Joint Committee On Human Rights Third Report


THIRD REPORT


The Joint Committee on Human Rights has agreed to the following Report:—

PROCEEDS OF CRIME BILL

The Background to the Bill

1. The Proceeds of Crime Bill, although presented as part of the emergency anti-terrorism package, has been introduced to the House of Commons following an extensive process of consultation.[5] The Bill is intended—

    (a) to authorise the establishment of a new body, the Assets Recovery Agency, to take action to secure the confiscation of proceeds of crime (Part 1 of the Bill);

    (b) to consolidate and in some respects to amend the law relating to confiscation of proceeds of crime following a criminal conviction, which has built up piecemeal since 1986, particularly to bring the law respecting different offences and different parts of the United Kingdom into harmony with one another so far as possible (Part 2 of the Bill deals with England and Wales, Part 3 with Scotland, and Part 4 with Northern Ireland);

    (c) to make provision for civil proceedings to be brought to recover property thought to have been obtained through unlawful conduct, without the need for a criminal conviction (Part 5);

    (d) to confer certain revenue functions on the Director of the Assets Recovery Agency (Part 6);

    (e) to consolidate and harmonize the law relating to the control of money laundering (Part 7); to consolidate and harmonize investigative powers to trace proceeds of crime (Part 8); and to consolidate and harmonize the operation of the proceeds of crime legislation in relation to insolvent individuals, partnerships and companies (Part 9); to make provision for sharing of information with and by the enforcement authorities under the legislation (Part 10); to authorise the making of Orders in Council to allow certain powers to be exercised to assist proceeds-of-crime investigations by authorities outside the United Kingdom (Part 11); and for related purposes (Part 12).[6]

2. There has been provision for confiscating proceeds of crime following a conviction of a drug trafficking offence since 1987 in England and Wales,[7] 1988 in Scotland,[8] and 1990 in Northern Ireland.[9] These were extended in England and Wales in 1989,[10] and in 1995.[11] In Northern Ireland, the parallel legislation covered both drug trafficking and other serious crimes.[12] In Scotland, provision was made for confiscation of the benefits of certain non-drug-related crimes with effect from 1996.[13] Additional sanctions were introduced for people who launder the proceeds of crime, with effect from 1996, in all parts of the United Kingdom.[14]

3. This legislation operates alongside separate legislation allowing for the seizure and forfeiture of property destined for use in connection with acts of international terrorism or terrorism concerned with the affairs of Northern Ireland.[15] Northern Ireland confiscation orders can, since 1991 be made against people who are convicted of offences of financing terrorism from legal sources or who launder terrorist funds.[16] The Proceeds of Crime Bill does not affect the terrorism-related forfeiture and confiscation legislation.

4. In 2000, the gross receipts from confiscation orders in the United Kingdom amounted to about £30 million. The Government have set a target of doubling this figure by 2004 and the Proceeds of Crime Bill is part of the strategy for achieving that.

5. Its essence is to broaden the circumstances in which confiscation can take place—including in circumstances where no criminal conviction relating to those assets has been made. The Minister for Police, Courts and Drugs (Mr. John Denham MP) told the House during the Second Reading debate on the Bill—

    ... many major criminal figures have become untouchable by criminal prosecution. They organise or finance the criminal activity and profit from the results, but remain remote from the commission of particular crimes. That often makes it impossible for law enforcement authorities to build a case against them ... Criminal proceedings may be impossible for other reasons, for example where the suspect is abroad and cannot be extradited, or where the suspect has died. In many of these cases, law enforcement has compelling evidence that assets were derived from unlawful activity, and this is often supplemented by evidence that property has been concealed and that no legitimate explanation for the property exists ... The law enforcement agencies regularly encounter cases such as those I have outlined, and a survey last year identified 400 individuals or groups with estimated combined assets of £440 million who potentially fell into this category.[17]

6. The provisions of the Bill would allow the Assets Recovery Agency to bring civil proceedings to recover proceeds of crime in such circumstances, probably where the sum involved is at least £10,000.[18] The Minister accepted, in reply to a question from Mr. Norman Baker MP, that it could sometimes be appropriate for an action for civil recovery to be brought after a person had been acquitted of an offence—

    ... because the action will concern the property, not the individual. Civil recovery is a matter not of finding a person guilty of a crime but of recovering the proceeds of crime, if that can be established to the satisfaction of the courts and according to the tests laid out in the Bill.[19]

These provisions are similar to the civil forfeiture powers available in the USA under legislation which has produced some significant constitutional litigation.[20]

The Human Rights Implications of the Bill

7. In the light of this extension of the power of confiscation, we have focused on the compatibility of the various assumptions which a court must make in such cases with the right to a fair hearing under ECHR Article 6. We have also considered the compatibility of the civil recovery provisions with the right to a fair hearing, and with the right to the enjoyment of property under Article 1 of Protocol No. 1 to the ECHR. During the Second Reading debate, the Conservative Home Affairs spokesman (Mr. Oliver Letwin MP) referred particularly to the possibility of an incompatibility with the right to be presumed innocent until proved guilty under Article 6(2) of the ECHR.

Confiscation Orders in England and Wales

8. Part I of the Bill provides for the establishment of an Assets Recovery Agency as the enforcement authority for the Bill's provisions in England and Wales and in Northern Ireland. (The Scottish Ministers would be the enforcement authority in Scotland.) In itself, Part I has no human rights implications.

