I beg to move amendment No. 389, in page 154, line 3, leave out 'may' and insert 'must'.

With this it will be convenient to take the following amendments:

No. 390, in page 154, line 5, leave out first 'and' and insert 'or'.

No. 392, in page 154, line 15, leave out subsection (4)(c).

No. 393, in page 154, line 17, leave out subsection (4)(d).

No. 391, in page 154, line 24, leave out paragraph (b).

Clause stand part.

The clause deals with recovery orders and the vesting and realisation of recoverable property. It states:

''If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order...The recovery order must vest the recoverable property in the trustee for civil recovery...But the court may not make in a recovery order—...any provision in respect of any recoverable property if each of the conditions in subsection (4) is met and it would not be just and equitable to do so, or...any provision which is incompatible with any of the Convention rights (within the meaning of the Human Rights Act 1998''.

As the Minister will remember, in our debate last week I expressed an opinion that the 1998 Act should be specifically referred to in view of the fact that the front of the Bill states that it is human-rights compliant. I cannot recollect previously having heard the 1998 Act referred to as a fetter on a power that a Bill intended to confer on courts.

Subsection (4) goes on to deal not with the bona fide purchaser for value without notice, who is protected elsewhere in this part, but with the bona fide obtainer of property. The subsection sets out four conditions that must be fulfilled before the court may decide not to make a recovery order. It would be worth while for the Committee to consider them:

''The conditions...are that—

(a) the respondent obtained the recoverable property in good faith,

(b) he took steps after obtaining the property which he would not have taken if he had not obtained it or he took steps before obtaining the property which he would not have taken if he had not believed he was going to obtain it,

(c) when he took the steps, he had no notice that the property was recoverable,

(d) if a recovery order were made in respect of the property, it would, by reason of the steps, be detrimental to him.''

Subsection (5) states:

''In deciding whether it would be just and equitable to make the provision in the recovery order where those conditions are met, the court must have regard to...the degree of detriment''

''the enforcement authority's interest in receiving the realised proceeds''.

This is an important clause. I tabled some amendments to it, and they have been grouped together. That is sensible, because it enables us to consider the clause as a whole, but that does not mean that I shall push every amendment equally.

I start with amendment No. 389, which in some ways is the most important amendment. It would substitute the word ''must'' for ''may'' in the phrase

''the court may not make in a recovery order''.

That would make the provision mandatory. If that were done, ''must'' would nevertheless be heavily qualified by the subsequent wording that I read out.

That would prohibit the court from making a recovery order if the conditions under subsection (4)(a) to (d) were met.

Let us assume that a case met all the conditions in subsection (4). Can the Minister realistically think of any circumstances in which it would still be just to deprive the innocent party of his property, and, moreover, in which that would still be compatible with the European convention on human rights? If my argument has any force, it would be sensible to substitute ''must'' for ''may''.

I just wondered whether it was a matter of linguistics. The phrase ''may not'' could be read as an instruction. The phrase, ''You may not do this'' is a prohibition. The word ''may'' is permissive, but ''may not'' is prohibitive. I wonder whether the hon. Gentleman's point, which is valid in his argument, is covered by the word itself.

The hon. Gentleman makes a good point, but I am not entirely persuaded by it. If he is right, why should not we have the words ''must not''? In that case, the Minister would have no difficulties in conceding the issue. I inferred from the use of the words ''may not'' that the provision was trying to leave some latitude to the court in such circumstances. If the Minister reassures me that no such latitude was intended to be given—he could do that by way of an intervention—I shall not pursue that amendment. Does the Minister wish to intervene?

Only to agree with the hon. Member for Lewes (Norman Baker) that the change of words would make absolutely no difference.

The Minister should consider changing the word, as ''must'' has a far more mandatory ring to it than ''may''. However, I shall move on to the other amendments.

The hon. Gentleman has had his victory for today; he cannot have another.

There is no harm in asking, and ''must'' is the better word.

Amendment No. 390 is a wider amendment, because it would allow the court, notwithstanding that the criteria of subsection (4) were not fulfilled, a residual discretion not to make the order.

