Amendment proposed [this day]: No. 281 in page 47, line 40, leave out from 'conduct' to end of line 2 on page 48.—[Norman Baker.]

Question again proposed, That the amendment be made.

It is good to see you in the Chair, Mr. O'Brien. I am sure that you have had withdrawal symptoms from our earlier proceedings and are pleased to be back.

The hon. Member for Lewes (Norman Baker) raised an important point. The issue should be announced with some retrospection. We must ensure that it is understood in the Bill and he may then, if he wishes, question the matter. The amendment would prevent the court from confiscating the benefits of general criminal conduct that took place before the Bill was enacted. He wants to explore the retrospective effect of part 2. To give some background, subsection (2) is based on the Drug Trafficking Act 1994. Much of that territory will be addressed in the order that commences the legislation and is not set out in detail in the Bill.

Before I turn specifically to the amendment, it may be helpful to explain how we intend to apply the relevant provisions. Article 7(1) of the European convention on human rights prohibits the imposition of a heavier penalty than the one that applied at the time when the offence was committed. That raises the question of what the heavier penalty is being applied to. The answer—which is reflected in the Strasbourg court's jurisprudence—is the offences for which the offender is being sentenced or otherwise dealt with in the present proceedings. The underlying principle of article 7 is, as the hon. Gentleman said, that an offender must know when he commits an offence what the consequences will be.

Bearing that principle in mind, we intend to provide that a confiscation order can be imposed under part 2 only when all offences that are the subject of the present proceedings have been committed after the Bill comes into force. That will include the triggering offences that determine a criminal lifestyle under clause 75(3)(a) and (b). The existing legislation will apply to offences committed before the Bill has been enacted. However, once that criterion is satisfied—that is, when the offences are committed after

enactment—a confiscation order can be imposed in respect of the benefit from conduct, however far back that benefit was derived.

That is fully compatible with the Strasbourg court's decision in the case of Ronald J. M. Taylor to uphold the use of assumptions. The court ruled that, when Taylor committed offences after the Drug Trafficking Offences Act 1986 came into force, he was aware that he was liable to a confiscation order that could have concerned earlier proceeds. As a result, the Commission considered that there had been no violation of article 7 of the European convention on human rights.

Confusion occasionally arises in this context. The assumptions relate to property passing through the defendant's hands at any time after six years before the commencement of proceedings, and before then if the property is still held. The assumptions will go back before the commencement of part 2. However, the confiscation order in respect of which they are made will be imposed for offences committed solely after the commencement.

The amendment would have a very harmful effect and would row back from existing legislation, which is consistent with the convention and has been tested against it. It would mean that everybody who was proceeded against under the Bill would receive an amnesty for any benefit derived from conduct before commencement—there would be no confiscation for any conduct before then. Practically, it would make the legislation inoperable. For example, the assumptions as currently drafted would be meaningless. In the week after commencement, they would read as if the defendant could be assumed to have received property from criminal conduct six years ago after commencement. That is impossible. Leaving that aside, the prosecutor and director would have the impossible task of proving whether conduct fell just before, or just after, commencement. He would have not only to prove his case but to show at what time the defendant derived the benefits of the proceeds of crime.

All offences that are taken into account will be after commencement. For example, when we track back for multiple offences, they must all have occurred after commencement. We will not be able to go back and count other offences that were committed previously. The commencement will be the trigger. The only retrospection will be the assumptions of the gain. That has been tested under the convention and does not contravene it in any way. I ask the hon. Member for Lewes to consider the consequences of the amendment.

I am grateful to the Minister for that long but helpful contribution. It is useful to have on the record how he thinks the Bill will be applied. As I understand what he said, offences for the purpose that we are currently discussing will be taken into account only if they are committed following Royal Assent, but other matters then kick in retrospectively.

Let us use the six-month period as an example. We will not be able to track back the fact that criminal activity had been occurring for six months until six months after the Bill's commencement.

I am very happy with that. I am grateful for the Minister's explanation and that he believes that the Bill is consistent with the European convention on human rights. That is a key element, and he explained why. Will he tell us now, or later, in addition to his helpful clarification, where the matter is implicit in this complex Bill, so that I can understand how the bits marry up and be assured that the understanding that he gave the Committee cannot subsequently be misunderstood by people who interpret the law?

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment No. 273, in page 48, line 17, leave out subsection (6).

