PROVISIONS SUPPLEMENTARY TO S. 18

HC Deb 05 November 1975 vol 899 cc465-87

Lords Amendment: No. 11, in page 15, line 29, at end insert: (3A) Where a licence is revoked on the grounds of any act or omission occurring after the licence was altered by virtue of the preceding section which act or omission would not have provided grounds for revocation of the licence had it occurred before the date of such alteration, and it is shown that the holder of the licence

1. (i) has incurred expenditure in carrying out work which is rendered abortive by revocation, or
2. (ii) has otherwise sustained loss or damage which is directly attributable to the revocation

the Secretary of State shall pay to him full and prompt compensation in respect of that expenditure, loss or damage. If any dispute, difference or question shall arise between the Secretary of State and the holder of a licence issued before the coming into force of section 18 of this Act, either as to the entitlement of such holder to compensation under the provisions of this sub-clause or as to the amount of such compensation, the Secretary of State shall, if the holder of such licence so requests, refer such dispute, difference or question to arbitration by the International Centre for Settlement of Investment Disputes. In such arbitration a licensee who is controlled by a company incorporated outside the United Kingdom shall be treated as a national of the State in which that company was incorporated and subsections (2) and (4) to (6) of section 302 of the Income and Corporation Taxes Act 1970 shall apply, for the purpose of determining whether for the purposes of this section, a licensee is controlled by another company.

Mr. Benn

I beg to move, That this House doth disagree with the Lords in the said amendment.

Mr. Speaker

With this amendment we may discuss Lords Amendment No. 12, in page 16, line 1, after "(3)" insert "and (3A)".

I should inform the House that a question of privilege is involved.

Mr. Benn

The amendment concerns a provision under which the British taxpayer would be asked to pay compensation arising from changes in the provisions under which licences are to operate. Lords Amendment No. 12 is consequential upon Lords Amendment No. 11, dealing with compensation upon revocation.

The position is straightforward. We have found it necessary to change the existing licence terms because the terms negotiated by the previous Government were foolishly and irresponsibly given, and did great damage to our national interests. The Conservatives gave away things that should not have been given away.

Mr. Patrick Jenkin rose—

Mr. Benn

The right hon. Gentleman must sit and listen. In the course of this debate he has made a great deal about the cost of the Government's proposals. The truth is that there was no firm commitment by the previous Government even to a petroleum revenue tax. I have heard him say often that the last Government had said they would introduce it. They said no such thing. They said that they would consider it. There was no commitment to a PRT—

Mr. Gray

There was no oil.

Mr. Benn

Of course there was oil. It was known that oil existed. If the hon. Member wants me to do so, I shall read him the Press release of the then Secretary of State for Trade and Industry in 1971, which will show that he had a clear idea of the value of the oil in the North Sea. Licences were given at that time to run for 46 years, with no provision for a whole range of safeguards for our national interest, including depletion control.

When the reckoning comes—perhaps this is not the time for it—it will turn out that what the previous Government were ready to give away so recklessly this Government are seeking to recover, in part, by proper legislative means.

Mr. Patrick Jenkin

I shall obviously want to comment on what the right hon. Gentleman said. I ask him to bear in mind at this stage that the terms are exactly the same as those of the Government of which he was a member in 1965 during the second round of licensing and, in 1967, during the third round. If blame is to be attached it must be borne in mind that both he and I attended the Forties inauguration on Monday, and that that field was discovered as a result of a licence granted under the second round and under a Labour Government of which the right hon. Gentleman was a member. I want that point to be firmly on record.

Mr. Benn

In due course all these issues will be put to the public. However, the right hon. Gentleman must also bear in mind that no oil had been discovered by the end of the Labour Government in 1970. The Forties field was discovered later. It is true that oil was discovered in pursuit of a licence in respect of an area where gas was first thought to be available. Under the gas provisions, the British Gas Corporation is providing the gas to the British consumers, but the circumstances were quite different.

However, even if it were true—it is not—that, in their granting of licences for oil, the previous Labour Government had failed to take the necessary safeguards, it must be open to this Government to change the licence terms by taking proper statutory powers.

We have Alberta thrown at us all the time, as if it were the only interesting oil province in the world. By legislation, Alberta has taken the power to change at will the rate of royalty to be paid and to require oil to be sold to the Alberta Petroleum Marketing Commission. Therefore, the Alberta club cannot be bashed on our heads in respect of this amendment. The right hon. Gentleman will not be able to shield behind Alberta when presenting his arguments.

We are changing the régime through legislation. Moreover, we are doing so, as anyone dealing with any British Government would expect, on the basis of good faith and good working relations with the oil companies. However, the effrontery of the Conservative Party, which failed to safeguard the national interest, but, when a successor Government corrects the position, says that compensation must be paid, is quite shattering.

There are many occasions on which the whole circumstance in which an industry operates is changed by different Governments and by different Acts of the same Government. Tax legislation can entirely transform the prospects for an industry which is taxed. The administration of exchange controls may be necessary at some time and may make a substantial difference to the prospects for an industry.

There is no retrospection in this case, in the strict sense in which retrospective law is held to be improper—namely, the making of illegal something which was legal when it was introduced. There is no question that in this case we are changing the forward prospects of an industry as a result of parliamentary legislation. There is nothing whatever, in a legislative form of this kind, that would merit any compensation. I have heard it argued in Committee that this is a breach of an international law. That is completely incorrect.

