§ Order for Second Reading read.4.43 pm
§ The Secretary of State for Trade (Mr. John Nott)
I beg to move, That the Bill be now read a Second time.
I am moving today the Second Reading of a Bill which deals with matters vital to the interests of the United Kingdom as an international trading nation. While I hope that it will command general support, I recognise that the Bill in some respects breaks fresh legal ground. I hope that I shall be able to persuade the House that it is justified. In view of the complicated nature of and the particular background to the Bill, I fear that I shall have to delay the House for rather longer than I would wish. It is, however, important that I set out the full facts underlying this proposed new piece of legislation.
My objective in introducing this Bill is to reassert and reinforce the defences of the United Kingdom against attempts by other countries to enforce their economic and commercial policies unilaterally on us. From our point of view, the most objectionable method by which this is done is by the extra-territorial application of domestic law. In theory this is a general problem, since many countries have policies which, given the occasion and the inclination, they might seek to enforce on persons located, or engaged in activities, beyond the normal bounds of national jurisdiction as recognised in international law.
In effect, however, the practices to which successive United Kingdom Governments have taken exception have arisen in the case of the United States of America. We have not suddenly become belligerent or confrontational in regard to this most powerful and valued friend. The Bill is a response to a situation of a very particular nature which has been developing over several decades and which in the past few years has become much more acute. It also emphasises that, in so far as the application or enforcement of any foreign law requires the active assistance or passive aquiescence of 1534 the United Kingdom the overseas country in question must have regard to the trading interests of the United Kingdom.
The Government recognise that the United Kingdom bears a heavy responsibility in the maintenance of the open international trading system in what is, nevertheless, an increasingly interdependent trading world. We have to maintain the principle of enterprise and competition between undertakings within individual nations and between trading nations themselves. At the same time, the increasing volume of international trade, the swiftness of modern communications, the international nature of many enterprises and increasing specialisation on the part of industrial nations means that, while trading nations are interdependent in a real sense, their economic and commercial policies are bound sometimes to come into conflict. We recognise this, and we believe that the right way to sort out the resulting differences of policy and approach is by intergovernmental discussion and negotiation through the established international organisations by which trade policy is co-ordinated multilaterally, as well as in bilateral contacts and negotiations between Governments.
I have to say that the United States has shown a tendency in certain respects over the past three decades increasingly to try to mould the international economic and trading world in its own image. There are certain well-established and deeply held principles in United States economic thought and law which, no doubt from the best motives, the United States seeks to have observed by its trading partners elsewhere in the world. This attitude is shared by the United States legislature, its courts and its enforcement agencies, all of which have contributed to the situation to which we object. Pre-eminently this arises in the field of anti-trust, or competition, law, and accordingly much of my speech will be devoted to that subject. But, as I shall explain later, there are many other areas in which the United States seeks to impose its own law or concept of good practice on those who do business with it, and even on those who do not do so in any direct sense.
The basic anti-trust law is the Sherman Act, which was passed in 1890. The wording of the Act outlaws restraints of trade in very general terms.
1535 In the first United States Supreme Court case in 1909 involving the extra-territorial reach of the United States anti-trust laws, the court spoke of the general and almost universal rule that the character of an act as lawful or unlawful must be determined wholly by the law of the country where the act was done. It stated that all legislation was prima facie territorial, and that it would be an interference with the authority of another sovereign, and contrary to the comity of nations, for a nation to apply its own laws to acts done outside its jurisdiction. This was a clear expression of the territorial principle of national jurisdiction which we in the United Kingdom still observe.
However, by 1945 the United States courts had changed the situation drastically. In a case involving a Canadian and five European aluminium producers who joined together to allocate the amount of aluminium to be produced, the United States alleged that there had been an effect on the price of aluminium in the United States of America. In giving judgment, the court stated thatany State may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the State reprehends".The court found the agreement between those non-United States companies, which was an action performed entirely outside the United States of America, to be illegal under the Sherman Act and punishable according to the provisions of that law.
Since that time this so-called "effects doctrine" has been applied and extended by the United States courts and regulatory agencies. Furthermore, in applying this doctrine the United States courts have paid comparatively little attention to the interests and policies of foreign Governments where these have been in conflict with those of the United States. Even if they had done so, it would, in my view, be fundamentally unsatisfactory for United States law unilaterally to pass judgment on economic problems which by their very nature are of concern to more than one country. The wide extent and fundamental uncertainty of this claimed reach of United States law through this pernicious extra-territorial effects doctrine has created uncertainty for international industry in this country and elsewhere. The views which I express on this subject are not held just by our Government; 1536 they are held and deeply felt in Canada, Australia, South Africa and other countries of the EEC.
However, we have further objections beyond this to the impact of the antitrust laws on our international trade. Not only are they enforced by criminal sanctions in proceedings initiated by an enforcement agency, but they confer a civil right to triple damages on parties injured by acts unlawful under them. We regard this civil sanction—I refer here to triple damages—as being penal rather than compensatory, and consequently we consider that in international dealings at least these proceedings should be subject to the limitations that we would regard as appropriate to criminal proceedings. In fact, they are subject to no such limitations. The plaintiff is given what appear to us to be unfair advantage. The defendant need not be present in the United States in order for the proceedings to be brought and heard there; whether or not he appears, he is subject to discovery; and failure to appear is deemed to be an admission of guilt. Furthermore, the United States system of class actions and the so-called "contingency fee" method of payment to lawyers combine to prejudice the defendants. Contingency fees encourage lawyers to invest their time and expertise in stimulating litigation by identifying potentially successful plaintiffs and prosecuting their cases for all they are worth.
As a matter of public policy in this country, we have always opposed the contingency fee system on the ground that it increases the partiality of the lawyer representing one party. Further, the consequences of such a system are exacerbated by the procedure of class actions. While the class action itself may be a sensible way of determining the rights of a large number of people in the same position, in practice the larger the class of plaintiffs involved, the greater the source of potential profit to the litigation lawyers.
The penalties that may be exacted in such civil anti-trust proceedings are often wholly disproportionate, particularly since the Government may either have brought criminal proceedings already or, for good reasons, rejected that option.
Indeed, the nature of the penal element in civil damages seems to come perilously 1537 near to being in conflict with the Bill of Rights 1689, which said:That excessive bail ought not to be required nor excessive fines imposed nor cruel and unusual punishments inflicted.The eighth amendment to the constitution of the United States, passed in the United States Bill of Rights in 1791, includes expressions from our Bill of Rights. It is therefore widely felt that penal and exorbitant damages—triple damages—are possibly equivalent to "excessive fines" as set down in the Bill of Rights.
The second area in which difficulties arise is the powers possessed by many agencies in their execution of the duties laid on them by the United States Congress. Those powers may lead them on occasion to pursue inquiries or launch proceedings against persons, who, according to our view of international law, are outside the jurisdiction of the United States. Successive Governments have been obliged to intervene in such cases on behalf of our traders. These agencies include the Federal Trade Commission, the Securities and Exchange Commission, the Federal Maritime Commission, the Commodity Futures Trading Commission, and others.
The third objectionable practice on the part of the United States is that from time to time it treats foreign subsidiaries of United States companies, or even companies in which United States citizens hold a number of shares, though not enough to make the companies subsidiaries of United States companies, as being for that reason subject to United States jurisdiction. Such companies may be required to behave in certain ways, including providing information for the purposes of United States domestic regulatory agencies.
That means that in furtherance of a United States Government policy, which may or may not be shared by other countries, companies domiciled and operating outside the United States, under the laws of other countries, are required to take actions which can and do have a direct bearing on their commercial wellbeing and on the jobs of, for example, British citizens who work for them in this country. No British Government can accept that British jobs should be harmfully affected by such legislative actions 1538 of the United States Congress or enforcement actions of United States Government agencies.
This is not my normal sort of speech. I hope that hon. Members will give me the benefit of any doubt. We are engaged in a delicate and complicated legal matter. I have written down my words and am choosing them with great care.
§ Mr. John Prescott (Kingston upon Hull, East)
I have sympathy with the Secretary of State's argument that it is a legal matter, but I hope that he will address himself to the arguments of economics and competition.
§ Mr. Nott
I have explained at length why we object to certain of the practices of the United States in the legal and economic field. I hope that I have made it clear that while to the casual observer it may not appear a matter of special importance that such and such a company is involved in a United States anti-trust inquiry, or is subject to investigation by some other agency of the United States Government, real issues of national interest are involved for us. The issues are not theoretical or merely of interest to lawyers. I will give an example that will interest the hon. Member for Kingston upon Hull, East (Mr. Prescott).
Last June, a United States grand jury handed down criminal indictments against several shipping companies and individuals, including two consortia in which there is a substantial British element—Cunard and Bibby Lines—and two British nationals. The indictments alleged that the consortia had violated United States anti-trust legislation by establishing rates without the approval of the relevant United States regulatory authority, the Federal Maritime Commission. The Government reacted strongly against the handing down of these indictments, as did the previous Administration to the institution of the grand jury investigation itself. The policy of the British Government, along with that of all European Governments, has been to avoid detailed regulatory intervention in the commercial aspects of international shipping. We believe that to be the best way of achieving efficient and effective shipping services and protecting the interest of the consumer.
There is the important point, too, that shipping is an international business. Once one starts regulating other than on an 1539 agreed basis, many jurisdictional problems can arise. Our own restrictive practices legislation reflects the policy that I have described.
In reference to this case, a senior official of the United States Department of Justice recently recalled that fines of over $6 million were imposed—the largest in the history of the Sherman Act. That was against our shipping companies. He continued that this upward trend was continuing and that, indeed, the antitrust division might well be on its way to becoming a "profit centre" for the Department of Justice. I think that we can draw our own conclusions from that attitude.
§ Mr. Eric Ogden (Liverpool, West Derby)
Presumably, the Secretary of State is not saying that he is against profit.
§ Mr. Nott
I do not think that the High Court of Justice and the Court of Appeal would consider themselves as profit centres. Generally I like a profit motive to be available, at least to business men, but that is a different matter from seeking to make the Department of Justice a profit centre.
The shipping companies decided to plead "no contest", because of the great cost of litigation in cash and managerial time, and so the case against them was not proved in court. Nevertheless, the highest possible fines were still imposed. Those companies now also face the threat of further proceedings and more sizeable fines by the Federal Maritime Commission for effectively the same offences. On top of that, civil triple damage proceedings have been commenced against them in which the claims may be over $1.5 billion in triple damage suits.
Such claims are no mere bogy. Some United States paper producers have recently paid $500 million in fines and damages as a result of anti-trust proceedings. The consequences for the shipping companies are potentially financially crippling. No Government can stand by and allow a vital industry to be threatened in that way when we contest the very basis of the United States action.
In another triple damage anti-trust case currently going on in the United States of America, where total damages of up to $6 billion are being claimed, yet 1540 another major United Kingdom company—Rio Tinto-Zinc—is at risk. The background to the case is worth explaining.
In 1964, when the United States uranium mining industry was threatened by foreign imports, it was afforded long-term protection by means of an effective United States Government ban on the import of uranium for use in United States reactors. At a stroke that denied to the non-United States producers about three-quarters of the world market for uranium. During the late 1960s and early 1970s, Westinghouse, which is the United States of America's biggest power engineering company, concluded a number of contracts relating to the construction of nuclear power stations in which it agreed to supply future quantities of uranium but failed to take the precaution of buying forward to cover its commitments.
In the meantime, the uranium producers outside the United States of America had, with the positive encouragement of Governments involved, taken some action to protect their markets outside the United States of America in the light of the United States ban and the generally depressed market conditions, which it aggravated.
