Commission's Powers of Investigation and Inspection: ECC Report

HL Deb 29 November 1984 vol 457 cc1069-99

7.29 p.m.

Lord Scarman rose to move, That this House takes note of the report of the European Communities Committee on the Commission's Powers of Investigation and Inspection (18th Report, 1983–84, H.L. 220).

The noble and learned Lord said: My Lords, I beg to move that the House takes note of the European Communities Committee report on the powers of investigation and inspection vested in the European Commission. This is a substantial report. With its two supplements, its three annexes and its minutes of evidence, it constitutes a comprehensive review—perhaps the very first comprehensive review—of the existing and proposed powers of the European Commission to investigate and inspect undertakings in the member states of the European Community with a view to the enforcement and application of the policies and rules of the Common Market.

The report not only reviews those powers: it examines the safeguards against their abuse which are to be found, or indeed ought to be found, in Community law and in the law of the United Kindom, and it makes proposals for maintaining and strengthening safeguards against abuse of these extensive powers. The proposals, which are to be found at the end of the report, are some of them addressed not to the Government of the United Kingdom but to the authorities of the European Communities, and particularly to the European Commission. Those proposals, with which I shall deal shortly in the course of presenting the report, have been put informally by my noble and learned friend Lord Templeman and by myself on a visit to the Commission in Brussels. We understand—of course, informally—that those proposals, by and large, are accepted by the Commission as reasonable. That is a satisfactory situation.

The report also contains proposals which are directed both to the authorities of the European Community and to Her Majesty's Government. These proposals are concerned with the enforcement of Community law relating to these powers of investigation and inspection inside the United Kingdom. My noble and learned friend Lord Templeman and I have also discussed these powers informally with officers of the Commission in Brussels. We understand that, if it appears satisfactory to the Government of the United Kingdom, the Commission, though they have some misgivings about these proposals, are prepared to give them a try. Therefore, one purpose of this debate will be to see whether Her Majesty's Government are prepared to indicate that they support the proposals contained in this report which deal with the enforcement of Community law inside the United Kingdom.

Before I come to the matters with which the report deals, it is my pleasure, as the then chairman of the legal sub-committee of the Select Committee on the European Communities, to express the gratitude of the Select Committee and its appreciation to all those who assisted the sub-committee in the considerable effort involved in the preparation of this report. I should like the House to know that the report could not have been prepared without the help of those who gave evidence or of our dedicated legal and administrative staff, and without the indispensable assistance of those officers of the European Commission who assisted us in our deliberations.

When one comes to the matter for debate, one starts with this position. The committee has accepted the need for these powers of investigation and inspection, and the need is this. The European Commission is the executive arm of the European Community. Its task is to ensure that the policies and the rules of the Common Market are applied throughout the Common Market; that is to say, inside all the member states.

These policies and rules are essential to the development of the Common Market. They consist of such things as the development of the agricultural policy; freedom of competition within the Common Market; the collection of the revenues called "own resources" of the Community inside the member states—that is to say, revenue arising from customs duties, agricultural levies, and VAT. It is plain that if the Common Market is to develop and is to remain sufficiently established to be effective, then these major policies and rules of law to be found in the treaties and in the regulations made under the treaties must be applied, and it is the Commission's task (and I quote the Treaty): to ensure that the provisions of the Treaty, and the measures taken by the institutions of the Common Market, are applied throughout the member states".

Your Lordships will appreciate that the Commission cannot possibly satisfy itself that the policies and rules of the Common Market are being applied without powers of investigation and inspection. It is for that reason that the committee tackled its task by first of all accepting as a matter of principle that such powers are necessary. The committee also accepted, after due study, that there are certain rules of Community law. Of course, your Lordships will appreciate that Community law is, by the European Communities Act 1972, part of the law of the United Kingdom, and it is accepted that there are certain principles of Community law which have to be observed.

There are two principles which are relevant to a consideration of the Commission's powers of investigation and inspection. The first is that the lawfulness or otherwise of the regulations and decisions made by the European Commission are a matter, not ultimately for the courts of the member states but for the European Court of Justice. That is to say, whether the power is necessary for the purposes of the regulation is a question of law for the European Court of Justice, not for our courts. Our courts may have to rule on it, but they themselves are bound to accept the ruling of the European Court of Justice as to whether the powers are necessary. It is the duty of the European Court of Justice under the Treaty to interpret and apply Community law.

The second principle—and this is the principle which is critical to the matters discussed in the report—is that, although the European Court of Justice has the duty of safeguarding the law in the European treaties, the enforcement of Community law within the member states is to be governed by the law of each member state. So one has this position: the European Court of Justice, if there be a challenge, decides whether a specific power of investigation or inspection of the records of commercial undertakings or Government departments is necessary. When the power is exercised it has to be exercised inside a member state, whether the power be exercised against a commercial undertaking or, in theory, against a government department. At that moment the exercise is controlled by the national law.

This report is essentially concerned with the problems of the exercise and enforcement of the powers of investigation and inspection for the various purposes of the Community within one member state, the United Kingdom. I emphasise that the report is not concerned with other aspects of Community law relating to powers of investigation and inspection. In particular, the report is not concerned with the difficulty—at any rate the difficulty very apparent to common law eyes—that the Commission has to carry the roles of legislator, prosecutor and judge in respect of many matters concerned with the exercise of these powers. Of course, those three roles, which it seems to us quite impossible to vest in one body, are vested in one body, subject always to review by the European Court of Justice.

We are not concerned with that. That difficulty has indeed been considered by the Select Committee in the past. Your Lordships will find it in the Eighth Report of the Select Committee of the 1981–82 Session of Parliament under the title Competition Practice. We made then certain proposals and I shall not further refer to them.

So I come to the exercise of the powers of investigation and inspection in the United Kingdom. The first finding which the sub-committee made, and which the Select Committee has endorsed in its report, is that upon the evidence given to the sub-committee the exercise of the various powers of investigation and inspection vested in the European Commission, exercised in this country, creates no problems of principle at all. The powers are necessary. They are exercised reasonably and upon proper notice to Government departments and to other persons affected. The great majority of the powers are based not on compulsion but on consent and co-operation.

