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If I may say so, I found it somewhat inconsistent for the noble and learned Lord, Lord Lyell of Markyate, to attack the system for being prosecutor, judge, jury and so on, all at once, and to criticise the detailed complexity of the procedure that this Bill introduces in order to provide adequate opportunities for the businessmen trader—the regulated person—to put his case and advance his proposition. The greater

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complexity exists now, as the Bill has been amended, in accordance with some of the useful propositions put forward by the noble and learned Lord and others, such as the noble Lord, Lord Goodlad, to make it quite clear or establish that the regulator cannot rush in, even with alternative civil sanctions. He must issue a notice of intent, there must be an opportunity for defence, an opportunity for each side to answer the other side’s case, and so on—and, of course, there must be an opportunity for an appeal to the tribunal. “Proportionate” is a most useful word which we hear from both sides of this House to indicate what we want to achieve.

In relation to fixed penalties, perhaps I may quote from paragraph 34 of the government guide to the Bill. In answer to the question, “What is a fixed monetary penalty notice?”, it says that they are,

What are the advantages? To bear out my point that we are not talking here about criminal offences, convictions and stigma, that paragraph goes on to say:

The point about fixed monetary penalties, which the noble and learned Lord is homing in on in his amendment, is that they deal with relatively minor cases in a way that does not impose criminal penalties and the stigma thereof, and they are one example of the more flexible approach in Part 3 of the Bill. For those reasons, I recommend that the House does not accept the amendment.

Lord Neill of Bladen: My Lords, I made a point in Committee which the noble Lord, Lord Borrie, has not addressed. As I understand it, the Bill intermingles the concepts of criminal and civil law in a virtually inextricable way. Clause 38(1) states:

Then, for good measure, it adds a criminal burden of proof in subsection (2):

Therefore, we are dealing with things which have been treated and held to be offences to the high standard of criminal law, and that is a subject to which the noble and learned Lord’s amendment relates and it is the point that he is making.

Lord Newton of Braintree: My Lords, I rise with some diffidence, not having taken part in earlier stages of these fairly extended proceedings. When I read the report of the last round—that is, Report stage on 31 March this year—I noted that the Minister accurately quoted the views of the Administrative Justice and Tribunals Council, formerly the Council on Tribunals,

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which I have the privilege of chairing, in support of his arguments. He also, rather less helpfully, adverted to the fact that I was not in my place at the time, and I thought that I would make up for that deficiency by ensuring that I was here on this occasion. I can confirm that what the Minister said about the position of the council which I chair was accurate and that it supports both the broad approach set out in the Macrory penalties review and the approach set out in the Bill on this particular point. I will repeat the specific words that the Minister quoted on the previous occasion from our response of 16 August 2007:

Against that background, I was very pleased to hear what my noble and learned friend said about the merits of tribunals. Tribunals already do a great deal of work in comparable matters, including, not least, the Financial Services and Markets Tribunal, with which the noble Lord, Lord Borrie, will be very familiar from his former role.

I do not wish to labour the point, but in general I think, as does the senior president, Lord Justice Carnwath, to whom reference has been made, that tribunals are very well equipped to carry out the kind of work envisaged here, with the specialist knowledge and expertise, which they bring to so many areas. I have a great deal of sympathy with the arguments put by the noble Lord, Lord Borrie, and I hope that, against that background, my noble and learned friend will understand that if he were to test the opinion of the House I might be in some difficulty in following him.

4.30 pm

Baroness Butler-Sloss: My Lords, I would like to refer to a point raised by the noble and learned Lord, Lord Lyell of Markyate, and by the noble Baroness, Lady Wilcox, in relation to tribunals. On Report, I was concerned about what sort of tribunal would try these offences, as the noble Lord, Lord Neill of Bladen, has pointed out. None the less, it is a civil tribunal. I was very comforted to receive a letter from Lord Justice Carnwath, which has eased my mind considerably. I was even more pleased that the Minister, to whom I am extremely grateful, has accepted my view that expressions in Clause 53—the appeal clause—were infelicitous, and is making it clear that it is intended that one of the tribunals will be under the overall control of Lord Justice Carnwath.

The tribunal system, which has had a huge makeover in previous years under the aegis of Lord Justice Leggatt, provides an extremely good service for the public in these sorts of cases. My concerns are certainly allayed. Although I would not like to feel that the magistrates have been criticised in any way, following what the noble Lord, Lord Borrie, says, I do not continue to hold my previous views and I am very happy with the proposed new appellate system.