Following a large and unexpected increase in the price of uranium after 1973, Westinghouse found itself in serious difficulties. In September 1975, it gave notice that its uranium supply contracts had become "commercially impracticable". It blamed the large oil price rise in 1973 and claimed that the cause was theactions of foreign uranium producing countries and companies that have significantly curtailed international uranium supplies".This led to Westinghouse being sued by the public power utilities. The total amount of compensation claimed was about $2 billion. Westinghouse took this figure as the basis for a triple damage anti-trust claim against the uranium producers. I note that Westinghouse had not included amongst the defendants the French producers that were involved. I cannot regard that as an accident, in view of Westinghouse's interests in France.
The case is still going on, but nine of the foreign defendants, including RTZ, have not accepted that the United States court has jurisdiction and have not appeared. Westinghouse is trying to recover damages from those foreign companies even before a trial on the merits 1541 has been heard. That is not scheduled to take place until 1981.
The actions of the non-United States uranium producers reflected policies of the Governments of the uranium-producing countries involved and were a direct result of the earlier United States protectionist embargo. Even the United States Government, despite their general claims to extra-territorial jurisdiction, decided to take only the most modest proceedings against one United States company in this case.
Why, then, should a United States company be able to drag foreign companies, including one of our leading companies, before a United States court in order to obtain massive damages for activities by non-United States companies outside the United States at a time when they were even denied access to the United States market?
I could give further examples of how various regulatory agencies in the United States are attempting to extend their reach to companies located outside the United States of America. The SEC and the Commodity Futures Trading Commission are both making moves to extend the reach of their jurisdiction beyond the United States, and Congress has recently passed legislation dealing with rebating in the shipping industry, which is legal in Europe but outlawed by the Federal Maritime Commission. Penalties could involve port closure for particular shipping lines.
I must emphasise that we do not dispute the right of the United States or any other nation to pass and enforce what economic laws it likes to govern business operating fully in its own country. Our objection arises only at the point when a country attempts to achieve the maximum beneficial regulation of its own economic environment by ensuring that all those having any contact with it abide by its laws and legal principles.
In other words, there is an attempt to export economic policy and law to persons domiciled in countries that may have different legal systems and priorities, without recognising that those countries have the right to lay down the standards to be observed by those trading within their jurisdiction.
§ Mr. Clinton Davis (Hackney, Central)
How does the right hon. Gentleman view 1542 the American anti-Arab boycott legislation? Does he feel that it is an example of the extra-territorial jurisdiction of which he complains? It is clearly a matter with wide international ramifications.
§ Mr. Peter Emery (Honiton)
Can my right hon. Friend assure the House, in view of the peculiar nature of the legislation, which is obvious from my right hon. Friend's speech, that all diplomatic channels and negotiations have been carried through between the British and American Governments in order to try to overcome the problems and to avoid the necessity of the Bill being produced?
I am sure that the answer must be "Yes", but it is important that that should be spelt out so that those coming to grips with the legislation may understand that successive British Governments have done everything possible to rectify the situation by normal negotiations.
§ Mr. Nott
The right hon. Member for Lanarkshire, North (Mr. Smith) and the hon. Member for Hackney, Central (Mr. Davis) will confirm that we have several decades of diplomatic representation on this subject behind us, as have most other Western countries. It is not just us who are offended by the extra-territorial jurisdiction claimed by the United States under the effects doctrine which came rather late into the Sherman Act proceedings.
Since the Government came to power, I have made diplomatic representations on the shipping case and the Government have been involved in the uranium case. The only aspect of the Bill that we have not debated in full with the United States authorities is clause 6, which involves the recovery of triple damage suits in this country.
Since we published the Bill, the United States ambassador has seen me and made certain representations and I have given him a response. Apart from that, the general underlying seriousness of the British Government's view towards triple damage suits and the extra-territorial reach of the United States has been a matter of diplomatic representations by 1543 successive Administrations over the years, but it has achieved nothing to speak of.
Voices are continually being raised in the United States against trends in that country. Last month Mr. George Ball, a former Under-Secretary of State and former permanent representative at the United Nations, who is well known to the House, said that during his years in the State Department he had encountered no set of problems that evoked greater frustration and exasperation from foreign Governments than the United States' occasionally excessive bureaucratic zeal in trying to extend its laws and regulations extra-territorially.
Mr. Ball pointed out that the United States would resent it deeply if other nations tried to impose their peculiar policies and prejudices on the USA. He concluded that, if the United States continued to try to extend its jurisdiction beyond its borders, the whole system of international comity could break down.
There are many other statements by United States lawyers and citizens before Senate committees that I could quote, but I have already gone on for too long and time forbids it.
Perhaps surprisingly, our proposals have received a remarkably good reception in the United States press. The Washington Post recently carried an editorial entitled "Anti-trust: The New Imperialism". It concluded:the Sherman Anti-trust Act is not a suitable instrument for the regulation of world trade. Maintaining international competition is the proper business of diplomats and negotiation, not federal judges and litigation.There have been several useful articles on the subject in the United States, where there is a general body of support for non-United States feeling about the effects doctrine.
The law does not operate in a vacuum. It is not something only for debates on jurisprudence between academic lawyers. The law is there to defend the interests of citizens and it is essential that we look on the Bill as an attempt to deal with a problem which we have failed to deal with at diplomatic level over many years. It is a genuine attempt to protect British economic interests, operating not necessarily even in the United States.
§ Mr. Ivan Lawrence (Burton)
My right hon. Friend has made clear that an appalling situation exists. It is appalling that we should be driven by our close friends the Americans to have to take this sort of defensive action.
The situation has existed for a long time. Why has no action been taken in previous decades? Presumably a considerable number of British companies have suffered from the effects of United States legislation.
§ Mr. Nott
I cannot answer for my predecessors. I admit that our approach in clause 6 is rather novel and will, no doubt, cause a fair amount of fluttering in the legal dovecotes. I hope that when the Bill goes to another place senior and distinguished members of the legal profession will state their views.
I do not know why my predecessors have felt unable to take the action that I am proposing. I believe that the time has come to do so. There are two particularly prominent examples in the courts in the United States and it is appropriate to move forward in the way that I propose.
We already have powers under a 1964 Act to deal with certain aspects of the extra-territorial reach of United States laws, but that Act was passed in response to a specific and offensive instance of extra-territorial claim to jurisdiction by the United States in shipping matters. It proved useful in a number of cases in which we have been able to ensure that commercial documents in the United Kingdom have not been available in response to United States requirements, but we have found that, in the light of recent developments in the United States, the 1964 Act is no longer adequate to protect our interests.
I should tell the House that we have received representations from the United States Government about a number of aspects of the Bill, particularly the extension of the powers to prevent the production of documents from outside the United States, the total non-enforcement of multiple damage judgments, and the rights of recovery conferred by clause 6. We are examining with care the points which they have raised with us on the publication of the Bill.
I stress again that we are, as ever, ready and willing to try to resolve problems 1545 underlying our commercial relations with the United States, or for that matter any other country, by discussion and negotiation. We think this is the right way, particularly as both we and the United States share a common commitment to a generally liberal attitude to world trade. For example, although the anti-trust action against British shipping interests has had an influence on certain provisions of the Bill, I have made it clear when expressing my strong objections to the action of the United States authorities in that case that we stood willing to continue our discussions with them with the aim of reaching agreement between us on shipping matters. Discussions have taken place in Washington in the last fortnight and we hope that the United States will respond to this approach. But the House will understand that any future changes in United States practice cannot affect the cases of United Kingdom companies already before the courts, and there is no alternative but to go forward with this Bill at the same time.
The Bill, with its explanatory memorandum, is before the House and I felt that it was more important to explain to the House the background to the Government's decision to bring this measure forward, rather than to give a clause by clause exposition of the Bill. I can do so, but I think that we can leave that to Committee. The memorandum sets it out relatively clearly.
If the House does not insist that I go through the Bill clause by clause, I will make some general remarks on this Government's attitude to competition policy and its relationship to United States antitrust policy. To some people, it may seem odd for a Government committed to the strengthening of British competition policy to propose a measure to impede the enforcement by our courts of the competition policies of other countries. There is no incompatibility between the Competition Bill and this Bill. Competition law varies from State to State in accordance with their economic and other priorities, and there is no international consensus on what competition policy should be.
Lord Wilberforce said, when giving judgment in the House of Lords:It is axiomatic that in anti-trust matters the policy of one State may be to defend what it is the policy of another State to attack".1546 That was a quite useful obiter diction from Lord Wilberforce. Without needing here to go quite that far—and we are not going quite that far—I would say that competition law is a branch of public law on which, by contrast with most fields of private civil law, there can be no presumption that one State will enforce the policy and laws of another State—just as States generally decline to assist in the enforcement of the taxation law of other States. On competition judgments, the existing situation, under ancient principles of our law, is that our courts will not enforce criminal penalties in the laws of other States, whether on competition or on anything else. Clause 5 of this Bill will make clear that triple damage judgments will similarly not be enforced, and the discretionary power of subsection (4) and (5) would be available to specify other foreign competition policy judgments as non-enforceable, if the other powers proved insufficient to prevent the sort of mischiefs of which I have spoken. These are points of important legal principle and do not affect the political commitment, which I believe we share with the United States, of operating and enforcing an effective competition policy in each of our two countries.
I say to the House that the Bill is not anti-American, or indeed anti-anybody. I hope that I have made that clear. It is designed to protect and not to provoke. But it deals with matters where the law and legal practice of the United States have become a mater of international concern—not only to us but to other nations, many of which have adopted their own means of looking after themselves. It is a legitimate exercise of our own sovereignty.
The Government believe that negotiation and discussion between sovereign Governments are always the best way to settle international trading problems and disputes, and therefore I hope that I shall have little cause to use the discretionary powers conferred by the Bill. But I wish to leave no doubt that I will be prepared to use it in the defence of the legitimate economic and trading interests of our country. I do not rule out further legal provisions unless we can solve these longstanding problems in a more satisfactory way than we have been able to do up to now.
I commend this Bill to the House.
§ Mr. John Smith (Lanarkshire, North)
The last time the Secretary of State introduced a Bill, I complained about the shortness of his speech. I am not in a position to complain about the length of time that he has taken this afternoon to explain the background to the Bill. The House will have found his explanation helpful.
Although the Bill is couched in wide and general terms, it is designed principally to provide protection for United Kingdom companies and citizens against legal actions initiated against them in the United States, arising from the anti-trust legislation of that country, pursued by the United States in reliance on its claims that its laws can be applied extra-territorially.
This is not a new problem. The constituent elements have been with us for many years. The United States assert jurisdiction, especially in the anti-trust sector, on a wider basis than do most other countries. The effects doctrine, the enterprise entity doctrine, the notion of treble damages and the judicial rather than governmental initiative that sets off legal proceedings all combine to create serious problems for other countries such as ourselves which trade internationally with the United States but do not seek to impose their laws on a similar extra-territorial basis.
As the Secretary of State explained in his introduction, the problem has become more acute in recent months as a result of certain pending legal actions which have, to put it mildly, somewhat raised the temperature. When the indictments were served in the shipping cases, the previous Labour Government made a forceful complaint to the United States Administration about the service of indictments on British citizens and warned them of our fears that a serious dispute would emerge between us if these actions were pursued. Regrettably, that dispute now exists in a serious form.
The Government are basically right to propose the measures in clauses 1 to 4 of the Bill, which derive in spirit from the Shipping Contracts and Commercial Documents Act 1964. The effect of the provisions is to widen the powers of the Secretary of State to cover powers other than shipping—which was covered by the previous Act—and to make his powers 1548 more effective. We make no complaint in principle about that, and we shall not be asking the House to divide against the Bill.
Clause 5 restricts the enforcement of overseas judgments. It may do no more than declare what the existing law is and what the courts might apply, and puts it into statute form. That is a matter that could be examined more carefully in Committee. It does not raise a tremendously important point of principle.
