It is a great pleasure to join you for this morning’s event, and I am particularly pleased to be able to warm to a theme on which I have waxed lyrical over my years in Parliament, both as a backbencher and as a Minister. As Solicitor General, with responsibility for oversight of both the CPS and the SFO, understanding the legal framework within which criminal cases are brought in our jurisidiction was an essential part of my work. I well remember sometimes vigorous debates with Treasury colleagues about the ambit of current economic crime legislation, so the tension between the need to effectively police economic activity and the imposition of undue burdens on business is all too familiar for me.
As Lord Chancellor, I was very happy to agree to a Law Commission review of the law of economic crime, which was commenced in 2020 and which reported a few months ago. My direct experience of the Law Commission has been an extremely positive one, and my decision to reform the way in which this independent body was funded, in order to give it a higher degree of certainty and operational flexibility, was a vote of confidence in its important work. I pay tribute to Lord Justice Green and his predecessors for their leadership. I am also proud of the fact that I was able to secure the passage of legislation to implement the Commission’s excellent proposals on criminal sentencing reform, with the creation of the Sentencing Code, which is the most significant law reform in this area in generations.
Before I move on to some of the detail of the Law Commission’s recommendations and their potential applicability to the Economic Crime Bill currently before Parliament, I want to dwell a moment on the relationship between law and politics. In my work with the Law Commission, I have already set out an example of how this relationship can be one of mutual respect, yielding invaluable fruit. As Lord Chancellor more generally, that office holder is at the epicentre of the relationship between Government and the Judiciary, taking an oath to uphold the rule of law. Undeniably, in the past few years, we have hit some moments of high tension between the executive and judicial branches of the state. My essential analysis is that our constitution has weathered the storm, and that we have reached a calmer period. My worries about the longer-term relationship between law and politics, however, still remain.
There is no doubt that as both worlds become ever more specialised, the opportunities for “constructive crossover” become fewer and fewer. Whether it is the decline in numbers of lawyer-polticians, familiar with both worlds and able to bridge the gap in an indefinable but invaluable way, or whether it is the rise of anti-lawyer rhetoric in Westminster and the rise of political chat by lawyers on social media, the two worlds seem to be moving further and further apart. The well-established convention of comity, whereby the differing parts of our constitution afforded each other mutual respect and respect for respective functions, seemed to be under attack. We are at risk of being a modern iteration of Disraeli’s memorable description of the divide between rich and poor in his 1845 novel, Sybil: “Two nations; between whom there is no intercourse and no sympathy; who are as ignorant of each other’s habits, thoughts and feelings as if they were dwellers in different zones, or inhabitants of different planets…”. Added to that is what I perceive to be the default position of both sides, namely one of mutual cynicism or even contempt. It will come as no surprise to any of you that I think this to be a terrible state of affairs. Not just bad for the lawyers and the politicians themselves, but really bad for the rest of society.
Some of the discourse of the last few years, heavily influenced by the schisms caused by Brexit, has reflected this dislocation. Enemies of the People, Lefty Lawyers are some of the more memorable and frankly distasteful slogans from this period. I have said a lot about them at the time and will continue to speak about why it is deeply unfair to impugn judges who cannot answer back and why the overwhelming majority of lawyers leave their politics, if indeed they have any, firmly at the door of the robing room or the court or the office in which they practice. But equally, we have seen in social media what are essentially political attacks being dressed up in the language of the law. Spurious legal actions whose funding is not always transparent and which effectively seek to bypass proper political lines of accountability have become fashionable, alongside wholly misconceived complaints to professional bodies being made about lawyer-politicians, their votes in Parliament and their advocacy for or against legal and constitutional issues that are far from controversial but the merits or otherwise are a question of political judgement. The shadow of Lawfare, too, is a long one.
What, then, is to be done? I strongly believe that in order to restore balance, work must be done not only with our politicians, but with the wider public too. Firstly, initiatives that bring Parliamentarians and members of the judiciary together, such as the one inspired by the then LCJ, Lord Thomas of Cwmgeidd and the Industry in Parliament Trust, should be encouraged. A number of colleagues have taken the opportunity to “shadow” judges and Tribunal Chairs in order to see and understand better the court process and the often hugely challenging work being undertaken.
Secondly, Public Legal Education should be propagated and spread as widely as possible. The two types of PLE, namely “just in case” and “just in time”, are of huge value when it comes to enabling people to at the very least be aware of the effect of the obligations that they enter into, whether it be signing a mobile phone contract, downloading music or other material, or to be alive to the need to take early advice on debt, housing and other day-to-day issues that, if neglected, can escalate alarmingly for those concerned. I was pleased to set up the Solicitor General’s panel on PLE whilst in office, and pay tribute to all those organisations that provide it together with schools, colleges and other forums where it has proved to be of real benefit.