Does the right hon. Gentleman suppose that when the American Government introduced prohibition, the Scotch whisky manufacturers could have claimed compensation on the grounds that they had established their business on the basis of their outlets for whisky in the United States? If the United States, in its wisdom, altered the position in such a way as to make illegal the importation and consumption of whisky in the United States, would that be contrary to international law?

Mr. Peter Viggers (Gosport) rose—

Mr. Benn

Let me develop the argument, because it is a general one. A State may introduce safety regulations for vehicles that may make it impossible for certain vehicles built by foreign companies to be imported. Moreover, this may apply to domestic companies that have developed vehicles in the expectation that those vehicles will be allowed to operate. If the regulations are to restrict the importation or operation of those cars, is compensation payable? The answer is, "Certainly not." A Government may decide to ban a certain product, on the ground that it is dangerous. I am just taking general examples of changes that may be needed in the law. Let us take a case which I recall well, because I was involved—namely, the banning of cigarette advertising on television. I represent a Bristol constituency that is well known for its cigarettes and the Imperial Tobacco Company, but was compensation paid in that instance? The answer is, "No, it was not." Every Government must be free to change the régime in which it operates if it believes it to be in the national interest.

Mr. William Clark (Croydon, South) rose—

6.45 p.m.

Mr. Benn

I shall be happy to give way, because this is an important matter. I point out that I am not using any of these arguments as a justification for what we are doing. Whether it is wise or not is a matter of opinion. We have heard all the arguments, and I have alluded to them, but I have not repeated them at any great length. I am arguing that there is no conceivable justification for saying that in a case in which an incoming Government, with the consent of Parliament, remedies the defects of its predecessors in dealing with the régime within which an industry operates, compensation is due. Were such a principle accepted, every time any Government, Minister or Parliament made a change in what might be called the legitimate expectations of firms, the claims for compensation would neutralise the position.

I shall give way now. I wanted to get my argument on the record first.

Mr. Viggers

I am extremely grateful to the right hon. Gentleman for giving way. He is known to have an agile and quick mind. Is he telling the House that he does not understand the distinction between regulations which a Government normally lay for carrying out the conduct of business and the vested contractual rights that the Government are proposing?

Mr. William Clark

I find the right hon. Gentleman's argument fairly specious, because the position of oil is not analogous to the matters about which he has been talking. I should like to bring him back to the realm of planning permission. If planning permission is granted and then, for one reason or another, it is cancelled, surely compensation is payable.

Mr. Benn

I do not know whether I should wait until the end of the debate, if there is one, to deal with these points. However, on the argument that was raised by the hon. Member for Croydon, South (Mr. Clark), I point out that I cannot deal with planning permission.

Mr. William Clark

Why not?

Mr. Benn

I do not believe that I am qualified to deal with a planning permission parallel. That is my answer. By legislation we are changing the régime within which a particular industry is operated. In my view it is a reductio ad absurdum to deal with the point which the hon. Gentleman has raised. Let us suppose that the previous Government had given, in perpetuity, total rights, in a contractual form, to explore for all the oil off our islands. Are the Opposition saying that an incoming Government would be able to do nothing whatever about it, in perpetuity? That is a manifest absurdity. The reason why the argument is being advanced is that the previous Government's failure in handling this precious resource has come to light. We are seeking to remedy the position in our relations with the oil companies. The real safeguard is wholly different in character. We need the oil companies for the development of the resources, and they need good relations with the host Government. Thus, there will be a good faith between us, which is worth having because it is based upon a common interest.

For the Opposition to elevate into a legal principle a failure of their own that has come to light and been remedied by legislation, and to use it as a compensation argument, does not stand a moment's examination. This is clearly understood by the oil companies. I believe that our relations with the companies are wholly realistic in character. The argument about compensation does not bear examination. Therefore, I invite the House to disagree with the Lords in the said amendment.

Mr. Grimond

I do not want to go over the arguments that were deployed in Committee. It is becoming a habit with the Secretary of State, when important general principles are disputed, to wave them aside and to say "After all, it is nothing to do with us. It is a mistake made by the Conservative Government." I do not take that view.

I think that we should have the advice of lawyers on this matter, because the Government are proposing a breach of contract. It is all very well to say that if the United States Government brought in prohibition the Scotch whisky manufacturers would have no right to compensation. I speak subject to correction, but if the American Government, having given a concession to a particular Scottish company to supply Scotch whisky to the American Armed Forces, then broke the contract, I believe that at least there would be a case for compensation. Therefore, we are talking about a more important matter than the errors of the Conservative Government. We are considering whether the British Government have an arrogant right to break a contract when they feel that it is in their interests to do so.

Is it to be argued that if the British Government enter into a contract which a future Government find unsatisfactory but which turns out well for the other contractual party, they have a right to break it by calling upon the public interest? That appears to be the doctrine.

I do not wish to go into all the arguments against it, because they are self-evident. They are to do not with retrospective legislation, or with the right of the Government to make or alter the general laws, but with the question whether, the Government having entered into a contract with the Corporation, they are entitled to break it without compensation whenever they feel so inclined. That is the proposition before the House.

As I pointed out in Committee, the Government enter into leases. They may enter into a lease, as many of us do, at a rent which proves to be less than might have been obtained. Is it to be argued that any Government have the right to break the lease and demand other terms without compensation?

This doctrine, apart from being shabby, is dangerous. We, above all nations, have an interest in upholding the sanctity of contract. Considering our size, we are probably more dependent on trade than is any other nation. We have large concessions in various parts of the world for minerals, oil, and so forth. It will be noted that any Government can say, "Our national interest demands that the concession freely given a year or two ago is at an end, and that there will be no compensation.".