Clause 6 is one aspect of the Bill that requires a more critical scrutiny by the House. I appreciate the reasons that lie behind it. It may be that the Government will be able to justify its purpose and provisions when we examine them in detail in Committee. From remarks made by the Secretary of State, it is obvious that it has already caused some difficulty, in explanation at least, to the United States.
At this stage I confine myself to drawing the attention of the House to certain aspects of clause 6 that merit quite serious and full consideration before the Bill reaches the statute book. In shorthand form, the clause gives United Kingdom companies and citizens the right to hit back at those who pursue them and have obtained treble damages awards against them in the courts of the United States. It allows them to sue for the recovery of the excess damages contained in the award over and above the compensatory element. They can do so in the United Kingdom courts.
As the Secretary of State conceded, this is a novel proposition. It is not one that has yet been advanced either by this country or any other of the countries which share this problem in their relationship with the United States or other countries. Of course, novelty should not be used as a ground for objection to any proposal, but some other aspects might justify fuller consideration.
The House will note that the other forms of protection that are given to United Kingdom companies and citizens are all under the control of the Secretary of State. That is true of clauses 1 to 4. In those circumstances the Secretary of State must give a direction. But there is no control by the Secretary of State over clause 6. It merely gives a right to 1549 a company to initiate these proceedings under the circumstances described in the clause.
§ Mr. Nott
That is absolutely correct, but the triple damage suits are not under the control of the United States Administration. That is the point at issue. United States civil suitors are using what we would regard as quasi-criminal measures. I believe that we have treated the matter fairly competently both ways. However, the right hon. Gentleman's point is a fair one.
§ Mr. Smith
I understand that the suits are not under the control of the United States Administration. Indeed, that is part of the problem. For example, one may speak to the State Department and discover that the problem has emanated from the Justice Department. That has been a perennial problem experienced by successive British Governments.
The Secretary of State's point is true of the protections given in clauses 1 to 4. They are protections that can be used against actions initiated by anyone other than the United States Administration. I am drawing the attention of the House to the difference between clause 6 and the other clauses. It may be that there will be circumstances in which the use of the power to sue by a United Kingdom company or citizen will not be in the national interest of this country, and as the Bill is presently drafted the Secretary of State will be able to do nothing about that.
I think that there was also some danger that the use of the power to sue by a United Kingdom company hitting back against the treble damages award might itself trigger off another counter-action in the United States against the British company that had assets in the United States. Therefore, we again face a situation in which legal action followed legal action in the respective courts of the respective countries. I would welcome at a later stage, not necessarily today, the Government's views on such a possibility, because this is a factor that the House should take into account before giving approval to the legislation.
No one should delude himself into thinking that by making the Bill an Act of Parliament we shall solve any of the serious problems that now exist between the United Kingdom and the United States. Those problems will certainly not 1550 be solved by a series of exhausting, embittering, expensive and lengthy actions and counter-actions in the courts of our respective countries. Perhaps the clause is designed to have a certain deterrent effect. If so, so far so good. If it does not operate in that manner, its use might not be very wise in many circumstances.
We must bear in mind that while the Bill may give a few more weapons to one side to assist the solution of these problems, we shall not solve them unless we tackle them by the traditional methods of international dialogue and discussion. Indeed, that is the only civilised and effective way of solving these problems.
I know that considerable efforts have been made. For example, the consultative shipping group, representing mainly OECD shipping countries, has sought to have discussions with the United States Administration and Congress about these problems. On some occasions, progress has been frustratingly slow. Nevertheless, the Government should persist in these discussions and negotiations in the hope that some arrangements will be arrived at that respect both the jurisdictions and commercial interests of our respective countries.
One idea in regard to shipping that might be worth pursuing is that of an independent scrutiny of shipping conferences. That idea might meet some of the concern of the United States, as well as some of our commercial requirements. I merely put it forward as the sort of idea that should be discussed between the United Kingdom Government and the United States Government.
We do not propose to take objection to the main points of the Bill, particularly clauses 1 to 4, but I believe that serious problems may arise from clause 6, which is novel and far-reaching in its effect, not just in legal terms but in regard to some of the commercial consequences that might flow if it were used too liberally and unwisely.
I believe that we should approve the Bill today, but we shall want to examine clause 6 very carefully and precisely in Committee. I hope that the Government will be prepared to listen to our arguments and give detailed examples of the way in which that clause may be applied. Perhaps they will accept any constructive amendments that emerge during our discussion.
§ Mr. Graham Page (Crosby)
The Bill is overdue. I do not blame my right hon. Friend the Secretary of State, because he has acted expeditiously in the comparatively short time that he has been in office. I also realise that there must be diplomatic negotiations in regard to these matters and that one cannot dash into legislation in order to protect the interests of our international trade without those negotiations.
Nevertheless, during the latter half of the 1970s the mischief that the Bill seeks to attack has been evident and growing, with the result that it has culminated in the two recent cases. I understand that the American company Westinghouse has now 29 actions against other companies, including an action for about $2 billion against RTZ and its subsidiaries for treble damages for acts committed outside America that were not illegal where they were committed. Another result is that 34 companies are suing Atlantic Container-line Services Limited—which, incidentally, is an undertaking that operates from the Royal Seaforth docks in my constituency—as well as Dart Containerline Limited and others within the consortium for treble damages even though those companies have done nothing illegal outside America.
In the shipping case, these companies and two Britons, Mr. Philip Bates of Atlantic and Mr. David Hall of Dart, have already been fined $1 million in respect of the companies and $50,000 each in respect of the individuals. In looking at those cases one can only think that they are an attack upon rivals to the Americans in international trade. It is an attack that is using weapons which to us are not the sort of weapons that should be used in international trade.
This all comes about because of the way in which the American courts have developed the American anti-trust law. I do not know whether I should pronounce "anti-trust" as the Americans do; I find that the Americans do not understand what we are talking about when we use the English pronunciation. Nevertheless, I shall use the English pronunciation in this House. At any rate, this law goes back to 1890, although the trouble has been caused by recent developments in the interpretation of that law by the American courts, based on 1552 the two doctrines that my right hon. Friend mentioned. There is the "effects" doctrine, by which the American courts can claim jurisdiction over activities, wheresoever or by whomsoever they have been done, which have effects within the United States or which affect the foreign commerce of the United States. Of course, that is a very great extension of what one would normally understand to be reasonable competition law.
The other doctrine is the "enterprise entity" doctrine, under which American courts claim jurisdiction over foreign subsidiaries and affiliates of American companies without regard to the separate legal entity that those bodies have within the countries in which they have been incorporated. Now that we have a Bill that endeavours to tackle the results of those doctrines as they affect our own nationals, we must make it effective. It must be effective not only against events such as those that have arisen in relation to shipping and uranium but to prevent those cases breeding a family of what I would call international trade-destructive monsters.
The details of the Bill will be discussed in Committee, but it is necessary to look at clause 1 to see whether the Bill will be effective in the kinds of cases which have already happened and which might happen in the future in the United States courts unless some deterrent is created.
Under clause 1, the Secretary of State can take action if it appears to himthat measures have been or are proposed to, be taken by or under the law of any overseas country".He can do so if such countries seek to control or regulate international trade, or if the measures taken by a countryapply to things done … outside the territorial jurisdiction of that country by persons carrying on business in the United Kingdom, … or threaten to damage the trading interests of the United Kingdom.There is much for the Secretary of State to prove if he is called upon to show that an order under clause 1(1) is a valid order. United States law, which declares it illegal for a British shipping consortium to fix freight charges on North Atlantic freight routes, obviously complies with those criteria, but they are severe criteria. However, I assume that that law can be designated by the Secretary of State as "a measure" under clause 1. 1553 The Secretary of State must then make another order by which he can require the person in the United Kingdom who is threatened by provisions under overseas law to tell him about the restrictions or requirements that have been placed on his trade. Then the Secretary of State can direct the threatened person not to comply with that foreign law, so far as itinfringes the jurisdiction of the United Kingdom or is otherwise prejudicial to the sovereignty of the United Kingdom"—or to the security of the United Kingdom or to United Kingdom relations with any other country. That provision is laid down in clause 2(2).
We have dressed up these proceedings with elaboration. If we are to condemn this practice, let us condemn it robustly and not make difficulties for the Secretary of State when he wishes to create deterrents to attacks on our international trade.
How might these measures deter the United States courts from the trend of their recent judgments? If they fine a threatened United Kingdom business, that fine stands. We can do nothing about it. We cannot recover the fine. That fine must stand and can be seized out of whatever goods the company may have in America. I presume it is not registrable as a judgment here, but I am not sure. If a British company is fined by the American courts and the fine is not paid, can we be required by the American Government to collect the fine here? I hope not.
§ Mr. Charles Fletcher-Cooke (Darwen)
The answer to that must be "No". That is a penalty, and no country will enforce the penalties of another.
§ Mr. Page
I am sure that my hon. and learned Friend is right, but I should like it on record that the Bill does not alter the general law. There is, of course, the deterrent of the recovery of part of the triple damages, and that seems to be the only form of attack in, for example, the uranium case, where I understand that the prosecution has been dropped, and the civil cases are going on.
Although the shipping and uranium cases are based on measures that the Secretary of State could designate under the provisions of clause 1, the question is whether this process will be effective in 1554 other cases which need to be attacked by the Bill.
My right hon. Friend the Secretary of State referred to companies in which there are 25 per cent. or more American shareholders. It is claimed by the United States courts that those companies are subject to American law, wherever they may carry on business. It is not necessary, according to United States law, for them to be carrying on business in America in order to be subject to American law. I find it difficult to see how the Secretary of State will apply the measures in clause 1 to that type of company. Yet it will create great difficulties in this country if a company is to be subject to both American and United Kingdom law and if those two laws are in conflict.
There are also attempts by the United States to control the activities of the United Kingdom subsidiaries of United States companies. One such activity has already been mentioned—that affected by the Arab boycott. There is an endeavour to regulate United Kingdom subsidiaries in connection with that boycott. That results in damage to our trade in the Middle East. I also find it difficult to see how the provisions of the Bill can help in such a case. I hope that I am being too pessimistic. I hope that we shall be able to deal in some way with that damage to our Middle East trade.
§ Mr. Clinton Davis
Why should not the United States Government take that view about the boycott, and seek to impose their law on companies, whatever their source, which seek to trade within their jurisdiction?
§ Mr. Davis
This is a major and fundamental factor. The whole concept of the Arab boycott of Israel and of companies that seek to conduct business with Israel is itself a flagrant denial of the very essence of what the right hon. Gentleman is now seeking to assert. Many people think that it is right to take such defensive measures. I see nothing wrong in doing so.
§ Mr. Page
I note the hon. Gentleman's view of the merits of that case and of that dispute. The precedent is one that might not be used particularly in political issues such as that but might be used in any trade issue against an international trade rival. We ought to be prepared to exercise such deterrents as the Bill may give against that sort of imposition on our companies trading throughout the world.
There are other instances of the American courts and the American Administration endeavouring to regulate undertakings outside their own jurisdiction in order to further their own trade. There is one practice in particular that I hope will come within the Bill. If a United Kingdom company has a branch office in a certain State in America—for example, California or Alaska—it may be taxed not only on the business that it does within that State but may be called upon to supply to that State the accounts of its parent company throughout the world, and even of the subsidiaries of that parent company which may be carrying on different trades in other parts of the world. That branch office, say, in California, is then taxed on a slice of the worldwide cake, and the size of the slice is decided by some tax formula of the State of California.
This has resulted in one case, of which I have been informed, where an undertaking, carrying on a branch business in such a State in America, has been liable to pay 75 per cent. of its profits in tax by reason of the double taxation which results. That unitary taxation on a worldwide reporting basis, as it is called, is obviously detrimental to our trade. I shall be very disappointed if this pernicious form of taxation cannot be tackled under the Bill.
