HL Deb 29 June 1982 vol 432 cc152-68

3.5 p.m.

Lord Lyell

My Lords, I beg to move that this Bill be now read a second time. The purpose of the Bill which is before your Lordships this afternoon is to empower my noble friend the Secretary of State to make regulations which will, we hope, create rights and duties in domestic law to enable the United Kingdom to implement the convention on a code of conduct for liner conferences. When the United Kingdom accedes to the convention it will be lodging fundamental reservations, as required by Council Regulation No. 954/79 of 15th May 1979. It is therefore important that the code, which is contained in the schedule to the Bill before your Lordships, and the Community regulations are read together.

Since therefore the Bill takes these two international legal instruments as its starting point, I hope it will be helpful if I explain briefly the negotiations which led up to them and then explain the way in which British interests stand to be affected by them. The liner code is likely to come into force internationally during the course of next year. It will then have been in gestation for well over a decade, during which British policy has evolved on a non-partisan basis under three Governments. In the first place, there was general agreement in the early 1970s that the code, as it was negotiated in the Committee on Shipping of the United Nations Conference on Trade and Development, was contrary to British interests. In 1974, the Labour Administration of the day voted against it. However, British Governments have not been opposed in principle to internationally agreed rules of conduct for liner conferences. Indeed, such rules had been suggested in our own Rochdale Report in 1970.

Liner conferences operate under exemption from the restrictive trade practices legislation, and from the corresponding legislation in other countries, and potentially they dispose of considerable market power. They should not exploit this power at their customer's expense and it makes sense to establish rules of conduct to ensure that they do not do so. Many of the United Nations code's provisions are concerned to help the shipper and the shipper organisation, and no British Government have seen cause to object to these provisions.

Our opposition to the United Nations code in its original form was essentially concerned with the cargo sharing provisions in Article 2. In essence, these seek to ensure that the cargo carried by a liner conference trading between two countries is divided equally between the member lines of those two countries and to leave member lines of third countries with some 20 per cent. between them. This is the origin of the often quoted 40:40:20 formula by which the United Nations code is best known. Its purpose is protectionist and, like protectionism everywhere, its effect must be to raise costs at the customer's expense.

Moreover, the British shipping industry, too, was very concerned about the potential effect of this cargo sharing article on its own interests. British liner shipping trades in conferences all over the world, and over 40 per cent. of its earnings come from the cross-trades. I should explain that that is from trading between two overseas countries, including notably cross-trades to and from continental European ports.

British liner shipping is served best if it can continue to compete commercially for cargoes in the ports of the world without flag discrimination. To be restricted in the cross-trades to sharing 20 per cent. of conference cargoes with other cross-traders would have been damaging to our industry's export earnings and to the jobs of those who work in it. There has been no tendency in this period for the trading opportunities and, hence, the job opportunuties of British shipping to become less dependent on cross-trading.

The most serious problem facing British shipping was that a number of continental European countries had signed the original code convention, and there was the clear prospect that the code might eventually apply generally on the Continent, imposing serious restrictions on our shipping lines' trading opportunities, and thus on job opportunities, in the cross-trades to and from European ports. We faced this possibility whether or not we ourselves acceded to the UN code, by virtue of the continental countries' intention to do so. It was therefore essential to agree a common position in the European Community to enable us to avoid this danger. That common policy was developed under the last Labour Administration; and my own Government were glad to continue it on behalf of the United Kingdom very soon after we came into office. The policy is embodied in EC Regulation 954/79 which creates directly applicable law in the United Kingdom.

The overall effect of the community's policy on the code will therefore he that its cargo-sharing provisions will protect the shipping of only those countries, mainly developing countries, that wish them to do so. Not only will liner conferences trading between member states be free of cargo-reservation, but, even more importantly, when the code applies to a route between a community member state and a third country, conference lines from all member states will compete in that route on the same footing. Secondly, lines from countries within the OECD which intend to accede to the Liner Code will also be able to compete on the same footing provided they offer reciprocal treatment on routes serving their own countries. Finland, Norway and Sweden have already announced their intention of joining the code and operating it in the same amended way as the United Kingdom and the rest of the European community.

Thirdly, conference shipping lines of other OECD countries such as Australia and the United States of America which at present do not intend to accede to the Liner Code, will also be treated in the community on the same footing as community conference lines for the purposes of the Liner Code, so long as those countries do not themselves discriminate against community shipping. Japan is the only country in the OECD which intends to accede to the UN code without having yet decided whether to offer the reciprocal arrangements available in the European community and in Scandinavia.

As a result of this fundamental modification of the code's provisions, calculations suggest that the code's cargo-sharing will apply in practice to only about a quarter of the world's liner conference trade. The other three-quarters will be free of the code's cargo- reservation provisions because they will be either not be applicable in intra-OECD trades, and they will be substantially modified in trades between OECD and developing countries, or because of the intention of other OECD countries, such as Australia and the United States of America, not to accede to it at all. From the point of view of British shipping, the development of the Community policy on the UN code was decisive. I am very glad to say that today, with the formidable support we are going to have later from my two noble friends Lord Inchcape and Lord Cayzer. Certainly, this support ensured that the code would not restrict the access of British shipping to compete in the cross-trades into, and out of, continental European ports.