Problems only arise where there are grounds for believing that a commercial undertaking may be in breach of its obligations under Community law: for example, in competition law when an undertaking is suspected of entering into an agreement or participating in a concerted practice the object of which is to restrict competition in the Common Market, or in the anti-dumping law, where dumping is suspected. Of course, the Commission can only get at the truth in such cases if it has a power to investigate the commercial undertaking and to inspect its records.

Two powers are essential if the Commission is able to carry out a proper inspection in the cases that I have mentioned: first, the power to make an unannounced or surprise investigation into the undertaking; and, secondly, the power to effect entry into the premises of the undertaking if the investigation is obstructed. Of course, the surprise investigation will take place in the United Kindom, and of course if entry is to be effected by compulsion, that also will be taking place in the United Kingdom.

I will take the surprise or unannounced investigation first. Every investigation under the competition laws of the Community has to be authorised by the Commission itself. But authorisation of the investigation is not binding upon the commercial undertaking to be investigated unless the authorisation itself is made by a formal decision taken by the Commission under Article 189 of the Treaty.

In practice the Commission invariably authorises surprise or unannounced investigations of commercial undertakings by a formal decision. A formal decision is an act contemplated and provided for in the Treaty of Rome. Appeal lies against that decision to the European Court of Justice, but, under European Community law, the decision remains operative until the European Court has pronounced upon it. This is absolutely useless for the protection of a commercial undertaking against whom the power is being execised.

The Select Committee reached the conclusion that, while we have to accept that this is sound Community law binding in this country, yet we can propose, and we have proposed, certain improvements in the Community law. If there be a decision (so far as I know there never yet has been a decision) to investigate residential as contrasted with commercial premises—as everyone in the Inland Revenue knows, commercial documents do have a way of finding a pleasant hiding place in madame's boudoir—the Select Committee thinks that this should be authorised by a collective decision of the whole Commission.

But, secondly, and of more immediate and practical importance, we think that the authorisations embodied in the decision, a copy of which has to be shown to the commercial undertaking, should be much more informative than at present they are. It should indicate to the commercial undertaking the purpose of the investigation, the range of documents which it is desired to inspect, and so on. We think that if those two proposals are accepted—and, as I have indicated we have reason to believe that the Commission will accept them—then the surprise or unannounced investigation becomes acceptable, bearing in mind the necessity for such types of investigation.

The next problem is where there is obstruction by the undertaking to the investigation. Here, the Community law is quite clear. Member states are required to afford the Commission's officials the necessary assistance. Of course, the Commission may fine an undertaking which resists the investigation, and that fine is subject to appeal to the European Court of Justice. But the fining power is of no value to the Commission if it has grounds for believing that it must investigate the undertaking and inspect its documents. How, then, is the Commission to overcome, inside the member state, the resistance of the undertaking to its investigation?

The duty imposed upon the United Kingdom by Community law is that the United Kingdom is to assist the Commission to carry out its investigation. In some member states such assistance is provided upon the say-so of the Commission given to the police; and, without any more ado, the police force an entry for the officials of the Commission into the premises of the undertaking. But this, of course, is not our way of doing things. In the United Kingdom we require the intervention of a court before a forcible entry or search or seizure can be permitted.

It is here that in the preparation of this report the sub-committee had considerable discussions with officers of the European Commission. At the outset of the preparation of this report the officers of the Commission were disposed to take the view that United Kingdom courts had no business to decide whether or not there should be a compulsory entry into the premises of a resisting undertaking. They thought that that was entirely a matter for the Commission and for the administrative authorities of the United Kingdom acting consistently with the duty imposed upon them (as they saw it) by Community law. But my noble and learned friend Lord Templeman and myself did manage to persuade the officers of the Commission that our system of warrants and injunctions works well and speedily, and, strangely enough, secretly up to the point of entry. Of course, the commercial undertaking has its rights to oppose it, but an ex parte injunction can be obtained and the argument can go on later as to whether it was lawfully or unlawfully granted.

In the result, the Commission, or the officers of the Commission, were disposed to accept that the United Kingdom system of judicial authorisation for the exercise of compulsory powers of entry and search would probably work. But it was not just an argument that we had about whether it would work. We represented to the Commission as a matter of Community law that the Commission had to accept, inside the member state, the member state's accepted methods of enforcement. Therefore, there is a very strong position here which the United Kingdom, I would suggest to Her Majesty's Government, must not abandon: that in matters of this sort we do it upon the authority of a judge, and that is the way we enforce these powers. If one sticks to that line, there is no legal answer that can be given, as I understand Community law, to our practice of requiring judicial intervention before compulsory powers can be exercised.

That really is the most important matter dealt with in the report. At the end of the report we make a number of proposals. They will be found in the Summary of Conclusions beginning at paragraph 50, and, although I have already been on my feet for a very long time, I make no apology because these matters require explanation. Otherwise, the House has no opportunity of forming a view. I will deal shortly with some of the proposals there to be found which I have not dealt with in the body of my speech.

We have said in paragraph 57 that advance notice should be the normal requirement before the exercise of a power of investigation. Certainly, advance notice is usually given by the Commission both to the appropriate Government department and to the undertaking to be investigated. We say that it should become a firm practice save in those cases where the unannounced or surprise investigation is necessary. We say that officials of the Commission should not exercise inside the United Kingdom powers of investigation and inspection save with the assistance of officers of the appropriate British Government department. We have found in evidence that it is a very great satisfaction to commercial undertakings faced with a notice of the exercise of such a power that there is present during the inspection, and so forth, an officer of the appropriate British Government department—and, of course, it means that there will be co-operation between Government departments of the United Kingdom and the Commission in the application of these powers in the United Kingdom. We make a specific recommendation in regard to residential premises. I have mentioned it. It is very important in the long term, but the problem has not yet arisen in practice.

The report deals in considerable detail with those documents which must be disclosed to the Commission's inspectors and those for which a claim of privilege or confidentiality can be met. I am glad to say that community law now recognises the existence of legal professional privilege and will give effect to it. The European Court decision on that is perhaps not all that we would want, but the hour is late and it is only a matter of detail.

Finally, one proposal which I have not discussed is as follows.

