Lords Sitting of 25 June 1979

Preamble
The House met at half-past two of the clock: THE LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Rochester.

CAREERS TEACHERS: TRAINING
Baroness VICKERS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government, in view of the need for school-leavers to be given adequate advice in regard to obtaining a job, what training is given to those selected as career teachers.
The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Baroness Young): My Lords, advice to school-leavers on obtaining a job, and assistance with placement, are available through the careers service which each local authority is required to provide and which works in close co-operation with the schools. In addition, schools provide programmes of careers education to help young people make sound vocational choices. There are no formal requirements for the training of those teachers who undertake careers work, but there is a wide variety of provision for in-service training, including courses of varying lengths provided by local education authorities.
Baroness VICKERS: My Lords, I thank the Minister for that reply, but does she not consider that there ought to be a reappraisal of the liaison between education authorities, schools and industry in order to improve this very important service, which I do not think is working at present as adequately as it should?
Baroness YOUNG: My Lords, I shall certainly take note of the very significant point which my noble friend has raised.
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Discussions are taking place on this important matter with my colleagues in the Department of Employment. I shall certainly ensure that my noble friend's comments are passed on to them.
Lord SOMERS: My Lords, does the Minister agree that one of the items of advice which might be given is that it is a good thing to get a job?
Baroness YOUNG: Yes, my Lords.
Lord STANLEY of ALDERLEY: My Lords, does my noble friend agree that careers teachers are encouraged to dissuade young people from making, as she says, a sound vocational choice, and in particular from taking an interest in technology and engineering, because universities unfortunately do not allow an "A" level in engineering to be regarded as an entrance qualification?
Baroness YOUNG: My Lords, this question on university entrance is somewhat wide of the precise Question which I have been asked on careers training, and I should prefer not to comment upon it. However, a great deal of encouragement is given to young people to take those courses which will lead them to the kind of jobs which are available.

MORGAN CRUCIBLE SITE: BATTERSEA MURAL
2.39 p.m.
The Earl of GOSFORD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will take action to prevent a repetition of the conduct of the Morgan Crucible Company in relation to the destruction of the Battersea mural on 6th June 1979.
Lord MOWBRAY and STOURTON: No, my Lords. When the Secretary of State granted outline planning permission for the redevelopment of the Morgan Crucible site in 1978, following a public local inquiry into an appeal by Wates Limited against Wandsworth Borough Council's refusal of planning permission,

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he did not make it a condition of that planning permission that the mural be preserved.
The Earl of GOSFORD: My Lords, while thanking the Minister for that Answer, may I ask him whether he is aware that the company trespassed on public land in the dead of night with heavy plant in order to destroy the mural. This mural had taken 60 people two years to complete, and the only people to be arrested were the artist and six local residents who ventured on to the site later in the day.
Lord MOWBRAY and SOUTRON: My Lords, I am sorry to make the noble Earl unhappy, but I am not aware of those facts. I understand that the machinery which was used to destroy the wall was operated from the company's own site, and I understand that they were completely within the law. What happened to the people whom the police arrested is not in my brief, nor does it have anything to do with the Question which I have been asked.
The Earl of GOSFORD: My Lords, on a point of correction, if I may make one, the plant did not come from the Morgan site. It came across public land, because there is a 20ft. drop on the other side of the Morgan site.
Lord MOWBRAY and STOURTON: My Lords, I still do not think that this is relevant to the Question.
Baroness EMMET of AMBERLEY: My Lords, is it not a fact that the Morgan Crucible Company are endeavouring to improve the site which is in question at the moment and that they should be helped to do so in every possible way?
Lord MOWBRAY and STOURTON: Yes, my Lords, planning permission was given for redevelopment with houses and offices.
Baroness BIRK: My Lords, does the noble Lord agree that the Question which has been put by the noble Earl refers to repetition of this conduct? My noble friend is asking—this is something about which many of us on all sides of the House are concerned—that where there is a mural
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(it may not be this one but others) and an attempt has been made to improve the environment, it should be taken into account. I believe that my noble friend is thinking, also, of the future.
Lord MOWBRAY and STOURTON: My Lords, the noble Baroness is quite right. I totally concur. Every case must be looked at on its merits, and the Government will do so.
Lord BROCKWAY: My Lords, following the question from the Front Bench, may I ask the Minister whether he will look rather deeper into this question? Is it not the case that this mural painting won national recognition as a work of art, and was it not very desirable that this artist and the 60 local people who co-operated with him should seek to beautify the area rather than that the kind of slogans which are so often put on walls should be found there? Will not the Minister look at the issue in that wider context?
Lord MOWBRAY and STOURTON: My Lords, I completely concur with the noble Lord, Lord Brockway, that this shows a very noble, volunteer spirit. When artists like Mr. Barnes and 60 volunteers are prepared to beautify an area which is not very beautiful, I do nothing but applaud. However, if I may put the other side of the coin, when these people asked the owners of the wall for permission to do this they knew that a planning application had been submitted. The Arts Council gave help to the painters, in the full knowledge that their work might be destroyed.
Lord MURRAY of GRAVESEND: My Lords, surely the point that the noble Earl has made is the fact that the Morgan Crucible Company were allowed to break the law quite flagrantly and other people were arrested. Is this not a case of one law for the rich and another for the poor?
Lord MOWBRAY and STOURTON: My Lords, I have told the noble Earl that I am not aware that the Morgan Crucible Company have broken the law.
Lord WYNNE-JONES: My Lords, will the noble Lord bear in mind that his earlier remark, that all such cases would be looked into carefully, is not very

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helpful after the job is done? I am sure the noble Lord will agree with me that there is very little that can be done to replace a mural which has been demolished; and should it not be the object of Her Majesty's Government—and, indeed, of everyone in the country—to ensure that any such mural, if it is accepted, is retained and not demolished?
Lord MOWBRAY and STOURTON: My Lords, the planning consent was given in 1978; the appeal to the historic buildings division was made and turned down under the noble Lord's Government. I have every sympathy, but murals painted on outside brick walls will not of themselves be permanent paintings. At best, they are transitory. If it is decided that something is of such enormous artistic merit, no doubt applications would be made to buy the painting concerned.
Lord WYNNE-JONES: My Lords, will not the noble Lord agree that throughout Italy and other countries there are many murals outside buildings on walls which are preserved?
Lord MOWBRAY and STOURTON: My Lords, I think that is a little wide of the original Question, in any case the climate of Italy is different from that of Battersea.

FISH FARMING: MEASURES TO ASSIST
2.45 p.m.
Baroness EMMET of AMBERLEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether any steps are being taken to implement any of the recommendations made by the NFU in their report of last July to redress some of the fish farmers' disabilities.
Lord SANDYS: My Lords, a series of consultation meetings with appropriate bodies will begin next month.
Baroness EMMET of AMBERLEY: My Lords, while thanking the noble Lord
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for that reply I should like to ask him a supplementary question. I have seen that there is to be a survey of likely nuclear stations around the coasts of our islands. When that survey is made, if the benefit to fish farming is taken into account in connection with the erection of nuclear reactors, which produce warm water, would it not be most beneficial to the fishing industry?
Lords SANDYS: My Lords, while recognising the benefit which flows from existing power stations which are sited around our coasts, to the fish farming industry, and indeed to fish culture generally, at the present moment it is not the practice to include this as part of the scheme of design. I shall be only too happy to pass on to my right honourable friend the suggestion made by the noble Baroness.
Lord STRABOLGI: My Lords, may I ask the Government whether they are to continue the R & D expenditure amounting to about £1 million, given by the previous Government, or will that be a victim of the economy axe?
Lord SANDYS: My Lords, I regret that at the present moment I am unable to confirm or deny what the noble Lord has said.
Lord SKELMERSDALE: My Lords, is my noble friend aware that very small changes, usually downwards, in the temperature of the sea cause fish to desert their traditional feeding grounds, and that by extension only very small changes upwards are needed to re-establish, for example, the sardine fishing industry off the coast of Cornwall? Will he further agree that power stations, nuclear or otherwise, could well be sited with such considerations in view?
Lord SANDYS: My Lords, while wholly agreeing about the historical movement of fish mentioned by my noble friend Lord Skelmersdale, I feel that this is a matter worthy of scientific investigation and when making recommendations I will emphasise it to my right honourable friend.
Baroness EMMET of AMBERLEY: My Lords may I ask the noble Lord to suggest to the Ministry that they make

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inquiries as to what is going on in this respect in Germany, where they have gone a long way towards using their nuclear power stations to help fish farmers?
Lord SANDYS: I will bear that in mind, my Lords.

THE GENEVA COMMITTEE ON DISARMAMENT
2.49 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they endorse the proposals which the previous Labour Government made to the Geneva Committee on Disarmament, and are actively advocating them at the Committee.
Lord TREFGARNE: My Lords, the Government will continue to work for balanced and verifiable measures of disarmament. We shall play a constructive part in the work of the Committee on Disarmament in Geneva.
Lord BROCKWAY: My Lords, I thank the Minister not only for that reply but for the very full letter which I have received today, but I ask him whether the Labour Government's proposals did not include negotiations with the objective of reducing and eventually eliminating nuclear weapons, instituting nuclear-free zones in the world and the prohibition of chemical and radiological weapons? Are these not very radical proposals, and can we have an assurance that Her Majesty's Government will support them at the Geneva Committee?
Lord TREFGARNE: My Lords, the document to which I think the noble Lord refers is a full and comprehensive one which is being closely studied by the new Ministers and therefore I do not think I can add much to what I said originally, but the Government certainly share the view of all other Members of the United Nations that this must be the ultimate goal of arms control efforts.
Lord GORONWY-ROBERTS: My Lords, I am sure we may take it from the Minister—may we not?—that it is the intention of the present Government to ensure that a Minister from the Foreign and Commonwealth Office will from time to time be attending the plenary sessions of the reconstituted Committee on Disarmament in Geneva. May I, in asking that exhortatory question, add the query: is the Minister in a position to say whether a Minister at his office has been designated as Minister for Disarmament?
Lord TREFGARNE: My Lords, I cannot say whether that will be done. It certainly has not been done yet.
Lord GORONWY-ROBERTS: My Lords, I made two points. The first was that a Minister would attend some of the plenary sessions of the reconstituted Committee on Disarmament in Geneva. The second was a distinct question: will a Minister be designated as Minister for Disarmament?
Lord TREFGARNE: My Lords, I do not know whether a Minister will be designated as a Minister for Disarmament as such. There may be some difficulties about that. However, I have no doubt that my right honourable friends will be attending in Geneva from time to time.
Lord BROCKWAY: My Lords, we are in the dark as to what is happening at the Geneva Committee. Can the Minister give us any detailed account of the progress which has been made in these disarmament proposals?
Lord TREFGARNE: My Lords, not at Question Time.

PARLIAMENTARY PAPERS: INDUSTRIAL DISPUTE
Lord DENHAM: My Lords, I must apologise for the fact that certain papers, including the Minute, are not being printed as usual. This is the result of action being taken by overseers at St. Stephen's Parliamentary Press who are members of the Institution of Professional Civil Servants. The IPCS are in dispute with the Civil Service Department over a pay claim for professional and technical officers affecting

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those grades. In accordance with previous practice when production of the Parliamentary Press has been interrupted, the authorities of the House are making the necessary arrangements to ensure that the continued production of essential supplies is done on an emergency basis. I very much hope that normal service will be resumed as quickly as possible.
Lord DERWENT: My Lords, I think that my noble friend said that the papers were not, as usual, being printed. Did he mean that they were being printed as usual, or as usual were not being printed?
Lord DENHAM: My Lords, I shall need a certain amount of time to work out what is the difference!

LIMITATION AMENDMENT BILL [H.L.]
2.53 p.m.
The LORD CHANCELLOR (Lord Hailsham of Saint Marylebone): My Lords, I rise to move that this Bill be now read a second time. This is, as your Lordships will be aware, a law reform Bill and I would like to remind noble Lords that in my speech on the Address I ventured to quote from two of my predecessors on the subject of law reform. The first quotation came from Lord Campbell, who said that law reform was either by consent or not at all. The second was from Lord Haldane, who said that it took three successive Lord Chancellors to effect any significant change in the law. To this I would add a third of my own which is that law reform should be continuous and evolutionary rather than abrupt and dramatic.
I hope that this little Bill will exemplify each of those three precepts. It would rather surprise me if my noble and learned predecessor Lord Elwyn-Jones were altogether astonished either at the appearance or the contents of the Bill. Indeed, with a little coaxing I trust that he may even be persuaded to take some modest credit for his own work in its preparation. As for the third Lord Chancellor, well, modesty forbids that I should identify him. I can only say that the Bill owes its origin to a reference by the then Lord Chancellor to the Law Reform Committee on 26th April 1971. Thus it
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only remains for me to justify the third principle. When I sought to introduce this Bill into the present Government's programme for legislation, one of my colleagues asked me: "What is the limitation of actions?" So, I had better begin by answering that question.
James I and VI (of blessed memory) had the happy idea of introducing into English Law in 1623 the first Statute of Limitations which had as its basic principle the thought that if you let your rights sleep for too long you had better not wake them up. The reasons which underlay this principle were many and various and I do not propose to trouble the House with them now. The purpose of some of them has evaporated with the passage of time, but the basic principle remains and is enshrined for the present in the Limitation Act 1939—passed within my own legal and legislative career. Perhaps I should say that that canny race the Scots had already provided themselves with a similar —but of course not identical—principle obtained, presumably, from the praetors edict in ancient Roman Law.
But I had better come immediately to the point and start explaining what the Bill is really about. It derives, as I have indicated, from the report of the Law Reform Committee which I initiated in 1971 and which delivered its report to my then successor—and present predecessor—significantly, just after the expiry of the statutory six years in September 1977. The Bill brings into effect almost all the recommendations of that committee.
Clause 1 of the Bill remedies what has for long been considered a minor injustice in the present law. Under the law as it stands, where a loan is made repayable on demand or without a specified time for repayment, the time of limitation begins to run from the making of the loan. That discourages indulgence on the part of the creditor. In future, if Clause 1 is passed, time will only begin to run against the creditor from the presentation of a written demand.
Clause 2 removes the immunity from suit at present available to a thief or to a receiver of stolen goods, after six years of unbroken unlawful possession. In future it will only be the innocent purchaser for value—if any—who will be immune. The thief will no longer be

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able to sit on his own ill-gotten gains. Clause 3(1) relates to what are called tenancies at will. Here the time will begin to run from the actual determination of the tenancy, and not as now from an arbitrary date fixed at the first anniversary of the date at which the tenancy began. Clause 3(2) amends Section 9(3) of the Limitation Act 1939. The lessor's title will be extinguished when rent is paid for a period of 12 years to a person other than the landlord. But there is a saving for small rents and, in future, to suit the change in money values, the limit is raised from £1 to £10.
Clause 4 abolishes a legal fiction about the time after which possession of land is deemed to be adverse to the true owner. In future the court will be able to look at the actual facts of the case instead of fictions. Clause 5 is for the protection of trustees when they are faced with a claim from an alleged beneficiary who turns up more than six years after the distribution of the estate. In future he will be liable only for the share of trust property which he would have had to pay to the late-corner had all the beneficiaries been sued in time, instead of as now for the whole of the late-comer's claim. Clause 6 provides that once a cause for action has been barred under the provisions of the principal Act it will be incapable of renewal.
Clause 7 is a restatement of old law in modern language. The committee found that the present and principal Act no longer reflects the principles on which the courts in practice act in case of fraud on the part of the defendant or mistake on the part of the plaintiff. The new provision confers an extension of time where there has been deliberate concealment which includes a deliberate breach of duty in circumstances in which it is unlikely to be discovered for some time. Clause 8 is procedural. It amends and re-enacts Section 28 of the principal Act and deals with the incorporation, by amendment, of new claims in pending actions. After the expiration of the relevant limitation period, amendments may be made only if they satisfy the conditions imposed by Clause 8(5) of the Bill, and any further limitations imposed by rule of court. It covers both set-offs and counterclaims and also proceedings made in third party
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proceedings as well as new causes of action.
At the Second Reading stage I do not think I need say any more, except to make two points. First, save in so far as Clause 7 deals with concealed fraud and mistake, there is no provision in the Bill relating to the thorny question of latent damage. I am told that this was the decision of the Government of which the noble and learned Lord, Lord Elwyn-Jones, was a member, and it is also the conclusion of Her Majesty's present Government. The second point is that as a result of the passing of this Bill—if it is passed, as I hope it will be—I hope that by 1980 I shall be in a position to introduce a Consolidation Bill, which is always a useful piece of legislation. I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2a—(The Lord Chancellor.)
3.1 p.m.
Lord ELWYN-JONES: My Lords, I am sure that the House will be grateful to the noble and learned Lord the Lord Chancellor for introducing and explaining the Bill—as he always does—so clearly to us. It is sometimes necessary to explain the apparently obvious. I remember that when I took one of the three original copies of Magna Carta to Congress—on loan I may say—I was a little confused to be told that an American schoolboy, on being asked "What is Magna Carta?", replied "Magna Carta is Jimmy Carter's mother". Therefore, there is always room for explanation about the apparently obvious.
I am certainly not surprised that the noble and learned Lord the Lord Chancellor has introduced this Bill. Indeed, it might be described as conceived by him, nurtured by me and now christened by him today. As he pointed out, it was he who, in 1971, invited the Law Reform Committee to consider what changes in the law regarding limitation of actions are, in the opinion of the committee, desirable. In 1974 that committee submitted a report on the limitation of actions in cases of personal injury; that report was substantially implemented by the Limitation Act, which I introduced in 1975, about which before the end of these proceedings

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we may hear a certain amount of questioning and, indeed, suggestion that some of the matters arising since then should be considered in this Bill. However, we shall see what happens when the Committee stage is reached.
Of course, on the dissolution of a Parliament, there is always a danger that law reform measures tend to get lost. I am glad that that has not happened on this occasion and that the labours of the Law Reform Committee of Lord Justice Orr and his colleagues—who so generously gave of their time and effort to produce, in 1977, their final report—have not been in vain, and that they should have the satisfaction of knowing that at any rate Parliament has taken up most of their recommendations, as it is now doing in considering the Second Reading of this Bill.
My noble and learned friend Lord Gardiner—ever watchful to see that Lord Chancellors are kept up to the mark (a process which I hope he will continue in the course of this Administration}—asked me what the previous Government's intentions were. In March this year lie asked me whether the Government accepted the recommendations of the Law Reform Committee on limitation of actions. I assured him then that we had decided to promote legislation for England and Wales, usimy, the well-known expression, "as soon as suitable opportunity arises". Unhappily, it did not arise owing to the fluxion of time and the course of events.
Therefore, I welcome the noble and learned Lord's introduction of the Bill today. It is a useful measure of law reform. As the noble and learned Lord the Lord Chancellor has indicated, several of its provisions will aim to achieve a wider measure of fairness and equity in the field of limitation with which the Bill deals. The noble and learned Lord has explained the Bill helpfully, as indeed has the admirable Explanatory and Financial Memorandum, which has certainly eased the task of noble Lords and myself who have sought to follow the Bill. I do not propose to comment on Second Reading on the details of the Bill's provisions. Happily, there is a great deal of expertise in your Lordships' House and no doubt we shall consider the matter carefully and in detail as we proceed.
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As the noble and learned Lord the Lord Chancellor has said, the Bill does not deal with the difficult matter which is raised in the final report of the committee —the problem of when the limitation period starts in the case of latent damage. We gave a good deal of thought to this difficult matter and some of us who considered it were as divided as was the committee itself. However, I certainly, and the majority of my colleagues, came down in favour of the view taken by the majority of the committee and favoured leaving the law as it is, certainly for the time being, so that the limitation period should start from the accrual of the cause of action. The minority of the committee favoured granting the court itself a residual discretion to override the limitation period in cases of latent damage, if the court thought it just to allow the litigation to proceed. That was the formula arrived at in considering limitation in relation to personal injuries.
The view that I certainly formed, and it was the view of most of my colleagues, was that in the absence of clear evidence that the current absence of that kind of judicial discretion outside the personal injury field causes serious hardship to a relatively small number of plaintiffs, it would not be sensible to put at risk the chance of obtaining insurance cover. I take the view—and it may well be that the noble and learned Lord takes the same view—that it would be preferable to await further judicial development of this matter before contemplating legislation in this particular field.
As I have said, it is not my intention to enter into the details of the Bill at this stage. The Law Society has criticised various aspects of it and it may well be that some of my colleagues who are members of the legal profession will take up its points and bring forward points of their own. Some also may be a little critical of the fact that the House has not been given enough time between publication of the Bill and Second Reading to consult interested persons or bodies on its contents. I have sympathy with that point of view, but it is right to say that, as in the case of reports of the Law Commission itself, the Law Reform Committee submitted a questionnaire in reply to which it received memoranda from a very large number of experts in the field; and interested bodies,

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including the Law Society itself, and a number of individuals, gave written evidence.
It is partly the wide nature of consultations of that kind—which is also the job of the Law Commission—which gives an assurance to Parliament when these measures come forward on the strength of its recommendations, that at any rate soundings have been taken carefully in the quarters which could have much to contribute and which would be most affected. Therefore, I hope that those who are not wholly happy about the immediate scene with which we are presented, nevertheless will join with me in welcoming the Bill.
3.10 p.m.
Viscount DILHORNE: My Lords, I lack the temerity of being critical of a Bill which is sponsored by two Lord Chancellors. The noble and learned Lord, and I will not say the late but the former Lord Chancellor, share responsibility for this measure, and I would not wish to be critical of it in any respect, except that I do not think it deals with all the matters which it should. The noble and learned Lord on the Woolsack referred to his desire to introduce a consolidation measure. Before that is done, consideration ought to be given to another aspect of our statute law with regard to limitation of actions.
I think I am right in saying that over the years Parliament has reduced the period within which an action for personal injuries can ordinarily be brought from six years to three years, bearing in mind how necessary it is to have liability determined fairly soon after an accident has occurred. But, as the law now stands, to that rule there is an exception for persons suffering under a disability. One category of persons who in law suffer under a disability are infants. Recently there came before this House a case which illustrates quite clearly the situation which I do not myself think should be allowed to continue. In 1964 a child stepped off a pavement. She was three and a half years old, and she suffered brain damage. As your Lordships may well know, claims in respect of brain damage may lead to very large awards of damages. I think that last week this
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House decided that an award should be of a sum of about £250,000.
An action could be started in respect of that claim from the day it occurred when she was three and a half until three years after she reached the age of 18. So that from that time for about 17½ years the defendants had the possibility of an action being brought against them for damages. I may say that I do not know to what extent she suffered brain damage, but that can be a serious injury as one knows.
In respect of the accident in 1964 a writ was issued three years later in 1967. It was served a year later in 1968. Then there was notice in 1977 of an intention to proceed with the action by the solicitors then acting. This was in 1977, with the accident in 1964, 13 years afterwards. Not surprisingly there was an application to dismiss the action for want of prosecution. But that application failed in this House because it was held that it was pointless to dismiss that action when, immediately that action was dismissed, another one could have been started, and started, I think I am right in saying from recollection, at any time before some date in 1982.
May I quote from the speech of my noble and learned friend Lord Diplock in dealing with this case. He said:
"My Lords, it is not and cannot be disputed that by 1977 there had been inordinate and inexcusable delay in the prosecution of the action and that the delay has given rise to a substantial risk that it will not be possible to have a fair trial of the issue of liability in respect of a road accident which happened nearly 15 years ago. It is also likely to have caused prejudice to the defendants, whose insurer's files upon the matter have by now been destroyed; so have the police records and statements relating to the accident."
In those circumstances, one may well wonder whether, if this claim ever does come to trial, there can be anything in the nature of a satisfactory trial of it. That is why I would ask the noble and learned Lord the Lord Chancellor to take steps to ensure that this problem is considered with some immediacy, with the hope that some amendment can be made to this Bill in the course of its passage through both Houses, so that the day may come when he can achieve his desire and introduce a satisfactory consolidation measure.

