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What is the complaint against the present system? It is said by some—and by Professor Macrory to some extent—that the court system is cumbersome and takes too long, but the background documentation suggests that at present the average time from committing an offence to judgment is, in many cases—possibly most cases—seven months. There is a reference to 11 months somewhere else. I wonder whether the new system will be that much quicker.

The background documentation mentions training. How many hundreds of people will have to be trained to create this new parallel court system, run by and for officials, and to what standard? This whole idea of certainty before a prosecution is brought sounds either unobtainable or artificial. The code for Crown prosecutors, as I have explained, is that there must be a realistic prospect of conviction, which seems much more practical. The prosecution must also be in the public interest. I return to that because Lord Shawcross, in his classic statement in the 1940s, said emphatically that not every case of guilt should be prosecuted and he hoped that such cases never would be—I see the Minister indicating that he would not hope that they were all prosecuted—but read Macrory and, time and again, he says that there is a need for more enforcement and so on. Let it be done through the courts.

Asking a prosecutor to know for certain whether he would get a conviction is too high a standard. I suspect that this provision has been put in by those drafting the Bill partly because the Government realise that, although this is described as a civil system, it is not a civil system at all; it is a criminal system under a civil disguise. The Minister will know that the European Court of Human Rights in such cases looks not to the label but to the substance of the matter. If very large penalties, which have been criminal penalties before, and possibly even smaller penalties, which have been criminal penalties before, are suddenly stated to be civil, the European Court at Strasbourg is quite likely to say, rightly, that these are criminal matters and that criminal standards must be applied.

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Finally, why are the courts criticised? I am drawing to a conclusion. It is said that they are cumbersome; that magistrates impose penalties that are too low and, therefore, prosecutors are reluctant to prosecute; and that there is a so-called compliance deficit. The Magistrates’ Association has responded that the main problem is that prosecutors fail to provide sufficient information to justify the high penalties that they seek. That should be quite easy to put right. Today, magistrates are very well trained. There are 28,000 of them up and down the country who perform a massively valuable public service and they are trusted. Environmental issues are high on everyone’s agenda, as are health and safety and food safety. I ask the Minister how many people currently prosecute these cases nationwide. I have made some inquiry from colleagues at the Bar and my understanding is that the quality of prosecution, which sometimes is very good, varies considerably. Some is not good and too often magistrates are not told enough of what they need to know for them to be satisfied that a higher penalty is called for, if it is.

I revert to paragraph 5 of the Select Committee’s report. This emphasises, first, the complex nature of the schemes and ministerial powers by direction to suspend regulators’ powers; secondly—a point that I have developed at some length—the extent to which it is constitutionally appropriate for regulatory authorities, rather than the ordinary courts, to make determinations about whether a person has committed a criminal offence and to impose unlimited financial penalties; and, thirdly, whether the procedural protections match up to minimum standards.

At this stage, I ask the Minister to give us the further information that I have outlined and I invite his department and the Secretary of State to reflect carefully on whether laudable objectives in other parts of the Bill cannot be even better enforced by continued use of our tried and tested courts system with perhaps some further training for the courts and the prosecutors.

Baroness Wilcox: I share the concern of the noble and learned Lord, Lord Lyell of Markyate, about this part of the Bill. It paves a way around the jurisdiction of the court and instead gives officials considerable prosecuting powers. I can anticipate the response of the noble Lord, Lord Bach, to these probing amendments. He will say that the current court procedures are too time-consuming and cost the country a lot of money to hear each year. That may well be, but this system is far more accountable, transparent and consistent—supposedly the aims of the Bill—than what the Bill in fact proposes.

The fixed and variable penalties, which the Bill gives the regulator the power to wield, are criminal penalties and therefore regulators do not have the right to instruct or implement them. That is the role of the court, which is founded on the concepts of accountability, transparency and consistency—all the words that the noble Lord, Lord Desai, feels are just too much when he talks about the Bill. I cannot think of any other way for us to express this. Does the noble Lord, Lord Bach, not think that giving such powers to the regulators makes a dangerous statement of little faith in the legal system which is essential to the

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protection of British citizens? I ask, as did the noble and learned Lord, Lord Lyell, that the Government look again at the tried and tested courts system.