A grievence which is stongly felt by commercial undertakings in the United Kingdom about these investigations and inspections where there is a suspicion in the Commission's mind of a breach of the competition rules is that the inspectors descend upon them, the investigation takes place, the inspectors go away and the undertakings never hear what the result is. This of course is not merely a maddening irritation: it can be a frustration of genuine commercial enterprise because the undertakings wish to know whether their agreements and whether their concerted practices—if there are such—or their other activities are a breach of the competition rules. They are left in a state of uncertainly for a very considerable time. I think that our proposal that there should be a notification as soon as possible and not less than a year after the investigation is the very minumum required to get rid of a very dangerous commercial uncertainty.

My Lords, that is the report. I hope that Her Majesty's Government will be able to say that they accept the substance of these proposals and will protect the United Kingdom enforcement procedures in the Common Market. Finally, as a lawyer, I can say that it will be a tremendous wrench from all our common law principles if judicial intervention before the exercise of compulsory power is discarded. I beg to move.

Moved, That this House takes note of the report of the European Communities Committee on the Commission's Powers of Investigation and Inspection. (18th Report, 1983–84, HL 220.)—(Lord Scarman.)

8.2 p.m.

Lord Prys-Davies

My Lords, I wish to thank the noble and learned Lord, Lord Scarman, and his colleagues for their careful and comprehensive study and for their substantial recommendations. I wish also to thank the noble and learned chairman for his explanation this evening in a notable speech, as one would expect.

In reviewing the extensive powers of investigation and inspection available to the Commission officers and in examining the safeguards, the Committee was reviewing a highly sensitive area on the borderline of public enforcement of Community legislation—regulations, directives, decisions—and private confidentiality. There is much ignorance among the general public—and indeed if I may say so among legal traditions—as to the existence, let alone the precise extent, of the powers of the Commission, which enable it to obtain information on the spot in our country in order to satisfy itself that Commission policies are being implemented in this country.

I am sure that it will come as a surprise to many people, if they have forgotten the Opposition speeches of 1972 when the European Communities Bill was before Parliament, to read that the Commission's decision to exercise its power of investigation and inspection cannot be challenged in the courts of the land. Neither can the powers of investigation be challenged, as I understand it, as being a possible breach of the European Convention on Human Rights because the European Community is not a contracting party to the convention, and the treaties establishing the Community contain no fundamental rights or safeguards to protect the individual citizen or commercial undertaking in the face of the official power of the Commission.

As I understand it, no code of such rights or safeguards was provided because the treaties were seen primarily as being instruments of economic integration between states. But experience has shown that the European Court of Justice has had from the outset to deal with cases in which individual citizens claimed that some Community legislation had violated a fundamental right previously guaranteed by the constitution, the legislation or the courts of the member state.

However, I must return to the subject matter of the report: the powers of investigation and inspection of the Commission. In the light of the Committee's report, and having regard to the evidence of our own ears from time to time, it appears to me that there are three main questions. First, does the average commercial undertaking or the citizen know what are the investigatory powers of the Commission which can be exercised in this country? I fear that the answer is no. The citizen cannot find in his local public library the legislation, the regulations and the decisions which confer these powers on the Commission. He will probably fare no better if he calls on his local solicitor. So there should be a clear text in clear language available in the public library and available in most solicitors' offices, of the powers which the Commission can exercise and which can affect our basic rights.

The Committee have now placed before us in a single document—and I think this is for the first time—a list of all the existing and proposed Community legislation which contains powers of investigation and inspection. Indeed, I counted about 30 pieces of legislation, current or proposed. It is rather interesting that of the 30 pieces, about one-third are proposals. That gives us an indication of the rate of growth of Community legislation and its likely impact on member states.

As I say, we now have in this report a list of all the current powers and the proposed powers which are available to the Commission. Should not the Commission arrange for this list, which is to be found in Annexe II, to be published in the official journal of the Community? Could it be circulated to the Law Society, which, in turn, could publish the list in the Law Gazette, and should it not be distributed in the public libraries? It can be argued that exact knowledge of the extent of the Commission's powers, put in readable guidance material, would be one of the best safeguards against the abuse of these powers.

I now come to my second question. Is there in this country dissatisfaction with the Commission's powers of investigation? The Government departments in the United Kingdom which gave evidence to the committee do not voice any criticism of the way in which the Commission's officers have exercised their powers of investigation, which is reassuring, and the Community officers who gave evidence to the committee were frank and helpful. The Commission itself has no complaints to make about the inspections which it has so far conducted in the United Kingdom, but it acknowledged that it is aware of the criticism voiced about the exercise of the power contained in Article 14 of Regulation 17/62.

But it is when we read the evidence of the CBI and of the joint working party of lawyers, particularly in the competition field, that we pick up the whiff of criticism or complaint. Indeed, the written evidence of the CBI gives concrete examples of difficulties which have arisen in the competition field. After 12 years of membership of the Community, the CBI complained that the full extent of the Commission's investigatory powers was still not clear to them and they argued that the powers were sometimes too vague and imprecise. They said that they should be clarified and made more precise. The joint working party of the Law Society, and the Senate of the Inns of Court and the Bar, go along with this criticism and they ask that the relevant provisions should be brought together and spelled out in one specific regulation. So there is evidence of some dissatisfaction and of complaints in the competition field.

I now turn to my third question which the noble and learned Lord, Lord Scarman, has really answered: what improvements are called for? The committee, in addressing itself to the complaints which it had heard, made about a dozen main recommendations. I have read and reread the report and it appears to me that the main recommendations meet the edge of all the criticism of which the Committee became aware. It has recommended in very clear language that, in general, there should be no right of entry by force in the United Kingdom, unless that is authorised by judicial authority in the member state. The noble and learned Lord, Lord Scarman, has underlined this evening that this is a fundamental principle which must be respected by the Community. The document authorising the investigation is obviously a key document, which cannot be challenged or examined by the national authorities or the national courts, and it is strongly recommended that it should not be issued unless at least one commissioner has examined personally the material upon which the proposal is based.

We read in the evidence of, in particular, the CBI that there is a strongly held view that the Commission document authorising the investigation is in itself incomplete. It is not clear from reading the authorisation document what falls within and what without the bounds of the investigation. We have heard that the committee has accepted this criticism and that it has recommended that the maximum possible information about the scope and objectives of the investigation should be included in the authorisation document and, where possible, that the documents which are to be produced should also be clearly specified. Again, the committee has recommended that advance notice of the investigation should always be given to the member state, and should, wherever possible, be given to the commercial undertaking, while acknowledging that there must be cases where an unannounced visit is essential.