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I am not going to suggest, or take up time by suggesting, what is the right answer to the problem. Of course one does not want an infant to be deprived of his rights because of his infancy. At the same time, one must have regard to the interests of defendants. Before the law was changed to what it now is there was a more limited period extending beyond the ordinary period within which an action could be brought if the child was in the custody of a parent. That led to some difficulties, but it may be that some consideration and slight amendment of the former provisions would be better than the present situation, and lead to more fairness and better administration of justice.
However that may be, I plead with the noble and learned Lord the Lord Chancellor—and I am supported in this by my noble and learned friend Lord Diplock—to take steps to secure, if he can, that the law in this respect is improved by this Bill, and the Bill itself contains some amendment of the existing law in relation to disabilities before it reaches the statute book.
3.8 p.m.
Lord MISHCON: My Lords, if ever, while your Lordships are tolerant of me, I am displaced in the list of speakers by anybody, I would always hope that it would be by somebody of the calibre and charm of the noble and learned Viscount.
Viscount DILHORNE: My Lords, will the noble Lord allow me to apologise?
Lord MISHCON: My Lords, even to receive the noble and learned Viscount's apology at the start of my speech is a privilege. May I first join in the congratulations extended by my noble and learned friend Lord Elwyn-Jones to the noble and learned Lord the Lord Chancellor for the lucidity and clarity with which he introduced the Second Reading. My observations—quite a deal of them inspired by the Law Society, of which I am proud to be a member—will be limited to points that should be raised on Second Reading in order to perhaps make the Committee stage of this Bill more intelligible to this House.
This is a matter of law reform which, rather peculiarly from the point of view of
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my learned profession, is not an esoteric topic. It is one which all your Lordships would be interested in because it deals with a balance of rights and a balance of equities as between a defendant over whom the sword of a prospective action should not dangle for too long, with all the attendant difficulties in obtaining evidence at a late stage and of lack of recollection, and the justice that is due to a plaintiff in the exercise of remedies that he may have because of rights of his which have been impinged. It is a delicate balance, but is one on which very often the layman has as clear a judgment as the lawyer, and it may be at times a better judgment. It is against that background that I beg leave to bring to the House the following matters which are relevant at this stage. I do so on the principle which should be enunciaated quite clearly, namely, that it is not the right which is expunged but purely the remedy as the result of a period of time having elapsed.
I wish to deal with four categories of matters arising out of the Bill which are relevant on Second Reading. The first category is some recommendations made by the Law Reform Committee but which are not followed in the Bill; the second category is a recommendtion which is followed but which I respectfully suggest should not have been followed in the Bill; the third category is a subject matter of the report already referred to by my noble and learned friend which is ignored by the Bill —indeed, the noble and learned Lord the Lord Chancellor referred to it—and that is the question of latent damage; and the fourth category concerns a case which was decided after this report appeared and therefore is not mentioned in the 21st Report of the Law Reform Committee with which we are dealing, but which is ignored by the Bill as though the case had not occurred.
On the first category—the recommendations made but not followed in the Bill—I am delighted that the noble and learned Viscount preceded me because he mentioned a certain case where there was a mental disability. The first point I wish to make is that the committee recommended—this is not the first time it has been recommended—that mental disability, mental disorder, should be defined. There is no clear definition until you get to protection order cases as dealt with in the Mental Health Act 1959, and the committee

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recommended that in this Bill or in any enactment following on their recommendations the definition in the 1959 Act of mental disorder, a very good one, should be followed. It does not appear in this Bill.
Secondly, the committee recommended that what seemed to be a rather illogical preservation, of a 12-year period after judgment had been obtained in cases for actions on the judgment, should be abolished. This Bill does not abolish. Thirdly —and in view of the dry-as-dust remarks which I have to make, I hope your Lordships will forgive an attempt at some light relief—I observed on reading the report that there is a heading dealing with the matter of landlord and tenant which is called "The Saint Marylebone case". Bearing in mind the title which the noble and learned Lord the Lord Chancellor enhances, I was intrigued at that heading, but I was intrigued further when I went on to read, and I do not know whether this is a subtle reference by way of prescience to the hoped for continuity of the Lord Chancellor's office:
"Reversal of the Saint Marylebone decision might prejudice the lessor"—
and it goes on to say—
"who could find himself saddled with a tenant whom he had never wanted".
Whether that is a hoped for prayer for the continutiy of the present Lord Chancellor I know not, but I revert to the heading of that chapter of the report which deals with landlord and tenant and I bring to your Lordships' attention the fact that Clause 3(1) of the Bill deals with the question of tenants at will and the change that was recommended by the report, but for some reason which escapes me does not make a similar change in respect of periodical tenancies where there is no written lease.
I come to the second category, the case where the recommendation has been followed but where, in my respectful submission, it should not have been, and here I deal with Clause 6 of the Bill. I believe it would be in your Lordships' knowledge that where, after the expiration of a period of limitation, an acknowledgement is made by the proposed defendant, or he makes a part payment, the time begins to run again and, in spite of the fact that the period of limitation has expired,
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a plaintiff can bring an action. The Bill follows the recommendation of the committee in that respect and does not revive that time-barred remedy. If I may say so respectfully, I cannot see the logic behind that because, to re-enunciate the principle, it is that it is not the right that goes but the remedy, and there can surely be no hardship on a defendant where indeed an acknowledgement of the indebtedness has been made, and a part payment has been made. I therefore respectfully observe that I cannot see why that recommendation has been accepted.
The third category—the example of an important issue which has apparently been ignored—brings me to the observations made by Lord Elwyn-Jones and to the question of latent damage. To put it in simple terms, most of us recognise it in a building case, where you suddenly find that the building that was built for you, a house perhaps, throws up a latent defect. The courts, as I am sure the Lord Chancellor will agree, have tended in recent times to take the point of the accrual of the cause of action as the discoverability of the damage, and that seems to be extrememly logical. This Bill ignores the question of latent damage, and does not deal with the recommendations made by the minority of the committee, who said that the proper course here is to give the court discretion to allow a case to be brought on consideration of its merits and the facts, even though prima facie the limitation period has gone. This would appear to be such a sensible recommendation, and in view of the fact that one cannot get certainty—which was the real reason for the majority decision to which Lord Elwyn-Jones referred—when one must go into the whole issue of when it could have been discovered by a reasonable person, I should have thought makes the majority decision unacceptable and that at least we ought to have had this difficult matter, and it is a difficult one, dealt with in the Bill, but it is not.
The last category to which I come is a category where a case has been decided since the committee sat and the Bill, as I see it, does not take any cognisance of it. The case was that of Batty v. Metropolitan Property Realisations [2 Weekly Law Reports, 1978; p. 500.] That case dealt with the following issue, which I should like to put to your Lordships very briefly and very simply. When

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there is a breach of contract, the period of limitation starts as from the date of breach. When there is a tort, which is a civil wrong (such as negligence), it dates as from the date of damage. There is a type of case (as this one was) in which there is an option either to go on contract—that is normal in a breach of duty case; for example, against a professional man—or to go on negligence, with different dates from which the date of accrual of the cause of action arises. The court decided in the 1978 case that the plaintiff could go for the one that suits him the better; in other words, the one which gives him a longer period by way of limitation. To have, in fact, under two roots of law, contract and tort, different periods from which the accrual of a right of action starts, when indeed in so many cases it may flow from both, seems to me to be an illogicality and an untidiness which obviously ought to be relieved under the Bill.
My Lords, I have spoken for long enough and your Lordships have listened with your usual tolerance. I have raised these points in order possibly to save time at the Committee stage by seeing how—if I may say this respectfully—the noble and learned Lord the Lord Chancellor deals with them, and by seeing whether or not he would welcome amendments at the Committee stage relating to the matters to which I have referred.
3.31 p.m.
The LORD CHANCELLOR: My Lords, it is clear from the way in which the Bill has been courteously and helpfully treated by those who have played a useful part in the debate, first, that this is a highly technical and difficult matter, and, secondly, that it is nothing more nor less than a bundle of Committee points. That it is a bundle of Committee points does not involve myself in any criticism of any of the points which have been made. As the noble Lord, Lord Mishcon, has said, it can help the Committee stage of the Bill if, on Second Reading, in effect public notice has been given by way of the banns read out in church (as it were), so that we have notice of what may be raised, and those who wish to raise them are able to know the kind of points which can be said against them.
May I deal, not necessarily in order, with the various points that have been
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made, but before doing so I should like to thank the noble and learned Lord my predecessor for the kindly welcome which he gave to the Bill. He acknowledged that law reform of this kind is a continuous process and that Lord Chancellors have the civilised habit of picking up the threads of law reform where their immediate predecessors have left them. indeed, I do not consider that with a technical matter of this kind it would be possible to have law reform and not to act in this nonpolitical way. Of all the offices under the Government, probably that of Lord Chancellor has the greatest degree of continuity. We usually know, though we do not always disclose, exactly what our predecessors, and indeed our successors, think about particular subjects, because we often discuss matters in an informal way. I am very grateful to the noble and learned Lord for the welcome that he has given to the Bill. The noble and learned Viscount on the Cross-Benches raised an interesting and important point, but while the questions are fresh in my mind—and they are quite numerous—I want to come first to the points raised by the noble Lord, Lord Mishcon, from the Labour Back-Benches. I believe that the noble Lord represents in broad terms the views of the Law Society, of which he is not only a member, but of which he is quite rightly proud to be a member.
First, the noble Lord took a series of recommendations of the Law Reform Committee which he claimed have not been followed in the Bill. In this regard he said that I have left undone those things which I ought to have done. The noble Lord wanted to find in the Bill—and said that he could not—a definition from the Mental Health Act of disability. I think that the noble Lord is perhaps mistaken in thinking that that is not in the Bill. I do not in the least blame him for missing this because I should have missed it myself in similar circumstances. I ask the noble Lord to look at paragraph 11 of Schedule 1 where he will probably find what he is seeking. Schedule 1 deals with the amendments to the principal Act, and it contains the usual gobbledygook involved in such legislation. Paragraph 11 states:
"In Section 31(3)—"
that is of the principal Act—
"for the words from 'but' to 'presumed' there shall be substituted the words 'a person is of unsound mind if he is a person who, by reason

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of mental disorder within the meaning of the Mental Health Act 1959, is incapable of managing and administering his property and affairs; and, without prejudice to the generality of the foregoing provision, a person shall be conclusively presumed for the purposes of that subsection'".
I am advised that the noble Lord will find that that deals with the first of the points that he raised.
Then he complained that there was no reduction in the period for an action on a judgment from 12 to six years. Again I ask him to look at Schedule 1, and this time in particular at paragraph 2(d). He will see that it states that in Section 2 (that is of the principal Act):
"in subsection (4), for the word 'twelve' there shall be substituted the word 'six' …".
So I think that I have probably successfully defended myself against the category of those things which I have not done but ought to have done.
Lord MISHCON: My Lords, may I thank the noble and learned Lord the Lord Chancellor who, with characteristic mercy, has dealt with those first two points. Furthermore, may I offer merely the excuse that I am afraid that I had not had time properly to study the schedule in view of the brief period that elapsed between the printing of the Bill on 14th June and this Second Reading debate. That is my only excuse.
The LORD CHANCELLOR: My Lords, I believe that the noble Lord has a very good point there. Indeed, earlier the noble and learned Lord referred to the shortness of the period, and of course he is quite right. He knows as well as I do—or probably better—the difficulties of slotting these items into the legislative programme. A technical Bill of this kind is not particularly contentious and we have to find something for the Lords to do in the early part of the Session; if we do not, they will not do it. We know what happens at the end of a Session if we do not. Thus one struggles very hard to provide provender in order for the hungry mouths to be fed. One is in that kind of difficulty, but I also understand the noble Lord's difficulty.
I turn now to the third point which he said I had left undone, and he is right in saying that I have not done it, although whether I ought to have done it is another
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matter. I refer to the absence of the recommendation with regard to periodical tenancies. I suppose that that means that subsection (2) of Section 9 of the principal Act should be repealed along with subsection (1).
The effect of this would be that a periodical tenancy would no longer be deemed, for limitation purposes, to be determined at the end of the first year or other period, but would be determined only when actually determined by the lessor. The reason for retaining this subsection is that it would be more in the general interest than would its repeal. If a periodical tenant could never prescribe against his landlord when the latter vanished, he would be disinclined to improve or maintain the property and would have difficulty in making title for the purposes of a mortgage for improvement, and so on. The policy was discussed between departments—and here I am supposed to say pompously that I have discussed it with the Secretary of State for the Environment, although of course I have done nothing of the kind; in fact it has been discussed at an official level—and the position is that we decided as a matter of policy, and for the reason I have given, to omit that particular thing.
In passing, I should like to say that my general approach to these committee and commission reports on law reform is that I tend to back the committee or commission where I can, but if my view is defeated in Committee by those who think they know better then, having made a valiant fight, I shall not resign immediately but will consider that perhaps the Committee may be right and I may be wrong. On the other hand, we think that as a matter of policy this is better left out of the Bill.
Lord ELWYN-JONES: My Lords, I do not know whether it will comfort the noble and learned Lord to know that I discussed this matter with the then Secretary of State for the Environment, and that I am inclined to agree with the noble and learned Lord. That may give him a certain amount of assurance; I do not know.
The LORD CHANCELLOR: That is all the more encouraging, my Lords. At

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any rate, it may be that the noble Lord, Lord Mishcon, having heard my explanation of the matter, may on balance think that there is something in it. Now a much more substantial question—and this is a matter upon which the committee was divided—was the question of the effect of acknowledgment or part-payment on a claim which is statute barred. Following extreme legal accuracy and traditional legal learning, the noble Lord, Lord Mishcon, and the Law Society represented to us that the cause of action is not destroyed by the time bar; it is only, as it were, buried but not dead, and disinterment by acknowledgment or part-payment will set time running again. This is of course absolutely accurate legal learning, but I happen to take the other view, as did a bare majority of the committee and, I believe, the previous Government. One can be too learned about these things, but I am going to try to be a little pedantic myself.
When the original limitation period of 1623 was introduced during the reign of James I, of course the mischief which was then aimed at was different from the mischief which is aimed at now, although the period happens to be the same. In those days, after six years a wicked and cunning plaintiff would get a lot of perjured witnesses to allege the existence of a contract or a cause of action and put up a false case against a defendant which he could not answer, and the reason why he could not answer it, as students of Dickens will remember, is that until comparatively recently neither the plaintiff nor a defendant could give evidence at all. Therefore, the mischief was that of a trumped-up, false case. Nowadays, the mischief you are aiming at is not that but the absence of certainty in dealing with insurance claims and in dealing with the carrying on of business.
The view of the majority of the committee—I will not read it all, but it is Part II, paragraphs 2.70 and 2.71, of the little blue report—was in favour of certainty after six years. It is quite true that there is an element of illogicality if you pursue the strict, legally accurate, view that what happens when an action is statute barred is that the remedy is removed but not the right. But the committee came to the conclusion that this was basically—and I use the word without offence—gobbledygook, and that
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what was wanted was certainty. On balance, I agree with this view. I quite acknowledge that other people may differ, and the question is on which side you come down, the majority or the minority view. I am with the majority on this occasion. We can try it out, if we want to try it out, in Committee. I shall not take it ill if the the Committee takes an opposite view, but I shall still vote for the position as I have argued that it should be.
The next point which the noble Lord raised concerned latent damage, and I think I can perhaps deal with that at the same time as I deal with the case with the rather unpromising name of Batty, to which he referred, which undoubtedly was decided after the committee reported. The first point about that—and, again, it is one about which opinions may differ —is my conclusion that the law is better left for the judges to develop at this stage, and it is better not to try to impose an artificial certainty by statute. The committee divided itself on the subject of latent damage, some members coming down on the side of discoverability and some coming down on the side of certainty. Here again, on the whole, I come down on the side of certainty but subject to the kind of case which Anns v. London Borough of Merton and Batty were really discussing. For myself, I do not think it is a bad thing for the judges to be left to develop the law on the lines upon which it appears to be developing. The law relating to negligence has been developed a very great deal in recent years. The point of departure was the Scottish case about the snail and the ginger-beer bottle. There, nobody ever discovered whether there was a snail or whether there was a ginger-beer bottle to contain it, but it formed a point of departure for the law of negligence which has been developing ever since. What has been happening in some of the fields is that, of their own motion, the courts seem to be developing, in relation to negligence, but not in relation to other causes of action, a doctrine of discoverability of their own; and that is what happened in Batty.
I can understand the interest of the Law Society in this matter, because I suppose the Law Society, being interested in the practice of the solicitors' profession, have hitherto thought themselves immune from actions for negligence after six years on the basis of the fact that they have a contract with

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their clients, and it was thought until recently that the cause of action arising on the contract protected them absolutely. They are quite right in thinking that the effect of Batty is to put that degree of certainty in jeopardy. I am quite willing to pursue this matter at a later stage in Committee if the noble Lord wants to revert to it, but my present inclination is to let the thing develop a little further before we try to legislate, and I believe that is the prudent decision. But it is a matter of judgment. It is not a question of politics: it is a question of weighing one particular point against another. I am afraid I am being very dull, but this is a rather technical subject.
My Lords, I come back to the very interesting and very important point which was raised by the noble and learned Viscount on the Cross-Benches. This is a personal injuries point. It relates to the disability, probably by way of minority, but not I think necessarily by way of minority, and the effect of the Statute of Limitations on a person suffering from a disability—and I shall deal with the child as typical even if he is not the only case. It is true that after 1939, when the principal Act was passed, it was thought by Parliament, rightly or wrongly—and I think that it is still open to question which view is the better—that six years was far too long within which to bar an accident case, which is the main personal injuries category; so three years was chosen as the definitive period. I have forgotten the exact date on which this was done. Then it was discovered that three years was too short and a great deal of argument was expounded on various anomalies which were then thrown up. I am glad to see the noble Lord, Lord Wedderburn, in his place. It is a matter in which the trade unions have taken a close and absolutely legitimate interest because injuries by employees are very closely affected by this. It was discovered very soon that injuries by employees became apparent or definitively serious at a date after the three-year period had expired.
The result was that there was quite a series of amending Acts. Indeed, the last one was introduced by the noble and learned Lord, Lord Elwyn-Jones, only a year or two back. I forget whether it was 1975 or 1976, but he made a brief passing reference to it in his own speech on this
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particular Bill. That was designed to remedy a misunderstanding by the Appellate Committee of your Lordships' House of what had been intended in one of the amending Acts. I myself wonder whether the original decision to reduce the period from six years to three years has not been more trouble than it was worth. That is a matter on which opinions may differ.
I want to say this to my noble and learned friend on the Cross-Benches. He will be aware of it, but as the point is raised in public I should remind him of it in order to put it on the record that the very point which he mentioned was closely argued in the earlier and interim reports of the committee. They put the case forcefully the other way, in paragraphs 107 and 108 of the 20th Report. So that the other side of the matter may be seen by the House, I think that I might quote at any rate parts of those paragraphs because they state the contrary case quite clearly.
They were discussing the very point of what the effect of disability and, particularly, minority should be in the case of an accident where a child or a person under some other disability was injured. This is what they say. I begin with paragraph 107:
"In view of his wide experience of accidents to persons under disability we also asked Mr. Turner, the Official Solicitor, to deal specifically with this subject and we are grateful to him for the trouble he took in answering our inquiries. Mr. Turner's opinion was that the rule must give rise to hardship"—
that is, the rule that there was an absolute bar in that some minors' claims for personal injuries have been and will be lost through the ignorance or indifference of a parent.
The noble and learned Viscount on the Cross-Benches rightly stated that the previous rule had been that where a child was effectively represented by a parent in custody of him the disability did not stop the running of the period. The report goes on:
"He gave us particulars of 18 cases between July 1968 and August 1971 selected at random from his records in which he had been asked by solicitors in private practice to act as next friend to minors whose claims would not otherwise have been prosecuted. On these he makes the comment that since there is no legal obligation on anyone to seek his intervention it is fair to infer that there must be many cases in which infants suffer loss by default."