Our judgment was that British interests would be best safeguarded if the United Kingdom agreed to a common policy having that effect. The alternative was, of course, for the United Kingdom to preserve its own freedom of action, but at the cost of other member states preserving theirs. The consequence of this would have been that British conference lines faced flag discrimination on the European continent with the loss of trade and indeed the loss of jobs. Community policy also modifies certain other aspects of the code. For example, it removes the automatic right to join a conference of all lines of countries served by that conference, and it restricts the requirement regarding the minimum period between increases in freight rates.

The General Council of British Shipping, and the British Shippers' Council, representing the customers of the shipping industry, were of course fully consulted at every stage of the developments I have described, and I am happy to say that both bodies are in full agreement with the decision that the Government took.

The present position in the community is therefore that member states are legally precluded from acceding to the United Nations Liner Code except on the basis of the common policy, which requires each member state to make the agreed reservations, as I have described. Legislation corresponding to this Bill is before, or due shortly to be introduced into, the national Parliaments of member states party to the package (that is, all member states of the EEC except Greece, who joined the Community at a later stage). The code convention provides that it comes into force six months after the countries signatory to it account for 25 per cent. or more of the world's liner shipping tonnage. This threshold has not yet been reached: the figure stands just below 21 per cent. but only a handful of European countries are needed to tip the balance. It seems likely that it will be tipped later this year, after the various European states have enacted their legislation. The code will almost certainly come into effect some time in the first half of 1983. It is of great importance to the United Kingdom's interests that we should have acceded to the code by that time.

We hope that when the code becomes operative it will bring to an end a protracted source of uncertainty in the world of liner shipping. While no-one could pretend that these developments have been designed expressly to advance British interests, there is no doubt that we have been able to avert the very real dangers recognised by our industry at an earlier stage. Countries are divided in their views on the wisdom of protecting their shipping industries but each has the ability to do so whether or not their trading partners agree. In the Government's view an internationally-agreed code, laying down an internationally-agreed trading régime, is less likely to lead to international friction than a variety of conflicting unilateral, national and protectionist measures. Such a régime may not give every country (or perhaps even any country) 100 per cent. of what it would like, but the Government are convinced that accession by the United Kingdom to this convention is in the country's best interest.

It by no means certain that the United Nations code will eliminate international disputes in liner shipping. One serious and growing source of dispute is the tendency of some countries to shut their trades to all but conference lines, thereby removing any possibility of competition with the conference. Some developing countries have even claimed the endorsement of the United Nations Liner Code for eliminating competition from their trades in this way. As has been made clear in another place this is not Her Majesty's Government's interpretation of the Liner Code. The code is concerned with the conduct of liner conferences. It confers rights and duties on shippers, shipping conferences and their members, as between one another, and it also provides machinery for resolving disputes between such parties. But it imposes neither rights nor duties on shipping lines plying outside conferences, nor on Governments in respect of them.

It remains the sovereign right of any country to exclude from its ports such shipping as it pleases. The exclusion of non-conference lines would not itself be a breach of the code. Countries, both party to, and not party to the code, might therefore seek to exclude non-conference competition, not least from the United Kingdom's own trade routes. This prospect causes great concern to British shippers, because they foresee themselves being deprived of choice and compelled to use conference services whatever their quality and at whatever price. The British Government share that concern.

We have always recognised that the legal privileges under which liner conferences trade requires the discipline of exposure to competition if these are to remain acceptable. If, therefore, the United Kingdom finds competition eliminated from its trade routes by another Government, whether or not it prays the code in aid, we will continue to make clear to the Government concerned that this is unacceptable to us, and that we stand ready to use the very considerable powers which Parliament has provided to counter acts which damage our shipping or trading interests.

Before I turn to the detailed clauses of the Bill, I hope that your Lordships will allow me to deal with a point that was raised at Report stage in another place, concerning the publication of information that the Secretary of State may obtain under Articles 5 and 6 of the code. Article 5 places conferences under a general obligation to police themselves and under a specific obligation to provide the Secretary of State with reports on action taken against malpractices. Article 6 creates a similar obligation in respect of conference agreements and related documents.

Clause 10(2) in the Bill governs the disclosure of information obtained by the Secretary of State. It prevents the disclosure of information without the consent of the person from whom it was obtained except for the particular purposes listed in Subsection 10(2) paragraphs (a) to (d) inclusive. Clearly the amount of informaton that might be disclosed, if any, will depend in no small measure on the views of the people from whom it was obtained. We may however find that those providing information under Article 5 will be more ready to consent to information being disclosed than will be the case concerning information provided under Article 6.

