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Westminster update: DAC 6 reporting requirement deferred
Your weekly update from our public affairs team on all the latest developments and debates in Parliament and across Whitehall.
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1. DAC 6 reporting requirements deferred
Last Wednesday the EU Council announced that it has adopted an amending directive to DAC 6 providing an optional six-month delay to the reporting deadlines due to the disruption caused by the coronavirus pandemic.
In response HM Revenue and Customs (HMRC) confirmed that the UK is taking up the optional six month deferral and that the government will amend the UK Regulations that implement DAC 6 to give effect to this.
The amended Regulations may not be in force by 1 July 2020, but HMRC confirm that no action will be taken for non-reporting during the period between 1 July and the date the amended Regulations come into force, so that there is no expectation that reports will be made in July.
We've been calling for a deferral of DAC 6 in light of the pandemic, given the burden it will place on firms, including law firms, in both the private and public sectors. We therefore welcome this announcement.
2. Lord chancellor gives evidence on coronavirus impact on courts
Last Tuesday the Justice Select Committee heard evidence in relation to their inquiry into the impact of coronavirus on the prison, probation and court systems.
The Committee heard from Robert Buckland QC, lord chancellor and secretary of state for justice, Susan Acland-Hood, chief executive, HM Courts and Tribunals Service (HMCTS) and Dr Jo Farrar, chief executive, HM Prison and Probation Service.
James Daly (Conservative) asked whether the lord chancellor thought there was any merit in removing the requirement for duty solicitors to have an office near a police station where they are on the duty solicitor rota, given that this is an extra burden on firms.
Responding, Buckland said this was worth discussing in detail with the Legal Aid Agency and is an example of the effects of COVID-19. In his closing remarks, Bob Neill (chair) said that, in reference to the backlog of cases, unless there is the infrastructure of the profession to the work, such as those on criminal legal aid, none of it will come to anything.
Responding, Buckland said he saw issues with legal aid in the noughties and this problem is not of recent creation. The chair commented that this was more reason to have a fresh look once COVID-19 passes and Buckland agreed.
The chair asked about possible restrictions on jury trials. Responding, Buckland stated he would have to take a lot of persuading before he took even a temporary departure from this however acknowledge that the courts were facing an unprecedented challenge. The caseload means he will need to look at a number of options for some time, which will maximise space and increase capacity.
Buckland said he was a strong advocate for Nightingale courts and work being done by HMCTS, judges and practitioners to identify accommodation has been successful and he had signed off a number of alternative venues.
The government will need to look at a number of options to scale up capacity such as court hours and staggering appearances for practitioners and users before looking at significant changes. Buckland referred to ‘war time’ juries where numbers were reduced to seven and said he was attracted by this option and it had merit.
He also referred to the proposal announced by the lord chief justice in relation to a judge and two magistrates for cases that fit into the ‘either way’ category. He noted this might be a way forward and could be limited to certain offences.
Asked about when the decision would be made in relation to jury trials, Buckland said he hasn’t finalised any decision yet, but any new legislation would need to be in force as early as September.
Buckland stated he views his role as lord chancellor to defend and uphold the right to trial by jury and he is reluctant to interfere with this. Any change will be ‘sunsetted’ and there will no secondary legislation to extend the change.
Andy Slaughter (Labour) asked about the backlog of cases. Buckland gave figures from 2014 for the crown courts, where the backlog was 55,116 where 30,000 of these cases were awaiting trial. The pre-coronavirus baseline for the crown courts was 39,214 cases and 406,610 cases for the magistrates courts. The latest figures from 24 May show the crown courts with a backlog of 40,526 cases and 483,678 for the magistrates courts.
3. Corporate Insolvency and Governance Bill finishes passage through Parliament
Last Tuesday the Corporate Insolvency and Governance Bill passed report stage and third reading in the House of Lords, before heading back to the House of Commons last Thursday for consideration of amendments.
It received Royal Assent on the same day, becoming the Corporate Insolvency and Governance Act 2020.
At report stage we supported amendment one, which would have required a list of all known creditors be included in ‘relevant documents’. Lord Hope of Craighead (Crossbench), who tabled the amendment, stated that it was intended to assist the monitor in their duty to notify every creditor of the company of whose claim he or she is aware.
He raised this with the minister, and indicated he was satisfied with the letter in response from the minister which outlined that it would place an unnecessary burden on the directors to submit a list of the creditors when applying for a moratorium.
In response the minister, Lord Callanan, confirmed he would place this letter in the House of Lords library. He also noted that the government has recently published draft guidance for monitors that would include that the proposed monitor is expected to ascertain the assets, liabilities and ongoing financial commitments of the company when judging its likelihood of rescue, and that would include details of creditors. The amendment was withdrawn.
We also supported amendments 77 to 84, 97, 98, 100 and 101, which sought to amend the definition of moratorium and pre-moratorium debts in the Bill.