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This is the conclusion that the committee then arrived at:
"We think that the Official Solicitor's comment quoted above is justified. His evidence does call in question the validity of the assumption underlying the rule"—
that is, the rule which, as I understand it, my noble and learned friend would wish to introduce; namely that if minors—
Viscount DILHORNE: My Lords, may I interrupt at this point? I did not suggest going back to the old rule. I am fully aware of the difficulties that arose from that. What I am suggesting is that the present rule which allows a situation to arise when an action can no longer be tried properly be looked at, with possibly a reduction of the period during which a person suffering disability can start proceedings.
The LORD CHANCELLOR: My Lords, I quite see that. If I may say so, in relation to this point, it is the sort of point which will be looked at since it comes from a very exalted source and it may be publicly argued at the Committee stage.
I shall refer the House to paragraph 108 of the report, and I shall not read it for it might be that I am wearying the House about it; but I want the House to realise that, if the noble and learned Viscount's suggestions were embodied in this statute, a certain number of disability cases would be barred through the negligence of somebody else; namely, a parent or guardian who had failed to prosecute the case with due diligence. It may be that the House will think that the balance of advantage is in the retention of the present position.
As a kind of trustee for the Law Reform Committee I must say that I rather deliberately chose not to embark on the treacherous quicksands of personal injuries in this Bill. I have got to see, if I can, that this Bill gets through, and I am wondering myself whether that particular quicksand is not one into which it might become engulfed if we use this Bill as a vehicle for improving the law in that field, if indeed it requires improvement. I will look at what the noble and learned Viscount has said about it. What he says is not only accurate but weighty and it might be that we can think of something better. We are only at Second Reading now. I am afraid that we shall
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never get on if I do not sit down. I think that concludes it.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

COMPANIES BILL [H.L.]
3.58 p.m.
The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard): My Lords, I beg to move that this Bill be read a second time. This is my first Bill which I introduce with some trepidation. I am not a lawyer and I was not involved in the debates or discussions on the previous Administration's Bill. I find myself reading with some astonishment my name printed on the back of this Bill; but I have been made happier by the Lord Chancellor's reference to gobbledygook and also to his phrase on the previous measure that one can be too learned about these things. I reflected that all these remarks are relative, but I hope that the noble and learned Lord, Lord Elwyn-Jones, who is to speak after me, will, if necessary, pronounce the words in Clause 48 in the language of the Principality.
This Bill deals with the implementation of the EEC Second Directive on company law and certain closely related matters. The Directive, and hence this Bill, is concerned with the formation of public companies, the subscription and maintenance of their capital and the payments of dividends. The House will recall that the Select Committee on the European Communities in their 24th report in the 1974/75 Session made a detailed study of this draft Directive, which was debated along with several others on 8th April 1976. I shall be dealing with the main provisions of the Bill and referring to the points raised in the Select Committee's report in a few minutes' time. In moving this Bill, it might be helpful to your Lordships if I first explain the Government's wider intentions for the reform of company law.
The Bill which we are debating today is the first of two Bills which we intend to introduce. A second Companies Bill will be brought forward in 1980. This first Bill omits a number of important measures of company law reform which were included in the Companies Bill

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introduced by the previous Administration and which were debated at length in Standing Committee in another place. This does not mean that subjects like the law relating to loans to directors, the proposals on insider dealing and the new provisions for the protection of the interests of minority shareholders have been dropped. They have not been dropped; but several of the more important proposals are being re-examined in the light, for example, of the recent Inspectors' reports into the affairs of Peachey Property Corporation and Dow-gate and General Investments.
However, the United Kingdom are already out of time, as noble Lords will know, in implementing the EEC Second Directive which was adopted in December 1976, with the requirement that our law should have been amended to implement it by December 1978. So in order not to delay further our obligation to implement the Second Directive, this Bill is confined in major part to that purpose, and it is hoped that it can be enacted quickly. This will clear the way for a further substantial Companies Bill in 1980 which will need to cover the implementation of a further EEC Directive, the Fourth Directive which deals with company accounts as well as a number of other measures of reform, including those that I have mentioned from the previous Administration's Bill.
The Government intend, before the Summer Recess, to publish a consultative document on company accounting and disclosure which will put forward detailed proposals for implementing the Fourth Directive. If I may just reiterate: the consultative document will be published before the Summer Recess in relation to the Fourth Directive, and there will be a further Bill in 1980 covering that and the main points which are not in this Bill.
So turning now to the content of the legislation that we are debating today, Part I of the Bill provides new definitions as a basis for classifying companies as public or private companies; and new machinery for registration and re-registration of companies, together with certain transitional provisions which will apply during the changeover to the new classification of companies. Clause I introduced an important change into our
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law. At present, private companies are defined as those which meet the three tests set out in Section 28 of the Companies Act 1948, which means that public companies at present in our law form a residual category. But the EEC Second Directive now applies only to public companies and imposes a number of new requirements upon such companies.
Many companies at present classified as public companies in Britain could not be expected to meet the conditions required by the Directive. Therefore Clause I of the Bill defines a public company, and private companies will thus in future form the residual category with Section 28 of the 1948 Act being repealed. The main requirements which companies will have to meet in future in order to qualify for registration as a public company are as follows: first, the memorandum of association must state that the company is a public company. Second, its name must end with the designation: "Public Limited Company" or "PLC", with an appropriate alternative in Welsh as required by Clause 2 of the Bill. Third, the company must have a minimum authorised capital as required by Clause 3.
The minimum capital is set out in Clause 52 at £50,000. Before commencing business, a newly-formed public company will have to obtain a certificate from the registrar as provided in Clause 4. To obtain the certificate, the issued share capital must be not less than £50,000, paid up to not less than 25 per cent. of the nominal value together with the whole of any premium. The requirements for private companies intending to convert into public companies are set out in Clauses 5 and 6, and the position of existing public companies is dealt with in Clauses 8 and 9.
I should perhaps explain that Clause 8 has been extensively re-drafted from the previous version of the Bill in order to deal with a defeat drawn to our attention by the Law Society; namely, that it will be necessary to know whether a company which is a public company now has, after the coming into force of the legislation, become a private company, or whether it is a public company which has not yet taken the necessary steps to re-register as a public limited company. In making this change. Clause 8 has been extensively recast and the consequences of failure are

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set out separately in a new Clause 9. These changes, it is believed, will also make this provision easier to follow.
Before leaving Part I of the Bill, I should also mention for the benefit of those who followed closely the Committee proceedings in another place on the 1978 Companies Bill that the definition of proprietary company inserted into Clause 1 of the Bill by the then Opposition has been dropped. This should not be taken to indicate a change of heart on the part of the Government in relation to relieving the legislative burden on small private companies; it is merely a change of method. We shall be dealing specifically with the question of disclosure and audit of small companies and with the definition of a proprietary company for these purposes in the consultative document on company accounting and disclosures, which I mentioned earlier, which is to be published before the Summer Recess.
Part II of the Bill deals mainly with the requirements of the Second Directive relating to the share capital of public companies. Certain of these requirements are, however, based on principles which apply equally to all companies, and therefore in appropriate cases the provisions are applied to private as well as public companies. This is the case with Clause 14, which provides that directors may not issue shares or other securities without proper authority from the company in general meeting. The importance of Clause 15 is that it makes it a new criminal offence for private companies to offer their shares and debentures to the public. Under our present law if a private company were to make such an offer no criminal penalty would be incurred.
Clauses 17 to 19 deal with pre-emption rights and require companies to offer equity securities to their existing equity shareholders in proportion to their present holdings before they offer them to other people for cash. The principle that an equity shareholder should have a right to maintain his proportionate stake in the company when shares are issued for cash has, I understand, wide support, and there is a Stock Exchange requirement along these lines. Indeed, the clauses extend to the private companies, because we feel the protection they provide for shareholders is valuable and is needed. Of course flexibility is important, and the clauses
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provide for the restriction or withdrawal of rights to pre-emption with the consent of shareholders. There is also provision for preserving pre-existing arrangements which are not compatible with these new rights. Under those clauses, in a large number of cases an annual general meeting or a special meeting of shareholders can override this general protection.
There were a number of difficulties with the earlier versions of these clauses. These have been eased, for example, by the removal of bonus shares from the scope of the provisions. However, some problems do remain where offers are made to overseas residents, particularly in the United States of America. The means of overcoming these remaining difficulties is already provided in Clause 18, but we are still exploring the possibility of improving Clause 17—and having tried to read it three times, I myself am glad to hear that—so as to avoid the problem altogether.
Clauses 20 to 31 of the Bill deal with the payments of share capital, and the underlying theme of the Second Directive provisions on which these clauses are based is that a public company's share capital must be properly paid for in money or money's worth. Shares may not be issued at a discount—that is Clause 21; nor may the consideration for shares in the case of public companies include an undertaking to perform work or provide services—that is Clause 20. Where the consideration includes a non-cash asset, the Directive requires that an independent expert's report must be obtained to ensure that the value of the asset is at least equivalent to the value of the shares obtained for it. This provision of the Directive has been implemented in Clauses 24 and 25.
When the Select Committee on the European Communities examined these provisions in 1975, they considered them to be rather too detailed and rigid. They were particularly concerned about the proposal that an expert's report must be prepared where the consideration included a non-cash asset, and felt that such a provision would put companies to unnecessary delay and expense. I am afraid that it did not prove possible during the final stages of negotiations on this Directive to secure any substantial amendment to

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these proposals which, as I have indicated, are intended to ensure that the capital of a public company is subscribed on a sound basis—an intention to which I am sure we would all subscribe.
I should like to mention a new feature of Clause 24. This now provides that where a non-cash asset is valued by a sub-valuer, that sub-valuer must be independent of the company and may no longer be an officer or employee of the company, as was the case in earlier versions of this clause. The change has been made to bring the clause into line with the provisions of Article 10 of the Directive, and I am given to understand that it will not give rise to difficulty.
Finally in relation to Part II of the Bill, I should mention Clause 35, which prohibits a company from acquiring its own shares. Clauses 36 to 38 deal with related matters. The Government intend to review the question of whether and, if so, under what conditions, a company might be permitted to buy its own shares. This review will cover both the position of small family companies, where problems can arise if, for example, a member of the company wishes to retire and sell his shares, and also the question of whether listed companies with surplus cash resources might be permitted to buy in a proportion of their shares, as in the United States of America. I do not expect that this review will he completed in time for it to affect these clauses but any amendments necessary will be incorporated in the later Bill.
Part III of the Bill contains new rules governing the distribution of profits to shareholders. This is one area where the adoption of EEC Directives has provoked a long-overdue reform of our law. The new provisions on dividends cover both private and public companies and implement both the Second Directive and certain provisions of the Fourth Directive on company accounts.

Clause 39 defines profits available for distribution as the accumulated, realised profits of the company, so far as they have not previously been utilised, less the accumulated, realised losses, so far as these have not been previously written off. No distinction is made between capital and revenue profits or losses. A
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new rule in this clause is that unrealised profits may not be distributed. At present, under English law I understand that such distribution is permitted, but in Scotland it is not. As long ago as 1962 the Jenkins Committee recommended that the distribution of unrealised capital profits should be prohibited, and this reform is clearly overdue. Noble Lords on the Select Committee will realise that their point has not been fully met here on differentiating between capital and revenue accounts for this purpose. We frankly believe that, in line with modern accounting, it is probably wrong to do so.
Public companies will also have to comply with an additional test in paying dividends. This is laid down in Clause 40 and requires that a dividend may be paid only if the net assets of the company are, after payment of the dividend, at least equal to the capital of the company plus any reserves which are not available for distribution. The principle which lies behind this provision is the capital maintenance concept, which is closely linked to the principle in Part II of the Bill that the capital of a public company must be paid up for proper consideration. The effect of this new rule is that public companies will have to cover net losses, whether realised or unrealised, from realised profits before paying a dividend.
Clauses 41 and 42 deal with special classes of company. Clause 41 provides special exemptions for investment trust companies, and Clause 42 clarifies the definition of "realised profit" as applied to insurance companies. A change has been introduced into Clause 43, which deals with the accounting aspects of dividend distribution, to remove the requirement that interim accounts of public companies should be audited. This was a point where the Select Committee's views have been fully met. Clause 44 provides for the recovery of dividends which have been made in contravention of the provisions of the Bill—that is, if in the interim dividend too much has been paid under the rules which I have just explained, then there is the ability for shareholders to be required to repay. But they would be required to repay only that part of the distribution which was unlawful and not the whole of it.
Of the miscellaneous and general provisions in Part IV of the Bill I will mention

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only one—Clause 46, which permits existing public companies to use both their old and new designations for a period of six months after re-registration as a public limited company, in order to allow them to use up stocks of stationery and the like. This six months period of grace has now been extended to cover any other legislative requirement relating to the display of a company's name; for example, under certain labelling regulations.
I have described the Bill as briefly as I can. It is largely, we believe—and I hope it will be agreed to be—a technical measure, although there have been considerable difficulties, which the Select Committee's report rightly foresaw, in the matching of the more detailed and prescriptive legal approach of most other EEC countries embodied in the Second Directive with that of the United Kingdom, which in company law matters leaves a great deal to the discretion of the courts. The Bill does, however, contain a number of useful measures of reform. Before I ask your Lordships to give it a Second Reading, I should like to say that I hope noble Lords will accept what is included, and what is not included, in this Bill and, if possible, in the main, concentrate upon it.
I have questioned my noble friend and his department quite closely on the demarcations. They stem from the Second Directive. But the Bill has to include changes to British law in a slightly wider field, in order to make a compatible package. The Directive also makes necessary, or almost necessary, the repeal of some of our existing legislation and this, in turn, dictates the inclusion of some of the clauses in this Bill. It may be argued that we could have included more, but speed and the factors which I have just outlined have been our guide. My Lords, I ask the House to give this Bill a Second Reading.
Moved, That the Bill be now read 2a.—(Viscount Trenchard.)
4.22 p.m.
Lord ELWYN-JONES: My Lords, this is not the first time on which the noble Viscount, Lord Trenchard, and I have discussed company matters across the Floor of the House. We did so at some length on the Patents Bill, and I recognise his experience in company matters. If I
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may say so—if I may repeat the language of the noble and learned Lord the Lord Chancellor—there was a good deal of gobbledygook in that. At the end of the day, I at any rate, began to understand.
But I am bound to say, bearing in mind the noble Viscount's own experience in company matters and his knowledge of the long-standing need for more fundamental and significant reform than this Bill contains, that I have been disappointed with the little morsel of reform that he has offered the House. It is a morsel of great size but of little substance, although I quite agree that it must be done to give effect to the EEC's Second Directive. The Long Title of the Bill is very encouraging—no holds are barred—on the field for law reform. It is described as "An Act to amend the law relating to companies", so we may look forward to a fruitful period in Committee when the matters requiring law reform, which my noble friends and other noble Lords in the House may wish to bring forward, can receive careful consideration.
One of the curious things about the history of company law is how reluctant Conservative Administrations have been to introduce any companies Bills. I think that their last one was in the time of Mr. Baldwin, and it is quite a long time since then. They nearly had one in 1973, but they did not get through with it owing to the effluxion of time and the course of events. When I heard the noble and learned Lord the Lord Chancellor earlier, describing the previous Bill as, perhaps, being introduced in order to give the Administration and the House something to do in the earlier part of the Session, I wondered whether that was the explanation for this rather tenuous Bill. But I accept that the more positive explanation is that it is brought forward because we are under a mandatory duty to implement the EEC's Second Directive on company law of 1976. Otherwise, without that compulsion, I doubt whether we should have had a Bill on company law at all even now.
The sadness about the matter is that there is readily available for Parliament a Bill introduced by the previous Administration in November of last year, after massive consultations with interested bodies. It was unopposed in another place on Second Reading. It underwent

1247
no less than 24 sittings in the Committee stage in another place, after Second Reading in November, and almost all the points of substance which were raised on that Bill were, I submit, dealt with and most of the criticisms had been met. As I understand it, legitimate concerns that were raised were capable of being dealt with by comparatively minor drafting Amendments. Now it seems that that good work that was done last year, and the beginning of this year, is in danger of being thrown away.
It is quite true that the noble Viscount has expressed the Government's intentions to legislate on the vitally important matters, in addition to those relating to the EEC's Second Directive, which were contained in the Companies Bill of last year. But the difficulty is that things always crop up in slotting things into the parliamentary legislative timetable, which, again, may present very grave difficulties for the Government's intended Companies Bill, and I warn the noble Viscount of the dangers that lie ahead. The general experience has been that Ministers who want to bring forward Companies Bills fight the Government unsuccessfully in the legislation committee, they tend to come in right at the end of the Parliament and then founder. Perhaps I ought to speak of this in sackcloth and ashes, because that was precisely the experience of the previous Administration, and it concerns me very much that what could be accomplished now may be the subject of indefinite postponement.
There are matters about which I think we are entitled to get a view from the Government at this stage, and perhaps the noble Viscount will be a little less coy about not lifting the veil of the promised land that is to come in 1980 to deal with the highly important matters, which I shall identify in a moment, which were included in last year's Bill but which we do not find in the present Bill. After all, company law represents the legal framework for most of our commercial and industrial institutions, and one wonders many times why it is that Conservative Governments have been so reluctant to change matters. Perhaps we shall have an explanation of that. Some of my noble friends behind me will, I have no doubt, suggest some explanations that occur to them, and my noble friend Lord Wedderburn gave a
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clear warning in an earlier speech of what is in store in this field.
But there is one preliminary matter about which I should like to ask the noble Viscount, and that arises from a statement by my right honourable friend Mr. John Smith when he introduced the Labour Bill in another place. He put forward the proposal that, instead of continuing the practice of intermittent reports on company law by ad hoc committees, there should be an independent and public body—a standing advisory committee on company law—on which not only the professions but industry, the City and the trade unions would be represented to undertake a continuing review of company law. I believe that that proposal was widely accepted in the City, in industry, in commerce and by the trade unions, and I hope that in the course of this debate the noble Viscount may be able to enlighten us with regard to that basic proposal. We should like to know the response of the Government and what they propose to do in that field.
So far as the Bill seeks to implement the provisions of the Second Directive, we can examine in due course the extent to which it fails to do so and the extent to which, if any, it departs from the requirements of that directive.
Quite apart from the non-EEC Directive matters to which I shall be referring but which the Bill does not deal with, I should also like to know the extent to which the present Government's Bill differs from the previous Bill in dealing with the EEC Directive. My impression is that it is mainly a question of drafting differences, but if there are differences of substance perhaps the noble Viscount will amplify the position—I think he mentioned one or two—when he comes to reply. If, however, it is preferable to deal with that matter at the Committee stage, I shall of course understand.
Coming to the lost opportunity, to which I have already referred, of introducing proper company law reform now, the fact is that the present Bill omits wholly a substantial part of the earlier Labour Government's Bill dealing with the duties of directors and conflicts of interest. I did not note that there was any reference to that subject in the preview which the noble Viscount gave of what is

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in store, if and when we see a Companies be expressed in statutory form in what Bill in 1980.
I submit that the proposals contained in Part IV of our Bill expressed succinctly the rules with regard to a director's fiduciary duty as they have been developed in a wide variety of court decisions over the past 100 years. A statutory statement of the kind which was set out in the Bill was recommended by the Jenkins Committee in 1962 and endorsed by the Bullock Committee in 1977. We also took the view that, as my right honourable friend Mr. Smith said on Second Reading in another place, it is no longer acceptable that company law should require directors to act solely in the interests of shareholders. This does not reflect the reality of business operations in the 20th century, or the practice of responsible boards of directors, and we believed that the law should be amended to reflect those changes.
We proposed in the Bill that the statutory duty relating to the definition of directors should require directors to take into account the interests of the company's employees generally as well as the interests of the shareholders. After all, an employee who works for a company for many years, perhaps for most of his working life, has an immense stake in that company—in many respects a more significant stake than many of the shareholders. We think that this is a fundamentally important matter. I hope that even at this stage the noble Viscount will be able to give us some assurance that this is something which the Government have in mind.
We think that it would be helpful to make clear what the law expects of a reasonably conscientious director with regard to his company's employees, and I do not believe that what I have proposed would receive serious opposition from responsible company directors. Indeed, it is very interesting that the right honourable gentleman, the present Secretary of State for Employment, said in an open letter to Conservative trade unionists dated 15th May 1978 that:
"Company law should be amended to reflect existing practice in industry, which is that in furthering the interests of their company the board of directors should have particular regard to the interests of employees".
I ask whether that is still the Conservative Government's view and whether it will
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be expressed in statutory form in what they have in mind to introduce.
The Labour Government's Bill also proposed important new provisions with regard to loans to directors. The provisions of Sections 190 and 197 of the Companies Act 1948 have long been recognised as inadequate. The Jenkins Committed proposed that Section 190 should be strengthened, and again, as my right honourable friend the Secretary of State said, investigations following the recent secondary banking crisis revealed a number of cases where abuses had occurred.
The accountancy profession has repeatedly urged the need to tighten up on loans to directors. Our Bill extended prohibition on loans to directors to cover, in the case of public companies, loans to a director's immediate family and the companies in which the director or his family have a substantial interest. Indeed, it was proposed to make a breach of those provisions a criminal offence where the company concerned is a public company.
But perhaps the most important omission from the present Bill is its failure to deal with insider dealing. We believe that this should be made a criminal offence, accompanied by realistic contemporary penalties. I meant to say a word earlier about this in relation to the prohibitions contained in the present Government's Bill. I have been unable to discover from it what are the proposed penalties for the matters prohibited under the Bill. Perhaps at some stage the noble Viscount would give us an indication as to whether they are to be the penalties which were fixed 30 years ago, or whether they have caught up with contemporary relevance and inflation. But that is a separate matter.
At any rate, we believe that insider dealing should be made a criminal offence and, if I may say so, there is nothing unique in this point of view. It was supported by an impressive report from Justice. It was supported by the Council for the Securities Industry, which represents a wide range of financial and business interests. Their chairman, Patrick Neill, Q.C., has said that it is absolutely right for insider dealing to be legislated against.