At the end of his speech this evening, the noble and learned Lord, Lord Scarman, came to the question of the long wait, and there is grievance over the long delay in notifying a company which has been investigated of the outcome of the investigation—delay which leads to uncertainty, frustration and possibly to damage, although there is no known evidence of damage. I noticed in the evidence that the noble and learned Chairman pressed the Brussels officer about the delay and the officer candidly replied that the point had some merit and went on to promise, "I shall give careful consideration to it". The committee must have considered this to be one of the large issues before it, because it called for a major reform of the Commission's practice in this respect. It said that the Commission should report as soon as possible and not later than within one year after the investigation.

There is considerable dissatisfaction among businessmen and lawyers about the Commission's attitude towards the ancient doctrine of legal professional privilege—a principle unstated in the treaties or in Regulation 17/62. I remember reading in 1978 a written reply by the Commission to the European Parliament, when the Commission stated that the Community did not provide for any protection for legal papers. We know that in 1982 the European Court of Justice recognised within narrow confines the principle of protection of written communications between lawyer and client, and the committee accepts that the court's interpretation is too narrow and is more restricted than United Kingdom law.

The obligation of confidentiality is another important matter to which the committee has attached importance. The commercial undertaking which is under scrutiny must be assured that the information which becomes available to the Community's inspector will not be used for a purpose unrelated to the investigation. The Committee asks that this safeguard should be specifically recognised in all Community instruments conferring powers of investigation, and emphasises that energetic steps should also be taken to ensure that this safeguard is implemented. We were gratified to learn that the committee has found no evidence that residential premises have been searched by a Brussels official, but we have been told this evening that the position could change in the long term. I am sure that there would be deep resentment in this country if a Brussels officer knocked on the door of a private house and insisted upon entry. The committee has given very wise advice to the Commission; to consider with great care how, and under what conditions, its inspectors should seek to enter homes in our country, and has said that such an inspection should be undertaken only exceptionally, and then with the collective authority of the whole Commission.

The committee's proposals and recommendations are now on record. We would say to the Commission, in no spirit of hostility, that we hope they will adopt them. We have heard this evening from the noble and learned Lord, Lord Scarman, that the response in Brussels has been favourable. We hope that the Government will press these proposals upon the Commission and take whatever steps the Government should take in order to protect our citizens.

We are grateful to the committee for having examined carefully this sensitive area and for having produced substantial recommendations which will go a long way towards safeguarding our citizens.

8.21 p.m.

Lord Denning

My Lords, first, I should like to thank the noble and learned Lord, Lord Scarman, and his committee for their important work. At the end of their report they say: The Commission's powers of investigation and inspection raise important questions of policy and principle". They recommended this report to the House for debate. It is right that it should be debated. It should be made known that Community law takes precedence over our own law. If our own law is inconsistent with it, Community law prevails. There have already been cases in which our trade union laws were held to be contrary to Community law. Certain of our statutes were held to be inconsistent with Community law and they were overruled. Community law is supreme over our own law.

It is all very well to say that the Community law should be placed in our libraries so that solicitors may have access to it. It is no good putting it there. The treaties, regulations, directives, precedents and decisions of the European Court fill volumes. No ordinary person can find out what Community law is. Nor can ordinary solicitors or counsel find out what it is. A specialist in Community law is required, yet Community law is superior to our own law.

What is this Community law? Much of it is unknown to us. If a British company is accused of being in a dominant position and therefore of exercising unfair competition, it can be brought before the Commission, and eventually before the European Court, and the law of the Community must be enforced. The same applies to quotas: Community law must be enforced. If the Commission say that one of our large companies—ICI, for example—is guilty of unfair competition or is abusing its dominant position, they can say that they want to be provided with all the documents of ICI in order to find out whether the company has launched an undercutting programme. The Commission has authority to require all the papers to be produced. The Commission is not obliged to hear an application by the company which is being investigated before it makes an order for an investigation or inspection. If a company should object, the Commission have the right of entry in order to enforce their decision. That is contrary to all our procedures.

My noble and learned friend Lord Scarman told your Lordships that the method of enforcing Community law is left to the courts of this country. I believe that my noble and learned friend said the Commission wanted the Board of Trade, or whoever it might be, to enforce Community law but the Commission were persuaded that enforcement must be through the machinery of the laws of this country. I would suggest that it must be sanctioned only by the courts of law, not through any administrative agency or through the Board of Trade.

I make no distinction between a law which is opposed and a law which is unopposed. Advance information is required before a charge is made. I suggest that there must be safeguards in our English law regarding the powers of investigation. Before any complaint is brought there must be authorisation to investigate the books and go through them. There must be a safeguard before the Commission exercise any of their powers of investigation and inspection. They should be required to go before a judge of the High Court and satisfy him about what Community law is on the matter. It should not be left to an individual to go to his solicitor to find out what the law is. The Commission must go before a judge of our High Court, produce their Community laws and satisfy the judge that there is a genuine need for an urgent investigation to be made. In other words, the investigation must be carried out according to the proper judicial authority of this land.

According to the Police and Criminal Evidence Bill, a search warrant must be obtained. I believe that such an application ought to be made before a circuit judge when excluded material has to be taken into account. There will be a great deal of excluded material in these cases. Therefore it is essential for a High Court judge to be satisfied that it is reasonable, necessary and fair for an investigation to be carried out in all the circumstances of the case and for those concerned to be given an opportunity to object. And the result of the investigation must be made known to those concerned.

I welcome the report for the important questions it has raised. I go one step further and say that enforcement of Community law through our English courts must be preceded by an application to a judge of the High Court. The relevant Community law on the matter must be explained to him, and also the reasons for the investigation. The affected party must be given an opportunity to object. That is the only proper way in which to safeguard our ordinary' English folk.

8.30 p.m.

Lord Campbell of Alloway

My Lords, the noble and learned Lord, Lord Scarman, is to be congratulated not only on his chairmanship of this committee and on the presentation of his report tonight but also on having been able to reach an informal situation with the Commission where they are prepared to try out these negotiations. Anyone who, like myself, has had negotiations with the Commission—professionally or otherwise—will realise the measure of the noble and learned Lord's achievement. And anyone who has not had negotiations with the Commission will not realise the measure of his achievement.

