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Mr. Mitchell: I do not need to give the Minister a definition. What she needs to explain is why it was thought necessary to add this definition four years ago in the Financial Services and Markets Act 2000 and why her predecessors also took precisely the same view in the Companies Acts 1985 and 1986. Why are the Government unwilling to concede the same definitions in this particular case when they accepted them in the year 2000?
Jacqui Smith: That argument suggests that the hon. Gentleman adopts a sort of cut-it-out, stick-it-down and paste-it-in approach to legislation. Simply because one set of words is used in one piece of legislation, it does not necessarily mean that the same words are right in another context. I have spent some time outlining the dangers of otiose words in legislation
Mr. Gummer: Would the Minister like to reflect on previous debates on precisely the same issues? The reason that the Government offered at the time for including those particular words was precisely the same reason why Conservative Members are asking the Minister to include them here todayso that people will realise that these things do not happen without good reason. If she refuses to accept that, she is effectively sayingthere is no doubt about itthat these matters can take place without good reason. She cannot have it both ways: if she will not allow "with good reason", it means that she accepts that these things can take place without good reason.
Jacqui Smith: It is a trivially attractive argument to say that we should reverse what is in an amendment to find out what legislation really means. Really, though, the right hon. Gentleman, with all his experience in government, should have more sophisticated arguments than that.
Mr. Andrew Mitchell:
For the first time during the course of the Bill, I must chastise the Minister for failing to give a proper answer. It is no good her talking about
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doing a scissors-and-paste-job on the legislation. These are words and phrases that her predecessors expressly used in 1985 and 1986. I have given chapter and verse on why her Government put them in and where they put them inparticularly in the Financial Services and Markets Act 2000. Why does she think that they were right then, but wrong now?
Jacqui Smith: Because this is a different Bill and we are debating the impact of what happens when words are put into legislation without any clear reason. As I am about to explain, there is a clear legislative basis for action. Fundamentally, the decision whether to act is one for the Secretary of State and the basis on which she may so decide is circumscribed by the principles of administrative law. As I said in Committee, the Secretary of State will have to have a sound reason for using the powers. She cannot act lawfully without one. Her decision to act must be within the legal scope of the provision and it must be in pursuit of the policy and objectives of the Bill. It must also be reasonable. Neither amendment No. 1 nor amendment No. 20 would change that. The risk is that they would do the opposite of what is intendedthat is, that they could muddy the waters sufficiently to mean that a person could misapprehend the circumstances under which an investigation might be carried out. Ultimately, new section 447 could be interpreted by the courts in a way that was not intended, so I do not accept that there is a need to reintroduce the so-called good reason test.
The remaining amendments in this group concern clause 23, which provides powers for inspectors and investigators to require access toand to remain onpremises that they believe are being used wholly or partly for the purposes of the business of the company that they are investigating. That is an important addition to the range of powers available to inspectors and investigators. The ability to gain access to company premises, and to spend time there, has great practical benefits, as information is the lifeblood of a successful investigation. Without it, inspectors and investigators cannot operate effectively.
The simple observation of a premises can be enormously valuable in allowing inspectors and investigators to build an understanding of the company's business. They can find out who controls the company's operation on a daily basis and form a view about its viability. Companies with something to hide have been able to impede investigation by refusing access to their premises, leaving investigators or inspectors unable to identify the people to whom they should talk, or to approach them.
For example, investigators or inspectors might want to establish what telephone script was being used with potential customers in a call centre, but that would be less easy to do if they were unable to gain access to the premises. Lack of access also means that inspectors or investigators cannot ascertain the relationship between individuals. For example, they could not establish whether a disqualified director was acting as a consultant to the company or whether he had a management role.
Without access, it is impossible to determine whether the records presented to inspectors or investigators provide a complete picture. Investigators have found themselves being kept off premises and being drip-fed
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papers over a period of time. In such circumstances, their investigation is delayed and it is possible for companies to use the delay to destroy information or amend records.
I reiterate that the powers in the Bill must not be confused with the existing search and seizure powers available to investigators and inspectors. The two sets of powers are entirely distinct. The search and seizure powers in section 448 of the Companies Act 1985 depend on a warrant: a justice of the peace must issue that warrant, in specified circumstances, to allow an inspector or investigator to enter premises, if necessary by force, for the purposes of a search and the seizure of documents. However, the powers in the Bill are not about forcing entry, searching or the seizure of documents.
