Economic Crime and Corporate Transparency Bill
Tuesday 25th April 2023
(1 year ago)
Grand CommitteeEconomic Crime and Corporate Transparency Act 2023 View all Economic Crime and Corporate Transparency Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 96-V Fifth marshalled list for Grand Committee - (25 Apr 2023)
Lord Sharpe of Epsom
Member’s explanatory statement
This amendment and the amendment in the name of Lord Sharpe of Epsom at page 207, line 11 amend inserted section 131ZB of the Proceeds of Crime Act 2002 (realisation of confiscated cryptoassets) to provide that only the sheriff may make an order under that section requiring confiscated cryptoassets to be realised.
The Parliamentary Under-Secretary of State, Home Office (Lord Sharpe of Epsom) (Con)
My Lords, we now move to the Home Office clauses of the Bill and the amendments associated with them. I reiterate the thanks previously expressed by my noble friend the Minister for Investment to everyone who has participated in the scrutiny of the Bill to date, not least noble Lords who either met us to discuss the Bill or spoke during the first few days in Committee. I also reiterate my thanks to my noble friend Lord Johnson of Lainston for shepherding the first three parts of the Bill through Committee. They comprise sizeable and vital measures to make our country, businesses and citizens safer.
The amendments in this group concern the confiscation and recovery of crypto assets. Amendments 77M, 77N, 77P to 77Y, 77YA to 77YF, 78A and 78B—there are a lot of them—make a series of small and technical changes to measures in the Bill to ensure that it works as effectively as possible. They include amendments to ensure that the measures will function effectively in the context of the Scottish courts and will mirror existing asset recovery powers so that immigration officers can utilise the crypto-asset forfeiture powers. These amendments provide greater clarity to existing measures in the Bill and remain wholly in line with the original policy’s intent. I hope that noble Lords will support these amendments and I beg to move.
Lord Fox (LD)
My Lords, I will speak to Amendment 78 in my name and also more generally. I thank the team sitting behind the Minister who met me last week to try to see through this. I was somewhat reassured by what they had to say, but a couple of points hinge around the words “UK-connected” in describing crypto assets.
What we know about crypto is that it is connected nowhere. A number of crypto concerns are now administered under UK financial administration, but a whole lot more are not. Clearly, if the authorities were able to seize a crypto wallet, that would perhaps offer a greater opportunity for confiscating assets than having to go through the courts with these crypto-asset services. This may have limited application in the real world, when we get there. I do not think it is a bad thing and it is not a problem, but I do not think we should raise our expectations particularly high when it comes to being able to confiscate these sorts of assets.
To some extent, that is what sits behind my modest amendment, which seeks to require the Secretary of State to review the adequacy of the definitions of crypto assets and, by definition, how they can be confiscated under the Bill. The Secretary of State would have to lay a report before Parliament within 18 months. Because everything is changing so quickly in this sphere, it does not seem unreasonable to ask the Government to come back to Parliament and tell us how it is going. It is quite clear that new crypto assets are popping up every day. Who would have thought of NFTs as being crypto assets at all even a couple of years ago? Are they included in this? I assume that they are.
New digital assets will emerge over the next 18 months and beyond and it is sensible for the Government to keep Parliament in touch with what they are trying to do to bring these assets to book when appropriate. We welcome the changes in so far as they go. I do not think we should get too excited about them, but we should ask that the Government and the Secretary of State keep Parliament in touch with the changes that are going on all the time.
Lord Ponsonby of Shulbrede (Lab)
My Lords, this is a slightly unusual debate, in that we have a lot of very specific amendments tabled by the Government. The noble Lord, Lord Fox, has opened the debate by talking about how fluid the situation is when dealing with cryptocurrency and crypto assets as a whole, and other amendments in subsequent groups will deal with particular aspects.
Just by chance, yesterday evening I bumped into a former magistrate colleague of mine, John Glen, previously the Economic Secretary to the Treasury, who told me about a speech that he gave on 4 April last year in which he set out the Government’s approach to crypto assets and the whole issue of trying to manage that approach in this fast-evolving world. I agree with the first point made by the noble Lord, Lord Fox. We all acknowledge that this is fast-moving and the Government are doing their best to position themselves to be at the centre of developments and well-connected worldwide, as the understanding of the practical input and use of crypto assets is properly assessed, while also trying to bear down on the criminal activity that is undoubtedly prevalent within these assets.
Having read John Glen’s speech, in which he outlined the Government’s detailed plan, I will just mention some of the key points that he made, and perhaps the Minister can then say something about the Government’s approach to dealing with this fluid situation. John Glen’s first point was about stablecoins, which are a way of trying to harness technologies such as blockchain for the benefit of government by, for example, tying the pound to some form of cryptocurrency. That was being looked into and it would be interesting to know how that is going.
Another element of the plan outlined in John Glen’s speech was to ask the Law Commission to look at decentralised autonomous organisations, which are basically the groups that will run these crypto assets and the like. If there is any progress report on the work of that task force, that would be very interesting.
John Glen also talked about a sandbox, to be run by the Bank of England and the FCA, which will look at ways to manage the evolutionary process of regulation. I absolutely understand that is a difficult thing to do. Finally, he announced with some fanfare that the Royal Mint will create its own non-fungible token, or NFT. I do not know how that is going, but I would be interested to hear what the Minister has to say about that—
Lord Ponsonby of Shulbrede (Lab)
Well, it is indeed a fast-moving world.
We support the amendments in this group, but I would be interested to hear if the Minister could say something about the wider strategy in trying to make sure that the British Government are part of the development of these technologies, while bearing down on sources of fraud and money laundering.
Baroness Altmann (Con)
My Lords, I rise to express my concerns. It is not that I do not support the amendments or the comments made by other noble Lords, but calling these things crypto assets in an economic crime Bill, when we know that their origin seems to have been organised crime finding a way to money launder its ill-gotten rewards I find deeply troubling. A number of leading bankers, with whom I agree, have suggested that these things have no value. I urge the Government to be very alert to the potential risk of trying to make cryptocurrency—I am not talking about blockchain technology—and these so-called assets, which actually do not exist, appear to be reasonable things for British citizens to put their money into.
Lord Agnew of Oulton (Con)
My Lords, I support the noble Lord, Lord Fox, in his amendment to make sure we have a review point quite soon after this Bill. I acknowledge my noble friend Lady Altmann’s point about the strange context to put this in, but given that we have this Bill on the table, it would be very easy to put in a reference point because the climate for this asset is moving enormously fast. Between November 2021 and November 2022, the value of bitcoin fell by $2 trillion, which is not far short of the UK’s total annual GDP, although it has recovered a little since then. This is a vast sum of theoretical money that is swilling around, and we do not yet really understand how to manage it, so I strongly support the noble Lord, Lord Fox.
Lord Sharpe of Epsom (Con)
My Lords, I thank noble Lords for the points that have been raised in this debate so far, and I specifically thank the noble Lord, Lord Fox, for tabling Amendment 78. I also thank him for his kind words about the detailed technical briefing that he received from officials on these provisions, and I am glad it proved valuable.
The proposed clause seeks to impose a duty on the Secretary of State to lay before Parliament a report reviewing the definitions of crypto assets contained in the Bill within 18 months of its passage. We believe this is unnecessary. The definitions in the Bill are in line with existing definitions in the Proceeds of Crime Act 2002 and the Terrorism Act 2000 and follow the approach recommended by the joint Treasury, Financial Conduct Authority and Bank of England Cryptoassets Taskforce: Final Report in 2018—I imagine that goes some way towards answering the questions asked by the noble Lord, Lord Ponsonby.
As to the issue of UK-connected firms raised by the noble Lord, Lord Fox, the provisions enable the seizure of crypto assets from wallets and firms. They were developed with partners and were based on operational insights and are valuable and necessary. These definitions will be reviewed whenever and as often as needed. There is general agreement that the world is moving at an incredibly fast pace, and therefore there is a provision in the Bill for the Secretary of State to amend the definitions of crypto assets in future through regulations which will be subject to debate in Parliament.
To go into a little more detail on future-proofing, the specific delegated powers allow the Secretary of State to amend definitions associated with crypto assets as part of these new crypto-asset confiscation and civil recovery regimes. The definitions in the confiscation and civil recovery provisions reflect those already in POCA, TACT and other linked legislation. Home Office officials will be working closely with law enforcement agencies to monitor the effectiveness of the crypto-asset powers post-implementation and, if necessary, the Government would look to update crypto-asset definitions. Noble Lords made very good points about the pace of change, and this legislation recognises that. The regulation- making power is intended for the express purpose of being able to respond dynamically to changes in technology or criminal behaviour rather than at arbitrary points in time.
The noble Lord, Lord Ponsonby, asked about stable- coins and decentralised finance. He mentioned emerging technologies in the crypto-asset ecosystem. This Bill caters for criminal abuse of these as far as is practically possible. For example, stablecoins are captured by our definition of crypto assets. However, the definitions have been developed in consultation with industry so as not to stifle legitimate innovation.
Having mentioned “legitimate innovation”, I heard what my noble friend Lady Altmann had to say on the subject and she made some very good points.
I hope this provides reassurance that the definitions of crypto assets will remain subject to review with the ability to be updated in a responsive way. The provision to amend the definitions of crypto assets would be used appropriately and afford Parliament the opportunity for scrutiny, so I ask the noble Lord not to move his amendment.
Lord Sharpe of Epsom
Member’s explanatory statement
See the amendment in the name of Lord Sharpe of Epsom at page 206, line 39.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Sharpe of Epsom at page 206, line 39.
Member’s explanatory statement
This amendment and the amendments in the name of Lord Sharpe of Epsom at page 208, line 47, page 209, line 2 and page 209, line 8 amend inserted section 131AA of the Proceeds of Crime Act 2002 (destruction of seized cryptoassets) to provide that only the sheriff may make an order under that section.
Member’s explanatory statement
See the amendment in the name of Lord Sharpe of Epsom at page 208, line 30.
Member’s explanatory statement
See the amendment in the name of Lord Sharpe of Epsom at page 208, line 30.
Member’s explanatory statement
See the amendment in the name of Lord Sharpe of Epsom at page 208, line 30.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Sharpe of Epsom at page 208, line 30.
Member’s explanatory statement
This amendment and the amendments in the name of Lord Sharpe of Epsom at page 209, line 30, page 209, line 38 and page 210, line 14 are consequential on the amendments in the name of Lord Sharpe of Epsom at page 206, line 39 and page 208, line 30.
“(4) In subsection (2), for “131A” substitute “131ZB(3), 131A(3) or 131AA(2)”Member’s explanatory statement
See the amendment in the name of Lord Sharpe of Epsom at page 209, line 27.
Member’s explanatory statement
See the amendment in the name of Lord Sharpe of Epsom at page 209, line 27.
Member’s explanatory statement
See the amendment in the name of Lord Sharpe of Epsom at page 209, line 27.
Lord Sharpe of Epsom
“RECOVERY OF CRYPTOASSETS: SEARCHES, SEIZURE AND DETENTION”Member’s explanatory statement
This amendment replaces the title of inserted Chapter 3C of Part 5 of the Proceeds of Crime Act 2002.
“RECOVERY OF CRYPTOASSETS: FREEZING ORDERS”Member’s explanatory statement
This amendment replaces the title of inserted Chapter 3D of Part 5 of the Proceeds of Crime Act 2002.
Member’s explanatory statement
This amendment and the amendment in the name of Lord Sharpe of Epsom at page 263, line 36 clarify that references in sections 303Z51 and 303Z17A of the Proceeds of Crime Act 2002 (freezing orders) to a freezing order are to a current freezing order.
Member’s explanatory statement
See the amendment in the name of Lord Sharpe of Epsom at page 245, line 3.
“13A_ In section 453C of the Proceeds of Crime Act 2002 (obstruction offence in relation to immigration officers), in subsection (3), after paragraph (g) insert—“(ga) section 303Z21 (powers to search for cryptoasset-related items) as applied by section 24 of the UK Borders Act 2007 (exercise of civil recovery powers by immigration officers);(gb) section 303Z26 as so applied (powers to seize cryptoasset-related items);(gc) section 303Z27 as so applied (powers to detain cryptoasset-related items);”.”Member’s explanatory statement
This amendment consequentially amends section 453C of the Proceeds of Crime Act 2002 (obstruction offence in relation to immigration officers) to provide that the offence in that section applies in relation to an immigration officer who is acting in exercise of certain cryptoasset-related powers in inserted Chapter 3C of Part 5 of that Act.
“Amendments to the UK Borders Act 2007
16_(1) Section 24 of the UK Borders Act 2007 (exercise of civil recovery powers by immigration officers) is amended as follows.(2) In subsection (1), for “3B” substitute “3F”. (3) In subsection (2)(a), for “Chapter 3B” substitute “Chapters 3B to 3F”. (4) In subsection (2)(c), after “303Z2(4))” insert “, Chapter 3C (see section 303Z20(4)), Chapter 3D (see section 303Z36(8)) and Chapter 3E (see section 303Z41(9))”.(5) In subsection (2)(d), after “303G” insert “(including as section 303G is applied by section 303Z25)”.(6) In subsection (2)(e), after “303I” insert “(including as sections 303H and 303I are applied by section 303Z25)”.(7) In subsection (2)(f)—(a) in the opening words, for “or 303L(1)” substitute “, 303L(1), 303Z28(1) or (4), 303Z32(1) or (4) or 303Z57(3) or (5)”;(b) in sub-paragraph (ii), for “or (as the case may be) 303O” substitute “, 303O, 303Z41 or (as the case may be) 303Z60”.(8) In subsection (2)(g), for “or 303Z14” substitute “, 303Z14, 303Z41 or 303Z60”.(9) In subsection (2)(h), for “or 303Z18” substitute “, 303Z18, 303Z52 or 303Z64”.”Member’s explanatory statement
This amendment amends section 24 of the UK Borders Act 2007 (exercise of civil recovery powers by immigration officers) to provide that immigration officers may exercise certain cryptoasset-related powers in inserted Chapters 3C to 3F of Part 5 of the Proceeds of Crime Act 2002.
Lord Sharpe of Epsom
Member’s explanatory statement
This amendment and the amendment in the name of Lord Sharpe of Epsom at page 310, line 41 clarify that references in paragraphs 10Z7CL and 10Z6A of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 (forfeiture of terrorist property) to a freezing order are to a current freezing order.
Member’s explanatory statement
See the amendment in the name of Lord Sharpe of Epsom at page 295, line 27.
Lord Sharpe of Epsom
“Money laundering: offences of failing to disclose
(1) The Proceeds of Crime Act 2002 is amended as follows.(2) In section 330 (failure to disclose: regulated sector)— (a) subsection (7A) is moved to after subsection (7B) and is renumbered subsection (7C);(b) after that subsection as moved and renumbered, insert— “(7D) Nor does a person commit an offence under this section if—(a) the information or other matter mentioned in subsection (3) consists of or includes information that was obtained only in consequence of the carrying out of a status check under section 40 of the Immigration Act 2014 or an immigration check under section 40A of that Act or both, and(b) but for the information so obtained the person would not have reasonable grounds for knowing or suspecting that another person is engaged in money laundering.”(3) In section 331 (failure to disclose: nominated officers in the regulated sector), after subsection (6A) insert—“(6B) Nor does a person commit an offence under this section if—(a) the information or other matter disclosed to the person under section 330 consists of or includes information that was obtained only in consequence of the carrying out of a status check under section 40 of the Immigration Act 2014 or an immigration check under section 40A of that Act or both, and(b) but for the information so obtained the person would not have reasonable grounds for knowing or suspecting that another person is engaged in money laundering.””Member’s explanatory statement
This creates a defence for people who fail to report money laundering if their knowledge or suspicion is based on information supplied under a status or immigration check. The defence applies where, but for that information, the person would not have reasonable grounds to know or suspect money laundering.