This is yet another of the contributions of the noble and learned Lord, Lord Scarman, to policing powers; well-balanced between the need for the power and the safeguards against abuse. It is always finely set—but this, in a Community context. In particular, the enforcement procedure which the noble and learned Lord was able to negotiate with the Commission can only and truly be described as a major achievement. It is a vast breakthrough in thinking. It is a major achievement which can never be underrated. It is referred to in paragrah 48 of the report.

As to the observations made by the noble Lord, Lord Prys-Davies (and I say this with great respect), I am afraid that it is part of the system of supra-national law that the decisions of the Commission cannot be challenged in our courts. There is no surprise element in this; it is endemic and part of the Treaty. It is the surrender. This was the point made by the noble and learned Lord, Lord Denning, and there it is.

But, by and large, I would say—again, with respect and deference to the noble Lord—solicitors are (as I know from my own professional knowledge) fairly well apprised of the powers of the Commission in this regard. Many solicitors have specialist partners. We also have a higly competent specialist Bar who render their services not only to this country but also to America and to countries in Europe and all over the world which have problems with the EEC.

If the noble Lord, Lord Prys-Davies, would care to look in the law section to be found in most public libraries—and which, frankly, is rather dull unless one happens to be a lawyer—he will find text books on this subject. This subject is taught, and well taught, in our universities. The noble Lord observed that there is an element of dissatisfaction. There is; that is true. It is inevitable. I agree with the noble Lord that the Commission simply must improve upon the period of delay and reduce it below the one year referred to in paragraph 49 of the report. It appears that the Commission are alive to this difficulty. There may well be problems of staffing or whatever, but I agree with the noble Lord that those problems must be overcome.

I was anxious to make this contribution—even in the company of so many more learned and distinguished speakers—because I have had a special interest in the subject of investigation and inspection since before its inception in the form of Regulation 17. This was when I was an unofficial United Kingdom observer on the old Brussels Committee, long before the United Kingdom acceded to the European Economic Community. I very seldom discuss in your Lordships' House what I have done in the past, and I very seldom use the word "I". I only do it on this occasion for this reason: I know the measure of the achievement and of the breakthrough that has been made by the noble and learned Lord, Lord Scarman, and I know it from my own experience. I regard this report as being a very significant and constructive contribution to the future shape of the European Community's anti-trust and anti-dumping jurisprudence.

The report is not only a comprehensive review—of course it is, and very useful to keep on the shelf in one's chambers—but, more than that, it grasps all the nettles of the investigative process. If it does not entirely remove the sting, at all events it renders the degree of pain tolerable. The questioning of the evidence of the Law Society and of the Bar, the evidence of the Commission and the evidence of the CBI is greatly illuminating; I agree with the noble Lord, Lord Prys-Davies, in that. This reflects constructively in the conclusions of the report.

Paragraph 51 of the report emphasises that the difficulties are really confined to the realm of the antitrust sphere. Paragraph 53 deals with a review of the Court of Justice and the decisions of the Commission. But, as is apparent from paragraph 64, and is indeed obvious, the revisory jurisdiction of the Court of Justice is absolutely no use on a snap search. Then there is paragraph 48 which, as I see it, is the major achievement. Paragraph 55 concerns the separate authorisation and the collective authority of the Commission—a very important development by way of a safeguard.

I come to paragraph 56, and here I question whether the report goes far enough. If one examines the examples of authorisation documents, past and current, which are set out on pages 129 to 131, one finds that they are not nearly detailed enough. I feel that they leave industry far too wide open. This is a matter that does need looking at, and I have no reason to believe that the Commission would not seek, so far as it is possible, to entertain constructive proposals with a view to improving that aspect.

Before concluding, I wish to say, in deference and, of course, respect to the noble and learned Lord, Lord Denning, that his suggestion about the Commission having to apply to a High Court judge is a wonderful suggestion. It is something we should all want. It is something we should all love. But it is something which, when the chips are down, we are never going to get. It is absolutely no use when one is dealing with the Commission being unrealistic to the degree of seeking to bargain on the basis of something one will never get. Sad, yes, but part of the surrender, part of the system, and there it is.

I could not let that go without at least giving my own personal view that, in negotiations on these subjects which I have had with the Commission, and the sense that I pick up, it is just not on. Therefore, it is no use proposing it. Of course, the noble and learned Lord, Lord Scarman, when he replies may, for all I know, say he has tried this one on. He may be able to tell your Lordships—I know not—what my suspicions are worth or even if they are well founded.

In conclusion, surely this report is very much to be welcomed as seeking to ensure not only a reasonable enforcement procedure in the United Kingdom but also throughout the whole of the Common Market. As a Common Market man, although my prime allegiance is to my country my secondary allegiance is to the Common Market. It will have an important and salutary effect on the development of Community law, having particular regard to the goodwill and the measure of respect and trust which exists between the Commission and this Select Committee of your Lordships' House, which is no mean achievement and no unimportant thing.

8.43 p.m.

Lord Shackleton

My Lords, the moment has now come in the course of this debate when the laymen are given an opportunity to intervene. I wish to intervene having been, in a corporate capacity, on the receiving end of these competition rules. The name of DG IV, I will not say is something with which to frighten the children, but nonetheless it has a significance which is not fully reflected in the evidence of the CBI.

I should first like to say that although the speech of the noble and learned Lord, Lord Scarman, was one of the longest I have heard in the House of Lords, we could have had another half-hour—and I hope we will have it in some way—to complete the picture. It was a most brilliant exposition. He and his committee, and his noble and learned friend, who went to visit the Commission, not only, I would have said, exceeded their responsibilities as an investigating Select Committee but actually succeeded in already advancing and enforcing some of the recommendations of the committee. That is a very considerable achievement.

Having, as I said, in a corporate capacity, been on the receiving end, I must first of all agree with the noble Lord who has just spoken that the noble and learned Lord, Lord Denning (there is always a certain satisfaction in finding that the noble and learned Lord, Lord Denning, is conceivably wrong), is wasting his time in thinking that there is any likelihood of a reference to an English court in a matter where Community law is very clear and where we have accepted it as members of the Community. No doubt the noble and leaned Lord, Lord Scarman, will comment on this. Nor, if I may say so—and this helps to illustrate some of my anxieties—does reference to a British court give all that amount of protection.