9. Part 2 of the Bill essentially consolidates, with only minor amendments, the law relating to confiscation of proceeds of crime following a conviction of an offence in England and Wales. The essential features of the regime are as follows—

      (b)  In considering whether to make an order, the court must decide[21] whether the defendant has a 'criminal lifestyle'. This test is satisfied if the defendant's conviction is for one of a group of offences which are statutorily presumed to be committed by offenders on an habitual basis,[22] or forms part of a course of criminal activity,[23] or is an offence committed over a period of at least six months.[24] The criminal lifestyle need not involve criminal conduct of any particular type.

      (c)  If the court decides that the defendant has a criminal lifestyle, the court must decide whether the defendant has benefited from his general criminal conduct (that is his criminal offences as a whole whenever committed, and whether or not they have been the basis of any conviction).[25]

      (d)  If the court decides that the defendant does not have a criminal lifestyle, it must decide whether he has benefited from the particular criminal conduct of which he has been convicted in those proceedings.[26]

      (e)  If the defendant has benefited under (c) or (d) above, the court must (subject to some detailed provisions which may reduce the amount to be confiscated) make a confiscation order for the 'recoverable amount'. This is the lesser of two amounts: the total amount of the benefit, or the available amount.[27] The 'available amount' is the total of free property held by the defendant (minus the amount payable in pursuance of obligations which have priority), plus the value of all 'tainted gifts'.[28] 'Tainted gifts' are all gifts made by a defendant who has or may be found to have a criminal lifestyle in the six years preceding the commencement of proceedings against him, and made at any time if the gift in any way represented property obtained as a result of criminal conduct. Where the defendant has been found not to have a criminal lifestyle, 'tainted gifts' are all gifts made by a defendant after the date of the offence of which he has been convicted, or the date of the earliest of several offences.[29] 'Gift' includes a transfer at an undervalue.[30]

      (f)  Where the defendant has been found to have a criminal lifestyle, the court assessing the defendant's benefits of crime must make four assumptions, unless a particular assumption is shown to be incorrect (the burden of establishing this being on the defendant) or there would be a serious risk of injustice if the assumption were made.

      (g)  The prosecutor, or Director of the Assets Recovery Agency, must make a statement of relevant matters, and the defendant may be taken to accept allegations to the extent to which he does not indicate disagreement and give particulars of matters he intends to rely on. If the defendant accepts that he has benefited from criminal conduct to any extent, that cannot be used in evidence against him in proceedings for an offence, thus safeguarding the right to be free of coerced self-incrimination to that extent.[31] Under Clause 11 of the Bill, the prosecutor or Director must inform the court of any matters which create a serious risk of injustice. The prosecutor or Director, as a public authority, will be subject to Article 6 requirements. They will therefore be under a duty to make disclosure of all relevant matters in order to secure a fair hearing. The word 'serious' will have to be read and given effect in the light of this.

      (h)  Having assessed the value of the defendant's benefit and the recoverable amount, the court must make a confiscation order against the defendant for that amount, subject to provision to protect third parties with interests in any property or with civil claims against the defendant.[32] The court must also provide for a term of imprisonment to be served by the defendant in the event of non-compliance with the confiscation order (in addition to any term of imprisonment imposed for the offence or offences of which the defendant has been convicted).[33]

10. Although the amendments to the pre-existing law made by the Proceeds of Crime Bill are not significant, the legislation which the Bill would replace was enacted before the Human Rights Act 1998. Although the present Bill has been given a statement of compatibility as required under section 19 of the Human Rights Act, a number of features of that previous legislation have been the subject of judicial scrutiny on human rights grounds. These concern: retrospective effect; the nature of the 'assumptions' a court is required to make; and the conflict between confiscation and the right to the enjoyment of property including preservation of assets pending the making of such an order. We consider the main decisions, and their implications, below.

RETROSPECTIVITY

11. It has been held that confiscation orders are penal in nature, despite the fact that they aim merely to divest the defendant of the benefits of crimes and are in addition to, rather than part of, the sentence for the crime. If legislation were retrospectively to increase the extent of the defendant's liabilities following conviction, it would be incompatible with ECHR Article 7(1) on those grounds.[34] On the other hand, it has been held that confiscating proceeds of crimes committed before the legislation came into force is compatible with Article 7, as long as the legislation was in force before the defendant committed the offence which gives rise to the confiscation order.[35]

12. No new retrospectivity is introduced to the statutory scheme under the Bill. It is our view that Part 2 of the Bill is unlikely to be held to violate Article 7 of the ECHR.

STATUTORY ASSUMPTIONS AND THE PRESUMPTION OF INNOCENCE

13. The previous legislation[36] incorporated assumptions equivalent to those in clause 11 of the Bill. These are that—

      (i)  any property transferred to the defendant at any time in the previous six years was obtained as a result of the defendant's criminal conduct;

      (ii)  property held by the defendant at any time after conviction was obtained as a result of criminal conduct;

      (iii)  all expenditure by the defendant in the previous six years was met from property obtained as the result of the defendant's criminal conduct;

      (iv)  all property was obtained free of any third party's interests in it.[37]

In certain cases it has been argued that these assumptions violate the right of the defendant to a fair hearing under Article 6(1) of the ECHR, and the right to be presumed innocent until proved guilty under Article 6(2). When this was argued in Scotland as a devolution under the equivalent Scottish legislation and the Scotland Act 1998, the High Court of Justiciary held that the statutory assumptions were incompatible with the presumption of innocence.[38] In England and Wales, the Court of Appeal decided that the assumptions were not necessarily incompatible with the presumption of innocence and the right to a fair hearing. However, the conduct of the trial judge would determine whether there was a violation of rights under Article 6 in any particular case.[39] When the Scottish decision was appealed to the Privy Council, the Privy Council decided that the assumptions would never be incompatible with rights under Article 6(2), but reached that conclusion on different grounds from those which had found favour with the Court of Appeal in the English cases.[40] The decision of the Court of Appeal is now the subject of an appeal to the House of Lords[41] which may help to resolve the inconsistencies in the caselaw. In the meantime, the European Court of Human Rights has delivered an important judgment on these matters in Phillips v. United Kingdom.[42] There are essentially three issues.

