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Criminal Justice and Police Act 2001 (Powers of Seizure) Order 2018
15 March 2018
Volume 789

Considered in Grand Committee

Moved by

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That the Grand Committee do consider the Criminal Justice and Police Act 2001 (Powers of Seizure) Order 2018.

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My Lords, I congratulate the noble Lord, Lord Stevenson, who is still with us for the third item of business. I am grateful for the feedback from the Secondary Legislation Scrutiny Committee regarding the explanatory material accompanying this draft order. We always strive to provide sufficient information for noble Lords to gain a clear understanding of an instrument’s policy objective and intended implementation. Furthermore, my department will take account of the comments of noble Lords made in this Committee when preparing explanatory memoranda for future instruments.

Insider trading and price manipulation in the wholesale energy markets is a crime and ultimately consumers and businesses pay the price for such behaviour in the form of higher bills. It is therefore important that the energy regulator in Great Britain, Ofgem, has sufficient powers to investigate and punish those behaving in such a way and that that acts as a deterrent. Insider trading and market manipulation in the wholesale energy markets are prohibited by the wholesale energy market integrity and transparency regulation—REMIT —which has been in force since December 2011.

In June 2013, the Government made civil enforcement regulations for REMIT—the Electricity and Gas (Market Integrity and Transparency) (Enforcement etc.) Regulations 2013—which give Ofgem powers to impose unlimited financial penalties, access to information and the power to enter the premises of a regulated person under a warrant. In March 2015 the Government strengthened that regime by making further regulations to create criminal offences of intentionally or recklessly breaching the prohibitions on insider trading and market manipulation.

The 2013 regulations give the regulator the power, under warrant, to enter premises to search for, and seize, information and documents that appear to be relevant. However, there are cases where Ofgem may have difficulty exercising this power of seizure. Investigating officers may be presented with a large volume of documents. Identifying documents relating to suspicious transactions among many documents of a similar nature can be akin to finding a needle in a haystack. Ofgem currently has no power to take away an entire body of documents to sift them for relevance off premises. In some cases, this may mean that vital evidence is missed.

Section 50 of the Criminal Justice and Police Act 2001 addresses this problem. It enables a person exercising a power of seizure to remove material from the premises being searched to determine whether it is something which the person is entitled to seize if it would not be reasonably practicable to determine that on the premises. The power in Section 50 applies where a person is exercising a power of seizure listed in Schedule 1 to the Criminal Justice and Police Act. More than 60 such powers are already listed in the schedule. The effect of this order is to extend this power to Ofgem when it is searching premises to investigate breaches of REMIT. The Government believe this would be a measured and sensible extension of Ofgem’s powers, which will help to ensure it can take effective enforcement action.

The Government sought views in December 2015 through consultation on whether Ofgem’s powers should be strengthened to bring them into line with this provision. Industry stakeholders, perhaps not surprisingly, believed that the additional powers offered to Ofgem were disproportionate. Others, including consumer groups, were neutral or in favour of the provision. The Government believe that effective regulation in this area is essential and that sufficient safeguards will be in place to meet stakeholder concerns. The Government do not believe that costs will be unreasonable.

The power will apply only where a court has granted Ofgem a warrant to search premises. When Ofgem exercises this power it will be under a statutory duty to sift information as soon as reasonably practicable after seizing it and return anything which it was not entitled by the warrant to seize. Additionally, a person who is the owner of a document can apply to the court for the return of such material.

We believe that this additional power will aid Ofgem in its investigation of market abuse and that the safeguards should ensure that it is not used unnecessarily. I commend the order to the Committee. I beg to move.

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My Lords, I thank the Minister for his full introduction to this order. Again, we have no significant concerns about the order itself because it is an appropriate way forward. Indeed, it seems to be needed, based on the description we have had.

As the Minister has said, the Secondary Legislation Scrutiny Committee reported on the order in order to draw it to the attention of the House on the grounds of a policy likely to be of interest. The committee’s main concern seems to be about the rather extended time taken to go from the initial idea booted around in the consultation paper in December 2015 to the final decision to move forward on a part of what was consulted on—only a part—as late as earlier this year. The Minister said that the issues raised will be taken back with everything else, but he did not give us an explanation about that issue. The letter from the department that covered it is also rather vague. It is mainly to do with the fact that internal government processes got in the way of the smooth running of the overall proposal and that the decision was taken quite late simply to go ahead with these REMIT proposals. More information about that would be of interest.

My concern is slightly different. The consultation that was carried out was broader than the REMIT, but the Explanatory Memorandum focuses on those issues. I take it that the references in Article 8 of the Explanatory Memorandum are around that. It says in paragraph (8.2):

“Some energy companies expressed support for the initially proposed “seize and sift” powers, but the majority of companies and representative groups”—

so it is not quite as the noble Lord mentioned—

“argued that these were disproportionate, unnecessary or gave Ofgem too much leeway on which information to remove”.