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The view that is now, I think, generally accepted is that dealing in securities by a person who has privileged information which he can exploit for personal benefit is wrong. We believe that insider dealing is insidious, that it threatens public confidence in directors and that it is unfair to other shareholders and investors alike. It is, indeed, forbidden under the rules of the Stock Exchange and the City Panel on Take-overs and Mergers. I believe I am also right in saying that they all agree that criminal sanctions should he introduced.
The view that the Labour Government took was that these proposals ought not to make it impossible for legitimate activities to continue. American provisions in this field go much further than what the previous Government proposed. Our proposals would, however, have underlined the fact that insider dealing is wrong, and they would have been an effective deterrent to potential wrongdoers.
I make no apology for raising these matters which are certainly within the scope of the Long Title of the Bill, even though they do not come within the limited ambit that the Government presently have in mind. I was interested in what the noble Viscount, Lord Trenchard, said about the Conservative proposals with regard to the proprietary company. Two days were spent on that in Committee. It was described as a "new animal" and we shall be interested to see what emerges from its reconsideration. Then there was another interesting Conservative proposal on which in due course perhaps the noble Viscount will enlighten us. It was moved by Sir Brandon Rhys Williams and it required large public companies to establish audit committees and to have a certain number of non-executive directors. These are both interesting proposals, and again we shall keep a watchful eye to see whether the great dawn of Conservative thinking on company law ultimately breaks and on the horizon we see daylight, and not a dark and uncertain cloud.
4.41 p.m.
Lord MOTTISTONE: My Lords, I should like to welcome this Bill. It seems to me to be wholly sensible to concentrate
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on the parts of the Bill of the last Administration which dealt with the Second Directive of the EEC and to put back to the next year the question of the more contentious issues that were in that Bill. I think the noble and learned Lord, Lord Elwyn-Jones, would agree that at the Committee stage in another place they were only just coming to what might be called the difficult part, so there is no knowing how long they might have taken over it had they been allowed to do so, Therefore I should have thought it was wholly sensible for a new Government, while they were settling in, to put off these more contentious points for mature consideration, more especially because the Fourth Directive is not yet ready for discussion, nor indeed is it necessary for it to he discussed yet in view of the fact that it is not to be implemented until 1982. So altogether I think the Government are taking a sensible course, and it is of interest that my noble friend gave an undertaking that this further Bill would be introduced in 1980. This is much earlier in the Parliament than either this Administration or earlier Labour Administrations have ever set out before, as the noble and learned Lord reminded us.
Having said that, I too, think that it looks as though the alterations to the remainder of the previous Administration's Bill appear to be mainly tidying up and unobjectionable. However, we have not had the Bill long and people are studying it. There are some parts of the Bill which seem to be unnecessarily obscure and, interestingly enough—and I hope that my noble friend will not take this amiss—the very clause which he said should be easier to understand is one that I and my friends picked out as being more difficult to understand, to wit, Clause 8 and its associated Clause 9. We would ask, if it is at all possible from a legislative and drafting point of view, that it should be made much clearer to the old public company just exactly what it has to do, and ideally in a tabular form—perhaps a schedule. It is extremely important for the old public company to readily and easily understand what is required of it, and I suggest that in the present Clauses 8 and 9 that is not the case.
On another point, we rather felt that Clause 18(6), which has the toughest penalty in the Bill, so far as we can see is being unduly severe, but that is very

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much on a first reading and it would be helpful if the Government could give thought to that and give an answer later on.
The most important point which I wish to make relates to Clause 46(3), trading under misleading names, which my noble friend mentioned, and it concerns the very short time of six months for changing to the full new name of a company. This really seems difficult. As your Lordships will be aware, many companies will buy in stationery and packaging material a year or so in advance, saving cost to themselves and, of course, to the consumer. Whereas I suppose stationery, rather scruffily, can be modified by something being scratched out and something else being typed at the bottom, people do not like to do that. It is the packaging which is the more important item, and I was interested to hear my noble friend say—and I should be delighted if he could elaborate on it slightly—that this would not be insisted upon in relation (if I heard him aright) to EEC Directives which have yet to be implemented. I read into that remark that perhaps the labelling Directive was what he had in mind.
Be that as it may, even if there are not Directives to condition this issue, six months is a very quick time, for packaging materials particularly; and of course there are all sorts of packages. If we take a milk bottle, for example, which has the name of the company embossed upon it, that might last quite a long time—two or three years. Not all milk bottles last that long because some get broken, but some do and it would be tragic to have to destroy them just because of this relatively short period of time. I think that is a very important point for consideration. If my noble friend is suitably taken with my argument, he himself might perhaps think in terms of amendments at a later stage.
At this stage that is all the contribution that I can reasonably make and I would commend it to your Lordships. I suggest to the Opposition that they should not waste too much thunder on the parts of the old Bill that they would have loved to see in this one because it is really rather a waste of time. We have to get this Bill through quickly, and there is another Bill coming along within twelve months.
4.48 p.m.
Lord WEDDERBURN of CHARLTON: My Lords, when I first addressed your Lordships' House I had the pleasure of following the noble Lord, Lord Mottistone, and as is the custom I tried to be unprovocative. I am afraid I somewhat distressed him on that occasion, and I cannot promise him any better this time because, as the noble Viscount has explained from the Government Benches, although the aim of this Bill, is to implement the Second Directive which should have been implemented in 1978 and must now be speedily implemented, and many difficulties remain in regard to the extent to which this Bill does adequately implement the Second Directive, which we shall no doubt deal with in Committee, as my noble and learned friend has pointed out the long Title is—and no doubt deliberately—in the following terms:
"An Act to amend the law relating to companies".
So we may legitimately ask the Government why those measures of the 1978 Bill, which reached an advanced stage in Committee in another place in the last Parliament, are not included. The noble Lord, Lord Mottistone, has said that they had not reached the controversial parts. With great respect they had reached Clause 57, and nothing after Clause 66 could remotely be regarded as being a controversial clause. Indeed, as I hope to show in my remarks to your Lordships' House, the most controversial measure, dealing with insider dealing, had reached a stage where some kind of agreement might well have been thought to have been reached.
The noble Viscount told us that a second Companies Bill is coming in 1980, because of the Fourth Directive on accounts. But as my noble and learned friend pointed out, parliamentary time is notoriously limited for company law reform. It is not a popular subject for any Administration. Who knows what kind of position we shall be in, in terms of parliamentary time, by 1980? Some of the proposals for company law reform which are hardly controversial, such as those made by the Jenkins Committee in 1962, have been kicking around in the dustbins for years, waiting for statutory rescue. It seems quite extraordinary that the Government have not seen fit on this occasion to include a number of the

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measures which were there ready for them to put in from the previous Administration's Bill.
With one exception, to which I shall come, I shall suggest four areas of law that have been fully discussed and which are reasonably agreed on both sides, subject to Committee work. I agree with the noble Viscount who has suggested that the kind of proposals made by the Dowgate Inspectors recently, in a report to which I made reference in my previous speech on 16th May, may raise some new issues. I am not asking that the Government should have given—although they are, we know, an energetic Government—such speedy consideration to those matters, but surely the matters in the 1978 Bill merited a place in a Bill to amend company law?
I wish to address your Lordships' House taking a lesson from the noble and learned Lord the Lord Chancellor—namely, that when one intends to deal with something in Committee one should, as he put it, give public notice during the Second Reading debate of the matters that one intends to raise. I wish to bring to your Lordships' attention four areas on which the Government can expect to be confronted with matters in Committee, however urgent the implications of the Second Directive may be.
However, before doing so, may I make two preliminary points rather prompted by what the noble Lord, Lord Mottistone, had to say about wasting time. What is the context of the reform of company law? Today the giant public company which is dealt with by the Bill, as well as the important but other type of private company, deals with a vast concentration of capital. To pick two references at random, in the Green Paper of 1978— A Review of Monopolies and Merger Policy, (Cmnd. 7918)—your Lordships will find in Chapters 1 to 3 a most useful survey of modern times since the rapid concentration of capital, particularly in Britain in recent decades. So, by even 1972 the 100 largest companies accounted for 41 per cent. of net output, and of course the number today is even less. As was pointed out in Table 3of the Bullock Report in 1977, to which my noble and learned friend dared to make reference —Cmnd. 6706—these large companies are
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financed much less by the equity market or even by loan capital: they are financed to the extent of about 75 per cent. by their own internal funds, by retained capital. So, these are massive concentrations of wealth and social power.
Company law reform is not a mere technical matter. Company law is that part of our law which sets down the conditions upon which those personified aggregations of capital may operate in our society for the 1980s with the privileges of incorporation and limited liability-privileges which are frequently forgotten but which have been available to them since 1855. Therefore, this is a most important subject. A Bill to amend company law may properly have confronted to it the question: Why have you left this and that out, especially when it has been fully debated, as have so many matters?
Merely as a preliminary point—because I cannot think of anywhere else to put it—may I make a minor plea to the Government in regard to the form of legislation. My plea is that there is a need to consolidate company law, but can the Government help us. When we find in Schedule 2 to the Bill 40 amendments made to seven statutes, could there not be printed in the statute not only the additions, insertions, substitutions, subtractions and particular sections and subsections of those seven statutes, but also as a separate Part II to the schedule, the full text of each section or subsection as amended? There are good precedents for that. As regards the Companies Act 1967, in the schedule which amended Schedule 8 to the 1948 Act there is set out the full text as amended. The Sex Discrimination Act 1975 sets out, as amended, the Equal Pay Act 1970. It is not often that I claim to speak on behalf of businessmen, but one would have thought that if the Government do not wish to waste the time of both businessmen and legal practitioners, they would surely be led to this approach in any Bill dealing with company law where there are some dozen statutes through which practitioners and businessmen have to weave their way by reference from one clause to another. Every time something is amended surely the amended section should be set out in full.
I now come to the first part of my major four points. Here I omit some part of

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my argument in that I wholly support the case made by my noble and learned friend on the Front Bench that the parts of Part IV of the 1978 Bill which dealt inter alia with contracts and loans to directors—hardly controversial matters except for their drafting—should surely have found a place. And, above all, surely the clauses dealing with insider dealing should have found a place in the Bill, as my noble and learned friend suggested.
Some of us have been pressing for 20 years for legislation on insider dealing, and we took heart in 1972 when the noble Lord, Lord Shawcross, who was then chairman of the City Takeover Panel, swung round in favour of the view that it should be a criminal offence. There may be few directors or "Tippers" or "Tippees", as the new jargon has it, who make large profits out of dealing in the securities of their own companies or the companies in respect of which they have confidential information. We just do not know. There may be few, but some observers suggest that there are many. Whether few or many, the practice should plainly be unlawful.
The Council for the Securities Industry has called it evil. It is contrary to the Stock Exchange regulations. What more encouragement do the Government want before they legislate upon the matter in a Bill to amend company law? Indeed, the Conservative Party put forward in the Standing Committee in another place—the noble Viscount will find the reference on 20th March in column 1093 of Standing Committee "F"—three conditions which it said must be met before insider dealing legislation could be regarded as satisfactory. They were roughly: the definition of "insider" must be appropriate; the law must not stop proper provision of information, especially to employees, which I would heartily support; and thirdly, the law must not inhibit legitimate investment activities especially by institutional shareholders or investment advisers.
What is so extraordinary is that not only did they put forward those three conditions, but Mr. Renton, the honourable Member who spoke for the Conservative Party on that Standing Committee, put forward amendments which he said would meet those three requirements.
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So, the Government have in the bag the text which they could put on the Statute Book. It is no great effort, it seems to me, to take one's own amendments and put them forward if they are satisfactory. For what strange and esoteric reason the Government chose not to do so, I still await the noble Viscount's explanation.
Indeed it is interesting that the noble Viscount made it clear that insider dealing and the other problems of directors and their fiduciary duties, are not to be discussed in the consultative document. He said that the consultative document is to deal with the Fourth Directive on accounts—that is understandable—and the new problem of the notion of the proprietory company, which does indeed need a great deal more discussion. But there is no need for a consultative document on these matters. It seems that they are just going to be put forward in the Bill. If I am wrong the noble Viscount will correct me when he comes to reply, and we shall see why it is necessary to have another consultative document especially on insider dealing in respct of which the Conservative Party spokesman in Standing Committee "F" of another place had what he called a satisfactory text, having welcomed the Bill and having welcomed the idea of legislation on insider dealing.
Indeed, the Council for the Securities Industry in its first annual report dated 29th May 1979 stated in paragraphs 47 and 48 that the 1978 Bill not only
"afforded a useful opportunity for dealing effectively with the evil of insider dealing",
but stated that the 1978 Bill
"went some way to meet the point raised by the Council and others"
and appeared to be in support of the kind of amendments which Mr. Renton had in mind, because it said later in paragraph 49 that:
"Further discussion on the Bill has shown that one of the first tasks is to examine the basic structure of the legislative proposals.".
As it mentions there "tippers and tippees", with which some of Mr. Renton's Amendments dealt, presumably the consent of the Council for the Securities Industry for Mr. Renton's text would not be difficult to find. So the difficulty for the Government in this matter seems to me to be rather hard to find.

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Perhaps, at this stage, I may interject a further law reform point and, I hope, a purely non-controversial law reform point, which I give notice I shall wish to press upon the Government in Committee. I beg them to consider reintroducing what was Clause 65 of the 1978 Bill. That clause attempted to improve the rights of a minority shareholder who may petition the court for an appropriate remedy in what are now called "cases of oppression" in the conduct of a company's affairs. The right so to do was introduced by Section 210 of the Companies Act 1948 on the recommendation of the Cohen Committee. But it has proved a restricted utility, largely for two reasons. First, because as the law stands, the petitioner must prove that the facts would allow for a just and equitable winding up; and, secondly, because the interpretation of "oppression" has been somewhat narrowly interpreted by the courts, although in view of the current text of the statute, one can have some sympathy with the courts in having to make that interpretation. Section 210 is particularly important because of the difficulties which a shareholder has in bringing minority action outside Section 210, due to the arcane niceties of the rule in Foss v. Harbottle, with which I shall not detain your Lordships, and the rather arrested development in Britain of what is known in North America as the "derivative action", despite the valiant efforts of the Court of Appeal in the case of Wallersteiner v. Moir (No. 2), 1975 Queen's Bench, page 313, led at a canter by the noble and learned Lord the Master of the Rolls but still I am afraid far behind the developments in other jurisdictions.
As far back as 1962 the Jenkins Committee proposed a reform of the law to allow a minority shareholder to petition the court for a remedy for something which was unfairly prejudicial—where the affairs of a company were being conducted in a manner unfairly prejudicial to some part of its members (Cmnd. 1749, paragraph 212(c)). Clause 65 would have gone a little way in that direction. It has been done elsewhere. Movements in this direction took place in Australia, in the Act of 1961; throughout the Commonwealth: in the Singapore Companies Act 1967 and in the Federal Canada Corporations Act 1975—which
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probably contains a better provision than Clause 65, if the Government wish to improve upon it—and only last year Section 168A of the Hong Kong Companies Ordinance introduced something equivalent. Cannot the Government do as well for British Company law as they can do for Hong Kong? It is time to introduce this measure and so far there has been no explanation whatever of the Government's failure to do so from their Front Bench. If it be said—as is sometimes said, and as, indeed, I have been at fault in saying myself—"Oh, this is just a matter of lawyers' interest and it all applies only to very small companies", then the Hong Kong case shows how untrue that is for only last month the Ordinance section was involved in a most important piece of legislation involving a takeover bid of some 450 million Hong Kong dollars.
Meanwhile the condition of English law has become worse and worse. After the decision of the Judicial Committee of your Lordships' House in the case of Ebrahimi v. Westbourne Galleries in 1973 (Appeal Cases, page 360) it is now easier to obtain the winding-up of a company on a just and equitable ground than it is to obtain a remedy for oppression when a company wants to keep going. It is time for that state of affairs to be put right.
I turn to my second quarrel with the Bill and, to some extent, this leads me to quarrel with my noble friends on my own Front Bench, in that it implies some criticism of the 1978 measure as well. Perhaps I may put this in the form of another question. Why was it impossible to reintroduce in this Bill Clause 70 of the old Bill and the schedule 2? That clause and schedule performed a very important task for which we have waited some 20 or 30 years; it updated very nearly every serious penalty imposed for breaches of company law. If there is one area where British company law is ludicrous, it is in the inadequacy of the penalties imposed for breach. Let us take, for example, Section 54 of the 1948 Act, which prohibits financial assistance by a company for the purchase of its own shares, which is, so it is supposed, a bedrock principle of our law. Time and again in report after report that is exposed as being broken by the manipulators and the operators of company law and those

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engaging in fraudulent or questionable transactions.
What is the maximum fine available to impose upon these operators? The same as it was in 1948—£100. That is a deterrent of hardly nuclear proportions to encourage them to keep their fingers out of the till after a fat killing. Why is it impossible to reintroduce Clause 70 and Schedule 2? I give the Government notice that they will be pressed to do so. Indeed, the penalties elsewhere are quite inadequate. The penalties for failure to file annual returns under the Companies Act 1976 were recognised by the 1978 Bill as already being out of date, because in Schedule 2 the 1978 Bill itself would have brought them to a higher level. It is worth noticing that, on the most recent information I was able to discover, by reason of a Written Answer in another place on 7th June 1976, 40 per cent. of all listed companies—245,000 of them—were in breach by not having filed their annual returns for 1975. I noted that in 1975 there were some 1,500 convictions for failure to file returns; in 1977 there were nearly 1,700 convictions for failure to file proper returns. Therefore, the evidence seems to be that nothing done so far has cured that kind of problem.
In looking at the penalty of the new obligation in Clause 34 of the Bill, which has been brought to the attention of your Lordships' House, perhaps I may raise a third matter. As has been pointed out, Clause 34 imposes a wholly novel obligation upon directors of a company to convene an extraordinary general meeting of shareholders, where the net assets of a public company have plunged to half, or less than half, the amount of its called-up share capital. That is meant to be a great check upon the activities of the directors, I note that, although it is a novel introduction into our law, which I welcome, it reflects the rather naïve assumption of our law, which is shared by the EEC in its Second Directive, that the shareholders meeting is still the primary organ of control and accountability in company affairs. Indeed, the model of traditional British company law is perhaps that of the Athenian City State of shareholders being brought together to elect and control on occasion their 10, as they were then, Strategoi or, if one prefers, their generals. But in the giant or even medium-sized modern
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company that old model is rather inappropriate. The directors, quite properly—where we know nothing improper is being done—can normally hold enough proxies and friendly votes, especially in the day of the institutional investors, to have their way, except, of course, during a takeover battle—and that has less to do with shareholders' democracy than it has sometimes to do with efficiency, with tycoonery, and sometimes to do with worse. But the illusory nature of shareholders' democracy was pointed out as long ago as 1945, in the report of the Cohen Committee on Company Law, Cmnd. 6659, with:
"… the dispersion of capital among an increasing number of small shareholders".
Since then we have had the advance of the institutional shareholder; but the model of shareholders' democracy has not worked any the more in the actual operation of company affairs. Indeed, the classic analysis by Berle and Means in 1932 in The Modern Corporation and Private Property is the starting point. If the noble Viscount wishes to emulate one of his other Ministers in Government by providing a reading list to those who advise him, I suggest that he starts with the 1932 Berle and Means book.
Lord HARMAR-NICHOLLS: My Lords, the noble Lord surely is not suggesting that the shareholders are not the final arbiters of what will happen to their company? He is not suggesting, is he, that the annual meeting is not ultimately able to decide the vital thing if it wants to? Is he suggesting that we should have some alternative to the shareholders speaking up for themselves at their annual meeting?
Lord WEDDERBURN of CHARLTON: Not exactly, my Lords. The noble Lord is leading me into territory on which I was about to comment, but if I may use two sentences instead of the one which I was about to use, I was about to say that the day will come when those of us who, as I did in your Lordships' House on 16th May, call for a companies commission to act side by side with the shareholders meeting as an element of control and a mechanism of accountability in the public interest as well as in the investors' interest, will be heard; because the traditional concept that only the shareholders meeting is capable of