Turning now to the clauses of the Bill, Clause 1 enables Orders in Council to be made certifying which states are contracting parties to the convention. Clauses 2 and 3, which lie at the heart of the Bill, enable the Secretary of State to make regulations for giving effect to the code in the United Kingdom. Regulations will identify those provisions in the code which give rise to enforceable duties, and will specify the persons by whom and to whom those duties are owed. Regulations may also clarify or supplement the provisions of the code. They will, of course, take account of the very important modifications of the code régime made by the Community's common reservations.

Clause 4 contains defensive powers to exclude, or restrict, the operation of the code where the failure of another state to honour its obligations under the code damages, or threatens to damage, our shipping or trading interests. Clauses 5 and 6 concern the bringing of legal proceedings against liner conferences and their members. Clauses 7, 8 and 9 provide for certain restrictions on legal proceedings arising out of the code, and allow for proceedings to be stayed where the code's own provisions for settling disputes are applicable.

Of the other six supplementary provisions in the Bill the three most significant are: Clause 10, which allots some minor regulatory functions under the code to the Secretary of State; Clause 11 which provides for the exclusion of the Restrictive Trade Practices Act 1976 and the common law doctrine of restraint of trade; and Clause 13 which includes the requirement for the Secretary of State to consult persons affected before making regulations and lays down the parliamentary procedure for statutory instruments. My department has, of course, consulted widely throughout the negotiation of the code and the EC regulation, and before preparing this Bill. Regulations made under the legislation will also be the subject of the closest consultation between the General Council of British Shipping and the British Shippers' Council, and other interests affected by them. I apologise for the considerable length of my remarks, but as your Lordships will appreciate, it is a detailed Bill, and I commend it to your Lordships.

Moved, That the Bill be now read a second time. —(Lord Lyell.)

3.25 p.m.

Lord Ponsonby of Shulbrede

My Lords, may I thank the noble Lord, Lord Lyell, for explaining what is a very detailed and complex piece of legislation. It is inevitably a complex problem to regulate world shipping, as it is to regulate world aviation. I think it is interesting to note that in the field of aviation the Government have fairly and squarely nailed their flag to the mast of deregulation, though we have heard little about this since the effects of deregulation have shown up in the operations of a number of airlines. It is therefore noteworthy that in the field of merchant shipping, by bringing forward this Bill for British accession to the UN Convention on a Code of Conduct for liner conferences, the Government are firmly nailing their flag to the mast of regulation. Indeed, this will be the first time that liner conferences have been subject to any form of regulation.

I applaud this initiative of the Government, as they have obviously firmly weighed up the pros and cons of accession. As the noble Lord said, when there was a Labour Administration in 1974 the Government voted against the code as then negotiated, as they saw it to be against the interests of British shipping. The United States of America also voted against the code at that time, and are still against it now and do not intend to accede.

As the noble has said, the code is due to enter into force six months after the date on which not less than 24 states representing at least 25 per cent. of the 1973 world liner tonnage become contracting parties to it. At present, 52 countries have ratified, with a combined total of 20.47 per cent. of world tonnage. In this situation it only required the accession of a few more countries to the code to cause the tonnage requirements to be met and for the code to be activated.

As we have been told, this would have placed British shipping in an invidious situation and effectively cut it out of much of the European cross-trade. It was, of course, with this situation in mind, and largely on the initiative of the British Government, that the Brussels package was negotiated, which effectively provides a régime for the disapplication of the code's cargo sharing provisions in the intra-OECD trades. The result of these measures is that as long as all OECD countries acceding to the code disapply its cargo sharing provisions in this way, 75 per cent. of the world's liner conference trades will remain free of cargo reservation. This means that on a route between a Community member and a third country conference liners from all member states will compete on that route on the same footing.

However, none of your Lordships this afternoon should be lulled into thinking that this measure has been designed to advance the interests of British shipping. Much of the original support for the code derived from the desire of certain developed countries to increase their share of liner trades cargo by reservation, since they could not win it by commercial means. The Brussel package has at least ensured that the position of British shipping will not be further undermined.

It is important to realise that the code and the Brussels package provisions taken together are unlikely to have any dramatic effect on the participation of developing countries, because in most trades between developed and developing countries the national lines already operate roughly on code principles.

I mentioned that the US Government are not acceding to the code, and I wonder whether the noble Lord could give your Lordships any indication of the likely current attitude of the US Government to the code once it comes into force.

This is an enabling Bill and much of how it works will depend on the way in which the code is implemented. The Bill in effect legitimises price fixing and market sharing in the shipping industry and it will be important to maintain a proper oversight of its operation. It will be important to see that the wider consumer and international interest is protected.

