We look at the ways in which provisions for unlimited fines in the magistrates' courts will affect businesses found to have committed regulatory offences, and consider how our clients can prepare for the changes afoot.
Change is looming in the magistrates’ court in the form of ss85 – 87 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO). Once in force, the magistrates’ courts will have increased powers to levy unlimited fines for summary convictions which are currently capped at the statutory maximum of £5,000 or a higher amount. These changes could have serious implications for many businesses as the magistrates’ courts will now have powers to punish corporate defendants (and individuals) for regulatory breaches with unlimited financial penalties.
What is LASPO?
The Bill proposing LASPO was introduced in 2010 primarily to deal with the reform of civil litigation costs and legal aid funding. In October 2011 the government sought to amend the proposed Bill in order to include additional provisions relating to magistrates’ courts’ powers, which can be summarised as follows:
- Any offence currently punishable on sentence in the magistrates court by a fine currently capped at £5,000 or more will now be punishable by a fine of an unlimited amount
- Fines expressed as being on the “standard scale” (Level 1 – 5, currently capped at £200 - £5,000) will be subject to appropriate increases at the discretion of the Secretary of State.
These provisions are not yet in force, a commencement order will need to be passed to bring them into force. None of the changes will have a retrospective effect and therefore will not be applicable to offences committed prior to the provisions come into force.
What do these changes mean?
At the time the 2011 proposal, the government confirmed the reasons for increasing magistrates’ courts powers, including:
- To encourage greater use of fines
- To enable the magistrates’ courts to impose more proportionate fines on “wealthy or corporate offenders and organisations”
- To reduce referral to the Crown Court
How will this affect me and/or my business?
Most significantly, there will be significant increases in the amount of fines payable on conviction of any health and safety, environmental and licensing offences which are currently capped at a statutory maximum. Many such offences are already subject to higher fine levels than the usual maximum fine of £5,000. It is worth noting that in the impact assessment the government identified that nearly two thirds of all fines over £5,000 are issued to organisations, meaning that the new rules will have a disproportionate impact on businesses.
There are likely to be an increased number of cases dealt with by the magistrates’ courts. Currently, the magistrates’ courts commit cases considered too serious for their limited sentencing powers to the Crown Court. Clearly the intention behind this change is to limit the number of cases where this step is required. From the government’s perspective, an increased number of cases being dealt with by the magistrate’s court may decrease the burden on the Crown Court and increase the efficiency with which prosecution cases are processed by avoiding time consuming and costly Crown Court proceedings.
However for corporate defendants the removal of the certainty of a maximum fine may mean that more businesses decide to either defend cases that would previously have been the subject of a guilty plea on a commercial basis, or, in the case of offences which can be tried in the magistrates court or the Crown Court, to opt for a Crown Court trial, where conviction rates are generally lower.
The government’s intention to target greater fines at “wealthy or corporate offenders and organisations” cannot be underestimated. The literature accompanying the proposed changes clearly directs the magistrates’ courts to use their increased powers which is likely to be to the detriment of businesses found to be in breach of regulations. Recent caselaw from the Crown Court in relation to fines for health and safety and environmental offences has already made clear that fines for large organisations are likely to be measured in several hundreds of thousands of pounds, if not more, for serious incidents.
What can I do?
As with all regulatory matters, proactive prevention is the best way to avoid investigations and prosecutions and to benefit from the statutory defences available if you are unfortunate to be prosecuted. As such, we would recommend that you look to review policies and practices to ensure that your business is fully compliant with all relevant regulatory requirements, including regulations which currently attract lower and/or capped fines and therefore have perhaps been considered of less concern in the past.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.