Edward Garnier's Lords 'Ping-Pong' Speech on Exemptions to Failure to Prevent regime in EC&CT Bill 18 October 2023 Hansard Col 213.

Motion A1 (as an amendment to Motion A)

Moved by Lord Garnier

Leave out from “House” to end and insert “do insist on its disagreement with the Commons in their Amendment 151A, do not insist on its Amendments 151B and 151C, to which the Commons have disagreed for their Reason 151D, and do propose Amendments 151E and 151F in lieu—

151E: As an amendment to Lords Amendment 151, in subsection (1), after first “body” insert “which is not a small organisation or which is a large organisation (see sections (Section (Failure to prevent fraud): small organisations), (Section (Failure to prevent fraud): large organisations) and (Large organisations: parent undertakings))”

151F: After Clause 180, insert the following new Clause—

“Section (Failure to prevent fraud): small organisations

(1) For the purposes of section (Failure to prevent fraud)(1) a relevant body is a “small organisation” only if the body satisfied two or more of the following conditions in the financial year of the body (“year P”) that precedes the year of the fraud offence—

Turnover Not more than ￡10.2 million

Balance sheet total Not more than ￡5.1 million

Number of employees Not more than 50.

(2) For a period that is a relevant body’s financial year but not in fact a year, the figure for turnover must be proportionately adjusted.

(3) In subsection (1) the “number of employees” means the average number of persons employed by the relevant body in year P, determined as follows—

(a) find for each month in year P the number of persons employed under contracts of service by the relevant body in that month (whether throughout the month or not),

(b) add together the monthly totals, and

(c) divide by the number of months in year P.

(4) In this section—

“balance sheet total”, in relation to a relevant body and a financial year—

(a) means the aggregate of the amounts shown as assets in its balance sheet at the end of the financial year, or

(b) where the body has no balance sheet for the financial year, has a corresponding meaning;

“turnover”—

(a) in relation to a UK company, has the same meaning as in Part 15 of the Companies Act 2006 (see section 474 of that Act);

(b) in relation to any other relevant body, has a corresponding meaning;

“year of the fraud offence” is to be interpreted in accordance with section (Failure to prevent fraud)(1).

(5) The Secretary of State may by regulations modify this section (other than this subsection and subsections (6) and (8)) for the purpose of altering the meaning of “small organisation” in section (Failure to prevent fraud)(1).

(6) The Secretary of State may (whether or not the power in subsection (5) has been exercised) by regulations—

(a) omit the words “which is not a small organisation or” in section (Failure to prevent fraud)(1), and

(b) make any modifications of this section (other than this subsection) that the Secretary of State thinks appropriate in consequence of provision made under paragraph (a).

(7) Before making regulations under subsection (5) or (6) the Secretary of State must consult—

(a) the Scottish Ministers, and

(b) the Department of Justice in Northern Ireland.

(8) Regulations under subsection (5) or (6) may make consequential amendments of section (Failure to prevent fraud: minor definitions).””

Lord Garnier:-

My Lords, the cracked record is up and at it yet again, but I make no apology because, although I fully understand the timetabling difficulties that the Government face—namely, that they would like to see this Bill receive Royal Assent before the close of the Session—I think we all ought to agree that it is better that, if we are to give this Bill a route through to Royal Assent, it should be a good Bill.

Most of the Bill is good, but this particular provision in relation to failure to prevent fraud offences falls down. I will not make the same speech that I made on 11 September, nor the same speech that I made in July, nor the same speech that I made in the spring, nor the same speech that I have made probably half a dozen times since I came into this House and probably a dozen times when I was a Member of the other place. Suffice to say that nothing I have heard from the Government, and nothing I have heard from those representing the Government in the other place, has come anywhere near meeting the case that has to be met.

First, it seems to me as a matter of straightforward principle that the criminal law should be uniform. It should apply to all in exactly the same way, and any defence that is available to a criminal offence should also be the same and applied to all uniformly. Of course, it will be up to the prosecuting authorities to consider the evidence and whether it is in the public interest to bring a prosecution on the evidence available, but we should not leave this Bill in a position where there is a different failure to prevent fraud offence for most companies than there is for 0.5% of the corporate and partnership economy.