We have discussed judicial discretion. I have said that, if all of the four tests laid down in subsection (4) were to be met, it would be impossible to envisage circumstances in which an order could fairly be made—I think that the Minister agreed with that. However, what would be the situation if some of the tests could not be met? The recoverable property might have been obtained in good faith by someone but, for instance, he might be unable to show that, when he took the steps, he had no notice that the property was recoverable. In those circumstances, might it be appropriate for the court to be unwilling to make the

order? With regard to those circumstances, the only protection at the moment would be incompatibility with the Human Rights Act.

At what point does one know that property is recoverable? Let us consider an example. Someone might have property in his possession that is associated—it is mixed in with his own property. That person has to live, and to operate. Before proceedings have been commenced, a rumour might start to float abroad that the property that he has held completely innocently, might be of interest to the Assets Recovery Agency. He has to deal and operate in that property to live; he has no other option—if he does not complete a deal, he may lose out. After proceedings have started, he fulfils all the criteria of subsection (4)(a) to (d), but it is alleged against him, ''When you took some of those steps, you should have known, even though you came by that property innocently and had taken steps in relation to it, that it was recoverable.'' He will fulfil the condition in subsection (4)(d), because he will be able to establish that it would be highly detrimental to him for the property to be removed and recovered by the enforcement agency. In those circumstances, should his only protection be the European convention on human rights and the Human Rights Act? I suggest that it should not be necessary to invoke them, and that the sensible course of action would be to allow him to rely on a judicial discretion, which would be provided by amendment No. 390.

Amendments Nos. 390, 392, 393 and 391 are alternative ways of approaching the matter, by tinkering around with some of the clauses. In light of the debate that we are having and the importance of amendment No. 390, it will not be necessary to press the amendments because they are simply illustrations of the way in which the clause could be altered by removing subsections. The amendments were designed to probe, and to stimulate discussion. Each amendment, if made, would affect what is possible and what is not.

I shall not press the amendments because the key amendments are amendment No. 389, which the Minister assures me is not required, and amendment No. 390, which would provide a measure of judicial discretion. I invite the Minister to concentrate on the latter.

The hon. Gentleman invites us to consider how narrow the criteria that a person must meet are, and says that if all the criteria were met, all that would save a person from a recovery order would be the provisions of the European convention on human rights. He says that there should be a wider safeguard than that. Indeed, he spoke about a person against whom proceedings have not been started but about whom stories go around.

We are discussing what happens after a court has decided that there is recoverable property. The hon. Gentleman said that we were not discussing bona fide purchasers for value because they were dealt with elsewhere. Yes, they would have been dealt with in the court case. They would have had an opportunity to

show the court that they were bona fide purchasers for value. If they had successfully shown that, they would not be considered at this point.

The hon. Gentleman asks for a broad safeguard after the decision has been taken. The safeguard for bona fide purchasers for value would be there because it would be present during the court proceedings when a decision was taken. We are discussing how the matter is dealt with after the court has taken the decision and decided how to deal with recoverable property that has been identified. That is the reason for the narrowness of the safeguard and the stipulation that all the different requirements be met. I am not sure that the hon. Gentleman portrayed that when he moved the amendment. We are not dealing with a totally innocent person who has been accused.

Amendment No. 389 would replace the word ''may'' with the word ''must'' in the first line of subsection (3), so that the phrase would read

''the court must not make'' rather than

''the court may not make''.

The amendment would have no effect on the meaning or the clarity of the subsection. However, although it would not make the subsection any worse—I will not argue with the hon. Gentleman about that—there is no need for change. If he argues for change, he must prove the need for it.

Amendment No. 390 would have two effects. First, the court would always be prevented from making a civil recovery order in a bona fide case of change of position. The provisions of subsection (3) envisage that such cases should attract exemption only to the extent that the civil recovery would not be just and equitable. Secondly, the amendment would introduce an entirely new exemption that would not be limited to bona fide change of position cases, in which civil recovery would be prohibited anyway, in which it would not be just or equitable to make the recovery order. In effect, that would convert civil recovery from a mandatory remedy to a discretionary one. The court would have to decide in every case whether it felt that the recovery of criminal proceeds was just and equitable.