Lord Borrie: We have listened to the noble and learned Lord, Lord Lyell, with tremendous interest. It was a brilliant speech, covering a great many of the matters concerning Part 3. It is excellent to deal with it in principle now and we shall deal with it in great detail under the amendments to come. When he referred to the House of Lords case in Tesco v Nattrass, I was reminded that that was one of the fairly rare cases in which a chief trading standards officer—I think, for Cheshire—Mr Nattrass, was reported as handling this very difficult case right up to the House of Lords. It began in the magistrates’ court under the Trade Descriptions Act 1968, which has its 40th anniversary this year. It is a regulation that I hope Members of the Committee on the other side will recognise as having had a great deal of success in improving marketing displays, marketing and advertising and all the requirements of honesty that that Act introduced. It has been, as the noble and learned Lord rightly said, dealt with by trading standards officers as prosecutors and then by the courts, be it a magistrates’ court or sometimes a higher court resolving guilt or otherwise. I am sure that my noble friend the Minister will agree that it is well worth having this general debate at the outset of discussion on Part 2.

In my Second Reading speech, I thought it unusual and peculiar that the phrase with which everyone, not just lawyers, is familiar as regards the standard of proof required in the criminal courts—“beyond reasonable doubt”—should appear in a new guise in the Bill. It is not the prosecutor having to prove in the courts beyond reasonable doubt that guilt is established; it is that the official should satisfy himself beyond reasonable doubt. He does not need to satisfy anyone else at all. That appears in Clause37(2), and it is most unusual, but I am sure that the Minister will deal with that.

I want now to suggest that there is merit in that and in the whole of Part 2, which stems from Professor Macrory’s report. There is benefit to the public interest. There is also benefit to businesses, which are likely to be defendants in these cases, of a greater flexibility than the one and only procedure now available; that is, prosecution for a criminal offence with a criminal conviction, and all that that means, if guilt is proven either in the magistrates’ court or in the High Court by the finding of a jury. Provided that there are sufficient procedural safeguards, the flexibility in Part 2, including the provision for fixed or discretionary penalties, is what business has indicated it would be happier with, instead of always being faced by regulators who say, “Either you get away with it, or you have to be prosecuted for a criminal offence”.

Many matters are not worthy of the court’s consideration—taking up the time of either a judge in the higher courts or of the part-time judges, the magistrates, in the lower courts. Sometimes they are stipendiary magistrates, to use the old phrase; now called district judges. Whether the judges are paid or unpaid, many matters can be put right often in discussion. If that is not sufficient, the procedures provided here—I

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will not go into the detail of stop notices, discretionary payments, fixed payments and so forth—will serve, provided that the procedural safeguards are adequate.

I agree with many of the remarks made by the noble and learned Lord, Lord Lyell, but I think that he went a little too far in suggesting that the procedural safeguards were not adequate. Sticking to fixed monetary penalties, let us look at Clause 38. Others have suggested different wording—the noble Lord, Lord Goodlad, has tabled an amendment. However, as the Bill stands, Clause 38 requires that there must be a notice with reasons: the businessman has the opportunity to ask for a review, with reasons, giving his reply; and then the regulator can think again. In his review, he will either confirm the penalty or not. If he sticks to his original view and confirms the penalty, there is a right of appeal. We can argue about who should hear the appeal and I do not want to go into that. I am talking about matters of principle which are procedural safeguards. The Bill is not lacking in them.

I have spoken quite long enough in my intervention on this matter.

Lord Desai: The situation is not as the noble Baroness has described. It is not that I do not like transparency, accountability and proportionality; I was objecting to efficiency, economy and effectiveness being bundled together. As a non-lawyer, and having sat on the Delegated Powers and Regulatory Reform Committee for some time, I feel that we have a problem when people promise to cut red tape, everyone saying that it should be cut. When it comes to it, others say that the cuts are too drastic and too quick. They want us to go on with the old-fashioned, tried-and-tested ways. They want us to return to the original practices.

What I see from Part 3, not as a lawyer, but as a selfless citizen, is that here is a procedure that is quick but which has inner safeguards so that if mistakes are made there is some redress. I agree with my noble friend Lord Borrie that the criminal standard is the safeguard. That is a safeguard that an ordinary local authority official does not have the magistrate’s ability to judge. He cannot impose a fixed penalty unless he is sure beyond reasonable doubt that an offence has been committed. We ought to welcome that, because it is a very high hurdle to jump over.

We ought to ask: is this going to be quick and efficient? Yes. Are there safeguards to guard against someone having been very arbitrary? Yes. There is a splendid, elaborate diagram on page 30 of the guide showing each stage where a person who feels badly done by can appeal. If there is injustice, it will take a long time to sort things out as it is at present, going all the way to the House of Lords. In a number of cases, it may be much easier and quicker to do it this way as provided for in these clauses. We ought to think of the efficiency of regulatory reform; does this reduce the regulatory burden or not? In my view, this is one good way of doing that.

