New Clause 67 - Civil asset recovery in cases of economic crime

Economic Crime and Corporate Transparency Bill – in a Public Bill Committee at 3:30 pm on 24 November 2022.

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“The Secretary of State must by regulations make provision for costs in civil recovery proceedings involving economic crime to be awarded against the enforcement authority only where the respondent can show that the enforcement authority has acted unreasonably, dishonestly or improperly.”—

Brought up, and read the First time.

Photo of Liam Byrne Liam Byrne Labour, Birmingham, Hodge Hill

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

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

With this it will be convenient to discuss new clause 68—Criminal asset confiscation in cases of economic crime—

The Secretary of State must by regulations make provision for the parties to bear their own costs in criminal confiscation proceedings following an unsuccessful prosecution of an economic crime.”

Photo of Liam Byrne Liam Byrne Labour, Birmingham, Hodge Hill

The new clause would cap legal costs where the Government try to bring unexplained wealth orders into effect. That point was picked up by the Foreign Affairs Committee when it was ably chaired by the Minister for Security. It also featured heavily in the economic crime manifesto which the other Minister helped launch in Westminster Abbey not too long ago, in the heady days of summer, when he was among the leading campaigners for cleaning up economic crime—his apprenticeship for the Bill in many ways.

You will know, Sir Christopher, that we have a real problem in this country, in that we introduced a brilliant legal reform back in 2018—I cannot remember whether that was one, two or three Governments ago, but it was introduced by a Conservative Administration and supported by Members across the House. Indeed, when I was in Washington with the Minister earlier in the year, unexplained wealth orders were lauded by the Department of Justice, the Department of the Treasury and everyone else we met as a really serious bit of legal innovation that the rest of the world could learn from. It fell to us to explain that all four of the unexplained wealth orders that have been moved so far have failed. Of course, one reasons that they are failing is because the poor National Crime Agency—I mean poor financially—is having to go up against some of the richest people in the world, and is simply being outgunned and outspent in court.

The case of Aliyev is a good example. I think it was the second unexplained wealth order, and the National Crime Agency sought to target properties owned by Ms Nazarbayeva and her son Nurali Aliyev. It was always going to be a difficult case, because the mother was the Speaker in Kazakhstan’s Senate and a successful businessperson—she was named in Forbes and all those kinds of things. Her son, who is an investor and entrepreneur, had founded Capital Holdings JSC, a business that manages about 25 different companies. However, the National Crime Agency suspected that the source of Nurali’s property wealth was his father, who had held several senior public roles in Kazakhstan and had fallen out with the Government. Unfortunately, he died in suspicious circumstances in 2015. The NCA suspected that the father had been involved in bribery, corruption and money laundering, and it had prayed in aid lots of good evidence in order to substantiate its case.

The enormously complex legal structures involved in the case meant that the National Crime Agency had to serve the unexplained wealth order against a host of offshore companies that owned the properties. It had to serve against the London solicitor Mr Andrew Baker, who was a trustee of the complex arrangements. Two of the properties were bought by companies in the British Virgin Islands and sold on to Panamanian companies. A third was sold from a BVI company to a company in Curacao, and then to another in Anguilla. It was the classic type of case that the Bill is designed to police.

In early April, however, Mrs Justice Lang discharged the unexplained wealth order that had been granted, because of new evidence that had been presented. Reuters subsequently reported that the protagonists in the case were seeking £1.5 million-worth of costs from the National Crime Agency, which had to fork out an interim payment of £500,000. Given that the NCA’s anti-corruption budget was only about £4 million in the year in question, Members can see what kind of impact such tactics can have. In the United States, which is much better at this than we are, there is a much stronger cost-control regime.

Again, this measure that has cross-party support. I think the hon. Member for Amber Valley (Nigel Mills) sought an amendment to the Criminal Finances Act 2017 that would have changed the law so that costs could not be awarded on an indemnity basis. I am no expert on that particular amendment, but it was rejected by the Government. None the less, there have been efforts by hon. Members across the House to try to get a handle on the matter.

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 3:45, 24 November 2022

The right hon. Gentleman says that there is a much stricter cost-control regime in the United States. He is clearly not aware that there is no such regime in the United States, because no adverse costs are awarded. It is a completely different legal system.

Photo of Liam Byrne Liam Byrne Labour, Birmingham, Hodge Hill

I meant, in summary, the economic effect. The impact is that agencies have much greater latitude to bring cases against bad people in American courts without fear of what it will do to their enforcement budget. That is exactly where we need our enforcement agencies to be. If we are going to strengthen their hand, to really effectively police the problem and to respect what the Government need to do, namely, to ensure that we maximise the effectiveness of our enforcement agencies within tight budgets, the measure should, I hope, be accepted by the Government. I am delighted to have had the opportunity to move the new clause.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Home Office) (Immigration)

I wish briefly to concur with my right hon. Friend’s every word. He has made a powerful case about unexplained wealth orders. That was something of a false dawn for the reasons he set out. Similar to what we said about SLAPPs, we are concerned about the chilling effect—the vast disparity between the financial firepower of the people that the UWOs seek to go after and that of the NCA and, frankly, the British state.

