Update | Crime: criminal cartel offence, the Victims' Right to Review, tax evasion and new caution guidance

The Enterprise and Regulatory Reform Act 2013 (due to come into force on 1 April 2014) has introduced significant amendments to the criminal cartel offence in the Enterprise Act 2002. At present, it is an offence for an individual to dishonestly agree with others to make or implement activities such as price fixing and bid rigging.

The amendments will see the 'dishonesty' element of the offence removed, widening the scope of the offence and making it easier to prove in practice. However, statutory safeguards have also been drafted to specify situations in which an individual will not be seen as engaging in criminal cartel behaviour.

These include circumstances where agreements that are entered into are made public and the consumer becomes aware of the agreement (section 188A). Furthermore, section 188B provides three defences to the cartel offence.

The first and second defences are that that at the time of making the agreement, it was the intention of the individual entering into it that it would not be concealed from the customer or the Competition and Markets Authority (CMA).

The final defence arises when, prior to making the agreement, the individual entering into it took reasonable steps to ensure that its nature would be disclosed to legal advisers for the purpose of obtaining advice before the making of the agreement or implementation. It will be interesting to see how this third defence will operate. As currently drafted, defendants may still rely on this defence in circumstances they have obtained unfavourable advice and continued to engage in cartel-like behaviour. In practice this could also raise the issue of the extent to which defendants may waive legal privilege in order to invoke this defence.

To charge or not to charge?

On 5 June 2013, the Director of Public Prosecutions, Keir Starmer QC, announced the Victim's Right to Review (VRR), a policy whereby any victim of crime may request that the Crown Prosecution Service re-examine any decision taken by the CPS to not charge a suspect, to discontinue proceedings or offer no evidence. While the VRR provides victims with a clear form of redress when the prosecution against a suspect fails, this right is not available in all situations. It does not apply to the large number of cases where the police have decided to take no further action and ?a file of evidence has not been submitted to the CPS.

The establishment of the VRR was needed to ensure compliance with Article 10 of the European Union Directive, which establishes minimum standards on the rights, support and protection of victims of crime. The VRR was also prompted by the Court of Appeal in R v Killick [2011] EWCA Crim 1608 in which the court stated "as a decision not to prosecute is in reality a final decision for a victim, there must be a right to seek a review of such a decision".

The policy reflects the gradual shift away from the traditional notion that it is the role of the state to enforce criminal prosecutions. The VRR allows victims greater access to the decision making process from which they had previously been excluded. In the past, any victim seeking such a review would have been restricted to making written complaints ?to the CPS, or seeking judicial review of?the decision.

Victims are asked to contact the CPS within seven days after being notified of a decision in order to start the review process. However, this discretion can be exercised up to three months after the communication of the decision. This may now create a great deal of uncertainty for those under police investigation. Will a suspect be told their fate, before or after, the VRR process has taken place? Will a suspect still be subject to police bail conditions for a further three months, if ?a VRR is being contemplated? As such, the new policy does not seem to make clear where the suspect stands during ?this process.

Nowhere to hide

With the increasing global momentum to expose and confront tax evading corporations and individuals, recent developments in promoting tax transparency and the exchange of information between tax jurisdictions will have significant effects on reducing crime and tax evasion.

Automatic information exchange mechanisms permit the automatic reciprocal exchange of information by national tax authorities. On 12 June 2013, the EU Commission extended the automatic exchange of information between EU tax administrations.

The exchange of information covers broad areas, such as income from employment, director's fees, capital gains, and account balances.

In the UK, this new wave of transparency will also apply to Crown dependencies and Britain's overseas territories, such as Jersey, the Isle of Man and the Cayman Islands. On 16 June, David Cameron, addressing the G8 summit in Belfast, signalled that he wants to take this further, by establishing a register of ultimate beneficial ownership, in order to trace the true owners of offshore companies. In the absence of support from other nations, Cameron was hesitant, however, of making the register public, so as not to erode any competitive advantage enjoyed by the UK.

This will no doubt fuel the debate on striking the right balance on data privacy versus the need to ensure that progress is made, rather than simply removing one tax haven and replacing it with another.

Specific risk group

Between 2010 and 2011, HMRC referred sufficient cases to the CPS to enable prosecutions for non-organised tax fraud ?to be brought against 165 individuals. ?Since 2010, HMRC has been allocated additional resources amounting to £900m over four years, and the department has seen the number of investigators engage ?in its Criminal Investigation Directorate swell by 320. According to the CPS, by 2014 to 2015, HMRC should be referring sufficient cases to allow the CPS to prosecute 1,165 individuals.

In a further attempt to stem the billions of pounds which tax evasion costs the UK economy, HMRC has formed more than 30 taskforces across the country, targeting specific trade sectors, professions and locations where there is evidence of a high risk of tax evasion. It is reported that the London legal profession has been targeted as a specific risk group and a special taskforce will investigate solicitors and barristers, with the aim of recovering £3m.

This has approached has already reaped rewards for HMRC. Rohan Pershad QC, formerly of 39 Essex Street, was sentenced in February this year to three-and-a-half years for failing to pay VAT of approximately £600,000 on his earnings between 1999 and 2011. Not long after, Edward Paul Agbaje, who specialised in criminal law from 1 Gray's Inn Square, was convicted of failing to pay more than £80,000 in VAT, and he sentenced to 18-months imprisonment.

Beware the caution

In April 2013, the Ministry of Justice issued guidance on the issue of cautions (also known as 'simple cautions') for adult offenders. Simple cautions are non-statutory disposals for adult offenders which are administered by the police and aimed primarily at minor offences. The new guidance now requires the police to explain the wider implications that come with the acceptance of a caution. In the past, the police might simply have advised an individual that the acceptance of a caution amounted to an admission of guilt to committing an offence, and should that person be found guilty of a further offence at a later date, then the caution may be made known to the court. The new guidance now requires the police to alert offenders of other significant issues, including travel and immigration consequences, and the need to disclose the caution if they are seeking to work with children or vulnerable persons.

Practitioners have come across countless situations in which clients find themselves in strife after failing to appreciate the potential ramifications of accepting cautions, sometimes for offences which occurred many years before, and often in respect of trivial matters. This problem was highlighted in the case of R (on the application of Stratton) v Chief Constable of Thames Valley Police [2013] EWHC 1561 (Admin). The claimant accepted a caution in 2008 when she was 23-years-old, following an incident in a pub where an allegation of assault and criminal damage was made against her. She was interviewed without legal representation. The tape of the interview was no longer available and the Court of Appeal relied upon a statement taken by the interviewing officer that the claimant admitted "an involuntary reckless action" by throwing a bottle towards the other person and that "she was not necessarily acting in self-defence". The claimant accepted a caution and signed a form stating that "I understand that if, in the future, I should appear before a court and am found guilty of another offence, then details of this caution may be given to the court." The Court of Appeal quashed the conviction. Upon detailed review of the circumstances relating to her police interview, her dealings with the interviewing officer and the custody sergeant who administered the caution, the court was of the view that the police had failed to properly spell out the consequences of the caution to her, let alone in a way that gave her informed consent to the caution.