One of the problems which will arise in implementing the code will be to define "national shipping lines". Will all United Kingdom flag-carrying ships be counted as a ship of a United Kingdom national shipping line, or will only those ships with head offices and effective control in the United Kingdom be so counted? I must say that the conciliation procedures outlined in the code do seem somewhat cumbersome. I wonder whether it would be possible for these procedures to be simplified in some form or another. In supporting the Bill, I should say that we agree with the Government that not to accede would be potentially damaging to United Kingdom merchant shipping and for that reason we give our support to the Bill.

3.32 p.m.

The Earl of Inchcape

My Lords, perhaps I may be permitted to comment on the Bill on behalf of the United Kingdom shipping industry. I speak as a past President of the General Council of British Shipping and declare an interest as chairman of P&O.

The British shipping industry welcomes the Bill. We believe that it will permit developments which will be of considerable help to our liner interests. In particular, it will safeguard the position of that large proportion of our liner fleet which operates as cross-traders, that is—as my noble friend Lord Lyell explained—which provide shipping services to other countries. This must be seen against a background of ever-increasing protectionism by many foreign Governments in respect of liner shipping and it might be helpful if I were to recapitulate some of the main points of the Bill—which were covered so well by my noble friend Lord Lyell and the noble Lord, Lord Ponsonby of Shulbrede —and show how we see it as shipowners.

Over the past 20 years many foreign Governments, particularly those from the less developed nations, have been anxious to boost the growth of their own shipping interests by political measures. These have usually taken the form of cargo reservation measures, mandatorily directing cargoes to their own liner fleets. By the end of the 1960's the developing nations sought international recognition of their aspirations. Following a prolonged debate within UNCTAD they forced through the UN Liner Code Convention by a majority vote in 1974.

The convention is a complex instrument. It grants extensive rights of membership to the national shipping lines of the countries served by conferences and more limited rights to cross-traders. It also contains a cargo-sharing provision which is often simplistically referred to as the 40:40:20 formula. This gives the national lines of trading partner countries, who are members of a conference, rights to equal shares of the cargo carried by that conference. Cross-trader members of the conference are entitled to a significant part of the cargo, such as 20 per cent. The code does not apply at all to lines operating outside a conference.

Of course, the code covers much more ground than this, giving what one might call "consumer rights" to shippers. Much of this part of the code reflects what was then already good conference practice and was, in fact, closely based on a voluntary code of conduct negotiated between the European Shippers' Council and the Council of European and Japanese National Shipowners Associations.

Although British shipowners were prepared to support that part of the code in principle, in 1974 they could not go along with the code as a whole, any more than could the Government. Its cargo-sharing provisions offended, and still do offend, a principle which we consider to be of fundamental importance—that commercial criteria alone should affect the ability of lines to carry cargoes. In our view, in an ideal world, only competition in a free market can provide the best and cheapest service for our customers. Unfortunately, this is not an ideal world and over the years our perspective has changed. It is not that British owners have become protectionists —far from it. But granting developing nations even a 40 per cent. share of their liner trades as of right now has to be regarded as a safeguard against more extreme unilateral measures by a variety of countries. Indeed, 50:50 cargo-sharing, completely excluding cross-traders, is now the target of many countries and there are those whose aspirations go beyond that level.

We were also faced with the situation that some EEC countries with less extensive cross-trader interests did not share our view of the code. They felt that it could help them. The Germans, the French and the Belgians voted in favour of the code in 1974 and showed every sign of ratifying, possibly taking others with them. It became increasingly necessary to have a Community view on the issue and in the end the so-called "Brussels Package" was negotiated, initially between the major European shipping lines, and subsequently taken over by Governments and enshrined as EEC Regulation 954/79.

This is a compromise between the views of those who supported the code and the views of those, like the British, who wished to restrict Government-imposed cargo-sharing as far as possible. To be implemented as a Community-wide reservation to EEC member states' ratification of the code convention, it effectively disapplies cargo-sharing provisions of the code in respect of trade between the EEC countries and, on a reciprocal basis, between the Community and other developed nations who are signatories to the code. Taking into account that a number of important countries, as has already been mentioned—such as the United States and Australia—have so far declared their intention not to ratify the code, the Brussels package means that trade between all the developed countries will hopefully remain unaffected by the code cargo-sharing provisions. In addition, in code trades between EEC and developing countries and in the developing country trades of other OECD countries, assuming they reciprocate, only the developing country share will be subject to code cargo-sharing.

Unfortunately, the democracies of Western Europe require many months to translate decisions to ratify conventions into appropriate implementing legislation. Although the code convention was signed in 1974, and the EEC agreed its common policy in 1979, no EEC country has as yet ratified. The code's provisions for entry into force will be triggered at the latest when two or three of them do so. Action has now become urgent because the developing nations are not unnaturally beginning to get impatient. We fear that there is a risk that they will get tired of waiting for the code and will move on to more drastic measures of cargo reservation which would seriously harm British liner shipping.

