Enterprise Bill

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Mr. Djanogly: I am still not sure why the Government do not want the CAT to act in relation to interim issues, but I hear what the Minister says. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 ordered to stand part of the Bill.

Clause 179

Cartel offence

Dr. Cable: I beg to move amendment No. 77, in page 130, line 28, leave out 'dishonestly' and insert 'knowingly or recklessly'.

There is a substantial break in the proceedings, as we jump forward in the Bill to a later clause. This may be one clause on which it would be appropriate to have an extended stand part discussion. The clause introduces, for the first time, the principles of the criminalisation of cartels and prison sentences, which clearly needs extended discussion.

My amendment relates to a technical drafting point. I am not a lawyer, as was painfully apparent from one of my interventions yesterday, but I am advised that the terminology—specifically, the use of the word ''dishonesty''—could be improved on.

There are two points on which the Minister may be able to advise me. First, in comparable offences, the phrase ''knowingly or recklessly'' would normally be employed. It is not clear why the word ''dishonestly'' applies in this case. The second point is a matter of common sense, rather than a legal point. It is possible to envisage circumstances in which a group of people collude to create a criminal cartel whose motives may not be dishonest at all. People might want to subscribe to a cartel arrangement for many reasons: from weakness of character, because they are acting under pressure from a superior in their company, or from personal ambition disconnected from personal dishonesty. Many motives are possible, so the conventional phrase ''knowingly or recklessly'' better captures the spirit of what the Government are trying to achieve.

I hope to be persuaded that there are good reasons for using the word ''dishonesty'' in this context. If the amendment were accepted, consequential changes would need to be made, including to some of the other amendments to which I put my name. This is a

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probing amendment related to the use of legal language.

Mr. Carmichael: I associate myself with the words of my hon. Friend the Member for Twickenham. He does himself a disservice by saying that this is a minor and technical amendment, as it is a significant one in the context of a cartel offence.

On reading the clause, it seems to me that politicians won the battle against the lawyers on this occasion. As a lawyer turned politician, I am familiar with that dichotomy. A great deal of political force lies behind the idea of having to show dishonesty, whereas, as my hon. Friend said, the more regular or expected terminology would be something like ''knowingly or recklessly''.

Does the terminology really matter? I suggest that it does. Lawyers will enforce, judge and interpret the provision, and if one looks at it from a lawyer's perspective, one sees that there will be problems with proving dishonesty. Such a charge brings with it the need to establish a much more complex mens rea, or a guilty frame of mind.

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If I were defending a client, I would say that it was not enough simply to show that he knew what he was doing and that the prosecution had to prove that he was acting dishonestly. I would say that it was possible to know something without there being dishonest intent. It is therefore possible to argue that the mischief at which we are striking will not be rectified.

As the provision stands, there will be problems with enforcement. As I said on Second Reading, the success or otherwise of the offence will be assessed according to the number of successful prosecutions. However, the Government risk weakening the offence by insisting on dishonesty. The phrase ''knowingly or recklessly'' is much more in line with other offences, and I commend it to the Minister for further consideration.

Mr. Field: Unless the Minister has other plans, I find myself in the unusual situation of being on the Government's side. I strongly feel that reference should be made to a dishonest frame of mind. I would be very reluctant for the clause and other provisions in effect to criminalise individuals simply on the basis of reckless behaviour. That would be a dangerous step for the criminal law to take.

I shall no doubt speak at length about one or two of the other clauses that relate to this matter, because I have concerns about the idea of prison sentences and criminalisation. We at least need proof of dishonest intent, and recklessness is far too lax a term. I appreciate the comments made by both Liberal Democrat Members about the usual terminology, but such terminology often applies to civil, not fully fledged criminal offences. I therefore sincerely hope that the Minister will resist the amendment.

Mr. Purchase: I want to probe the matter a little further. Historically, there is no question but that cartels have acted against the interests of ordinary consumers. It is therefore important that get the law right, and it is right and proper to probe the matter.

