Fraud Bill [Lords]

Public Bill Committee, 22 June 2006.

Standing Committee B

New Clause 1

David Heath (Liberal Democrat, Somerton and Frome)

I beg to move, That the clause be read a Second time.

Martyn Jones (Labour, Clwyd South)

With this it will be convenient to discuss amendment No. 17, in schedule 3, page 16,line 45, at end insert—

‘Criminal Justice Act 2003 (c. 44)

Section 43.'.

David Heath (Liberal Democrat, Somerton and Frome)

I welcome you to the Committee, Mr. Jones. I hope that our proceedings will be relatively short, but we shall see.

New clause 1 would repeal section 43 of Criminal Justice Act 2003, whose purport is to allow non-jury trials in fraud cases, so it is entirely relevant to our discussions. Let me say from the outset, however, that I do not intend to press it to a Division, and my purpose in putting it on the amendment paper is simply to set out clearly our position on section 43 and allow the Solicitor-General to repeat the assurances that were given in another place about the Government’s intentions. That is a sensible thing to do and simply makes the position clear.

There has been a lot of discussion about section 43 since the passing of the 2003 Act and there have been what we might describe as misunderstandings along the way about various party’s intentions and the degree of consultation inherent in taking such issues forward. I shall not rehearse those arguments again today, but simply say that the Liberal Democrats are utterly unpersuaded of the need to proceed with implementation of the section 43.

If the Bill is enacted, the measures in it will go a long way towards simplifying and clarifying the laws on fraud, and that is indeed the intention. In so doing, the Bill will, I hope, assist with the presentation and management of fraud cases and at least partially remove whatever pressure there is on trial juries. Juries are an important part of the justice system, and although we accept that some trials take place without them, we are unpersuaded that cases involving the serious crime of fraud should be included. In a perfect world, therefore, section 43 would be repealed.

Of course we accept the assurances given by the Attorney-General in another place, where he made it plain that the Government intended not to use section 43, but that if they did proceed with changes to the arrangements for jury trials in fraud cases, they would do so through primary legislation. Of course, I accept those assurances and I am grateful for them. Given that they are in place, however, it could be argued that there is no need for section 43 and that repealing it would make no difference. Equally, if section 43 is not to be used, there is no mischief in it, which is why I do not intend to proceed to a Division. I simply ask the Solicitor-General to repeat the assurance about the Government’s intentions.

If the Government have formed the view that there may be a need to proceed through primary legislation, I invite the Solicitor-General to consider that there should be time for the Bill, if enacted, to take effect and for some assessment to be made of its impact on the duration of trials and the prevalence or otherwise of failed trials under the new offences. It would be absurd to discard a basic building block of English justice without that objective assessment or evidence to suggest that the changes would have a beneficial effect. That is the position of Liberal Democrat Members, and it may well be the position elsewhere on the Opposition Benches. I invite the Solicitor-General to make any comments that he feels appropriate about the new clause.

Dominic Grieve (Conservative, Beaconsfield)

I am grateful to the hon. Member for Somerton and Frome (Mr. Heath) for bringing the new clause forward. He will know that his views on the subject are identical to mine and my party’s. We sought to resist section 43 of the Criminal Justice Act 2003 when it was introduced. There was a stand-off between the Lords and the Commons and its eventual introduction was accompanied by a double-lock mechanism that required a resolution of both Houses of Parliament—which, it became apparent, the Government were unable to secure.

I make the position quite clear: I do not think that the Government, in seeking to put that provision in the Criminal Justice Act, were attempting a ruthless undermining of trial by jury. However, I happen to believe that they were profoundly mistaken. Jury trial is a very good system, and I believe that it is possible to have jury trial in long and complex fraud cases. Indeed, from the few fraud cases that I have done, my experience is that the jury appear to have absolutely no difficulty understanding the key elements of the offence or the allegations being made. As I mentioned earlier in our proceedings, the basic problem that emerged in virtually every case in which I was involved was that the case had been badly presented and the indictment poorly drafted. Those cases tended to fail, quite often at half-time after a submission of no case to answer. Sometimes—as with the case in which my hon. and learned Friend the Member for Torridge and West Devon (Mr. Cox) was involved—cases ran into the sands because the case management was extremely unsatisfactory. That has nothing whatever to do with the jury.

