Proceeds of Crime Bill

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Mr. Paul Stinchcombe (Wellingborough): Through his amendment, the hon. Gentleman attacks the level, not the type, of default. If he accepts that the right types of default are contained in the clause, does he accept that in subsection (9) we must identify all the relevant parties?

Mr. Grieve: I am not sure that I agree. Subsection (4) mentions that the second condition is:

    ``in the criminal investigation there has been a serious default by a person mentioned in subsection (9)''

I accept that a criminal investigation cannot be ordered by the financial investigator.

Mr. Stinchcombe: Or by the director.

Mr. Grieve: Yes. However, the oddity of the clause, which perhaps the Minister can explain, is that it leaves up in the air the question of what role the financial investigator and the director have in the criminal investigation. It is possible for someone to be prosecuted but not be subject to a confiscation procedure.

We heard earlier that the financial investigator seems to have some relation to the investigation because of the authorisation that he is given by a court, a police superintendent or some other person. When I first read the clause, I assumed that the financial investigator was a cog in the criminal investigation and so thought it possible that he was included under subsection (9) in that role. I may be wrong. That is why I wanted clarification about the financial investigator's status.

Mr. Stinchcombe: At the outset of the hon. Gentleman's remarks, he asked why the director was not included in subsection (9). Does he agree that the director cannot be responsible for any of the people mentioned in the three conditions?

Mr. Grieve: I accept that the director cannot be responsible for defaults in criminal investigations because he does not conduct them. The clause is about the confiscation of assets, which includes the steps taken in a criminal investigation to restrain assets. Confiscation takes place after conviction, so an overturned conviction is likely to lead to compensation for the consequences of confiscation. One can foresee a situation—not covered by the clause—in which a default takes place during the restraint process and the defendant is acquitted. In such a case, is compensation catered for? I am uncertain about that.

Mr. Stinchcombe: I wonder whether we are getting closer to the issue. The hon. Gentleman is trying to attack not the threshold of default but the types of default that he says should be contained in the clause.

Mr. Grieve: The hon. Gentleman is right that I am concerned about the types of default, but I am also concerned about the threshold. I tabled an amendment to delete the word ``serious'' so that we could consider that. He is right that the test in a criminal investigation should perhaps be serious default, whereas a different test might apply for something that goes wrong in the restraint proceedings. I tabled the amendments to get the discussion going. Once matters are clearer, perhaps we will be able to decide whether this section of the Bill requires substantial amendment.

What is serious default as opposed to default? I would be grateful if the Minister would clarify that matter. Is it the test of, effectively, a malicious prosecution, or is it another test? That is another matter on which we need clarification. Until I have heard from the hon. Gentleman, it is difficult for me to develop further arguments and some of my arguments may not be justified. If the hon. Gentleman would respond and give us an impression of what the clause is designed to achieve, whom it is supposed to cover, what sort of compensation could be recovered under it, and what it would be granted for, we would be greatly enlightened.

The Chairman: Order. It might have been better to have this debate under clause stand part.

Mr. Bob Ainsworth: The test for compensation under the existing legislation is serious default by the authorities. That is the position under the Criminal Justice Act 1988 and the Drug Trafficking Act 1994. The Government believe that the existing test should be retained, despite the fact that restraint will be available from an earlier stage in proceedings. That is fair and proportionate. Lowering the threshold for compensation would risk impeding the Bill's objective of enabling the wider use of restraint and compensation to recover the proceeds of crime.

I shall deal separately with the amendments tabled by the hon. Member for Beaconsfield. Amendment No. 139 appears to be completely indefensible. It deals with those defendants against whom criminal proceedings are initiated but the proceedings do not result in a conviction or the conviction is subsequently overturned or quashed. The policy on compensation in such cases has been in place for many years and I am not aware of any evidence that it has given rise to injustice. We must be extremely careful to avoid introducing excessive financial risks to law enforcement and prosecuting authorities, which would be extremely effective in deterring them from doing their duty of enforcing the criminal law. It is inherent in criminal justice that a proportion of those against whom proceedings begin will end up not being prosecuted or convicted. There are already ample safeguards in criminal procedure to prevent criminal proceedings from being brought frivolously.