Lord Sharpe of Epsom (Con)
My Lords, I will speak first to the government amendments in this group. The first of these is Amendment 78C. This is intended to avoid unnecessary burdens on business from having to submit the same information for immigration purposes and under the SARs regime. The new clause creates a defence for people who fail to report money laundering if their knowledge or suspicion of money laundering arises solely as a result of an immigration check carried out using data supplied by the Home Office.
Under the Immigration Act 2014, banks and building societies are required to check whether their existing account holders or applicants for a current account are disqualified persons. Should banks match any of their existing customers against the disqualified persons list—the DPL—they will be required to notify the Home Office. At the same time, a match against the DPL could also trigger a requirement under the Proceeds of Crime Act 2002 to submit a suspicious activity report, known as a SAR, to the NCA. This would require banks and building societies to report the same information twice, placing a financial and administrative burden on both them and the NCA.
By creating a defence against the offence of failing to report in Section 330 or Section 331 of POCA when the suspicion is solely the result of an immigration check using information provided by the Home Office, we will essentially remove the requirement for banks and building societies to submit a SAR under those circumstances. This will help mitigate the burden of such reports and the potential for dual reporting in the case of existing accounts. This amendment modifies existing POCA obligations and provides certainty on reporting requirements; failure to provide this certainty risks reporters taking a risk-averse approach to reporting and continuing to overreport.
I turn to Amendments 78D and 78G, tabled by the Government. These amendments ensure that applications for information orders can be made only where an authorised NCA officer reasonably believes that the foreign Financial Intelligence Unit—FIU—is requesting the information for strategic or operational intelligence analysis.
These amendments seek to address concerns from stakeholders that information orders could be used for purposes beyond those for which they are intended—specifically, that they may otherwise be used by foreign FIUs to circumvent existing intelligence and information-sharing procedures, under mutual legal assistance processes, by using the information shared through the information order as evidence in legal proceedings. Although information-sharing between international FIUs is crucial to combating economic crime and terrorist financing at an international level, a foreign partner should use existing mutual legal assistance processes if they wish to request evidentiary material from the UK. This is because the mutual legal assistance process is tightly regulated and has appropriate procedures and safeguards in place for sharing information of this kind. This amendment is essential to ensure that the information order measures in the Bill work as intended and that applications made for the orders are proportionate and justified.
Amendment 78E amends Section 339ZH of the Proceeds of Crime Act to remove the extension of the definition of money laundering to include predicate offences. The inclusion of these offences in the definition of money laundering would have broadened the scope of the clause beyond its intended purposes. We will rely on the existing definition of money laundering in Section 340 of the Proceeds of Crime Act 2002; this will ensure there is a consistent definition of money laundering across the Act. The exclusion of predicate offences from the definition does not affect law enforcement’s ability to investigate or pursue cases of money laundering. It is for these reasons that I ask the Committee to support this government amendment.
Amendments 78F and 78H are small amendments to Section 339ZL of the Proceeds of Crime Act 2002 and Section 22F of the Terrorism Act 2000, allowing certain preliminary steps in relation to making a code of practice under these provisions, such as consultation on the draft code of practice, to be carried out prior to Royal Assent. This amendment will also bring the duty to issue a code into force on Royal Assent, ensuring that we avoid any unnecessary delays in laying a code of practice and operationalising the powers.
I hope that those explanations have provided further clarity on why these government amendments are needed, and I ask the Committee to support them. I beg to move.
Lord Agnew of Oulton (Con)
My Lords, I speak in favour of my own amendment, which is part of this group—Amendment 86, which is about asking for prioritisation of SARs reporting. Just to set the scene for noble Lords, according to the UK Financial Intelligence Unit, the praetorian guard of the NCA in this respect, there were 901,000 SAR reports in 2021-22, 70% of which related to banks. That is a number far in excess of what institutions can meaningfully deal with, so huge opportunities are being missed.
The Home Office itself has just produced its own report, called Transparency Data: Accounting Officer Memorandum: Suspicious Activity Reports (SARs) Reform Programme, published on 24 February, just a few weeks ago. It accepts that there are at least four problems in our management of the SAR regime:
“Inconsistent levels of compliance reporting in some parts of the regulated sector … Insufficient human resource capacity within the UKFIU which limits their ability to analyse financial intelligence or engage with partners to improve the quality of SARs … Under-utilisation of SARs by law enforcement … Legacy IT systems which cause inefficiency and ineffectiveness throughout the regime”.
That is in the words of the Home Office, from literally only a few weeks ago. What is so frustrating is that the Government have been talking about this for at least four years. In April 2019, a strategic outline business case for the programme was reviewed by the Home Office. An economic crime plan was produced in July 2019 and then the full business case was subsequently reviewed and approved by the Home Office in April 2021. Yet we still do not seem to have a lot of action.
All my amendment is trying to do is to push the machine to get on with this. Of course, the Minister will ask me not to press the amendment, but I would ask him whether, in so doing, he can give us a date—maybe not today but in writing to the Committee—by when all this stuff will start to happen, because we are missing huge opportunities to identify economic crime. My simple proposal is to triage the SARs, so that the shortage of resource, which no doubt will remain for a while, can at least be concentrated on areas of greatest risk to our system.
Lord Vaux of Harrowden (CB)
First, the noble Lord, Lord Agnew, makes a very interesting point and I should like to hear the Minister’s views on it. I should also be interested to hear how many of the 900,000-odd SARs are acted on and followed up each year. That would be an interesting statistic to understand.
I wish to ask about Amendment 78E, which I do not fully understand. It would remove the reference being inserted into the Proceeds of Crime Act to predicate offences. I am not sure why we should take it out. It would be interesting to understand from the Minister why it was in the Bill in the first place and why the Government have now changed their mind and are taking it out. As I understand it, a predicate offence is the offence that creates the finances that are then laundered. It must in many cases be quite hard to untie those two things. I should have thought that it must be useful to any crime agency looking into these things to understand the full chain, from the original offence to the laundering of the funds. Clause 172 is talking only about information orders, not about creating new offences or anything else, so I am unclear why we would want to remove the predicate offence from the information order and would like to understand it a little more.
Baroness Altmann (Con)
My Lords, I support my noble friend’s amendment. I understand that the Government may have concerns about accepting it, but he made a very powerful case for trying to find a way to deal with an underresourced investigation procedure, perhaps by prioritising by frequency of the same company or individual under suspicion for their activity, the amounts of money available or certain countries that may be involved. There must be a way of prioritising the investigation of suspicious activity reporting, because I am certainly aware that some such activity is raised in what most people might consider relatively minor cases—but, of course, the banks need to take the issue seriously and report if they have suspicions. I would welcome the Minister’s comments and thoughts on the proposals of my noble friend Lord Agnew, but I also thank the Government for their amendments.
Lord Fox (LD)
My Lords, I thank the Minister for a clear exposition of the government amendments. I do not think I can find anything to get upset about over them—disappointingly, as I always like to get upset about the Government.
I should like to add a little, perhaps over-philosophically, on the amendment of the noble Lord, Lord Agnew. There is actionable information and there is noise, and 900,000 submissions sounds like noise, not actionable information. The noble Lord set out manfully how to try to make that noise actionable, but my sense is that you have to go back to what a SAR is. My understanding —I am looking at the noble Lord, Lord Leigh, as I consider him the expert on these things—is that they are a self-reported classification. I wonder how this would help because, clearly, the risk register would drive behaviour and people would self-report under a different classification. I wonder whether, overall—perhaps the Minister can help here—how much SARs ever help in dealing with the proceeds of crime. In other words, when is this information useful, how is it useful and in what circumstances do the Government feel it is essential to know it? Starting from that position, we might have a better idea of how we sift the noise to make it more valuable, because it strikes me that the noble Lord, Lord Agnew, absolutely hits on the problem. I am not 100% convinced he hits on the solution, but we need a solution, so some dialogue between the noble Lord, the Government and others to come up with a plan would be very helpful.
Lord Ponsonby of Shulbrede (Lab)
My Lords, I support the comments that have already been made. As the noble Lord, Lord Agnew, has said, he is really asking the Government to triage the SARs, for some way of managing the overwhelming amount of data which is reported. The only little glimpse of this I have in my other role as a magistrate is that we deal with proceeds of crime applications at magistrates’ court level, and it is not that unusual—I have dealt with it myself—where you are talking about potentially billions of pounds. But we are just seeing one very small snapshot of that in the particular application that we see in the magistrates’ courts. I am very well aware that these are immensely complicated situations to deal with, but just from listening to the speech of the noble Lord, Lord Agnew, I think he is, as he said, really just pushing the Government to try and get on with their own plan. It would be very useful for this Committee to hear what the Government are planning to do and to come up with a timetable to try and impact on this problem. Other than that, I support the amendments.
Lord Sharpe of Epsom (Con)
My Lords, I once again thank noble Lords who have spoken in this debate. I have listened with considerable interest to the points that have been raised. I am particularly grateful to the noble Lord, Lord Fox, for going against his natural instinct and supporting the Government.
I thank my noble friend Lord Agnew of Oulton for his Amendment 86, which would create a requirement for risk rating for submissions of suspicious activity reports, known as SARs. As my noble friend acknowledges, SARs intelligence is a critical tool in our ability to identify, disrupt and recover the hundreds of millions of pounds which underpin the most serious and organised crime in the UK. However, it is often not possible for reporters of SARs to assess the level of risk related to a SAR, or the underlying offence associated with the report, when it is submitted to the National Crime Agency. That is because the reporter may not have a complete picture of information on which to make such a rating. This could lead to potentially inaccurate information being submitted to the NCA if this were a requirement, as well as additional burdens on reporters that would distract resources from tackling economic crime.
Furthermore, the NCA already has procedures in place to enable reporters to alert specific concerns. It has issued an online guidance of glossary codes to reporters, which can be included in their reports and which allow them to label a SAR with a specific concern. These glossary codes can, for example, relate to suspicions of vulnerable children, human trafficking, or firearms offences, and enable the National Crime Agency to triage the reports so they can be allocated appropriately.
In addition, the SARs reform programme is delivering major reforms to the legacy SARs IT, to enable better analysis and exploitation of SARs intelligence to deliver law enforcement outcomes to disrupt criminals. As my noble friend has gone into more detail on this subject, I will answer in more detail generally about resource allocation and what have you.
We are increasing capacity within law enforcement to analyse and act on SARs intelligence. This will include 75 additional officers in the NCA, which will almost double capacity. Some 45 of these officers are already in post, and the milestone for recruiting the remaining 30 is the end of this financial year 2022-23. The programme has also provided more than 20 new financial investigators in the regional organised crime units dedicated to SARs analysis. These new staff are already delivering operational results from SARs intelligence, including the recovery of criminal assets—£380,000 to date this year, with approximately another £1 million frozen; I will come back on to some numbers in a second—and also identification and arrest of previously unknown organised crime group members.
In terms of the IT systems, a new SARs digital service, including data analytics, which will replace legacy IT implemented more than 20 years ago, is on its way. The first elements of the new SARs IT systems, which are for bulk reporter submission, were delivered in early 2021, to enable organisations to submit large volumes of SARs—bulk reporters—to begin testing the new systems. To ensure consistency of service, de-risk delivery and ensure the protection of the public, the end-to-end SARs digital service will be delivered in stages. The new SARs online portal and bulk submission system is shortly due to go live. This will be followed by further releases, which will replace the current SARs IT used by the UK Financial Intelligence Unit, law enforcement agencies and other government departments. My noble friend was quite right to bring up the subject, and I hope that provides some clarity as to what is being planned.
The noble Lord, Lord Vaux, asked about the additional number of SARs. The NCA received and processed 573,085 SARs in 2019-20. The number of SARs submitted increases significantly every year. Action taken as a result of these SARs saw £191,637,824 denied to criminals in 2019-20, which is an increase of about 46% on the previous year’s figure. SARs are analysed by the NCA for priority risks and then actioned accordingly. The majority of the reports are also made available to more than 75 law enforcement agencies and used in a variety of ways. This was recognised in the Financial Action Task Force’s mutual evaluation of the UK in 2018. We recognise that we could do more and are committed to the SARs reform programme, which aims to improve our ability to analyse SARs and for law enforcement to take action on them when appropriate.
The noble Lord, Lord Vaux, also asked why Amendment 78E is being tabled now. The original draft used a definition of money laundering based on a global standard from FATF—the Financial Action Task Force. The new definition ensures that the definition of money laundering is consistent with the rest of POCA. A predicate offence in the context of money laundering is an offence that leads to proceeds of crime being generated which then become the subject of a money laundering offence. The inclusion of these offences in the definition of money laundering in this clause would effectively include any criminal activity, thereby broadening the scope of the clause beyond its intended purpose. The exclusion of predicate offences from the definition does not affect law enforcement’s ability to investigate or pursue cases of money laundering.
I believe that I have answered all the specific questions. Once again, I thank all noble Lords who participated in this short debate. I ask my noble friend Lord Agnew not to press his amendment.
Lord Sharpe of Epsom
“(b) an authorised NCA officer has reasonable grounds to believe that the request was made only for the purpose of assisting the foreign FIU to conduct one or both of the following—” Member’s explanatory statement
This amendment amends inserted section 339ZH(6B)(b) of the Proceeds of Crime Act 2002 (information orders: foreign FIUs and money laundering) to ensure that information orders can only be granted where an authorised NCA officer reasonably believes that the foreign FIU is requesting the information for the purpose of conducting operational or strategic analysis.
Member’s explanatory statement
This amendment removes inserted subsection (6C) of section 339ZH of the Proceeds of Crime Act 2002. That subsection would have extended the definition of “money laundering”, for the purposes of subsections (6A) and (6B) of that section, to include predicate offences in respect of money laundering.
“(2A) A requirement in paragraph (a), (b) or (c) of subsection (2) may be satisfied by the carrying out of the action required by the paragraph in question before this section comes into force.”Member’s explanatory statement
This amendment amends inserted section 339ZL of the Proceeds of Crime Act 2002 (code of practice about certain information orders) to provide that certain preliminary steps in relation to the making of a code of practice under that section (for example, publishing a draft) may be carried out before that section comes into force.
Lord Sharpe of Epsom
“(b) an authorised NCA officer has reasonable grounds to believe that the request was made only for the purpose of assisting the foreign FIU to conduct one or both of the following—”Member’s explanatory statement
This amendment amends inserted section 22B(6B) of the Terrorism Act 2000 (information orders: foreign FIUs and terrorist financing) to ensure that information orders can only be granted where an authorised NCA officer reasonably believes that the foreign FIU is requesting the information for the purpose of conducting operational or strategic analysis.
“(2A) A requirement in paragraph (a), (b) or (c) of subsection (2) may be satisfied by the carrying out of the action required by the paragraph in question before this section comes into force.”Member’s explanatory statement
This amendment amends inserted section 22F of the Terrorism Act 2000 (code of practice about certain information orders) to provide that certain preliminary steps in relation to the making of a code of practice under that section (for example, publishing a draft) may be carried out before that section comes into force.