Lord Razzall: My Lords, I have some considerable sympathy with the remarks of the noble and learned Lord because those of us who have been through the Committee and Report stages of the Bill, let alone

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Second Reading, will be aware that he is attempting an impossible task. He feels that the Macrory recommendations should not apply at all. As a noble and learned Lord, he has spent many learned hours attempting to find amendments that will fit into the Bill to try to improve it. Those of us who have listened to what he has said on a number of occasions, in Committee and on Report, are in no doubt about his views, that the system does not work. I suppose he should have produced an amendment that Parts 3 and 4 should not form part of the Bill. The substance of his amendment here cuts through to the very heart of the Government’s Bill.

The Bill went through considerable pre-legislative scrutiny and considerable lobbying from all sorts of organisations before it came to your Lordships for consideration. Members of your Lordships’ House have to decide whether they support the recommendations of Professor Macrory. I understand perfectly the noble and learned Lord’s view and that, like the noble Lord, Lord Neill, he does not accept the recommendations of Professor Macrory. We on these Benches do not agree. The pass has long since been sold on whether regulators need to go the criminal or magistrates’ courts to enforce regulation. The best example I can use is the current operation of the FSA. Do the noble Lord, Lord Neill, and the noble and learned Lord, Lord Lyell, really suggest that the FSA, which imposes considerable sanctions and penalties on individuals, should not be allowed to do so? The philosophical thrust of their amendments is that that would be the case.

We on these Benches have considerable sympathy with what the noble and learned Lord is trying to do, but it does not work. You can throw out Parts 3 and 4 of the Bill entirely, but you cannot amend them. You must accept that we are implementing the Macrory recommendations or not.

Finally, I will make one point on what was said by the noble and learned Lord and the noble Baroness, Lady Wilcox, before it is forever implanted in Hansard. I am a member of the Delegated Powers Committee, and when the Bill first came to us we had a number of reservations which were expressed to the Government. We have considered them again. My noble friend who chairs the committee is not in his place but, as far as we are aware, all those recommendations have been implemented in the Bill. However, both the noble and learned Lord and the noble Baroness, Lady Wilcox, said that the Delegated Powers Committee, in its recommendations, had made these points. We did make those recommendations, but the Bill now reflects them. I cannot speak for the noble Lord, Lord Goodlad, who chairs the other committee that looked at this and who produced amendments either on Report or in Grand Committee. I understand that he is also satisfied with the implementation of the recommendations. As a member of one of those committees, I thought that that ought to be on the record. However, for the reasons I have indicated, I fear that we cannot support the amendment.

Baroness Vadera: My Lords, I am grateful to the noble and learned Lord, Lord Lyell, for his contribution to this debate. I have sent him a full reply

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to the points he raised on Report and, as he mentioned, I met him on Friday with my noble and learned friend Lady Scotland and my noble friend Lord Bach. We discussed his concerns in more detail and, having understood each other well, he will not be surprised to hear that we strongly disagree with his amendments and the intentions behind them.

The points that I wish to make have been eloquently made by my noble friend Lord Borrie and the noble Lords, Lord Newton and Lord Razzall, and I am very grateful for the intervention of the noble and learned Baroness, Lady Butler-Sloss. However, I shall provide clarification of the Government’s views, which, because of the lateness of our previous debates, have not been on the record.

I start by restating the case for these measures. We live in a world of fierce global competition. It is imperative that we create the most competitive environment for our growing businesses. They need to be able to get on with what they do best: creating wealth and jobs; a sentiment in which I know those on the Opposition Benches strongly believe. The burden of disproportionate regulatory enforcement is a central issue for business, yet we still have a system of regulatory enforcement born out of Victorian times, protecting workers from the onslaught of industrialisation. We now live in an age where this has been delivered in the main. We now have informed customers, empowered employees and enlightened companies. Above all, they value their reputation and their brand. We do not need to criminalise all of them for every regulatory non-compliance, or even for most of them. I make absolutely no apology for that. This is not a stigma that they deserve in every instance, or that will assist them to compete effectively for Britain.