14. The first question is whether the operation of the statutory assumptions which the courts are required to make engages the right to be presumed innocent until proved guilty under Article 6(2). The Court of Appeal in Benjafield[43] and the High Court of Justiciary in McIntosh[44] thought that they did. The courts stressed that the statute requires courts to assume that the defendant benefited from what the new Bill calls a criminal lifestyle extending to offences other than those with which the defendant was charged, let alone those of which he has been convicted. This was thought to engage the right to be presumed innocent of those offences of which the defendant has not been proved guilty. On the other hand, the Privy Council in McIntosh[45] thought that the words of Article 6(2), 'Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law', did not apply to an inquiry relating to an application for a confiscation order, because at that stage the defendant will already have been convicted and will no longer be a person 'charged with a criminal offence'.

15. This was considered by the European Court of Human Rights in Phillips v. United Kingdom.[46] By a majority of five votes to two, the Court held that Article 6(2) is not applicable to a post-conviction inquiry into whether or not the defendant had benefited from drug trafficking offences, including offences other than those of which he had been convicted. The reasoning of the majority was essentially similar to that employed by Lord Bingham of Cornhill in the Privy Council in McIntosh v. Lord Advocate. For the purpose of such an inquiry, there is no absolute right to be considered innocent of all offences other than those of which the defendant has been convicted. On the evidence of the decisions of the courts set out above, we conclude that Article 6(2) of the ECHR is not engaged by the statutory assumptions which the courts are required to make when assessing confiscation orders.

16. The second question is whether the right to a fair hearing under Article 6(1) applies to a person who is facing an application for a confiscation order following conviction. The Court of Appeal and the Privy Council agreed that it does, because the process leading to a 'determination of any criminal charge' against the defendant continues after conviction until sentencing is complete. The case law of the European Court of Human Rights is also clear on this point.[47] In addition, it was held in Welch v. United Kingdom[48] that a confiscation order is in the nature of a penalty for an offence for the purpose of engaging Article 7. The European Court of Human Rights accordingly held in Phillips v. United Kingdom[49] that the defendant is entitled to a fair hearing in the determination of an application for a confiscation order.

17. This conclusion leads us to the third question, which is whether the statutory assumptions which the court is required to make therefore violate the right to a fair hearing under Article 6(1). The Court of Appeal in R. v. Benjafield treated Article 6(1) as incorporating the presumption of innocence under Article 6(2), which was treated as a specific instance of the general obligation to offer a fair hearing.[50] By contrast, in the Privy Council in McIntosh v. Lord Advocate, Lord Bingham of Cornhill (with whom Lord Hoffmann, Lord Hope of Craighead, Lord Clyde and Lord Hutton agreed) preferred the view that Article 6(2) imposed obligations separate from and additional to Article 6(1), saying he did not think that the Court of Appeal's conclusion did justice to the language of Article 6(2) or the reasoning of the Strasbourg organs in cases under Article 6(2).[51] But even if the Privy Council decision on this is correct, it may still violate Article 6(1) to make assumptions for which there is no supporting evidence, and then to place on the defendant the persuasive burden of disproving the assumptions on the balance of probabilities.

18. In Phillips v. United Kingdom,[52] the European Court of Human Rights decided—

    ... that, in addition to being specifically mentioned in Article 6 § 2, a person's right in a criminal case to be presumed innocent and to require the prosecution to bear the onus of proving the allegations against him or her forms part of the general notion of a fair hearing under Article 6 § 1... This right is not, however, absolute, since presumptions of fact or of law operate in every criminal law system and are not prohibited in principle by the Convention, as long as States remain within certain limits, taking into account the importance of what is at stake and maintaining the rights of the defence ...[53]

19. The Court held that the rights of the defence were adequately safeguarded by the opportunity to rebut the statutory assumptions, having been informed of the evidence on which the prosecution relied, and by the conclusion of the judge that, on the balance of probability, evidence provided by the prosecution positively established that assets to at least the value of the confiscation order were proceeds of drug trafficking. The Court did not find it necessary to consider the compatibility of the assumptions with Article 6(1) beyond the facts of the case. It is therefore clear that compatibility depends to a great extent on the procedure adopted and the way in which the judge goes about making his or her decision in each individual case.

20. The Court of Appeal in R. v. Benjafield was at pains to stress that the duty to offer a fair hearing would require a court to take account of the number of offences of which the defendant was convicted—

    Clearly, the greater the number of convictions the greater the likelihood of benefit, but the statutory minimum of convictions [one for drug trafficking, money laundering, and some other offences; three for a 'criminal lifestyle' in other cases] is all that is required for the confiscation process to be put in motion [in respect of benefit from crimes of which the defendant has not been convicted]. In the course of that process, the court can take into account the number of offences proved because they are probative either of the likelihood of the defendant having benefited or not benefited from his offences.[54]

In addition, the Court of Appeal in R. v. Benjafield stressed that, 'The court should be alert to make allowance for situations which make it impractical for a defendant to satisfy the burden of proof which the legislation places upon him.'[55] At the same time, the Court of Appeal and the Privy Council both considered it to be necessary to strike a fair balance between the legitimate interests of the defendant and those of society as a whole. The need to combat serious crime by depriving wrongdoers of the benefits of their crimes was sufficient to justify making some assumptions, saving the legislation from being intrinsically incompatible with Article 6(1). But the trial judge has a duty to apply the law in individual cases in a way that prevents the assumptions being given inappropriate weight in the circumstances of the case. As the European Court of Human Rights held in Phillips, presumptions of fact and law must be kept within reasonable limits which take into account the importance of what is at stake and maintain the rights of defence and the concept of a fair trial in the circumstances of each case.[56] Parliament can make laws which are capable of being applied by the courts both compatibly and incompatibly with the requirements of human rights instruments.

