some of the information is very sensitive. To take only one example, the publication of the foreign exchange reserves could have the most profound effect both on the gilts market and on the stock market. Some of the other information in the public sector can, likewise, have profound implications. Thus, the question is: why is there public sector immunity? We should be very interested to hear the answer.

The Earl of Caithness

I hope that I can set the minds of the noble Baroness, Lady Mallalieu, and the noble Lord, Lord Harris of Greenwich, at rest. The clause sets out certain limits on the prohibitions laid down in this part of the Bill. It removes from the scope of the legislation the activities of government in managing the economy. The provision reflects the fact that the Government necessarily possess information which is highly price sensitive and which cannot be made public. Examples of such information include security matters, knowledge of the Government's policy with respect to interest rates or the Government's knowledge of other governments' intentions. Without the provision it would be impossible for the Government to discharge their responsibilities, and therefore it is essential.

However, the exemption is limited. It does not apply to private dealing as opposed to public activity. Nor does it apply to the activities of the Government undertaken other than for the purposes of economic management. It does not apply, therefore, to government share sales.

The exemption reflects an exception in the directive which all member states recognised was necessary for the purposes of managing the economy. I hope that the noble Baroness is satisfied.

Baroness Mallalieu

I am enlightened and satisfied. I thank the noble Earl.

On Question, Clause 40 agreed to.

Remaining clauses and schedules agreed to.

House resumed: Bill reported with amendments.