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being the mechanism of control is really out of accord with the actuality of the modern giant, and especially the modern giant transnational corporation and its associated and conglomerate groups.
Applying that concept to Clause 34 the traditional philosophy is followed, but there could not be a more important meeting on that philosophy than the meeting which has to take place when the assets of the company have plunged. What happens if the directors fail to call such a meeting in good time? There could hardly be a more serious breach of their duty. No doubt the noble Viscount will point out that they could be dismissed by the shareholders meeting under Section 184 of the 1948 Act, and of course he would be right, but that would be shutting the door after the assets have bolted. What sanctions should they be subjected to? A criminal sanction, says the Bill. Quite right, a criminal sanction for failing to call this crucial meeting in the life of the corporate body. And how much may they be fined? The Bill says, a fine not exceeding one-fifth of the statutory maximum, which, unless I have misunderstood the statutory maximum, means £200. The assets are gone, the company is in ruins, the directors are in Biarritz having paid their price to society of £200 apiece. It is a nonsense. Company law penalties are absurd. Even on the fifteen occasions on which penalties are imposed in this Bill, your Lordships' House must surely consider carefully whether they should not be severely increased, compared with the other penalties in our criminal law for similar offences elsewhere.
That brings me to the third major point. What about the employees— or, I was tempted to say, what about the workers? In Standing Committee F in another place the Conservative Member for Hertfordshire, South, Mr. Parkinson, who is now no doubt the Minister of State for Trade dealing with this Bill (and since it is in the last Session, as I understand your Lordships' Rules of Order, I can quote what the Honourable Member actually said), stated on Clause 34, at column 407, relating to the control of directors by the shareholders' meeting where the assets have plunged:
"In an ideal world, in an ideal Conservative world, the workers would also have shares, so the
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meeting of the shareholders would in fact include the employees as well".
My own studies of industrial democracy have not led me to believe that workers' shareholding is a satisfactory way to that conclusion. But at least Mr. Parkinson had the workers in mind. He knew that employees can no longer be excluded from the dramatis personae on the stage of company law. The Labour Government of 1978 knew it because in their 1978 Bill they had a clause which required directors to take account of the interests of employees as well as shareholders. The Conservative Government of 1973 knew it because they had a clause which at least enabled directors to take account of employees' interests. There is no clause in this Bill to liberate directors from the 19th century shackles of not being able to take into account—and I choose my words carefully here—directly, as opposed to indirectly, the interests of their employees.
Professor Gower's Modern Company Law, at page 522, which I was going to read to your Lordships, is perhaps not necessary to make the point, but it could be added to the noble Viscount's reading list for his advisers. Indeed the interesting thing is that the City Takeover Panel agrees, as I understand it, with this view, because General Principle 11 of the 1976 City Takeover Panel Code states, in regard to the directors' duties of an offerer or offeree company:
"It is the shareholders' interests taken as a whole together with those of employees and creditors which should be considered".
So the Government are out on a limb. They are deserted by the previous Conservative Government of 1973 and by all others who wish, in effect, to reverse the decision—I believe, on the authorities as they stood, the perfectly correct decision in law—of Mr. Justice Plowman in the case of Parke v. Daily News in 1962 Chancery, page 927, where he rejected the view, perhaps rightly on the authorities, that although the prime duty of directors was to shareholders, they must take direct account of employees in these days.
This adjustment is no minor matter. It may appear a minor legal adjustment to the Government, but the failure to make this adjustment will be noted by employees in companies, and they will note that the

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Government have failed to bring in their interests into company law after other Governments of both parties have successively for six years agreed that it should be done. One can only ask why the Government are so curiously slow in coming forward on this matter.
May I now turn finally to my fourth heading of complaint about what is missing from this Bill. At least on this occasion it is not a complaint against the Government for failing to do what their predecessors did in 1978, because my noble friends on the Front Bench failed too to take the opportunity. There is a special opportunity in this Bill, for the very first time in British company law, to do something appropriate in regard to the rights of shareholders. It is the first time because, as the noble Viscount said in his address to your Lordships' House—this is in Part III of the Bill—there is a long overdue reform of our law by putting into statutory form the legal principles governing the computation of profits available for dividends and other distributions, and the restrictions upon distribution of assets other than profits. I agree with him that this is a long overdue codification on which, for once, the Second Directive has been of great value in stimulating us all into what should have been activity long ago.
In regard to this matter, there is one way in which the shareholder is not protected in a way in which the worker is. A shareholder is not protected in his company in a way in which the worker is protected in his trade union. Since 1913, by virtue of the Trade Union Act of that year, a trade union which wishes to make political payments must set up a separate political fund. Into that political fund must be paid only special contributions paid by the union's members as a separate political levy. Every member of a trade union has, since 1913, had the right to contract out and become an exempt member, relieved from contributing to the political fund.
The scheme is now administered by the Certification Officer, and his report for 1978 shows that 73 trade unions have political funds, unions with some 10 million members, of whom 19 per cent. have decided to contract out of the political levy. It is the same figure as over the last two or three years, which will be
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a matter of great discontent to noble Lords opposite who have been trying so hard to get people to contract out of the political levy, as is their right, and as is the workers' right, but not the shareholders' right.
Although there is a penumbra of doubt in certain cases which it is not appropriate at this time to go into, by and large it is normally quite lawful for British companies to give their funds to political purposes. Indeed, Section 19 of the Companies Act 1967 requires that political purposes donations, and subscriptions to political purposes, must be set out in particulars as they are defined in the directors' report for the relevant year, if they exceed £50. So they must be disclosed. But the shareholder has no right. When Rank, Hovis McDougall in 1978 gave £30,000 to the party opposite, or when Guest Keen and Nettlefolds gave £25,000, no shareholder could say, "I want to contract out. I don't like the Conservative Party". I was going to say that I was sure noble Lords on the Liberal Benches would assure me that there were shareholders who would say, "I don't like the Conservative Party", but unhappily they are not here to say it. However, I am sure that if they were here they would support my view. that such shareholders exist, and I am sure that my noble friends will also agree.
Why should the shareholder not have a right parallel to that of a worker in his union? Also, what about the Government public interest? When Allied Breweries gave nearly £27,000 to the Conservative Party and its associated bodies in 1977, a matter to which I shall come, it received over £1 million from the Government. And what about trade union pension funds? Consider, for example, a coal miner; he can choose whether he pays towards the political amounts paid by his union to the Labour Party, but neither he nor the trustees of his pension fund can choose whether a company in which that fund has invested gives its money to the Conservative Party.
Noble Lords may say or may hear the argument that the kind of sums I have mentioned arc fairly small: what do they matter? Consider what was shown in the most recent analysis by a journal called Labour Research, which is wholly independent and whose figures on this

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matter have never been challenged; if they are to be, I hope we shall hear that in Committee because an amendment will be moved on this matter. That recent analysis, in September 1978, showed that, from March 1977 to March 1978, 378 companies gave £1,439,594 in political donations, of which £771,000 went direct to the Conservative Party. I was about to say, had there been any Members of the Liberal Party present, that in the previous year they got £5,000, but, unhappily for them, in the year I am gouting they got nothing at all. The only party to which industrial money was given was the Conservative Party.
Of the rest, £172,000 went to what are generally acknowledged to be closely associated organisations of the Conservative Party—the Economic League; the Centre for Policy Studies; Aims, as it is now called; and Common Cause—and £425,000 went to British United Industrialists, which is a cloak and dagger elite of Conservative industrial establishments and which called off its registration as a registered company after the 1967 Companies Act was passed, when it was made to disclose further matters on political donations, because, to quote from The Times of 11th April 1973, it wanted:
"…to stop snoopers finding out more about us than they need to".
It is generally agreed that we can add the £452,000 to British United Industrialists, which gives us a total of nearly £1,400,000 to the Conservative Party. I have looked up the report in the Financial Times for 7th October 1978, which deals with donations to the Conservative Party as a whole—which they revealed had gone up by 50 per cent. in 1978—and I have taken statistical advice on these matters. I am told by my statistical advisers that an appropriate conservative guesstimate of the amount going to the Conservative Party and its associated bodies in 1979 will be at least £2,500,000.
It so happens that, at page 51 of the Certification Officers 1978 report, it will be found that the expenditure from trade union political funds was £2,460,000, a fact I found out after receiving my statistical advice. So the problem is similar in size as well as in quality. It is comparable with one very significant difference— namely, that whereas trade unions may
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apply their assets to political purposes only out of their political funds, which at the moment stand at some £4 million, companies may use any funds for political purposes so long as they are reasonably incidental to the objects of their memoranda, which means hundreds of millions of pounds, if they wish to do so.
This situation led the honourable Member for Tower Hamlets, Bethnal Green and Bow, Mr. Mikardo, in another place, quite properly to say on the Committee stage of this Bill that here for the first time was an opportunity, because of the codification of dividends and the law relating to them, to move a new schedule concerning this matter. Although the Government had some sympathy with the issue, they raised 16 technical difficulties in the face of the honourable Member's new schedule. Unless the noble Lord can persuade me to the contrary, I give him notice that I and some of my noble friends will be moving a schedule to this Bill. I understand the agonised look on the face of the noble Lord, Lord Trefgarne, on the Front Bench opposite, but I must tell him that unless he can find some way out of the position we shall move a new schedule to try to deal with the matter, which we hope will not lead—
Lord MOTTISTONE: My Lords, perhaps I may interrupt the noble Lord to tell him that the reason why we on this side are looking rather fazed is that he has already taken twice as long as even very long speeches normally take and I was wondering whether it was really necessary for him to take quite so long to say not very much.
Lord WEDDERBURN of CHARLTON: My Lords, the noble Lord might care to read my speech in the Official Report to see whether in fact it contains not so much. If one is going to move a fundamental new clause in Committee, then the noble and learned Lord the Lord Chancellor has already told us today that it is right in relation to a limitation of actions Bill, a technical law reform measure—he took 20 minutes to do so and of course he did it with much greater clarity than I could claim—
Lord TREFGARNE: Hear, hear!
Lord WEDDERBURN of CHARLTON: If one is to move an important

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amendment to a Bill which is concerned with the very bedrock of the law relating to manufacturing organisations in Britain, my Lords, it does not seem to me unfair to explain the point to the Government—who, if one reads the Official Report of Standing Committee F, do not appear to have any conception of what is going on in this sphere—in considerable detail. I shall resume my seat in a moment when I have said, as I was about to say when interrupted by the noble Lord, Lord Mottistone, that unless the Minister can persuade me otherwise, I and my noble friends will move such a new schedule in Committee. He might apply himself in his reply to this simple question: is there really any reason, in principle and if a provision can be drafted, why a shareholder should not have a right to contract out of political donations made by his company equivalent to that of the member of a trade union? That will be moved in Committee. Otherwise, apart from what I have said, I welcome the Bill.
Lord MOTTISTONE: My Lords, the noble Lord, Lord Wedderburn of Charlton, might recall the phrase: brevity is the best feature in the art of public speaking.
5.27 p.m.
Lord MISHCON: My Lords, in following the marathon effort of my noble friend Lord Wedderburn of Charlton, my contribution will be a more jogging exercise, to last but two minutes by way of maximum, and therefore if your Lordships will take an average between my noble friend's speech and mine, we shall reduce ourselves to the length of speech to which the noble Lord, Lord Mottistone, referred.
I wish to be brief for two reasons; first, your Lordships have already been kind enough to listen to me once today and, secondly, much of what I wanted to say has already been said from these Benches and I therefore feel it no useful contribution to your Lordships' debate merely to repeat speeches that have already been made and points that have already been put.
The general point I wish to put briefly is this: there are those of us who realise the responsible part that the private sector of our economy plays in our affairs, and, in realising that, would plead with
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the Government to notice the very real concern there is among people in the City and elsewhere about the unacceptable face of the conduct and affairs of some of the companies that have recently come under review. That makes it essential that instead of it being a leisurely exercise to look at a revision of company law, it is an urgent exercise. And instead of the statement which the noble Viscount made— that we shall not be listening to a speech from him again moving the Second Reading of another Companies Bill until 1980—that excuse (that one has to reflect on the inspectors reports in recent cases) should bear in mind, if he will forgive me saying so, that it is the inspectors reports in recent cases that have made it even more urgent that a revised Companies Bill comes before Parliament. I therefore urge him, in relation to the expedition which I believe may be exercised in regard to a Bill to propose trade union reform, to use even more expedition in the case of this very necessary revision of the Companies Act which of course has already, as has been pointed out, been dealt with so fully in the previous Session by the Labour Government.
5.30 p.m.
Lord HARMAR-NICHOLLS: My Lords, I fear that a two-minute intervention has been forced upon me by the revival of the old chestnut by the noble Lord, Lord Wedderburn of Charlton, who obviously wanted, at the beginning of the Session, to let it be seen that he is a loyal and extreme supporter of his party. What he has said can be made to sound so plausible. I do not think that the House would mind the noble Lord's schedule. Indeed, it is right that each House of Parliament, if it has any feelings at all on a matter, should use the Committee stage to make a Bill what it wants it to be. If the noble Lord wants to bring in a schedule, it is a good thing that it should be aired, as it was in another place. It was his Government who refused to accept the point that he made about shareholders being able to contract out of contributions made to a political party.
There is only one point that I should like to put to him. The way that he presented that side of the political argument was unfair. A large part of his previous argument was that he did not

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think that shareholders ought to have the power which they have in being able ultimately to decide what a company should do. He seemed to be suggesting that the shareholders needed someone else to tell them at an annual meeting what they should and should not decide upon. There is one power that the shareholders have in relation to contributions to political parties by a company. If such action is reported to them, as it must be under the Bill, they have the power to dismiss the directors from office. They have the power to do that every three years. If the shareholders feel that the directors are using their money in a way which is not in the best interests of the company—though it is often in the best interests of the company to spend money to prevent it being nationalised—they can then dismiss the directors.
The noble Lord represented the contracting out power in relation to trade unions as being something without blemish. 1 wonder whether he would produce another schedule, on the appropriate occasion in relation to the appropriate Bill, which would allow trade union members to dismiss their trade union leaders. So many of these leaders are appointed for life, and it seems that once they are appointed the trade union members do not have ultimate control as to how the union should be conducted.
All I say to the noble Lord is by all means let him produce his schedule and let us argue it out in detail and properly. But to raise phoney differences relating to the control of a union as compared with the control of a company does no service at all during consideration of a Bill as important and as serious as the one now before us.
Lord HATCH of LUSBY: My Lords, before the noble Lord sits down, I should like to ask him whether he is aware that in every trade union there is a constitution under which the general secretary and the president of the union are elected by the members and can be dismissed by them in exactly the same way as the shareholders he mentions can act? The big difference is that, whereas a member of a trade union can contract out of contributing to the funds of a political party, a shareholder cannot. He may object,
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but he cannot contract out of the contributing of money by the company to a political party, even if he dislikes that political party.
Lord HARMAR-NICHOLLS: My Lords, this is not the Bill on which to argue that particular point. However, the noble Lord knows as well as I do that in many unions the chances of getting a form to enable one to contract out are almost impossible because they are never supplied. On a number of occasions when they have been asked for they have never been sent. The noble Lord also knows that in a number of unions the leaders are in fact appointed for life and it is very difficult—indeed almost impossible—to dismiss them. I maintain that the shareholders of a company, under the existing law, have a greater control over their company than the members of a trade union have over the conduct of their union.
5.34 p.m.
Lord BRUCE of DONINGTON: My Lords, the noble Lord, Lord Harmar-Nicholls, will forgive me if I do not pursue the matters that he has laid before your Lordships in connection with the remarks of my noble friend Lord Wedderburn of Charlton relating to political funds. This seems to me to be a matter which we should be capable of arguing more extensively in Committee. The House will be indebted to the noble Viscount, Lord Trenchard, for the account that he has given both of the Bill itself and of the reasons for its introduction in its truncated form.
I do not propose to enlarge upon the remarks of my noble and learned friend Lord Elwyn-Jones, with which I entirely concur. But unless it be thought that there is some impelling urgency for complying with the second EEC Directive on this matter, I ought to inform your Lordships that the only country out of the Nine that has so far enacted any legislation in connection with this matter is the Federal Republic of Germany. So in putting the legislation before the House at any time during the next few months we should be quite certain to be in advance of the remainder of our European colleagues. Thus I believe that on that account the question of the degree of urgency does not stand up. As my noble and learned

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friend Lord Elwyn-Jones said, the title of the Bill permits the introduction of clauses which not only restore, or partly restore, the contents of the previous Bill introduced in another place, but also entitle us to consider the various other matters, including those that have been made by my noble friend Lord Wedderburn.
I turn now to the omission of the disclosure items: that is, those relating to insider dealings. I believe that these could quite properly have been included in the existing Bill. Upon referring to the Committee proceedings in another place, one finds that the first three clauses involved (which were, I believe, Clauses 57, 58 and 59) were in fact assented to by the Committee without very much argument at all. Only Clauses 60 to 63 remain for consideration, and I am reluctant to feel that had a further day's time been given those clauses would not have been enacted.
There is a small political point involved here on which your Lordships may be sensitive. We know that when it comes to conduct relating to insider dealings there is a view that the City can somehow deal with such matters on its own by the application of a code of conduct that can be rigidly enforced by the powers that be within the City. That may well be so, my Lords, but this desire to have voluntary action when it comes to companies and insider dealings contrasts very sharply with the Conservative Party's opposition to the applicability of codes of conduct under voluntary action in regard to trade union legislation. In that case it much prefers to legislate, and no doubt we shall hear more about that in due course.
I do not intend to detain the House for long because so many of my views on the Bill have been stated by my noble friend Lord Wedderburn, whom I thought made a very adequate and penetrating survey of the position as we see it, which we on this side of the House therefore intend broadly to support. However, I should like to deal with one or two smaller points, one of which was raised by the noble Lord, Lord Mottistone, who thought that the penalties under Clause 18(6) of the Bill were a bit stiff. Of course, the penalties under Clause 18(6) relate to Clause 17, which, in relation to the allocation of equity securities, provides that a company shall not allot any such securities
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"on any terms to any person unless it has made an offer to each holder of relevant shares",
and so on. Clause 18(6) merely says:
"A person who knowingly or recklessly authorises or permits the inclusion in a statement circulated under subsection (5) above of any matter which is misleading, false or deceptive in a material particular shall be liable…".
The words of that clause, it seems to me, if a person falls within their ambit, in fact constitute a very serious offence. The words are
"knowingly or recklessly authorises or permits",
and I should have thought that if a director does anything of that character, anything which falls within that definition, then the penalties (which are of course the maximum) are by no means too severe.
I now pass to Clause 34 of the Bill, which I should like the noble Viscount to elucidate. Clause 34(3) relates to the convening of an extraordinary general meeting where the capital falls below a certain level, which point has already been mentioned by my noble friend Lord Wedderburn. Subsection (3) provides:
"Nothing in this section shall be taken as authorising the consideration, at a meeting convened in pursuance of subsection (1) above of any matter which could not have been considered at that meeting apart from this section".
I should like the noble Viscount to elucidate that if he can, because it rather seems to me, on the face of it, that the only thing that can be considered at such a meeting is what measures should be taken to deal with the situation, and that it would not be possible to discuss the reasons for the situation arising at all; in other words, it would not be permissible to hold an inquest. Of course, this may be a matter of legal gobbledygook, or whatever the term may be, but I must confess to some mystification in endeavouring to interpret it. I am a little worried about the provisions of Clause 34 as a whole. I know that Clause 34 has been inserted in the Bill to comply with Article 17 of the Second Directive.
Viscount TRENCHARD: My Lords, I wonder whether it would be helpful, in order to save time, to mention to the noble Lord that I understand—and I have just had it onfirmed—that Clause 34 is identical to one which was in the previous Government's Bill.
Lord BRUCE of DONINGTON: My Lords, I am grateful to the noble Viscount.