If the Government wish to return to the topic in future, they would be well advised, as the hon. Member for Somerton and Frome said, to allow for a little delay to see how the new Fraud Act works. I have some confidence—clearly, so, too does the Solicitor-General, as he is presenting the Bill to the House—that this Fraud Bill has the potential to make the prosecution of fraud easier. Certainly, in terms of the problem of comprehensibility to a jury, this Bill, as it stands, can only be an improvement. I hope that the Government do not, as a result, run off and hastily introduce new primary legislation—that is what they say they want to do—to implement section 43 in some new or variant form. Of course, if they do that, we will listen carefully to their proposals, and if they have any merit, we will give them careful consideration.

In the course of the passage of this Bill through the other place, I was pleased to learn that the Government were prepared to give an assurance that section 43 would never be used to implement restrictions on trial by jury in long fraud cases. However, the suggestion that there might even be primary legislation in the next Session of Parliament clearly raises the possibility of yet another serious difference of view occurring in this House and, I suspect, the other place on the subject. I make this plea to the Solicitor-General: if the Government’s intention is to proceed in the next Session, perhaps they should delay it a year and just see how the new fraud provisions work. It might be possible to provide enough reassurance to the Solicitor-General—and, I dare say, the Attorney-General, who seems particularly exercised about the issue—that a change to the right to jury trial is not needed.

Although I welcome the spirit of the new clause, I certainly shall not press it to the vote; that would appear churlish, in view of the assurances given by the Government in the other place. However, I am grateful for the opportunity that this Committee has had to touch on the subject, as now the Government know where we stand on it. Perhaps we can also have a short response from the Solicitor-General, telling us how the Government’s thinking on the subject is developing.

Mike O'Brien (Labour, North Warwickshire)

On Report in the other place, my noble and learned Friend the Attorney-General, said:

“The Government, while remaining committed to the policy contained in Section 43, have taken the view that we need to separate this issue from the passage of the Fraud Bill. We therefore propose to bring forward fresh primary legislation to give effect to that policy as soon as parliamentary time allows rather than bringing forward an order giving effect to Section 43.”—[Official Report, House of Lords, 14 March 2006; Vol. 679, c. 1130.]

That, I hope, gives Opposition Members the reassurance that they need that section 43 will be dealt with in primary legislation, rather than by means of an order. That, at least, is the way in which we propose to go.

I shall not give a long rehearsal of the arguments on non-jury trials, but there were 29,000 jury trials last year. If section 43 had been implemented, there might have been 29,000 less half a dozen or perhaps 20, and most of those non-jury trials would have been very long fraud trials. Between 2002 and 2004, there were 19 fraud trials lasting longer than six months; six lasted more than a year. We are primarily talking about long fraud trials dealing with very complex issues. In a number of fraud trials, judges expressed concern. For example, in the Blue Arrow case, Justice McKinnon, the trial judge, said:

“No jury should be asked to cope with what this jury have had to endure.”

We are concerned that justice should be done in fraud cases. We broadly support juries dealing with the vast majority of fraud cases, never mind general cases of criminal culpability. In 2003, of the 2,978 people tried for fraud, 2,258 were found guilty, 1,879 of whom pleaded guilty. The vast majority of those cases would still be tried by a jury, even after implementation of section 43—although, obviously, in the case of a guilty plea, a jury would be unnecessary, in terms of finding guilt. That is our broader position.

I appreciate that both the hon. Gentlemen who have spoken say that they are speaking to the new clause in order to hear a rehearsal of the Government’s position in this place, which is a fair and proper thing to do. However, with the reassurance that I have given, and having repeated the words of my noble and learned Friend the Attorney-General, I hope that the hon. Member for Somerton and Frome will feel able to withdraw the motion.