21. This makes it clear that the European Court of Human Rights and the Court of Appeal considered that the statutory assumptions imposed on the courts by the legislation were not intrinsically incompatible with Article 6, but might violate Article 6 in individual cases if judges did not exercise their judgment in such a way as to avoid unfairness. In view of this approach to the application of Article 6(1), we conclude that the statutory assumptions which the Proceeds of Crime Bill requires courts to make in considering confiscation orders will not violate Article 6(1) as long as trial judges apply themselves to assessing benefits appropriately. However, we have asked the Home Secretary whether he thinks there would be advantages, in terms of legal certainty, if the statutory assumptions were to be drafted in a way that incorporated the considerations highlighted as relevant to the exercise of the duties of the courts by the Court of Appeal.

CONFISCATION ORDERS AND THE RIGHT TO THE ENJOYMENT OF PROPERTY

22. As there is normally no doubt that the defendant is entitled to the property subject to the confiscation order, the order will usually constitute an interference with the right to enjoy property under Article 1 of Protocol No. 1 to the ECHR.[57] However, a person may be deprived of his property under that Article if it is done 'in the public interest and subject to the conditions provided for by law and by the general principles of international law.' The state has the right 'to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.' A confiscation order must meet these conditions.[58] This requires that there be 'a reasonable relationship of proportionality between the means sought to be employed and the aim sought to be achieved',[59] which entails maintaining a balance between the public interest and the rights of the property owner.

23. In Phillips v. United Kingdom, the European Court of Human Rights unanimously decided that confiscation orders in drug trafficking cases satisfy these tests. The Court accepted that the power to make a confiscation order in that case had been conferred in order to deter drug trafficking, to deprive traffickers of profits, and to remove assets which could otherwise be used to fund further drug trafficking. Although the sum to be confiscated in that case was substantial (£91,400), it corresponded to the amount by which the defendant had been found to have benefited from drug trafficking in the previous six years, and was within the limit of the defendant's available assets. As the Court had already held in relation to Article 6, the procedure for making the order had been fair and had respected the rights of the defence. In those circumstances, the confiscation was lawful under Article 1 of Protocol No. 1.[60]

24. This shows that the use of confiscation orders in drug trafficking cases is compatible, under the conditions which applied in that case. It is arguable that the Proceeds of Crime Bill, like the current legislation which it replaces, makes it possible to impose confiscation orders on defendants whose level of criminality differs widely, particularly when the prosecution relies on a course of criminal conduct or a 'criminal lifestyle'. We have asked the Home Secretary for his view on whether the requirement of proportionality is likely to be met in all cases not involving drug trafficking in which a court would have a duty to make a confiscation order.

25. The Bill would slightly extend the availability of restraint orders and charging orders, preventing a suspect or defendant from dealing with his or her assets, by making it possible for a court to grant such an order from the time when a criminal investigation is initiated.[61] The object of such orders is to prevent someone from disposing of or hiding assets in order to frustrate the making or enforcement of any confiscation order which might be made following a conviction. The extension has a significant inter-relationship with the proposed power to seek to recover proceeds of alleged crimes in civil proceedings. The safeguards for the rights of the suspect or defendant and third parties (including his or her family and people who have interests in property held by him or her) in relation to the powers to make restraint or charging order under the terms of the Proceeds of Crime Bill seem to us to be sufficient to meet the requirements of Articles 6 and 8 of, and Article 1 of Protocol No. 1 to, the ECHR.

Confiscation Orders in Scotland and Northern Ireland

26. Part 3 and Part 4 of the Bill make provision for Scotland and Northern Ireland which is, in all material particulars, equivalent to that made for England and Wales by Part 2. The same conclusions can therefore be drawn in respect of compatibility with Convention rights.

27. However, in clause 101, special provision is made in relation to Scotland to protect the interests of members of the defendant's family in the family home where it forms realisable property (as part of the defendant's assets) but the prosecution has not satisfied the court that the home was acquired as a benefit of criminal conduct. This would appear to provide valuable additional protection for the right to respect for the home of the defendant's family under Article 8 of the ECHR. We have sought an explanation as to why no similar express provision is made in respect of England and Wales or Northern Ireland.

Civil Recovery Orders in England and Wales

28. The truly innovative part of the Proceeds of Crime Bill is Part 5, which allows the 'enforcement authority' (the Director of the Assets Recovery Agency in England and Wales or Northern Ireland, and the Scottish Ministers in Scotland) to bring civil proceedings in the High Court or Court of Session to recover property which is, or represents, property obtained through unlawful conduct. It also permits the enforcement authority to bring proceedings in a magistrates' court or sheriff's court to forfeit cash seized from a person or from premises which is recoverable property.

29. In any such proceedings, the enforcement authority would have to satisfy the court on the balance of probabilities that the conditions for making a recovery order are satisfied. No order may be made if it would be incompatible with any Convention right.[62] This, together with a 'good faith' exception[63] and provision for the payment of compensation where people suffer loss in certain circumstances[64] and other provisions, should generally be sufficient to protect the interests of unimplicated third parties and of people, including members of a suspect's family, with interests in the property. It should, in our judgement, generally be possible to operate the legislation relating to civil proceedings for the recovery of unlawfully acquired assets without acting incompatibly with the right to respect for the home under Article 8 and the right to property under Article 1 of Protocol No. 1 to the ECHR.