I add this. There should be a form of consistency between each of the Government’s Bills dealing with failure to prevent. The Bribery Act 2010 has a failure to prevent bribery offence. The Criminal Finances Act 2017 has a failure to prevent the facilitation of tax evasion offence. Neither of those two failure to prevent offences is limited in its scope, in so far as neither of those Acts of Parliament provide an exemption for anybody, still less for 99.5% of the corporate economy. For some extraordinary reason which is yet to be explained this Bill provides that only 0.5% of the corporate and partnership economy should remain liable for any failure to prevent fraud offences. I have yet to find an answer.

I read in Hansard the House of Commons debate of 11 September which overturned my successful amendment. My right honourable friend Mr Kit Malthouse said that, clearly, I do not understand anything since I have never run a business. Well, he is wrong about that, quite apart from being offensive, because I have run my own business as a self-employed barrister for nearly 50 years. Furthermore, I have been a head of a set of chambers, which is, if I may say so, quite a respectable business to run.

Noble Lords:-

Hear, hear!

4.00pm

Lord Garnier

If one wants to learn anything from the speeches made in the House of Commons, I suggest that my noble friends on the Front Bench— and other noble Lords if they have a moment—read those of Sir Robert Buckland and Sir Jeremy Wright, two former law officers. They agree with my remarks of 11 September and find it puzzling that their own Government, a Government who are in favour of producing cogent and cohesive criminal law, have come up with this dog’s dinner.

I have done my best to be accommodating. It is not an accusation that is often levelled at me, but on this occasion, I think that it can be, justly. I have done my best to meet some of the Government’s less organised thinking. As I said at the outset, as a matter of principle, I cannot understand why there should be an exemption for anyone from the proposed criminal law, just as there is not under the Bribery Act and the Criminal Finances Act. However, to make life easier for the Government, on the last occasion I suggested that microbusinesses should be exempted from the failure to prevent fraud offences provision. I abandoned my provisions relating to the failure to prevent money laundering. The Government did not find that attractive, even though I tried to explain my abandoning of the principle on the basis that just as we have an age limit for criminal responsibility—10—we could perhaps also, by a rather clumsy analogy, exempt micro businesses from criminal responsibility under the failure to prevent provision. That did not seem to go down very well with the Government—certainly not with Mr Kit Malthouse.

I have now moved a little further towards the Government. You may say, “Well, that’s a bit wet. If you’ve got any principles, why not stick to them?” Well, okay, accuse me of being wet, but I am doing my best to help the Government get out of an unnecessarily sticky hole. I have amended my proposal so that rather than micro businesses being exempted, “small” businesses should be exempted—I define a small business on page 5 of the amendment paper, which states that, for the purposes of this provision,

“a relevant body is a ‘small organisation’ only if the body satisfied two or more of the following conditions in the financial year of the body … that precedes the year of the fraud offence”.

Those conditions are that the turnover of the business should be

“Not more than ￡10.2 million”, the balance sheet should be “Not more than ￡5.1 million” and the number of employees should be “Not more than 50”.

In speaking against my own case, I rather wish that I had not put that down, but I have because I am trying to assist my noble friend on the Front Bench in getting his Bill enacted before the end of this Session.

I repeat that the criminal law should be uniform. Defences to the criminal law should be uniform. We should not have exemptions based on the size of the business. The Theft Act applies to all suspects—I am seeing whether my noble friend still enjoys my old joke about the six feet six burglar—regardless of whether they are six feet six or five feet six. We do not exempt people on the basis that they are small people or do not fit a particular height, so why are we doing it here? I have yet to find out. I am afraid that unless the Government move a little closer to me, I will invite your Lordships to join me in the Division Lobby...

Speech in reply: My Lords, I will make one point in total agreement with my noble friend the Minister—we are not having a row, we are having an argument. He and I have a different view about the merits of our respective arguments. If the House listens to no other speeches, and if it wishes to forget mine, I urge noble Lords to remember what the noble Lord, Lord Eatwell, and my noble friend Lord Agnew said. From both sides of this House, they perfectly summed up the lacuna in the Government’s case.

I thank all noble Lords who have taken part in this short debate. Despite the fact that this is not an argument about party politics—it has nothing whatever to do with the Salisbury convention—I regret that I am insufficiently persuaded by my noble friend the Minister that he has quite got the point. I must therefore ask the House if it will join me in agreeing with my Motion by testing the opinion of the House.

Division on Motion A1

Content 245 Not Content 204

Motion A1 agreed.