Lord Agnew of Oulton
“HMRC anti-money laundering function
After section 5 of the Commissioners for Revenue and Customs Act 2005 (Commissioners’ initial functions), insert—“5A Commissioners’ anti-money laundering functions (1) The Commissioners are responsible for anti-money laundering supervision.(2) The Commissioners must treat the function in subsection (1) as a priority equal to the functions in section 5.””Member’s explanatory statement
This amendment introduces a priority for HMRC to exercise its AML supervisory role. Having such a duty would ensure that HMRC fills an enforcement gap by generating more action against the promoters of aggressive tax avoidance schemes and the enablers of economic crimes in order to deter wrongdoing.
Lord Agnew of Oulton (Con)
My Lords, my Amendment 79 asks that HMRC be given a specific requirement to prioritise the exercise of its AML supervisory role. The reason I ask is the criticism that the Government have raised against HMRC. The Financial Action Task Force observed that tax issues
“carried too much weight compared to other”
money laundering risk factors. It is concerning that HMRC has a repeated tendency to view AML risks from a more narrow tax perspective instead of considering a broader set of AML risks, despite being identified as a weakness. That is not my diagnosis but the Government’s diagnosis of the problem.
I raised several specific issues in our previous days in Committee, but they are absolutely relevant to support this amendment. The most recent assessment of HMRC’s effectiveness in this area showed that it was failing to keep pace with the requirement to register a business within 45 days, with performance worsening over the year from 78% in 2020-21 to only 70.71% in 2021-22. In practice, this means that more businesses—nearly one-third—are operating outside the scope of its supervision for longer periods than in previous years.
The next point is that the self-assessment highlights issues in the ECS recruitment process and delays in appointing staff, which have resulted in existing staff members being asked to fill in with training duties. That goes back to my earlier point on the last amendment about the lack of qualified resource. HMRC discloses that there continues to be delays in publishing guidance for businesses under its supervision on the steps required to meet their regulatory obligations as well as on responding to specific money laundering risks.
Fourthly, the volume of face-to-face visits conducted by HMRC has slowed down—there has been a downward tendency in the number of on-site visits. There were 1,265 in 2018-19, and in the year 2021-22 that had slumped to 289—for most people, Covid was behind us, so I am not sure that that is an entirely legitimate explanation.
The next point is that HMRC has not yet used civil powers it has at its disposal to issue censuring statements for failing to comply with the MLR, or injunction powers to prevent a future breach. Again, I am sure that is happening because it simply does not have the resources available.
Lastly, an increase shows signs that HMRC is ramping up its enforcement as a supervisor, but the penalty amounts being recovered are reducing. A total of £44.8 million in fines were issued between 2018-19 and 2021-22 have now been revised down to just £8.6 million. Again, I am sure that this all goes back to resource and specifically to focus.
As I said in my opening comments—I know this from my experience of being an HMRC oversight Minister for Brexit border readiness—there is a huge cultural focus on tax collection in HMRC. There is nothing wrong with that, but this is a first cousin and it is HMRC’s responsibility to look after this stuff, and, frankly, it is not doing the job properly. My amendment would simply put some focus on that in the Bill. Again, I know from my experience as a Minister for five years that officials respond to these kinds of controls in the way they manage the resources in their department. I hope my noble friend the Minister will listen. I beg to move.
Lord Leigh of Hurley (Con)
My Lords, I will make a disclosure further to my subsequent disclosure of being a member of the Institute of Chartered Accountants in England and Wales; I am also a member of the Chartered Institute of Taxation, also by examination, which means that in theory I am capable of giving tax advice but, sadly, not in respect of anything after 1985. None the less, I feel that I should disclose that when discussing this issue.
It is customary to congratulate a noble friend on the introduction of an amendment, and I very much congratulate my noble friend on the introduction of this amendment. He speaks with great knowledge of the inside track of what is going on in the Treasury, and he is the one person who stood up against potential fraud taking place. As such, I hope that my noble friend the Minister, the noble Lord, Lord Sharpe of Epsom, will listen to my noble friend’s words. I appreciate that this has been thrust upon the Minister and it is not normal Home Office territory; it is not even the Business and Trade territory of my noble friend Lord Johnson of Lainston but Treasury territory.
However, this amendment is particularly important. It seeks to amend the HMRC Act of 2005. The problem with the Act as it stands is that it does not make stopping tax avoidance or even evasion a big enough priority for HMRC, and as a result HMRC views it as part of a sort of cost-benefit analysis rather than as a deterrent. This is particularly worrying with regards to VAT, where VAT avoidance can distort competition. As a result, the EU Commission used to occupy an oversight function with regard to the application of VAT and would always take action where a member state did something with VAT that distorted competition. For example, Italy tried to give an amnesty to companies which had not paid VAT in order to save money in Italy, but the Commission stepped in and stopped that. However, now it has lost that oversight, so the question is: who polices HMRC with regard to the application of VAT?
Noble Lords will recall that we discussed at Second Reading the case of 11,000 Chinese businesses that registered themselves at the flat of a Mr Dylan Davies in Wales, who was subsequently pursued by HMRC and the bailiffs for unpaid VAT. When we discussed the issue, we referred to it from a Companies House perspective, which had not picked up that 11,000 companies were registered in a two-bedroom flat in Wales. Actually, HMRC should have picked up on that; had this amendment been in place, maybe it would have done so. There is a history of HMRC not seeking to pursue fraud, never mind money laundering, so the very least we can do is make sure that it has a duty to detect money laundering where it sees it. I am indebted to Richard Allen of RAVAS, who has pretty much run a one-man campaign against VAT fraud and highlighted these sorts of issues. There are clearly other issues in the 2005 Act, but this is an opportunity to plug one very important hole.
Lord Vaux of Harrowden (CB)
My Lords, I will briefly support this amendment. As I said on a previous group, I was surprised to discover that the vast majority of small accountancy firms are not regulated by the Institute of Chartered Accountants in England and Wales, of which I am a member—fortunately, I am not also a member of the Chartered Institute of Taxation.
That majority of small firms are the ones doing the verification under the overseas entity register and will be the authorised corporate service providers. They are, or will be, regulated by HMRC for anti-money laundering purposes, and that is the qualification they need to be able to do the verification. If HMRC is not carrying out this role seriously—which it is not—then all the safeguards built into this Bill on verification become meaningless. It is incredibly important that HMRC’s resolve in terms of its responsibilities as an AML regulator is sufficiently stiffened to mean something for all these ACSPs and the due diligence verifiers in the overseas entity register. Without that, this Bill loses an awful lot of teeth.
Lord Fox (LD)
My Lords, it is true that the Minister is being asked to take on Treasury functions—having first talked about cryptocurrency, we are now dealing with this issue—and I look forward to his response. I, too, support the noble Lord, Lord Agnew, who has been consistent in his theme that, without due, proper and improved enforcement, the Bill that we are spending all these hours debating will have very little effect on the outside world. This is one element of the enforcement story.
The noble Lord’s point is bang on: where there is a finite resource—which, of course, there always is—HMRC will target what it believes benefits the country most. As the noble Lord pointed out, that tends to be tax generation rather than AML functions. For this Bill to be successful, something needs to change to refocus the Treasury on AML issues, as we have heard. If that is not to be the noble Lord’s amendment, what will it be?
Lord Ponsonby of Shulbrede (Lab)
My Lords, I agree with all the points that have been made by noble Lords. When on the previous group the Minister read out the figures recovered, they were derisory compared to the amount of dirty money that it is speculated is washing around the systems for which we are responsible. The whole thing is extremely important. The noble Lord, Lord Agnew, speaks with great authority on this matter. He is an insider and, as the noble Lords, Lord Fox and Lord Vaux, said, this is a way of getting proper enforcement into the Bill so it has proper teeth and so that HMRC can reprioritise not just tax generation but its work against money laundering. We support the amendment.
Lord Sharpe of Epsom (Con)
My Lords, once again I thank all noble Lords who have spoken, and I particularly thank my noble friend Lord Agnew for his amendment. While the Government agree whole- heartedly on the critical role that supervision must play in tackling economic crime, we cannot support the proposed new clause. HMRC already has an anti-money laundering supervisory function, and it takes its responsibilities very seriously. HMRC supervises nine sectors and is already the default supervisor for trust or company service providers when they are not already subject to supervision by the Financial Conduct Authority or one of the 22 professional body supervisors. The proposed amendment would duplicate these provisions and to that extent it is unnecessary. Furthermore, it could make HMRC responsible for all anti-money laundering supervision, potentially cutting across existing regulatory relationships, such as that between the major banks and the FCA. HMRC takes its money laundering supervisory responsibilities very seriously.
My noble friend raised a number of issues regarding face-to-face compliance and so on. He said that the number of face-to-face compliance visits dropped from 1,265 in 2018-19 to just 289 in 2021-22, but these figures are misleading because the overall number of interventions was greater, with the total number increasing from 1,396 in 2018-19 to 3,725 in 2021-22. Although these figures include a mass-targeted exercise checking for business risk assessments and other key documents in 2021-22, the total would still have increased from 1,396 to 2,329 without that. A range of factors caused the variation in face-to-face intervention levels from 2018-19 levels including, as my noble friend noted, pandemic issues, the impact of recruiting and training —I will come on to that in a second—with a large number of new officers and differing resource levels needed to support different types of interventions. In 2022-23, HMRC carried out more than 3,000 interventions, of which more than 900 were face-to-face. It also issued more than 750 penalties to non-compliant businesses and refused more than 400 applications to register. HMRC’s anti-money laundering function is carried out by its fraud investigation service and works alongside other teams in this section and across government and law enforcement to maximise its impact.
My noble friend asked whether it is true that HMRC is failing to meet a legal requirement to register businesses within 45 days of application, with a reduction from 78% to 70% meaning that nearly one-third are operating outside the scope of supervision. Nearly one-third of applicants are outside the scope of supervision while their applications are being determined. Businesses are under supervisory scrutiny during the application process, and HMRC’s risk-based approach means that businesses from the highest risk sectors are prioritised. The highest-risk sectors are money services businesses and TCSPs, which cannot begin carrying out relevant activity until HMRC has determined that they are fit and proper. There are some cases where it is not possible to process an application within 45 days, for example, if waiting for important information from an overseas agency. However, there have been particular challenges that caused delays that HMRC regrets, including issues with its computer system, but I understand that significant progress has been made recently and that HMRC is now much closer to achieving the 45-day turnaround for all but the most tricky cases.
The Government are clear that further reform of the anti-money laundering supervision system is needed, but the best scale and type of reform to improve effectiveness and solve the problems that have been identified is not yet clear. His Majesty’s Treasury will issue a formal consultation on the possible options by the end of June 2023. Implementation timelines will depend on the outcome of this consultation.
My noble friend Lord Agnew and the noble Lord, Lord Vaux, asked about HMRC’s performance as a supervisor. A senior manager independent of the supervision team carries out a robust annual assessment of HMRC’s supervision against OPBAS standards. The process currently under way to deliver the next self-assessment has also involved an assurance team from HMRC’s customer compliance group to add a further layer of scrutiny and independence to the process. This assessment must necessarily highlight any problems and areas where HMRC can improve its supervision. Those issues include needing to recruit and train large numbers of new officers—again, to address the question from my noble friend—and some inconsistencies in performance across the unit. However, the 2021-22 assessment judged that HMRC is effective and compliant in its obligations under the money laundering regulations and as set out in the OPBAS sourcebook, driving up performance despite the pandemic. The assessment also highlighted numerous strengths, including well-structured risk assessments, use of multiple supervisory tools in a risk-based approach and a robust registration process. On recruitment, HMRC’s supervision team is larger than it has ever been now, totalling more than 400 staff.
All this will ensure that the risks and implications of each option are fully understood before the Government commit to any particular model of supervision. Pre-empting this through an amendment of this type risks generating exactly the type of confusion over responsibilities that I think my noble friend seeks to avoid. I therefore hope that he is able to withdraw his amendment.
Lord Vaux of Harrowden (CB)
I have to say that I am becoming increasingly concerned as we go through this process that, every time we raise concerns about things, we are told that everything is fine. That is what we are being told now—that HMRC is doing a really good job of the ML regulation. The truth is that we have massive quantities of money laundering going through the UK market, and in many cases that is enabled by people who are regulated by the HMRC—a lot of the small entities particularly. So there is a problem, and we keep being told that it is not that serious. It worries me substantially that we are not really taking this seriously or trying to solve the serious problem that this country has. We have become a laughing stock and are known as the “London laundromat”. It is embarrassing.
Can I ask a supplementary question? As I mentioned before, the ACSPs are going to be performing the verification processes, which are not actually going to be covered by the anti-money laundering regulations. The people doing it have to be registered with an anti-money laundering regulator, but the regulators themselves do not actually have any process set out for ensuring that the verification processes put in this Bill are covered. How do we bridge that gap?
Lord Sharpe of Epsom (Con)
I have to say to the noble Lord that I did not anywhere say that the Government say that everything is under control and perfectly fine. As the noble Lord will be aware, the anti-money laundering regulations themselves are due to be looked at.
The second part of his question relates to why HMRC does not supervise the TCSPs properly, allegedly —but it does.
Lord Vaux of Harrowden (CB)
I am looking forward to when this Bill goes through and becomes an Act as to the verification processes being put in place by the Bill by the ACSPs.
Lord Sharpe of Epsom (Con)
Ah, the noble Lord said ACSPs—my apologies. I misheard an acronym. In that case, I shall have to write on that, because I do not know the answer.
Lord Thomas of Gresford
“Strategic lawsuits against public participation
(1) It is an offence for a person or entity without reasonable excuse to threaten civil litigation against another person or entity with intent to suppress the publication of any information likely to be relevant to the investigation of an economic crime.(2) A person guilty of an offence under this section is liable— (a) on summary conviction in England and Wales, to a fine;(b) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum;(c) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both).”Member’s explanatory statement
This amendment introduces a new criminal offence to deal with groundless threats in pursuance of SLAPPS in order to suppress investigations into economic crimes.
Lord Thomas of Gresford (LD)
My Lords, I will speak to my Amendment 80, in my name and those of the noble Lords, Lord Cromwell and Lord Agnew, and the right reverend Prelate the Bishop of St Albans, for whose support I am most grateful.
I will give a little background to set the amendment in context. In the 2021-22 Session, I drafted and introduced a Private Member’s Bill on the issue of SLAPPs, based on the Ontario model, as endorsed by the Supreme Court of Canada. Obviously, I had modified that model to suit the procedures of the civil justice system in England and Wales. Through the noble Lord, Lord Wolfson of Tredegar, I met with the Under-Secretary of State in the MoJ, James Cartlidge MP, and his officials, and had a very positive meeting with them.
My draft Bill was basically acceptable in principle, but there was one matter, they told me, it did not deal with: the scourge of pre-action threatening letters, designed to inhibit and intimidate journalistic or academic investigation. However, I was told that the Government were proposing a consultation on the issue, and indeed there was a call for evidence on 17 March 2022. It was wide-ranging; there were 48 questions asked of respondents. As it happens, not one referred to the issue of threatening letters prior to proceedings. However, one respondent suggested that any pre-action letter should require a statement of truth, so that any false allegations in the letter could be treated as a contempt of court.
The consultation finished in May of last year, and the MoJ published a full response in July. Dominic Raab said in the foreword:
“Strategic Lawsuits Against Public Protection, or SLAPPs, are a growing threat to freedom of speech and a free press – fundamental liberties that are the lifeblood of our democracy. Typically used by the super-rich, SLAPPs stifle legitimate reporting and debate”.