30. However, there are four matters which we believe deserve further consideration—

    —  first, does the capacity to make a finding of criminal conduct in civil proceedings violate the presumption of innocence under Article 6(2) or the right to a fair hearing under Article 6(1) of the ECHR?

    —  second, does the regime make adequate provision to protect the due-process rights of the suspect under Article 6, particularly Article 6(3)?

    —  third, do the new procedures operate retrospectively, and, if they do, is Article 7 of the ECHR engaged?

    —  fourth, do the enforcement procedures for recovery orders satisfy the requirements of Article 8 of, and Article 1 of Protocol No. 1 to, the ECHR, particularly in relation to third parties with interests in the property?

FINDINGS OF CRIMINAL CONDUCT IN CIVIL PROCEEDINGS AND ARTICLE 6(2)

31. There is nothing novel about allowing courts to make findings in civil proceedings which amount to findings of criminal behaviour, either as the main focus of a judicial decision or as an incidental matter to be settled in the course of a civil claim. For example, the civil law of deceit has always overlapped significantly with the criminal law of fraud.[65] More recently, it has become more common for victims of crime to bring civil proceedings against people who are suspected of having committed the offences, even if they were never prosecuted or have been acquitted. In these cases, there is a risk of criminal and civil courts reaching diverging decisions on account of the different standards of proof applied. Until now, it has been possible to justify this, because the civil proceedings aim to recompense victims for their losses and injuries, not to impose a penalty on the defendants.

32. It would be more difficult to use this justification in respect of recovery orders under the Bill. Unlike a normal civil action for damages, recovery orders allow an organ of the state (rather than the victim of a civil wrong) to obtain property on the basis that it represents the benefit of crimes committed against others, rather than providing compensation for particular victims in respect of identified wrongs. Many of the crimes which give rise to such benefits are likely to be those sometimes described as 'victimless', where the money is handed over willingly by people in exchange for (illegal) goods or services of which they are keen to avail themselves. The common law has been unwilling to develop a civil cause of action in litigation for purposes other than compensation and restitution.[66] The Bill would make it possible for the first time to apply property recovered under the proposed civil procedure to public purposes. By providing that property is not to be treated as recoverable if a victim of crime obtains a declaration that the property belongs to him or her,[67] the Bill makes it clear that the proposed new procedure has nothing to do with compensating victims of crimes.

33. It is necessary therefore to consider how these provisions affect the applicability of the presumption of innocence under Article 6(2) of the ECHR. As noted above, it applies only where someone is 'charged with a criminal offence'. However, that term has a partially autonomous meaning in the caselaw of the European Court of Human Rights. When deciding whether someone is so charged, the Court takes account of three matters—

      (a)  The classification adopted by the national legal system is significant in that the Court will regard a case as involving a criminal charge if the national system does so. If the national system classifies the case as non-criminal, the Court considers the following two criteria, in order to prevent a State from relieving itself of obligations under Article 6 merely by reclassifying crimes as something else.

      (b)  The essential nature of the proceedings, as a matter of substance rather than law, is significant. In Phillips v. United Kingdom, it was held that proceedings for a confiscation order after conviction are not within Article 6(2), because the charge against the accused has already been decided.[68] However, in the civil recovery proceedings proposed under the Bill, the defendant is likely not to have been charged with an offence, or to have been acquitted of it—this being the main point of the use of a recovery order rather than a confiscation order. Proceedings may then be regarded as being essentially criminal in nature, as they will be founded on an allegation that the respondent 'holds recoverable property',[69] which is property obtained by unlawful conduct.[70] Bringing proceedings for a recovery order therefore seems likely to involve an allegation of criminal conduct which the person has either not faced before or of which he or she has been acquitted. It will involve an allegation of criminal behaviour of which the respondent will not have been convicted. This distinguishes the case sharply from Phillips. It seems very possible, therefore, that Article 6(2) would be engaged by such proceedings.

      (c)  The third criterion is the type and severity of the penalty to which the respondent would be liable in the recovery proceedings. The amount of money involved in such proceedings is likely to be substantial, particularly if the Secretary of State fixes a minimum amount to be pursued in proceedings for a recovery order in the region of £10,000.[71] On this ground, too, it is quite likely that the proceedings for a civil recovery order could be held to amount to a 'criminal charge', engaging Article 6(2).

34. We must assume therefore that proceedings under Part 5 of the Bill would be likely to engage the right to be presumed innocent until proved guilty, and we must consider whether the proceedings would be likely to violate that right, and related rights under Article 6(3). Subject to the three reservations we set out below, it is our view that they would not. The safeguards contained in the Bill, particularly the applicability of the Convention rights to decisions made by both the enforcement authority and the courts throughout the process, the judicial oversight of the process, protection for the interests of third parties, and provision for compensation, are in principle capable of ensuring that a fair balance is maintained between the rights of those involved and the public interest.

THE RIGHT TO A FAIR TRIAL AND ARTICLE 6(3)

35. The 'balance of probabilities' standard for establishing that unlawful conduct has occurred[72] (and thereby normally establishing that the person holding it is in some way implicated in crime) is to some degree lower than that which would normally be applied in criminal proceedings, but the onus of proof remains on the person or body seeking the order and the rights of the defence are preserved. This is not an example of a provision introducing assumptions or placing the onus of proof on the respondent. In its submission to us, Liberty notes that the 'balance of probability' standard is not as high as would normally be expected in criminal proceedings. However, as Liberty recognize, the balance of probabilities test is flexible and context-specific. The more serious the implications of the matter to be established, the more confident of the facts the decision-maker will have to be before being satisfied that an appropriate balance of probabilities has been achieved. In other words, as Lord Bingham made clear in B. v. Chief Constable of Avon and Somerset,[73] the balance of probabilities need not, and in cases such as these probably would not, mean reaching decisions on the basis of a mere 51 per cent probability.