§ Mr. Nott
My right hon. Friend has touched on a very valid point. The problem is that the remedies for dealing with what he dislikes can in the last resort only lie, as so often, in our exercising extra-territorial jurisdiction against the United States. I share all my right hon. Friend's objections to some of the practices that he mentions, but we must not go so far as to take the very measures about which we are effectively complaining to others. This is the dilemma, and it causes us some problems. I am looking forward to my right hon. Friend's joining 1556 us on the Committee, because in principle I do not have any objection to strengthening the Bill.
§ Mr. Page
I do not follow my right hon. Friend when he says that we might be taking similar action of an extra-territorial nature. I should have thought that under the Bill, even as it stands, the Secretary of State could say to the head office of a company in the United Kingdom "You shall not produce the accounts of your company worldwide." The State of California could see the earnings of the branch office within that State, but by order here we could reasonably say that the whole of the company's accounts must not be produced. That would at least be some deterrent to taxing the branch upon a slice of the worldwide earnings of the company. But this is rather encroaching on the Committee stage of the Bill, and one would have to consider exactly what the Secretary of State might insist that some company in this country shall or shall not do.
The Government have obviously decided, by the Bill, to take a very important step in protecting the international trade of our undertakings in this country. It is no use nibbling at the problem now. If we have caused any offence to the Americans, we have already caused it by producing the Bill. I do not think that we shall retrieve the position—I do not want to retrieve it—by toning down the Bill or wrapping it round with so much procedure that the Secretary of State cannot do anything effective. The Bill must bite on all the international trade barriers which are akin to the sorts of cases that my right hon. Friend the Secretary of State set out in his speech. I hope that we shall be able to look at the Bill carefully in Committee and ensure that it is indeed an effective and a robust Bill.
§ Mr. John Prescott (Kingston upon Hull, East)
The Bill, as has been explained by previous speakers—and particularly by the Secretary of State—is a countervailing measure. It is to provide protection, as we understand it, so that other countries' legal judgments will not be binding here on United Kingdom trading interests. I have some sympathy with the general point made in the Bill but I have some very severe disagreements 1557 particularly in regard to the justification for the Bill.
I confess to not having noticed or understood the full contents of the Bill until yesterday. The Bill, by its title, deals with a familiar subject. I am specially concerned with shipping matters. I declare an interest, having been a seafarer for 10 years. I have no financial interest in the contents of the Bill, but I am particularly interested in trade between our country and other countries, because this affects shipping and seafarers.
I also have an interest in the development of world trade generally in a world that is increasingly one of haves and have-nots, and with Britain being one of the haves, one of the rich countries, it would appear that the Bill represents and reflects a dispute between two of the richer nations of the world, the United States and the United Kingdom, about what they both consider to be their legitimate interests. In a world in which many areas are starved of their share of industrial development, it is a little obscene to see the richer countries fighting over their share of the trading interests which they have maintained for so long. To that extent, therefore, it is a Bill that I approach with a certain amount of sorrow.
The overall principle governing trade relations, as the Secretary of State has said, should be that agreements concerning extra-territorial commercial activity are the result of intergovernmental action and international action. I fully endorse that principle, and I imagine that everyone in this House would do so. Indeed, there are considerable precedents which have developed over the years, particularly in the area of shipping. We have seen the call for international law and regulation to control many matters. This especially applies to the law of the sea, in which I have had an active interest. It is a very important area for Britain and for many countries, involving the exploitation of mineral wealth beneath the sea as well as the conduct of trade between the nations.
I have particular interest in the development of the liner code. We have attempted in the international arena to find a code that would be satisfactory to the new nations wishing to develop their part in world trade and to develop their 1558 industrial potential to the full. To that extent I am very much a code man and very much in favour of the development of the code. I am sorry that the British shipping interests were so slow in recognising the importance of accepting that principle and had to be dragged along for a considerable period in that respect.
The shipping industry often does not recognise what is in its own long-term interests. It is very dangerous—there are many examples of this—to identify British shipping interests with the national interest. That is all too often the case. I do not necessarily mean that that is the exclusive role of the present Government. It has been a problem for a number of previous Governments, primarily because of the kind of advice received in this clearly complicated area, and one where politicians are bound to need to rely on a considerable amount of advice.
I have one judgment to make about the advice given to Governments by Civil Service Departments. There is a certain amount of bipartisan agreement between the two major parties here. I have disagreed even with my own party over several pieces of legislation. I disagreed with the 1964 Shipping Contracts and Commercial Documents Act, even though I was not there at the time. However, it is relevant to this debate because that was the first piece of countervailing legislation which sought to protect British shipowners against attacks, as they saw them, from the American Administration who disagreed with the control and regulating aspects of the conference shipping position on trade between Europe and America.
However, I have noted the identity of interests in this area and have not prevailed in my arguments for the acceptance of different views. I have concluded that all too often—having watched a number of my close colleagues attempt to argue against the advice given, not always successful—the advice given by the Civil Service Department shows a strong preference for, or identity with, British shipping interests.
I notice, when I attend shipping functions, how many ex-civil servants are present. They seem to be in attendance either when we are lobbied by the industry or on the social occasions when we meet to discuss the various business interests of the shipping industry. I hope that the 1559 Secretary of State will give fair consideration to the number of civil servants who leave the Departments of Trade and Industry and go into the shipping industry. I believe that that is an alarming tendency and I hope that the Secretary of State will seriously consider future activities in this area, because the Department appears to be becoming a nursery for future shipping industry personnel.
I cannot help but feel that in the period during which this has developed, almost decades—
§ Mr. Prescott
All right, a number of centuries. That may well strengthen the case. Therefore, as a humble seaman perhaps I should say that there seems to have been a close identity between the Civil Service advice and the opinions held by the shipping industry itself. There is a connection between those two points.
My contribution is about the politics of the Bill rather than the law. I well understand the difficulties of the Secretary of State who has to deal with a Bill that has considerable legal ramifications. Nevertheless, I am more concerned with the politics, the reasons for the Bill, its effect on the politics between this country and America and the consequences for development of trade between our two countries.
Understandably, the Bill is retaliatory, but it contains a fair share of hypocrisy. The essence of disagreement, apparently, between ourselves and the United States of America is on the definition of what may be considered competition. I take the point that jurisdiction between the laws of one country and America is the point at issue in the Bill. Nevertheless, it is the definition of competition that has caused the disagreement between America and ourselves. I shall explain what I mean by that.
I was interested in the remarks made by the Secretary of State when he said that there can exist a difference between two parties who may agree to the same definition of competition. It is an interesting argument, and one that I would have thought was written into the United States constitution, which, to a great extent, creates the difficulty here. But I note also that as we are a member of the Community there is a treaty that expressed certain obligations—one might 1560 call them constitutional—that are of a binding nature and that show a laissez-faire attitude towards competition.
To take the point further, I understand that for some time now the Commission has been concerned about the activities of the conference system, in the sense that it regulates trade. I understand that the Commission has prepared proposals in line with the obligations in the Treaty which are not far removed from the argument put forward by the Department of Justice in the United States for upholding the constitution wedded to a laissez-faire philosophy and a legal interpretation of what competition should mean.
It will be interesting to watch the development of something similar in Europe, particularly in regard to the shipping body organised in a conference system which the Secretary of State used as an example of why we have the Bill today, which is to protect shipowners in their activities. That is basically what the Bill will do. Therefore, it is a definition of competition, written into constitutions, that makes it difficult in the legal sense.
I do not think that the Secretary of State's own remarks about competition leave me in any doubt—certainly during Second Reading of the Competition Bill—where he stands. He said:At the heart of the Bill lies the fact that the consumer cannot be free to choose unless producers are obliged to compete and because economic freedom rests on competition.He also made it clear thatIn overseas trade … competition and open markets remain the greatest stimulus to trade aboard ".—[Official Report, 23 October 1979; Vol. 972, c. 221–38.]That is a quite clear and unequivocal statement about what the Secretary of State believes is competition.
I do not believe in competition to that extent. I am not an advocate of the competition system. I believe in a political philosophy that does not have that purpose and objective. My philosophy is different to that of the Secretary of State. Nevertheless, his view coincides with the view given by the shipowners who believe in competition.
One could legitimately ask why the conference system exists. I believe in regulated trade and I find that logically I must accept some kind of conference arrangement to achieve that. I cannot 1561 simply say "Leave it to competition and that will settle it". But if we are prepared to allow regulation of trade, the difference between myself and the Secretary of State—unless he can assure me later that he shares my view—is that if companies come together to regulate trade, one can interfere with the criteria that determine the freight rates, if they are guaranteed and protected in the use of the power to regulate trade. I have always felt that we should ask the members of the conference system on what terms they do it and look for the justifications why they do it.
As I understand it, that information has not been made available to Governments so that they could make a judgment. One of the reasons may be that members of conference systems of other countries have laws in their countries making it illegal, as we do, to provide such information to their Governments. I hope that whoever replies will address himself to that point.
There seems to be a clear dispute between the parties about the nature of competition. The Secretary of State has made clear what he believes is the position, and I think that I have made clear that I am for the regulation of trade and, therefore, I am not too alarmed at the various means that are adopted to do it.
The Bill is about the imposition of sovereign law extra-territorially. The Secretary of State makes a fair point, in respect of a number of clauses in the Bill, that we cannot accept that the jurisdiction of one country can be imposed extra-territorially. Coming from Hull, I am bound to say that I thought of the Iceland conflict, in which I supported the Iceland point of view. I thought that they were right and that we made a major mistake in that matter, involving an extra-territorial judgment. It is a pity that we did not do the same for our fishermen.
The Secretary of State used Rio-Tinto Zinc as one of the justifications for this legislation. I believe that Rio Tinto-Zincs is different from the shipping case, in the sense that that company was not operating in America. It is a very clear case of saying "Our law will apply to a company—whatever the company—that is not an American company operating outside the jurisdiction of American law."
1562 I oppose the idea that multinationals can get together and regulate trade. I do not seek here to do anything about that, although I believe in statutory controls on multinationals. That is more than British Governments of either party have achieved in the negotiations within UNCTAD on the multinationals. Our Governments have always gone for codes rather than statutory requirements in law. To that extent it would be more encouraging if the Government were to tell us that while we have no laws for extraterritorial activity, they will press in international circles for some kind of statutory control of the multinationals. They should at least press for a requirement to provide proper information, in order to assess the transfer costs and the very nature of the economic material needed to establish whether the multinationals' activities are fair or unfair in the interests of the community.
The RTZ case is clearly different from the shipping case. Therefore, I disagree with many aspects of the Bill in the same way as I disagreed with aspects of the Shipping Contracts and Commercial Documents Act 1964. That Act basically protected our companies from giving information to the Federal Maritime Commission about their activities. This was tied up with the complaint by America that these actions of conference systems were restraining trade and controlling freight rates and were illegal under their legislation. We passed legislation in this House giving the companies protection. In doing so we enabled the companies to say to the Federal Maritime Commission that if they gave the Commission that information it would be a criminal act. In a sense that was a strengthening of the British position against the American inquiry into that restrictive practice.
My major disagreement with the Bill—I believe that the Secretary of State feels some concern about this—is on clause 6, which concerns the recovery of awards of multiple damages. This is referred to in one document as "novel". Certainly it is unprecedented. I do not believe that any other legislation of this kind has been passed before. The Secretary of State talked about Britain being no different from other European countries in this dispute with America. We acted as one, and we were all fined as one. In fact, all seven companies were fined $1 million. 1563 As the European companies acted together, both in the conference and in joint agreements with Governments, how is it that the Governments did not discuss whether there should be a common response in legislation? Why is it that Britain goes much further than anyone else in developing this principle? Canada, which was concerned about the legislation on uranium, took certain countervailing measures but did not go as far as we did. I believe that we are the first country to bring in this kind of legislation. That is a major extension of legislation which this House should scrutinise carefully.