My right hon. Friend’s new clause would absolutely push the Bill in the right direction. It provides a means for us to level the playing field. On the basis of that common-sense proposal, we can start to have serious conversations about how to crack down on some of the kleptocrats. I thank my right hon. Friend for his clause and the manner in which he has proposed it. I hope that the Minister will seek to champion it rather than oppose it.

Photo of Thomas Tugendhat Thomas Tugendhat Minister of State (Home Office) (Security)

I am grateful for the intent behind new clause tabled by the right hon. Member for Birmingham, Hodge Hill. He has an absolutely valid point—we need to equalise the firepower between some of the organisations. We have a fundamental challenge, because we cannot assume that arising from the actions of a UWO, which is not a human rights action but to do with civil litigation, costs should fall on the losing party. We must look at how to balance the different elements.

My own inclination would be look more at how we fund our agencies to do this work. Some members may have heard that I once was in the Army. The way the armed forces does such things is by having two different forms of budget—the ongoing budget and the war reserve. I am much more inclined, and much more persuadable, towards the argument that we should be making sure that the agencies that take on such claims have a war reserve to ensure that they can meet the costs without that affecting their ongoing work, rather than changing the law in a way that would affect civil liabilities in many different areas.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

To be honest, I do not think that would prevent the impact that the fear of incurring costs would have on how any of the agencies operate. Everyone in the House has great respect for Bill Browder, and I am sure that the Minister will have talked to him about the issue, and I know that the Under-Secretary has, too. Bill Browder is completely shocked and astounded by the fact that we allow any costs at all to be claimed by successful litigants when they challenge Government action.

I do not know whether either Minister had the chance to meet Judge Mark Wolf, who is over here campaigning for an international anti-corruption court. I do not know whether they have come across him. He was here last week and, when we talked about such litigation, he expressed absolute astonishment that defendants in any of these cases, have the right to any of their costs being met. In America, looking at those figures, great success comes from that hugely important lack of ability to claim costs.

Photo of Thomas Tugendhat Thomas Tugendhat Minister of State (Home Office) (Security)

It is worth pointing out that the Americans do not use unexplained wealth orders, which, after all, are civil litigation, because they do not have them. Therefore, the question of costs does not apply in the same way.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

I would not use the example of unexplained wealth orders. They have not worked in the way that we had all hoped and intended. On the failure to prevent bribery, if we think of the acts that the Serious Fraud Office has been engaged in—I think it is with Serco, where they face a couple of million pounds in claims and costs. It goes right across the panoply of tools that we have to fight economic crime.

Photo of Thomas Tugendhat Thomas Tugendhat Minister of State (Home Office) (Security)

This new clause clearly focuses on the Proceeds of Crime Act 2002 and the different ways in which it would be affected. I will not accept it, for the reasons that I have given; I believe it expands far too far into other areas of civil litigation. I do, however, take the right hon. Lady’s point entirely. The ways in which our agencies can defend themselves has already been on my plate for many, many weeks.

Photo of Liam Byrne Liam Byrne Labour, Birmingham, Hodge Hill

The Minister has had quite an education since becoming a Minister and joining the ranks of the Government, because, of course, it was in the Foreign Affairs Committee report on tackling illicit finance in which he authored a number of quite strong words about the need to reform and improve the regime for unexplained wealth orders, which are an important legal innovation. They are looked up to by enforcement agencies from around the world, and it is a national embarrassment that they are not working. It could well be, as the Minister argues, that the right answer is to create a war-fighting fund for our enforcement agencies, but that would have been possible if the Government had not opposed all the amendments that we suggested to create and restock the war chest that might be needed.

I appreciate that in this business a politician’s first instinct is to want to have their cake and to eat it, but unfortunately the Minister voted against putting us in that position at an earlier stage in the Bill. It is therefore important to send a clear signal to the other place that this is an important set of reforms for the Government to focus on and get right. I will therefore press the new clause to a vote.

Question put, That the clause be read a Second time.

Division number 17 Economic Crime and Corporate Transparency Bill — New Clause 67 - Civil asset recovery in cases of economic crime

Aye: 6 MPs

No: 8 MPs

Aye: A-Z by last name

No: A-Z by last name

The Committee divided: Ayes 6, Noes 8.



Question accordingly negatived.

Ordered, That further consideration be now adjourned. —(Scott Mann.)

Adjourned till Tuesday 29 November at twenty-five past Nine o’clock.

Written evidence reported to the House

ECCTB 28 UK Anti-Corruption Coalition