4.30 pm

Lord Cope of Berkeley: I am not capable of adding to the great constitutional arguments advanced by my noble and learned friend Lord Lyell, but I have one

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query on the use of the word “civil”. The sanctions are described in this clause as civil, but my noble and learned friend has explained that in many respects they are, in truth, criminal sanctions. After all, they all refer to offences. How can they be civil sanctions if they are against offences? The relevant subsequent clauses, such as Clause 37, refer to the penalties being imposed for an offence. If it is an offence, presumably it is a criminal sanction rather than a civil sanction. Why is it described as civil?

Lord Bach: This has been a very welcome debate, and the Committee will be grateful to the noble and learned Lord, Lord Lyell, for his tour de force in putting his case, which was so obviously well researched and which was expertly put. One would expect nothing less, and obviously a great deal of work has gone into that speech. He described it as probing and a little bit more; using modern jargon perhaps it could be described as “probing plus”, with a lot of the plus. We are very grateful to him. I hope he will not expect me to be able to answer a large number of his questions, and I am not going to go into all the comments that he made. I promise him and the Committee—there have been letters and he mentioned them—a further, considered letter, which will be placed in the Library before Report. I do not promise that it will be done this week, or even next, but it will be done as soon as we can and before Report, to deal with the many issues that he raised, which can be found in today’s Hansard. I hope he will forgive me if I do not go down the road of trying to attempt to answer, which I could not anyway, the many points he raised. I will do my best with the general principles and with some of the specific points that have been raised by him and by other noble Lords who have spoken in this debate.

In the final report of his review, published in November 2006, Professor Macrory found most regulators to be overreliant on criminal prosecution as a means of tackling breaches of regulation. The scheme put forward in Part 3 is very much the Macrory scheme. I am sure there are differences between Macrory and this scheme in detail, but this is the Macrory scheme. He identified what he called a “compliance deficit” where non-compliance has occurred but no enforcement action is taken because the appropriate tool is not available to the regulator. He went on to say that this is an extremely inflexible system that has insufficient benefit for all the interested parties: the business that is being regulated, the local authority with the duty of regulation and the general public—the consumer who is meant to be the beneficiary of regulation.

What is the compliance deficit that Macrory talked about? It is where non-compliance has occurred but no enforcement action is taken because the appropriate tool is not available to the regulator. Macrory found that for certain offences many regulators do not have access to any sanction except criminal prosecution. This lack of flexibility constrains their ability to respond effectively to regulatory non-compliance. He thought that a heavy reliance on formal criminal sanctions makes the resolution of cases a costly and time-consuming exercise for business and regulators. In many instances, although regulatory non-compliance had occurred, the limited resources within regulators means that the

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cost or expense of bringing criminal proceedings deters the regulator taking action, creating what Macrory defined in a neat phrase, if not entirely to the satisfaction of the noble and learned Lord, as the “compliance deficit”. He set out a regulatory system that would allow for a flexible and proportionate approach—I agree with the noble and learned Lord that when those words are used they must be used as though they mean something, and I argue that “flexible” and “proportionate” in terms of Macrory do mean something—with a broad range of sanctioning powers, where regulators could respond to the needs of individual cases and the nature of the underlying offence. Unfortunately, not everybody was able to make the open house session held on 15 January, but I know noble Lords will have heard about that important session from third parties who were able to hear Professor Macrory speak first hand about his review and his powerful case for change.

Part 3 implements the main legislative recommendations of Professor Macrory’s report with the aim of putting his principles into practice. I should remind the Committee that there has been general support for the new scheme from a number of groups, including local authorities; business representatives, for example, through the Institute of Directors; individual businesses; some regulators’ representatives, trading standards, for example; and—this will be of particular interest to the noble and learned Lord—the Council of Her Majesty’s Circuit Judges and the Justices’ Clerks’ Society. The fact that all these worthy bodies support Professor Macrory’s scheme—in general; I am not going to pretend that they support it in every detail—of course does not mean that it is necessarily right. But it is powerful support for what we believe to be a powerful scheme.

The scheme creates a framework within which regulators can acquire access to a suite of civil sanctioning powers in addition—and this is important—to their current criminal sanctions. Not all the powers will be needed in all cases; sometimes comparable powers already exist, sometimes they will not be appropriate in a particular context. I agree with the noble and learned Lord on the importance of the role of criminal courts in dispensing justice and punishment—as how could I not, having spent the best years of my life practising in them? The new civil sanctions in Part 3 are an alternative to criminal prosecution, but prosecution will remain the right course of action for many of the more serious, egregious offences. The sanctions are part of a wider package of recommendations made by Professor Macrory, all of which are aimed at improving enforcement of regulatory regimes generally. As my noble friends Lord Borrie and Lord Desai have said, that is really what the Bill is trying to do. That particular aim of the Bill has general support, I think.