36. There are, however, two matters which could in some cases give rise to an incompatibility with Article 6.

RIGHT TO OBTAIN LEGAL REPRESENTATION

37. The first matter relates to the respondent's right to defend himself through legal assistance of his own choosing under Article 6(3)(c). Where an interim receivership order is made pending trial of the action, to preserve assets which might become subject to a recovery order, clause 255(4) expressly forbids any exclusion to enable any person to meet any legal expenses in respect of proceedings in relation to the application for the recovery order. Where a large part of the respondent's assets is subject to the interim receivership order, this could effectively deprive the respondent of the right to choose his own legal representative. It would interfere significantly with the rights of the defence (as well as potentially placing a significant additional burden on the legal aid fund). It contrasts in a notable way with the treatment of people subject to restraint orders under the confiscation legislation (Parts 2-4 of the Bill), which can be subject to exceptions for reasonable legal expenses.[74] It is hard to see why a threat to rights under Article 6(3)(c) should be thought to be justified under the recovery order procedure, unless it is assumed that the proceedings do not involve a criminal charge. As noted above, this assumption, if it is being made, is questionable.

38. Even if Article 6(3) is not applicable we believe Article 6(1) is, because the recovery of assets involves a determination of the respondent's civil rights and obligations.[75] Article 6(1) includes a right of access to a court, which is potentially compromised by denying a respondent the right to use his or her own property (albeit property which is suspected of having been obtained as a result of criminal conduct) to secure legal representation to defend his or her rights. There may be circumstances in which refusing to permit reasonable legal expenses to be paid for out of the property would necessitate granting legal aid at public expense in order to comply with Article 6(1).[76]

39. We have asked the Secretary of State why clause 255(4) of the Proceeds of Crime Bill is thought to be appropriate in the light of the need to secure compatibility with Article 6 of the ECHR.

RETROSPECTIVITY

40. The second cause for concern relates to the retrospectivity of the provisions. Not only does it apply to property obtained before the Bill, if passed, will come into force; the retrospective operation is unlimited, as the Bill provides that the normal statutory rules on limitation of actions will not apply to applications for recovery orders.[77] The unlawful conduct which would now make a person liable to have property taken away could therefore have occurred at any time in the past, when he or she would have had no knowledge of consequent liability to a recovery order. The recovery order is likely to be regarded as a penalty under Article 7 of the ECHR, because (like the confiscation order in Welch v. United Kingdom) it has no compensatory role, is a consequence of criminal conduct having been established, and potentially subjects the respondent to an order of considerable severity.

41. In our view, there is a significant risk that the retrospective operation of the proposed recovery order regime would be held to be incompatible with Article 7 of the ECHR.

APPLICATION OF RIGHTS TO PROPERTY AND TO RESPECT FOR THE HOME

42. The final potential problem concerns the impact of recovery orders on the right to property under Article 1 of Protocol No. 1 to the ECHR, and on other rights, such as the rights of members of the respondent's family in respect of the family home under Article 8 of the ECHR. A recovery order would interfere with property, perhaps including the family home. It would be possible to justify the interference with property under the conditions noted above. One condition is that there should be a reasonable relationship of proportionality between the interference with property and the aim sought to be achieved. Under Article 8, it would be possible to justify an interference with the home if it satisfied the conditions of legal authority, legal certainty, legitimate aim, pressing social need, and proportionality as those have been explained by the European Court of Human Rights. It is possible to doubt whether the making of a recovery order would always be proportionate, in view of the potential retrospectivity of the legislation, the wide variety of types of criminal conduct which may give rise to an application for a recovery order, and the range of interests which may subsist in property.

43. In practice, the regime under Part 5 of the Bill would seem to contain extensive safeguards against a disproportionate use of the power to make an order. In particular—

44. In our view, therefore, the provisions of the Bill relating to recovery orders do not seem likely to engage the right to property under Article 1 of Protocol No. 1 or the right to family life under Article 8.

45. The provisions for civil recovery in Scotland and Northern Ireland are, in all relevant respects, equivalent to those in England and Wales, and do not require separate consideration.

Powers to Obtain and Disclose Confidential Information

46. Part 6 of the Bill allows the Director of the Assets Recovery Agency to take over the responsibility of the Commissioners of Inland Revenue for assessing liability to tax where the Director has reasonable grounds to suspect that a person or corporation under investigation has acquired income or a capital gain in connection with criminal conduct, and that the income or gain is properly chargeable to income tax or is a chargeable gain.[79] The Director can take over functions of the Commissioners in respect of income tax, capital gains tax, corporation tax, national insurance contributions, statutory sick pay, statutory maternity pay, and students loans.[80] This does not allow the Director to exercise the Inland Revenue Commissioners' wide powers to require disclosure of information and documents, or to enter and search premises and seize material, under sections 20 to 20C of the Taxes Management Act 1970 (as amended).[81] In our view Part 6 of the Bill does not raise human rights issues to which either House need give particular attention.

47. Part 7 of the Bill continues existing requirements and authorizations for the disclosure of information in connection with money laundering. In our view, Part 7 of the Bill contains adequate safeguards to provide effective protection against violating the right to respect for private life and correspondence under Article 8 of the ECHR.