There is no allegation that the oil companies have behaved badly, or that the Government were conned into this situation. They may have been foolish, but many Governments are foolish. Having entered into these contracts freely, they are now saying that because the contracts do not suit them they can be abrogated without compensation. That is a dangerous doctrine to preach in world conditions today.

Mr. Benn

I want to be sure that I understand the right hon. Gentleman on this important issue. In 1972, licences were given to the oil companies for 46 years without any power to control the rate of depletion. Is the right hon. Gentleman seriously saying that between 1972 and 2017 a sovereign Parliament is unable to control depletion by legislation, general in character and not limited to particular oil companies, without paying compensation to the oil companies for what they would have gained had they continued to exploit those resources without any limit, up to end of the 46 years? If so, he is saying something of enormous constitutional importance—namely, that the British people have no right to control assets under the North Sea until the licences have expired. If the right hon. Gentleman is saying that, will he spell it out clearly, so that we may know the Liberal Party's position?

Mr. Grimond

Of course, the British Parliament is sovereign and can do anything, short of making a man into a woman, or the other way round. The question is: what are the Government doing? They are proposing to break contracts because it suits them to do so. They have the power to do that. I am saying that it may be necessary to control extraction from the North Sea, but that it is also desirable, to put it at its lowest, to pay compensation if the Government feel that it is necessary to exercise this power.

Mr. Viggers

I must declare my interest in the oil industry, which is duly recorded.

The Secretary of State and his hon. Friends are fond of attempting to show, by direct reference or innuendo, that Opposition Members are speaking for the oil industry. Indeed, the right hon. Gentleman suggested that one point was not of substance because it was not put forward by the oil industry. I believe that all my hon. Friends are speaking for the best interests of all people in this country. If the Government and certain of their back-bench supporters could rid themselves of their pathological dislike and envy of oil companies in general, and of the multinationals in particular, they would cause less suspicion and less of a rundown in offshore exploration and production and of employment in the services and supply sectors of the industry.

This is a crucially important amendment. The Government by the Bill are changing the terms upon which licences for offshore exploration and production were granted. They are doing so retrospectively so that the new licence terms are imposed on existing licensees in substitution for the contracts originally given.

The new licence terms include a right for the Government, in certain circumstances, to revoke licences. This is a new right that the Government have given themselves and, as the Bill stands, the revocation will not give rise to any compensation for the licensee.

The Lords amendment proposes that where a licence is altered, giving rise to the Government's right to revoke, and where the licensee finds this new power of revocation is used against him, he shall be entitled to reasonable compensation for his loss.

The Government have sought to justify their action in two ways. First, the right hon. Gentleman said that the Government need to give themselves wide discretionary powers, which include the revocation of licences. We must remind the Government that the wide discretionary powers which appeal to Ministers and civil servants appear harsh and arbitrary in the eyes of prospective licensees and foreign Governments.

Secondly, the Government have sought to justify their high-handed approach by quoting the national interest. It is so easy and apparently blameless to involve the national interest that it may be thought difficult to argue against it, but the most basic of our national interests is a respect for law and for binding contractual relationships.

How dare the Government invoke the national interest to break contracts entered into by them and to undermine respect of the word of the British Government? Neither of those excuses withstands examination.

7.0 p.m.

Although the principle at stake is a broad one, the circumstances in which the point will arise are, I hope, unusual. Licensees can be trusted to obey their best commercial judgment. I do not think that anyone in Government would dispute that. But under the new terms they will become subject to the Government's direction. A licensee can thus be compelled by the Government to do things which are contrary to his commercial interest simply to preserve his prior investment in a licensed area. If the licensee agrees with the Government's direction, no question arises. I am talking only about situations in which the Government are in dispute with a licensee who feels that his best commercial interests are not served by the Government's direction.

I am referring to the case in which the Government seek to overrule a licensee—who must, presumably, be the best judge of his commercial interest—the dispute cannot be resolved, and the Government revoke the licence. The licensee may have spent thousands, even millions, of pounds, in the exploration and development of the licensed area, yet the Government are giving themselves powers to revoke the licence.

This situation is not without historical precedent. A similar situation arose in the Water Resources Act 1963. In that case it was properly decided that compensation should be paid when a licence was revoked or varied. The Lords amendment follows Section 46 of the Water Resources Act 1963 and provides that fair compensation shall be paid in these circumstances. I emphasise that the occasions upon which compensation will arise will be rare, and the grounds for obtaining it narrow. Under the Lords amendment, compensation will arise only if the licence terms are varied by the Government—giving a right to revocation—and revocation takes place. Moreover, compensation will be paid only when the licensee has incurred expenditure in carrying out work which is rendered abortive by revocation, or where he otherwise sustains loss or damage directly attributable to the revocation. There is provision for arbitration on the amount of compensation.

The circumstances we are considering, in which revocation may take place, may be unusual, and the grounds narrow, but the principle is a broad and vital one. First, no national interest is more important than the rule of law and the observance of contractual arrangements. Second, countries and companies dealing with the United Kingdom Government have always been able to rely on the integrity of the United Kingdom. Unless we agree to this amendment, this measure will undermine that respect and trust. Indeed, contrary to what the right hon. Gentleman has said, the Bill, as unamended, is in my submission a clear contravention of international law.

Third, we are a trading nation, and it is crucially important that we should be able to maintain the principles of international justice in our dealings with foreign Governments. The right hon. Gentleman talked about his proposed action in the unamended Bill and said that it was appropriate for him to take proper statutory powers. These are clearly improper statutory powers. I regret having to use an argument of expediency to persuade the Government to uphold a moral principle, yet it is actually contrary to our interests to abrogate our international obligations. I can quote many examples of the United Kingdom's posture in cases where foreign Governments have sought to upset vested rights.

