These amendments address technical matters of how and when relevant evidence should be provided to persons subject to a sanction and would be better left to the order as it would allow further detailed
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provision to be made. Furthermore, while we may agree with the sentiment behind Amendments Nos. 59 and, as it happens, 66, it may stop the use of other, more transparent, means of providing evidence to persons subject to a sanction. For example, instead of providing all the relevant material in the notice of intent itself, as suggested by the amendment, the regulator could instead provide full access to its investigation files. Some regulators, such as the OFT in competition law investigations that are comparable to the civil sanctioning regime, use this means of providing all the relevant material to persons subject to regulatory sanctions. In certain cases this could be a more efficient means of providing information to benefit both the parties rather than the more onerous requirement to state all of the facts and matters in the notice of intent itself. I am sure that, on this basis, the noble and learned Lord would not wish to have these unintended consequences given that the requirement already exists in law.

Lord Lyell of Markyate: My Lords, I think I am satisfied with what the noble Baroness has said. However, we are dealing partly with highly sophisticated firms that can cope with all this and partly with ordinary blokes and blokesses who have to understand in simple and straightforward language what it is they are being accused of. Can the noble Baroness confirm that in the notice there will be at least a few sentences in straightforward language that will tell people what they have got to meet?

Baroness Vadera: My Lords, I can certainly confirm that, particularly when it comes to blokesses.

On Question, amendment agreed to.

[Amendments Nos. 58 to 60 not moved.]

Clause 40 [Fixed monetary penalties: criminal conviction]:

Baroness Vadera moved Amendment No. 61:

“(a) in a case where a notice of intent referred to in section 39(2)(a) is served on a person—(i) no criminal proceedings for the relevant offence may be instituted against the person in respect of the act or omission to which the notice relates before the end of the period in which the person may discharge liability to the fixed monetary penalty pursuant to section 39(2)(b), and(ii) if the person so discharges liability, the person may not at any time be convicted of the relevant offence in relation to that act or omission;(b) ”

On Question, amendment agreed to.

Clause 41 [Discretionary requirements]:

Lord De Mauley had given notice of his intention to move Amendment No. 62:

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The noble Lord said: My Lords, in fact I rise to speak to Amendment No. 65A which replaces the original amendment, Amendment No. 62, which I shall not move, with apologies for any inconvenience that might cause. In a moment I will also speak to Amendment No. 69.

The objective of Amendment No. 65A is to provide an accused business with the opportunity to make representations to an independent person when it is proposed to levy a penalty on that business. The Bill already provides for a review of the proposed imposition of a penalty if the business objects. It also provides for an appeal to a tribunal if the regulator decides to go ahead with the penalty. The Minister made much of this when he opposed our amendment in Committee. However, this is an appeal as a convicted person, not the hearing of a case on the basis of being innocent until proven guilty.

The Bill provides that an enforcer should determine each of the following: first, that an offence has been committed beyond all reasonable doubt; secondly, that there are no due diligence defences; thirdly, that a penalty is the appropriate enforcement response rather than a prosecution in a court; and fourthly, the level of the penalty. Any review of these decisions is then, it is proposed, to be carried by that very enforcer, so that enforcer, as we have said before, is effectively the policeman, judge and jury. We simply do not believe that it is satisfactory or equitable for this to be the procedure.

In his response to the debate on our amendment in Committee, the Minister could not oppose our proposal in principle, and indeed the guide published with the Bill makes it absolutely clear that this is what the Government want to happen, at least to some extent. The guide states on page 29:

But it goes on to say:

We support the first part of that statement, although the second slightly spoils the effect. However, we think that there is an essential degree of agreement here. Where we differ is on how important this is. We believe it is so important that it should be a provision in the Bill and not just left to a statement of hope in a guide. It is inappropriate to leave the civil rights of citizens or the rights of businesses before the law to a recommendation in a guide.

Because he could not disagree in principle, the Minister suggested in Committee that the problem with the amendment was that it was not clear who the independent reviewer would be. Unfortunately there are many things in this Bill which are not clear. There are many implementation measures left to implementing orders, as this would be. As the amendment makes clear, and as the Minister did not recognise in Committee, this is exactly the procedure to be adopted here. In this case it is sensible because there will be different orders
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for different regulators, and so it will be possible to ensure that the independent reviewer is one who is relevant to the regulator. Thus, in the case of a local authority, it might be the legal department of that authority or a neighbouring authority. We will be happy for the Government to consider this further and to offer their proposals in the order rather than now.

The effect of Amendment No. 69 would be that, just as an enforcer has a choice of prosecuting a business either through the courts or on the basis of an administrative penalty, the business, too, would have the right to opt to be dealt with in the courts if it so wished. When we tabled our original amendment, the Minister objected on the basis of a practical concern rather than a matter of principle. He was concerned that a business might simply play a waiting game and, after a long negotiation within the business penalties approach, decide to require the matter to be dealt with in court. That was never our intention.