Moreover, the restraint and confiscation proceedings in the Bill contain ample safeguards. The defendant can apply to the Crown court to have the restraint order lifted. If that fails, he can appeal to the Court of Appeal. He can seek to have assets released for his reasonable living and business expenses. If that is refused, he can appeal. When a receiver is appointed, the Bill imposes a requirement to maintain the value of the assets. If the defendant disagrees with the actions taken by the receiver, he can apply to the court. If that fails, he can appeal. If property is irreplaceable, he can ask the court for a ruling to that effect, so that the receiver cannot dispose of it. Given those safeguards, there is no justification for the alteration proposed under amendment No. 139. It would cause real damage to the aim of making the confiscation system more effective.

Amendment No. 138 deals with suspects whose assets are restrained during a criminal investigation, but before a charge has been laid. I concede that Conservative Members have an arguable case, but it is misguided and potentially damaging. At present, those suspects who are not yet about to be charged with anything cannot have their assets restrained. Early restraint is therefore one of the major innovations under the Bill. Until the investigation has been completed, it is not known whether there are sufficient grounds to take criminal proceedings against such people. An investigation may be launched on the basis of suspicion and that suspicion may prove to be unfounded. For that group of people, therefore, it is suggested that the threshold of compensation should be reduced. Under the amendment, any error by the investigator, regardless of its seriousness, would expose the law enforcement to a compensation claim if the error prolonged the investigation, no matter how briefly.

All my arguments about amendment No. 139 apply to amendment No. 138. The Bill provides ample safeguards to persons affected by restraint orders, so that they can ask the court to protect their interests. Moreover, the purpose of bringing forward restraint is to address the problem that is at the centre of the current legislation, which is that assets are often untraceable, have been used up by the time that the suspect has been charged or have been put beyond the reach of the law enforcement agencies.

The hon. Member for Beaconsfield raised an important matter. I do not wish to diminish it. It goes right to the heart of what we are doing in Committee. Subsequently, we and the House must decide whether we understand and support the Government 's position, which is fundamentally that providing for effective early restraint is proportional. That test will be applied if the matter is challenged through the legal system. We believe that it is proportional. Without it, the measures under the Bill will be rendered massively ineffective. We ask the Committee to accept that the threshold is in the right place. It must be kept at that place if people want the provision to be effective so that the proceeds of crime can be confiscated.

Norman Baker: I apologise for having to pop out for 30 seconds or so in the middle of the Under-Secretary's contribution.

In an intervention on the hon. Member for Beaconsfield, I made a point about subsection (6) and the category of people who would be eligible for compensation in the event of a serious default being proven or accepted—namely, those who had realisable property. My point was that malicious confiscation or people suffering in ways other than through the loss of realisable property were theoretically possible. What safeguards are provided for people in such circumstances?

Mr. Ainsworth: Subsection (6) states that the third condition is that the person had realisable property or has suffered loss.

Norman Baker: And has suffered loss.

4 pm

Mr. Ainsworth: The hon. Gentleman is right. The provision states:

    ``and has suffered loss in consequence of anything done in relation to it by or in pursuance of an order''.

We are not trying to define property narrowly. A person will have to have shown that he has suffered loss as a result of the activities of the law enforcement agency being brought against him.

Norman Baker: I prefer the Minister's slip, when he substituted ``or'' for ``and'', which was a much more satisfactory formulation. Will he amend the Bill accordingly?

Mr. Ainsworth: I am not sure whether that would substantively change the existing wording. However, I will check it out and come back to the hon. Gentleman.

The hon. Gentleman said that the matter is entirely outwith people's rights under the criminal law, but people who are pursued through the criminal law have no automatic, statutory right to compensation. Indeed, unlike restraint, arrest carries no statutory right to compensation and claimants must rely on case law. When compensation is requested for wrongful arrest, the standard that the courts apply is fairly high. The courts will generally consider only whether a police officer had reasonable cause for suspecting that a person had committed or was committing an offence for which he could be arrested. If the officer can show that he did, a claim for unlawful arrest is likely to fall. The measures that we propose are not, as the hon. Gentleman suggests, deeply different from those that apply in other circumstances relating to the criminal law.

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Prepared 29 November 2001