It is right that I should quote some at length. The first is a Note to Indonesia in 1965, which reads: Her Britannic Majesty's Embassy are therefore instructed to request the Indonesian Government either to restore this property promptly to the British owners, or to acknowledge their obligation in accordance with international law, to provide prompt, adequate and effective compensation. Command 5758, of 1938, dealing with the affairs of Mexico says: The British Government cannot but regard the failure of the Mexican Government to discharge their existing obligation as in itself rendering unjustified an expropriation, an essential condition of the validity of which would be the payment of full and adequate compensation amounting in this case to a very large sum. The right hon. Gentleman has referred to Alberta. I have to put it to him that on the information I have been given he is misinformed. As I understand it. Alberta and the other Canadian Provinces have changed royalty rates but are not in breach of the licence terms. The Canadian Provinces other than Alberta—I am informed—have no maximum royalty rates specified in the lease terms, and royalties are established by regulations issued from time to time. Alberta leases issued prior to June 1962 had a maximum royalty specified only for crude of and for the initial 21-year term, that is, not for gas or renewal periods. Alberta leases issued after June 1962 had maximum royalties set for both oil and gas during the initial period of 10 years. At the time when Alberta increased royalty rates there were very few leases which were not in renewal periods. Consequently, in all but these few cases there was no question of a breach of the lease term.

The most important and leading case dealing with international obligations—it happens to concern oil—is the Anglo-Iranian Oil Company case—that of the United Kingdom v. Iran. I quote from the record of the Memorial of the United Kingdom, page 83 of which says that The Government of the United Kingdom does not consider it necessary to elaborate the proposition that rights acquired by foreign nationals by virtue of concessionary contracts are property rights and that as such they are entitled to the same protection as international law grants to the property rights of foreigners. This proposition is generally recognised and to the knowledge of the Government of the United Kingdom has never been seriously challenged. This is exactly what the Government are proposing to do.

I have too much respect for the ability of the right hon. Gentleman and his hon. Friends to imagine that they can possibly think that this is anything other than a breach of a vested contractual right. I do not accept that the right hon. Gentleman cannot perceive, if he concentrates his mind upon the subject, that there is a complete difference between a vested contractual right and statutory regulations dealing with such things as whisky imports—the example he chose to put forward. This is a grave matter. We on the Conservative side of the House must urge the Government to think again before they allow this Bill to be enacted in its present form.

Some of the cases that I have quoted stretch back over 30 years. This is indicative of the historical importance of this issue. If the Government persist in their proposals they will sin in haste but we shall repent at leisure.

Mr. Patrick Jenkin

There is no single act of this Government in the whole of their oil policy which has done more to undermine the confidence of the industry than the unilateral abrogation of the accrued contractual rights without compensation. The Secretary of State sought to justify what he is doing in a combative speech. I do not criticise that. I am sorry to have to tell him that in that speech he gravely misrepresented the true facts.

The right hon. Gentleman sought to argue that the terms he was dealing with were solely the responsibility of the previous Conservative Government. They were not. The second and third licensing rounds were carried out by the last Labour Government, after there had been substantial finds of gas—although, of course, the companies were looking for oil. The 1969 licensing round occurred when there had been substantial finds of gas and the 1971–72 round was on the same terms.

The right hon. Gentleman went on to say that the Conservative Government were to blame. This point was dealt with at length in Committee and I will deal with it only briefly now. The right hon. Gentleman's main argument hinged on the need for depletion control. He referred to the Public Accounts Committee. Is the right hon. Gentleman aware that nowhere in the report of that Committee, published in February 1973, nor, as far as I can see, in any of the evidence tendered to the Committee, is there any reference to depletion control? Even as late as February 1973 no one was contemplating that by the 1980s we might have a sufficient flow of oil to justify the use of depletion control. That situation came about during 1973 and 1974.

The sole concern of the Public Accounts Committee was Government take. On that score there are two points to be made. Firstly, we must have regard to the sequence of events. The third round applications were invited on 22nd June 1971 and the closing date for applications was 20th August. The first British oil field was declared commercial in November 1971. The Government were committed by the terms on which they had issued the applications. The tender bids had already opened before BP declared its field commercial. It was the first major commercial field in the North Sea. Subsequently, allocations were made at the beginning of 1972, but on the same terms on which the companies had already bid on the tenders. Therefore, the then Government quite rightly felt that it would have been grossly improper to allow the bids to go ahead and to prevent applications to renegotiate the terms. That argument was put to the PAC and it is somewhat surprising that it did not attach more weight to it.

Mr. John Smith

Surely the right hon. Gentleman recognises that the PAC was concerned with take rather than depletion. After all, it is the Public Accounts Committee. It was not concerned with issues such as depletion. I quote a small part of one of the Committee's conclusions, which reads: The second and third rounds of licensing had been framed on the initial expectation that offshore petroleum would be in the form of natural gas, but the position was materially altered before the fourth round by the discovery of oil which would be handled and distributed by private companies and not by a nationalised industry. The Public Accounts Committee supports the distinction between the previous round and the fourth round.

Mr. Jenkin rose—

Mr. Gordon Wilson

I am grateful to the right hon. Gentleman for giving way. Will he accept from me that in Scotland over the past four years considerably more attention has been paid to depletion and the overall control of production of this resource than has been the case in the United Kingdom? Does he accept that the subject of depletion is not strange to us?

