Regulatory Enforcement and Sanctions Bill [Lords]

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Mr. McFadden: The amendments and clause 40 are important because the clause sets out in detail how the fixed monetary penalties that we were discussing will be applied. There is a great deal of detail in the clause—for example, the issuing of a notice of intent under subsection (2)(a). A person may make written representations to the regulator in relation to that and they may ultimately appeal against the final decision, as we have discussed.
The amendments would intervene in the area of a notice of intent before a sanction has been imposed—that is their focus. We already know that there will be an appeal to an independent tribunal when a sanction is imposed. The amendments would add a second appeal earlier in the process when a notice of intent has been issued. They cover similar territory to the amendments discussed at length in the other place, but they are slightly different. I am still not entirely clear about who the independent person referred to in the amendment might be. My broader concern is that if the amendments were accepted, further provision would need to be made for that in the Bill. Details would have to be given about the powers of the person and the procedure for considering representations and so on.
Let us remember where we started: the recommendations from Professor Macrory that there should be greater simplicity and speed, and that there should be a greater variety of options available to regulators to ensure compliance. My worry is that the amendments will make the system over-complex by giving us two different appeal processes—one where a notice of intent is issued and one where a sanction is imposed, as already in the Bill.
The Bill provides a right of appeal to an independent and impartial tribunal on the final decision, as I have said. An appeal would be able to consider matters such as whether the regulator had unreasonably dismissed the objections referred to in the clause under subsection (2)(c)—objections raised to the sanction after the notice of intent.
The issue is whether we need two rights to have the case heard by two different persons, both before and after a sanction is imposed. The amendment would add a further level of bureaucracy and additional resources would be needed to set up and maintain a body that would hear all the representations. The process of imposing a sanction would be made much more lengthy and cumbersome. The amendment might actually take us back to the problem we are trying to resolve, which is how to give greater flexibility to regulators and have a variety of options in relation to the kind of offences we are talking about.
During the debates in the other place, my noble Friend Baroness Vadera addressed similar issues on similar amendments. She agreed that there was a need for high quality decision making by regulators, and we made changes to the guidance to the Bill to strengthen that. The guidance states that
“the regulator should have arrangements in place to review or monitor individual decisions. This will ensure that there is confidence in the regulatory system”.
We want to ensure that there is some quality in the decisions, but it is important to remember that there is a right of appeal against the final decision. The question before us is whether we need two rights of appeal in the process. I hope the Committee agrees that the right of appeal to an independent tribunal covers the issue of one regulator being judge and jury together, so we would not need the additional right of appeal at the earlier stage, around the notice of intent.
Mr. Prisk: The debate has been useful. I fully recognise that there are weaknesses in the amendments, but the central issue is that all that is available to someone who has a sanction placed against them at the moment is an appeal to disprove their guilt—in other words, we have an appeal process after the event. The purpose behind the amendments was to find out how we could establish a means by which a person who has been accused is able to correct something or to challenge the process with someone who is not making the notice in the first place. The amendment is not necessarily about its own merits, but about highlighting a weakness in the existing system. Of course, if we are to have a civil procedure, it needs to be reasonably unbureaucratic and reasonably efficient. If it is to have the confidence of the community that it is trying to police, there needs to be confidence in an element of fairness. I am not confident that the procedure has that appropriate balance.
Mr. McFadden: Always reasonable.
Mr. Prisk: Always reasonable, always open. I am pleased that the Minister is happy to say that from a sedentary position. It is important that we can find some way forward, to make sure that there is confidence in the system. The danger, I suspect, is that there will not be, as currently constituted. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lorely Burt: I beg to move amendment No. 53, in clause 40, page 18, line 16, at end insert
‘may require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions’.
The Chairman: With this it will be convenient to discuss the following amendments: No. 54, in clause 43, page 20, line 24, at end insert
‘and may require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions’.
No. 55, in clause 47, page 23, line 24, at end insert
‘and may by notice require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions’.
Lorely Burt: The amendments all have the same purpose. The provisions would enable the business to opt for court action, if preferred, even though it could face the prospect of a criminal conviction as a result, thereby ensuring that the option was available at the request not only of the regulator but also of the company. Businesses should not have to face the risk of unsubstantiated damage to their reputations until and unless they have been proved guilty. For many businesses, the risk to loss of reputation is worse than the cost of the appeal. Consequently, many businesses would take the sanctioning decision to appeal, and they should have the option of taking the decision through a criminal court, if they so wish.
Mr. McFadden: In a sense, the amendments are not too dissimilar from those that we discussed previously. They are coming at the issue from a slightly different angle, but I suspect that they are motivated by a similar concern. The hon. Lady said that the client—or the accused, whatever phrase we use—should have the choice, and the amendments would apply the choice to fixed monetary penalties, discretionary requirements or stop notices.
5.45 pm
The new sanctions under the clause and following clauses are an alternative to criminal prosecution. They will be imposed only when a regulator is, as I have said, satisfied beyond reasonable doubt with the criminal standard of proof that a criminal offence has been committed. The regulator will have undergone a thorough and rigorous investigation and, at the end of the process, will have determined that a person is liable for the offence. The important question to be answered is whether we think that, after that process, it should be for the person, the business concerned or the regulator to decide what route the sanction takes.