This is the point that I want to draw to your Lordships’ attention—he continued:
“They are at their most pernicious before cases ever reach a courtroom, with seemingly endless legal letters that threaten our journalists, academics, and campaigners with sky-high costs and damages”.
At the Second Reading of this Bill, the noble Lord, Lord Sharpe of Epsom, said:
“The Government are committed to tackling SLAPPs”
—I am sure that is right—
“but as the first country to pursue national legislation on such a complex issue”
—he ignored all the states of the United States, Canada and Australia, where such legislation exists, but never mind about that—
“it is right that we take the necessary time to consider this carefully and make sure we get it right. We will introduce primary legislation to tackle SLAPPs—this is where I am going to upset all noble Lords—as soon as parliamentary time allows”.
Now, I have to admit, I was upset. He continued:
“We are in the process of ensuring that we have anti-SLAPPs legislation which properly and comprehensively addresses the problem”.—[Official Report, 8/2/23; col. 1317]
So when will parliamentary time allow? Certainly not in this Session: it is highly unlikely that it will feature in a programme running up to a general election. So we are looking at years before this legislation can come to pass, although I guarantee that a Liberal Democrat-led Administration would deal with the matter as a priority.
I come to the substance of my amendment. I take the view that the endless stream of threatening letters—the “most pernicious” element, as Mr Raab described it, and really he should know—can be dealt with in the context of this Bill by criminalising their use in the investigation of the crimes set out in Schedule 9. I appreciate that may not cover the whole gamut of strategic litigation, and that a wider Bill will be necessary in due course, but investigative journalism is very much involved in turning over the stones of fraud, money laundering, bribery and the rest, and it is certainly in that area that SLAPPs have most frequently been used.
So the new offence that I propose could not be simpler:
“It is an offence for a person or entity without reasonable excuse to threaten civil litigation against another person or entity with intent to suppress the publication of any information likely to be relevant to the investigation of an economic crime”.
I think that is fairly understandable. The prosecution would have to prove a threat; a solicitor’s letter will speak for itself, and it will be for the jury to decide and judge its contents. Evidence will be necessary, of course, to prove intent, but that raises no more problems than in any other case in which intent has to be proved. Again, it will be a matter for a jury. An evidential burden would be placed on the defendant to raise a reasonable excuse for the prosecution to disprove, and the ultimate burden of proof of guilt would, of course, rest with the prosecution.
I believe that an offence of this nature, simply stated, would immediately result in a change of culture among those reputation lawyers who profited from this type of litigation. Their collective response to the consultation to which I referred was, “Nothing happening here, guv. Threatening? Oh, it’s just the rough and tumble of ordinary litigation”. No longer would the young Turk in the office be able to dash out on his laptop ill-considered threats. He would know that he will have a responsibility to interrogate his client thoroughly before committing his firm to intimidating conduct which would land both him and his senior partners in the dock, with all the reputational consequences for themselves. Further, it would be a great relief to threatened investigative journalists if, instead of having to consult their lawyers at considerable expense, they could make a complaint to the police and allow the criminal law to take its course. We can make this change now and let the great stew of reform of the civil procedure system which is slowly cooking in the MoJ follow “when parliamentary time allows”.
I conclude by strongly supporting the other amendments in this group for the same reasons. These are creating the means to tackle the SLAPPs problem of imbalance, as described in paragraph 15 of the Government’s response to the consultation. This is how the Government put it:
“the extreme power imbalance and inequality of arms between, on the one hand, media organisations, advocacy groups, academics, and journalists and, on the other, Claimant corporations or wealthy individuals who typically bring these cases”.
This group of amendments is designed to do something now—action, as the noble Lord, Lord Agnew, called for on an earlier amendment. I beg to move.
Baroness Stowell of Beeston (Con)
My Lords, I am grateful to my noble and learned friend Lord Garnier for allowing me to speak before him. I shall speak to the three amendments I have tabled in my name. I should declare that I chair the Communications and Digital Select Committee, and I have tabled those three amendments with the full authority of the committee, because they follow the work that we have done over the past year or so inquiring into the practice of SLAPPs. We have also been in correspondence with the Solicitors Regulation Authority, and that correspondence is available on the committee’s website.
My amendments are Amendments 87, 88 and 89. I am very grateful to the noble Lord, Lord Cromwell, for signing all three of them and to my noble friend Lord Faulks and the right reverend Prelate the Bishop of St Albans for signing Amendments 87 and 88. I add, in a personal capacity, that I support the other amendments in this group, both that from the noble Lord, Lord Thomas, and the noble Lord, Lord Cromwell.
At Second Reading, we heard a comprehensive description of the impact of SLAPPs against journalists and public bodies, and the noble Lord, Lord Thomas, has given us a taste of that in his opening remarks, so I will not go over any of that again.
In very simple terms, looking at our different amendments, the noble Lord, Lord Thomas, is tackling this from the perspective of the rich and powerful who abuse the legal system; the noble Lord, Lord Cromwell, is seeking to introduce provisions that support journalists or public bodies in mounting a defence against that action; and, in my amendments, I am trying to deter and prevent solicitors from supporting anybody, normally the rich and powerful, in bringing forward this action in the first place.
In Amendments 87 and 88, I am trying to make it explicit that solicitors cannot accept clients who want to abuse the legal system and avoid and suppress information that could be relevant to economic crime, by giving the regulator clear power to fine and sanction solicitors who breach that rule. They also make it clear that dirty money cannot be accepted for fees when the purpose of the action could prevent someone being subject to the justice system.
To unpack that a little further and focus on those two amendments, at the moment the SRA can fine traditional law firms and solicitors up to £25,000—we know how small a sum that is for some of the very large and powerful legal firms involved. Strangely, the regulator can fine different types of law firms—what are known as alternative business structures—up to £250 million, but this applies only to that kind of category of firm. There is an odd discrepancy. The Solicitors Regulation Authority recently criticised the inadequacy of the £25,000 limit and called for it to be addressed.
My amendments are very much in line with the aims of the Bill, which already removes the regulator’s fining cap for a narrow set of economic crime transgressions but does not specify that this will be applicable to SLAPP cases relating to economic crime. The SRA has said that the Bill’s tests are tightly drawn and the numbers of relevant cases that will fall within them are limited. My Amendments 87 and 88 make it clear that measures to remove the fining cap for professional misconduct also apply specifically to cases that involve an abuse of the legal process to suppress legitimate reporting on economic crime. Not all SLAPPs are about economic crime but, importantly, the regulator says that around half of its current SLAPP investigations are linked to economic crime. Amendments 87 and 88 therefore provide a sensible and proportionate change that supports the spirit of the Bill and government policy to tackle SLAPPs.
Amendment 89 is about closing loopholes that allow the rich and powerful to abuse our legal system and use criminal funds to pay for it. Throughout our scrutiny of SLAPPs as a committee, I have learned that payment for legal advice is not subject to the same type of money laundering regulation checks as other legal services. The Proceeds of Crime Act apparently does not prevent lawyers accepting dirty money to pursue SLAPP cases or require them to report suspicious activity. We have held evidence sessions on this matter and our witnesses described it as a significant issue. Addressing this is complex because—I say this in a Committee of very distinguished lawyers—everyone should have a right to use our justice system and lawyers will need to be able to represent criminals without prejudicing confidentiality. I understand the argument that I expect lawyers to make on the need for criminals to be able to seek proper support and for questions not necessarily to be asked about money.
Lord Cromwell (CB)
My Lords, I, too, support all the amendments in this group, two of which are in my name. I am very grateful to noble Lords who have added their names to my amendments and I have added my name to their amendments, so we are all onside together, I hope.
There are many good actors in our financial and legal systems, and I hope we can take that as a given. However, the need for this Bill and the general welcome it has received from all sides reflects the need to address the dark areas where reform is essential to meet modern challenges. One such is Companies House, which we discussed at length on previous days. Today, we have had money laundering and another, which we have now reached, is the use of SLAPPs—the use of UK legal processes and law firms to harass those who seek to publish public interest information relating to economic crime.
The problem with legislating to prevent SLAPPs, other than the Government’s refusal to do so, has been definitional. Everyone has the right to defend themselves and their reputation, and lawyers have a role in seeing off scurrilous attacks. However, it is widely acknowledged that, increasingly, some actors weaponise the law not to seek redress for unfounded slurs by a legal remedy but to use UK law firms to bludgeon into silence those investigating economic crime and thereby ensure that economic crime remains concealed.
As a senior former Law Lord, who, sadly, is unable to be here today, said to me only yesterday, the legal profession cannot simply be asked to regulate itself. The Government have very limited resources to do so, so we must protect investigative journalists who fulfil the vital function of bringing economic crime into the light.
Acting against SLAPPs belongs in this Bill. In previous days of debate and again today there have been references to the “London laundromat” and similar terms. In some ways, you could argue that the UK has become a market leader in economic crime. It is possible to go on kleptocracy tours, where you drive around London and buildings are pointed out to you—breathtakingly expensive properties derived from unexplained wealth. In April 2022, the National Crime Agency reported that the scale of money laundering in the UK was in excess of £100 billion per year. SLAPPs are an inseparable part of this dark side of our financial industry.
In the same month as the National Crime Agency published its report on money laundering, the Foreign Policy Centre and ARTICLE 19 published the tellingly entitled, London Calling. They have made it clear to me—I do not want to up the ante on the noble Baroness, Lady Stowell—that at least 70% of the SLAPP cases reported to them have a direct connection to economic crime.
It is simply too easy for those with vast resources to deploy UK law firms to impede and suppress economic crime investigations. This is not some nicety or obscure point of technical legal finesse; it has embedded itself in our legal system. It intimidates the weak and it takes over victims’ lives, often for years. Those willing to provide SLAPP services do not just operate against UK targets. Daphne Galizia, a Maltese journalist investigating corruption, was hit with no fewer than 47 libel cases as part of a direct, grinding intimidation strategy led by a UK law firm. As a tragic footnote to her story, when she persisted in exposing corruption, someone decided the intimidation was not working and she was simply murdered.
I will not weary the Committee with further examples. The real point to note here is that, exactly because SLAPPs are so effective, most economic crime information of this sort never sees the light of day. Editors simply cannot take on the costs and risks of resisting such attacks, and newspapers are muzzled in reporting economic crime. In short, the Bill is a welcome opportunity to tackle the ills of economic crime, but one that comes along only very occasionally, as others said in the preceding days.
I have done my best to explain why this Bill is the correct legislation to put into law protection from SLAPPs and thereby remove the stain they place on the reputation of our legal profession, the damage they do to the UK’s rule of law and their use in distorting UK markets. But I should not need to labour these points, for the following two reasons. First, there has been vigorous and repeated cross-party support in both Houses for dealing with SLAPPs. Secondly, as the noble Lord, Lord Thomas, highlighted for us, the Government have repeatedly and specifically declared not only that they are very concerned about this issue but that they intend to legislate to deal with it. However, these declarations have always ended the same way: with promises to act “in due course” or “when parliamentary time allows”. I am sorry, but there is absolutely no sign of it on even the furthest horizon, and the electoral horizon is now getting very close. I hope the noble Minister will take a more engaged approach.
I thank noble Lords for their patience and I now turn to the amendments. The amendment of the noble Lord, Lord Thomas of Gresford, tackles the issue of SLAPPs head on, making it an offence to use threats in this way. The key point of this amendment is that it defines an offence to which the court can apply its judgment, and its existence should discourage the use of SLAPPs. The noble Lord, Lord Thomas, put this across brilliantly. Will the court get it right every time? As in any other area of law, perhaps not, but this amendment would be a great practical step forward.
I turn to the three amendments in the name of the noble Baroness, Lady Stowell of Beeston, which she again put across so well. The use of SLAPPs, as she highlighted, needs action on several fronts to reduce or remove the incentives and dismantle the enabling environment. These amendments would enable the regulatory authorities to act more effectively to punish and deter UK firms from engaging in SLAPPs, first by imposing more meaningful fines on those conniving in the suppression of information on economic crime, and secondly by closing a loophole whereby, almost incredibly, a publication seeking to expose economic crime can face a heavily resourced attack using UK lawyers paid with the proceeds of crime. This is an abhorrent oversight that needs to be ended.
I turn to the two amendments in my name, Amendments 105 and 106. I will take these together as I have already been speaking for some time. Amendment 105 enables a public interest defence for someone investigating economic crime and attacked with a SLAPP. The defence is that their disclosure is relevant to the investigation of economic crime and publication is in the public interest. It provides a basis for a defence but is not a carte blanche for journalists; the court will need to be convinced. I hope the Minister will recognise its value as a basic protection for those exposing economic crime.
Amendment 106 needs a bit more unpacking. It enables the court to strike out all or part of a case that is being used to prevent disclosure or publication of information relevant to the investigation of an economic crime. Now, some may challenge the need for such a provision, saying that the courts can already strike out abusive cases, but while in theory a lawsuit filed for an improper purpose can be considered an abuse of the court's process and therefore disposed of pre-trial, in practice the courts have been highly reluctant to make any such inference.
I hope that the Committee will allow me to summarise why this is the case. Under the Civil Procedure Rules, there are currently two ways to dispose of a claim pre-trial: by filing a motion to strike under CPR 3.4 or a motion for summary judgment under CPR 24.4. Of these two motions, only the motion to strike explicitly provides for disposal of claims that represent an abuse of the court’s process. The associated practice direction explains that an abuse of process includes claims that are
“vexatious, scurrilous or obviously ill-founded”,
but there is no established legal definition for vexatious or scurrilous.
There is some case law that suggests that the improper use of the court process could be considered vexatious and therefore abusive. Does this help? Sadly, not really, because it is very doubtful that CPR 3.4 ever could be used in this way, for two reasons. First, improper purpose has been interpreted by the courts in an extremely narrow way. For example, filing a lawsuit with the sole purpose of financially ruining the target, which is a typical SLAPP tactic, is not considered improper by the court. Secondly, and more broadly, courts are universally and perhaps understandably reluctant to infer an improper purpose on the part of the filer where doing so would lead to the dismissal of the case. The Committee will therefore not be surprised to learn that I am not aware of any SLAPP case which has been filtered out on this basis.
So where else can we turn? Frivolous cases—that is, those that are entirely meritless—can be disposed of pre-trial using the aforementioned Civil Procedure Rules. However, the hurdle for such motions is insurmountably high. A motion to strike requires that a claim discloses no reasonable ground for bringing a claim. A motion for summary judgment requires the defendant to show that the claimant has no real prospect of success. The burden lies on the defendant to meet that threshold. So given the ambiguities inherent in defamation and privacy law, it is therefore exceptionally rare for such motions to ever succeed. I apologise for trying noble Lords’ patience with this explanation, but I hope I have gone some way to outline why in practice existing mechanisms to deal with abusive lawsuits are inadequate to deal with SLAPPs.
Lord Garnier (Con)
My Lords, I begin by confessing to having been at the media law Bar for the past 45 years or so, so I know a little bit, but not a huge amount, about the subject we have been discussing. I want to salute the enthusiasm of the noble Lords, Lord Thomas of Gresford and Lord Cromwell, and my noble friend Lady Stowell of Beeston. As I said at Second Reading, this is a subject that needs to be discussed. It needs a through and very comprehensive debate.
The Long Title of the Bill is:
“A Bill to make provision about economic crime and corporate transparency; to make further provision about companies, limited partnerships and other kinds of corporate entity; and to make provision about the registration of overseas entities”.