It is for those reasons that I welcome the Bill. In my view accession to the code convention, subject to the Brussels package, will be in the best interests of British shipping in the protectionist age in which we live. It will give legal sanction to valuable rights for shippers, and it will acknowledge to a limited degree the aspirations of the less developed countries to have a greater share in liner shipping. I believe that the Bill should be supported.

3.39 p.m.

Lord Gleokinglas

My Lords, in following my noble friend Lord Inchcape, the first thing that I should like to do is to say how sorry I was to read in the paper this morning that he is abandoning ship, if that is the correct way to put it for somebody who for so long has been such a successful chairman of such a very successful British shipping company. It must at least be some consolation to him in giving up part of his heavy work that so many of his ships played such an important and useful part in the recent victory in the Falkland Islands, and I pay my respects to his ships for that and to their crews for what they did.

Having said that, the first thing that struck me as I tried to find my way through this Bill was how similar it was to a Bill also started by the Socialist Government in, I think, 1968 and urged on them by the British Council of Shipping to provide sonic special Companies Act in a great hurry. The then President of the Board of Trade, who shall he nameless, wanted the Bill through in about a month, which in parliamentary terms was quite ridiculous for a Bill of very great complexity. I, for my sins, was asked to look after the Opposition side of it. So I went to see the gentleman concerned and said: "Look, I am sure that we could do it, provided that you explain to us in advance what each clause means so that we do not have to waste endless time in the Committee stage asking what it is about". He agreed to this.

In due course we attended our first meeting at the Board of Trade. I asked what something in Clause 1 meant and he said that he did not know. So he turned to an admirable lady who was advising him on these matters and asked her. She said that she had not the faintest idea. So she suggested that we ask the draftsmen. The parliamentary draftsman was asked what it meant; he thought for a while and he said: "Well, Minister, as a matter of fact it does not mean anything. I drafted it in that way because after several inquiries I could not find what any of the Ministers wanted".

On reading a good deal of this Bill, I am bound to admit that I think almost exactly the same has happened. I do not pretend to be a legal expert. I think that it is almost the responsibility of the Royal Society for the Prevention of Cruelty to Animals to hand it over to my noble friend Lord Lyell to deal with, because, charming, competent and kindly though he is, this is a Bill that needs legal expertise—and not only British legal expertise, but a great deal of international legal expertise. I think that it involves a great deal more than even this extremely august body should be expected to accept in what, I have no doubt, will be a very short period of time.

Having said that, I think that it is fair and right for us to consider whether this is a good Bill or a bad Bill, putting it in its simplest terms such as most of us can understand. I think that one must say that the parentage is quite horrible. It comes from an UNCTAD committee which everybody has tried to resist for the last 12 years because everybody knew that this UNCTAD committee was proposing a bad step, which would be followed by worse ones. For 12 years Governments on each side of the House have solidly opposed this particular approach to the problem. I happened to be in Santiago in, I think, 1970 at the UNCTAD conference where the idea was first mooted. Although I tried to stamp on it then, I was unsuccessful.

Why this present Government have decided to pick it up is a puzzle to me, as I think it is to the noble Lord, Lord Ponsonby, and certainly to some others. It is essentially the sort of Bill which a Government dedicated to private enterprise and getting rid of restrictive practices ought not to touch at any point whatever. It is also quite certain to put up prices. I do not think there is any doubt about this, because even my noble friends Lord Inchcape and Lord Cayzer, who are much more skilled on the shipping side than I am, admit this. It is the sort of restrictive practice which is designed to put up prices. Those of us who have had some experience of these things are beginning to realise what a disaster IATA has been. I only hope—and I cannot quite visualise her at the moment—that if we have to go through with this nonsense, a Baroness Burton will emerge on your Lordships' Benches who will harry the Minister concerned with the horrors which this Bill will certainly bring to the whole industry.

The point on which we have to make up our minds is whether this is a bad Bill. It may be that it is the best that we can make of a bad situation. I rather suspect that that is what my noble friend Lord Inchcape was saying when he welcomed the Bill, though he said it in a very delicate way. When the Under-Secretary of State for Trade finished his Third Reading speech on this Bill in another place the phrase he used in this veil of tears was that the best was often the enemy of the good. But as he had spent very many days in Committee explaining that this was a bad Bill, I am not quite sure what was the enemy of the good, because it certainly was not the best in the form of this Bill. So, if we have to pass this Bill, I hope that we shall accept it as a sort of necessary evil. As I say, I hope that there will be a Baroness Burton who will emerge to try to ensure that its worst effects are kept out of the general picture.

There is no doubt at all that we are running into several very serious dangers. We are getting out of one or two difficult situations, but there are many in front of us. On 8th June this year the Financial Times announced that Indonesia had said that all cargoes to or from Indonesia must be carried in Indonesian ships. This not only includes the liner conferences but it also includes all the bulk cargoes. Although Ministers in the other place, and I have no doubt in this House too, will tell us when we come to the Committee stage that they have the greatest reservations about bulk cargoes being included in this code, bulk cargoes are already being included by Indonesia. I hope that when my noble friend winds up, lie will tell us exactly what the Government and what the EEC have done since 8th June in order to try to stop it.