I have listened carefully to the Minister and he seemed to suggest that he wanted a mandatory regime rather than a discretionary one. As I understand it, that is why he is objecting to amendment No. 390, which would insert some discretion by replacing ''and'' with ''or''. In that case, why are the words

''it would not be just and equitable to do so'' included at all? What is their function? Are they intended to provide discretion and, if so, how is it that discretion fettered? If the Minister is really arguing for a mandatory clause, surely the words should not be there at all.

The phrase applies only when considering the other issues dealt with in subsection (4). It is not intended to provide discretionary ability. The court decides whether there is recoverable property, after it has heard the case for and against. In

those circumstances, when the court has decided that there is recoverable property the recovery is mandatory. The circumstances that we are dealing with are those in which people have taken actions after that, because they have received recoverable property that they did not know was forfeit, or they anticipated that they would receive that, and they have suffered detriment, and it would not be just and equitable to continue to recover property in those circumstances. That is the barrier over which the individual must climb. He must be able to show that all those things are the case in order to obtain the exemption that the clause provides. The clause is not intended to provide discretion on the recovery in the first place—that is the court's decision, and the rest flows from that.

Subsection (4) sets out four tests, and there must doubtless be a factual assessment of whether the tests in paragraphs (a), (b), (c) and (d) are met. The phrase,

''it would not be just and equitable'' is not included with those facts in subsection (4). That phrase is slotted elsewhere in the clause, in subsection (3). That suggests that it is a matter not of fact but of discretion.

The hon. Gentleman is absolutely right about the structure of the clause. However, the effect of the clause is that five tests must be met. Four of those are contained in subsection (4), but the ''just and equitable'' test would also have to be met. Therefore it is a narrow area, and the effect is that all five of the tests would have to be met. I am not denying that.

I am not sure what the hon. Gentleman is arguing for. Although he is pointing out things in the clause, he is not making an argument, other than that the confiscation should be discretionary. As I said, that is not the Government's position. We believe that when the decision has been taken, the recovery should be mandatory. We should provide people with safeguards in those limited circumstances in which, in effect, all five of the tests are met—the ''just and equitable'' test as well as the four objective tests laid out in subsection (4). The hon. Gentleman does not appear to agree with me.

Amendment No. 391 would remove the obligation on the court, when it is considering whether making a recovery order would be just and equitable, to have regard to the enforcement authority's interest in recovering the property.

To make the position clear, amendments Nos. 392, 393 and 391 went together. They would have reduced the condition that the respondent obtained the recoverable property in good faith. The alternative approach would be amendment No. 390, which would substitute ''or'' for ''and'' before the words

''it would not be just and equitable to do so''.

On balance, I prefer that amendment, which is why I did not want to trouble the Minister unnecessarily.

In that case, let us turn to amendment No. 390. We oppose it. The Government do not agree that a respondent who satisfies the criteria under subsection (4) should have an automatic exemption from civil recovery. Those criteria constitute a standard defence in civil law. The defence does not attract automatic exemption elsewhere and we do not consider that it should do so under the clause. Indeed, the courts have specified that the defence should be developed on a case-by-case basis. When the criteria in subsection (4) are met, the court must retain the ability to exercise its judgment in the light and circumstances of the case.

Let us suppose that the respondent has spent money on an expensive cruise, and would not have done so had he not received as a gift some very valuable jewellery that transpires to be the proceeds of another person's unlawful conduct. Whether the respondent should be allowed to keep the jewellery must surely depend on the circumstances, including the degree of detriment that he will suffer if it is recovered. If he is wealthy, the court may think that the detriment that he will suffer is small and is outweighed by society's entitlement to recover the criminal proceeds. Why, after all, should he be allowed to benefit from them? If, however, the recovery of the jewellery would throw him into penury and prevent him from maintaining his mortgage payments, leading to the loss of his home, the court may decide that he should be allowed to keep the jewellery.

There may be intermediate cases, in which the court decides that some, but not all, of the jewellery should be recovered. That is why subsection (3) is drafted as it is. It requires the court to consider whether recovery would be just and equitable and, in doing so, to weigh up the enforcement authority's interest in recovering the property on one hand, and the degree of detriment that would be suffered by the respondent on the other.