I turn now to amendments Nos. 2,3,7 and 8, which concern the basis on which a judgment is made by an inspector or investigator using the new power to enter a premises and remain there. All four would amend or replace references to what an inspector or investigator thinks: under the proposals, either the word "thinks" is replaced with the phrase "reasonably believes", or it is amended to read "thinks on reasonable grounds". New section 453A contains two references to an inspector or investigator being able to act on the basis of what he or she thinks.
An inspector or investigator may use the power to enter premises and remain there if he or she thinks that that would materially assist the investigation. I emphasise that that is not the only criterion applied to use of the power, as its use by the inspector or investigator must also be authorised by the Secretary of State.
Secondly, inspectors or investigators will be able to remain on the relevant premises for as long as they think is necessary to assist the investigation. I stand by the clarification that I gave in Standing Committee: there is no difference in legal effect between the word "thinks" and phrases such as "reasonably believes". Inspectors and investigators must act within the law, and that means that they must have reasonable grounds to believe that gaining access to the premises in question will help the investigation. They will be able to remain on premises only for as long as they have reasonable grounds for believing that that is necessary. The context and safeguards for inspectors' actions are already set out in the legislation. The length of their stay is likely to be a matter of hours rather than days, but I will return to that point when I reach amendments Nos. 9 and 10.
Amendment No. 14 seeks to include in the written statement a description of the inspector or investigator's grounds for belief that the use of the power of entry will materially assist them. I understand that the hon. Member for Sutton Coldfield wants to guard against any possible misuse of powers that he regards as extensive, but I do not think that his amendments are necessary or desirable. There is already a series of specific safeguards that will apply to the use of the powers. I touched on those in Committee, but they bear repeating. The power to require entry to premises can be used only if the investigator or inspector has been authorised to use it by the Secretary of State in the
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investigation in question. The power can be exercised only at reasonable times. The investigator or inspector must produce evidence of their identity and of their appointment or authorisation. They must provide a written statement of their powers and of the rights and obligations of the company or other occupier and of persons present on the premises and they must produce a written record of the visit.
We are consulting on the content of the written statement that will be prescribed by regulations. I understand that we have sent out the consultation document and that we have sent a copy to the hon. Gentleman. As he has not had the chance to look at it yet, I shall ensure that he gets another copy. It is intended that the statement will be more than just a bald repetition of the statute. It will set out in plain English what the company, for example, can expect. However, I do not think that it would be right to set out the reason why the inspector or investigator thinks that gaining access to the premises would assist their investigation. It might be difficult to do so without including some detail of the complaint that led the investigator there. Were the investigator to provide information about the substance of the complaint, it might make obvious the source of that complaint. That could, for example, be an employee or a supplier or customer. It could make life difficult for them and it might dissuade other complainants from coming forward in the first place. Clearly, there will be an opportunity to have some discussion with the inspector or investigator, when they arrive, about the reason for their visit, but it would be disproportionate for the inspector or investigator to be required to provide what amount to written reasons. We have gone a long way with safeguards already and, in my view, nothing more is necessary or desirable.
Before I turn to the hon. Gentleman's amendments on residential premises, let me deal with amendment No. 23, which seeks to modify the definition of "relevant premises". He appears to have the situation in mind where, for example, the company under investigation occupies one or more parts of a building and other people occupy other parts of the building. He wants the power to enter and remain on premises to be exercisable only in relation to the parts used for the company's business. He thinks that the definition of "relevant premises" needs to be amended to achieve that. It does not. That is the effect of the clause as it stands.
Although the expression "relevant premises" is defined in new section 453A, the word "premises" is not. So it must take its natural meaning, in context. "The Shorter Oxford English Dictionary" defines it as including
"(a part of) a building housing a business etc".
Therefore, where a company trades from a building such as an office block, the "relevant premises" under new sections 453A and 453B are those parts of the building that are used for the purposes of the company's business. If the business is carried on in only one part of a building, it is only that part of the building that is the "relevant premises" and not any other part.
The reference in new section 453A(3) to premises that are "wholly or partly" used for the purpose of company business is there to deal with the situation where, for
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example, the company shares an individual office with another company. So the inspector or investigator can require entry to and remain in that individual office even though it is also used for the purpose of another company's business.