David Heath (Liberal Democrat, Somerton and Frome)

I thank the Solicitor-General for what he said, and we are grateful for it, although it was entirely expected, because it follows on from what the Attorney-General said in another place.

I could dispute parts of what the Solicitor-General said. The fact that a case was unendurable for a jury may not owe anything to the difficulty of understanding the evidence or the pressures put on the jury, but may simply be because the case was managed in such a way that absurd time pressures were put on jury members, in terms of the trial’s duration. I know that the Government have been working on the improved management of complex cases. We must wait and see whether that—and, indeed, this Bill—has the desired effect; I hope that the Bill will simplify indictments and legal arguments and reduce the length of time needed.

On Second Reading, I juxtaposed a British trial with an American trial, although I freely admit that the British one was not a fraud trial. It was the Bank of Credit and Commerce International litigation.

The fact that the trial took two years and that the two opening speeches alone took 200 days of court time is a disgrace to the operation of our legal system and our courts. Possibly the biggest fraud case of modern times—the Enron case, which was heard by a Texan court in Houston before a jury—was completely finished in 15 weeks. That suggests that management and having a firm control of the presentation of cases are key issues, and that the ability or otherwise of a jury to cope with the complexity of fraud trials is not. Indeed, there is plenty of qualitative evidence that that is the case.

Geoffrey Cox (Conservative, Torridge and West Devon)

Merely to reinforce what the hon. Gentleman is saying, with every word of which I agree, in the Jubilee line case, which the Government have used as evidence of the need for change, the jury displayed astonishing diligence and attentiveness to its duty. It kept up constant attention, with a series of pertinent questions, and at no stage, until the trial eventually drifted into the sands for entirely other reasons, gave any indication of wanting to do anything other than reach a conclusion. The hon. Gentleman’s words are exactly right and felicitous—the problem is one of management.

I am engaged in another case—also a major fraud trial—in which the Americans managed to bring the related defendants to trial by 2004. The parallel proceedings, concerning exactly similar issues, will not be brought to trial in this country until 2007. There is a clear and instructive comparison to be drawn between the American and English systems.

David Heath (Liberal Democrat, Somerton and Frome)

I am most grateful to the hon. Gentleman, who speaks with experience that I do not share.

I do not want to labour the point. I welcome what the Solicitor-General has said, although I regret that he did not say that he would allow the proposals to bed in and an objective assessment to be made of its effect on jury trial before bringing forward primary legislation. I still hope that that might be the case, although it was not explicit in his comments.

The fact that the Bill has been broadly welcomed in all parts of the Committee and that we are, I hope, proceeding with it expeditiously suggests that we all share the same objective. The fact that we profoundly disagree on one point is unfortunate, but it is a disagreement that we can argue about if and when primary legislation is brought forward. On that basis, I beg to ask leave to withdraw the motion.

New Clause 3

David Heath (Liberal Democrat, Somerton and Frome)

I beg to move, That the clause be read a Second time.

Again, I do not intend to press the new clause to a Division, but it is important that the Committee at least consider whether we should have jurisdiction for fraud beyond our national jurisdiction. The issue was discussed in the gestation of the Bill and there are conflicting views on it. I do not advocate international jurisdiction other than in clearly defined cases. When we debated the previous amendment, we discussed US jurisdictions, some of which claim extraordinary extraterritorial scope, way beyond what is reasonable in either law or common sense, particularly in commercial law.

With fraud, there is great cause for concern in some areas, as it can easily be perpetrated on British citizens from outside our national jurisdiction. It is not like knocking someone on the head; one is unlikely to be standing in another jurisdiction—except, perhaps, Gretna Green—and knocking on the head someone within the confines of England and Wales. Fraud is an offence of a different sort, which can easily be perpetrated from abroad.

I know that there is much collaboration and co-operation between law enforcement and prosecuting authorities in other countries to deal with this worldwide phenomenon, and I certainly do not propose that the English and Welsh prosecuting authorities should seek to investigate and prosecute fraud wherever it happens in the world, which would be absurd, but there are occasions on which fraud has an international dimension, which might obstruct the successful prosecution of a fraud perpetrated on someone in this country—possibly by a British national who is in another jurisdiction. There might be difficulties because of the clear territorial limits on the offences as they stand in securing a successful prosecution.