The amendment is, simply, probing. I read the clause, and I read and reread subsection (6). Although I think that I understand it, it makes little sense. Perhaps the Minister will be kind enough to tell me what it means. I shall read it to the Committee so that it is on the record:

''References to property or a pecuniary advantage obtained in connection with conduct include references to property or a pecuniary advantage obtained both in that connection and some other.''

I await clarification of the provision.

I can tell the hon. Gentleman that he has missed out this time. My question marks are against adjacent clauses, not the one under discussion. It may contain a little contorted language, but it is fairly clear. The amendment would prevent the court from confiscating benefit from criminal conduct when it was received partly in connection with criminal conduct and partly in some other way. I shall cite an example of how subsection (7) works. An offender who obtains money from a fraud may invest it in stocks and shares and make a healthy profit. Clearly, the profits from that investment should be confiscated as well as the benefits of the original fraud. I am sure that the hon. Gentleman does not disagree with that principle.

If we accepted the amendment, a clever lawyer would immediately be able to argue that the profits from the investments could not be confiscated because they were obtained as a result of, or in connection with, the criminal's investment skills as opposed to the original criminal conduct. That is why it is necessary to cast the net sufficiently widely to ensure that all the benefits are caught. The pecuniary measure must be used to avoid the narrowing of the definition to the actual benefits of the crime.

I understand exactly the Minister's point. On rereading subsection (6) in the light of his remarks, however, I am slightly anxious whether the net is being cast too wide. I fully agree that, if the proceeds of crime were invested, that and the profit

element should be confiscated. However, is there not a danger that the wording of subsection (6) could be taken to extend to any property that the defendant may have? That is not the intention, because that would defeat the whole purpose of the examination of assets to decide which were derived from criminal conduct and which were not.

Let us go away and make absolutely certain that such circumstances will not occur. Clearly, associated property should not be confiscated, but the whole of the property, not only the net value of the proceeds of crime, should be. The hon. Gentleman is not demurring from that principle.

I want to clarify my hon. Friend's point. Let us suppose that an individual who was subsequently caught under the confiscation process had put £200,000 that had been earned legally and a further £100,000 that could clearly be identified as the proceeds of a large drugs deal into a property that cost £300,000, which doubled in value. How much money would be confiscated by the state and how much would remain the person's own money?

In principle, we would have to take the original proceeds of crime and any profit derived from that. If legitimate money became mixed with the proceeds of crime and was subsequently subject to a profit, it could not be considered to be the proceeds of crime. We would have to untangle that and decide what were the proceeds of crime, what gain was made with those proceeds and what was genuine money.

Under my rough and ready example, my adversary the hon. Member for Glasgow, Pollok (Mr. Davidson) could reasonably argue that the state would be entitled to £400,000—in other words, the £100,000 that was put in initially, and the entirety of the increase in asset value. On the other hand, if one took the view that two thirds of the upfront money was paid legitimately, two thirds of the increased value could be thought of as legitimate money. That would amount to a £200,000 pot that the state could confiscate. The subsection does not make that clear, and that is why I wanted guidance on how it will operate.

Surely, it comes back to one of the two basic safeguards in the Bill. Property cannot be confiscated if it is shown not to be the proceeds of crime. It is for the courts to decide whether property is the proceeds of crime. If the defendant can show that assets are not the proceeds of crime, they are not confiscatable, but if they are, they most certainly are. Those are matters for the court to decide on hearing the case. The hon. Gentleman is reversing his previous position and saying that we should deprive the court of its discretion.

I entirely accept that it is a matter for the court. That is why, at this juncture, we want to provide the correct guidance to the courts, and why it would be useful to clarify the situation. As the Minister is unable

to come to a decision on a relatively straightforward example, it would be unfair to put such a burden on the courts unless we know how the spoils will be split. I accept that the matter is difficult.

If the Minister had eyes in the back of his head he would know that the hon. Member for Glasgow, Pollok has been trying to attract his attention. He, no doubt, will have his own view, which I shall be interested to hear.

I rise fairly confident that my hon. Friend is provoked by the hon. Gentleman, and not by me.

We must bear it in mind that this interpretation is used in existing legislation. We have no desire—nor, I think, do Opposition Members—to narrow the current interpretation.

This is an important issue because, as the hon. Member for Cities of London and Westminster (Mr. Field) will appreciate, inside dealers and other villains and nefarious ne'er-do-wells in the Cities of London and Westminster are wondering how they will use their ill-gotten gains. If they mix those gains with legitimate money, will that penalise their financial well-being?