In other words, they were about the powers. It seems to me that the majority of companies did not agree with the proposal. They felt that the existing powers would be sufficient and that seeing papers on sight, sifting through them there and taking information away in that form would be sufficient for their processes. In paragraph (8.3) however, the department’s response states:

“Having taken account of the consultation responses, BEIS considers that the aim of the policy … justifies the additional burdens identified by industry”.

They were not complaining about the burdens, but the powers. The Explanatory Memorandum is completely silent on whether these powers are appropriate. It seems that the Government have decided to ignore the consultation and go ahead. Will the Minister comment on that? He is not wrong in the sense that the ends may justify the means, but the process would have left a number of companies a bit bruised, given the very short time available and the lack of any individual consultation. They would be entitled to feel that they have not been taken account of properly.

Finally, I have to come back to the matter of the implementation date. This is a new group of civil servants and I can expand on my worries. Other noble Lords will realise that I have raised this matter before. This order may be cited from, and comes into force on, the “twenty-first day after the day on which it is made”. It will have a considerable impact on a small number of companies operating in the electricity and gas field. It is therefore not inappropriate to think that the order should start from the common commencement date: 6 April. If you do the maths, 21 days takes you just beyond 6 April. It would be not inappropriate if the Minister decided to suggest, even with the regulation in this form, that 6 April would have been a better date, and I appeal to his better judgment to make the necessary changes if he can.

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In considering this order we should consider the enormous public dissatisfaction with some of the regulated industries that we have seen for a long time. I think I am correct that the regulators have often been caught out saying that prices should be allowed to rise by a certain amount, and immediately after the announcement, companies’ share prices have risen. To me, this means that the regulator has misjudged the situation. Bodies such as Ofgem are extremely powerful, and from the point of view of the consumer and the general public it is important that a very close watch is kept on their activities. I am happy to support what is in this paper because the balance of advantage between consumer and supplier is tilted very much one way, and this will tilt it back the other way.

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My Lords, I think that I am grateful to the noble Lord, Lord Bradshaw, for his comments. It is always difficult to get the balance right in these matters, which is what we are trying to do in a number of other pieces of legislation—as the noble Lord will be aware—that are before another place at the moment.

It is important that we ensure that Ofgem has the appropriate powers to look after the consumer interest. Obviously, we take very seriously the idea of any extension of powers that we might grant to Ofgem or any other body, and that is why, under the Police-and-whatever-it-is Act 2001, we have to make an order if we want to do that. They are affirmative orders and we have to come to the House to argue the case for them. That is what I am doing.

The noble Lord, Lord Stevenson, was slightly worried about the consultation and whether we listened to the consultees. What I said in my opening remarks was that the industry and stakeholders, perhaps not surprisingly, believed the additional powers were disproportionate, but I added that others, including consumer groups—this is the point that the noble Lord, Lord Bradshaw, picked up—were neutral or in favour of the provision. The Government have to consider these matters very carefully.

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Just to be clear, paragraph 8.2 of the Explanatory Memorandum does not say what the Minister just said. It may just be that the expression needs to be changed, but it states,

“the majority of companies and representative groups”.

I think “representative groups” includes consumer groups. The Minister said there were others, but we do not have the detail. They,

“argued that these were disproportionate, unnecessary or gave Ofgem too much leeway”.

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It does not just include consumer groups. The point I was making was that consumer groups in particular were neutral or in favour. Having listened to the consultation, the Government came to their conclusions and decided what was necessary. We considered that the powers were very important and we considered bringing them in with appropriate safeguards. I think that is what we have done.

The noble Lord was concerned about the timing of the order. I am glad that it was not just me listening to him. As he said, there is a collection of officials listening behind me, and I hope this will suffuse through the department so that all of us—Ministers as well as officials—can be aware of his concern that as far as possible we stick to the appropriate dates. Obviously, there will be other occasions when we cannot. I have no power to make amendments now. The noble Lord probably guessed that, since he made the suggestion. Since I have general agreement that this order should go through, I repeat that the department could possibly do better in future. I will keep my beady eye on these matters and see to it that we do as well as possible. As I said at the beginning, we will continue to take the Committee’s views into account in future.

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I go back to my original point and ask the Minister, for my comfort and satisfaction, to write with a bit more explanation about the make-up of the responses that were received. May I also welcome the Minister to the small band of people who believe in common commencement dates?

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The noble Lord will get a reputation for having a bee in his bonnet about common commencement dates and will, no doubt, be teased by his colleagues as “Lord Common Commencement Dates” for ever. I will certainly write to him in greater detail on the other matter. I am grateful for the support from both noble Lords.

Motion agreed.