Let me give a few brief examples. The first is obvious: multinational corporations. We live in an increasingly multinational, global, commercial world, which means that bodies corporate often work in many countries and jurisdictions and have subsidiaries that might not trade in this country. A company with an office in the great state of Delaware, or, worse, in Liberia, might perpetrate fraud against an individual or company in the United Kingdom. I want it to be clear that there will not be a defence that allows a company operating in this country that has committed an offence to avoid successful prosecution by arranging its business so that the fraud is effectively perpetrated by a subsidiary company that is not registered or trading from this country, but is nevertheless under the control of that British company. I hope that that is covered by the Bill, but I am not confident that it is.

My second example is unsolicited mail. We and our constituents receive torrents of unsolicited mail, some of which I believe constitutes fraud. A few years ago, I brought to Parliament’s attention a case in which a clairvoyant was threatening vulnerable people with consequences through her enhanced psychic awareness. She said that major events would occur if the targeted person did not secure her protection by virtue of an amulet or other device, which would protect her from the inevitable consequences of not paying over money to an address abroad so as to secure that protection.

That abhorrent correspondence was carried through the Royal Mail from a business address in the Netherlands, and was of great concern to the people who were vulnerable to that sort of material. I think that that fraud would not be prosecutable under the Bill. Perhaps the Minister will say that it would be, but I do not think that he can. I think that other measures need to be taken.

Frankly, it appals me that despite the fact that these matters are drawn to the attention of Royal Mail, it, as a carrier, is still prepared to take bulk mailings of extremely questionable material, but that is by the by. I want to ensure that when fraudulent materials that are sent through the post are involved, the matter can be prosecuted if it is possible to secure an extradition and an arrest.

Some unsolicited mail is sent electronically. We are all familiar with the famous west African scam, which seems to have gone global—it is no longer just relatives of President Abacha who will have untold amounts of money available if they can persuade people to part with a small amount to establish a new bank account. Relatives of President Marcos in the Philippines, or any recently deposed despots who appear to have many relatives with access to large amounts of money, say that all they need is a British bank account so as to secure untold riches for the unsuspecting recipient of their communication.

Most people are aware that this is a scam, but there must be some who are not or it would not continue. Some unfortunates must lose a lot of money as a result, and it is important for us to provide as much legal protection as possible for those people.

I want to draw the Committee’s attention to something that was brought to my attention in my constituency surgery last week, and it is a new one on me. A gentleman came in outraged because he had applied for death certificates on the internet and had been charged in euros. His original outrage related to the fact that a Department—part of the British Government—was charging in euros rather than pounds sterling, which is the sort of complaint that we get in my part of the world. He thought that an extraordinary state of affairs.

I investigated the matter because I thought it sounded odd and I uncovered the fact that a website purporting to be a British Government website—it even has the appellation .gov—is selling Government certificates to people who do not know better. It appears in the search engines above the Government’s own websites and sells certificates at a higher cost than they do. The person concerned buys forms for £7 from the Government and sells them for £21 as a private enterprise while purporting to be a Department.

The view of the registrar’s department was that there is no illegality in such transactions, although it obviously deplores and would like to deal with them. I hope that they will be illegal under the new measure, because it would be a misrepresentation if a person purported to be connected with the Government when they were not. Even so, I am not convinced that such a thing could successfully be prosecuted under the Bill because the person involved in the case that I cited is based in France, in spite of the fact that he has a .gov.UK website.

There are strong arguments for international jurisdiction. The Under-Secretary’s argument at the conclusion of the debate on Second Reading drew a distinction between corruption and fraud. I would like the Bill to have included corruption, but my amendments were out of order in that respect, which is right. He said:

“The resource implications for ‘policing’ UK nationals worldwide for fraud are therefore much larger. The cost would need to be carefully examined before any party committed itself to it.”—[Official Report, 12 June 2006; Vol. 447, c. 580.]