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The fact that it was in the previous Bill does not, I regret to say, make it any more comprehensible, and my views on it were offered in an entirely non-partisan spirit, without any desire to reflect upon Her Majesty's present Administration. I merely ask the question, and I should still like that subsection to be elucidated. The fact that there is a precedent for it is of no particular concern to me.
I am a little worried, though, about Clause 34 in its entirety. As I have said, I know it is in Article 17 of the Second Directive—a woolly EEC Directive if ever there was one, as indeed the noble Viscount will testify if he has examined it—but 1 sometimes wonder about the holding of an extraordinary meeting of a company, particularly where employees are not specifically represented, in th circumstances that are described in Clause 34. An extraordinary general meeting to advertise the woes of a company at a critical time may not invariably be the best way of improving the situation, and may in fact precipitate a worse circumstance than the circumstance which has to be disclosed. I am aware that in saying that I do not of necessity speak for the Opposition as a whole, but as a matter of practical and company experience over the past 25 years I can conceive of circumstances in which the application of this clause might possibly have ruined a company which would otherwise have recovered, and in which, in many cases, companies have indeed recovered. But it is in the EEC Directive, and we are loyal members of the EEC, so I would assume that this clause will go through without further amendment, apart of course from the possibility of my noble friend Lord Wedderburn introducing something into Clause 4 which enshrines the interests of employees.
I do not propose to go through the various other points upon which I have taken notes in the course of listening to the speeches which have been made this afternoon, because it would be repetitious for me so to do. From our standpoint, in spite of the limitations of the Bill we shall of course support it through its Second Reading in the House, and shall reserve to ourselves the right to introduce amendments on the lines that have been suggested by many of my noble friends
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this afternoon. However, we should like a little further information from the noble Viscount, Lord Trenchard, concerning the timing of future legislation. Are we to understand that the provisions which have been omitted from the previous Bill—provisions relating to the duties of directors, and so on, and to the penalties under the old Clause 70, to which my noble friend Lord Wedderburn referred—are to be included in the next Bill to come before your Lordships following the Fourth Directive? Are we to understand that these matters are to be dealt with promptly?
Then I should like to ask a question as to what efforts are anticipated in connection with the affairs relating to winding-up and insolvency which are at present being considered by a committee under the chairmanship of the distinguished accountant Sir Kenneth Cork. This committee has been sitting a long time, and many may think that the quicker we are able to get the report of that committee the better. I was surprised to learn that this committee was set up—and it was set up by a previous Administration, so I lay no blame on the Government—without having proper research staff available to it. Consequently, the honorary efforts which have been made by distinguished accountants and lawyers in order to investigate and bring up to date the whole question of insolvency and the winding-up of companies has proceeded, not only on an honorary basis but with the benefit of only a secretary provided by the Government. Any steps, therefore, that could be taken to provide this committee with assistance in order to enable it to arrive at its conclusions more speedily would, I am sure, be welcomed by all noble Lords. We should like to know how quickly the Government propose to produce their own conclusions, their own observations and their own White Paper on this report when it comes out. With those concluding remarks, we, too, on this side of the House commend the Bill on Second Reading.
5.50 p.m.
Viscount TRENCHARD: My Lords, I should like to start by looking at the actual words of the Long Title of the Bill:
"… to amend the law relating to companies".
I It does not, as I understand it, say, "To

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amend all the law relating to companies" —and a great deal of the law relating to companies which is outside the Companies Bill has been mentioned by various speakers. Indeed, speeches have ranged widely over all subjects that affect companies. I have to start by saying that this Bill before the House is therefore one which amends an important part, but only a part, of company law. Neither do I feel that the Government should dress themselves in sackcloth and ashes, bearing in mind the length of time we have been in office and the date at which a Companies Bill has been introduced.
The last Administration thought so highly of this subject about which we have heard so much of their views on priorities today that it took them until their last year in office to introduce a Bill. I suppose it is that their feelings are slightly hurt that it is our fault—and I have to admit to it being our fault—that it is not law. The noble and learned Lord, Lord Elwyn-Jones, talked about the great dawn of Conservative thinking in relation to company law. He himself admitted that it was not a great dawn in any event and we had a similar experience in 1973 to his own in 1948. At least this Administration has moved with alacrity to get on to the Statute Book in their first year of office a body of company law which all noble Lords have said is a major improvement.
There is a Fourth Directive of the EEC Commission and that means that there simply must be a second Bill. I hope noble Lords will note the terms which the Government authorise me to use in relation to the introduction of a second Bill in 1980 in what we believe will be the second year of our period in office. I hope that your Lordships will before the Committe Stage read the terms that I did use because they have been very deliberately and carefully chosen. I hope therefore that we shall not spend too much time discussing the reason why this Government wish to move in two stages rather than in one, but at least are moving with greater alacrity than has been the case in the past.
The fact that noble Lords have concentrated on a number of measures not included in the Bill does show that these are the ones that they want to go into in very great depth. I am not so well
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versed in the Committee stage proceedings in another place on the last Administration's Bill as are noble Lords opposite or noble Lords who supported me on this side, but it is my understanding, which I have had confirmed, that many of the points which have been raised by noble Lords as points they would wish to see in this first Bill were not fully agreed before, particularly as regards the best methods of achieving them without achieving other undesirable things. It is the Government's intention, therefore, to introduce a second Bill which will give a very full opportunity for noble Lords to discuss those items which are not in this Bill.
The noble and learned Lord, Lord Elwyn-Jones, asked me whether there were other differences in relation to this Bill and that of the previous Administration, particularly in relation to the EEC Directive. The answer is, very slight ones. I did raise some of them in my opening speech, but they are very small—mainly improvements in drafting and in clarity.
Lord ELWYN-JONES: My Lords, will the noble Viscount permit me to intervene? Does that not take some of the gilt off the gingerbread of his claim about the speed with which the Government have brought in this measure? It is really only a recap of what we did for them away back in November.
Viscount TRENCHARD: My Lords, I do not think so, bearing in mind the other problems that we have had to attend to in the first five weeks of our Administration. I think the record is fairly good.
I think it would be wrong at this stage for me to go through each of those points which some noble Lords opposite would like to see in this Bill but which are not there. I think it would be a waste of your Lordships' time if I were to go into the detail of those measures. I think that I am going to leave all those points quite simply with the defence that they are not fully agreed as to methods in the vast majority of cases. In the odd case, it could be argued that some points are not controversial. That is why at the end of my opening statement I said that we had deliberately drawn the limitation as close as we could to the EEC Directive and what flowed from it, in order that we could legislate in the shortest possible time.

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In relation to the penalties, I would mention—and I think it is Clause 54 which covers these—that the question of penalties is usually a subject for the Committee stage. The maximum penalties are not those which were mentioned in the debate. I think that the noble and learned Lord, Lord Elwyn-Jones, raised the question of the proposed standing advisory committee on company law and asked me particularly whether I could say something on this matter. The Government agree that the means by which they obtain advice on proposals for reform of company law and on the EEC harmonisation programme needs to he improved. We also accept that the bringing together of a number of representatives of the various professions and other bodies affected by company law would be a useful way of promoting the improvement we seek. The Department of Trade are therefore considering whether there is a way in which they can obtain the undoubted benefit of advice on company law from a representative group without setting up yet another advisory committee on a permanent basis. It is intended to make a further announcement about this before the Summer Recess. That is, I am afraid, as far as I can go at this stage.
The noble Lord, Lord Wedderburn of Charlton, ranged very widely over subjects which affect companies and, indeed, all of us in this country. It would be wrong of me to chase them to any great degree; I believe that they are outside the context of what we should be discussing. He mentioned the statistics of the rapid concentration of capital and the fact of 75 per cent. of investment being found from internal funds. There are many studies and discussions on these subjects. The Administration certainly believes that in the conditions it has started to create and intends to continue to create, with some growth of new business, we may move the concentration of capital in the opposite direction.
Furthermore, on the question of internal funds, I think I am right in saying—and I say this from my industrial background knowledge—that this situation has existed for a very long time not only in this but in many other countries. The vast majority at least of new investment has to be found from company funds, which is why it is so
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difficult to have adequate investment when profits are so appallingly low in real terms as they are now.
The noble Lord raised four areas—or I wrote that I noted he had raised four areas and then I found I had written down about eight. Again, it would be of no service to the House for me to follow each and every one of the items he thought should be in the Bill. We do not deny the importance of loans and contracts so far as directors are concerned, nor of insider deals. The method of controlling them is still being debated in many learned journals and important places. In our view, more thought and consultation on many of these measures is necessary. It is wrong to say that the present Government are fully in agreement or even that the Opposition—as we were at the time of the last Bill—were fully in agreement with many of these proposals.
Clause 34 covers the situation where there has been a great fall in the value of a company and a special shareholders' meeting is held to hear about it: this matter was raised by the noble Lord, Lord Bruce. Although this is clearly required by the EEC Directive, the argument that it may in some cases do the wrong thing is one that the Select Committee itself mentioned in the Twenty-Fourth Report. But it really can be argued both ways. If that argument is taken to mean that major falls in value which will affect shareholders can be kept quiet from them, the evil of that has to be contrasted with the danger of upsetting the applecart at a moment when in some case recoverys might be about to start.
The next point I should like to raise is the employees' interest. There is again no doubt of the importance of employees' interests. But I wonder whether this can be considered as one of those vital, urgent matters which must go into the first Bill when, if I may say so as an industrialist— and as noble Lords have already said— nobody wishes to avoid taking employees' interests into account or indeed can avoid taking them fully into account in this day and age.
We move from there to the rights of shareholders and to the contrast with the political levy where trade unionists have the right to contract out of the political levy but shareholders have apparently no

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such right. I wonder whether the noble Lord was really worried about the rights of shareholders or whether he was more worried about the political considerations at this point. There are differences, my Lords. Not only do all company considerations have to be declared openly, so that shareholders can and do raise such matters, but the individual shareholder is in an entirely free position as to where he places his investment. The individual employee in much of the trade union world is in no such a position. One could of course say that he could change his job but, in present conditions and with the levels of unemployment we have now reached, that is not a very practical suggestion. So the average employee is tied to his job. He can contract out of the political levy. I should be interested whether all such employees actually know that they can contract out of the political levy. As my noble friend Lord Harmar-Nicholls has already said, in effect, a very great number just pay it automatically. In the case of shareholders, they can raise the matter. It has to be declared. They can sell their shares individually and invest in another company.
So far as the political result is concerned, we know that a very large proportion of the funds of the party opposite are provided by the trade union movement, whereas—notwithstanding the figures which I shall read in Hansard and did not fully follow or at this stage exactly accept—company contributions to the Conservative Party are in the minority.
As regards codification, the noble Lord is far more knowledgeable than I am in this area; but he has used words before which indicate his acceptance of the daunting task that codification really involves. This is perhaps another occasion for me to point out that there is going to be more companies' legislation—there must be—as a result of the EEC Fourth Directive. Codification would seem to me logically to follow behind that.
Very quickly I should like to say to my noble friend Lord Mottistone that I have heard the point he mentioned in relation to the six-month period for the change of stationery and other notices. I will discuss this with my colleagues, particularly as he indicated so clearly
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that there is perhaps a difference between notepaper on the one hand and, on the other hand, embossed metal, durable milk bottle tops or other durable notices which are displayed in various places. I should like to take advice on that point.
I am advised that the noble Lord, Lord Bruce, is correct in saying that, so far as we know, only Germany has legislated at this moment. We understand that others are getting fairly close and we are overdue. We believe that the policy is to set a positive and good example in Europe so that by doing so we shall get more co-operation as regards the interests of this country. In any event, as I have said before, we believe that this enormous body of law, covering many important things which are not included in the Bill,is best dealt with in two parts. This will allow full and adequate consideration of method on the important points which are not included in this Bill.
I am advised that Clause 57, which he mentioned, was bitterly disputed in Committee in the other place: it refers to insider deals. On the question of winding-up and insolvency, we hope there will be a report from the body—whose name I have temporarily forgotten—early next year.
I would end by saying that we do not feel that any matters have been raised by noble Lords which actually bear on the legislation before your Lordships. All, or very nearly all, bore on legislation which is not before your Lordships. I hope this means that the legislation now before us is indeed, as we believe it to be, largely non-controversial and beneficial. We trust, therefore, with that in mind, that your Lordships will give the Bill a fair wind during future stages.
Lord MISHCON: My Lords, before the noble Viscount sits down, I wonder whether he would be good enough to deal with the question I raised: do the Government appreciate the grave concern in the City and elsewhere as the result of recent investigations into the affairs of certain companies, including those of Peachey, which lie mentioned? Do the Government therefore intend to treat the second Bill that the noble Viscount has mentioned as one of extreme urgency?—since many of us feel it is essential (and here I include people in the City) that the

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things which have emerged from the Inspector's report should be dealt with by legislation as soon as possible.
Viscount TRENCHARD: My Lords, I thank the noble Lord for reminding me of that. I certainly should have included in this winding-up a statement of complete agreement with the sentiment of extreme concern over what has been revealed in the Peachey case. So, yes, and furthermore, yes, we believe it to be urgent; we also believe that getting proper legislation in this kind of area is more complicated than has been suggested by noble Lords opposite. It needs a great deal of further consultation, including consultation with the City interests which, as the noble Lord mentioned, are very much concerned about this point.
Lord WEDDERBURN of CHARLTON: My Lords, before the noble Viscount sits down, may I raise one small point: being heartened by his silence on at least one matter—that is, the introduction of Clause 65—can he say whether the Government would at least consider not necessarily opposing a move in Committee to reintroduce what is in fact a non-controversial matter, namely, the protection of minority shareholders from oppression? At least I hope they will not shut the door upon that going into this Bill.
Viscount TRENCHARD: My Lords, I note what the noble Lord says. I believe it is going to he extremely difficult to draw the demarcation line, even for one small, apparently innocent reason, differently from the way we have drawn it—because I do not believe, if once one starts to argue about Clause 65, that it is not possible to start arguing about a very great many more. Nevertheless, I have listened to what the noble Lord said in relation to Clause 65 and I shall discuss it, but with absolutely no commitment and without holding out much hope.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

THE NORTH SEA: ANTI-POLLUTION MEASURES
6.16 P.m.
Lord BUXTON of ALSA Lord BUXTON of ALSA rose to ask Her Majesty's Government whether
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they will now take the lead among our European partners in organising adequate and efficient surveillance and control over vessels in the North Sea and thereby enforce strict standards of anti-pollution for the safety and conservation of the environment and its living resources, without waiting for the resolution of international negotiations affecting the oceans beyond the North Sea. The noble Lord said: My Lords, the purpose of my Question to the Government is to ask them to recognise that the time has come for the North Sea to be treated as a separate issue from the oceans as a whole. It is now quite obvious that we cannot wait for world-wide agreement on the laws of the sea before dealing with the special problems of the North Sea. It is nearer to a shallow bay than an ocean: it is more like a backwater, and to compare it with the rest of the oceans is like comparing, say, the Wash with the Bay of Biscay.
Secondly, it is small and enclosed. It is smaller than the Hudson Bay, a bit wider than the Baltic and about the same size as the Black Sea. These are very nearly vast lakes and, in their own way, special cases. The exits to the Atlantic from the North Sea are shallow and narrow enough to prevent the interchange of pollutants with the deep oceans, and therefore there is always the prospect that spills of oil will finish up on somebody's beach.
It therefore cannot be regarded simply as part of the negotiations for the oceans as a whole. The Mediterranean is more favoured and was designated as a special case by the international convention known as MARPOL. This banned the discharge of oil altogether in the Mediterranean and so the case for special areas has already been made. If there was ever a special case for being designated a special area, it must be our own North Sea—even more so since it is now the oil scene of the century, and that aspect is going to escalate.
I am concerned primarily with the conduct of shipping in the North Sea and its approaches. There is a continuous lack of discipline and failure in standards resulting in pollution, but it is only among a minority—and this is the point I am anxious to make—of merchant ships and tankers. Of course, there is a majority of good sailors, and certainly the oil companies do their best where they own

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tankers, but not necessarily where they charter them. Oil companies have the prerogative to pick and choose when chartering, and they should do this conscientiously and not resort to what is called "spot" chartering; that is, simply accepting the nearest vessel to hand for reasons of cost.
Even though the majority of sea captains conform to acceptable standards and disciplines, there were nevertheless 500 recognised incidents last year of one sort or another. Only four or five were major spills, and in 50 per cent. of the cases involved there was no way of telling the source. We have no adequate surveillance for spotting and tracking the culprits. But it is not the major spills that matter; it is the continuous offences or negligence over the whole spectrum of oil activity in the North Sea which are an accumulating and compounding threat to our sea's natural resources. But the offences are confined to only a few.
The main problem, therefore, is the general background oiling all the time from all causes over and above the recognised incidents. I believe that only about 5 per cent. of the oil in the sea actually comes from accidents. In concentrating on accidents, therefore, the Government are chasing the wrong objectives. It is sometimes claimed that the position is improving on this part of the coast or that, because there are fewer accidents. But the accidents are not the right clue. The most reliable testimony is the sea birds. Where oil is concerned, biological monitoring is the most revealing of all. The fact remains that the sea bird casualties have been mounting at a dramatic rate since 1973. In 1973, there were eight incidents involving a few hundred casualties; in 1975, there were 2,000; in 1977, there were 4,000; and in 1978, there were 10,000 sea bird casualties, and up till April this year there were more than half that.
Those are just the sea birds washed ashore and spotted—perhaps a fraction of the annual total. It may be that in the last 10 years at least half a million seabirds have perished as a result of oil. But whether or not one minds about seabirds is quite immaterial. This situation is a startling reflection of the sudden impact of the oil era on our North Sea natural resources, because what affects seabirds
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also affects fish stocks, crustacea, shellfish, intertidal life, seaweeds, alginates, creatures of the shoreline and salt marshes and, not least and above all, the happiness and holidays of the British public. There are no signs that the general situation is improving.
It is not my intention to criticise what has been done by the Government in concert with other countries. Everything that has been done is in the right direction, and the international efforts to conclude agreements must continue. But these efforts through IMCO, the United Nations and other groups cannot avert the mounting danger to the North Sea. For a start, it takes, on average, five years for an IMCO convention to enter into force. Goodness knows how many years it is after that before there is any prospect of enforcement. One must hope that one day the plethora of laws of the sea will be universally adopted and accepted, even by the most unreliable flags of convenience. IMCO has conceived and debated a stream of conventions, amendments to conventions and definitions, has initiated conferences resulting in more conventions, has introduced 30 instruments on safety at sea and has developed 130 resolutions, recommendations, codes of practice and contingency plans, but these will not save the North Sea.
Frankly, this whole law of the sea scene is becoming a lawyer's paradise, whereas what we need is not more laws or more bureaucracy, but more leadership and determination, and a clear and aggressive attitude by the Ministers concerned, and Environment and Defence are just as concerned and involved as Trade. Freedom of the seas, especially on our continental shelf, is really now an unacceptable anachronism. Freedom to navigate there should be, but this freedom should be permitted only within strict standards and disciplines, because the North Sea is shallow and enclosed. We therefore have good, sound and logical reasons for acting differently and independently, in company with our North Sea neighbours.
The disasters of the "Torrey Canyon" and the "Amoco Cadiz" were, taking the long view, probably a good thing, because they induced serious alarm at Government level and profound public

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concern. These isolated catastrophes do serious damage in a temporary and local sense, but they are nothing like so serious as the continuous background oiling that occurs all the time by a minority. As I said, in 1978 there were over 500 such incidents reported in the North Sea and around our coasts.
If I suggested that the "Torrey Canyon" and the "Amoco Cadiz" might have been helpful, this in no way applies to Sullom Voe. Here there was absolutely no excuse for the reckless judgment in opening Sullom Voe before ballast discharging facilities were available, and they are not available yet. I am a sufficient realist not to suggest that closing Sullom Voe should be contemplated. but it was a totally irresponsible case of risk-taking which one hopes will never be repeated by this Government.
We also have to rid ourselves of the archaic law of the sea about salvage beyond territorial waters. In the case of the "Torrey Canyon", immediate decisions and vital steps were delayed by the intervention of Dutch salvage people. Precious hours and then days were lost. This is absolutely unacceptable in today's circumstances in the North Sea, and the North Sea countries must he forthright and declare that it is absolutely unacceptable and that this so-called law of the sea will not be observed here, because the North Sea is different.
If the same attitude, and the same planning and politics that apply to the seas were adopted in the case of aviation, nobody would fly at all. The analogy would be that the main action that Governments took to control air traffic would be on how to clear up the debris after a jumbo-jet had crashed. You can control what goes on in the air, because it is a 20th century phenomenon. But, apparently, because mariners have been sailing the seas for several centuries nobody can interfere with them.
Of course, we have to face reality and accept that we are entirely dependent on energy and development, and that it is no good. therefore, complaining about oil. In fact, we must be thankful for the oil, and we are apparently on the threshold of an era of further expansion of North Sea oil activity. But we must avoid wasting
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it and spilling it at the cost of the environment. I believe that the first step is that the EEC countries concerned, including Norway, should get together and decide on joint action for surveillance and control; not for drawing up laws. As with oil concessions or weather reporting areas, the whole of the North Sea should be allocated for the purpose of surveillance and pollution control. There should be no part of the North Sea beyond territorial limits which is not subject to surveillance.
Reporting in by all vessels approaching the North Sea and traffic separation areas should be made compulsory, in the same way as aircraft report in when approaching the country. The Government do riot at present require vessels outside territorial waters to use pilots. This is quite inadequate, and there are apparently no traffic separation schemes yet for ships approaching Sullom Voe. The relevant international convention brought in an amendment in 1978, prohibiting any discharge of oil within 50 miles of the nearest land. That may be all right in the case of the Atlantic or the Pacific, but it is absolutely not all right in the enclosed North Sea. As I have said, the Mediterranean already has better standards and objectives than our own North Sea, and whether the oil is 50,60,70 or 80 miles out in the North Sea it will finish up on somebody's beach.
There should be agreed standards and levels of police forces for surface craft, but especially for aircraft. It is particularly important that these national police forces, primarily in the air, as components of a co-ordinated North Sea strategy should follow through into each other's sector and work in the closest harmony and co-ordination, and they should not simply break off when in pursuit because they have reached their own territorial limits.
There is no need for a great new bureacratic outfit in Brussels, The Hague or anywhere else. It is more a case of leadership, declaration of intent and a determination by the new Ministers to make things work. It should be enough, after preliminary negotiations by the countries of Europe and Norway, to order their surveillance and patrol units to co-ordinate, co-operate and get on with it. Far more difficult and hazardous exercises were accomplished between allies during the war.
It may be asked what these aircraft patrols and police surveillances are supposed to achieve. The best analogy is the copper on the beat or the speed-cop on the motorway. The likelihood of being watched and spotted is the best deterrent there is. Just as everyone immediately conforms to the speed limit the moment a police car appears on a motorway, so sea captains and mariners will he equally inhibited if they know that they are likely to he observed and even photographed or recorded by sophisticated equipment from above. These tactics have already been very successful with the United States coastguard services.
On the subject of fines, this aspect is not, in my view, nearly so critical as some say. The most effective penalty for a ship is to be delayed while patrols satisfy themselves as to the conduct or record of the vessel concerned. Legal proceedings and fines become irrelevant. Once this degree of surveillance is widely known, no shipowner or its captain is likely to take any chances. In the case of the "Torrey Canyon" the captain, on the instructions of his owner, took a short-cut in order to save a tide—he obviously lived to regret that—because the financial advantages would apparently have been very significant. That proves the point one way. The other way—it is relevant to note—is that there was a bad oil spill in April of this year off the Bass Rock. However, all that happened to that Liberian tanker, because it was outside our territorial waters, was that it was reported to Liberia. The tanker company was then fined 500 dollars, the maximum under Liberian law.
On the other hand, to intercept and delay vessels while questions are being asked, and documents and records examined, is financially significant and would soon be recognised as something to be avoided, particularly if it could result in the withdrawal of insurance cover. In fact, France is already ahead of us in this respect, shameful as that may be. France has introduced effective policing and intervention in the Channel on their side, following "Amoco Cadiz". French naval vessels are now deployed to police the sea lanes off the French coast, and aircraft surveillance has been stepped up on a routine basis.
It is embarrassing that we are less purposeful, when one thinks of our record
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as leaders of the world on conservation matters. The French actually complained about Britain's attitude of laissez-faire at a conference in Brest last year and about our failure to be resolute and determined. We used to be the unchallenged leaders in conservation matters, and I sincerely hope that this Government will restore us to that position.
We all know that ships can he intercepted at sea, provided there is an adequate North Sea police force deployed by this Government and others. Acceptance at any North Sea port can he refused until the intercepting party gives the go-ahead and, according to the degree of suspicion or offence, the delay can be protracted, with painful financial consequences. The fine, therefore, will then, to all intents and purposes, have been paid if the approach which I am suggesting is adopted.
The North Sea situation is nothing like the problem that it is generally supposed to be. We are concerned with only a small minority of offenders. The lawyers' paradise is partly derived from the entirely mistaken approach that marine oil pollution is liable to be caused by all tankers under all ownerships and under all managements. This is manifestly not so.
We are concerned with a small minority, under two headings: first, lax or inexperienced mariners—or sea rogues, one might say—who should not be allowed into the North Sea at all; and, secondly, sub-standard vessels which should not be admitted into the North Sea, because they are old crocks which would never pass their MOT test, if they had one, which the oil companies should not charter and, further, which Lloyds (perhaps they should have their arms twisted by the Minister concerned) should not thereafter continue to cover by insurance.
To take the case of a city, it is not as though the forces of law and order have to move in in order to deal with the inhabitants because they are all criminals. The forces of law and order move in to deal with a handful of hooligans and criminals. The same situation applies in the North Sea. It is a small problem.
In taking tough action with the minority of offenders, I simply do not believe that the North Sea Governments will offend the respectable majority. They will, in