In an earlier case in which the noble and leaned Lord, Lord Denning, had instructed me, as a director of a company, to give evidence—in the famous Westinghouse case and on a matter, I may say, which I knew nothing about—I was saved only by the House of Lords, which overruled the noble and leaned Lord, Lord Denning, and more or less dismissed the whole matter as a fishing exercise. But it is exceedingly expensive, and one must realise that the development of this sort of law does add to the expenses. Certainly my company in the Westinghouse case was probably spending up to £500,000 a year on something which was quite outrageous. I should add that I am concerned at the extension of the infection of the glories of the anti-competition procedures into the satisfactory workings of industry. Nonetheless, we have to live with it.

I think the recommendations of this committee and the application of those recommendations are something for which we should be exceedingly grateful. There is no doubt, if we look at what is happening—and I am with the noble and learned Lord, Lord Denning, to some extent on this matter—that the rules are still not clear. This leads to further refinement, but there needs to be more. If a small company is involved and is confronted with a knock on the door and someone saying, "We want to see your books and you cannot speak to your lawyer straightaway; you must produce them", that must lead to a degree of anxiety and may have the effect of companies getting so frightened that they put either their reports or their minutes, or their computer tapes, as the noble and learned Lord, Lord Scarman, said, in their wife's boudoir in order to protect them. Of course, defensive measures are apt to be taken in such circumstances.

One must realise that this sort of approach without warning in a competition case—which I accept, as the committee has—is probably necessary in certain instances, although it is desirable that there should be advance notice. I hope that in most cases people will be advised by their lawyers that they ought not to indulge in what could be regarded as improper practices in burying or withholding information. Nevertheless, the temptation is very strong. For the small companies it must be a great anxiety.

Part of the rules to be developed—and there has been reference to this to some extent in the CBI evidence—is that there should be courtesy and kindness. In all my experiences the officials have shown great courtesy. Reference has already been made by the noble Lord who has just spoken to the view that some of the delays are quite intolerable. I know of one case where there has been a delay of over five years. I am not sure what is the equivalent of the Statute of Limitations in the European courts, but there must be a limit beyond which an investigation, once begun, should not drag on. Some speed is only humane.

I am still concerned—I would like the noble Lord to comment on this, if possible, when he replies—about the danger that such an investigation under rules drawn up, not necessarily by lawyers but by administrators, could lead to what can only be described as a fishing expedition. Perhaps the noble and learned Lord, Lord Scarman, will be able to comment on that.

There is one major point which shows the complete inability of the Community to understand what is a professional lawyer.

I happen to have been responsible as an administrator for making the rules of many departments, including those of a legal department. It did not have to tell me. It reported to me for pay and rations, and in no way for policy or interpretation. It behaved professionally. That is the essence of the professional standing of a lawyer acting as a lawyer within a company. The moment he ceases to act as a lawyer and becomes an executive, in that sense he is no longer a legal adviser.

What does DG IV say on this subject? On page 114, at Question 340, in talking about in-house lawyers, he says: I would say that certainly in a number of instances this might be a problem if the undertaking would try to abuse the privilege. When the in-house lawyer is deeply involved in the day-to-day business, when he participates in meetings, where agreements are prepared which later on become the object of the procedures, when all this happens, to distinguish clearly between the activity of the in-house lawyer as an adviser and his activity as a part of the machinery to make the commercial policy of the company becomes an almost impossible task". The in-house professional lawyer does not make the commercial policy of the company. I have no doubt that the rules for the professional behaviour of lawyers in this country are not understood. I hope that this matter will be pursued. In-house lawyers will also be most likely to stop an executive, so to speak, fiddling the evidence away because they are in their professional role.

Once again I would just say that, although the Select Committee did not take all the advice that was given to it, nonetheless it represents further progress. I think that this is a continuing operation. I hope that the noble and learned Lord, Lord Scarman, will be in a position to chair—but perhaps he would prefer not to—the next foray into this subject.

8.52 p.m.

Lord Bruce of Donington

My Lords, I too, should like to express my gratitude and that of my noble friends to the noble and learned Lord, Lord Scarman, for having so clearly explained the Select Committee's conclusions on the evidence presented to it concerning the Commission's powers to investigate and inspect. Like my noble friend Lord Shackleton, I have the honour to address your Lordships as a quasi-layman. I am well conscious of the fact that as a mere chartered accountant I have no authority to interpret the law or its practice with anything like the felicity and extensive knowledge that the noble and learned Lord undoubtedly has. Indeed, it is with diffidence, bearing in mind the array of legal talent in your Lordships' House, not omitting that of the noble and learned Lord, Lord Denning, that I venture to address your Lordships at all upon this subject. I offer my apology in advance to all noble and learned Lords if I should make mistakes in my interpretation. I assure them in advance that I shall not take it amiss if at any stage I am corrected in the interpretation that I venture to give to it.

The noble and learned Lord, Lord Scarman, towards the conclusion of his speech, was careful to remind us of the unique nature of the Commission. As he says, and as I now venture to repeat, it not only has powers to investigate: it has powers to prosecute, to try and to sentence. Those are formidable powers. The noble Lord, Lord Campbell of Alloway, said that that was all part of Community law about which we all ought to know and which we accepted under the Treaty of Accession in 1972, when we agreed to subordinate British law to Community law. But when one goes through the inspection powers which are carefully outlined in the report, and particularly those applicable to the United Kingdom, we should imagine what may go through the mind of the ordinary British citizen when he thinks of the powers given or taken by the Commission.

The powers of entry that we have in this country under our legislation for Customs and Excise and the Inland Revenue in certain limited circumstances have already been dealt with by the Keith Report, and there are other powers of inspection. But in this country we have the final assurance that if action is brought in court as a result of such an inspection, of course, British law applies; and British law should not be undervalued in that respect.

In the first place, our courts are presided over by people well skilled and trained in the law over very many years. Perhaps one would agree that the performance of certain judges may occasionally be open to question. Some, indeed, have been known to have eccentricities. But in the final analysis the body of law is there and it is administered by people who know very well the whole process of law, and in particular the law in regard to the admissibility of evidence.