Having read that, I go on to admire the ingenuity of the drafter of these amendments to fit them into the Long Title because, whereas there is a debate to be had, and it must be had, about SLAPPs, I question whether this Bill is the appropriate vehicle for that debate. That is a procedural issue.
My second point is that when I began at the defamation Bar in the mid-1970s, the economics of the media world were entirely different. Print media were riding high. They were selling millions of copies. The Sun was selling nearly 10 million copies a day. The Daily Mail, owned by Associated Newspapers, was selling a huge number of copies a day. Social media and online media had not been invented.
I used to be instructed by newspaper groups to go to the Queen’s Bench Masters’ corridor, acting for defendant newspapers, to run up legitimate legal arguments—they were not made up—which were there to starve the claimant, in those days called the plaintiff, out of the claim. The newspapers knew very well that they had a case to answer, but they had more money, so the police officer, schoolteacher or nurse who had allegedly been defamed in the local or national newspaper, unless they had an immensely rich backer, was never going to be able to withstand the onslaught of daily interlocutory applications made against them. Sometimes the master would accede to some of the applications that we made, and sometimes they did not, but the newspaper did not care because it had the cash. The individual—the claimant or plaintiff—did care, and sometimes was frightened off by the prospect of having to spend vast sums of money to recover his or her reputation in court.
The boot is now on the other foot. The print media is impoverished and no longer as rich as it used to be; the regional press is decimated, the local press more or less non-existent, and the national press is under some considerable strain. If you want to make money in the media world, you do not do it by publishing printed newspapers—you do it through the broadcast or online media. What we are now seeing is that those who are in the legitimate, perfectly lawful and praiseworthy business of writing as journalists, and those who publish written journalism in hard copy as publishing companies, are finding it increasingly difficult to withstand the economic might of those who disagree with what they have to say in their newspapers. Do not get me wrong: I entirely sympathise with people such as Catherine Belton, who was sued by various Russians—a range of very rich people. But one would get the impression from listening to the noble Lords who have spoken so far that the courts are weak and feeble arbitrators of the disputes that are before them.
For the last 45 years, I have seen cases struck out—I like the American expression, to strike, that the noble Lord, Lord Cromwell, used a moment ago. For the last 45 years, and long before that, before I was out of nappies, Queen’s Bench judges in the High Court in the High Court in London—and I dare say in Edinburgh and Belfast as well—have been striking out cases that were abusive, vexatious or frivolous. What the courts have to deal with is not just the law but the evidence. Just because a worthy defendant complains that they are the victim in a SLAPP case, the court cannot simply take the allegation on the face of it—it has to look at the evidence. By and large, evidence is something that you get to at trial, albeit it that evidence is occasionally tested at the interlocutory stages of an action.
While saluting the enthusiasm of the noble Lords who have spoken in favour of these amendments and who have ingeniously used this Bill to run the argument, I urge the Committee to be cautious, because the number of SLAPP cases is remarkably small compared to the number of writs issued each year. It is important that this Committee does not mislead the public about the extent of the problem. Legitimate claims have repeatedly been incorrectly described as SLAPPs by the media—but of course the media has an interest in calling them SLAPPs, for the economic reason that I have described.
In the recent case of Banks v Cadwalladr, decided by Mrs Justice Steyn only last year, she said:
“Ms Cadwalladr has repeatedly labelled this claim a SLAPP suit, that is a strategic lawsuit against public participation, designed to silence and intimidate her. I have set out a summary of my conclusions in paragraph 416 below. Although, for the reasons I have given, Mr Banks’s claim has failed, his attempt to seek vindication through these proceedings was, in my judgment, legitimate. In circumstances where Ms Cadwalladr has no defence of truth, and her defence of public interest has succeeded only in part, it is neither fair nor apt to describe this as a SLAPP suit”.
Despite this, Mr Banks’s claim continues to be referred to as a SLAPP by large sections of the media. Of even greater concern is the reference by some journalists to individuals taking out what they call SLAPP orders—whatever they might be—echoing the media’s disingenuous campaign against privacy rights, including by pejoratively referring to privacy injunctions or agreed confidentiality clauses as gagging orders.
I do not want to be misunderstood. SLAPPs are a problem, but their prevalence is wildly overstated, and it seems to me—after 45 years of jogging around this racecourse—that solicitors are unlikely to be complicit in many of them. I rather suspect that more solicitors are dealt with by the Law Society, the SRA or the police for stealing client money than for running SLAPP cases.
Let us please just settle down a bit and not get overexcited by the one, two or three Russian oligarchs who have made an allegation that they have been defamed and who, on the evidence, have sometimes been proven right and sometimes wrong. The essential point is that a dispassionate judge, dispassionately looking at the evidence, will make a dispassionate ruling on what he or she has found, as Mrs Justice Steyn did in the Banks case, and the world goes on.
Being sued is indeed expensive and annoying, and it enables lawyers to be instructed and charge fees—I am afraid that is part of the way we do things in this country—but to suggest that SLAPPs are a plague and a menace just on the say-so of one, two or three cases, of which a number of us may or may not disapprove, does not prove the case. There is much work to be done to look into the question of SLAPPs and much debate to be had, but this Bill is not the place to have that debate. I applaud the noble Lord, Lord Thomas, and other noble Lords who have brought forward these amendments because the matter needs to be discussed, but it is not properly discussed within the confines of this Bill.
Baroness Wheatcroft (CB)
My Lords, the noble and learned Lord, Lord Garnier, speaks as a lawyer. I speak as a journalist, with a long career in newspapers. I declare my interest as chair of the oversight committee at the Financial Times. I assure the noble and learned Lord that the very presence of the possibility of SLAPPs weighs very much on the minds of journalists. As he explained, newspapers no longer have the sort of money that might have funded the types of cases that he described and indeed worked on, but now there are some very important cases that they do need to pursue, and for that reason I very much support all the amendments in this group.
I will give just one example: the case of Wirecard, which was company fraud on a massive scale that cost a lot of people a lot of money. One brave journalist on the Financial Times had pursued the case for a long time, against huge opposition from the company and those around it who were making money from it. His editor was prepared to allow him to continue to pursue the case, at which point the German company hired a well-known London law firm which threatened all sorts of litigation and also criminal proceedings. It accused him, without any base, of having been interested in manipulating the share price of Wirecard in order to make a great deal of money. At that point, the Financial Times was risking a great deal of money and a huge hit to its reputation. The law firm bombarded the company and the journalist with letters threatening all sorts of things, but the Financial Times decided to stick with it. In the end, as we all know, that was the right decision and some people were able to salvage some honest money that would otherwise have been lost to an almighty fraud.
Lord Garnier (Con)
Before the next contribution, I apologise to the Committee but I must be in two places at once. I hope the Committee will forgive me for not being here when other speeches are made and the Minister winds up. If that is thought to be very rude, I shall sit here, and there we are, but if I may, would it be—
Lord Garnier (Con)
It is unprecedented and very rude of me, but there seems to be rather a lot going on at the moment.
Lord Cromwell (CB)
I will take 30 seconds to respond to a couple of the noble and learned Lord’s comments while the rest of the Committee decide whether they are happy. Apart from trying to remove from my mind the image that the noble and learned Lord planted earlier of him in his nappies and thanking him for his kind words, I say that he is exactly the kind of critical friend that we need to get this right. However, to suggest that it does not belong in this Bill, which is about economic crime and transparency, which SLAPPs directly impinge on, is disingenuously playing with words. SLAPPs are embedded in our system and directly relate to economic crime and transparency.
On his reference to there being very few cases, I made the point earlier that most cases never see the light of day because people are intimidated. That is exactly the point here. Our courts need defined tests to examine potential SLAPPs and sometimes say “That is not a SLAPP”, and sometimes say, “That is a SLAPP”. Some egregious cases will get that treatment. As my colleague to my left said, it is the threat of the sheer cost of getting to trial, along with all the other intimidatory tactics, such as of truckloads of documents turning up at your house on a Friday night, that we need to dissuade law firms pursuing.
Lord Lipsey (Lab)
My Lords, I hate to intrude on disputes between lawyers, even though the lawyers in this case seem to be on different sides. Like the noble Baroness, Lady Wheatcroft, I will intervene briefly as a journalist. At times, I was deputy editor and had charge of all the libel cases that came before us. In truth, there was an inequality of armaments. We had wonderful lawyers in-house, Mr Murdoch’s very deep pockets and an evidential base which would normally have been compiled by a journalist working to good standards. Many of the people wanting to sue us were not in that position at all; they took offence at something, whether it was right or wrong, but if the paper took a hard line, then they would go away.
We need to emphasise that the world has changed. Not only—and this is a perfectly valid point—are newspapers poor, but there are a number of extremely unscrupulous, very rich people, be they Russian oligarchs or any kind of oligarch, who are prepared to try anything they can to get a journalist or, even better, to stop the journalist publishing. I admire the courage of the FT in going ahead with the case the noble Baroness, Lady Wheatcroft, mentioned. I do not think many editors would have been so brave. This is the modern world. I am always disappointed when I find that legal firms are willing to go along with this kind of stuff.
There are not many laughs in the committee chaired by the noble Baroness, Lady Stowell—not because of her, as she is an admirable chair, but because the subjects of the committee do not lead to a lot of laughs. However, I laughed out loud when I found that the maximum fine that can be applied by the Solicitors Regulation Authority is £25,000; that does not buy you a coffee with a decent KC any more. It is a different world with the people who are operating in it now.
I shall conclude as the noble Lord did. We have heard that it will take years before anything happens. It will not be this year because we are in recession, nor next year because there is a general election coming up; so it will go on, and those who are against making the change will continue their lobbying. We now have an opportunity, by the ingenious use of this Bill by the noble Baroness, Lady Stowell, to force action now. We should seize it.
Lord Agnew of Oulton (Con)
I support Amendment 80, tabled by the noble Lord, Lord Thomas, and the amendments tabled by my noble friend Lady Stowell and the noble Lord, Lord Cromwell. I think there is a strong consensus—I will come to my noble and learned friend Lord Garnier’s point in a moment—that we should not just keep kicking this can down the road.
To give the Committee a little perspective, we are dragging our feet relative to the rest of the civilised world. The EU took steps a year ago to propose an anti-SLAPP directive and 34 US states already have anti-SLAPP laws in place. The need for reform is urgent. The figures put forward by the Foreign Policy Centre and members of the UK Anti-SLAPP Coalition show that SLAPPs are on the rise and that the UK is the number one originator of abusive legal actions. In fact, the UK has been identified as the legal source of SLAPPs. It is almost as frequent a source as all European Union countries and the US combined. That is the reality.
On journalists, obviously I defer to the noble Baroness, Lady Wheatcroft, who has been in the hot seat herself. They play an important role in transparency and in shining a light on bad behaviour. We have heard before in this debate and in other committees about the Azerbaijani laundromat, which was investigated by the NCA only following the light that journalists shone on it.
I think my noble and learned friend Lord Garnier is misled in that the vast majority of these cases never get to court. They are invisible, other than to the person who has been subjected to that action. I can speak with some passion on this because it happened to me only a year or so ago by an organisation that had received billions of pounds of public money. The implication in the letter I received was essentially a SLAPP, so I had to take a view. No lawyer ever heard about that, let alone a judge. That is happening on a far more regular basis than people are prepared to accept.
We come to the last part, which the noble Lord, Lord Thomas, and others have talked about—that there is not enough room in the legislative calendar to get this done. But here we are: we have an economic crime Bill on the books, whose drafting work has been done by very clever people—at least as clever as parliamentary draftspeople. Surely, they and the Peers in this place can get together to get the right clauses and then we will have done it. I get so frustrated about this. The Government seem so feckless in not getting on with it. What is the excuse? It is crystal clear to any thinking person that we need to have some legislation on the statute book to contain this.
Of course, there must be safeguards against reckless accusations that damage the reputations of decent people and the right to recover costs where that happens. But, as we heard from the noble Lord, Lord Lipsey, and the noble Baroness, Lady Wheatcroft, the reality is that there is an asymmetric warfare going on today which is completely different from anything that existed probably 20 years ago.
Here we have the chance for a clause that is well drafted—although I am a non-legal person—by the noble Lord, Lord Thomas, with supporting clauses from my noble friend Lady Stowell and the noble Lord, Lord Cromwell. Why will the Government not sit down and have a proper, grown-up conversation about doing this? As the noble Lord, Lord Cromwell, said, please do not just fob us off with, “No, we’re not going to do it. Withdraw your amendment”. I am prepared to have a fight about this on Report and to lead a Division in the House, because I am sick of it. It is time for this Government to wake up from their complacency and always looking to delay until we do not exist any more. I strongly support these amendments and I hope the Minister will have a credible answer to the question of why they are not getting on with it.
Lord Thomas of Cwmgiedd (CB)
My Lords, I will make one or two brief observations, because almost everything that could be said has been said.
First, it is important to distinguish between the threat of litigation and the use of litigation. If you look at the threat of litigation, the arguments so powerfully put forward by the noble and learned Lord, Lord Garnier, go away. Going back more than 30 years, the late Captain Robert Maxwell MC was the past master in the use of threats. It was the courage of Bronwen Maddox of the Financial Times and her then editor that exposed him. She did not have to undergo an examination of what had happened because he died at almost exactly the same time. When people say, “This is very difficult. We need more time”, I say that we have had 30-plus years to deal with it.
Secondly, the problem of the use of litigation is, in a sense, a separate issue. As the amendment in the name of the noble Lord, Lord Thomas of Gresford, makes clear, it is important that this is looked at separately. Most urgent is dealing with the threat. I very much hope that the Bill will also deal with use, but that involves different considerations because, by that stage, you will have involved a court and the balance between the actions of the court and the regulator is more difficult.
However, saying “This is all very difficult” is no excuse for delay. This is damaging to the UK, and things have got worse in 30 years for two reasons. First, most lawyers jealously guarded their reputation, but I am afraid that a number now take the view that any publicity is good publicity and they do not guard their reputations as carefully as they once did. That is not true of many, but a few take that view. Secondly, the cost of litigation has escalated out of all proportion to the position 30 years ago.
In response to, “This is all too difficult. We need more time”, I say that we have had 30 years. Even for the Ministry of Justice, that is a very long time. At times I felt that it could be said of the Ministry of Justice what was said of Philip II of Spain: if death came from Spain, we would all be immortal. Let us therefore hope that the ministry will engage with this and get on with the matter.
I want to make one final observation. There is always this very real problem of lawyers using funds. However, the fact that it is a real problem means that we should investigate it and not just put it in the “Too difficult” box. I am afraid that the Ministry of Justice has too many large “Too difficult” boxes as an excuse for inaction, and the time for inaction has ended. I am very glad that the noble Lord, Lord Agnew, has taken the view that this is something on which we must make progress.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to rise to take part in this debate, which has been rich, full and powerful. I will seek not to repeat anything that has been said but simply to make a couple of points.
First, I offer the Green group’s support, showing that we have the broadest possible political support in your Lordships’ House for this approach. I also want to address the use by the noble and learned Lord, Lord Garnier, of “ingenious”. These amendments are not ingenious—they are obvious, reflecting an obvious step. It is interesting that a number of Members of your Lordships’ House, operating so far as I am aware entirely independently, have collectively brought together a group of amendments that forms a quite complete package. I am happy to accept that we can work on the detail, and I very much join others in wishing that the Government will work on the detail, but the package is there, approaching this issue from different angles.