We always envisaged that this would be a relatively speedy action by the business. For this reason, our new amendment requires the business, within 14 days of being served with a notice of intent to issue a penalty, to advise that it wishes to have the matter dealt with in the courts. That would enable those with responsibility for such matters within the business to be properly appraised but would not allow for last-minute decisions.

The amendment would achieve two aims, one direct and one indirect. The direct one is to provide a degree of equity for the business by placing it on a par with enforcers in having a choice of going to court if the enforcer has opted not to go down that route. In turn, this would have the important effect of ensuring that enforcers do not use the business penalties route simply because their case is less certain than would be required in court. The Bill makes it clear that the required level of proof for a civil penalty of this kind is beyond reasonable doubt. If enforcers are aware that the case may end up in court, this will serve to ensure that they do not propose civil penalties unless they are certain they have such a level of proof.

The indirect aim to which I referred is that the amendment will help ensure the whole system is fair. We have criticised the Bill for failing to offer the opportunity for an accused to make representations to an independent person prior to being convicted. We still believe this should be included in the Bill to make the civil penalties regime coherent in itself. However, acceptance of the amendment would go some way to alleviating that problem because the accused would have the opportunity to opt for court and thus for an independent judgment if desired.

The Deputy Speaker: My Lords, before spelling out the amendment proposed, perhaps I may advise the House that Amendment No. 62 is now the lead amendment in this group, as Amendment No. 59 cannot be called. That will enable debate on Amendments Nos. 62, 65A—to which the noble Lord, Lord De Mauley, has already spoken—and 66 to 69. The amendment formally in front of your Lordships at the
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moment is therefore Amendment No. 62, in the name of the noble Lord, Lord De Mauley. Is the amendment not moved?

Lord De Mauley: Not moved.

[Amendment No. 62 not moved.]

[Amendment No. 63 not moved.]

Lord De Mauley moved Amendment No. 64:

The noble Lord said: My Lords, Amendment No. 64 seeks to bring the penalties in the discretionary regime into line with all other penalty provisions. While I am grateful to the Minister, the noble Lord, Lord Bach, for his response to my letter of 3 March and to the Government for their amendment in this group, it does not go far enough because—and the noble Baroness may put me right on this—if an offence is triable summarily only, it is unlikely to involve a large fine. We are concerned with a situation where a regulator can levy an unlimited fine. It would be inequitable if a regulator which was—as we have repeatedly said—policeman, judge, jury and even initial appeal court had the capacity to set the maximum level of fines. Even the Office of Fair Trading, I believe, can set the level in a competition case at only 10 per cent of turnover.

In general the courts have to set penalties in accordance with the terms laid down by Parliament, so they are not unfettered. A business cannot have confidence in a system where the enforcer has the ultimate power to fine that business to the extent that it is put out of business. None of the mitigating factors in Section 45 of the guide to the Bill, to which the Minister kindly drew my attention in his helpful letter, dealt with that point at all.

The amendment does not seek to reduce the level of fines or to make them ineffective. It restores to Parliament the right to determine the maximum level. I beg to move.

Baroness Vadera: My Lords, in Committee, as the noble Lord said, we debated whether there should be a cap on the level of the variable monetary penalty that a regulator can set. We continue to believe that a cap for the more serious offences would not be appropriate. Regulators must be able to capture any financial benefit gained from non-compliance. That was one of the key recommendations of both the Hampton and Macrory reviews. If a business knows that any profit gained will be removed, with the potential for an additional penalty on top, there will be less incentive to break the law in the first place. That will help deter future non-compliance and ensure that there is a level playing field for compliant businesses, which are the majority. It is an essential part of the risk-based approach to enforcement.

The regulator will be required by Clause 62 to publish guidance setting out the criteria it is likely to take into account when setting the level of the variable monetary penalty, so there will be transparency in the process. As the noble Lord knows, possible criteria are
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listed on page 35 of the guide to the Bill. These include the seriousness of the non-compliance, the business’s disciplinary record and whether the business has taken any actions to address the harm caused by the non-compliance. Those criteria will vary depending on the regulatory area. We have discussed the business’s right to raise objections and to make representations after a notice of intent is issued as well as to appeal against the penalty. If the tribunal agrees, the business will have the power to withdraw or vary the penalty imposed.

Requiring that there should be a cap on variable monetary penalties in every single case may mean that regulators would continue to seek criminal prosecutions. There is no maximum on the fine that may be imposed by the Crown Court. We therefore do not wish to create a perverse incentive for regulators to pursue criminal prosecutions.

That is not to say that variable monetary penalties will not be capped in practice. In making an order under Part 3 of the Bill, the Minister may consider that such a cap is necessary, and is able to set an appropriate cap for a particular set of offences. We do not, however, think that that should be an obligation on the Minister in every case. The noble Lord referred in particular to a cap based on the business’s turnover. That was specifically ruled out by Professor Macrory, as he felt that such a cap would act as a target rather than a ceiling. It is also worth noting that the Government have followed the recommendations of the Delegated Powers and Regulatory Reform Committee on the issue of capping the penalties. I refer again to the example set out in Committee by my noble friend Lord Bach of the £14 million fine that was imposed on Citibank.