In the case of the Cities of London and Westminster, let us say that £1 million of relatively honest money and £2 million of corrupt money were invested together, and doubled in value. It seems fair to me that the investor should get back only £1 million, as that person would not have made any gain if the dishonest money had not been available to invest jointly with the honest money. When considering whether someone should get a proportion of the gain back, we should be as unhelpful as possible to those who, for the sake of argument, we could refer to as Fields. Those Fields, who have been investing—

Order. This is too long an intervention.

I did say to the hon. Member for Cities of London and Westminster that he, and not I, had provoked my hon. Friend. That was shown to be the case. Although I am on my hon. Friend's side on the matter, it would be for the individual to show that the assets in question were not the proceeds of crime. I noticed the hon. Member for Lewes disagreeing as my hon. Friend spoke, but when a business has been set up, established and in part funded by the proceeds of crime, to what extent—even if legitimate money was going into it—do we want to render the profits of that business beyond the reach of confiscation? None of us wants to do that. We want to stick to the safeguard in the Bill, whereby if the defendant can show that the assets in question are not the proceeds of crime, they are not confiscatable.

Despite the contorted language, that is the interpretation in the current legislation, which appears to have been operated successfully by the courts up to now, and removing it would narrow the definition. The hon. Member for Beaconsfield (Mr. Grieve) knows better than I do how these things work, but I am advised that the criminal courts often use very narrow

definitions. If we went down that route, we would find ourselves rendering large sums beyond the reach of confiscation.

I agree with the Minister's analysis that it is a question of applying the general test in each case. It may be that a critical mass of money is required for an investment, in which case the hon. Member for Glasgow, Pollok is correct. On the other hand, if one invests £3 million in shares, the return may be no different from, or three times as much as what one would get if one invested £1 million in shares. Therefore, there is no advantage to having the extra money for that investment. It depends on the circumstances.

I have been wrestling with the subsection and trying to understand what it means—I also declare an interest in that I am not a lawyer and therefore look at things in plain English. Some of the Bill is in plain English: clause 79(2), for instance, is a clear statement. Clause 76(6), however, is not a clear statement. Will the Minister explain the relevance of the phrase ''and some other'' at the end of subsection (6)? What would be the implication if that phrase were not included?

It clearly relates to ''connection''. The subsection refers to proceeds obtained

''in that connection and some other''.

It is designed to give the court the ability to confiscate proceeds that were gained in connection with criminal activity. We discussed that under a previous clause and we are effectively having the same discussion now. The hon. Gentleman is right that the individual circumstances are relevant, and I would have thought that the whole Committee would be able to unite behind the concept that some businesses are funded in part or in whole by the proceeds of crime and are in a position to compete unfairly with other businesses—and effectively put them out of business in many cases.

We do not want to encourage that, and we want to be able to remove a pecuniary interest when it was clearly gained in connection with criminality. We need to give the courts the discretion to be able to decide what is the proceeds of crime, what was gained in connection with the proceeds of crime, and what is clearly not the proceeds of crime. If we deprive them of that ability, we narrow their capacity to deprive the criminal not only of what he gained in the first place but of what he has managed to make of it as a result.

The Minister and I are not at odds in any way in respect of the objectives that we want to be achieved. I agree with giving the courts discretion, and I have consistently argued for that throughout our proceedings. However, if subsection (6) were to finish with the words ''in that connection''—removing the word ''both'' before those words—that would refer back neatly to subsection (5). The two subsections would then seem to be self-contained. I do not understand the purpose of the phrase ''and some other'', which seems to be hanging loose.

I do not know whether the hon. Gentleman is hanging loose, or I am, or the words ''and some other''. I have tried to explain to him how

the words work, the reasons for them, and their origin in existing legislation. I agreed—and I will check it out—that they do not result in a widening, in response to what the hon. Member for Beaconsfield said. I do not think that I can satisfy the hon. Gentleman further at this point.

I am grateful to the Minister, whose comments have been enlightening.

Before I ask leave of the Committee to withdraw the amendment, I wish to make two pleas. My first plea concerns plain English. The Minister has explained that the phrase ''some other'' is intended to refer to some other connection. With regard to plain English, the clause would not be spoiled—indeed, it would be greatly enhanced, despite the appearance of the word ''connection'' twice in one line—if the word ''other'' did not end the sentence and it referred to an

''advantage obtained both in that connection and some other connection.''

That is merely a matter of drafting practice. That form of words would be much clearer. I accept that the present wording has been inherited from a previous statute, which presumably nobody bothered to scrutinise properly.