Mr. Jenkin

I recognise what the hon. Gentleman says about depletion, but when the SNP started talking about the matter it was anticipating a very much lower figure. The SNP talked in terms of 50 million tons a year. It was not until 1973 that anyone began seriously to recognise the need for depletion control. Let us hear no more about that.

The first commercial find of oil in the British sector of the North Sea came after the Government were committed in 1971 to the terms of the fourth round. I have never disputed that in the new circumstances following the dramatic finds of 1972 and 1973, which went through into 1974, there is a need for the Government to take depletion control. Perhaps the right hon. Gentleman will give me credit for acknowledging that. We have said that if the Government interfere with an accrued contractual right in this way, compensation is required to be paid under international law and in the national interest.

7.15 p.m.

My hon. Friend the Member for Gosport (Mr. Viggers) gave some extremely telling quotations from the views taken by successive Governments. The view has been taken that interference with an accrued contractual right is just as much an interference with a proprietary right requiring compensation as is the taking of property. We are dealing with a most extreme case where an act done by a company under an existing licence in breach of a new obligation imposed by the Bill will lead to the revocation of the licence. That is the only circumstance to which the amendment is directed. A licensee might lose his licence by doing something which was never a breach when the licence was first issued. The licensee may act on the faith on which he spent large sums, but he may lose his licence because he is in breach of a regulation which has since been added to the original terms.

My hon. Friend the Member for Gosport has stressed the element of legality and the practical effects. I cannot usefully add to his extremely comprehensive and persuasive statement on international law. This is the expropriation of a property right that has been established over and over again. It was established as recently as last year by the Government's amendment that they supported at the Sixth General Assembly in common with their Common Market colleagues. By changing the terms and imposing onerous new obligations upon the licensees, the Government are interfering with established property rights.

The examples that the Secretary of State has given include cigarette advertising. I have never known it to be an accrued proprietary right to be able to advertise cigarettes. The right hon. Gentleman also referred to tax changes. There is no accrued legal right that means that it is not possible to impose additional taxes. There has never been an accrued right to have prohibition. The right hon. Gentleman put forward an absurd argument.

The key to the matter is the national interest. The practical argument is that the national interest destroys the Government's case for arguing against expropriation without compensation whenever United Kingdom firms are threatened overseas. This Bill is a direct incitement to foreign Governments—there is no shortage of candidates—to imitate us. The Bill will undermine the national interest. It will provide a precedent for those Governments that are ambitious to expropriate United Kingdom concerns. What could be more of a precedent than that which is now before us?

The changes to the licence terms are necessary, but where they could result in the loss of a licence under terms that were never contemplated when the licences were first issued it seems that compensation should be paid. It is a matter of profound national interest to uphold the rule of law and to ensure that our interests are safeguarded in the rest of the world. I hope that my right hon. and hon. Friends will feel it right that we should support that high principle in the Lobby.

Mr. Benn

I have heard this case several times before, and each time I hear it it becomes less credible. I must tell the right hon. Member for Wanstead and Woodford (Mr. Jenkin) that it was a pathetic presentation of an argument that may have political merit but has no legal basis. I understand that in the right hon. Gentleman's view it would be proper for us to tax 100 per cent. any revenue that might accrue to an oil company in a particular field from now to the end of the licence, but that it would not be right to change the general régime under which the licence should operate. That cannot be a credible argument.

The hon. Member for Gosport (Mr. Viggers) referred to the Mexican and Indonesian Governments in cases where confiscation had taken place. No such question arises in this instance. We are not altering the law, there is no retrospection. We are laying down a general framework that is not discriminatory against any of the licensees from any country or against our own national oil interests.

We are saying that it is necessary for us to have certain depletion controls. That is not arbitrary action involving confiscation or anything of that kind. I do not believe that the exaggeration contained in the lectures that have been delivered, or the pomposity with which these arguments are always accompanied, constitute justification for the erection of a completely vague legal argument. It would be very much better if the Conservative Party was prepared to argue the case on grounds of merit, and then we should know where we were.

We then heard the right hon. Member for Orkney and Shetland (Mr. Grimond) laying down some great, immutable principle about the sacredness of contracts—when he voted for legislation that broke contractual obligations to pay increases in salaries due under agreements reached some months before the Government's new incomes policy came into effect. The Liberals have always argued for statutory powers over incomes, regardless of the contractual rights of those who may have made long-term provisions. We heard no high moral arguments then and there are no high moral arguments to be sustained now.

The right hon. Member for Wanstead and Woodford said that that there had been an error of judgment which was not discovered until 1973. He was edging as near as he could to the election date in early 1974. An error occurred. There should have been depletion control. It does not matter whether the error was spotted by the SNP, or whether it first appeared in the Report of the Public Accounts Committee, the Petroleum Times, or the New Scientist. It does not matter when it was discovered. The fact is that it was discovered, and that we have brought forward a remedy to protect the people of this country and their interests.

At that point the right hon. Member for Wanstead and Woodford should have seen where the national interest lay. He should have rallied round the legislation and said, "Perhaps we should have done better. We made a mistake, and we must blame the previous Labour Government." When the matter is identified, surely he has a clear duty to support the national interest in correcting the error. But when that error comes to light, he tries to elevate it into a breach of an international obligation comparable to some of the most extreme cases that can be found in the world. The right hon. Gentleman does less than justice to his own credibility. Even on this issue the Conservative Party is more interested in compensation for oil companies than in safeguarding the national interest. There is no basis whatever for the amendment, and I hope that the House will disagree with it.