I have very serious reservations about the powers that we allow for the recovery of two-thirds of the damages, which is over the amount of the damages allowed in this situation. [An HON. MEMBER: "Fines not damages".] Well, I have heard them called fines and other things as well. Presumably it is a penal measure in American legislation for those who have committed this act to get not only damages but some form of compensation arising out of a criminal act that has been committed against them.
§ The Under-Secretary of State for Trade (Mr. Norman Tebbit)
The easiest way to put it is that we see nothing wrong with someone seeking recompense for damage that has been caused, but to seek, on top of that, twice as much again beyond the damage that was caused cannot be called anything other than penal. It is not compensation; it is a fine that is being levied.
§ Mr. Prescott
I agree that there may be strong disagreement in this country about that action. Certainly there will be strong disagreement over whether it should apply over our jurisdiction. That is a judgment that has been exercised in America and these are the kind of penalties that the Americans will impose, in commercial as well as criminal law, on those who commit this criminal act. Indeed, under their legislation it is considered to be a criminal act. Therefore, there is a dispute between us about what constitutes fair damage.
Nevertheless, if someone engaged in commercial business commits the act in America and no one in this country disputes that act, we would not dispute the 1564 right of American courts to impose their penalties as they see fit.
The difference between the shipping companies and RTZ is that the shipping companies are active in America. They have offices and assets in that country. They are registered as companies there and they offer a service within American commerce of carrying goods from one point to another at a certain price. In the view of the Department of Justice that is done in a discriminatory manner. I think it is agreed that it is discriminatory. There is a difference in freight rates between east- and westbound traffic. The Department is entitled to argue that that causes damage against commercial activities. It seems that a case has been made by the Department of Justice that this act, illegal under United States legislation, took place in America. If one accepts that that is a possibility—and it is distinctly different from RTZ—then the Department has a case to apply United States law to an activity that occurred in that country.
Therefore, we should be asking whether all avenues were exhausted by all parties to this dispute. It is to the credit of the President of the United States that he vetoed a Bill from Congress with the express purpose of achieving this kind of discrimination and attacking the conference system. Presumably he vetoed it to get diplomatic negotiations going. When the Secretary of State was the Opposition spokesman, he welcomed this activity during our discussions on the Merchant Shipping Act. He referred particularly to section 31, in which we attempted to impose some provision in our legislation to judge what was "the national interest" in such matters. That matter is not included in this Bill, and the Secretary of State does not necessarily have the powers to assess it. The Conservatives were responsible for having this dropped from the Merchant Shipping Act 1978. The Opposition made it clear that we would not have got the Bill in the last few days of our Government unless we reached an agreement.
The House should be aware that the shipowners did not exhaust all the possibilities. I make this point particularly to hon. Members who are lawyers. If one looks at the legal case taken by the Department of Justice against the shipowners, one sees that it was not concluded. 1565 The result was what is called nolo contendere. That meant that the shipowners were fined but not proven guilty. I think that the same case was used against Spiro Agnew. There was no doubt in many people's minds as to the verdict but it was not actually proven in court. Therefore, the shipowners could have pursued this matter in court had they so wished. They did not. They withdrew, and in doing so they did not exhaust all legal procedures that were available to them.
If the case rested on that point it might be a little alarming, but what is even more alarming is not that regulated trade is not possible in America—it is, and they, too, have the hypocrisy of announcing competition and allowing all sorts of regulations and protections—but that the shipowners had the possibility of going before the Federal Maritime Commission and making a case that this regulation of trade and prices was in the public interest. That is similar to the provisions in our own monopoly legislation.
We may declare something to be a monopoly but we do not necessarily say that it should cease if we believe it to be in the public interest. However, the shipowners did not take that course. It may be that they thought that providing information about their activities would be considered an illegal act in Britain. We have enacted that sort of legislation.
Is the Minister satisfied that all legal and other requirements were satisfied before the Government were asked to take such harsh action? I do not think that the shipowners have exhausted all the possibilities open to them. In my view, the House is being asked to act somewhat prematurely. The Minister's case is stronger than that advanced by RTZ, but it has not been substantiated.
When the Minister replies, I hope that he will be able to satisfy us that the practices of the conference system are in the interests of the community and that he has investigated them. If he is unable so to satisfy us, I hope that he will take up the suggestion that another body should be established to control and regulate the operation of the conference system. I hope that we are not too late to prevent the development of a trade war between ourselves and America in the name of competition. If that is the 1566 outcome, both parties will find themselves in a somewhat hypocritical position.
§ Mr. Charles Fletcher-Cooke (Darwen)
All courts have, latent within them, a deep imperialism. They all wish to extend their jurisdiction. No court is more inclined to do that than one suffused with an ideology that is almost equivalent to a religion. Anyone who has talked to American competition lawyers, whether on the Bench or at the Bar, will know that the Sherman and Clayton Acts in the United States are the equivalent of holy books.
Once a court or a system gets an ideology into its mind to such a degree of fanaticism as one can find in the United States, it is no surprise, however deplorable it may be, that it becomes a matter for imperialism overseas. The gospel has to be spread to the pagan and the heathen. The answer is not to reason, although it is right that Governments should try. The only thing to do is to put in the boot. For example, it is no good trying to reason with the Ayatollah Khomeini. It is no good trying to reason with a fanatic. It has to be made clear that eventually the boot will be put in. That is what the Bill does.
Clauses 1 to 4 strengthen considerably powers that already exist. Clauses 5 and 6 take some drastic measures to ensure that the action for triple damages does not injure our traders.
I entirely support clause 5. It is in conformity with all the principles of private international law. I do not go so far as to say that the action for triple damages is contrary to human rights or is a cruel or unusual punishment. It is a well-known device of rather primitive Governments who wish to enlist the services of private citizens to police the public order that they think they are unable to police under the public services.
In Britain the common informer—whom we abolished only recently—often made quite a substantial living by informing on those breaking the law and recovering the fines for himself. He suffered no damage and he was allowed so to proceed because the public services and the police were inadequate to undertake the prosecutions themselves. Therefore, it 1567 does not behove us to call these primitive methods of sanction for the enforcement of public order cruel, unusual or contrary to human rights.
There are many occasions in our system when we award damages beyond the loss sustained. Punitive damages are not unknown in our civil courts. In the courts of the Commonwealth, or the equivalent of them, such damages are quite frequent.
I had a case before the Privy Council in 1978 called Mahesan v. Malaysia Government Officers Co-operative Housing Society Limited, which is reported in the second volume of the All England Reports 1978, at page 405. There was in Malaysia a housing association which employed an officer who was corrupt. He sold some of the association's land, as he was entitled to do in law, but received a bribe from the purchaser. He was prosecuted under the Prevention of Corruption Act and ordered to pay the amount of the bribe to the association as well as a fine to the State. He was ordered to pay the exact amount of the bribe over to the association.
The association sued him in the civil courts for damages and recovered damages of the amount of the bribe. Therefore, he had to pay over the amount of the bribe twice. The only issue before the Privy Council was whether he should pay it three times because of various legal technicalities. No one seriously doubted that the association recovered twice for the damage that it had suffered from the land being sold at an under-value.
We cannot say that multiple damages are of themselves inherently wicked, because they appear in many systems of law in various forms. They are certainly penal. It is a rule of international law that no country's courts will be allowed to be used by other countries for the benefit of recovering penalties that are enforced by other countries. Clause 5 is satisfactory because it provides that damages that do not exactly equate with the damage sustained may not be recovered because that is in the nature of a penalty.
I know that there is a dreary case called Huntingdon v. Attrill which states that that principle is not right and that no civil damages for that purpose may be 1568 described as a penalty. I believe that case to be wrongly decided, but that does not matter because the Bill, as far as it goes, will reverse it pro canto, and quite right, too. There is no earthly reason why our courts should be used as instruments for the recovery of foreign penalties. To my mind, two-thirds of triple damages is surely a penalty.
All that Huntingdon v. Attrill really provides is that "penalty" is an ambiguous word. It may mean a fine imposed by a criminal court. It may mean civil damages beyond the actual damage sustained, or it may mean a penalty prescribed in private contract between two private persons by which damages are set down in a large figure and liable to be recovered if there is a breach even though the actual amount of damage has not been sustained by the person injured.
All that may be interesting in a seminar, but there is no doubt in my mind that clause 5 does no violence to the general principles of private international law.
§ Mr. Prescott
The hon. and learned Gentleman has advanced an interesting thought. I have been told that triple damages first became evident in legislation enacted during the reign of Queen Elizabeth I about restraint of trade. It is something that is found in our own legislation, and the hon. and learned Gentleman has given a modern example of it. Does he feel that it is creating a precedent for those who might find themselves faced with triple damages under our legislation for an offence committed in Britain and will ask the Government to adjust laws to claim back their damages?
§ Mr. Fletcher-Cooke
In the laws of the United Kingdom, I do not think that we have the triple damage remedy. Damages, or what may be called damages, have been awarded to persons beyond what they have sustained. However, it is a small branch of our law and not strictly comparable. I was saying that in other Commonwealth jurisdictions it occurs more frequently.
I have certain misgivings about clause 6. It is one thing to say that we do not, like all civilised countries, use our courts to recover the fines, penalties or taxation imposed by other countries. It is no good seeking to enforce taxation levied 1569 in the United States through the courts in this country. It is no good anyone in the United States trying to enforce in the courts of this country criminal fines that have been levied there, and that applies throughout the comity of nations.
However, as far as I know, it has always hitherto been the case that if, in one way or another, the country levying the fine or raising the taxation can recover that tax or fine from outside the country where the person being fined or taxed happens to be, it is not open to him to use the courts of his native country to reverse that decision and recover that fine. As far as I know, that has never been done. This is the first time that the rule against the enforcement of penal or taxation judgments has been turned on its head in that way.
If one looks at the confines of clause 6 and at subsections (2) and (3), it becomes apparent that the circumstances in which it is possible or likely for anyone to wish to recover the penalty of two-thirds of the triple damages are so improbable that I may be shying at a scarecrow. I am not sure whether that will be the defence of the Minister, because he would not have put in the clause unless he thought that it was useful, forceful and effective. However, it is so confined in its operation that it is unlikely to be seriously used.
Although it makes it less surprising, and perhaps less alarming, if I am right we have to consider whether it is worth it. Is it worth attracting a charge of counter-judicial imperialism for a relatively small, perhaps even negligible, result? I am open to persuasion that clause 6 is necessary and that a sword is needed in addition to a shield, and I shall be the first to cheer if I am so persuaded.
My right hon. Friend the Secretary of State has shown great courage in introducing the Bill. I do not wish to criticise the previous Administration or the one before that, but the Bill is long overdue. It is the only way to solve the problem and to show that we mean to defend our trading interests, and I wish the Bill well.
§ Mr. Eric Ogden (Liverpool, West Derby)
I apologise to the House and to hon. Members for my absence during earlier speeches. My agent came from Liverpool on urgent matters, and I believe 1570 that all hon. Members would agree that in such circumstances one's agent should have priority even over the proceedings of the House.
§ Mr. Ogden
Particularly with reselection in view. Man the barricades!
I was present when the Secretary of State spoke. He had to curb his usual wit and enthusiasm in order to perform his duty and to get the necessary points on the record, but he did not appear to be enjoying the experience.
The right hon. Gentleman surprisingly quoted the American Bill of Rights in support of the Bill. It was intriguing to hear a high Tory Minister—and that is intended to be a compliment—calling in aid legislation that was introduced by a legislature in rebellion against the Crown. We later recognised the inevitability of facts, but at that time it was in rebellion against the Crown.
