Faulks: I struggle to understand government objection
The House of Lords has renewed its backing for an amendment to the Economic Crime and Corporate Transparency Bill which would give judges more freedom not to award costs against enforcement agencies.
Former justice minister and unaffiliated peer Lord Faulks KC said his amendment would not prevent judges from doing “what is fair” but would give them a “nudge” towards taking into account the reasonableness of the prosecution case and the impact of costs orders on agencies.
The bill is currently in its ‘ping pong’ stage, where it is passed back and forth by the two houses to resolve disagreements about the final text.
One of the two outstanding issues is Lord Faulks’ amendment, which as originally passed would have prevented enforcement authorities from having to pay legal costs in unsuccessful civil recovery proceedings, subject to certain safeguards.
The Lords passed the amendment during the bill’s passage through the house, but the Commons rejected it.
Lord Faulks last week pressed a watered-down version of the amendment that set out what a court should consider when deciding what costs order to make.
He told peers that that he “would have liked the enforcement agencies to have had complete protection against costs orders in the event that they lost a recovery claim”.
He went on: “I struggle to understand the government’s objection to this amendment and its predecessors; they seem, with respect, to be adopting a somewhat tender approach to fraudsters.
“Judges regularly, in ordinary cases, make orders that each side bear their own costs, or make issue-based costs orders, or other orders which reflect the justice of the individual case…
“This amendment is intended to reduce the possibility of an agency saying to itself: ‘We cannot afford the risk to the budget if we lose a case, even when we’ve got good evidence to bring it.’”
The peer said campaign group Spotlight on Corruption suggested that there were a number of cases in the pipeline which carried costs risks, including over 60 cases being reviewed by one agency and close to £1bn in assets frozen by an enforcement body.
“Another advantage to this amendment is that those defendants or respondents to an application who defend these cases will know that, even if their legal strategy prevails, they may not recover their costs. This may mean that they are keener to reach a compromise.”
Home Office minister Lord Sharpe, responding for the government, said it remained of the view that the amendment would be “a significant departure” from the ‘loser pays’ principle, and “not something that should be rushed into without careful consideration”.
However, it was not necessarily “a bad idea”, which is why the government had added a statutory commitment in the bill to review payment of costs in civil recovery cases in England and Wales by enforcement authorities, to publish a report on the findings and to lay it before parliament within 12 months.
The amendment was carried by 245 votes to 209.
The other amendment by Lord Garnier KC, to limit an exemption for SMEs from the new failure to prevent fraud offence to those with less than 50 employees and turnovers of less than £10.2m, was also carried, by 245 votes to 204.
The Bill returns to the House of Commons tomorrow.
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