Mr. Patrick Jenkin

I remind the right hon. Gentleman that he has not said a word about the fact that a legal principle is involved—a principle that seeks to protect British interests throughout the world. What an example he is setting to Governments who are only too anxious to expropriate British property!

Mr. Benn

There is no legal argument whatever. The standing of this country rests on the good faith of successive Governments and the way in which they behave in their contacts with other Governments and the companies with which they deal. The ultimate guarantee of our good faith lies in the conduct of our relation with the oil companies, and indeed with everybody else. But the Conservative Party, for purposes of narrow advantage, seeks to elevate the correction of a past defect in legislation into something with which it can beat the Government abroad. The Conservatives have done great damage by what they have attempted to do and there is no basis for their argument.

Question put, That this House doth disagree with the Lords in the said amendment:—

The House divided: Ayes 271, Noes 227.

Division No. 385.]	AYES	[7.24 p.m.
Allaun, Frank	Fernyhough, Rt Hon E.	Maclennan, Robert
Anderson, Donald	Fitch, Alan (Wigan)	McMillan, Tom (Glasgow C)
Archer, Peter	Flannery, Martin	Madden, Max
Armstrong, Ernest	Fletcher, Raymond (Ilkeston)	Magee, Bryan
Ashley, Jack	Fletcher, Ted (Darlington)	Mahon, Simon
Atkins, Ronald (Preston N)	Foot, Rt Hon Michael	Mallalieu, J. P. W.
Atkinson, Norman	Forrester, John	Marks, Kenneth
Bagier, Gordon A. T.	Freeson, Reginald	Marquand, David
Bain, Mrs Margaret	Garrett, John (Norwich S)	Marshall, Dr Edmund (Goole)
Barnett, Guy (Greenwich)	Garrett, W. E. (Wallsend)	Marshall, Jim (Leicester S)
Barnett, Rt Hon Joel (Heywood)	George, Bruce	Maynard, Miss Joan
Bates, Alf	Gilbert, Dr John	Mellish, Rt Hon Robert
Bean, R. E.	Ginsburg, David	Mendelson, John
Benn, Rt Hon Anthony Wedgwood	Golding, John	Mikardo, Ian
Bennett, Andrew (Stockport N)	Gould, Bryan	Millan, Bruce
Bidwell, Sydney	Gourlay, Harry	Miller, Dr M. S. (E Kilbride)
Bishop, E. S.	Graham, Ted	Miller, Mrs Millie (Ilford N)
Boardman, H.	Grant, George (Morpeth)	Moonman, Eric
Booth, Albert	Grant, John (Islington C)	Morris, Alfred (Wythenshawe)
Boothroyd, Miss Betty	Grocott, Bruce	Morris, Charles R. (Openshaw)
Bottomley, Rt Hon Arthur	Hamilton, W. W. (Central Fife)	Morris, Rt Hon J. (Aberavon)
Boyden, James (Bish Auck)	Hardy, Peter	Moyle, Roland
Bradley, Tom	Harper, Joseph	Mulley, Rt Hon Frederick
Brown, Hugh D. (Provan)	Harrison, Walter (Wakefield)	Murray, Rt Hon Ronald King
Brown, Robert C. (Newcastle W)	Hart, Rt Hon Judith	Newens, Stanley
Brown, Ronald (Hackney S)	Hatton, Frank	Noble, Mike
Buchan, Norman	Hayman, Mrs. Helene	Oakes, Gordon
Buchanan, Richard	Heffer, Eric S.	O'Halloran, Michael
Butler, Mrs Joyce (Wood Green)	Henderson, Douglas	O'Malley, Rt Hon Brian
Callaghan, Jim (Middleton & P)	Hooley, Frank	Orbach, Maurice
Campbell, Ian	Horam, John	Ovenden, John
Canavan, Dennis	Howell, Denis (B'ham, Sm H)	Padley, Walter
Cant, R. B.	Hoyle, Doug (Nelson)	Palmer, Arthur
Carmichael, Neil	Huckfield, Les	Park, George
Carter, Ray	Hughes, Rt Hon C. (Anglesey)	Parker, John
Carter-Jones, Lewis	Hughes, Robert (Aberdeen N)	Parry, Robert
Cartwright, John	Hughes, Roy (Newport)	Peart, Rt Hon Fred
Castle, Rt Hon Barbara	Hunter, Adam	Prentice, Rt Hon Reg
Clemitson, Ivor	Irvine, Rt Hon Sir A. (Edge Hill)	Price, C. (Lewisham W)
Cocks, Michael (Bristol S)	Irving, Rt Hon S. (Dartford)	Price, William (Rugby)
Cohen, Stanley	Jackson, Colin (Brighouse)	Radice, Giles
Coleman, Donald	Jackson, Miss Margaret (Lincoln)	Rees, Rt Hon Merlyn (Leeds S)
Conlan, Bernard	Janner, Greville	Reid, George
Cook, Robin F. (Edin C)	Jay, Rt Hon Douglas	Richardson, Miss Jo