48. Part 8 of the Bill continues and to some extent develops investigative powers in respect of proceeds-of-crime investigations. In particular, there is power to obtain a disclosure order requiring a person reasonably suspected of having benefited from criminal conduct to provide information, produce documents, and answer questions in connection with a money laundering investigation.[82] Save under limited circumstances which seem to us to respect the right to be free of coerced self-incrimination under Article 6 of the ECHR, statements cannot be used as evidence on a criminal charge against the person making them.[83] They could be used against the person in the course of an assessment of the benefit of criminal conduct on an application for a confiscation order following conviction,[84] but this does not necessarily breach Article 6, and the court would have a discretion to exclude the disclosures if they threatened a fair hearing.

49. It appears that the statements could be used in evidence against the person making them in the course of an application for a recovery order in civil proceedings under Part 5 of the Bill, as the privilege operates only in criminal proceedings. However, the court in the proceedings under Part 5 would probably have to consider whether allowing the statements to be used would deprive the respondent of a fair hearing under Article 6(1) of the ECHR, and it would be necessary then to consider the possibility that proceedings under Part 5 would amount to a criminal charge for the purposes of Article 6(1) and (2).

50. In our view, the safeguards surrounding the powers relating to the obtaining or disclosure of information contained in Part 8 of the Bill should be adequate to provide reasonable protection against violating the rights under Articles 6 and 8 of the ECHR.

Insolvency

51. Part 9 of the Bill makes provision for the relationship between the proceeds of crime legislation and the law on insolvency. It seems to raise no separate human rights issues which require to be drawn to the attention of either House.

Sharing of Information

52. Part 10 of the Bill would allow the Director of the Assets Recovery Agency or the Scottish Ministers to use information, obtained for one purpose, in connection with the exercise of another function as the enforcement authority under the legislation. Clause 421 would allow certain public authorities with investigative functions to disclose information to the enforcement authorities for the purpose of the exercise of their functions, as long as the disclosure does not contravene the Data Protection Act 1998 and is not prohibited by the Regulation of Investigatory Powers Act 2000. Provision is made for further disclosure by the enforcement authorities for particular purposes. Part 11 of the Bill would allow similar provision to be made by Order in Council in respect of external investigations (i.e. investigations by authorities outside the United Kingdom who request assistance from the authorities in the United Kingdom) other than investigations into whether a money laundering offence has been committed. As all the United Kingdom authorities involved in the process would be public authorities within the meaning of the Human Rights Act, and the Scottish Ministers' powers under the Scotland Act 1998 do not extend to acting in a manner incompatible with Convention rights, the powers are sufficiently circumscribed to avoid incompatibility with those rights.

53. In our view the provisions of Parts 10 and 11 of the Bill do not raise any issues relating to human rights which require to be drawn to the attention of either House.

Conclusion

54. For reasons we have set out above, we have sought from the Government its response to the following questions in respect of the Proceeds of Crime Bill—


5  
It is based on recommendations by the Home Office Working Group on Confiscation, Third Report, Criminal Assets (London: Home Office, November 1998), and the Cabinet Office Performance and Innovation Unit, Recovering the Proceeds of Crime (London: Cabinet Office, June 2000). The Government published a Consultation and draft Bill, Proceeds of Crime: Consultation on Draft Legislation, Cm. 5066 (London: The Stationery Office, March 2001). Back

6   For commentaries on the Bill, see the Explanatory Notes prepared by the Home Office, published by The Stationery Office as Bill 31-EN; the Home Office note distributed to Members and Peers, Proceeds of Crime Bill: A Background Note by the Home Office (October 2001); Sally Broadbridge and Christopher Blair, Proceeds of Crime Bill: Bill 31 of Session 2001-2002, House of Commons Library Research Paper 01/79 (October 2001); and the Liberty briefing, prepared by Clare Montgomery QC, Matthew Ryder and Danny Friedman of Matrix Chambers, Proceeds of Crime Bill 2001 (31): Response (October 2001). Back

7   Drug Trafficking Offences Act 1986. The law is now contained in the Drug Trafficking Act 1994, as amended. Back

8   Criminal Justice (Scotland) Act 1987. The law is now contained in the Proceeds of Crime (Scotland) Act 1995, as amended. Back

9   Criminal Justice (Confiscation) (Northern Ireland) Order 1990, SI 1990 No. 2588 (NI 17). Back

10   Criminal Justice Act 1988, Part VI. Back

11   Proceeds of Crime Act 1995. Back

12   Criminal Justice (Confiscation) (Northern Ireland) Order 1990, SI 1990 No. 2588 (NI 17). Back

13   Proceeds of Crime (Scotland) Act 1995. Back

14   Proceeds of Crime Act 1995; Proceeds of Crime (Scotland) Act 1995; Proceeds of Crime (Northern Ireland) Order 1996, SI 1996 No. 1299 (NI 9). Back

15   Originally introduced in the Prevention of Terrorism (Temporary Provisions) Act 1989, this is now to be found in the Terrorism Act 2000, s. 23. Back

16   Originally contained in the Northern Ireland (Emergency Provisions) Act 1991, the provisions are now subsumed within the general law on money laundering, to be found in the Proceeds of Crime (Northern Ireland) Order 1996, SI 1996 No. 1299 (NI 9). Back

17   House of Commons Official Report, 30 October 2001, col. 760. Back

18   Ibid., col. 764. Back

19   Ibid., col. 761. Back

20   David Feldman, 'Individual rights and legal values in proceeds of crime legislation: a comparative approach' (1989) 18 Anglo-American Law Rev. 261-88; Sally Broadbridge and Christopher Blair, Proceeds of Crime Bill: Bill 31 of 2001-2002, House of Commons Library Research Paper 01/79 (October 2001). Back