Thirdly, we should emphasise the importance of access to justice, not just for individuals, but for businesses as well. The rise of online procedures in areas such as money claims is, to my mind, a huge step forward and an indication that we are trying to shape a system that truly serves the public, rather than vice versa. As our world increasingly moves online, then so must justice. I am constantly surprising political colleagues by explaining that in many areas of litigation, namely crime and the High Court, this is precisely what has happened. There is still more to be done, however, but I was proud to do my part to advance technology in our courts, aided considerably by the realities of Covid19 and the need to adapt our court system at huge pace in order to keep the wheels of justice turning.
Digitalisation and the rise of machine or artificial technology create huge opportunities for legal professionals and indeed the public in getting access to justice in a way that until now has been barred by questions of time, complexity and cost. We have to remember the drawbacks however, from the risk of leaving behind those who do not have the wherewithal or access to the internet right through to the way in which AI is used in the system. As China has done increasingly since 2017 in millions of civil and consumer cases, should our courts too resort to AI algorithms in order to decide cases? Consistency and adherence to precedent may be attractive reasons to let AI flourish, but we have to ask fundamental ethical questions about its effect on the human quality of justice itself before we walk blithely into this space. The fact is that AI should have some role in justice matters, but as a servant, not a master, which is why some form of international rules for its use should be drawn up, bearing in mind the fact that AI is used very differently in different disciplines and that we risk creating rules that are so high-level as to be meaningless. I will be returning to this theme when I embark upon a Research Fellowship at the Mossavar-Rahmani Center for Government at Harvard Kennedy School next year, so more later.
When it comes to international challenges, Russia's invasion of Ukraine in February of this year not only forced us to re-evaluate our diplomatic priorities in dealing with the Kremlin but brought our policy regarding the influence of tainted foreign money into sharp focus. This coupled with the information released in leaks like the Panama Papers and widely reported instances of fraud during Covid have all illustrated the need for serious government action. Beyond the clear moral justification to respond to the proliferation of tainted money entering the city or being laundered in overseas territories, ensuring the UK’s international reputation as a financial hub and home of a preeminent legal tradition is in our economic interest.
After the events of February 24th, the Government moved swiftly, freezing assets and sanctioning figures linked to Putin's regime. The Government deserves credit for the depth and breadth of the sanctions imposed, but it is for policymakers to ensure that London is never again used as a laundromat for tainted money. We must acknowledge the questionable practices that were allowed to proliferate by successive governments of both parties for decades.
This process was underway during my time in government, in July of 2019 we initiated the Economic Crime Plan, which identified 52 clear actions required for the UK to tackle a wide range of economic crimes, including fraud, bribery, market abuse and money laundering. However, over three years later, only 48% of the necessary actions identified have been completed.
The Economic Crime and Corporate Transparency Bill is an encouraging sign that the Government intends to build on the successes of the 2019 Economic Crime Plan as well as tackle gaps and address actions not carried out. Reforms to key agencies like Companies House – giving the organisation extensive powers to check, challenge and decline incorrect information provided by prospective companies. Further, the empowerment of law enforcement with greater powers to obtain information potentially linked to the financing of terror groups or money laundering are the actions of a government that is serious about tackling economic crime.
Furthermore, in a world where 80% of all fraud is online the new powers proposed for the National Crime Agency (NCA) will be crucial. The Economic Crime Bill, coming as it does after a first tranche of legislation was passed earlier this year, will make it quicker and easier for the NCA to seize, freeze and recover assets online, including cryptocurrencies. In the long term, however, the simple need for funding will determine much of the NCA’s capacity to deal with ever-evolving threats. This is something the Treasury is aware of as the NCA’s budget has gone from £ 450.5 million in 2020/21 to a projected £ 797.7 million in 2022/23 and despite the difficult economic headwinds, such investment must be maintained.
One of the obvious areas where the benefits of online services have also led to significant detriments is in online fraud and economic crime generally. I believe that the Economic Crime and Corporate Transparency Bill presents a clear opportunity for Parliament -for Government – to act. The Law Commission Options Paper, based upon a three month consultation process and drawing on experience from other common law jurisdictions, has come up with some serious proposals that merit action. For those who think that doing nothing will suffice, I remind everyone about the particularly narrow construction of the “directing mind” test, which whilst I make no comment about the merits of the individual case, did nothing to enhance this jurisdiction’s reputation for being able to identify and prove corporate criminality relating to an issue of overwhelming public interest, namely the 2008 Banking Crisis and the entirely understandable desire for accountability, which remained largely unfulfilled. Should we be surprised then, when people express cynicism in the ability of UK authorities to prosecute economic crime? Making choices here is not a luxury, it is a necessity, if we are to enhance, even recover, our reputation when it comes to bringing those who break the law to book.