My second plea is of more import, as the Minister is aware. I am reassured by what he has said, because I fully support the intention—we have no disagreement about the aim, which is to allow the court to look at pools of money that include mixed funds. He has also made it clear that mixed funds must be disentangled: I have no quarrel with that, although there are clear rules about how to approach mixed fund money—but that is not an area with which I am particularly familiar. I do not wish to go back over old ground, by saying that that is a matter that the Crown court will have to play around with—although I suspect that the Crown court is not very familiar with it either, and that the High Court, in its jurisdiction, would be much more familiar with how one deals with mixed fund moneys.

The intention is not that mixed funds should be confiscated in a quick and simple manner but that they should be disentangled. However, as it reads at present, the clause—even though it may always have been applied in ways that effect that disentanglement—gives the courts the power to confiscate mixed funds, including the proportion of them that did not come from the proceeds of crime and the criminal conduct. I do not think that that is what the Minister or the Department intended to achieve. I would be grateful if he would confer with his drafters and officials to see whether that cannot be more clearly spelled out without leading to the creation of a new loophole.

I want to explore whether the hon. Gentleman and I agree in principle. I am not saying—and I do not think that he is asking me to say—that mixed funds must be dealt with in the same way in every circumstance. Everything depends on the circumstances. A mixed fund might be able to be

unravelled simply; it might be possible to identify clearly the part of it that is the proceeds of crime, and the associated profits that arose from that, and the part of it that is not. However, funds might have been sunk into a business or an investment, in which case the matter would become more complex and detailed.

I do not think that the hon. Gentleman would want us not to be able to take the profits that arose from a business that was clearly put in an advantageous position as a result of the investment of criminal moneys. It would be for the court to decide what was or was not the proceeds of crime, and money associated with the proceeds of crime, and we should not lay down a firm methodology with regard to how it disentangles mixed funds.

If the hon. Gentleman wishes us to make the provision narrower, by backing away from that capability, a matter of principle is at stake. If he is merely seeking to make the Bill clear, we could perhaps look at other forms of words that do not make the provision narrower but make the clause more readable.

I am very conscious of what the Minister said. I accept fully that there may be circumstances when it is inevitable that funds that could have come from outside would have to be confiscated because disentanglement could not take place. However, I note a contradiction between subsections (4) and (6). Subsection (4) clearly states:

''A person benefits from conduct if he obtains property as a result of or in connection with the conduct.''

We agree with the unequivocal statement under subsection (4), yet subsection (6) suddenly starts to muddy the waters and introduces a new element, which means every asset that the person has. If judicial discretion were not introduced, that could be anything.

It is not our intention to deprive the court of its ability to consider the issue. I accept what the hon. Gentleman says. I shall try to satisfy him. There is scope for confusion. I shall see whether others can wrap a towel round their heads and unravel it. We do not want to narrow the court's ability to confiscate the proceeds of crime. If all he wants is to make the provision clearer, I shall look into whether that can be done. I give him that assurance.

I am grateful to the Minister for his reassurance. Having clarified such matters, however, he may find himself less in agreement with me. He will have been advised by his officials about how the system has worked in the past in that it is the practice of the High Court to deal with mixed property. The Crown court may well not have the training or be so well versed in such practices. That makes it all the more important that there should be clarity about what is intended. Although I fully accept that he is not intending to confiscate all property, I read subsection (6) as allowing for that to happen.

I presume that that was not intended originally under the old legislation, because we would have heard about it. There would have been complaints. The matter would have been flagged up. There would have been court cases and judicial interpretation. I assume that the measures have worked all right, but from a straight reading of subsection (6), especially juxtaposed with subsection (4), there is a contradiction. I worry that subsection (6) could open up much more than the Minister intends, although I am mindful of the fact that subsection (6) may have to be so worded to make sure that mixed property can be properly considered and judicial discretion applied. I hope that I have made myself clear.

There is no intention on my part to hide the policy. If the hon. Gentleman is right and there is something more profound between us, I want to expose that so that we can discuss it on Report.

In fairness to the Minister, I suppose that it could be argued that if the phrase were to cover any property, it would have to read

''in that connection and any other connection''.

The word ''some'' had significance to the original draftsman, but it is opaque and the absence of the final ''connection'' does not help clarity.

I am grateful to the Minister for agreeing to reconsider the matter, and on that basis I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 76 ordered to stand part of the Bill.

Clause 77 ordered to stand part of the Bill.