I bring up a point made by the noble Lord, Lord Agnew, in the previous group, which reflected on the failures of HMRC to deal with money laundering. That is just one element of the way in which our institutions that are supposed to be taking on economic crime are simply not up to the task or resourced for it. I join the media crew here as a former newspaper editor, which is the perspective I come from. In many of the worst cases, as the noble Baroness, Lady Wheatcroft, outlined earlier, it is not law enforcement or HMRC that uncover situations that bring gross abuses and crimes to public notice but journalists and NGOs bravely stepping out to expose what is happening. The Government are not capable of doing that, and we desperately need the fourth estate to take those actions. It fills a gaping hole which otherwise will not be filled, and crimes will not be exposed if the media and NGOs are not in a position to do this.
I think the noble Lord, Lord Cromwell, referred to an important report from the Foreign Policy Centre and Article 19. Last night an event in the Houses of Parliament looked at an updated report that they had prepared called London Calling—a very timely event. To look at some of the contents of the report, it says that the UK is
“a leading jurisdiction for domestic and trans-national SLAPP cases”.
A 2020 study by the Foreign Policy Centre found that 63 journalists working on financial crime and corruption in 41 countries identified the UK as the leading international jurisdiction for legal threats. I also make the point—it was made by others, but it needs to be driven home—that this report notes that the use or threat of SLAPPs “rarely make the public record”. So, although the noble and learned Lord, Lord Garnier, says this is just a handful, it is the tip of an iceberg of people using the UK legal system for criminal purposes. It is not exposed, but we know that it is there.
I will make two final points. The world knows that that issue is there. If we think about the geopolitical state of the world now, this is broader even than the financial impacts. I note one estimate of the cost of worldwide economic crime: $274 billion. There is the financial cost, but also the impact in a world where the rule of law is under consistent attack, where we see not just individual oligarchs or kleptocrats but entire nation states attacking the rule of law. The UK is putting itself in a far weaker position by being the home where the kleptocrats, oligarchs and those states are able to use the law as a weapon.
Finally, we have mostly referred to the traditional mainstream media. Looking at the range of organisations involved in the initial launch of the Foreign Policy Centre and Article 19 report, on the panel were Tortoise Media, Open Democracy and English Pen. This concerns some very small, brave organisations with very few financial resources; it is not just the old legacy media, which still have some financial resources left. We have people stepping up to the plate. We think about London, but we have also seen a real rise of quality regional media in places such as Manchester, Liverpool and Sheffield, where local media is stepping up and doing investigative journalism. They have almost no resources to be able to take on the threats; they need legal protection, so this needs to happen at all levels. Your Lordships’ House has come up with a package that takes us a long way towards where we need to be. We must get there now. As many others have said, we cannot wait.
Baroness Altmann (Con)
My Lords, I add my support to my noble friend Lady Stowell’s Amendments 87, 88 and 89 and congratulate her and her committee on their work. I also support Amendment 80 from the noble Lord, Lord Thomas, and Amendments 105 and 106 from the noble Lord, Lord Cromwell. As I said at Second Reading, this is a vital issue that must be covered in this Bill. In this group, we are discussing threats and lawsuits whose intention is to silence, intimidate or censor critics such as investigative journalists. So often, as the noble Baroness, Lady Wheatcroft, explained so well, they stem from economic crime.
This issue is not just about actual lawsuits. As others have said, often the matter will start with a threatening letter or even a phone call, which is enough to stop journalists or investigators from pursuing inquiries. That is why so few SLAPPs have come to court. I respectfully disagree with my noble and learned friend Lord Garnier on whether the few cases are any indication of whether this legislation and these amendments are required. These threats and vexatious potential lawsuits threaten not just journalists, campaigners, authors or academics but everyone’s rights in this country. They limit the rights of the public to have matters exposed, such as bribe-taking, poisoning water supplies with toxic chemicals, or general economic wrongdoing, which falls squarely within the remit of this Bill. Our courts are supposed to be there to protect ordinary people and small companies without large resources against those with more power, money and influence. Without these amendments, that protection will be fundamentally weakened when we have an opportunity to strengthen it.
I am not a lawyer, but Amendment 80 seems sensible to me. I believe that the Law Society supports judiciary-led gatekeeping. Amendments 87, 88 and 89 from my noble friend Lady Stowell seek to remove the incentives to issue these kinds of threats by introducing properly meaningful fines and intend that payments should not be able to come from the proceeds of economic crime. Again, that seems eminently sensible. I will listen carefully to my noble and learned friend but, equally, I urge him to listen carefully to the powerful arguments across all sides of this Committee and either accept these amendments or introduce his own.
Lord Vaux of Harrowden (CB)
My Lords, I am not sure whether I can speak to this, being neither a journalist nor a lawyer. I am very sympathetic to what these amendments are trying to do. It must be right to try to prevent the abuse going on. However, I confess to feeling some niggling doubts. Journalists do not get everything right, and there are those who are not above embellishment or exaggeration. The balance of power is not only one way. A small company or individual may well find themselves up against a large media organisation, for example. Whatever we do, we must not make it harder or more expensive for innocent parties to defend themselves from unfair reporting, pre-emptively if necessary.
There is a balance to be found, and I am not yet convinced that these amendments quite reach it. That said, I agree that there is a problem with the current situation. It is being abused, and we need action sooner rather than later. So let us have the discussion and get something into the Bill. If not now, when?
Baroness Stowell of Beeston (Con)
I shall just add briefly a comment before we get to the wind-ups, in response to something that my noble and learned friend Lord Garnier said when he urged us not to overstate the problem of SLAPPs. I just wanted to make two brief points.
One has been made by many people already, which is that in fact, when it comes to SLAPPs we do not really know the scale of this problem, because so many of these cases never make it to a court of law. I wanted to make a second point in response to what my noble and learned friend said about not seeking to overstate the problem, and his questioning my and others’ ingenuity in bringing forward amendments in the Bill. My understanding of the reason for the Bill is that economic crime is a real problem. So, if we are legislating because that is the real problem, and we are aware that some of the most significant perpetrators of economic crime have ways of preventing the evidence that would lead them to be potentially subject to the justice system because they operate in that kind of market, as it were, surely we ought to seek to close that gap. Whether or not the number of them that might qualify under that heading is large or small, there is a gap. As I say, the objective here is tackling economic crime, and our amendments are only about economic crime.
I understand very much that the broader question of SLAPPs will have to be returned to, because the whole issue of SLAPPs cannot be addressed in an economic crime Bill. However, my amendments and others in this group are trying to make sure, in the context of economic crime, that those who may be the most significant perpetrators of it on a large scale have nowhere to hide.
Lord Fox (LD)
My Lords, this has been a fantastic debate and I will not add any pearls of wisdom and substance, but I would just like to just say something about process in response to the noble Lord, Lord Agnew. In the event that the Government are unable to satisfy what I think is the strong view of your Lordships that something needs to be done, I think we can pledge that the noble Lord, Lord Thomas, and I will work well within our own group to make sure that the comments of the noble Lord, Lord Agnew, about pushing this further on Report will certainly have some legs from our point of view.
Lord Cromwell (CB)
I will just add a word, first to the noble Baroness, Lady Stowell. The fact is that most SLAPPs are related to economic crime, and I think she was being a little modest perhaps in that area. This would certainly be a very good start—half a loaf is better than no loaf, and all those sorts of aphorisms. Colleagues who have spoken around the House have left me feeling quite optimistic, much more than I expected, I have to say, but then a pessimist says that things could not be any worse, and an optimist assures you that they can.
I am heartened in particular by the comments from some of the far heavier-weighted legal minds than mine—I am neither a journalist nor a lawyer—and by their willingness to grip this. There are definitional and other issues involved here, but if I may quote my colleague, they are difficult but doable. We ought to take that to heart.
My question is whether the Minister will rise to the challenge of working with us. This is not a question of us putting something up to be shot down; it is an offer to work together, drawing on the resources of this House, to put this right in the Bill, which, as we have exhaustively explained, is its natural home.
Baroness Blake of Leeds (Lab)
I thank everyone for the extraordinary debate that we have had on this issue today. I continue in the vein of looking for optimism in the outcomes of some of the discussions that we have had. I pay particular tribute to Members of this House who have joined Members of the other place in relentlessly pursuing this issue, to the extent that there is now a far greater understanding—not only in Parliament but in the wider country and the communities particularly affected—about the issue of SLAPPs, which perhaps a year or two ago was not understood at all.
To start by going back to the very basics, SLAPPs are, as we know, strategic lawsuits against public participation, abuses of the legal system, generally by the super-rich—and, it is important to remember, they are intended to harass, intimidate and financially and psychologically exhaust one’s opponent. I am not sure that that element has quite come through, although everyone is fully aware of it. We have talked today about this practice being embedded in the system and its close relationship to the scourge of economic crime. In other debates that we have had on the Bill so far, we have highlighted the real extent of economic crime facing this country. All of us have an obligation and commitment to come together to work out how we are going to deal with it.
As we have heard, the use of SLAPPs has been linked to Russian oligarchs. That is inevitable, given what has happened over the past year, particularly with regard to looking at ways to prevent journalists from reporting on their links to economic crime, with particular reference to the war in Ukraine. As we have seen, SLAPPs are not only used by those committing economic crime, but the amendments proposed here narrow the definition to those concerned with suppressing information on economic crime. The wider point which we need to take on board is about the serious concerns that SLAPPs are now being used to suppress democracy globally. It is important to put it as far as this.
I am sorry that the noble and learned Lord, Lord Garnier, has had to go, but I would like to say to him that his attempt to reassure us on the numbers has not had that effect at all. It has been clearly stated that the small numbers that reach court highlight and emphasise the problem that we have.
I shall go on to ask the Minister to comment on the view coming from the other place that SLAPPs are under a separate jurisdiction and therefore should be under a separate Bill. We have heard some great arguments as to why we should look at these amendments seriously and incorporate them into this Bill.
I thank all noble Lords who have spoken to their amendments and clearly given us a full understanding of the purpose behind them and how they will contribute to the overall objective. From our position on these Benches, we look forward to engaging in full and detailed conversations as to how, as I suspect will be necessary, we present further amendments on Report. We support the principle of the Government bringing forward effective legislation and will continue to call out this issue wherever it occurs, whether on this estate or elsewhere, when anyone in a position of influence puts undue pressure on someone to make sure that important matters do not see the light of day.
I want to highlight some of the reasons why feelings are running so high. We need to understand and remember the severe power imbalance between the claimant and the defendant. In this context, journalists and media outlets are put at a disadvantage from the outset, as we have heard today. Defending a legal case can, as we know, be prohibitively expensive and a huge drain on resource. As we need to emphasise every time we speak about this, SLAPPs can create significant financial jeopardy for journalists and media outlets, with legal costs starting to accrue long before cases get anywhere near reaching court.
Putting ourselves in the place of those who have been subjected to this, I think that the process of defending a legal case in this sphere can feel like punishment: a fear of devastating financial impact, potential loss of savings, their homes, pensions and livelihoods if a case goes to court. The effort in putting a case together involves massive distraction from the work that people are trying to do. As others have said—it is a serious charge but one we should take seriously—this is having the impact of undermining the basis of democracy.
We have talked about how libel laws in the UK are weighted, but we also need to emphasise the issue of libel tourism. It remains an issue in the UK. The bar to bring a case here is problematically low, and the use of privacy and data protection laws is increasing. We need to consider that SLAPPs in the UK are often pursued against individuals rather than the organisation they work for, which undermines the resources available to mount an adequate defence.
One of the themes running through all our discussions on the Bill is the reputational damage to London and, therefore, the country. London’s obvious position as a global hub for the super-rich has compounded the problem. We must make sure that clients cannot use threats of legal action to clean up their image and remove unfavourable information from the public domain. There has been insufficient recognition by the UK Government and official bodies of the connection between protecting media freedom and countering corruption.
Returning to the personal, I suggest that other factors include the psychological impact of intimidation and harassment on those subject to legal challenges. That has not been sufficiently recognised, and such things lead to a massive impact on mental health.
Will the amendments before us today tackle those issues? I think that is a subject for further discussion, but the main question that has been put repeatedly from across the Committee today is whether the Government are serious about measures to end these practices. We had some optimism in July last year when there seemed to be a commitment that legislative reform measures would come forward, but where are they? Are they being moved forward? Will the Government follow through by supporting the measures proposed in amendments to the Bill?
We have heard that this is a serious issue. It is urgent for so many reasons that we have discussed today. My last question for the Minister is: will the Government take this opportunity to act, recognising how urgent the situation is, and meet with us to discuss ways that we can move this important matter forward?
The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bellamy) (Con)
My Lords, I warmly thank all noble Lords who have spoken in this debate and who have spoken to me directly on this issue. I also thank noble Lords for the enormous amount of thought and consideration that has been put into this issue by those who have spoken. There is significant strength of feeling across the Committee on this important issue. I begin by providing an assurance that the Government share those concerns and that it is clear to the Government that we should take legislative action against SLAPPs. As the Government have set out, for many reasons that have been mentioned in this debate, we are firmly committed to legislating effectively, comprehensively and without undue delay on this issue.
Noble Lords will not necessarily be entirely happy when I say that we do not think this Bill is the correct vehicle for tackling this issue. There are essentially two reasons for that. One is that here we are dealing with economic crime. I take my noble and learned friend Lord Garnier’s technical point about the scope of the Bill, but the major issue here is that, even if we were to put in an amendment to this Bill, it would still be too narrow because we are not covering matters that are not economic crime, such as freedom of expression, political interference, national security and so forth. The Government’s preference would be to handle the entire landscape of SLAPPs in one place, and that is not this Bill.
Lord Agnew of Oulton (Con)
The Minister talks about introducing some SLAPPs legislation “without undue delay”, but there is no possibility of a timetable to introduce that. We are only 15 or so months away from a general election, and the legislative timetable is jammed solid already. There is no fixed slot for it to come in. I utterly reject the idea that the Government want the perfect to be the enemy of the good: “We are going to do everything in one Bill”. Why not do this bit now, which will take very little parliamentary time? As the noble Lord, Lord Cromwell, said, it will deal with probably 80% of the problem, because we know that shutting down debate on economic crime is probably our biggest problem. When in 10 or 15 years’ time—this point was made by the noble and learned Lord, Lord Thomas—the Government finally find the perfect moment, although some of us will be dead by then, they could then repeal the relevant clauses of this Bill and do it all in one bit. But I utterly reject the pathetic excuse that this is not the right moment. I ask my noble and learned friend to be a little more straightforward in his commitment.
Lord Bellamy (Con)
My Lords, I entirely understand the frustrations felt by my noble friend Lord Agnew and others. It is not to be ruled out that we could find an appropriate legislative vehicle for this matter before the next general election. That is not to be ruled out. However, I cannot today go further than to say that this issue will be brought forward by the Government when parliamentary time allows. That is normally a long-grass phrase—kicking it into the long grass. I regard it today, and say it today, as a short-grass phrase because I am not at the moment giving up on having legislation relatively soon, but I can give absolutely no commitment on that matter.
Lord Thomas of Cwmgiedd (CB)
I ask the noble and learned Lord, as a little test of this commitment, is there is a draft Bill? If there is one, his assurance is really wonderful but, without one, is it not just a phrase for the long grass?
Lord Bellamy (Con)
I can tell your Lordships that the Government have not been idle in preparing possible drafts to deal with this matter, and I am very happy to keep in close contact with noble Lords between now and Report on progress and to discuss as widely as we need to how we should approach this matter.