Rightly, the Law Commission decided that the adoption of a US-style of corporate liability, making the corporation liable for criminal acts of the employee committed in the course of their employment and with intent to benefit the corporation, would take things too far. I have long taken the view that any reform to corporate liability should not come at the expense of individual liability. In other words, if an employee embarks on a frolic of their own with no authority from their employer, is it fair to impose a blanket of liability on the corporation? Consideration was also given to the Australian approach to criminal liability, where the corporate culture and system itself could be the basis for a conviction, or the Australian and Canadian approach allowing the acts or mental states of “senior managers” or “high managerial agents” to be attributed to a corporation, but ultimately, they were rejected in favour of some underlying principles that the Commission recommend should underpin new economic crime offences, namely:
- Organisations should only be liable if the conduct was undertaken by the employee or agent with a view to benefitting the organisation directly, or benefitting a person to whom the employee or agent was providing services on behalf of the organisation;
- Organisations should have a defence if they can prove that they had in place such prevention measures as were reasonable in the circumstances, or if they can prove that it was reasonable not to have any such procedures in place;
- There should be a requirement that the Government publish guidance on the prevention procedures an organisation might put in place, with consideration to be given to sector-specific guidance as well;
- There should be a presumption in favour of the extra-territorial jurisdiction of failing to prevent offences, meaning that overseas conduct by employees or agents would be covered.
Most fundamentally, the Commission rejected the creation of a general corporate offence of failing to prevent crime, preferring a more bespoke approach. Its major recommendation is that a new offence of Failure To Prevent Fraud (as defined by the 2006 Fraud Act) should be created. The offence would be committed where an “associated person” (for instance an employee or agent) commits a fraud with intent to benefit the corporation or a person or corporation to whom the “associated person” provides services on behalf of the corporation in question. This offence would not apply to inchoate offences ie attempts or to conspiracies.
A defence should be available if the corporation could prove that it had such prevention procedures as were reasonable in the circumstances or that it was reasonable not to have any such procedures in place. It is recommended that Government Guidance as to appropriate prevention measures should be published in order to assist corporates.
Other proposals were also outlined, namely the creation of: Failure To Prevent Human Rights Abuses offence; Failure to Prevent Ill-Treatment or Neglect, replacing the Section 21 Offence in the Criminal Justice and Courts Act 2015 which only applies to care providers and Failure to Prevent Computer Misuse, with an acknowledgement that this last offence should be part of the Home Office’s review into the operation of the Computer Misuse Act 1990.
There also followed a range of proposals relation to civil penalties, reporting requirements by companies on anti-fraud procedures and some preventative Civil Order procedures based on the transparency in supply chain provisions in S54 of the Modern Slavery Act 2015 and also the Serious Crime Prevention Orders regime under the Serious Crime Act 2007.
The Government is now considering its next move following these recommendations. The political climate is moving quickly. Earlier this month, the House of Lords Fraud Act and Digital Fraud Committee published a report entitled “Fighting Fraud: Breaking The Chain” which pulls no punches about the scale of the task ahead and starts with the stark paragraph that “Fraud is the most commonly experienced crime in England and Wales today. It accounts for approximately 41% of all crime against indivdiuals”. The Committee estimates that fraud has increased by 25% in the year to March 2022 in comparison with the year to March 2020, with £4b of losses in that past year alone. These are, of course, general figures, and the Committee’s Report rightly focuses on ways in which the Financial Services sector can help “design out” the problem whilst advocating a much clearer and coordinated approach to fraud from within Government via the creation of a Cabinet subcommittee chaired by the Security Minister and with a clear anti-fraud mandate.
The Committee also backs calls for the new corporate offence of failure to prevent fraud, albeit departing from the Law Commission’s approach by preferring the approach taken in the Criminal Finances Act, that is, no requirement to prove benefit to the company from the fraud. Underpinning the Committee’s approach was the evidence given to it about the potentially beneficial effect of this on corporate culture, and the simple fact that the offences of failing to prevent bribery and tax evasion already impose compliance requirements on corporations that do not make this additional offence a wholly new departure.
It is my hope and indeed expectation, that the Government will work to further improve the Bill, and that we will see the introduction of new clauses to cover the Law Commission recommendation of the new Failure to Prevent Fraud offence as the Bill makes its way through both Houses of Parliament. I will continue to make the case to Ministers, and hope that the work that I started those years ago will finally come to fruition.
In the meantime, some of you may have heard that I will be coming back to practice, whilst continuing to undertake my important constituency and Parliamentary commitments. Having held a second job as a Minister for over seven years, I believe that I can achieve the sort of blend that will demonstrate the value of the lawyer-politician and how the two worlds of law and politics can be brought together in ways that serve the wider interests of our country.