Yes, of course. The same applies to sexual offences in respect of international jurisdiction, but we cannot police every transaction and investigate every allegation.

However, the capacity to indict and successfully prosecute is an important part of the armoury of our national jurisdiction on the offence because it can so easily be perpetrated by someone outside our territorial boundaries. I invite the Solicitor-General to comment on my remarks, explain the reasoning that has led the Government to believe that we should seek no form of international jurisdiction in the Bill, and say whether they will keep that position under review or whether they will return to it.

Mike O'Brien (Labour, North Warwickshire)

The hon. Gentleman raises a number of issues, some of which touch on points made earlier, particularly the question of where we draw the line between what is and ought to be a crime of fraud, and what is a commercial relationship that we decide should not be criminal, in which the buyer needs to beware, but where there are various safeguards through advertising regulations and other means, and where there are civil rights. The hon. Gentleman also asked what we should be prepared to prosecute in our courts, where actions are committed by persons abroad.

The UK does not have jurisdiction over foreign companies, wherever their ownership is, for acts carried out overseas that have no impact in the UK. However, if the fraud results in a loss of property in the UK, we have some jurisdiction. Part I of the Criminal Justice Act 1993 confers jurisdiction over certain crimes of dishonesty if a “relevant event” occurs in England and Wales, which is defined as:

“any act or omission or other event (including any result of one or more acts or omissions) proof of which is required for conviction of the offence.”

Paragraph 24 of schedule 1 to the Bill amends definitions of offences for the purposes of the jurisdictional provisions of the 1993 Act, deleting references to offences that are repealed and adding references to new offences. Those changes ensure that the wide jurisdictional provisions of the 1993 Act apply to the new fraud offences so that, in a phishing case, for example, where a false representation is made in the UK, it does not matter whether the offender is operating from abroad, because he may be caught by the offence in clause 2.

In addition, paragraph 25 of schedule 1 amends section 2 of the 1993 Act to ensure that the offence of fraud in clause 1 can be prosecuted if the only event that takes place in this jurisdiction is the gain or loss of property. That provision covers cases where fraud committed entirely overseas leads to the removal of funds from a bank in the UK. I hope that with those reassurances, such as they are, the hon. Gentleman will feel able to withdraw the motion.

The ambition of the new clause is extraordinary. It seeks to broaden our courts’ jurisdiction over fraud offences committed by anyone located anywhere in the world where fraud is a crime. The new clause is so extraordinarily wide that I dare say that it would collapse under the weight of its own ambition, as it would require anybody—not just UK nationals who live in jurisdictions where fraud is a crime—to behave in accordance with UK fraud law. A citizen of the USA or France, or anyone else for that matter, who commits acts while in their home country or anywhere where fraud is a crime, would face prosecution by UK prosecutors, even if the crime had no impact in the UK. The hon. Gentleman indicated that that is not his intention, but it would be the effect of the new clause as drafted.

We want to ensure that fraudsters, where they can be properly dealt with in our courts, are so dealt with. They can be located in any number of places all over the world. We have all heard about the number of sinister scams over the years involving Spanish lottery frauds or African advanced fee frauds. Such cases already have some coverage under the 1993 Act. If it is the case that proof of any act or omission if is required for conviction—for example, if the deception or gain takes place in the UK—our jurisdiction will cover it.

David Heath (Liberal Democrat, Somerton and Frome)

I am extremely grateful to the Solicitor-General for his helpful comments. He admonished me a little on the drafting of my new clause. The provision is analogous to that set out in the Sexual OffencesAct 2003 and uses almost exactly the same terms. It is not such an extraordinary provision, as the British Government already have the jurisdiction or ability to prosecute for any sexual offence carried out by any person anywhere in the world on the exact same basis. That is the section that I have lifted, effectively en bloc. Of course, the limiting factor is the decision to investigate and prosecute. It is completely impractical to investigate and prosecute every offence that occurs anywhere, and we would not wish to. The new clause would allow there to be no blockage to procedures against any person.