Where a private home is concerned, the words are intended to make it clear that, for example, the inspector or investigator can require entry to a director's home study, despite the fact that the director also uses that study for other unconnected business or domestic affairs. The words "wholly or partly" are not included so as to entitle an inspector or investigator to enter, and remain in, parts of a building not used for the company's business, although of course the right of entry to company premises inevitably entitles them to pass through such other parts to reach the company premises.
I suggest that what I have described as the effect of the new provisions is in fact their most obvious and natural meaning. They could not properly be construed as enabling inspectors or investigators to enter and remain in one part of a building simply because another part of the building was used for the business of the company they are investigating.
Amendments Nos. 4, 12, 13, 15 and 16, would, together, introduce a warrant procedure to gain access to residential premises. I am aware that the hon. Member for Sutton Coldfield has genuine concerns about the fact that the definition of relevant premises extends to residential premises also used for a company's business, and that inspectors or investigators will be able to get to relevant premises by moving through premises used entirely for residential purposes. He wants to establish a regime with regard to those premises whereby an inspector or investigator can use the new powers only if a justice of the peace has issued a warrant, and with the assistance of the police. As he sees it, he would be introducing an additional safeguard, but as I have already emphasised, clause 23 is not a power of search and seizure and no force can be used.
As I explained earlier, the inspector or investigator will be trying to establish the facts. I reiterate the point I made in Committee: to introduce any kind of judicial warrant procedure, whether or not involving the police as the hon. Gentleman seeks to do, would be entirely unsuitable and, I contend, unnecessary in light of the safeguards that will be in place. Indeed, with his new responsibilities for policing, I am not sure that he would consider it a good use of police time if, in all circumstances, there was a warrant and, presumably, a police officer attending alongside the DTI investigator.
It is inevitable that there will be circumstances where a company under investigation is trading from residential premises and where access will materially assist the investigation. I have already outlined the vetting process that leads to an investigation into a company. Furthermore, a trip to residential premises will not be the first step in the investigation process, but it is right that it should be an option, should that prove helpful to the inquiry. We must not allow people running dodgy companies to think that they can increase their chances of hiding from inspectors or investigators by trading from their residential address. I have spelt out the safeguards in the provisions and they offer a fair balance.
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I turn to the hon. Gentleman's amendments on time limits for the exercise of the new powers to enter and remain on premises. Amendments Nos. 5 and 6 would restrict investigators' powers to enter and remain on premises to "normal office hours", while amendment No. 11 would limit visits to the hours between 9 am and 5.30 pm, Monday to Friday, unless the inspector or investigator "reasonably believes" that his investigation would be "seriously impaired". The purpose of amendments Nos. 9 and 10 appears to be to limit the permitted duration of a visit to a maximum of one month.
At this point, I want to say something about co-operation. I have already referred to information as the lifeblood of an investigation. Obviously, co-operation from those being investigated is always the most desirable circumstance, as it makes the investigation easier, speedier and more effective. It is crucial, of course, that inspectors and investigators have powers to conduct an effective investigation even when there is a lack of co-operation, but the norm for the inspector or investigator will always be to maintain the most productive relationship.
As I said earlier, the inspectors and investigators will be seeking to obtain information. They will try to achieve that by making contact with the company under investigation during the normal working hours of its business. However, normal working hours will vary from one business to another.
Companies that use call centres to interest members of the public in a wine investment scheme or a holiday club are likely to trade during the evening and at weekends. The days when every business in the high street opened only between 9 am and 5.30 pm, Monday to Friday, are a distant memory. Nowadays, companies target their resources to suit their customers' needs and expectations, and, in just the same way, Department of Trade and Industry inspectors and investigators must be flexible in their approach to investigations. However, their powers cannot, of course, be open-ended, so we have stated that inspectors and investigators can enter and remain on premises only at reasonable times. As I have already said, any other limitation is not practical in the modern business environment.
We have included a test of reasonableness in proposed new section 453A(2) of the Companies Act. The inspector or investigator must take into account all the circumstances of a case. He or she must take into account the company's actual trading hours, who is on the premises and what they are doing.
Amendments Nos. 9 and 10 refer to an inspector or investigator being able to remain on premises only for a period not exceeding one month. That would be inconsistent with the protection already afforded by proposed new section 453A. The effect of the first line in new section 453A(2) is that an inspector or investigator must leave the premises as soon as it becomes unreasonable for the company or other occupier to allow him to remain there and he is asked to leave. It is unlikely that it would be reasonable for an inspector or investigator to remain indefinitely for days at a time. However, the hon. Gentleman's proposal might have the effect of implying that it would be reasonable for the inspector or investigator to do so, up to a limit of one month.