There are many people who think that these poor developing countries have a fair point, that they ought to be allowed to carry cargoes in their own ships. It all sounds very nice and gentle. But, of course, they are not their own ships. In many cases they are ships chartered from the Russians and chartered at very special rates for very special purposes. This is a problem of which one at least has to be aware.

We have heard that America will not join the code, and I am delighted to hear it. It is one of the first sensible things that I have heard about America for the last fortnight. There is hound to be some change of behaviour in America and I am delighted that this is one aspect. But how many other countries will not? We are told only Australia and America so far, but I have a feeling that there must be quite a few more and that once the full implications of these codes, conventions and so on are understood, there will be quite a number who will wonder whether they really ought to ratify. I hope that my noble friend Lord Cayzer—who is to follow me and who, as I remember from the days when I was at the Board of Trade, is extremely knowledgeable and keen on all these things—will be able to tell me that he thinks that this is essential for British shipping. If he does, we must accept it, because British shipping plays a very large part in the invisible earnings of this country, which has always been rather dear to my heart.

When last I spoke to your Lordships I was trying to encourage you to pass the Lloyd's Bill, which produced about £600 million for our invisible earnings. On this occasion, I hope that the Minister is going to do everything that he can to help the shipping industry, but in addition to that to help that particular part of that industry, the commodity traders, who are responsible for something like £200 million in the invisible earnings of this country. They would be very heavily hit if bulk shipping is included, and they are liable to be hit if the flexibility of shipping, as they know it at the moment, is confined. Although I think that it is a bad Bill, I am certainly not going to vote against it today.

3.51 p.m.

Lord Cayzer

My Lords, like my noble friend Lord Inchcape, I am chairman of a company which has considerable interests in shipping. I have been in my time president of the Chamber of Shipping, which is now called the General Council of British Shipping, and which of course incorporates the Shipping Federation, which has all to do with crewing. Shipping conferences came about nearly 100 years ago. In those days they were composed largely of British shipowners. They devised their own code of conduct, and on the whole this worked reasonably well.

Our Victorian ancestors were sturdy individualists, and I think they knew what they were doing, because before they instituted conferences there had been a situation of unbridled competition not only between them but with the other foreign shipowners that comprised the conferences. This was very much in the interests not only of shipping, and British shipping at that, but it also entailed stable rates and regular services. To say that it was a monopoly I think is quite untrue because there were always those fighting on the perimeter outside the conference, and from time to time they fought their way in, and so conferences were continually kept on their toes and had to be careful not to outprice themselves.

It was after the Second World War that things began to change radically and we had to face the fact that many of the countries which hitherto had been in the British Empire became independent. One of the first things they wanted was their own shipping, their own airlines, banks, and so on, and we were faced with a difficult situation. I can remember going to many of these countries and attending many conference meetings where we had to argue with them, and in the end we had to include them in the conferences. That is perhaps the reality of this Bill. It is something which we would rather not have but it is something that we may have to put up with.

A Government code of conduct which was put forward in 1974 and led to what is called the Brussels package really began the change which is now about to come about. As my noble friend Lord Inchcape has explained the delay in ratifying the convention and introducing legislation has triggered off a sense of impatience in developing nations. We are, as I have said, making the best of a bad job—or perhaps making the worst of a bad job. We have only agreed because we believe that otherwise more drastic measures might be taken by UNCTAD, or the developing countries for that matter, which might be more damaging, particularly to our cross-trades. Whether these cross-trades will be available to us in 10 or 20 years' time one cannot anticipate, but, as the Minister has said, they have provided a very large percentage of our earnings, currently over 40 per cent.

Given that the code has been forced upon us, it is necessary to have enabling legislation, and the General Council of British Shipping, not without a lot of heart searching, considers that the Bill is the best way forward in these circumstances. Though I do not like it myself, I think it is probably right: one has to compromise. We should understand, however, that this Bill and corresponding legislation in other countries which makes conferences legally liable for the implementation of ill-defined code practices may create an unwelcome degree of litigation, and cross-jurisdictional problems between countries. Nonetheless, it seems that we have to agree the code and legislation for fear of an even more unhappy outcome.

I wish I could make a more agreeable and constructive contribution. I bear in mind my own experience when Governments begin to tamper and to intrude into commercial arrangements, and on these occasions profitability goes out of the window. I hope very much that the shipping lines of the countries involved will be able to work together satisfactorily, and I also hope and believe that British shipowners will continue to play the very prominent and constructive role that they have done over the many years of conference arrangements.

3.57 p.m.