The Secretary of State rightly said that the other maritime countries are equally concerned about the effects of United States legislation. Although the Bill does not mention any other country, it is obvious at which country it is aimed. It could include Ireland, although most of the traffic goes across the border, and it could be used against any country. The right hon. Gentleman was right in saying that we should not pretend.
The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) talked of putting the boot in. Some of those whom he has prosecuted say that when he wishes he can put the boot in most effectively. There was an American who believed in speaking softly but carrying a big stick, and perhaps the purpose of this legislation is that the British Minister can continue talking softy to the Americans but have in his back pocket at least a stick. We shall see how large it is.
Surely it would have been better if our maritime partners, let alone our EEC partners, agreed to bring in similar legislation at the same time. We are acting as a pathfinder to sort out the difficulties, and other nations may or may not follow.
I should like to know how far consultation with the Americans has gone and what stage it has reached with our maritime partners on the effects of the legislation and the need for it.
1571 I was privileged to have a preview of the right hon. Gentleman's remarks in a speech that he delivered to the General Council of British Shipping on 7 November. Hon. Members with maritime interests were invited, and I was lucky enough to be free to go. My colleagues with Shadow ministerial responsibility had to leave to come to the House and they missed the right hon. Gentleman's speech. I thoroughly enjoyed the speech, and if the right hon. Gentleman had delivered that speech today I believe that the whole House would have enjoyed it. Perhaps he can arrange for it to be placed in the Library. That does not mean, however, that I agreed with everything that the right hon. Gentleman said, but he displayed dexterity in answering some of the president's points.
The president first gave his usual report on the state of the industry, which I call the rolling programme. It is said each year that it is hoped that the shipping scene will get better. Perhaps it will, and perhaps it will not, but the crisis remains. The right hon. Gentleman followed the president and, in the sharpest bit of sidestepping that I have seen for many a year, almost avoided the mention of future problems for the British shipping industry. He said:It seems that, not for the first time, the financial and industrial forecasters are united in their anticipation of impending doom—which gives me some encouragement.I never knew a shipping man who'd made his fortune by following the prevailing opinion of the market; any more than I've ever met a Minister who'd enhanced his reputation by gazing at the vital statistics exhibited by our country's leading models.The right hon. Gentleman touched on the problems of the shipping industry. Indeed, he might take the opportunity today to do the same. Of course, Mr. Deputy Speaker, you may rule that the debate is not concerned with the problems of the shipping industry. However, it concerns the protection of the interests of the British shipping industry, and some reference to it either now or in Committee—for those hon. Members who are fortunate or unfortunate enough to be on that Committee—will be useful.
The right hon. Gentleman told the assembly of about 1,000 people exactly what they wanted to hear. There was no one there to ask the right hon. Gentleman to give way and to ask "What about 1572 this and what about that?" It was a masterly performance which I thoroughly enjoyed. In parts of it there was almost a touch of Merseyside—I hope there was. The right hon. Gentleman almost admitted that he would have opposed the Bill if it had been introduced by a Labour Government. We are committed to intervention and more controls and against free market forces; and I could understand a Labour Government introducing the Bill.
Yet here we have a Conservative Minister, a hawk—that is a compliment to him—introducing legislation the intention of which is to limit competition. If the Bill is to protect British interests, from what are those interests being protected? Perhaps the American ambassador will write to the members of the Committee telling them about the legislation. I understand that the anti-trust laws of the United States prevent free competition in that country or anywhere else. Therefore, we have a Conservative Minister standing on his head, smiling benignly at me, and practising the opposite of what he preaches in this country. It would be good of him to admit that fact.
We should give the Bill a Second Reading and leave hon. Members such as the hon. and learned Member for Darwen to examine the Bill in Committee with full flow. The Committee stage should be an enjoyable experience.
§ Mr. Ivan Lawrence (Burton)
I shall not attempt a full flow. Even if I did, I could riot match the eloquent speech of my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke). Time is short and Government business presses.
It is unfortunate that in this one area of substantive criminal law in which the Americans go further than we do—their anti-trust legislation—they should be using it to clobber the closest friend and ally that they have. It is a cruel stroke. As long as United States law is confined to the boundaries of the United States, foreign companies cannot complain about its operation. They take into account, as part of the cost of doing business in the United States, any restrictions in that legislation. No hon. Member objects to what is rightly and properly within the jurisdiction of the United States courts and legislature.
1573 However, when the United States extends its laws to reach foreign companies conducting business outside the United States, that is inexcusable. It is intolerable that the enforcement of that law should be made penal. We are entitled—nay, obliged—to defend our citizens. My only astonishment is that it has taken so long. My right hon. Friend referred to a decade or more before this unhappy position has been reached. I regret that diplomatic action has failed to protect British companies from the unreasonable affects of United States law.
It is difficult to understand why the United States law is allowed to operate in this way. Rebating is legal in Europe, and we are doing no more than is permitted under our traditional and reasonable laws. Yet here is a direct attack upon our national legislation, and the Americans should expect us to be angry and to react by protecting ourselves.
By and large, the Americans are understanding towards us. They would not tolerate our behaving in relation to their citizens in the way that they are behaving in relation to ours. I cannot think of any of our legislation which is harmful to the Americans. If there were any such legislation, I do not believe that they would tolerate it for one moment. We know our American friends well enough to be able to say that. They do not normally behave in such an inequitable way.
The Shipping Act 1916 allows shipping lines to behave in an uncompetitive way in circumstances where the behaviour meets with the acceptance of the Federal Maritime Commission. Therefore, the Americans are prepared for the distortions and it is strange that that tolerance has not been extended to the subject of today's debate. I am even more astounded that the Americans should put up with the effects of their policy. They allow a defence to trading companies where those companies have been coerced by their Governments to behave in a way which, otherwise, would be contrary to the American rules. The astonishing effect is that State trading nations are favoured and free enterprise traders are handicapped. Russian and OPEC shipping companies are exempt from the restrictions that are placed on us. However, when a free enterprise nation such as 1574 Britain, with a free enterprise company such as Rio Tinto-Zinc, is concerned, the clobbering process is introduced. As a result, heavily subsidised Soviet ships have captured trade from Western shipping lines. A recent letter in the Financial Times from the president of the General Council of British Shipping, Mr. David Ropner, pointed out the absurdity of the effect of the American legislation. He said:The Administration's one-sided view of shipping matters made normal sea trade with the US commercially impossible.I find it difficult to understand why the American Administration should tolerate that position. The outcome is that many ships are running half-empty, which means that they are wasting substantial amounts of fuel and incurring severe losses. It is estimated that without the deterrent effect of the anti-trust regulations, there could be a 10 to 15 per cent. increase in the Western allies' sea trade with the United States of America. Depression in merchant fleets also damages an important strategic sector of NATO. Since that is the effect of the American policy, it is incredible that they should be pursuing it and that no steps to protect the interests on their side have been taken.
I understand that the American dockers' organisation is concerned about the policy and that moves are afoot in Congress to consider the matter further. I hope that, in due course, the Americans will change their attitude towards these British commercial enterprises.
May I ask the Minister one or two questions? First, is it right that some European Governments have similar legislation to this Bill on their statute books or that they are in the process of implementing it? That would make our action so much stronger in the sense that we would be united with our European partners. Secondly, I am not sure how far this Bill will affect those cases currently before the courts. My right hon. Friend mentioned the subject in his speech but I would like to know more—
§ Mr. Nott
This point has been raised several times. All precedents have their birth and their glorious morning. Somebody has to be first. Although it would be good if we could move forward wholly in unison and in time with our European partners, we are still a legislature and someone has to be first. I am not arguing 1575 with my hon. Friend. I am answering a question that has arisen repeatedly. We have done our best to keep our allies fully informed. I have written personally to the Prime Ministers of Australia and Canada and discussed the matter with them. In answer to my hon. Friend's first point, all precedents start somewhere. I felt I should answer that point straight away.
§ Mr. Lawrence
I hope that my right hon. Friend did not gather from the tone of my remarks that I was being critical of him. I am delighted that any radical first step should be taken by us. I am only sorry that we have not taken more radical first steps. We would then perhaps have been leading Europe. I have a suspicion that European countries are either implementing similar legislation or have it in mind to do so. Our approach, therefore, would have added strength because the Americans would appreciate that we speak with the force of a united Europe.
§ Mr. Ogden
I hope that I may be allowed to intervene in this love feast between the right hon. Gentleman and his hon. Friend. The Secretary of State gave a perfect parliamentary answer. It was accurate, concise and told us nothing that we did not know before. He was asked whether any other countries in Europe, or elswhere, have similar legislation. The right hon. Gentleman did not answer. He was asked whether any other countries were preparing such legislation. There was no answer. The right hon. Gentleman simply said that someone has to be first and someone last. It was accurate and concise. The Under-Secretary of State for Trade, who carries considerable burdens in his office, for which we have great sympathy and understanding, may be persuaded to give the answer that the House seeks.
§ Mr. Lawrence
The length of time taken by the hon. Member for Liverpool, West Derby (Mr. Ogden) in that intervention, added to the length of time that I will take to conclude my remarks, will give enough time for my hon. Friend to assemble the complete and authoritative answer when he comes to address us. I think I have adequately made the point of asking how the Bill will affect cases currently before the courts. I hope that there will be a reply.
1576 Thirdly, I associate myself with the remarks of my hon. and learned Friend the Member for Darwen on clause 6. I cannot pursue his remarks about the effect on international law and its complete new radical approach, because his knowledge of the subject is far deeper and more extensive than mine. I am, however, puzzled, about how this clause is expected to operate as a matter of practice, how it can be enforced and what would be the procedures. I hope that the Minister will explain.
The Bill is another example, I am delighted to say, of a robust Government acting in an entirely justifiable way in an act of national self-protection. I am delighted that the Opposition have had the good sense to support it and to support the robust action of the Government. I only hope that the United States will take this legislation to heart and do nothing in the future to make it necessary for us to invoke it.
§ Mr. Jeffrey Thomas (Abertillery)
This has been an interesting and thoughtful debate on a matter that has become of increasing public importance. I look forward to hon. Members developing their arguments when we reach the Committee stage. It has to be said at once that this is a wholly exceptional Bill to meet wholly exceptional circumstances. Clauses 5 and 6 are not only exceptional and far-reaching in their nature and effect but are unique in English law. They are none the worse for that. Although they will raise a legalistic eyebrow or two, I hope that they will not founder on the rocks of legal purism.
I should perhaps begin by congratulating the Secretary of State on taking the first step along the interventionist road. It was only in July that the right hon. Gentleman was saying that competition in the market place was the best protection for the consumer against abuses by producer or distributor. I remind him of that in no carping or critical way. As he knows, the gates are always wide open for sinners who repent. Who knows? Before we can say "Price Commission" we shall have a Protection of Consumer Interest Bill and measures that make the United Kingdom multinational companies which we seek to protect in this Bill more accountable to the public and their work forces.
1577 The object of the Bill is to provide a measure of protection and redress to United Kingdom companies and individuals against prejudicial exercise of extra-territorial jurisdiction by foreign States. We must not be mealy-mouthed. We mean, especially, the United States of America. The Bill is necessary because of the exercise of such jurisdiction by United States courts against United Kingdom companies in anti-trust proceedings. As we have been told, the toughest enforcement provision is the right given under the Sherman Act of 1890 and the Clayton Act of 1914 to a private person or company who suffers damage as a result of anti-trust violations to sue offenders and recover "threefold the damages by him sustained". Those are draconian measures.