The noble and learned Lord has made a number of detailed points over the course of Committee and Report, and I would like to go through some of them as briefly as I can. The noble and learned Lord implied that the new sanctions represent a significant constitutional change, violate the separation of powers and oust the jurisdiction of the courts. They do not represent constitutional change or undermine the courts. Civil sanctions have been long established. There are precedents from the 19th century relating to Her Majesty’s Revenue and Customs and there are those today that the noble Lord, Lord Razzall, referred to in the Financial Services Authority, Ofwat and the OFT. Some civil sanctions clearly operate to divert cases out of the criminal courts; for example, conduct concerning market abuse or evasion of VAT can attract both kinds of sanctions. This kind of scheme has attracted wide support from the public and business. Even the Court of Appeal, in the Han case, has endorsed such schemes. Civil sanctions also supplement criminal prosecution in areas such as anti-social behaviour orders, serious crime prevention orders and orders under the Proceeds of Crime Act 2002. There is evidence to show that they lead to improved outcomes in terms of changing behaviour and promoting compliance.

Civil sanctions do not in any way undermine the role of criminal prosecution. As noble Lords should by now be well aware, the Bill ensures that criminal

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prosecution remains the alternative preferred approach for the more serious cases, especially those where there is deliberate intent or repeated negligence. Doing so enables the courts to concentrate on the more important cases that merit prosecution and would increase the stigma and reputational harm and therefore the effectiveness of criminal prosecution.

The noble and learned Lord has on occasion implied it is not a matter of precedent but of the scale of cases transferring away from courts. Of course we are seeking to widen the potential use of civil sanctions, hence the Bill. We are seeking this in a measured and targeted way for effective regulators, and I shall come on to talk about that. I wrote to the noble and learned Lord on 21 April giving him the results of a thorough review of the statistical evidence undertaken by my officials. We estimate that there are currently between 30,000 and 40,000 prosecutions for regulatory offences that could potentially be dealt with in future by one of the new sanctions. That is higher than the estimates originally made by Professor Macrory, but I shall give noble Lords a sense of the scale: this is still only 2 per cent of all prosecutions in criminal courts.

The noble and learned Lord implied on a number of occasions that we are putting businesses at the mercy of junior civil servants with a tick-box mentality, a sentiment that has been echoed by the noble Baroness, Lady Wilcox. I shall make a case that I believe in very strongly. The advances in technology that have driven globalisation have also fragmented the supply chain in production and services, which means that we have niche businesses and very specialised businesses on a scale that we have previously never had in our economy. Britain in particular has benefited from this trend because of our openness to globalisation, an issue on which I believe there is cross-party support. In this environment, I defend, not condemn, the role of experts in a modern economy, and that includes the role of expert regulators. Instead of a magistrates’ court, which Hampton said hears, on average, a health and safety case only every 14 years or an environmental case only every seven years, businesses value a regulator whose job it is to understand their business, their market, the detailed regulations and therefore the nature and seriousness of the non-compliance with those regulations. They value a move away from adversarial and confrontational prosecution to co-operative and consensual regulation which encourages buy-in, better compliance and therefore a better outcome for the stakeholders who regulations are seeking to protect.

Lord Lyell of Markyate: My Lords, will the noble Baroness address my point about the Health and Social Care Bill, which is going through this House at the moment? It legislates for precisely what I suggest: the regulator should be able to offer a penalty that the citizen, whether business or individual, can accept. If it is accepted, it is a civil penalty—an administrative penalty—which does not involve a criminal conviction, but the citizen continues to have the right to say, “No, I won’t accept this. I want to be taken to a court and have the matter proved against me ab initio”. The Government’s policy is to do that in that area and in relation to alcohol, as the Delegated Powers and

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Regulatory Reform Committee suggested. That is reasonable and proportionate and fulfils what the noble Baroness said, which was that we do not want to criminalise everything. Why not go away and think carefully about doing that here?

4.45 pm

Baroness Vadera: My Lords, I was going to come on to that point, although I should say that we are discussing this Bill and its structure, which has been consulted on. It applies to a wide set of regulators, as the noble and learned Lord has said on many occasions; it is not a narrow Bill that applies only to a certain set of regulators. I will come on to address the point of the alternatives between civil and criminal penalties, if I may first finish the point that I was making.