21   All decisions must be made on a balance of probabilities: cl. 6(7). Back

22   These are drug trafficking offences, money laundering offences, and other offences to be specified in regulations to be made by the Secretary of State: cl. 75(1), (2)(a), (b), (c). Back

23   Conduct forms part of a course of criminal activity if the defendant has benefited from it and has been convicted of three or more offences, from which he has benefited, in the same proceedings, or has been convicted of at least two other offences (from which he has benefited) in the previous six years: cl. 75(1), (2)(d), (3). Criminal conduct is conduct which is criminal in England and Wales, or would be criminal if it were committed in England and Wales: cl 76(1). Back

24   Cl. 75(1), (2)(e). Back

25   Cl. 6(4)(b); cl. 76(2). Back

26   Cl. 6(4)(c); cl. 76(3). Back

27   Cl. 6(5); cl. 8. Back

28   Cl. 10. Back

29   Cl. 77. Back

30   Cl. 78. Back

31   Cll. 17, 18. Back

32   Cl. 6(5), (6). Back

33   See Powers of Criminal Courts (Sentencing) Act 2000, ss. 139(2) and (4) and 140, and cll. 36(2) and 38 of the Bill. Back

34   Welch v. United Kingdom, Eur. Ct. HR, Series A, No. 307-A, (1995) 20 EHRR 247. Back

35   Taylor v. United Kingdom, Eur. Commn. HR, App. No. 31209/96, Admissibility decision of 10 September 1997, [1998] EHRLR 90. Back

36   Criminal Justice Act 1988, s. 72AA(3), (4), inserted by Proceeds of Crime Act 1995, s. 2. Back

37   Cl. 11. Back

38   Re McIntosh, Petitioner 2001 JC 78, High Court of Justiciary. Back

39   R. v. Benjafield; R. v. Leal; R. v. Rezvi; R. v. Milford [2001] 3 WLR 75, CA Back

40   McIntosh v. Lord Advocate and another [2001] 3 WLR 107, PC. Back

41   Argument in R. v. Benjafield was heard in the Appellate Committee in the week commencing 29th October 2001. Judgment is awaited. Back

42   App. No. 41087/98, judgment of 5 July 2001, unreported. Back

43   R. v. Benjafield; R. v. Leal; R. v. Rezvi; R. v. Milford [2001] 3 WLR 75, CA Back

44   Re McIntosh, Petitioner 2001 JC 78, High Court of Justiciary. Back

45   McIntosh v. Lord Advocate and another [2001] 3 WLR 107, PC. Back

46   App. No. 41087/98, judgment of 5 July 2001, unreported. Back

47   Deweer v. Belgium (1980) 2 EHRR 439; Eckle v. Federal Republic of Germany (1982) 5 EHRR 1; Foti v. Italy (1982) 5 EHRR 313; Raimondo v. Italy (1994) 18 EHRR 237. Back

48   (1995) 20 EHRR 247. Back

49   App. No. 41087/98, judgment of 5 July 2001, unreported. Back

50   [2001] 3 WLR at 98, para. [69]. Back

51   [2001] 3 WLR at 119, para. [27]. Back

52   App. No. 41087/98, judgment of 5 July 2001, unreported. Back

53   Ibid. at para. 40 of the judgment. Back

54   [2001] 3 WLR at 106, para. [96]. Back

55   [2001] 3 WLR at p. 104, para. [90]. Back

56   See also Salabiaku v. France (1988) 13 EHRR 379; Hoang v. France (1992) 16 EHRR 53, esp. at paras. 33 and 36 of the judgment. Back

57   Phillips v. United Kingdom, above. Back

58   Ibid., at para. 51 of the judgment. Back

59   See, e.g., Allan Jcobsson v. Sweden (No. 1), Judgment of 25 October 1989, Series A, No. 163, at para. 55; R. v. Dimsey [2001] UKHL 46, at paras 62-71 pc Lord Scott of Foscote. Back

60   Phillips v. United Kingdom, above, at paras. 52-53 of the judgment. Back

61   Cl. 41(2). Back

62   Cl. 267(3)(b). Back

63   Cl. 267 (3)(a), (4). Back

64   Cl. 282. Back

65   Financial Services Authority v. Rourke, Times, 12.11.01, Neuberger J. Back

66   AG v. G BlakeBack

67   Cl. 280. Back

68   Judgment of 5 July 2001 at para. 35. Back

69   Cll. 248(1), 249(1). Back

70   Cll. 302(1)-(3) (the meaning of cl. 302(3)(b) is obscure, if not non-existent), 303, 306(1). Back

71   Cl. 301. Back

72   Cl. 246(3). Back

73   [2001] 1 WLR 340, HL, at paras. [30]-[31]. Back

74   See e.g. cl. 42(3)(a). Back

75   Raimondo v. Italy, Eur. Ct. HR, Judgment of 22 February 1994, Series A, No. 281-A, involving the confiscation of the assets of a person suspected of involvement with the Mafia. Back

76   Airey v. Ireland, Eur. Ct. HR, Judgment of 9 October 1979, Series A, No. 32. Back

77   Cl. 287 would amend the Limitation Act 1980, the Prescription and Limitation (Scotland) Act 1973, and the Limitation (Northern Ireland) Order 1989, SI 1989 No. 1339 (NI 11), to produce this effect. Back

78   Cl. 267(3)(b). Back

79   Cl. 311. Back

80   Cl. 317(1). Back

81   Cl. 317(3). Back

82   Cll. 346, 347. Back

83   Cl. 349. Back

84   Cl. 349(2)(a). Back


 
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