Lorely Burt: I am interested in the route that the Minister is taking. He seems to be implying that, if a case is considered strong, the judge and jury have already gone out, come back and decided that the company is guilty. Given what he has said, I am even more concerned about pressing my case.
Mr. McFadden: I do not know whether what I have to say will ease the hon. Lady’s concern. The alternative set out in the amendments could leave the system open to abuse. For example, it could give someone who was accused of an offence a mechanism to delay the enforcement process by opting for a criminal prosecution and thus requiring the regulator to undergo another process after it has gone through the process of setting out its case and presenting all its evidence. There is a right of appeal to an independent tribunal but, as I said in respect of the previous amendments, we want a system that does not have to go through the same processes over and over again.
Allowing a person to choose which route to go down would not be in keeping with the Macrory review. In a proportionate sanctioning regime, criminal prosecution should be reserved for the most serious cases. That remains a weapon for serious breaches of the law. We are not saying that the new sanctions should replace that system entirely, but that they should replace it in some circumstances, and that can be assessed by the regulator only in view of all the cases before it.
The choice between civil and criminal sanctions should remain at the discretion of the regulator, not the person who is accused of the offence. We understand the concerns that members of the Committee might have about the new sanction powers being misused.
Ann McKechin: Can my hon. Friend confirm that, in Scotland, such measures would be inappropriate, as the decision whether to prosecute is in the hands of the procurator fiscal who takes the action on behalf of the regulatory authority? The regulatory authority does not have the discretion in that regard.
Mr. McFadden: The principle to which my hon. Friend referred is right. It is not for the accused to choose their route, which would be the result of the amendments. For both fixed monetary penalties and discretionary requirements, there will be an opportunity for a person to make representations to the regulator before the sanction is imposed. It will enable the person to raise defences and challenge the case against him or her and to challenge the evidence relied on by the regulator.
The ultimate appeal will be referred to an impartial, independent tribunal. The tribunal will also have the power to overturn or reduce the level of the penalty imposed by the regulator or take any other steps that the regulator could have taken in relation to the incidents of regulatory non-compliance. The Bill contains broader safeguards in the form of the review clauses that we referred to earlier—such as that relating to part 3—and suspension provisions, which we discussed in relation to parts 1 and 2.
Mr. Prisk: It is a peculiar argument that, if someone is allowed the option of choosing the criminal path, that will somehow lead to a flood of cases. The truth is that an individual would choose that path under only the most exceptional circumstances. Does the Minister recognise that it would be a tiny number? Clearly, most businesses would not wish to go down that path. It is a thin argument.
Mr. McFadden: The hon. Gentleman allows me to turn again to the impact assessment. That states that from the Bill’s overall estimated benefit to business—which comes to an annual sum of £200 million—the biggest proportion will probably come through this part of the Bill due to savings made from fewer court appearances for businesses and fewer lengthy legal costs in criminal prosecution cases. Those are significant savings to business.
Mr. Prisk: It is a fascinating extract, I am sure, but it does not answer the point. The idea that having that option available will suddenly regularly increase the burden to business is not right. This will affect a tiny handful, a very small proportion of businesses. It is about ensuring, where there are no other options and no independent person to appeal to before being found guilty, that this option exists should a business feel that it would like to have its day in court and stand before the law. That is why it would exercise it and that is why it is an important principle.
Mr. McFadden: In the end it comes down to a judgment about the safeguards in the Bill. We had this discussion on the previous set of amendments that were moved by the hon. Gentleman and this is a similar matter. The Government’s view is that there should be the right to make representations to the regulator on the basis of a notice of intent being issued—something set out in the clauses that the amendments seek to change. The notice of intent must include the grounds for the proposal and set out the right to make such representations, objections and so on. There is also the right of an independent appeal to the tribunal, which is independent, impartial and separate from the regulator. As I said, should we judge that the powers are not being used properly after the enactment of the Bill, the wider review and suspension provisions provide adequate safeguards. In the end, it is also a judgment about whether the person accused or the regulator should decide the path of its function.
Ann McKechin: Does the Minister agree that we should stick to the general principle that prosecutions should be taken if they are in the public interest, not because of personal requirements? I am disappointed that the Opposition do not recognise that prosecutions should be taken in the public interest. There is a general principle that should be applied here and that is what the Bill tries to put in place.
Mr. McFadden: I agree with my hon. Friend, and I am happy to confirm to her that officials did consult the office of the procurator fiscal on the measures.
Lorely Burt: I was interested to listen not only to the Minister but to the hon. Lady. I do not agree that public interest should override individual fairness. I have listened carefully to the Minister when he talked about people who might try to exploit the system and delay the process for their own financial ends. Even so, if justice is done then in the end these individual companies will be punished. The delay in punishment of a few rogue traders should not be at a loss to everyone else, particularly companies that are innocent or that value greatly the loss of their reputation, which is an extremely serious consequence for them. I do not believe that the regulator or anybody else should take that right away from them.
To use an analogy from civilian life, a person might be accused of stealing a loaf of bread, but they have the option of electing to go before a jury, not because of the value of the loaf of bread but because of the value of their individual reputation. I do not believe that that option should be taken from companies. I therefore wish to press the amendment.
Question put, That the amendment be made:—
The Committee divided: Ayes 6, Noes 8.
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