Variable monetary penalties should not be regarded as an isolated sanction. They can also be combined with other discretionary requirements in order to fully address all effects of a breach of regulation. As we have just discussed, the variable monetary penalty element of a sanction can be mitigated if a business offers undertakings to benefit third parties affected by the non-compliance.

As a part of this, I shall speak to Amendment No. 65, which I hope will go some way to addressing the noble Lord’s concerns. I appreciate his concern about variable monetary penalties and do not believe that they should be capped for the more serious offences. However, I am happy to say that, as the Delegated Powers and Regulatory Reform Committee proposed, we are prepared to cap variable monetary penalties for the minor, summary-only offences, and Amendment No. 65 would set the cap at the level that would otherwise have been available to the magistrates’ court, which, as we discussed earlier, is usually £5,000. In the light of what I have said, I trust that the noble Lord will feel able to withdraw his amendment in favour of Amendment No. 65.

9 pm

Lord Lyell of Markyate: My Lords, Amendment No. 65 can be regarded as benign in the context of the Government’s approach, but the Government’s approach is to take the maximum power for themselves in almost any circumstances and to give that to every regulator.
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The Government are speaking with forked tongue, because at one point they say they will be proportionate but at the next they say that it is important to capture any profit and to be an effective deterrent. Courts can perfectly well understand these things, but they stand back, are independent, and look at them in the context of ordinary life in this country. Now it is being taken to a group of specialists and to a system where you are found guilty and you incur the penalty. You can even run up costs for not paying the penalty on time because it continues to run, it seems, unless and until an appeal tribunal suspends it temporarily, which it may or may not do, and you may or not understand.

One of the difficulties for the Opposition when a Bill goes so fundamentally against what we understand as the normal principles of justice is that one cannot really rewrite it sensibly by amendments. My noble friend has raised some very important points. I go back to my plea for the Government to think very carefully about this whole area and whether it is not wiser to go to the courts. I had certainly understood from other answers in other debates, both in Committee and on Report, that the Government were saying that the most egregious and serious cases should probably go to the courts, but now the Minister wants absolutely unlimited powers, to be dealt with by the regulators.

We have still not heard a sensible explanation for how a system that currently works 99 per cent in the magistrates’ court and less than 1 per cent in the Crown Court will be divided up, as the Minister put it, roughly into 60 per cent administrative penalties and 40 per cent for the courts. I am amazed that no principle seems to exist for determining which cases will go to the courts, which will be administrative penalties, which will be—massively—variable penalties, which will be fixed penalties, or how much the fixed penalties will be. The Government have just not answered those questions. I hope they will reflect further.

Viscount Eccles: My Lords—

Lord Bach: My Lords, perhaps the noble Viscount will give way. I know that this evening has not been a classic example of how Report stage should be conducted in this House, but I have to remind noble Lords that Chapter 7.134 of the Companion states:

It was of course convenient for the noble and learned Lord, Lord Lyell, to speak to Amendment No. 65, which I presume will be put after Amendment No. 64, but I wonder whether the noble Viscount will confine his remarks to an elucidating question or two.

Viscount Eccles: My Lords, I have a very short question. The Minister talked about capturing the financial benefit as part of the civil sanction regime. How do the Government propose to put that together in a way that will work with proof beyond all reasonable doubt?

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Baroness Vadera: My Lords, as noble Lords are aware, there has been considerable discussion about the regulator's requirement to bring forward a case to a criminal standard of proof. That is a requirement. I hope that the noble Lord will be satisfied with that given that this was debated at some length earlier.

The noble and learned Lord, Lord Lyell, asked about the need at all for variable monetary penalties and why they are there to capture benefits of non-compliance, particularly if the more serious offences are to be prosecuted through the criminal courts instead. They would be useful in instances of non-compliance where a business has inadvertently breached regulations and corrected its breach quickly but has made a significant financial gain or competitive advantage. I mentioned the case of Citigroup, where a fine significantly captured the competitive advantage that it had gained from non-compliance. In that circumstance, a regulator might decide that a variable monetary penalty would be a more appropriate and proportionate response than a criminal prosecution.

Lord De Mauley: My Lords, I am grateful to my noble and learned friend, who put the point much better than I did. I do not think that the Minister’s response has addressed all my points. I should be most grateful if she would consider them after today; as indeed I will consider her response.

In view of the time taken so far, I will not press the amendment this evening, but I reserve the right to return to it at Third Reading. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Vadera moved Amendment No. 65:

(a) triable summarily only, and(b) punishable on summary conviction by a fine (whether or not it is also punishable by a term of imprisonment),the amount of the variable monetary penalty may not exceed the maximum amount of that fine.”