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The reasonable times test is likely to constrain the inspector or investigator to remaining on premises for a matter of hours, rather than days. On every occasion that the inspector or investigator wishes to gain access to premises, he or she must be satisfied that doing so will materially assist the investigation. Together with the reasonableness test, that will rule out the possibility of visits being repeated or drawn out for no good reason. The combination of the two teststhe reasonable-times test and the test about materially assisting the investigationprovides a strong limitation on the use of the powers. In my view, nothing further is required or desirable, as it could weaken the safeguards in the Bill.
Amendments Nos. 21, 22 and 24 appear to be intended to add a layer to the process, whereby an inspector or investigator can use the power to enter and remain on premises. Once the inspector or investigator had been given authority by the Secretary of State to use the power and could show that its use would materially assist the investigation, such authority would last for only 30 days. It would be possible to renew it, but only on the written request of the inspector or investigator to the Secretary of State.
In addition, the hon. Gentleman proposes that the ability to remain on premises be confined to a period of seven consecutive working days. We see no point to that. It seems to be a cumbersome, artificial and unnecessary system of statutory checks on the use of the power to enter and remain on premises. It would add nothing of value to the existing process. The deadlines of 30 days in respect of the authority or seven days to remain on premises are entirely arbitrarysomething that is impossible to avoid with that approach.
Moreover, the hon. Gentleman, in dealing with one way in which he perceives that the powers could be used oppressively, has not dealt with other situations about which I am sure he would be equally concerned. What would happen, for example, if an inspector or investigator were to visit the premises for eight hours every other day for 30 days? Why is he not tackling that?
The truth is that all the necessary checks and safeguards are already in the new powers. For example, our approach provides a test that will be applied so that each case is judged on its merits. On every occasion when inspectors or investigators seek to enter premises using the power, they must think that it will materially assist the investigation. They must have reasonable grounds to think that the investigation will be helped by gaining access to the relevant premises. Once on the premises, they could stay for only as long as they thought it necessary to achieve their purpose. They may remain only for a reasonable time, which is likely to be a matter of hours rather than days. The necessary safeguards are in place to deal with such situations, so I remain of the view that our approach in clause 23 is appropriate. I am not attracted by the regime proposed by amendments Nos. 21, 22 and 24 because it would introduce an arbitrary, artificial and cumbersome layer of bureaucracy to the process without adding any value to the system.
I have responded at length to the worries that were reflected in amendments and raised by Conservative Members. However, the right hon. Member for Suffolk,
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Coastal (Mr. Gummer) asked what I will say to my constituents. I will be in a strong position if my constituents tell me that they have lost their savings or investments in a company and that Department for Trade and Industry investigators cannot investigate the matter properly because they cannot enter premises at an appropriate time, remain on the premises or get the information that they need to ensure that justice is done. I will be able to say that I have ensured that their interests will be safeguarded. I will be able to reassure constituents who are worried about whether to make a complaint about the company for which they work because they think that something dodgy is going on that I resisted calls from Conservative Members for investigators to have to submit information that could give away the fact that they had done the right thing by reporting such dodgy dealings.
I am confident that I have struck the right balance between safeguards and improvements to the company investigations regime and that I will be able to defend that to the House and my constituents. The system will improve the current situation by safeguarding not only people's savings, jobs and investments, but the corporate framework that is important to this country's prosperity.
Let me turn to amendment No. 16 and especially to Government amendments Nos. 17 and 18. The high point of the time spent by the hon. Member for Sutton Coldfield in Committee was when he rightly identified a lacuna in the Government's approach, and the Government amendments are my response to that. We thus cannot claim credit for the inspiration behind the amendmentsI am grateful for the assiduous attention that he gave the matter.
Inspectors or investigators who use the new power to enter and remain on premises will be able to take other individuals with them as appropriate, such as technical experts or interpreters. While on the premises, inspectors or investigators will be able to use their other powers to require information. They will also be able to take in their surroundings by observing and hearing people and activities and by observing the layout of the premises for themselves. As the hon. Gentleman rightly pointed out in Committee, it cannot be right for information acquired by an accompanying person to be in any way less protected than that gained by an inspector or investigator. We were guilty of overlooking that crucial point of principle, and Government amendments Nos. 17 and 18 will put that right.
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