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I am not sure how to distinguish between dishonesty and the phrase ''knowingly and recklessly'', as applied to the conditions in (a) to (f). Are they the same? If so, there is no point substituting the phrase ''knowingly or recklessly''.

Mr. Carmichael: I fear that we are in danger of counting angels dancing on the head of a pin. However, I suggest that if one can prove (a) to (f), one has something pretty close to dishonesty, although not necessarily. In those circumstances, the phrase ''knowingly or recklessly'' would be preferable.

Mr. Purchase: I am happy to seek advice from any quarter on this matter, because I think that we are dancing on the head of a pin. I am entirely unsure about the difference between the terms, and I am anxious that we get the terminology right. Clearly, (a) to (f) provide the grounds on which action will follow, but to make that reality, we must show people's intention. You used the word ''recklessly'', which could mean unintentionally. Do we need to prove that reckless behaviour has contributed to dishonesty? If that is the case, we really need an explanation from the Under-Secretary.

Mr. Carmichael: If you are able to prove (a) to (f), why is it necessary to prove that it was done dishonestly? The issue of dishonesty is an extra burden on the prosecutor.

The Chairman: Order. Before the hon. Gentleman replies, I should say that this afternoon the Committee seems to be slipping into terminology that is not consistent with procedure in the House. The hon. Gentleman may think that he is inviting Mr. Purchase to respond to something, but by using the word ''you'', he is inviting me to do so. I, of course, do not comment on the merits of the Bill.

Mr. Purchase: I do not want to push this much further. I am anxious to hear what my hon. Friend the Under-Secretary has to say. It is important for the Committee to understand whether, if there is a substantial difference between the two terms, we can adopt one or both or leave the measure unamended and be happy that, in terms of paragraphs (a) to (f), proving dishonesty is no more difficult than proving that an act was done knowingly or recklessly.

Miss Johnson: First, the effect of the amendment—I hope that hon. Members are all aware of this—would be to widen the scope of the offence considerably. The Bill provides for a definition based on dishonesty in order to create a tightly defined offence. We think that that is important. Although there is no legal requirement for an exact correspondence between the new criminal offence and EC or domestic competition law, we would like there to be consistency. The dishonesty test is designed to achieve both these objectives; a tightly drawn offence and consistency.

Bona fide activity, or activity which would be exemptible under existing EC or domestic competition law, should not be caught in practice. This will be achieved first because the OFT will not prosecute a case where there is any real possibility that the agreement between the undertakings would be compatible with Community or domestic competition law; and secondly, because for a conviction, the court

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must be convinced beyond reasonable doubt that the defendant acted dishonestly.

The sort of evidence that would point to dishonesty is likely to include a failure to seek legal advice, combined with attempts to disguise or hide activity. For example, holding secret meetings and the absence or destruction of records, and other such practices, would be instances of such evidence.

Dishonesty would be proved according to the well-established Ghosh test, which requires the jury to consider two questions. First, was what was done dishonest by the standards of reasonable people? Secondly, did the defendant realise that this was the view of reasonable people? The conduct is only dishonest if the answer to both questions is yes. In a criminal trial the answer must be yes beyond any reasonable doubt for dishonesty to be proved.

That means that the defendant must have believed his or her conduct to be wrongful in nature, in the sense of realising that reasonable people would regard it as such. For example, a defendant whose company had an exemption from the commission, or legal advice stating that the agreement would be exempt, could hardly be regarded as dishonest in concluding such an agreement. In other areas of the law juries have shown themselves to be well capable of identifying dishonesty using the test.

An offence based on knowing or reckless conduct, as is proposed by the amendment, would not be focused in this way. It would cover a much wider range of anti-competitive activity than the Government intend.

Mr. Carmichael: I take the Under-Secretary's point but I wonder whether she overstates the case, because the measure would remain in the context of the agreements referred to in subsection (2). The offence would remain tightly focused.

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