The point that I was attempting to make was about knowledgeable regulators being able to lead to a better compliance outcome. In that context, the noble and learned Lord expressed the fear that regulators will hand out fines disproportionately. There is no evidence to suggest that that will be the case and all the evidence to suggest that it will not. In addition to being expert, they are bound by the regulators’ compliance code and have to act in a way that is proportionate, accountable, transparent, consistent and targeted. They will not be granted the new powers unless the Minister is satisfied when a Hampton review is undertaken on each regulator that they are capable of acting in such a way. Their detailed powers will be subject to an affirmative order requiring a debate in both Houses and they could have their powers taken away if they misuse them.

The noble and learned Lord suggested that we are seeking to pursue the Bill in preference to improving the performance of magistrates’ courts by instead taking cases away from them. We are not. We are implementing all the recommendations of the Macrory review, including those outside the scope of the legislation, which give courts the necessary tools to tackle regulatory offences more effectively than currently. I have already provided details of that in writing to the noble and learned Lord.

The noble and learned Lord and the noble Lord, Lord Neill, have questioned whether the Bill is compliant with the European Convention on Human Rights, especially Article 6. It is. As we discussed on Friday, the Government firmly believe that the safeguards in the Bill satisfy our obligations under the ECHR. Indeed, I should point out that the European Court of Human Rights has itself recognised the benefits of removing certain forms of conduct from the category of criminal offences under domestic law. In the case of Ozturk v Germany, the European Court of Human Rights said that such measures could serve the interests of the individuals as well as the needs of the proper administration of justice.

The noble and learned Lord implied that regulators will be acting as judge, jury and sentencer, in a phrase expanded by the noble Baroness, Lady Wilcox, and has in the past drawn an analogy with traffic wardens. Traffic wardens do not have to give notice of intent, hear representations and be satisfied to the criminal standard of proof before issuing a

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parking fine. I have enumerated several times the checks and balances in the Bill, so I will not repeat them now.

I say in response to the query from the noble Lord, Lord Neill, that he will know that, where serious assertions are made in civil proceedings, the burden of proof will follow the gravity of the assertion. Therefore it is not at all unusual for the balance of proof to be determined with little difference if the assertion is serious.

I stress again that there is a right of appeal against the new sanctions to an independent, impartial and expert tribunal. The details of this were discussed in particular by the noble and learned Baroness, Lady Butler-Sloss. There was some confusion on Report about the membership of the tribunal. I clarify that we envisage that the tribunal will be chaired by a tribunal judge and not by a civil servant. We have clarified the drafting, which we will come to later.

I shall clarify comments made by my noble friend Lord Bach on the last day of Report. The tribunal will have powers to confirm, to overturn or to substitute a regulator’s sanctioning decision. Its role will be similar to, but not the same as, that of the Court of Appeal Criminal Division. It will examine not whether the sanctioning decision is safe or unsafe but whether there are grounds for overturning the decision. Wide grounds of appeal have been provided for each sanction, which in some ways will allow for a fuller examination of the decision than the Court of Appeal, as it specifically allows for the examination of matters of fact. The Court of Appeal is generally reluctant to overturn the jury’s findings of fact.

The noble and learned Lord, Lord Lyell, talked about current Bills and mentioned the wheelie bin case, which I believe involve the same question of whether business should have a choice whether to accept the civil sanction or whether to opt for a criminal prosecution. It cannot be for business to choose how it will be treated. Allowing a business to do that would leave the system open to abuse. The business could, for example, attempt to delay the enforcement process by going down one route and then opting for another. For the new system of civil sanctions to have the confidence of the public, it must be swift and effective.

Furthermore, in a proportionate sanctioning regime, criminal prosecution should be reserved, as we have said, for the most serious cases. This can be assessed by the regulator only in view of all the cases before it. Therefore the choice between civil and criminal sanctions must remain at the discretion of the regulator and not the offender. What might be appropriate in certain limited cases might not be appropriate for the Bill and its structure, which we have discussed and consulted on at length. We have already set out that the route that the regulator chooses will be determined by a number of factors such as the nature of the offence, the characteristics of the case and what is set out in the regulator’s own enforcement policy, which will be public.

The noble and learned Lord questioned the blanket nature of the powers under the Bill and, on occasion, the lack of detail of things such as the level of fixed monetary penalties. He also detailed procedures of the

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new tribunal. This is an enabling Bill and, given the complexity of businesses and the differences in various regimes of regulation, we can hardly have one size fits all in this primary legislation. Details will be in the orders that grant powers when the Minister is satisfied that they are warranted and to the level needed, and they will be available and the subject of debate and affirmative order by both Houses.


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