Lord Mottistone

My Lords, I should like to open by endorsing the remarks of my noble friend Lord Glenkinglas in paying a special tribute to all the merchant ships which took part in the Falklands operation, and of course to those of P & O as well. It seems an admirable opportunity, having a Merchant Shipping Bill, even if we do not like it, to make those remarks. I should also like to thank my noble friend Lord Lyell for introducing the Bill so skilfully in view of how little the Bill had to tell us, but I shall come to that later.

In what I have to say I am advised mainly by the British Federation of Commodity Associations. But having studied this point I must say that I entirely agree with my noble friend Lord Glenkinglas that it is particularly unfortunate that the code was ever signed in 1974, and indeed that we allowed these various interests around the world to get away with getting to the stage of producing it. I hope that the Government —perhaps my noble friend is able to reassure me on this—can act with rather greater resolution, or perhaps even skill, or perhaps craftiness, in preventing anything similar happening with regard to a bulk trade code which I understand is under discussion at Geneva at this moment, because I am advised that that would be even more unfortunate if it came into being.

However, I accept that the code is a reality, and after their heart searchings the General Council of British Shipping have said in effect that it is better to join the club and influence it from within than be outside it. The damage having been done some 10 years ago, perhaps that is the best way of tackling it.

My noble friend Lord Lyell said when taking us through the Bill—I had previously noted the fact—that the heart of the measure was in the regulations. I am sorry that that should be so; I have always disliked the habit of Governments to make the heart, or even the major part, of their Bills by regulation. I can remember fulminating about that from the Benches opposite as much as from these Benches, and I am disappointed that a Government who I support should follow that practice. I hope, however, that they will be able to produce that heart of the Bill before we have completed all the stages of its progress through this House, and perhaps my noble friend could comment on that. If that is not immediately in view, he may be able to explain why we cannot see the regulations, at least in draft, before we get too far with the Bill's progress, the more especially because he and I have described them as the heart of the Bill.

In regard to Clause 13, the Government are to consult before finally laying the regulations before Parliament. I hope they will stick to that decision, but my noble friend made a point of the fact that the Government had consulted with the General Council of British Shipping and the British Shippers' Council. I would draw to his attention that there are other interests. In particular, while the British Shippers' Council represents a large number of interests on that side, it does not, for instance, handle the trade in commodities between third countries, and therefore the interest of the British Federation of Commodity Associations should be taken into account. My noble friend might care to note that he needs to seek a little wider before finalising the regulations. However, I should still like to see the regulations before Report.

I will not touch on further points because they are more suited to debate in Committee. I trust that my noble friend will be ready to receive amendments of varying sorts, even if only of a probing nature to try to elicit the information which has, as yet, not been disclosed to us and to make the specific points about the dangers we see in the Bill that may arise in the future.

Lord Ponsonby of Shulbrede

My Lords, the noble Lord earlier said that the damage was done 10 years ago, but he did not make it clear by whom, in his opinion, the damage had been done. I take it he means that the damage was done as a result of the fact that the code was negotiated at that time by the United Nations Conference on Trade and Development—that the damage was done by the negotiation of the code at that time—which the Labour Administration of the day voted against.

Lord Mottistone

I noted that, my Lords, but it went over a long period and they handled the signing of it. The damage, as I see it, was done by our negotiators not being tough enough at the negotiating table in those early days when it was first under discussion. There was a tendency in the early 70s for people rather to think that they might be able to influence and man-oeuvre things and that it would turn out all right in the end. I should have thought that experience is now showing, particularly as our share of world shipping has dropped quite extensively in those 10 years, that our influence is not so great and that we must fight harder to get our way and persuade people. The French and Germans were mentioned at that time as being countries who had gone along with it. We might have done a little more to try to persuade them not to go along with it. We might use our membership of the EEC now to get a solid EEC view against a bulk trade code. That is the sort of thing we need to do; a little more toughness at the negotiating table, not assuming that it will go our way because we were powerful 100 years ago.

4.6 p.m.

Lord Lyell

My Lords, we are most grateful for the great reception which this complicated, albeit brief, Bill has received from all your Lordships this afternoon. I wish to begin by thanking the noble Lord, Lord Ponsonby, for his welcome for the Bill and for the clear figures he gave; I mentioned 21 per cent. and he fined that down to 20.47 per cent., the tonnage of the nations which have acceded to the convention.

The noble Lord asked me two questions, the first being about the attitude of the United States and other OECD countries to the code. There appears to be little likelihood that the United States will join the code now or in the short term since, as noble Lords will be aware, the United States shipping interests are totally different to those of the United Kingdom. The United States lines are hardly active in cross-trades which serve European Community ports, and of course the three members of the European Community originally signed the convention in 1974. Since we are far more affected, indeed vitally so, in serving European Community ports, especially in the cross-trades, and the United States are hardly involved in it at all, it is in no way strange that the United States willl not be joining the code.

The noble Lord, Lord Ponsonby, also asked about the definition of a national shipping line. The code already contains such a definition. It may be generally satisfactory, although of course it will leave some room for doubt, but it allows contracting parties to add further criteria to the definition. The department will be required to consult interested parties—that will include a very wide spectrum of those interested in this field—before making any regulations to specify the conditions for recognition as a United Kingdom national shipping line.