Corbett, Robin	Jeger, Mrs Lena	Roberts, Albert (Normanton)
Cox, Thomas (Tooting)	Jenkins, Hugh (Putney)	Roberts, Gwilym (Cannock)
Craigen, J. M. (Maryhill)	John, Brynmor	Robertson, John (Paisley)
Crawford, Douglas	Johnson, Walter (Derby S)	Roderick, Caerwyn
Crawshaw, Richard	Jones, Alec (Rhondda)	Rodgers, George (Chorley)
Crosland, Rt Hon Anthony	Jones, Dan (Burnley)	Rodgers, William (Stockton)
Cryer, Bob	Judd, Frank	Rooker, J. W.
Cunningham, G. (Islington S)	Kaufman, Gerald	Roper, John
Cunningham, Dr J. (Whiteh)	Kelley, Richard	Rose, Paul B.
Davidson, Arthur	Kerr, Russell	Ross, Rt Hon W. (Kilmarnock)
Davies, Bryan (Enfield N)	Kilroy-Silk, Robert	Rowlands, Ted
Davies, Denzil (Llanelli)	Kinnock, Neil	Sandelson, Neville
Davies, Ifor (Gower)	Lambie, David	Sedgemore, Brian
Dean, Joseph (Leeds West)	Lamborn, Harry	Shaw, Arnold (Ilford South)
Delargy, Hugh	Lamond, James	Sheldon, Robert (Ashton-u-Lyne)
Dell, Rt Hon Edmund	Latham, Arthur (Paddington)	Shore, Rt Hon Peter
Dempsey, James	Leadbitter, Ted	Short, Rt. Hon E. (Newcastle C)
Doig, Peter	Lee, John	Silkin, Rt Hon S. C. (Dulwich)
Dormand, J. D.	Lever, Rt Hon Harold	Sillars, James
Douglas-Mann, Bruce	Lewis, Ron (Carlisle)	Skinner, Dennis
Dunn, James A.	Lipton, Marcus	Small, William
Dunnett, Jack	Litterick, Tom	Smith, John (N Lanarkshire)
Eadie, Alex	Loyden, Eddie	Spearing, Nigel
Edge, Geoff	Luard, Evan	Spriggs, Leslie
Edwards, Robert (Wolv SE)	Lyon, Alexander (York)	Stallard, A. W.
Ellis, John (Brigg & Scun)	Lyons, Edward (Bradford W)	Stewart, Donald (Western Isles)
English, Michael	Mabon, Dr J. Dickson	Stoddart, David
Ennals, David	McCartney, Hugh	Stott, Roger
Evans, Fred (Caerphilly)	MacCormick, Iain	Strang, Gavin
Evans, Gwynfor (Carmarthen)	McElhone, Frank	Strauss, Rt Hon G. R.
Evans, John (Newton)	MacFarquhar, Roderick	Summerskill, Hon Dr Shirley
Ewing, Harry (Stirling)	McGuire, Michael (Ince)	Swain, Thomas
Ewing, Mrs Winifred(Moray)	Mackenzie, Gregor	Taylor, Mrs Ann (Bolton W)
Faulds, Andrew	Mackintosh, John P.	Thomas, Jeffrey (Abertillery)
Thomas, Ron (Bristol NW)	Watkins, David	Williams, W. T. (Warrington)
Thompson, George	Watkinson, John	Wilson, Alexander (Hamilton)
Thorne, Stan (Preston South)	Watt, Hamish	Wilson, Gordon (Dundee E)
Tierney, Sydney	Weetch, Ken	Wilson, William (Coventry SE)
Tinn, James	Weitzman, David	Wise, Mrs Audrey
Tomlinson, John	Wellbeloved, James	Woodall, Alec
Tomney, Frank	Welsh, Andrew	Woof, Robert
Torney, Tom	White, Frank R. (Bury)	Wrigglesworth, Ian
Tuck, Raphael	White, James (Pollok)	Young, David (Bolton E)
Urwin, T. W.	Whitehead, Phillip
Wainwright, Edwin (Dearne V)	Whitlock, William	TELLERS FOR THE AYES:
Walden, Brian (B'ham, L'dyw'd)	Wigley, Dafydd	Mr. James Hamilton and
Walker, Terry (Kingswood)	Willey, Rt Hon Frederick	Mr. Tom Pendry.
Ward, Michael	Williams, Alan Lee (Hornchurch)
NOES
Adley, Robert	Gorst, John	Mills, Peter
Aitken, Jonathan	Gow, Ian (Eastbourne)	Miscampbell, Norman
Alison, Michael	Gower, Sir Raymond (Barry)	Moate, Roger
Arnold, Tom	Gray, Hamish	Monro, Hector
Atkins, Rt Hon H. (Spelthorne)	Griffiths, Eldon	Montgomery, Fergus
Banks, Robert	Grimond, Rt Hon J.	Moore, John (Croydon C)
Beith, A. J.	Grist, Ian	More, Jasper (Ludlow)
Bennett, Sir Frederic (Torbay)	Grylls, Michael	Morgan, Geraint
Bennett, Dr Reginald (Fareham)	Hall, Sir John	Morris, Michael (Northampton S)
Berry, Hon Anthony	Hall-Davis, A. G. F.	Morrison, Charles (Devizes)
Biffen, John	Hamilton, Michael (Salisbury)	Morrison, Hon Peter (Chester)
Biggs-Davison, John	Hampson, Dr Keith	Mudd, David
Blaker, Peter	Hannam, John	Neave, Airey
Boscawen, Hon Robert	Harrison, Col Sir Harwood (Eye)	Nelson, Anthony
Bottomley, Peter	Harvie Anderson, Rt Hon Miss	Neubert, Michael
Bowden, A. (Brighton, Kemptown)	Hastings, Stephen	Newton, Tony