However, we did not support the inclusion of debts that arise under contracts or other instruments involving financial services within the definition of “priority pre-moratorium debt” in amendments 79 and 81.
A number of peers raised concerns about the potential for gaming of the moratorium and priority of lenders and creditors, including Baroness Altmann (Conservative).
When speaking about the government’s amendments, Lord Callanan said the government wanted to avoid lenders exercising their rights to accelerate their pre-moratorium debt, thereby potentially gaming the system through a moratorium.
The government’s proposed amendments exclude pre-moratorium financial sector debts from super-priority, or protection from compromise, where the financial services debt has been accelerated between the proposed monitor giving their statement on the likelihood of the company’s rescue and the end of the moratorium. The amendments removed the super-priority or protection for such pre-moratorium debts in a subsequent insolvency or restructuring process.
Lord Callanan also stated the government would consider using the powers in the legislation to amend the definition of pre-moratorium debts, if needed. Amendments 77 to 84 and 97, 98, 100 and 101 were agreed to.
The Bill subsequently passed third reading, with Lord Callanan stating that as a result of this legislation, “the hope is that otherwise viable companies will no longer face the threat of insolvency. The measures that the Bill introduces will give businesses the vital support that they need to keep themselves afloat, thereby preserving jobs and maintaining productive capacity, enabling the foundations to be late for this country’s economic recovery.”
On Thursday 25 June, the House of Commons consider the Lords' amendments. Lords amendments 1 to 116 were agreed to, and the Bill subsequently passed, receiving Royal Assent later that day.
4. Independent Review of Terrorism Legislation questioned over Counter-Terrorism Bill
Last Thursday the Public Bill Committee for the Counter-Terrorism and Sentencing Bill met for the first time, taking evidence from the Independent Reviewer of Terrorism Legislation, Jonathan Hall QC.
Our concerns around the use of polygraph testing were raised by Alex Cunningham, shadow justice minister, who quoted a section of our briefing for the session: “The Law Society does not agree that polygraph conditions should be placed on individuals released on licence.”
He noted this was a bold statement, and asked for Jonathan Hall's views on the use of polygraphs. Hall stated his belief that polygraphs were helpful for authorities to recognise when they are being deceived, and to reduce the burdens on them.
Much of the session centred around concerns that we had raised regarding the relaxation of the evidential burden for imposing a Terrorism Prevention and Investigation Measure (TPIM) and the removal of time limits on their renewal.
In response to questions from the justice minister, Chris Philp, on the first point Hall shared his concern that lowering the standard of proof required could open up the margin for error, while on the second he said that while there are circumstances in which someone ought to be subject to controls for longer than two years, the changes proposed in the Bill are not necessary since extension beyond two years remains possible as the law currently stands.
The next session of committee stage will be held on Tuesday 30 June.
5. Future Relationship Committee questions EU chief negotiator
The Future Relationship Committee recently released the transcript of a closed evidence session it held with Michel Barnier, the EU’s chief Brexit negotiator, in early June.
He said what he was seeking from UK negotiations is “a change and some kind of political impulse to ensure that more realism is injected into the conditions for access to the European market.”
He referred to the political declaration and said this contained a UK commitment to level playing field commitments. However, he finished his opening statement by saying that “despite all the difficulties and all the constraints, I am confident that we will be able to reach an agreement in the very short amount of time that we have left before 31 October.”
When asked if agreeing a deal before 31 October would give the EU adequate time to prepare, Barnier said that “you cannot improvise preparation in a few weeks,” but this was the last date a deal would be possible.
When asked what would happen if a deal was not agreed by this point, he said that “you will go out on WTO terms.” He clarified that “in some fields, if there is no deal, we might find contingency measures that will give us a few months’ grace, but I suggest that we do everything we can to reach an agreement, at least in the areas where we risk a cliff edge.”
Upon being asked about the European Court of Justice, Barnier said that ”whenever it is a case of interpreting Union law it would be the Court of Justice that interprets that so that we can preserve the European Union’s legal autonomy. This was approved in the context of the withdrawal agreement and the political declaration, so that is what it means. Extradition might be one issue, as might UK participation in European Union programmes and the exchange of data. That is where the interpretation of European law can only be done by the Court of Justice.”
Coming up this week
This week will see the introduction of the new Business and Planning Bill, which will undergo all its Commons stages in a single day on Monday as part of a fast-tracked procedure.
The Immigration and Social Security Co-ordination (EU Withdrawal) Bill will have its remaining stages in the Commons on Tuesday, while the Counter-Terrorism and Sentencing Bill will be back at committee stage on both Tuesday and Thursday.
In the Lords, the Private International Law Bill will have its third reading on Monday, and the same day will also see an oral question on supporting victims of domestic abuse during the pandemic.
If you made it this far
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