I share some of the misgivings about extra-territorial jurisdiction. Indeed, I often criticise the ambitions of the United States in that respect and the fact that that its jurisdiction applies to British citizens as a result of the extraordinary asymmetric extradition arrangements we have with it, but that is another matter.

Dominic Grieve (Conservative, Beaconsfield)

I was not going to intervene, but I have to say that, as drafted, the new clause is even more ambitious than the wildest dreams of a district attorney in Texas.

David Heath (Liberal Democrat, Somerton and Frome)

Possibly the great state of New York already has such a provision in place. Texas tends to be rather introvert rather than extrovert with its legal system—it is about the only thing that it is not extrovert in.

I am grateful to the Solicitor-General. He has covered some of the ground that I wanted to cover. We have to be a lot more astute in protecting our citizens against the predations of those operating from outside the country, particularly on the internet, which makes it too easy for people to be defrauded. It occurred to me in the example that I gave that we might need provision for misrepresentation of a position under the Crown or something of that sort. If people honestly believe that someone is a Government official, they are far more open to being defrauded than when someone is purporting to be carrying out a commercial transaction. We might like to consider that. I was very surprised to hear that the scam that I described—I think it is a scam—was not an offence, as his legal advice seems to suggest. Having said that, I have no difficulty in begging to ask leave to withdraw the motion.

Mike O'Brien (Labour, North Warwickshire)

Mr. Jones, I thank you and your colleague for your sterling chairmanship of this Bill, which is very important, given the impact that it will have on many of our constituents and in ensuring that fraud will be dealt with. The Bill was potentially legally quite complex, but it has benefited from proper scrutiny, provided by Opposition colleagues with care and diligence in a way that I hope means that the public have been well served. You have not had to intervene to quieten us down too much. We got on with the business, answered the questions, dealt with the issues, raised the difficulties that might be presented by the wording of various clauses, and got through the Bill. We did the business of Parliament, assessing the legislation in a proper way that does credit to this Committee and the chairmanship of you and your colleague. Hopefully, in due course, that will lead to good law.

Dominic Grieve (Conservative, Beaconsfield)

May I join the Solicitor-General in thanking you, Mr. Jones? Please pass on our thanks to Mr. Amess for his chairing of Committee on Tuesday. It has been a very pleasant and short Committee. In the nine years that I have been in the House, this is the first time that I been on a Bill Committee in which we completely scrutinised everything that we wanted to consider. In the past, I am afraid, the guillotine and the programme motion have usually left some things—albeit small things, sometimes—not considered, so this is a first. It bodes well for the future passage of the Bill through the House.

I thank the Solicitor-General for his response to our points, and I thank other members of the Committee. It has been an enjoyable experience, as I thought it would be when I first came into the Room.

David Heath (Liberal Democrat, Somerton and Frome)

I concur with those sentiments, and thank you, Mr. Jones, and your colleague Mr. Amess, for your chairmanship of proceedings. I also thank hon. Members for their contributions. I particularly thank the Solicitor-General, who was at pains to give us the fullest replies possible, ably assisted by his officials, and that is not always the case.

I share the view that we have done justice to a Bill that has its complexities. It is not a particularly simple Bill, but it is largely good, and we have had the opportunity to raise the issues of concern to us. I hope that the brevity of our proceedings will not be confused with lack of diligence. I would say, never mind the width, feel the quality. We have had some substantial debates in a brief time. Overall, I commend the Bill to the House.

Mike O'Brien (Labour, North Warwickshire)

It was remiss of me not to thank the officials who helped to prepare the Bill. I am grateful to them for the way in which they have advised me, and my colleague the Attorney-General in another place, throughout. I also thank my colleagues on the Labour Benches, who have done their duty here, too, when need be.

The Bill has been dealt with expeditiously, and no doubt those who deal with such issues will need to consider whether a full day might not be necessary for the Bill on Report. That matter will, no doubt, be dealt with through the usual channels, but I just want to put my view on the record.

Martyn Jones (Labour, Clwyd South)

I thank hon. Members for their general good behaviour and co-operation. This Bill has been a pleasure to chair.