I shall defer to the noble and learned Lord, who knows far more about this than I do, but I can talk from my personal experience. I should say to the House that in my professional life over the past 30 years I have been largely engaged in the investigation of alleged fraud. My understanding of the law in the United Kingdom is that if evidence is brought against an individual, that evidence must be tested in court. If a person makes an accusation, the accused and his counsel have the right of cross-examination. I have sat in many courts—including, I am happy to say. as an observer in courts over which the noble and learned Lord, Lord Denning, has presided—and I know the deadly efficiency with which cross-examination of witnesses can be carried out in order to elicit the truth.

It does not always do so. I think that I have watched most members of the Bar, eminent in their fields, in certain branches of the civil law. It is my experience that cross-examination, combined, of course, with initial examination, re-examination and then further cross-examination on any new matters that may arise, is one of the most infallible ways to arrive at the truth. We have a judge sitting on the bench—or three judges in the appeal courts—whose whole life and experience in a variety of fields have involved arriving at the truth, and who has to be persuaded after hearing a conflict of views, in both statute and case law, as to what the legal position is. This is one of the bastions that we have in the United Kingdom.

I can quite understand the strictures of the noble and learned Lord, Lord Denning—perhaps I should not say strictures, but the noble and learned Lord's insistence that in the United Kingdom there should be no powers of entry and investigation without the authority of a judge. It is all very well for the noble and learned Lord, Lord Campbell of Alloway, to say, "You won't get it", or, "Never, never"—and he did say that.

Lord Campbell of Alloway

My Lords, I am not learned; certainly not in this company.

Lord Bruce of Donington

My Lords, may I apologise to the noble Lord?

Lord Campbell of Alloway

My Lords, certainly.

Lord Bruce of Donington

But it is always a great pleasure to compliment the noble Lord. He said, "Never; you will never get it". "Never" is a word that should very rarely be used. The laws that are devised by individuals, whether they be laws passed in the United Kingdom through its sovereign Parliament or whether they be in the European Community, are not fixed and immutable for all time. It may well be that we shall have to amend some of the provisions of the Treaty if we find them completely objectionable.

The existing inspection powers being discussed relate, as the noble and learned Lord has said, to matters of agriculture, to the collection of Community dues and to other matters, but more particularly in the realm of competition, enshrined originally in Articles 85 and 86 of the Treaty. Those of your Lordships who have not had the pleasure of reading Articles 85 and 86 would be well advised to do so. They are expressed in the most general terms. It is almost impossible to erect an edifice of law upon them unless one is highly imaginative and, I must say—applicable to the Commission—legally ignorant. They are very wide indeed. There would not be so much difficulty with them if they were evenly applied.

One of the basic requirements of a tribunal of any kind, whether it be in the United Kingdom or in the Community, is that it should act and should be seen to act with fairness and justice. This is the whole essence of the rule of law—fairness and justice. One therefore has to strike a slight note of query over the Commission when, for example, in the realms of civil aviation, where the most blatant collaboration and the most blatant conspiracy against the public interest arises under our very eyes, day after day in the cartel fixing of fares, one finds that the Commission does not touch that. Oh, no; the Commission does not touch the really difficult ones.

I want to come back to the Commission, which, as I have said, has all these powers. We find that, when it acts, it acts in the most extraordinary way. I stand to be corrected by any noble and learned Lord, but, for example, it is not bound by the rules of evidence in its judicial acts—not at all. It is possible for the Commission to act on evidence coming into its possession, sometimes libellous in nature, not originating from either party to the action, and to use it and not permit any interrogation or cross-examination of its authors.

Lord Campbell of Alloway

My Lords, would the noble Lord give way? I am grateful to him. They cannot act on it unless they have given the accused person the opportunity of being heard and of making representations on it. If they do so act, the Court of Justice will quash it. That is the position.

Lord Bruce of Donington

My Lords, I am very glad I have drawn the noble Lord on that point, because I now propose to prove what I have said. As in so many cases when one is considering learned documents of this kind, of such a comprehensive nature, it is very frequently useful to see how it actually works out in practice. So, with your Lordships' permission, I am going to give the history of an individual case which I can document and which I can prove. I ought perhaps to disclose to the House that I notified the noble Lord opposite of the broad lines upon which I was going to conduct this part of my speech, in order that he could prepare himself for reply. I think that is much better, rather than these things being sprung on one.

There is a small company in the north-west of London called Hasselblad G.B. Limited. It operated, and still operates, under a distributor agreement with Hasselblad, the firm in Scandinavia which is probably quite well known to your Lordships. A complaint was made against it by one of the persons to whom it sold cameras. In all, half a dozen or, at the most, two dozen cameras were involved. I ask your Lordships to bear that in mind in view of the fact that the case cost this particular little company £110,000.

This is the start. They had a letter from the Commission in August 1979 notifying them of the complaint. In December of that year, following correspondence, this company's lawyer visited the Commission, ascertained what the complaint was and what further information the Commission required and gave an undertaking about the particular conduct complained of—that Hasselblad GB was trying to supply a particular retail firm in this country which did not meet its advertising standards and which did not meet the general standards of what they considered to be appropriate to the distribution of a camera of this eminence. As your Lordships probably know, it is one of the finest cameras in the world. So the lawyer went to see the Commission, was informed exactly what the law was, gave an undertaking that the practice complained of—we are talking of between six and possibly two dozen cameras—would, of course, be dicontinued and that there would be no problem whatever.

When he left, he had the firm impression from the Commission that everything was quite satisfactory and that they need not bother about it any more. I repeat, there was no breach of any kind. And the Commission themselves do not say that there was after that day.

In June 1980, one morning, the Commission descended on the office and works of this little firm—two members of the Commission, one member of the Office of Fair Trading. The managing director was not there and did not know anything about it. Suddenly these people appeared. They were aggressive. They demanded this; they demanded that; they demanded the other. Their whole attitude suggested to those who were there at the time that they were determined to find something anyway, that they had already made up their minds that breaches had occurred.