Lord Cromwell (CB)
What the Minister is saying is potentially helpful. His initial statement was almost verbatim what we got at Second Reading and in previous Bills. I could almost set it to music now, I have heard it so many times, but we seem to be getting somewhere. Will he clarify whether he is happy to continue discussions with us about these Bills, which, apparently, the non-idle Government have been working on or about a possible amendment to this Bill? Will he clarify which one we are addressing here?
Lord Bellamy (Con)
It is the former. The second point here is that the Government are not happy, for reasons that I shall now, I hope, go into a little detail about, about the actual amendments being proposed here. I preface that by saying that we should not overlook the fact that there is one enormous conceptual issue behind all this, which is the question of access to justice. This is probably the first time that anyone has ever legislated against someone bringing something to court, which is something that we need to stop and think about. Where is the balance? If I may say so, reference has been made to the rule of law, and it is somewhat ironic to say that we must uphold the rule of law by penalising someone who seeks access to justice. That is a very difficult area, and we need to find a balance. The Government would like to explore further how that balance is to be found because, in the Government’s respectful view, it is not yet found in the amendments before the Committee today.
Lord Cromwell (CB)
I think that we are actually in agreement on that, and I hope that I made it clear earlier that what we need to do is to work together to get this right with critical friends, including the noble and learned Lord, Lord Garnier, who will bring a forensic examination of whether the work is right, but I go back to an earlier comment that this is difficult. Yes it is, but it is not impossible.
Lord Bellamy (Con)
I entirely accept that it is not impossible and, to take the phrase of a noble Lord earlier, that it is actually doable. I think that it was the noble Lord, Lord Cromwell, who used that phrase.
Baroness Bennett of Manor Castle (GP)
My Lords, I was hoping that someone with a great deal more legal knowledge than me would rise to speak, but I feel that I need to challenge the Minister’s comment that this proposal is unprecedented. Other noble Lords will be able to say more, but we have a process of law about vexatious litigants who are unable to bring cases. There is a whole set of rules there, and there are rules in the family courts that eventually stop cases being brought. So it is not the case that this is something that has been miraculously conjured out of the air that does not exist in any form whatever in the legal framework.
Lord Bellamy (Con)
My Lords, on that last point I had primarily in mind the amendments that seek to criminalise bringing cases before the courts, which is the subject of some of the amendments.
Lord Fox (LD)
I am sorry. I appreciate the access that the Minister is giving us. I am really following up the point that the noble and learned Lord, Lord Thomas, made. The Government are not being inactive. Can the Minister tell us how many people are in the dedicated team that is currently pursuing this issue? It is complicated, as he pointed out, and Government do want to get more depth on this, so how many people are now working on this, and when does he think they might actually come up with something that could then go into a draft Bill? In a sense, what is the timetable and what is the amount of horsepower that is going into that timetable?
Lord Bellamy (Con)
I am afraid I cannot give the noble Lord a timetable. I cannot tell him how many people are working on it, but I can tell him that important work is being done. I am not in a position, and I very much regret that, to go further than that today, but I am prepared to keep in close touch with your Lordships between now and Report to share progress and thoughts on whether there is a legislative vehicle that can conveniently—and soon—be introduced.
Lord Cromwell (CB)
I am sorry. I will press the Minister a little more on that. When will we first hear from him on that update on progress?
Lord Bellamy (Con)
Can I write to the noble Lord, Lord Cromwell, on that point?
Baroness Blake of Leeds (Lab)
Can I ask that we are all included in the correspondence?
Lord Bellamy (Con)
Absolutely. I will write to everybody after this debate and try to elaborate a little on what I have said. I hope noble Lords understand that in terms of my boss, I recently had a change of personnel, and it takes a little while to allow the dust to settle, if I may put it like that.
The only other thing I would respectfully draw noble Lords’ attention to, and I fully accept there is a certain amount of controversy as to how big this problem is, is that the Solicitors Regulation Authority issued a warning notice on 28 November 2022, which led to that authority undertaking investigations in relation to SLAPP complaints, so we are not without a regulatory instrument to at least hold the line until we are able to legislate. That, as far as one can tell, has had a salutary effect on the practical consequences of SLAPPs. It is not the case that nothing has been done.
Lord Thomas of Gresford (LD)
My Lords, the Minister said that the amendment which I have put forward criminalises access to justice. It does not do that; it criminalises a threat of litigation that is unwarranted and known to be unwarranted without reasonable excuse. It is perfectly simple, but I would be very unhappy to leave this Room today with the thought that the Minister has in mind that my amendment is criminalising access to justice.
Lord Bellamy (Con)
My Lords, perhaps I expressed myself a little loosely. Let me put it like this: in the Government’s view, this is not an area where we should introduce the criminal law, whether it is in relation to pre-litigation or in any other respect in terms of litigation. One is faced with a very basic question of when is something that is a robust and justifiable approach to litigation in a pre-action letter a threat. That is not straightforward, in the Government’s view. The Government’s view is that this is not a matter where the criminal law should intrude.
Baroness Stowell of Beeston (Con)
My Lords, I am sorry to interrupt my noble and learned friend, but his reference to the Solicitors Regulation Authority prompts me to ask him a couple of questions. He makes reference to access to justice and to the Government being nervous about legislating in a way that would call that into question. As I said at the start, the amendments that I have tabled, Amendments 87, 88 and 89, are directed at the Solicitors Regulation Authority. As my noble and learned friend has already said, it issued a notice recently to reinforce the fact that this kind of activity is unacceptable.
My amendments seek to codify that yet further and give it the power, which it does not feel it has sufficiently clearly in law, to act when a solicitor is conducting themselves in a way that could be supporting somebody trying to prevent proper inquiry into what could be economic crime. I am struggling because I understand the argument my noble and learned friend is making about parliamentary time and the Government wanting to legislate for this in the round, but I also know as a former business manager that it is very difficult for any individual government department to be confident, even if it wants and hopes to be able to legislate in the way he is indicating that he and his department do, because the timetable is not in its control.
There is frustration in this context because we know that this is about only economic crime and that we are proposing amendments that would tackle only economic crime, as the noble Lord, Lord Cromwell, has said several times—maybe this is a bigger issue than even the SRA is telling me. This would make a difference none the less. In my humble view—I am not a lawyer—I do not think we are proposing anything that would limit people’s access to justice. When my noble and learned friend goes back to his department, even if he cannot make any kind of commitment at the Dispatch Box today, which I understand, could he at least have a conversation with others that is a bit more open-minded than his colleagues seem to have been on this matter up to this point?
Lord Bellamy (Con)
I thank my noble friend for that intervention. I can certainly have that conversation. I do not want to give the impression that the Government are close-minded. We are very prepared to legislate and have said that we are willing; the question is finding the right vehicle. I will deal with my noble friend’s amendments in a moment. When I said a moment ago that there are issues around access to justice, I meant no more than that. We have to be very careful in talking about approaching a court and whether that is in some way unprofessional, subject to sanctions or otherwise criticisable.
As far as the Government can see—if I may think aloud—there are probably two essential mechanisms to deal with this, one of which is in part reflected in some of these amendments, although the Government would not entirely agree with how it is put. One is an early disposal mechanism and the other, critically, is a cost protection measure so that people are not exposed to costs. As has been said many times, the risk of having to pay the costs is the real imbalance. Those are two general thoughts that, I hope, illustrate that the Government are not closing their mind to this. We are thinking about it and hope to come forward with a comprehensive, balanced solution, but today I cannot say exactly when.
With that background, I will deal with the specific amendments, which the Government are sympathetic to but cannot accept. On Amendment 80 from the noble Lord, Lord Thomas, as I have already said, new criminal offences should be created with care. That is especially true when targeting professionals with responsibility for assisting persons to achieve access to justice. There is a risk of inadvertently undermining access to justice in that way and the Government’s view, as I have said, is that a criminal approach in this area is not correct and would in any case create quite a lot of difficulties around proof beyond reasonable doubt, the concept of reasonable excuse, et cetera. Criminal offences need to be clear and we are very reluctant to see a new criminal offence created. That is our position on Amendment 80—it is too far-reaching. On that basis, I ask the noble Lord, Lord Thomas, in due course to withdraw it.
Baroness Stowell of Beeston (Con)
Briefly, I urge my noble friend to look at the correspondence I have had with the SRA specifically about the Bill. The SRA makes it clear that what I am proposing by way of these amendments would give greater clarity to the fact that SLAPP cases which relate to economic crime would also not be subject to the current cap but would benefit from that cap being lifted, which the Government are seeking to do. To put it another way, my amendments are trying to make sure that the intention of what is already in the Bill is achieved in the way that the SRA is asking for.
Lord Bellamy (Con)
Indeed. I respectfully suggest to my noble friend that she may have copied the letter to which she refers to the Home Office and the Ministry of Justice recently.
Baroness Stowell of Beeston (Con)
It was also copied to the Minister’s office.
Lord Bellamy (Con)
Indeed. I suggest that I meet with my noble friend and we go through it with a fine-toothed comb. I am happy to meet with anybody else who wants to go through particular amendments with a fine-toothed comb and see where we are, because there is no point in arguing about things where we are ad idem.
The same point arises on Amendment 89, which relates to POCA—I pronounce it “poker”, but others pronounce it “pocker”—and Section 327 of that Act. Amendment 89 aims to stop corrupt claimants using their criminal property to pay their legal fees. Our view on Section 327 of POCA is that that is already effectively covered because it makes it a criminal offence for anyone to convert, conceal or transfer criminal property, so the payment for legal services using criminal property is already a crime. I am led to believe that the Solicitors Regulation Authority will shortly publish new guidance on the application of POCA in relation to solicitors’ responsibilities in that respect. So our position on our amendment is that it is already covered, but again, let us discuss this in detail so that we can get it right. Formally speaking, for those reasons I ask my noble friend in due course not to press her amendment today.
I am grateful to the noble Lord, Lord Cromwell, for his Amendments 105 and 106, and for the care and attention that he has devoted to this. Again, the Government’s position is that these amendments do not quite cut the mustard, if I may put it that way.
As drafted, Amendment 105, which seeks to create a new defence, would cut across several other areas of jurisprudence. There is a common law public interest defence for a breach of confidence, and a very careful balancing, in Section 4 of the Defamation Act 2013, as to when you can have a public interest defence in defamation cases. This kind of provision should not be rushed through without a careful examination of its side effects on other legislation and potential unintended consequences. Neither does the amendment quite attack what the Government would suggest is the main problem, which is not whether you have a defence but whether you have the money to fight it in the first place. You need some cost protection to be built into the SLAPPs framework.
The same point applies to Amendment 106 on the power to strike out. There are already powers to strike out, and the noble Lord makes it clear that we need to clarify those powers—but one cannot get away from the fact that, typically speaking, a strike-out application is very expensive and complicated, because you are trying to throttle a case at the beginning and the court is having to go through a great deal of work to get there. In the end, a strike-out will probably not be effective in achieving what the noble Lord seeks to achieve. We share the objective, but we are not sure that this is the right way to do it.
While we are sympathetic to the sentiment behind the amendments, from a technical point of view, the Government do not think that they are quite right. Unscrupulous claimants could exploit all this by ensuring that the process remains very complicated, long and burdensome. That is the Government’s position on these amendments. I repeat that I am very happy to engage so far as I can in a dialogue with noble Lords to see whether we can make further progress on the technicalities of this issue and look for a proper legislative vehicle in which to carry it forward.
Baroness Bennett of Manor Castle (GP)
I do not believe the Minister addressed the point that I and a number of other noble Lords raised about the international dimension of this, and the UK’s position in the international framework. Noble Lords may have seen that the noble Baroness, Lady Kennedy of The Shaws, was joined in this Committee by some guests, one of whom was Sebastien Lai, the son of Jimmy Lai, who was a victim of what has been labelled lawfare by the Chinese state in Hong Kong. We are also seeing British institutions being used as a weapon for that lawfare. Does the Minister acknowledge that there is a true international reputational issue and that the whole rule of law across the world is under attack?
Reflecting on what the Minister said, I think we heard something of a hint about the Government’s thinking that cost protection could be one way of addressing this issue. That fails to address the point made by the Labour Front Bench and others that, even if there is cost protection, an enormous amount of time, energy and stress goes into a case. Even if you are able to take away the financial threat, you are taken away from doing other journalism if you have to spend months engaging in a case.
Lord Bellamy (Con)
I thank the noble Baroness. I am perfectly prepared to accept that there is an international aspect. The Solicitors Regulation Authority is on the case, it has issued its warning notice—fired its warning shot—and that is having an effect, so it is not as if the position is not being tackled. The question is about legislation, and the need to get it right from a rule of law and an access to justice point of view. There is a conflict here, as the noble Lord, Lord Vaux and the noble and learned Lord, Lord Garnier, pointed out. One has some misgivings about this because, as was also said earlier, journalists are not always right, and one must bear that in mind. If you have ever been on the receiving end of the tabloid press as a defendant, you will know that they still have not inconsiderable power if you have no money to defend yourself.
Lord Cromwell (CB)
If I may say so, one of the formative experiences of my childhood was being on the receiving end of tabloid journalism, and it is something I will never forget. That does not alter my commitment to getting this right.
I am encouraged by the Minister saying that my amendments do not quite cut the mustard—“do not quite” is a pretty good score in my book. I agree with him that early access will be a key feature of the right answer here, and cost protection, depending on what form it takes, is potentially helpful. He constantly prays in aid access to justice is a big issue, and I agree that the definitional issue of a SLAPP is very important. However, in the conversations he has promised to have, I would want him to make a distinction between harassment and denying the right to justice. Denying the right to justice, the ability to go to court if you wish, is not what I am about—I am about where people have no intention of going to court if they can possibly avoid it but are simply harassing people who want to bring economic crimes into the light. The Minister has given us a hint that there is a government Bill in draft here. I am taking that in good faith; I hope that faith will be well placed and that we will see it soon.
Lord Bellamy (Con)
Again, I thank the noble Lord for his remarks. The key problem is to distinguish access to justice from harassment. It is quite difficult, but it can be done. That is my answer to that question. On where the Government are, as I said before, we are working on drafts, but I cannot go any further than that until I know whether there is a legislative vehicle and which it can be. I am sorry not to be able to commit the Government at the Dispatch Box today any further than that but, as I said, I am hoping—and I can only express as a hope—that this is a short-grass and not a long-grass issue.
Baroness Bennett of Manor Castle (GP)
My Lords, I apologise to the Committee, I perhaps should have declared my position as co-chair of the All-Party Parliamentary Group on Hong Kong in my last intervention.
Lord Thomas of Gresford (LD)
My Lords, I am grateful to Minister for his response and look forward to discussing these issues with him. I am grateful to all noble Lords who have spoken, and in particular to the noble Baroness, Lady Stowell. I commend her and her committee for the work they have done in investigation and taking evidence on this issue. I admire the guts and determination of the noble Lord, Lord Cromwell, and the fury of the noble Lord, Lord Agnew, on this issue.
I do not want to speak for too long: we have had a very long debate. The only dissenting voice was that of the noble and learned Lord, Lord Garnier. Your Lordships may recall that I said that, when the results of the consultation were looked at, the claimants’ lawyers were saying, “There’s nothing to see here, guv. It’s all the ordinary rough and tumble of litigation in this country”. The noble and learned Lord, Lord Garnier, referred to his experiences in the bear garden. I remember the bear gardens—I remember appearing in a bear garden for the leader of the Opposition in the Singapore Parliament; it was not an easy position. He was suing the Straits Times for libel, and the application to strike out was made on the grounds that he had no reputation in this country. When he died, some years later, he had obituaries in the Times, the Telegraph and the Guardian.