Civil sanctions are already an established part of the regulatory enforcement landscape, although not all regulators have access to such sanctions. The noble and learned Lord referred to the FSA, which has similar but not the same type of effective civil sanction. I do not know whether the noble and learned Lord thinks that they have worked well or not so far. Part 3 will enable those powers to be extended to a number of other regulators that do not at present have such powers.

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The Constitution Committee is a very much respected committee of this House. The noble and learned Lord is a member of it, and I am delighted to see that the noble Lord, Lord Goodlad, the distinguished chairman of the committee, is part of our proceedings this afternoon. The committee has genuine concerns about these Part 3 powers. That is why we have limited access to the new sanctions to those national regulators listed in Schedule 5, those that enforce the offences listed in Schedule 6—basically, local authority-type offences—and those who enforce offences in secondary legislation made under enactments listed in Schedule 7.

We believe that the Bill includes a number of important safeguards for those subject to a civil sanction. In short, businesses will know the nature of the case against them, as there are information obligations in the notice imposing the sanctions. There are also opportunities to make representations and objections to challenge the sanction. In particular, there will be a right of appeal, which is significant in my view, to an independent and expert tribunal whose membership will comprise both judges and non-legal experts in a particular regulatory field. Regulators will also be required to issue guidance on the enforcement of offences and the use of particular sanctions so that the regulated community will be fully aware of its rights to challenge sanctions. The package provides important protections for persons subject to these civil sanctions. In general terms, that is how we put our case.

I shall deal with one or two of the important points that the noble and learned Lord raised—not all of them but some of them. He made a strong case about what criminal cases, by their very nature, allow for with regard to transparency and accountability. He asked, rhetorically, whether it was in the interests of the general public that when Tesco, Sainsbury’s or Asda—I cannot go through all of them—offend against regulations, that should not become public.

4.45 pm

I can tell the noble and learned Lord that regulators will be able to publicise details of civil enforcement action. This is accepted government policy and a recommendation of Macrory himself. Regulators are also required by Clause 62 to publish an enforcement policy explaining when they might use their criminal or civil sanction powers. The noble and learned Lord has of course read the letter from my noble friend the Minister—as he was one of those who received it—about the minimum requirements of procedural fairness and what fixed monetary penalties are actually aimed at. A further letter will be coming, but I shall read a small part of the earlier one:

no state of mind being necessary. Moreover,

I emphasise the next line:

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The noble and learned Lord asked a number of searching questions about what criteria for fixed monetary penalties would be used, whether they would be the same for everybody and whether distinctions would be made. Fixed monetary penalties can and will vary depending on prescribed criteria. For example, a penalty may vary depending on the size of the business—which the noble and learned Lord was asking about—and may therefore take account at a general level of the circumstances of the offender. The Minister may of course determine the criteria when conferring powers by an order debated in Parliament. The process is to be found on page 29 of the guide, and I do not want to take up the Committee’s time by quoting from it.

There has been talk about safeguards; I mentioned them in my answer. There are safeguards that will protect those who fall foul of the civil sanctions. One of the most important is that there will be a right of appeal to a tribunal at a fairly late stage, but not necessarily very far down the line, in these matters. A person can challenge the regulator’s determination of his liability to a civil sanction by raising one of the grounds provided for in the Bill. Generally speaking, a regulator’s decision may be overturned on the basis of an error of law or fact, or that it was unreasonable, allowing the tribunal to examine matters of law, fact and discretion. The tribunal will therefore be well placed to scrutinise the regulator’s decisions. I make it clear that the imposition of these civil sanctions will not constitute convictions, which business will no doubt be grateful for.

The noble and learned Lord made an important point about the burden and, in particular, the standard of proof that the Bill sets out for these measures. He rightly points out that a Crown prosecutor only brings a prosecution if there is a realistic chance of conviction. However, it should be noted—and the noble and learned Lord will probably be more aware of this than anyone else in the Committee—that that is a separate test from the one that the criminal courts must themselves apply when they come to consider the question of conviction or otherwise. A court can only impose a sentence if it is satisfied that the defendant’s guilt is beyond reasonable doubt; a statement of the obvious that applies as much to the regulator. Its significance is to be found in the right of appeal to an independent tribunal, which must take that matter into consideration when deciding the appeal. That is a substantial safeguard.

The noble Lord, Lord Cope, asked, as always, a pertinent question: are these really civil sanctions? They are an alternative to criminal prosecution. The underlying offence is a criminal one, but the regulator will have the choice of pursuing a criminal prosecution or imposing a civil sanction. These are civil sanctions because they will be imposed administratively.

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