Matters came to a head with the hearing of the case of RTZ and Westinghouse. In the course of his speech in that case, Lord Wilberforce said:The intervention of Her Majesty's Attorney-General establishes that, quite apart from the present case, over a number of years and in a number of cases the policy of Her Majesty's Government has been against recognition of United States investigatory jurisdiction extra-territorially against United Kingdom companies. The court should in such matters speak with the same voice as the Executive. They have … no difficulty in doing so.With the increasing development and complexity of international trade and transnational companies, it is inevitable that commercial activities, decisions, agreements and practices carried on, or made, in one State should have effects in another. It is likewise to be expected that authorities charged with regulating trade and business in the latter State should wish to have some degree of control or regulation over such extra-territorial activities. It is a vital principle of international comity, however, that exercise of that control or regulation by the first State should not infringe the jurisdiction or sovereignty of the second State, and so avoid international trade being detrimentally affected. It is important that the Bill should be regarded by our trading partners not as an exercise of economic nationalism but as a measure that fosters international trade.
I turn briefly to the clauses of the Bill. I hope that the House will forgive me if I do not canvass each of the clauses in detail or depth. It may be thought that 1578 this could be more appropriately and speedily done in Committee. I hope that it will be helpful if I refer to one or two matters which cause us concern so that they may be considered between now and when we meet in Committee.
In clause 1 the term "overseas country" should be expressly defined to ensure that it means a law district, not a political unit. If it is interpreted in the latter sense there will be problems in deciding what, for example, is the law of the United States where there is not only federal but state law.
I should like to refer, among other things, to the point made by the right hon. Member for Crosby (Mr. Page) on the wider provisions and effects that the clause could have. I hope that the Secretary of State will use his power under the clause, which is not inconsiderable, with regard not only to anti-trust or competition law measures but to all foreign measures damaging to United Kingdom trading interests—for example, foreign expropriatory legislation purporting to affect United Kingdom-situated assets. I hope, too, that measures will be taken under this clause to counter unitary taxation measuers taken in some jurisdictions, such as California, against United Kingdom companies. Thus, a company—as happened in the the case of EMI—may be taxed on its worldwide profits both in California and in the United Kingdom.
Clause 2, which we welcome, is extremely important. In circumstances where the Secretary of State has issued a direction, there will be no need for persons in the position of RTZ in the Westinghouse case to resort to complex defences, such as privilege under the United States Fifth Amendment, to resist the production of documents. I have some reservations about the inclusion of such a politically charged word as "sovereignty" in the Bill. I believe that it is almost unprecedented and is bound to lead to problems of construction and interpretation.
The ultimate test on the discovery of documents was laid down yesterday in their Lordships' House. They decided that the test was whether discovery was necessary for disposing fairly of the proceedings. The situation in America is wholely different from that envisaged by the House of Lords.
1579 The mischief aimed at in clause 2 is the American law relating to discovery documents, which allows wide-ranging fishing expeditions which often amount to industrial espionage hiding under the skirts of the so-called anti-trust rules. I fear that a number of difficulties will arise under this new provision.
The heart of any American trust case is the discovery of business documents. Without them, in many instances there is virtually no case at all. Recently there have been signs that foreign non-disclosure laws have, as a practical matter, become ineffective as constraints on extra-territorial application of the United States anti-trust laws, especially where a parent company has its headquarters in America. In that context I should like an assurance from the Minister that in future it will be a complete defence to requests for discovery of documents to plead the terms of this clause and the penal clause—clause 3.
I add my own disquiet and disappointment that these matters could not be solved by international agreements. From an international law standpoint, I am also not happy that criminal laws and courts should be used for these ends, although their use in this way serves policy objectives important to the country involved. In a sense, international law is poorly served as legal institutions are converted into political and diplomatic policy makers and enforcers. Perhaps in the circumstances that cannot be helped as many efforts have now been made over many years to deal with the problem, as was pointed out by the Secretary of State and by my right hon. Friend the Member for Lanarkshire, North (Mr. Smith).
As regards clause 3, I am a little unhappy that magistrates may be determining issues where complex defences might be raised by defendants—for example, ultra vires matters, and so on. It will be interesting to know the classes of cases which the Secretary of State and the Under-Secretary envisage magistrates hearing, bearing in mind that the maximum penalty is only £1,000.
We suggest that the second limb of clause 5—subsections (2)(b) and (4)—is unsatisfactory. In our view, the Secretary of State should be empowered to make orders under subsection (4), not in respect of the provisions or rules of law referred to but in respect of particular objectionable 1580 judgments based on the provisions or rules of law referred to. As it is drafted, the Secretary of State could make an order under subsection (4) which, in the light of subsection (5), could deny recognition to any foreign judgment, objectionable or not, based on the provisions or rules of law referred to—that is, in effect, to any foreign judgment in relation to restrictive practices.
The subsection is too wide to deal with the mischief aimed at, namely, particular judgments. Moreover, unless power were given to the Secretary of State to make an order in respect of particular objectionable judgments, it would be arguable that the judgment did not, as a matter of construction, fall within the terms of the order made. Further, an order made under the subsection, as drafted, could lead in cases within the scope of the competition provisions of the Treaty of Rome to inconsistency with the latter. In fact, the equivalent Australian statute enables recognition to be denied to particular objectionable judgments.
The second limb of this clause is also unsatisfactory. In subsection (4) the power to make the order there stated extends only to provisions or rules of law, in effect, relating to restrictive practices, not to provisions or rules of law relating to monopolies. Therefore, there should be power to make an order to extend to the latter.
My right hon. Friend the Member for Lanarkshire, North and hon. Members on both sides of the House have expressed disquiet about clause 6. I add my voice to those misgivings. I have general misgivings, but I am unhappy about the way in which clause 6, as drafted, can operate in practice. It seems to me that the scope of recovery needs to be enlarged. As drafted, the clause enables recovery only against the party in whose favour the judgment was given. If that party were not in the jurisdiction of the United Kingdom, the right of recovery presently given would be nugatory. For example, foreign States would be unlikely to recognise a United Kingdom judgment ordering such recovery.
Moreover, corporate parties given a multiple damages judgment against a United Kingdom individual in a foreign State could prevent recovery back of damages against them by the United Kingdom individual and enforcement of the latter 1581 damages award against their United Kingdom assets by the simple expedient of operating through different corporate entities in the United Kingdom. It may be that to forestall the latter the word "party" in clause 6(1) needs to be defined to include an associated or subsidiary company.
Some of those observations were perhaps primarily Committee points, but I thought that it might be helpful if I mentioned them at this stage so that they could be investigated between now and the Committee stage.
On the whole, we welcome the Bill, even if our welcome is tempered by our apprehension about how it will operate. However, it is refreshing to see that the Conservative Party has been converted to interventionism on the road to America. It is equally refreshing that this Government—of all Governments—should be seen to be cocking a snook at the high priests of capitalism. I suppose that they have come to the sad realisation that when capitalism gets out of control, and the free play of market forces becomes rough, measures such as these are required as necessary panaceas. We hope that this is the first of many U-turns by the Government.
§ 7.1 pm
§ The Under-Secretary of State for Trade (Mr. Norman Tebbit)
As the hon. and learned Member for Abertillery (Mr. Thomas) says, here comes the first U-turn. I shall be as soothing, reasonable and understanding as all those hon. Members who have spoken in this debate have been. If I may say so, their speeches included the odd U-turn here and there.
I hope that I can adequately express the Government's gratitude to the right hon. Member for Lanarkshire, North (Mr. Smith) and to his hon. and learned colleague. I appreciate especially their measured and constructive welcome of the Bill. As the hon. and learned Gentleman said, many of the points that he raised would, I think, be best dealt with in Committee after a suitable pause for thought. I can deal straight away with one or two of his queries. I shall turn to others later.
The hon, and learned Gentleman was particularly concerned with the provision in clause 2 designed to prevent fishing 1582 expeditions. We believe that there is adequate protection here since clause 2(2) provides that the Secretary of State may give a direction forbidding the passing of information if the relevant demand infringes United Kingdom jurisdiction or is prejudicial to the sovereignty of the United Kingdom.
I notice that the hon. and learned Member reacted to the use of the word "sovereignty". No doubt that is a matter which can be explored. Perhaps there is a better way of expressing it. Perhaps we can see whether compliance would prejudice the security of the United Kingdom or international relations.
Clause 2(3) provides that a demand is also inadmissible in all other circumstances unless information is required for the purpose of specific court proceedings as defined in the subsection. There is bound to be a grey area where information is merely requested. If no compulsory powers exist in the country from which the demand originates, the United Kingdom person is under no obligation to reply anyway. We are satisfied that the subsection gives us adequate powers to prevent fishing expeditions. We are prepared to examine the question again in order to confirm that and to take into account what hon. Members say in the Committee.
I particularly noted the hon. and learned Gentleman's contribution about the dangers of confusion between political units and law districts in those countries which have a federal law system. We understand that. The hon. and learned Gentleman also asked about the unitary tax point. It is possible, under section 2, to deny to a foreign Government papers which are called for. Such a request could be denied even though the purpose was not for the regulation of trade but was, as in the case mentioned by the hon. and learned Gentleman, a request for information for unitary tax purposes.
The hon. and learned Gentleman also raised the important question of whether the provisions of clause 2 afforded an absolute defence to a United States discovery requirement. I am not even an English lawyer, let alone an American lawyer, so I think that it would be hazardous if I said that they positively did so. We cannot necessarily guarantee the kind of treatment that would be accorded by a United States 1583 court to persons from the United Kingdom who might be prevented from complying with the discovery requirement. However, we would expect recognition to be given to the fact that a prohibition was in force and that a breach of that prohibition would expose the offender to criminal penalties in his own country. Such a situation has prevailed in the past, and I hope that it will continue in the future.
My hon. Friend the Member for Burton (Mr. Lawrence) asked whether other members of the European Community had similar legislation. It is a complicated picture. There is a wide range of legislation among Governments and, as I sought through the various pieces of advice and my own recollections on the matter, I can say that this is the position. Several other European countries, for example, the Netherlands, Switzerland and Norway, have similar statutes on blocking the passing of information. Australia, Canada, South Africa and some other countries also have similar laws. Australia and South Africa have provisions restricting the enforcement of triple damage judgments but on a rather more limited basis than the provisions in our Bill. We think that at least four other countries—three in Europe and one elsewhere—are considering legislation on the enforcement of judgments. However, we have no firm knowledge about how far they have gone down that road.
Therefore, we are pioneers in the sense that we are somewhat ahead of most other countries. It is fair to say that we are not so far out as to be isolated, nor are we moving against the stream. Rather, we are one of the leaders in the stream of legislating in this respect. My. hon. Friend the Member for Burton also asked to what extent, if at all, this legislation is retroactive. There is a difference between clauses 5 and 6 in this respect.
Clause 5 is not retroactive and does not seek to undo any overseas judgment for multiple damages which might have been enforced by the United Kingdom courts. An overseas multiple damages judgment which might come before our courts for enforcement could still be enforced either by registration or by giving a finally determined judgment up to the time when the Bill becomes law. There is, therefore, no element of retroactivity. Somewhat differently, clause 6 goes a little further. 1584 Clause 6(4) does not apply to any judgment given before the passing of the Bill. My hon. Friend will see, therefore, that there is a difference between the two.
Clause 5 ensures that even when a judgment has been given in the country concerned it cannot be enforced unless it has been before the British courts before the date on which the Bill becomes law.
My hon. Friend said that he was puzzled about how this will operate in the courts. My hon. Friend is a lawyer. If he finds the operations of the courts puzzling, who am I to disagree? There is ample room for discussion in Committee about the way in which the provisions in the Bill will come before the higher and lower courts.
I welcome much of what was said, with his usual good humour, by the hon. Member for Liverpool, West Derby (Mr. Ogden)—a curiously named constituency. He asked how far consultations were progressing with the United States authorities and our maritime partners. He suggested that it might be better to await European Community legislation rather than for us to be pathfinders. I am not sure whether he meant that we should wait for the Commission to propose measures or for our partners in the Community each to propose its own measures. Several of our partners in the Community already have such measures, some of which go even further.