I know the games that these media lawyers play. They do not face up to some of the realities that we in the criminal courts perhaps have to face from time to time. But I have the highest regard for the noble and learned Lord, Lord Garnier, in his professional capacity, so nothing that I say should be taken as derogatory to him—otherwise, subject to professional privilege, I might find myself in court.
Lord Bellamy (Con)
Just to clarify, as I said, the Government’s position is that it is not appropriate to introduce a criminal offence in relation to access to justice. It is not a question of just having another offence. Access to justice is a very important area, and we are on a slippery and possibly Orwellian slope if we start saying that it is criminal for someone to go to the law on some point. It is a very difficult area—that was all I said.
Lord Thomas of Gresford (LD)
So, according to the Minister, it is not criminal for a person to threaten litigation, with all the expense and worry that that involves and the way that it crimps the investigation of crime. He is saying that it is not unlawful and should not be criminal. There are criminal offences that cover conduct far less morally bankrupt than that, which is what I hope we shall discuss with the Minister before Report. For the moment, I beg leave to withdraw my amendment.
Lord Etherton
“(a) constitutes the offences of fraud, false accounting, money laundering or offences under any binding sanctions regime, whether at common law or in primary or secondary legislation,”Member’s explanatory statement
This amendment provides for a shorter and more focused definition of “economic crime” than is presently to be found in Clause 180(1)(a) and Schedule 9.
Lord Etherton (CB)
I preface my remarks by emphasising that what I say about this amendment and the other amendments in this group is not intended in any way to qualify or undermine the broad objectives of the legislation. They are intended to make the legislation better.
I will focus for the moment on Amendment 81, which addresses the definition of economic crime to be found in Clause 180. The amendment has the support of the Law Society and the Bar Council. In the current wording of the Bill, the definition relates to only three matters. The first is the disclosure obligations under Clauses 175 to 178; the second is that by virtue of Clause 181(2C) it applies to the Law Society’s powers to impose a fine in cases relating to economic crime; the third circumstance is that it applies to the new legal services regulatory objective in Clause 183 of promoting the prevention and detection of economic crime.
Under the current definition in Clause 180, economic crime is defined by reference to a long list of offences, common law and statutory, extending over two and a half pages in Schedule 9. The definition of economic crime would be further extended under the Government’s proposal to add a new Schedule 10, which is directed to the failure to prevent fraud. As we heard in the last debate, although I think it is right to say that none of the amendments relating to SLAPPs is tied to any definition of economic crime in the existing Bill, SLAPPs would have to be in some way connected to some definition, and that may be wider than one would otherwise contemplate economic crime to comprise.
The definition of economic crime in Clause 180, by reference to Schedule 9, and its extended meaning by reference to the proposed Schedule 10, raises the fundamental question of what this Bill is actually about. Under Schedule 9, for example, it includes theft, and under the proposed Schedule 10 it includes false statements by company directors.
The Government’s intention, however, as I understood it, is that the Bill is directed to a specific type of criminal activity—fraud, false accounting, money laundering and the breaches of sanctions. Those are the activities which Amendment 81 sets out. Those elements were identified in a meeting which I had with Dame Margaret Hodge, who has played a significant role in the promotion of this type of legislation. Those activities—fraud, false accounting, money laundering and the breach of sanctions—chime with the Bill’s three key objectives, mentioned at the very beginning of the Explanatory Notes, which are focused on the abuse of corporate structures. That is what the Bill is about: the abuse of corporate structures to launder money, hide assets obtained unlawfully and prevent restitution of such assets by making them irrecoverable. To include theft under Schedule 9 goes far outside that type of activity, as it would embrace, for example, a straightforward theft of any object in any circumstances, which has no economic significance other than the loss of value to the owner of the object.
Further, Section 19 of the Theft Act 1968, mentioned in Schedule 10, as I have said, makes it an offence for any officer of a company or unincorporated association knowingly to make a false or deceptive written account with intent to deceive members or creditors. This is a very broad offence, and again not necessarily related to the objectives of the Bill, as they are explained in the Explanatory Notes, and as I understand them to be. I suggest, therefore, that the Government should focus on the real objective of the Bill and define economic crime accordingly and consistently, rather than by reference to a long list of common-law and statutory offences, which are diffuse and wide-ranging.
That brings me to my next point, which concerns good legislation and proper drafting. To define economic crime by reference to a wide range of offences over two and a half pages is not good drafting.
It complicates rather than simplifies the law. It also gives rise to potential difficulties if any legislation mentioned is repealed and re-enacted in the same or a different way. Of course, in these circumstances there is provision by way of regulation for the Secretary of State to add to or detract from Schedule 9, but there has to be an alteration. By defining the constituent elements of economic crime, as is done in Amendment 81, there is a clear steer as to the objectives of the Bill, and any change in legislative offences will not require an alteration to the Bill. Schedule 9 and proposed Schedule 10 would cease to be relevant. Amendments 82, 83 and 84 are all consequential on Amendment 81.
I now move to the next substantive amendment to Clause 183, which introduces a new regulatory objective into the Legal Services Act. Amendment 90 is signed by my noble friends Lord Verdirame and Lord Pannick and the noble and learned Lord, Lord Goldsmith. Unfortunately, none of them is able to be here today. I am very grateful to them for their support. This amendment also has the support of the Law Society and the Bar Council. Currently, the provisions in Clause 183 relating to the new regulatory objective are far too wide in the following respects. First, it is not confined to the conduct of the lawyer but is expressed as general enforcement of the law relating to economic crime. It turns the regulator of legal services into a general enforcer of the law. Secondly, Clause 183 is not confined to legal activity as defined by Section 10 of the Legal Services Act 2007. In broad terms, legal activity is defined in the 2007 Act to mean the conduct of litigation, advocacy and legal advice and assistance.
Thirdly, the clause does not focus on what is critical, namely the misconduct of the lawyer in this context, which is facilitation or collusion by that lawyer in economic crime. Facilitation or collusion by lawyers in economic crime are the principal areas of misconduct in relation to lawyers mentioned to me in my meeting with Dame Margaret Hodge. Fourthly, it does not make clear that the proposed legislation on economic crime does not trump legal professional privilege where that applies or to the “professional principles”, which will remain one of the regulatory objectives under Section 1 of the 2007 Act.
Just addressing this last point, in any legal proceedings legal professional privilege precludes the usual obligation to disclose and permit the inspection of all relevant documents. The privilege, which is the privilege of the client, not their lawyer, is a fundamental common-law constitutional right on which the proper administration of justice rests. There are two aspects to the right—first, legal advice privilege, which applies to communications made confidentially for the purpose of seeking or giving legal advice, whether or not litigation is contemplated or pending and, secondly, litigation privilege, which applies to communications which come into existence for the purpose of litigation.
Lord Thomas of Cwmgiedd (CB)
In supporting what the noble and learned Lord has said, I underline the importance of legal professional privilege; I recall it in many cases but one in particular, where a judge remarked that the worst thing he had ever done was to open up this subject in a particular case. We deal with this at our peril.
Lord Fox (LD)
My Lords, it is with more than a little trepidation that I will speak on this group of amendments, with two noble and learned Lords sat behind me. In his opening observations, the noble and learned Lord, Lord Etherton, got the SLAPPs argument a bit back to front. My noble friend Lord Thomas worded the SLAPPs amendment in the way that he did so as not to include the non-economic crime aspects of SLAPPs. That was exactly to avoid the issue that I think the noble and learned Lord highlighted in saying that SLAPPs would drag other criminal definitions into the Bill. My noble friend’s careful wording was designed specifically to avoid that, but no matter.
More generally, there is a functionality in Schedule 9 which, if taken away, we will lose: the ability to put offences in and take them out using regulation. That is included in Clause 83 on page 165. If the noble and learned Lord is successful in his campaign, he needs to consider putting that back in, because in future we do not want to have to use primary legislation to achieve that objective. That is something to look at.
On the final amendment to Clause 183, Amendment 90 —with the names of the four riders of the apocalypse on it—again I take the noble and learned Lords’ points about client privilege. I have one question for the noble and learned Lord, Lord Etherton. If a solicitor is taken on and starts through their client privilege to find things that they do not like, I assume that they would be encouraged to walk away from that client. Not having been in that situation, I would like to understand what the professional advice is. Do they carry on and sit behind privilege or is a solicitor essentially encouraged to walk away from a client when they begin to uncover things through that privilege that they find to be illegal or immoral?
There is another debate to be had at the beginning of the next sitting, where we talk about failure to prevent. It is quite clear that the point raised here cuts into the failure to prevent debate. I encourage both noble and learned Lords to be present for that because their point here is absolutely relevant to the failure to prevent debate, and we have to have those two debates almost together. I hope that they will be able to make time on Thursday to join in that debate.
Baroness Blake of Leeds (Lab)
I do not have an enormous amount to add but I thank the noble and learned Lord, Lord Etherton, for his comments and for the full explanation of the amendments before us in this group.
I will add a concern about the removal of the schedule naming the offences. Perhaps we will need to have a better understanding of why that would be an advantage, but I remain to be convinced on that point. On Amendment 90, I do not have much to add to the comments made by the noble Lord, Lord Fox, which lead to a need for greater clarification before we can move on from this.
Lord Bellamy (Con)
Once again, I am grateful to noble Lords who have spoken in the debate. I will first take Amendments 81 to 84, tabled by the noble and learned Lord, Lord Etherton.
Whereas our lengthy debate earlier in the day was directed at expanding the Bill, this is directed at narrowing it. It may not be a total surprise if I say that the Government are not very happy about proposals to narrow the scope of the Bill. As was said, these amendments arise, apparently, with the support of the Law Society and the Bar Council. The Government met the Law Society and the Bar Council on a number of occasions and the question of the definition of economic crime was gone into in some detail, and one is a little surprised to see that this matter is being persisted in.
The list of the offences in Schedule 9 is very close to the list of offences in the Crime and Courts Act 2013, which applies to deferred prosecutions in various cases, which are often relevant in financial matters, and, although not exactly the same, they are based on that definition.
The other introductory comment that I would, if I may, make is that, while the overwhelming bulk of the legal profession upholds the highest standards, much of this Bill would have been unnecessary were that true of all legal professionals. It is against that background that the Government are reluctant to run the risk of introducing loopholes into the Bill by reducing the scope of Schedule 9.
The first point to note is that the definition of economic crime in Clause 180 and Schedule 9 applies right across the Bill and includes the information-sharing measures in Clauses 175 and 176. Those measures, for example, entitle bank A, when it receives from bank B a large sum of money, to ask bank B whether it is a proper transaction, so there is information-sharing between financial institutions. Clause 176 enables a financial institution to notify a platform, for example, that it has concerns about particular transactions or clients. These are pretty essential powers in the Bill, and the definition of economic crime applies to those powers as well. In the Government’s view, it would not be desirable to have two definitions of economic crime across the Bill as a whole.
The definition applies to other legal services measures in Part 5 of the Bill, which amend the Solicitors Regulation Authority fining limit and information provisions. So for consistency and ease of understanding, the Government’s position is that it is sensible to have a single definition of economic crime through the Bill, and not reduce that definition at this stage. Just to make an illustration, there was some suggestion that introducing the word “theft” would go a bit too far. It may in a certain situation be quite difficult to say whether something was fraud or theft—it might well be both—but it is not the sort of argument that the Government feel that one should get into. Having worked with the Law Society of England and Wales and the Bar Council on these matters, the Government have clarified in the Explanatory Notes which offences are likely to be most relevant to the financial sector. They have not excluded them, but they have indicated that fraud, money laundering, terrorist financing, bribery, and any offences under regulations made in relation to money laundering are likely to be the ones that the profession should concern itself with most in practice. But it is important that regulators should not be unduly constrained in the ambit of the definition of economic crime in this Bill.
I can reassure noble Lords that all the existing safeguards that apply to regulators under public law principles, including what is proportionate and fair, continue to apply. Section 3 of the Legal Services Act provides that the Legal Services Board must have regard to the principles of transparency, accountability, proportionate action and consistency and target only those cases where action is required. The new objective in relation to economic crime fits within that framework. One is to an extent tilting at windmills here to try to reduce the scope of this major piece of legislation designed to tackle the very serious problems that noble Lords have now debated at length. On that basis, I shall ask the noble Lord in due course to withdraw his Amendment 81 and not press his other amendments.
I turn to Amendment 90, which affects the regulatory objective. The essential aspect of the amendment is that the objective is too wide and that we should spell out that it is all subject to legal professional privilege. Those are the essential points that were made.
I will take the point about legal professional privilege first. The Government entirely accept and agree with the noble and learned Lord that legal professional privilege is a fundamental principle of English law. It protects the confidentiality of communication between a lawyer and client in terms of legal advice, and ensures complete fairness in legal proceedings in terms of litigation privilege, for example. However, the Government are not able to accept the amendment for the following reasons.
Lord Etherton (CB)
Perhaps I should first take the opportunity to answer the question of the noble Lord, Lord Fox. I think the answer is that if somebody goes to a solicitor for advice on a potential course of action, it may be clear that it is unlawful, in which case legal professional principles would require the solicitor not to act for that client in relation to that. But there may be gradations of arguability about whether it is lawful or not; I gave the example of things going up and down, and he would be perfectly entitled to advise on those degrees of legality and prospects of success in litigation. My point was simply that that should not render the solicitor in any way concerned about committing any breach of a regulatory duty. That is the way it would work, and it would be the same for a barrister.
Turning to the Minister’s comments, I am afraid he has not really addressed the point that I made, which is that, in paragraph 2, the Explanatory Notes say that the Bill has three key objectives. That is the Government’s definition of what it is about:
“a. Prevent organised criminals, fraudsters, kleptocrats and terrorists from using companies and other corporate entities to abuse the UK’s open economy. This Bill will reform the powers of the Registrar of Companies and the legal framework for limited partnerships in order to safeguard businesses”.
Then it deals with strengthening
“the UK’s broader response to economic crime”
by seizure of crypto assets and so on. The extension of the definition of economic crime to matters such as I mentioned, for example representations of directors or theft, is way outside that. It is nothing to do with London as the place where people launder money, for example, and I do not accept that there may be some difficulty in distinguishing fraud and theft. A fraud may involve a theft, but fraud is quite clear as to what it is.
Amendment 81 is not an attempt to narrow the definition, except in relation to what I understand to be the essential elements: fraud, false accounting, money laundering and offences under any binding sanctions regime. If it is something more than that, then that ought to appear in the Explanatory Notes or be clearly stated by the Minister at the Dispatch Box. It should be made clear. You could combine a statement such as that—the broad objectives—together with various bits of legislation, but actually the advantage of expressing it in these generic ways is that it would make it far simpler and easier to understand, and would not require changes to the Act when there are legislative changes, with regard to the various offences currently listed in Schedule 9.
Having said that, I have made perfectly clear what the primary objections are to the new regulatory offence, which does not concentrate on the actual personal collusion or facilitation by the solicitor but could cover, for example, information that the solicitor receives in the course of advice from the client about some third party—because it is that wide, I say it would be an abuse of the legal regulation to leave it in that way rather than confine it to a personal involvement.
But I have made those points. I have listened to the Minister and certainly, so far as today is concerned, I beg leave to withdraw the amendments.