My noble friend Lord Inchcape made what I am sure your Lordships considered an extremely expert speech, as we have come to know he will always make in your Lordships' House, especially on these matters. He stressed the Government's case for the Bill and explained forcefully that as the three member states of the European Community had signed, we, for better or worse, to protect our shipping interests, felt that we had to. My noble friend also gave a lucid explanation of the reasons why the United States and Australia would at present seem to have no intention of signing the convention.

My noble friend Lord Glenkinglas made some kind remarks both about me and the Bill, and I certainly thank him for the remarks which were directed towards me. Indeed, I could not wish to have in the House this afternoon a nicer critic of the Bill than my noble friend, and your Lordships will be aware of his great expertise in matters which concern my department. We are also very grateful for his stories of what had happened in the past 20 years, which seem to make a very complicated Bill and code very simple.

So far as the question of Indonesia and the bulk trade is concerned, we understand that recent Indonesian measures are not in line with the Liner Code, but they provide an example of the kind of unilateral measures that can, and so often do, damage our interests. I am sure that the noble Lord will accept, and I hope that your Lordships will accept, that these measures highlight the need for an agreed multilateral régime such as the Liner Code, as especially applied in that trade.

I should like to thank my noble friend Lord Cayzer for his very helpful and expert speech. I hope that I can paraphrase what he said. He pointed out that the Bill was making the worst—or, as he put it, the best of a bad job. I hope that I explained why the Government felt that we must put forward the Bill. Certainly from these Benches we were very grateful for my noble friend's support.

My noble friend Lord Mottistone had a particular point to raise on commodities and the Federation of Commodity Associations. I fear that I cannot say that I can produce regulations at a very early stage, but I hope that it will be agreeable to my noble friend that, if I may consult him outside the Chamber, I shall attempt to let him have an answer on the possibility of producing guidance as to what regulations might be forthcoming, and perhaps say at what stage they might be forthcoming. But I cannot give him any answer or any satisfaction this afternoon on that particular point.

My noble friend several times raised the question of consultation and spoke of the need for consultation with customers or clients of the shippers and shipping interests. I am sure that my noble friend is aware of a letter that was written by my right honourable friend the then Secretary of State for Trade to the honourable Member for Hillingdon, I think it is, in another place. In the letter my right honourable friend the Secretary of State stated that he realised that the Federation of Commodity Associations had resigned from the British Shippers' Council shortly before the Government consulted the council on the particular issues in the Bill, and thus the federation was not involved in the original consultations. However, I hope my noble friend will accept that if there has been an omission, it has now been fully rectified. My department is always very willing to receive any views that are put forward by my noble friend Lord Mottistone and indeed by all interests which are especially concerned with or touched by the Bill.

In general, we are very grateful for the welcome that this complicated Bill has received from your Lordships this afternoon, and I am sure that all of us who have been present look forward to discussing it in further detail at a later stage. With those words, I commend the Bill to the House.

Lord Spens

My Lords, before the noble Lord sits down I should like to mention that in reply to the noble Lord, Lord Mottistone, he said that he would not be able to introduce regulations very quickly. I fear that I have something of a suspicious mind, and I would draw the noble Lord's attention to subsections (2) and (3) of Clause 13. Clause 13(2)(a) states that regulations under section 2(1) made before the expiry of the period of three months beginning with the date on which this Act comes into force", shall be subject to affirmative resolution. But subsection (3) states that regulations under section 2(1) made after the expiry of the period mentioned in subsection (2)(a)", shall be subject to negative resolution. Is the noble Lord saying in effect that the Government will not be able to produce the regulations in time for them to be subject to affirmative resolution procedure? If that is so, it is all right, but if it is not so, would it be possible to alter the time periods in the subsection?

Lord Lyell

My Lords, I thank the noble Lord for his observation. The points that I was attempting to make in reply to my noble friend Lord Mottistone had nothing at all to do with the affirmative resolution or negative resolution procedure referred to in Clause 13(2) and (3). I hope that I was making it clear that I could not give my noble friend Lord Mottistone a sight of even draft regulations. The time-scale that I had in my mind, and which I think my noble friend Lord Mottistone had in his mind, related to before either the Committee stage or the Report stage in your Lordships' House. I understand that the regulations are still in draft or in gestation in the department. The noble Lord, Lord Spens, will see that Clause 13(2) (a) contains the phrase: beginning with the date on which this Act comes into force". Certainly I had no intention of referring to that particular time-scale when replying to my noble friend Lord Mottistone. So I hope that the noble Lord will be satisfied on that particular point. But I can confirm to the noble Lord, Lord Spens, that we shall time the regulations for affimative resolution where possible.

On Question, Bill read a second time, and committed to a Committee of the Whole House.