Can the Minister explain the reason for subsection (3)(b)? Surely it is axiomatic that, throughout the Bill, all provisions have been assessed for compatibility with the Human Rights Act 1998. The phrase that is used in subsection (3)(b) does not appear throughout the Bill with regard to every provision, so why has it been thought necessary to include it in clause 267? Is there a specific point to be made, or is subsection (3)(b) redundant?

Let me finish dealing with amendment No. 390, which was the main concern of the hon. Member for Beaconsfield (Mr. Grieve). We may then talk about why the Human Rights Act appears in the clause but nowhere else in the Bill.

I am sure that the correct approach is to allow the court to use its discretion, and to look at both sides of the argument when it is examining whether the respondent has suffered a bona fide change of position. We do not agree that civil recovery should be converted to a wholly discretionary order. That is the second, and even more wide-reaching, consequence of the hon. Gentleman's amendment. It seems to us that people seeking to hang on to the proceeds of unlawful

conduct should be allowed to do so only in the limited and clearly defined circumstances that we have proposed. As I have said, the criteria are based on standard civil defences in other cases. Those are our main reasons for opposing amendment No. 390.

The hon. Members for Beaconsfield and for Lewes asked why the European convention on human rights was mentioned in subsection (3)(b) of the clause, but not elsewhere in the Bill. It is mentioned there because there is a duty to make a recovery order that is mandatory at that point. Potentially, that could conflict with the court's duty under section 6(3)(b) of the Human Rights Act, which makes it clear that that duty takes priority. Because we are insisting that the confiscation procedures are mandatory, we felt that it was appropriate to make it clear that the provisions of the Human Rights Act were none the less the overriding consideration in such policy. I think that I have dealt with the substantive point made by the hon. Member for Beaconsfield in connection with amendment No. 390, and I ask him to consider withdrawing the amendment.

I am grateful to the Minister for his explanation. Speaking personally, I should be more reassured by the use of the word ''or'' rather than the word ''and''. I appreciate his point, and I suppose that I can rely on the Human Rights Act when an individual does not fall within subsection (4). It is odd, however, that the hon. Gentleman explicitly acknowledges the presence of the Human Rights Act, given that the only reason why the Bill refers to it is the acknowledgment that subsection (4), with its tightly drawn provisions, might turn out to be incompatible with it. If that were not the position, there would be no reference to the Act in the clause. However, if the amendment were accepted, it would provide a fall-back position for the court, which took the view that notwithstanding the strict fulfilment of the tests under subsection (4), it would still not be just and equitable to allow recovery to take place. That is the issue between us.

I wonder whether, by a side wind, the hon. Gentleman's amendment could bring about a situation in which it was not just or equitable for such action to take place, yet the conditions under subsection (4) were satisfied none the less.

The hon. Gentleman makes a good point. It could be argued that a better amendment would be longer-winded than my amendment, and the clause would say:

''any provision in respect of any recoverable property if each of the conditions in subsection (4) is met and it would not be just and equitable to do so, or'' that it would not on some other grounds be just and equitable to do so. I listened particularly to what the Minister said, and as our argument developed, it struck me that the removal of the linkage between subsection (4) and the words ''just and equitable'' was undesirable. As the hon. Gentleman may have

appreciated, that was not my intention. I wanted to allow for a further possibility, not to reduce the force of the original one. That is one of the reasons why I shall withdraw the amendment. I acknowledge that as it stands, it would not completely meet my objective. However, will the Minister consider the issue, because we may revisit it?

We shall have a very happy Christmas.

The Minister will have a very happy Christmas: he will be helped by many officials to consider my argument. As for my Christmas, I am informed that on 4 January I will have to think about the next set of amendments to table for our return to the Committee. [Interruption.] I reassure the groaning hon. Member for Birmingham, Hall Green (Mr. McCabe) that our proceedings in Committee will end on 5 February—I am grateful to have received some sympathy from Labour Members. I shall also think again and consider whether this matter should be reviewed on Report by way of a better-worded amendment. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 267 ordered to stand part of the Bill.