Many of us have reservations about waiting for the Commission to propose measures, not only because of the delay involved but because of the implications of the extension of competence. It would be wrong to extend competence in such a wide area on this issue, which we hope is a passing problem and not a permanent attitude by the United States authorities.
§ Mr. Ogden
I thank the Minister for the care with which he responded to my question. However, he said that my constituency was curiously named. That could be a term of admiration or a term which would not be appreciated at home. My constituency was the Hundred of West Derby, which was an ancient part of Merseyside long before the port was established. The land was owned by the Stanley family—the West Derbys—and the King of the time would not allow the Derbys to be concentrated in one part. He wanted them spread round. I have 1585 been called to talk about foot rot and sheep dips, but I hope that the Minister did not mean to criticise my constituency.
§ Mr. Tebbit
Good gracious, no. As always, the remark was made in friendliness and in pursuit of knowledge. I have indeed gained in knowledge. Chingford certainly does not wish to extend its jurisdiction over Liverpool.
I return to more serious matters. The issue is: to what extent have we consulted the United States authorities and our maritime partners? We have consulted almost interminably with both. Those consultations continue.
Only a few weeks ago the consultative shipping group returned from consultations in Washington with the United States Government. I wish that I could assure the House that the group had made more progress. It made some progress and it did not go backwards, which we feared it might at one time. I suspect that there will be a greater willingness to discuss these matters now that the Bill has been introduced and received a general welcome from both sides.
§ Mr. Clinton Davis
At the beginning of the debate my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) referred to the support given at Question Time by the Secretary of State for the proposition that on its merits some degree of independent scrutiny of the conference system was justified. That should be debated seriously with the United States authorities.
I have seen some records of the consultative shipping group's discussions in the United States. It seems that that matter has not been taken on board seriously. Is there a division within the group about the merits of the proposal? Should not the Government use every endeavour to persuade those in the consultative shipping group that to avert their gaze from this necessary step is counter-productive?
§ Mr. Tebbit
I had not forgotten what the right hon. Member for Lanarkshire, North said. I shall be dealing with it later. I do not believe that there is any great division in the group about this matter. We are not opposed to greater transparency and openness, or even to a degree of supervision of the conference system. We feel strongly that this must 1586 be achieved by international agreement, We are willing to have consultations with the United States authorities. We hope that if we do have consultations they will be held with the intent of reaching an agreement and that the United States will pull back from this exercise in extraterritorial jurisdiction.
My hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) raised some interesting questions, particularly about a case in which he was involved. He referred to a law report published in 1978. That is the sort of book that I cannot go to bed without. He agreed that the extra element of damages is penal. He explained clearly that our courts do not enforce, and never have enforced, foreign public penal laws. That is the essence of clause 5.
My hon. and learned Friend said that clause 6 contained confined powers and that this was because of its drafting. He wondered whether it was worth attracting the charge of counter-imperialism for what he saw as little gain. We shall seek to discover in Committee who is seeing the matter most clearly. It will not be easy for people to recover those punitive elements of damage, but even in their restrictive form it is right that the powers should be there.
If the Committee believes that those powers are too narrow, we might be able to widen them a little. It would be dangerous to think too much about widening powers which are at least novel, if not unprecedented.
My right hon. Friend the Member for Crosby (Mr. Page) also welcomed the Bill. He said that it was overdue. He wondered whether clause 1 was effective because subsection (1) was drawn so tightly. I believe it is right that it should be tightly drawn, and to some extent it has to be looked at together with clause 2. He asked whether United States fines would be registered for enforcement in the United Kingdom. Again, the answer is "No". If he means penal fines, those would not be so registered, because we would not enforce a criminal provision of that kind. He raised a number of important questions concerning the way in which United Kingdom subsidiaries of United States companies might be affected. I suggest that he leaves those details to the Committee stage.
1587 I have already dealt, at least to some extent, with my right hon. Friend's question about the California unitary tax system so far as the Bill affects it. We would be able to resist the calls for documents to be produced, but of course this is not directly aimed at that unitary tax system. We must resist the temptation to be ourselves tempted into extra-territoriality. He asked, too, whether we could refuse to make documents available to the United States from United Kingdom parent companies. Clause 2(1)(a) deals with that subject.
The hon. Member for Kingston upon Hull, East (Mr. Prescott) took the line that the shipping interests and the national interests are not necessarily identical. I am not sure whether he went so far as to see something inherently wrong in our protection of our own shipping industry, but I beg him to consider whose interests are adversely affected or would be adversely affected if we did not protect in this manner.
The interests that would be principally affected are those of our seafarers if we did not act in this way, as well as, of course, our merchant shipping owners. I believe it is right that we should continue to protect them against unfair competition and against the unfair use of legal powers abroad. If the EEC should at some time design a competition policy for the shipping sector, it would of course be an agreed policy between partners in the Community, but I believe that that is a very long way away, if it is ever to come. Our problem with the United States is not really over its competition laws. Those may be very well suited for the United States, and it is a matter for that country. The only row we have with the United States is that we do not believe that it is a good thing for it to export its laws to us. It is as simple a matter as that. We are not disposed to criticise its laws on competition in general, although we have some reservations about the principle of triple damage suits to the extent that we would not allow them to be enforced in our courts.
§ Mr. Prescott
I do not really need to be lectured about the interests of British seafarers. I believe my record will stand on its own. The point I asked the Minister 1588 to accept was this. If the activity of British shipping companies, as members of the consortium, took place on American territory—as indeed it did—and that action was concerned in trading in one form or another, surely it would be right for the American courts to apply their laws to that activity.
§ Mr. Tebbit
There are two points at issue there. First, at least half of the matters which were at issue took place outside the United States, and, if one took those matters out of the consideration, the remaining matters would not have constituted a case for the United States authorities to proceed upon. Secondly, we are firmly of the opinion that it is not only a matter of extra-territoriality. In the forum of the consultative shipping group, the 13 major trading partners of the United States, we have been in discussion with the United States for two years to try to sort out the shipping problems between us.
Officials of my Department visited Washington very recently, as I have said, but the United States has refused to talk reasonably with us about a joint approach and has actually shown considerable reluctance to continue discussions from time to time. Therefore, we are discussing the United States not only exporting its laws to our territory, but refusing to discuss in a reasonable manner how we should regulate trade between the two countries. I fully accept, as the hon. Gentleman said, that the RTZ and the shipping cases are very different, and I am glad that he said that. He expressed his reservations about clause 6 and asked whether we negotiated with the Americans. Good gracious! We negotiated and negotiated, but at the end we could not get anywhere.
§ Mr. Lawrence
May I ask my hon. Friend a question on this point of negotiation? My right hon. Friend was courteous enough to set out the proposals that are embodied in this Bill in a speech he made, I believe on 14 September, in Los Angeles to the Anglo-American Chamber of Commerce. Did anthing happen? Was there any response from the Americans between 14 September and the introduction of the Bill in this House to give us any cause for believing that the Americans were taking seriously what we are about to do?
§ Mr. Tebbit
To be fair to the United States authorities, what my right hon. Friend did not mention in his speech in Los Angeles were the provisions of clause 6 of the Bill. It is those that have caught the attention of the Americans principally. There is a lot of American territory to cross before one gets back home. It is also true to say that the Permanent Secretary at the Department of Trade subsequently had further discussions in Washington, but unfortunately those did not make the progress for which we might have hoped.
Finally, dealing with the points raised by the hon. Member for Kingston upon Hull, East, the shipping companies in the action concerned did not defend themselves in the courts because of the crippling costs involved. They did not admit guilt. They were not found guilty. They agreed to pay a fine to see an end of the matter and it was the maximum fine that was possible that was imposed upon them. They then believed that that had ended the matter; but then the Justice Department, having heavily fined them, let go and the Federal Maritime Commission moved in, and behind the FMC there moved in about 30 private interests all with triple damage suits.
§ Mr. Prescott
I understand that the dispute has been with both the Federal Maritime Commission and the Department of Justice. They are separate agencies in this action. My part of the argument was that, whatever the outcome with the Department of Justice, the hon. Gentleman, and the shipowners, could have applied to the Federal Maritime Commission, which has been trying to get information about this practice, to judge whether it is an illegal practice or a regulated trade with which it can agree. Had they done that, perhaps the FMC might have agreed and we would then not have been here discussing this kind of legislation. They did not seek to do that. They came to the hon. Gentleman for this kind of legislation.
§ Mr. Tebbit
No, that is not so. They did not come to us for this kind of legislation. They were picked on by the United States Justice Department, and, as the hon. Gentleman says, the FMC is a separate part of a body politic which seems to have some elements of being spastic in it, in that the centre does not control all the limbs. There was a degree of expectation 1590 that, after the Justice Department had inflicted the fines, the FMC would not proceed. There is a good deal of material which I could go on to quote, but I will not do so because otherwise the House might feel that it was tending to become a little tedious. That material suggests that the United States Government are well aware of the difficulties which arise when various enforcement agencies go their own way in what I would describe as a somewhat spastic manner.
I think that I have now dealt with almost everything except the remaining points raised by the right hon. Member for Lanarkshire, North. I hope to do that if I can find the appropriate piece of paper.
I speak for the Government as well as for myself. That is sometimes an inhibition. However, I hope that the House will bear with me.
I am glad that the right hon. Gentleman agreed basically with the Government's position on clauses 1 to 4. Referring to clause 5, he asked whether its provision put the existing law beyond doubt. It does just a little more than that. Certainly it does that, but it makes plain that those judgments cannot be enforced in the British courts. He referred to clause 6 as giving United Kingdom companies the right to hit back. I am not sure that I would go as far as that. After all, those companies are only grabbing back their own wallets. That hardly comes under the heading of hitting back—and not even the whole contents of their wallets are involved.
The right hon. Gentleman criticised clause 6, saying that it was not to any extent controlled by the Secretary of State. I have a long and involved answer to that. However, in essence, my short answer is that clause 6 gives a civil right to United Kingdom persons. It would not, in general, be desirable for the Secretary of State to have powers to limit or authorise the exercise of that civil right. The right hon. Gentleman asked whether there would be tit-for-tat actions—or hostile ping-pong diplomacy, I suppose. We very much hope not. We trust that the United States authorities will see the dangers of that and avoid entering a legislative arms race with us. Perhaps they might be prepared to discuss a legislative SALT agreement at some time and get out of this race.
1591 The right hon. Gentleman mentioned the independent supervision of shipping contracts. I think that I have already dealth with that matter reasonably. I assure him that we are—just as he did when he was Secretary of State—always trying to reach agreement with the United States authorities.
§ Mr. Prescott
If the Minister is prepared to say that the Government are prepared to co-operate in that, does that mean that if the Federal Maritime Commission want to obtain information from British companies in this consortium to make an assessment, which is the case, the Government will encourage British owners to give that information to them?
§ Mr. Tebbit
No, indeed. That would be the FMC trying to make rules on the basis of information that it was taking from the United Kingdom. If the United States authorities wish to come to an agrement with us, we shall bring with us information that is relevant to the discussion of that agreement. We cannot give the United States authorities a right to demand information from companies in the United Kingdom over which we say they have no jurisdiction. That is virtually the end of the matter. There is no more room in which to scatter any more papers.
If I may conclude on the note on which I began, I thank all Members who spoke in the debate for the constructive manner in which they did so. If they believe that we may have been a little precipitate in what we are doing in relation to the United States, I remind them of this. The late Sir Winston Churchill said that jaw-jaw was better than war-war. For years we tried jaw-jaw. We have now been driven to law-law. That is the situation in which we have landed. We hope that the American authorities will notice our reluctance and draw the conclusion that it is for them now, in the fullness of time, after the Bill is enacted, to come forward with their ideas on how we should proceed beyond that.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).