Boyson, Dr Rhodes (Brent)	Havers, Sir Michael	Onslow, Cranley
Braine, Sir Bernard	Hawkins, Paul	Oppenheim, Mrs Sally
Brittan, Leon	Hayhoe, Barney	Osborn, John
Brotherton, Michael	Heath, Rt Hon Edward	Page, John (Harrow West)
Brown, Sir Edward (Bath)	Heseltine, Michael	Page, Rt Hon R. Graham (Crosby)
Bryan, Sir Paul	Hicks, Robert	Pardoe, John
Buchanan-Smith, Alick	Holland, Phillip	Pattie, Geoffrey
Budgen, Nick	Hooson, Emlyn	Percival, Ian
Bulmer, Esmond	Howell, David (Guildford)	Pink, R. Bonner
Burden, F. A.	Hunt, John	Price, David (Eastleigh)
Butler, Adam (Bosworth)	Hurd, Douglas	Prior, Rt Hon James
Carlisle, Mark	Hutchison, Michael Clark	Pym, Rt Hon Francis
Chalker, Mrs Lynda	Irvine, Bryant Godman (Rye)	Raison, Timothy
Churchill, W. S.	Irving, Charles (Cheltenham)	Rathbone, Tim
Clark, Alan (Plymouth, Sutton)	James, David	Rawlinson, Rt Hon Sir Peter
Clark, William (Croydon S)	Jenkin, Rt Hn P. (Wanst'd & W'df'd)	Rees, Peter (Dover & Deal)
Cockcroft, John	Johnson Smith, G. (E Grinstead)	Rees-Davies, W. R.
Cooke, Robert (Bristol W)	Jones, Arthur (Daventry)	Renton, Rt Hon Sir D. (Hunts)
Cope, John	Joseph, Rt Hon Sir Keith	Renton, Tim (Mid-Sussex)
Cordle, John H.	Kaberry, Sir Donald	Rhys Williams, Sir Brandon
Cormack, Patrick	Kershaw, Anthony	Ridley, Hon Nicholas
Corrie, John	Kimball, Marcus	Ridsdale, Julian
Costain, A. P.	King, Evelyn (South Dorset)	Rifkind, Malcolm
Crouch, David	King, Tom (Bridgwater)	Rippon, Rt Hon Geoffrey
Crowder, F. P.	Kitson, Sir Timothy	Roberts, Michael (Cardiff NW)
Dodsworth, Geoffrey	Knight, Mrs Jill	Roberts, Wyn (Conway)
Douglas-Hamilton, Lord James	Knox, David	Rodgers, Sir John (Sevenoaks)
Drayson, Burnaby	Lamont, Norman	Ross, Stephen (Isle of Wight)
du Cann, Rt Hon Edward	Langford-Holt, Sir John	Rossi, Hugh (Hornsey)
Durant, Tony	Latham, Michael (Melton)	Rost, Peter (SE Derbyshire)
Eden, Rt Hon Sir John	Lawrence, Ivan	Sainsbury, Tim
Elliott, Sir William	Lawson, Nigel	Scott, Nicholas
Emery, Peter	Le Merchant, Spencer	Shaw, Giles (Pudsey)
Eyre, Reginald	Lester, Jim (Beeston)	Shaw, Michael (Scarborough)
Fairbairn, Nicholas	Lloyd, Ian	Shelton, William (Streatham)
Fairgrieve, Russell	Loveridge, John	Shepherd, Colin
Farr, John	Luce, Richard	Silvester, Fred
Fell, Anthony	McAdden, Sir Stephen	Sims, Roger
Fisher, Sir Nigel	Macfarlane, Neil	Sinclair, Sir George
Fletcher, Alex (Edinburgh N)	MacGregor, John	Skeet, T. H. H.
Fletcher-Cooke, Charles	Macmillan, Rt Hon M. (Farnham)	Smith, Cyril (Rochdale)
Fookes, Miss Janet	McNair-Wilson, M. (Newbury)	Speed, Keith
Fox, Marcus	McNair-Wilson, P. (New Forest)	Spence, John
Freud, Clement	Mates, Michael	Spicer, Jim (W Dorset)
Fry, Peter	Mather, Carol	Spicer, Michael (S. Worcester)
Gardner, Edward (S Fylde)	Maude, Angus	Sproat, Iain
Gilmour, Rt Hon Ian (Chesham)	Maudling, Rt Hon Reginald	Stainton, Keith
Glyn, Dr Alan	Mawby, Ray	Stanbrook, Ivor
Godber, Rt Hon Joseph	Maxwell-Hyslop, Robin	Stanley, John
Goodhart, Philip	Mayhew, Patrick	Steen, Anthony (Wavertree)
Goodhew, Victor	Meyer, Sir Anthony	Stewart, Ian (Hitchin)
Goodlad, Alastair	Miller, Hal (Bromsgrove)	Stokes, John
Stradling Thomas, J.	van Straubenzee, W. R.	Wiggin, Jerry
Tapsell, Peter	Vaughan, Dr Gerard	Winterton, Nicholas
Taylor, Teddy (Cathcart)	Viggers, Peter	Wood, Rt Hon Richard
Temple-Morris, Peter	Wainwright, Richard (Colne V)	Young, Sir G. (Ealing, Acton)
Thatcher, Rt Hon Margaret	Wakeham, John	Younger, Hon George
Thomas, Rt Hon P. (Hendon S)	Walder, David (Clitheroe)
Thorpe, Rt Hon Jeremy (N Devon)	Walker, Rt Hon P. (Worcester)	TELLERS FOR THE NOES:
Townsend, Cyril D.	Wall, Patrick	Mr. W. Benyon and
Trotter, Neville	Weatherill, Bernard	Mr. Cecil Parkinson.
Tugendhat, Christopher

Question accordingly agreed to.

Subsequent Lords amendment disagreed to.