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fact, award them recognition and encouragement. I an convinced that stern and forthright action against sea rogues and old crocks will be welcomed by all countries, by all oil companies and by all the authorities involved. That is why the tortuous, legalistic process is the wrong way for the North Sea and why the bluff, strong arm approach to root out the handful of offenders is the right way.
Published figures show that most accidents are due to a bad class of owner-operators associated with particular flags of convenience. Charter by oil companies from those independent owner-operators resulted during the period from 1972 to 1976 in seven times as many accidents as vessels actually owned by the oil companies. It is the chartered vessels which cause risk, collisions and pollution. It is they which have caused the unnecessary burden of maritime legislation—the lawyers' paradise. In the world's tanker fleet there are, apparently, only 450 substandard vessels—which is, I understand, only 15 per cent. of the total. Of these, about 50 were Panamanian, 20 Cypriot and 175 Greek.
Every week, and probably while we are sitting here today, sea rogues, or substandard old crocks, are committing offences. There were three such reports only a few days ago. On 14th June, a Singapore flag tanker leaked 50 tons of oil near Belfast, having been in collision off Sutherland with a Polish bulk carrier. That was not in the news. On 15th June, the Liberian flag tanker "Amoco Trinidad" bound for Texas from Sullom Voe, was spotted by the Royal Air Force at the head of a 15 mile oil slick north of Saint Kilda. That may have done as much damage to natural resources as a major accident, but that was not in the news. On 16th June, a Norwegian flag tanker, "Polytrader", fully loaded, sailed dangerously close to the island of Foula, a famous bird resort, despite sailing instructions to the contrary. This could have been another major disaster like the "Torrey Canyon". And that was not in the news.
These regular incidents are clear evidence of substandard vessels, or substandard navigation and crews, and they should not be permitted in the North Sea or in British waters at all. Yet they are
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never in the news. Parliament and public are unaware of them, and they are not what the Government are trying to deal with. It is interesting that on 21st June a German tanker collided, when it was coming out of Esso Fawley, with an RFA logistical vessel, whatever that may be. Noble Lords probably heard in the news on radio this morning that it has now sunk.
It is interesting that this incident is going to receive a great deal of publicity. Already it has been on radio; now it will be on television, and no doubt it will be in all of tomorrow's newspapers. However, the vessel has not yet spilled any oil and it is not doing any harm. Obviously, it is a very serious matter, and it is extraordinary that this vessel should have been involved in a collison, but so far as 1 am aware it presents no danger to the natural environment or to natural resources, and there has been no spillage of oil. However, this incident has got into the news, whereas the three incidents which I have mentioned to your Lordships, and which were probably infinitely worse, were never heard about.
The slow, tortuous exercise of international maritime legislation will not solve our problems. The North Sea Governments, led by Britain, should take a sledgehammer and crack this nut.
Effective identification and control of this small minority of substandard tankers, or substandard crews, could transform the pollution situation and reduce the need for international legislation. Without insurance, substandard tankers and substandard crews could not operate. However, if they are allowed to operate, then laws and regulations become futile. Only surveillance and control are effective, yet the absence of surveillance and control leads to the demand for more and more legislation which, in its turn, does not solve the problem.
On the question of cost, both for this country and for the North Sea group, it is a question of priorities. All I would say is that a country which cannot protect and conserve its own environment for the nation, and for our descendants, cannot afford to spend millions on welfare and on causes like the arts. Of course I am not hostile to the arts—I am very much for the arts—but they provide an interesting and significant yardstick. The

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Government have been spending over £60 million on the arts for a minority interest. Although the grant to the arts probably benefits only a small fraction of the population, I do not grudge it, provided that the new Government, unlike the last, get their priorities right. If £60 million is a reasonable figure for the arts, policing the North Sea to ensure the survival of its natural resources and our sea shores is worth a great deal more than that.
The whole spectrum of the oil business is a very serious threat to the natural resources around our coast and in the North Sea, and £60 million, or even £200 million, would be chickenfeed to avert problems, trouble and bad publicity, particularly in the expanding years ahead. Probably, however, it is not necessary; it is a question of co-ordination and determination. North Sea oil revenue to the country is estimated by the Government to be £4 billion a year in the mid-1980s. Surely it is worth spending a reasonable percentage of that revenue to protect our environment.
There may be 1 million devotees of the arts, but there are over 5 million bird watchers and wildlife sympathisers, 5 million fishermen, millions with yachts, boats and little craft of all sorts, and many millions of people—mainly families—who spend their holidays and weekends by the sea, playing on the sand or among the rocks and the cliffs around our coastline.
The cost of living is one thing. That is a real problem. However, I object to the term, "standard of living". We all have different standards. When it comes to recreation, some people may prefer to be sitting in the opera house, but for others the idea of paradise is a tent, or a derelict cottage near the sea, or a boat. What is relevant to all is the quality of life. No Government have the right to prescribe standards and it would surely be alien to this Government to continue to give a bonus of £60 million to a small minority group, while denying the wherewithal to ensure clean seas, shores and beaches and a decent natural environment for the majority and for future generations.
May I therefore urge the Government to take this new opportunity of introducing a fresh and popular philosophy regarding North Sea conservation; first, by treating
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the North Sea as a special case. This will win great acclaim and respect from the country. What can be done for the arts can certainly be done for our marine environment. Some might say that the responsibility for the North Sea is confusing and that there are too many departments involved. In my view, this should be regarded as the strength of the position, in that almost every Ministry, as well as the Navy and the RAF, seems to have a common aim in North Sea surveillance and improved standards of control. While all parties must want to see North Sea pollution minimised, there are other aspects, such as security and defence, which all point in the same direction and would justify the use of all our resources for a common purpose, in order to fill the dangerous vacuum in surveillance that exists in the North Sea today. I would imagine that NATO might be just as relieved as the RSPB.
Secondly, therefore, we cannot delay on the North Sea until global international negotiations are concluded. I trust the Government will recognise that the practical course now is to get on with the job in concert with our North Sea partners and Norway and not allow prolonged Law of the Sea negotiations to inhibit forthright action.
6.42 p.m.
Baroness STEDMAN: My Lords, we all remember the maiden speech of the noble Lord, Lord Buxton of Alsa, on conservation, and I am delighted—and I am sure the House is—that he is giving us the opportunity this evening of talking more about conservation, particularly so far as the North Sea is concerned and the effects of oil spillage and the importance of protecting our environment from marine pollution. One of the first trade questions I had to answer in your Lordships' House from the Dispatch Box opposite was on the tragedy of the "Amoco Cadiz", and I am deeply conscious of the amount of time and thought that this incident has provoked, even among various Government departments—trade, environment and MAFF, and now with the North Sea oil being such a major industry in Scotland, the Scottish Office are also deeply concerned.
The noble Lord, Lord Buxton, has referred to the need for us to try to get

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European co-operation, through the EEC at least, for some strong measures to combat the marine pollution and its effect upon our environment. On the face of it, this seems to be a sound suggestion, particularly since international agreements are so difficult and take so much time to negotiate. As he has reminded us, we have to remember that all the countries bordering on the North Sea are not yet members of the EEC—for instance, Norway is not—but if we can get voluntary codes of practice agreed among our immediate neighbours in regard to the surveillance and control, then for heaven's sake let us work towards it. But I believe it is an international problem and ultimately it can only be dealt with internationally.
One such step in the right direction was the Merchant Shipping Act which received Royal Assent as recently as March of this year, because that Act makes provision for the prohibition of the deliberate discharge of oil from ships as agreed in the international convention for the prevention of pollution from ships. In March, too, the Department of Trade organised a national conference on combating oil pollution, and that gave an opportunity for a forum to review and discuss the improved arrangements for dealing with oil spills at sea. I understand that the organisation of that conference was the United Kingdom's contribution to World Maritime Day on 16th March. It is an annual event, sponsored by IMCO, and this year it had as its theme, "Safer Shipping and Cleaner Oceans". That, I am sure, is something that we can all support.
At that forum there were many interesting papers presented by experts. For instance, we learned that the "Amoco Cadiz" spilled 220,000 tonnes of oil, mostly light Middle East crudes, with some 4,000 tonnes of bunker fuel. In a two-week period that was spilled on to the coast of Brittany. The wind carried that oil into bays and inlets where high concentrations were measured in the shallow waters and the effects on the organisms depended upon the type of habitat, on the distance from the spill and, indeed, even on the configuration of the coastline. In general, those living on the surface of the beach or the seabed were smothered, while the burrowing organisms were affected by
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the toxic dissolved fraction of the oil. Brittany supports a diverse commercial fishing industry and their fishing industry, particularly for oysters and clams, suffered very severe losses.
Recently in this House we had a short debate on the problems of the oil spillage off the Shetlands at Sullom Voe, and here in one incident involving 600 tonnes of heavy fuel oil over 3,500 bird casualties were found in the following three months and are still being found as a result of that accident. Over 5,000 of our sea birds died on the stretch of the coast between Spurn Head and North Northumberland in two months early last year. These figures do not show the true level of the casualties because many of the birds perish at sea and never reach the shore.
So in the United Kingdom we must be concerned because we host populations of birds with a very low annual breeding rate, birds such as the guillemots, the razorbills and the puffins, together with species that only breed in a very few places, some of which are in the United Kingdom—all those which congregate on our shores during the winter, before migration or for moulting. Other elements in the marine and coastal environment are also at risk from oil spillages. The sand and the mudfiats are the feeding and the roosting grounds and oil stranded in the vegetation here can cause heavy mortality. The salt marshes are used for grazing sheep and cattle. They can recover from a single spillage, but they cannot survive chronic and continuous pollution. The grey seal pups can even become asphyxiated if the oil is washed over them at high tide.
The "Torrey Canyon" incident in 1967 led to the formation of contingency plans by the Government and there is some specialised pollution clearance equipment now available to local authorities. Incidents like the "Eleni V" can be dealt with by these earlier contingency plans, but more highly developed plans are needed for incidents like the "Amoco Cadiz".
Until now the Government have accepted that it is the local authorities who should direct the actual beach cleaning operations, and also that their plans dealing with beach pollution must go side by side and dovetail in to the plans of the Department of Trade for dealing with

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pollution at sea. Cleaning up beaches can be a very costly operation for local authorities. Can we not work internationally for Governments to accept the financial and other responsibilities for spillages from their registered vessels and thus enable the Government to make all the necessary financial help available to local authorities without any delay, and let the final and ultimate settlement be between Governments? Certainly with cuts in public expenditure as massive as those foretold in the Budget, coastal local authorities will be extremely hard-pressed to find the resources to deal with marine pollution and pollution on their beaches.
I know that there is an agreement—the Bonn Agreement—which has been operative since 1969 between the United Kingdom, Belgium, Denmark, France, the Federal Republic of Germany, Netherlands, Norway and Sweden to arrange for their ships and aircraft to report all oil slicks, to inform one another of oil slicks which are likely to pose a serious threat to another's coast and to seek, where possible, to give assistance one to another. That is a good beginning, but now we have to build on it and provide for better surveillance of the type envisaged by the noble Lord, Lord Buxton of Alsa. There is a new Marine Pollution Control Unit within the Marine Division of the Department of Trade and various studies are being undertaken to deal with pollution at sea; what salvage arrangements are necessary; reviewing the liability and compensation provisions and considering beach cleaning arrangements. The report already published by the Department of Trade on Command, Control and Communications is excellent, so far as it goes. What we now need is a sound and reasonable system of monitoring the movements of tankers and that should be one of the priorities of the Government at this time.
The Royal Society for the Protection of Birds, which many noble Lords support, as I do, and of which body my noble friend Lord Donaldson of Kingsbridge is president, is understandably very deeply concerned about the effects of oil pollution. The RSPB was the first organised body to campaign against oil pollution through parliamentary means way back in 1922. Yet, the problem is still with us and is as bad as ever. The RSPB claims that some of the worst hit areas—those on the
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English Channel coasts—now have relatively few sea birds left to kill. Such has been the unnecessary slaughter because of oil spillages.
From studies made it would seem that deliberate discharges appear to kill many more birds overall than do tanker disasters. But, if half a ton of fuel oil from a bilge discharge is spilled in the wrong place, then disproportionately large numbers of birds will be killed. The real problem seems to be that the United Kingdom anti-pollution laws, since the first Act in 1922, have not been actively enforced outside ports and harbours. Indeed, in recent years one, two or three offences at sea have been successfully prosecuted each year. I quote from a Department of Trade report of 1st August 1978 on the exercise and performance of the Department of Trade under the Prevention of Oil Pollution Act 1971, for the year ending 31st December 1977, where it says:
"Fifty-eight prosecutions for unlawful discharges of oil were undertaken during the year by harbour authorities for offences committed in ports and two by the Department of Trade for offences at sea. Fifty-six of the harbour authority prosecutions as well as the Department of Trade prosecutions resulted in convictions. Nineteen convictions related to offences by United Kingdom registered ships and thirty-two to offences by ships of foreign flags. The remaining seven convictions concerned discharges from installations on land".

So, no realistic deterrent exists at present. That same Department of Trade report ended by saying that 59 countries had accepted the international convention for the prevention of pollution of the sea by oil as agreed in 1954–25 years ago—and as amended in 1962, which was 17 years ago. Yet, we are still saying in this House that international action is needed to deter offences outside territorial seas which threaten bird life and marine environment in our care.
The RSPB and others feel that the IMCO rules are being widely flouted and the RSPB also believes that active surveillance over the United Kingdom Continental Shelf waters must be stepped up. We must have a new initiative to protect our vital marine resources, our wildlife and our environment.
I referred earlier to the problems off the Shetlands. A measured count of sea birds killed since 1975 has latterly shown a rise with a strong bias towards the

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vulnerable North. A recent report of the RSPB indicated
"… a perceptible change in the geographical distribution of incidents affecting birds. Of 55 cases, each killing more than 50 birds during the period 1971–1976, only live or (9 per cent.) were north of Aberdeen. In the 28 months, January 1977-April 1979, the comparative totals were 9 our of 35 (26 per cent.). Whilst these figures are admittedly based on small samples, there are fears that the expected surge of incidents off North Scotland, threatening the main seat of Europe's seabird population, is now in train".
The United Kingdom has an international obligation to conserve the sea bird heritage of the North-East Atlantic, centred in North Scotland, Orkney and Shetland. That duty is now being put to a very severe test by the advent of North Sea oil tanker traffic. It is difficult to discharge that obligation unless real preventive methods are provided. That brings me back to where I started. This is not solely a European problem; it is an international one which needs international agreements, international cooperation, and an international willingness to accept the obligations to preserve our marine resources.
It is the safety of people at sea that must always be paramount, but we owe it to the generations that are still to come not to let up in the fight against pollution and in the fight to preserve our environment and our heritage. The noble Lord has given us an opportunity to raise the matter again in the House. I must conclude, I am sorry to say, with an apology which I have already made to the noble Lord, Lord Trefgarne. I have an inescapable commitment which means that I must leave the House just before 7.30. 1 apologise to the House and to the noble Lord, Lord Buxton of Alsa, if I am not present for the reply, but I assure your Lordships that no discourtesy is intended on my part.
6.57 p.m.
Lord TANLAW: My Lords, we too on these Benches are very pleased to be able to join with the noble Lord, Lord Buxton of Alsa, and share his concern for the problems that oil pollution has caused to the environment and to conservationists. This is an international problem and one as regards which this country has had a fine record to date. If I interpreted correctly what the noble Lord, Lord
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Buxton, said, he wishes to keep that position.
However, I hesitate to suggest that any form of unilateral action taken by any one nation—even this country—could in practice make it harder for pollution to take place than a recognition of internationally adopted regulations. That view is emphasised by the General Council of British Shipping which believes that unilateral action by any one maritime nation would merely encourage outbreaks of similar action in other parts of the world which would be to the detriment of shipping in general, and in my view it would also add to the confusion that exists in maritime law in the area which we are discussing this evening.
As I see it, the nature of the problem is two-fold: first, there is the prevention of spillages in port which is one particular problem for which there is a set of regulations clearly defined and which can be controlled and monitored by our shore-based administration. However, the spillages that take place at sea are the ones which we seem to have more difficulty in finding an answer to, and they are pollutions by accident or by wilful dumping of ballast.
The proper use of port facilities and the implementation of local regulations have, to a large extent, been covered in an earlier debate in this House. Therefore I should like to concentrate now mainly on the problems that arise at sea and especially in the approaches to oil terminal ports. I believe that action could and should be taken in laying down accepted routes for tankers on the approaches to terminals such as Sullom Voe. My right honourable friend in another place, the right honourable Member for Orkney and Shetland, has expressed concern that tankers are taking a short cut—one of which was referred to by the noble Lord, Lord Buxton—between the mainland and Foula which is a notoriously dangerous channel, and he anticipates the possibility of a major accident occurring in that area. My right honourable friend has anticipated, tragically, the kind of sequence of events of accidents that have occurred to date in the area of oil pollution. I believe that great attention should be paid to his words. He has pressed that tankers should be asked to keep well West of Foula and requests have also

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been sent to oil companies and others to execute that as a standing order for masters. Unfortunately—and this was again indicated by the noble Lord, Lord Buxton of Alsa—international law is obscure as to whether or not this can be made legal. Perhaps the Minister will be able to guide me on this when he replies at the end of the debate.
Only a matter of weeks ago the tanker referred to by the noble Lord, Lord Buxton, was observed passing between Papa Stour and Foula. This gave rise to much local concern. It may be worth mentioning that the Shetland Islanders are better qualified to recognise the dangers that exist in navigating the treacherous waters which surround our shores than are some of the masters who sail those waters. Therefore, these warnings should not go unheeded.
Perhaps there is a partial solution; it is a practical solution and does not encroach into the area of international law. I do not see why any vessels observed from the shore by shore-based surveillance, such as the coastguard, should not be reported to the oil terminal and given some form of time penalty. Masters would soon realise that by taking a shortcut—and those short-cuts mean that the vessels come close to the coast—they can be observed either by the coastguard or by a member of the county council, and be reported to the terminal. Thus, far from saving time, the vessel will lose time. I do not believe that this is necessarily a satisfactory answer, but it is a practical one until some regulations can be made to clarify the route approaches to Sullom Voe.
Briefly, there are two types of spillages. One is the premeditated, wilful act of the dumping of ballast at sea, which we have covered in a number of debates. The noble Baroness, Lady Stedman, has also mentioned it and I believe it is something for which we can legislate. I believe that the accidental spillage that creates the background pollution referred to by the noble Lord, Lord Buxton, is much more difficult, because I suspect that a great deal of this pollution takes place without the knowledge of the master of the vessel. I suspect that it takes place through misuse of equipment, through ignorance of the equipment, and through the wrong kind of crew personnel operating equipment
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which they should not operate—in which case they would not tell the master of the vessel that they have made a mistake; they would just hope that no one notices. It is almost impossible to legislate for that, except perhaps by the terminal ports or some form of regulatory body supervising the standard of crews that operate the machinery on these very large vessels.
Finally, I want to return to the problem of obtaining international agreement on regulations to combat oil pollution. I suspect that oil pollution is one of the few subjects that so clearly divides the world between the developed and the less developed countries. Oil pollution of the high seas is mainly a problem for industrial nations whose appetites for fuel still remain insatiable. Less developed countries may never have the opportunity to pollute their territorial waters with oil because the oil will have run out long before their economies have reached the stage of industrial development which we have in the West. For instance, we should not forget that those countries bordering the South China Sea may not be keen to give oil pollution such a high priority as we, in the West, give it, because their shores are not being polluted by oil; they have the debris of broken boats and bodies from a persecuted people on their beaches.
I am trying to say that we in this country have reached a stage of industrial development that has created the problems of oil pollution. It has also given us a sense of education that we must protect our beaches, and, as has been said, protect our wildlife and create a nice environment for tourism and pleasure. However, there are other countries which, as yet, may not have the opportunity to regard the problem of oil pollution in the same way as we do. Therefore, we must be sympathetic towards some of their hesitancy in reaching international agreements of the kind sought by us today. So let us show understanding when we ask for their help in making regulations to solve the problems on our shoreline, and at the same time show sympathy towards the very different problems which rest on their shoulders.
Lord BUXTON of ALSA: My Lords, for the record, may I remind the noble Lord, Lord Tanlaw, that I did not suggest

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unilateral action by this country; only joint international action with our European neighbours, including Norway.
7.7 p.m.
Lord RITCHIE-CALDER: My Lords, I am delighted to take part again in this discussion and to follow the noble Lord, Lord Buxton of Alsa, in bringing this Question to the attention of your Lordships. I should like to deal first with the last point raised by the noble Lord, Lord Tanlaw, which is that we must wait for the slowest in the convoy in international affairs. That is basically true. Most of the developing countries, which are now properly arguing their case in the Law of the Sea Conference—in which I am pretty heavily involved—are, in fact, not fully aware of the risks which we are now discussing. On the other hand, as the noble Lord, Lord Buxton, has pointed out, events are taking place very near home, in the North Sea.
As a professor of international relations, I have always maintained that we should proceed through international law, even with delays of international law. However, there is one aspect of this matter which does not tolerate delay. It is the fact that one can saturate a whole area, as we arc now doing in the North Sea, with this type of pollution even before the global answers are reached. Most of the things that we are now discussing in terms of what could be done as regards protection in the North Sea have already been basically accepted in international law, either in IMCO or in the Law of the Sea Conference. The fact that these conventions have taken a long time either in being ratified or in being applied is another serious question. But the fact is that we accept them as desirable, as meaningful and as practical.
I want to take up the argument advanced by the noble Lord, Lord Buxton, that we should and must make the North Sea a special case. As he pointed out, we have made the Mediterranean a special case. I take a good deal of satisfaction from that, because I was involved in preparing the first report on the pollution of the Mediterranean which alerted the 17 countries which, in the end, came together in the Barcelona Pact. Therefore, we can make progress by making
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people aware of their immediate, close-in interests, and we have certainly done it in the Mediterranean—even by creating an adversary situation between the countries bordering the North African Mediterranean coasts and the industrial nations bordering the European coasts. Speaking now from my experience as the chairman of the Advisory Committee on Oil Pollution in the Sea, this is something which we could do on our own initiative—not unilaterally and not simply in blunt defiance of international regulations, but by reaching an understanding with all our neighbours bordering the North Sea and persuading them to take part in what I and the noble Lord, Lord Buxton, believe is the necessary act of surveillance.
The North Sea, and even more so the Western and now the Northern approaches are densely packed with ships and the hazards are increasing every day. If you look at a radar map of the traffic, you begin to think that it is an insoluble problem. As the noble Lord, Lord Buxton, pointed out, it is not that kind of thing. As he said, there are the rogues. They are the people who go to the extent of getting in behind an oil disaster like the "Eleni V and the "Amoco Cadiz" and getting rid of their ballast oil. This goes on continuously.
We ought to try also to get this into proportion. The Advisory Committee on Oil Pollution of the Sea pointed out in its report in March that 50 per cent. of the incidents which we were able to establish and discriminate were in fact not from accidents but were from fuel and bunker oil. The principal sources were cargo supply vessels, platforms—we keep on forgetting about the amount of incidental spillage from platforms—and tankers, in that order.
It is the tankers, the vessels which are going to make the most spectacular contribution if they have an accident, which in fact, in the totality, are contributing less than the other sources of pollution. If we are to have proper surveillance it is important that we have a proper system of determining the nature of the spillages. If I may put in a commericial for my own organisation, we are now doing a remarkable job in this. In our last report we have in fact produced the very careful—and I repeat "careful"—picture of the

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incidents and identified them in various ways.
We are now co-operating with the Norwegians and the Swedes, and are hoping to work also with the EEC countries in the collection and assembly of information. We can now begin to get a proper picture out of this confusion of sources, and to identify the sources. As I think your Lordships will know, it is important that you know where the oil came from. When you come to the question of insurance, you have ultimately to go back to the source even to recover the insurance.
The most important thing we want to do—and I want to press upon the Government that they can at least make this contribution—is to make sure that in the North Sea surveillance systems (the Nimrods, the protection systems, and so on) in fact carry infra-red detection systems so that no ship will ever feel secure at night. If that was well enough known, if it was generally believed that it was so, you could cut down a great deal of the mischief because they would not know they were being watched. That would be almost as effective as intercepting them.
The other thing which thé noble Lord, Lord Tanlaw, pointed out is that there is a way in which you can deal with the problem. We have, in ACOPS—the Advisory Commission on Oil Pollution of the Sea—been advocating that we must get some port stage jurisdiction; we must be able at the port stage to deal with the people who make the mischief at sea. We have not got that. It is a significant fact that in 1978 the Department of Trade was able to report only one successful prosecution of a ship which had polluted at sea. We can deal with it in the ports. The port authorities are rather good.
I have just been to Sullom Voe, where they are having some difficulty because the Shetland Islands Council are carrying out what is called a secret inquiry into what happened at Sullom Voe—much to the indignation of the 17,000 people of Shetland who think that they should he sitting in on that. Here is an authority which is taking its responsibility extremely seriously, because this incident was, from the point of view of the Shetlands, as
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my noble friend Lady Stedman pointed out, serious in terms of the effect on wild life, and so on. But in a case such as this the Government ought to have stepped in and conducted that public inquiry with the rights of privileged hearings, because the Islands Council is not covered by privilege, and therefore can be exposed to all kinds of outcomes from this. So they shut the doors as thoroughly as you can ever shut the doors in Shetland. They know exactly what is happening every hour of the day.
Here you have a population of 17,000 and a council which is standing up to the whole effects of this, and the whole of the impact of the oil. Along with the Sollum Voe Association, they have established these lanes, and so forth. and insisted on ships using them coming in. They have also made it clear that any ship which has obviously got rid of its oil ballast on the way in will be at the end of the queue when it comes to refuelling, which is the time sanction which the noble Lord, Lord Tanlaw, was asking for. Please, my Lords, do not force me into pointing out that this might be called industrial action.
That is one way short of proper jurisdiction, without powers, and so forth, that you can begin to operate. The most important thing is that we have to have in the North Sea a new understanding between ourselves and other North Sea States, and we have to have the supervision and the powers of intervention. This has now become so serious that we shall not be able to offer any promises to posterity unless we do something now.
7.17 p.m.
Lord TREFGARNE: My Lords. we are indeed indebted to the noble Lord, Lord Buxton of Alsa, for raising once more the question of oil pollution of the sea by ships, which is undoubtedly a matter of continuing public interest and concern. We have all been sickened, have we not, by the pathetic sight of seabirds so smothered by oil as to he barely recognisable as once living creatures; we have all seen photographs of the beaches of Brittany as they were last year covered by a thick carpet of oil; and many of us—or our children—have come across the tar and the like to our cost on our own beaches.

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As I have said, all this is undoubtedly a matter of continuing public interest and concern, but I should like to begin by considering the extent and nature of the problem. Perhaps the most widely quoted global assessment of the scale of the problem is that made under the auspices of the American National Academy of Sciences. This suggested that, in 1973, shipping accounted for 2·1 million tons, or slightly over one-third, of the oil entering the oceans of the world. Land-based sources were, quantitively, rather larger, accounting for some 2·5 million tons, or about 40 per cent. of the total. A recent updating of these figures indicates that, in 1977, shipping accounted for about 1·4 million tons, or a little over a quarter of the total.
Breaking these figures down a little further, the National Academy of Science assessment indicated that shipping accidents, mainly tanker accidents, which of course attract worldwide attention, account for around 0·3 million tons, or only 5 per cent. of the total. The other calculations to which I referred earlier show broadly the same picture. By far the greater part of oil entering the sea from ships is discharged as a result of their day-to-day operations. The major element is undoubtedly the small minority of tankers that pump overboard oil contaminated ballast water or tank washings; but we should not forget the role of those ships of all types, not only tankers, which discharge their engine room bilges.
I recognise that oil discharged from ships represents a particularly worrying aspect of the overall problem of oil pollution, notably when a large spill has a devastating local impact. None the less, we should bear in mind that these discharges do not represent the total problem, and that there are grounds for believing that international action over the years has succeeded in reducing the scale of these discharges.
I turn to the nature of the impact on the environment of oil discharged from ships. First, there is the impact on fisheries. There is no doubt that oil on the sea surface disrupts fishing, since fishermen are naturally reluctant to haul their gear through an oil slick which may contaminate their nets and taint the catch. Oil on the surface of the open sea does, however,
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have space to disperse and be diluted and time to degrade by chemical and biological means. In these circumstances, it has not been found to cause adverse effects on fisheries or marine food chains. In coastal regions, on the other hand, where oil can make contact with the bottom and become stranded on the shore, it may damage organisms by smothering or by toxic impact, and where oil becomes incorporated in the sediments these effects can remain for years.
Secondly, there is the impact on amenity beaches. The effect of the exceptional major oil spill close to the shore is there for all to see; such gross pollution can be removed at great cost, but oily residues that become buried can persist for years. Then there is the continuing problem of tar balls and the like associated with the so-called "operational" discharges from ships. This undoubtedly represents a nuisance, but how much of a nuisance? Such information as we have suggests that local authorities choose to spend perhaps £100,000 a year on cleaning up this form of pollution.
Thirdly, there is the impact on other parts of our coast. Oil pollution generally does little harm to life on exposed shores, but in sheltered bays and estuaries where fine sediments occur, and in salt marshes, it can have far-reaching and long-lasting effects on the components of the food chain and on the large variety of birds which may feed and roost there.
Fourthly, there is the impact on birds. The sea birds and wildfowl in and around the British Isles are of international importance. Our knowledge of their movements offshore is at present limited. To help remedy this gap in our knowledge, the Nature Conservancy Council are hoping to undertake an investigation of the distribution of sea birds at sea, which would help us to assess the threat posed by particular spills. What is of particular concern here is that an individual spill—which need not be very large—will decimate a species with only a handful of breeding colonies around our coasts and with a low annual breeding rate. The "Esso Bernicia" incident at Sullom Voe is an example that comes readily to mind.
I now draw your Lordships' attention to an absentee from this catalogue—the

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loss of human life. Oil spills in themselves do not kill people. I would therefore pose the question: where should oil pollution rank in our priorities? Oil pollution clearly has harmful consequences, but how does it rank, for example, compared with trying to prevent accidents involving ships? A particularly serious and striking example was the explosion at the beginning of this year on the "Betelgeuse" in Bantry Bay, which killed 50 people; or trying to prevent accidents involving aircraft? We all remember the recent tragedy at Chicago airport; or trying to reduce the annual carnage on our roads? The chances are that someone has been killed even during the course of this short debate.
But that does not mean that we should simply accept the situation and do nothing. A great deal can be done, has been done, is being done and will continue to be done. And I might remark in passing that our concern must extend to the whole of our coastline. With the greatest respect to the noble Lord, Lord Buxton of Alsa, I am sure we would be unwise to restrict our attention to those parts of our shores which happen to border on the North Sea.

I turn to the question of how one should tackle the problem and the issue of "unilateralism". It is no accident that for many years we have sought to establish an internationally agreed world-wide framework for the shipping industry. The reason is quite simple; shipping is by its nature an international industry. A ship begins its voyage in one country and very often ends its voyage in another, perhaps having called at a third, fourth and fifth country on the way. A single, well understood set of rules that have been agreed and are accepted world-wide is an important factor contributing to shipping safety. If I might suggest an analogy, what would happen if each of our major cities introduced and sought to enforce its own set of road signs and its own version of the Highway Code?
Added to that, a single set of rules makes it possible for shipping to operate flexibly on a world-wide basis. This flexibility is greatly to our advantage both as a major shipping nation and as a major user of shipping services for our imports and our exports. If one accepts that we have an important national interest at
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stake in promoting an international approach to shipping matters, it necessarily follows that we must exercise extreme caution before we indulge in national, or unilateral, initiatives. And that applies equally to regional initiative with our European partners; the North Sea is not an inland water of exclusively regional concern but a major sea used by the ships of the nations of the world.
A somewhat related matter is the question of enforcement which has traditionally been regarded as the responsibility of the flag State. This approach has many advantages; the flag State is more likely to have access to the owner and is better placed to supervise safety standards on a sustained basis. But there is a complementary and increasing role for the port State—that is, the country at whose port the vessel calls—to enforce agreed international standards. Discussions at the United Nations Law of the Sea Conference have reached consensus on an important extension of port State jurisdiction on pollution matters.
There are those who envisage a wider role for the coastal State—that is, the country whose shores the ship is passing—but what does coast State enforcement involve in practice? It means being prepared to induce a perhaps reluctant master to bring his ship into our ports. Are we ready to contemplate the use of gunboats, or putting a shot across the bows of an oil tanker or sending boarding parties to sea, except under the most extreme circumstances? Questions of practicality also arise if one contemplates regulating traffic from the shore, drawing parallels with civil aviation.
I am advised, first, that "sea clutter", as it is called, tends to distort radar displays, making it difficult to track small craft at sea. But perhaps more important is the basic, indeed obvious, difference between the environment in which aircraft are controlled and that in which ships operate. The difference is that one aircraft can fly at a higher altitude than another. This has two consequences. First, one can set aside air lanes for the exclusive use of civil airliners—and when we speak of air traffic control, we generally have in mind the system applied to these aircraft—and the second consequence is that crossing traffic can be kept vertically separate.

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It does not seem to be realistic to envisage the physical separation of the different types of user of the seas, and it is plainly impossible to envisage the vertical separation of crossing traffic. This means that, for the most part, the master must remain responsible for the safe navigation of his ship. He is increasingly being aided by modern technology and we should not forget that ships move relatively slowly and generally in relatively empty seas. Ship movements will no doubt continue to be more closely controlled in and around major ports and there will be areas, such as the Channel, where a degree of traffic management is necessary. Indeed, a whole range of measures over the past decade have succeeded in greatly improving safety standards in that relatively busy waterway. The number of collisions has been more than halved.
Your Lordships will be aware of the voluntary ship movement reporting scheme, which we introduced at the start of this year with our French colleagues and with the full knowledge of the Intergovernmental Maritime Consultative Organisation—IMCO. After the current trial period, we hope that IMCO will recommend full participation in this scheme. Discussions are also under way towards developing an integrated traffic scheme for the Channel as a whole. We hope that these developments will in due course lead to a further improvement in safety.
While again on the subject of aircraft, perhaps I might say a few words about aerial surveillance. The pilots of all British aircraft, and the masters of all British ships for that matter, are already asked to report any oil spills that they see. This applies equally to military aircraft and ships, including the so-called "North Sea Tapestry" flights. When added to the assistance provided by the Services in dealing with oil spills, this represents a most valuable contribution by the Ministry of Defence to tackling the problem of oil pollution.
It is sometimes suggested that this so-called "casual" surveillance should be supplemented by aircraft dedicated to this task. This could undoubtedly be done. Indeed, in due course, by developing work already under way at the Warren Spring Laboratory and elsewhere on side looking
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radar and infra-red sensing devices, we could develop something approaching a 24-hour a day, all-weather surveillance capability. The knowledge that such a systematic surveillance was being carried out might well deter some masters from discharging oily ballast water or oily bilge water. Such flights might provide some of the evidence needed for successful prosecutions in other cases, and such flights might identify some oil spills that merited taking action to disperse. But the annual cost could easily amount to several million pounds. The question that we have to ask ourselves, my Lords, is whether that additional expenditure is justified, given our other priorities and our determination to reduce the demands that the public sector makes on the available resources.
I said earlier that a great deal is being done to mitigate the problem of oil pollution. I have already spoken briefly of developments that are in train further to improve safety in the Channel. A number of international conventions and agreements have been concluded in recent years that are directed at improved standards of shipping safety, pollution prevention, and training for seafarers. The necessary number of ratifications of the International Convention for the Safety of Life at Sea has now been achieved, and that convention will come into force next May. We now need to bring the other agreements into force. For our part the Merchant Shipping Act 1979, which received the Royal Assent in the closing days of the last Parliament, will enable us progressively to do just that.
We need to enforce those internationally agreed enhanced standards both in relation to our own ships and for all ships in our ports, so far as skilled manpower is available. We also need to continue to develop our arrangements for dealing with serious oil spills. So far as the situation at sea is concerned, that is now the particular responsibility of the Marine Pollution Control Unit that has been established within the Department of Trade. I see that the noble Baroness's coach has turned into a pumpkin; but she mentioned the new Marine Pollution Control Unit, and it is certainly doing a great job.
Many noble Lords will have read of the exercise held last week—Manchex—to

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test the arrangements known as Manche-plan that we have developed with our French colleagues for responding to maritime emergencies in the Channel. Similar exercises are regularly held to test our national arrangements along other parts of our coastline, and they represent one important way in which we seek to improve our contingency plans still further. Your Lordships may also have read that we are investing in two caches of salvage equipment in order to ensure the availability of the pumps and associated equipment needed to transfer oil from a stricken tanker to a receiving vessel. This will involve expenditure of several hundreds of thousands of pounds.
As I said when opening, oil discharged from ships is only part of the problem. We therefore look forward to receiving in due course advice on this and the wider perspective from the Royal Commission on Environmental Pollution, on which the noble Lord, Lord Buxton of Alsa, once served with such distinction. We shall continue our efforts in all these ways to promote safety at sea and to limit the damage to the marine environment that is associated with the undoubted benefits we enjoy as a result of the activities of the shipping industry, and, in particular, from our use of oil.
There is no doubt in the Government's mind that oil pollution is a problem that merits, and will continue to receive, serious attention. Our first aim of course remains to prevent oil being spilled into the sea, although we must recognise that a catastrophe is an ever present danger. It is part of the price of personal mobility, industrial production, warmth and light. Let he who enjoys none of these cast the first stone. But recognising the inevitability of at least some accidents, we shall continue to deal with those spills in a way which seeks to minimise the pollution damage done to sea birds, fisheries, ecologically sensitive areas, and amenity beaches.
Before I sit down I wish briefly to deal with some of the points raised by various noble Lords in the course of the short, but interesting, debate this evening. The noble Lord, Lord Buxton, who raised a number of matters, asked about making the North Sea a special case, and the noble Lord, Lord Ritchie-Calder, also mentioned this point. The Mediterranean
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is of course already a special case under the MARPOL convention, but I know of no evidence that the North Sea is incapable of absorbing the very limited discharges permitted under that convention. But should evidence to the contrary be produced, then MARPOL embodies a procedure for creating further special areas. The noble Lord, Lord Buxton, also referred to the 500 or so oil spills reported in 1978. I might mention that according to the ACOPS annual report, to which the noble Lord, Lord Ritchie-Calder, referred, about three-quarters of them resulted in no damage being perceived or reported.
The noble Lord, Lord Buxton, also asked me about the powers to detain ships pending investigation. I regret that I do not think that we have such powers at present, but it seems to me that we should continue to exercise considerable care before detaining ships and delaying them simply on suspicion. This practice could lead to confusion and a degree of chaos in the shipping industry. Moreover, the approach smacks of a presumption of guilt, rather than one of innocence, and that I believe is not an approach we should adopt without the most careful consideration.
Several noble Lords raised the question of Sullom Voe and the serious problems that have been occurring there recently. At the beginning of this year there was a considerable public outcry because of pollution from oily balast water discharged by tankers using Sullom Voe. This was associated in the public mind with the fact that the ballast water reception facilities at Sullom Voe had not been commissioned, although tankers can be operated so as not to cause pollution even in the absence of such facilities. The terminal operators took action which put a stop to this practice close to the Shetlands, although, I fear, it has been alleged that the tankers are simply discharging their ballast water further south. The latest situation on the construction of the ballast water reception facility is that construction work and installation of equipment is now being finalised, and BP anticipate that they will he able to take over the entire plant by the end of June. They further anticipate that they will be able to treat all ballast water by September, when the new facility will be fully operational.

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The noble Lord, Lord Buxton, asked me about intervention on the high seas following a shipping accident. The international convention relating to intervention on the high sea in cases of oil pollution casualties, which I believe was signed in 1969 and came into force in 1975, affirms the right of a coastal State to take such measures on the high seas as may be necessary to prevent, mitigate, or eliminate the danger to its coastline or related interests from pollution by oil, or the threat of it, following a maritime casualty. I hope that that information is helpful.
The noble Lord, Lord Tanlaw, asked me about routing of tankers to and from oil terminals. This is a matter which, for the moment at least, we think is best tackled on a voluntary basis in co-operation with the oil industry, and that is what we have in hand for the waters to the North of Scotland.
This has been an interesting and helpful debate. Again, the House is grateful to the noble Lord, Lord Buxton, for introducing this topic to us this evening, and I hope that at least some of the answers that I have been able to give have been of some value.

CRIMINAL JUSTICE (AMENDMENT) BILL [H.L.]
Lord WIGODER: My Lords, I beg to introduce a Bill to amend the Criminal Justice Act 1967 to restrict reports of committal proceedings in magistrates' courts in cases where there is more than one defendant. I beg to move that the Bill be now read a first time.
Moved, That the Bill be now read la.—(Lord Wigoder.)
On Question, Bill read la; and to be printed.

DEALINGS WITH WITNESSES BILL [H.L.]
Lord WIGODER: My Lords, I beg to introduce a Bill to prohibit certain dealings with witnesses in criminal and civil proceedings. I beg to move that the Bill be now read a first time.
Moved, That the Bill be now read 1a.—(Lord Wigoder.)
On Question, Bill read la; and to be printed.

IPSWICH PORT AUTHORITY BILL
Reported from the Unopposed Bill Committee without amendments.