Eventually, this particular firm's lawyer arrived and had conversations with the three investigators. Things went quite pleasantly. They were quite urbane until the point arrived when the investigators sought to take away privileged communications between the company and its solicitors. The solicitors protested that this should not occur. The commissioner—I can give his name if necessary, but such details will take time—gave an undertaking that, although they wanted to see the privileged communications, they would not in fact be used in the formulation of the judgment itself. The undertaking was dishonourably broken. In fact, the privileged correspondence was used at paragraph 34 of the decision itself.

The noble Lord, Lord Campbell of Alloway, says that trust has to be the element of our relationship with the Commission. The noble Lord appeared to trust the assurances that were given by the Commission representatives to the noble and learned Lord, Lord Scarman. I would not trust them after that, as far as I could fling them. My own considered judgment on this—I have had an opportunity of reading all through the transcripts of this case and through all the judgments and the documents—is that it is in my professional life one of the grossest breaches of faith that I have so far encountered.

At any rate, in October 1980, there came the statement of objections. Hasselblad GB were invited to reply. And so the process went on, the proceedings entirely in writing. Eventually, there was a hearing in February 1981 of the whole matter in Brussels. It was not a hearing before a court of justice. It was a hearing before a body of people who investigate, who prosescute, who judge, and who sentence. I am told, and I believe it—I believe it within the context of the transcript of the proceedings that I have seen—that the proceedings by this body presuming to administer justice were a disgrace, an absolute disgrace.

I would say further that, precisely because there was no question of being able to cross-examine witnesses, being able to arrive at the truth, it was left to the hearing, a hearing in which a phalanx of Commission people sat on one side and Hasselblad GB representatives on the other, and largely consisting of a series of questioning, cross-questioning and haranguing argument. It was a complete charade of any process of justice that we would understand in this country. Remember, my Lords, the amount involved.

That was in February 1981. In December 1981 the decision was handed down by the Commission. The Commission fined this company £93,000—more than the entire net worth of this little company. That fine might be compared with some of the actions taken by this Commission in regard to rather larger and more powerful bodies. For example, Fordwerke had a case brought against them by the Commision. On an undertaking not to repeat the practices complained of they were let off with a caution; there was no fine at all. That was hardly comparable with this particular instance.

On 8th March 1982 an appeal was made to the Court of Justice. On 2nd June 1982 there was a hearing. The noble Lord, Lord Campbell of Alloway, paid touching tribute to the Court of Justice and I should not wish to say anything in disrespect to them. I myself have appeared before them in connection with a taxation matter referred to them by the special commissioners of income tax, with whom I was in some temporary disagreement. I am bound to say—and here I must be a trifle subjective—that I was very pleased indeed that the European Court of Justice decided in my favour and against the Commissioners of Inland Revenue; this was delightful. But there was a difference. The Court of Justice there had the law to decide on. The commissioners did not have to submit any questions of fact at all because, mercifully enough, whatever opinions the Commission put in regard to the law—and some were put in by the French Government and some were put in by the British Government—they were all legal interpretations. If I had thought that the Commission were going to present the facts to the European Court of Justice I should have been very afraid indeed on the basis of the case I cite.

There was, however, a mishap at the hearing, which shows that even in the European Court of Justice there can be mishaps. Before the case, counsel appearing on behalf of this little company was invited to communicate how much time it was thought the case would take; and so, in advance, counsel told the registrar's staff that he thought the case would take a whole day. He had himself intended—and communicated his intention—to address the court for an hour and a half.

I must be slightly personal here, because I have had the privilege of sitting behind the noble and learned Lord, Lord Denning, before his elevation to the Bench, when he was a QC in a case brought under the Moneylenders Act 1927. Far be it from me to suggest, because I was there at the time, that the noble and learned Lord, Lord Denning, was in any way too long in his opening address to the court. But he took an hour and a half, and this was a case involving a comparatively small sum of money but a very large question of principle. I listened to the noble and learned Lord with the utmost fascination. I am very happy to say that the instructing solicitor for the party for whom he was appearing was acting on behalf of a client of mine; and we won.

Nevertheless, an hour and a half is what counsel before the European Court of Justice asked for. When he arrived with his client, he was suddenly told that only half an hour had been allowed. Apparently there had been an error and instead of one and half hours the message which was passed through the secretarial department to the registrar's department omitted the figure " 1 ". So instead of taking the whole day, the case was constricted to a morning.

That would not happen in the United Kingdom. Whatever its imperfections may be, the pursuit of justice in the courts of the United Kingdom is such that the time taken to arrive at a judgment in a case is the time that the judges consider it necessary to take, even though it is inconvenient for lunch and even though it might conceivably be inconvenient for golf, or such other pursuits as activate noble and learned Lords after 4.30 or 5 o'clock in the afternoon.

Therefore, by a misfortune the case was never really fully deployed in oral evidence before the European Court, which, as your Lordships know, operates on the basis of written documents, opinions that are delivered to it by the Commission, and a summation of the case containing the views of the Advocate-General, which is laid before the various judges. Undoubtedly this system results in an economy of time, but in this case that did not happen.

Eventually the European Court reduced the fine to £45,000 on grounds that were not connected with the main part of the case but which concerned a certain injunction and other proceedings which are still the subject of litigation and therefore upon which I cannot touch. There we are; the fine was reduced to £45,000. That judgment was made on 21st February 1984. The Commission knew perfectly the financial circumstances of the company. They and they alone knew the triviality of the alleged offence to begin with. They would not even give time to pay and it nearly ruined the directors and shareholders of the company. In total it cost them £110,000 for an incident that, from the beginning, never ought to have gone beyond the stage of having received the assurance, after the initial error—if indeed there was an error, and I am not persuaded that there was—in 1979. Therefore, when we are considering the conditions of investigation, let us consider the end result and judge these investigatory powers within the context not only of what might happen but of what has in fact happened.

I have a question or two to ask the Government. On this occasion I am happy not to be in an adversarial posture so far as Her Majesty's Government are concerned. I know—because the procedure provides for it—that when the Commission are reaching a decision they prepare a draft for submission to what is called an advisory committee which comprises representatives of various member states. Before they finalise the document, they are bound to take it to the advisory committee. The first question that I have to ask—and it is the only detailed one—is what advice did the British representative on the advisory committee tender to the Commission on the basis of the case that was presented to the advisory committee?

The other question that I have to ask is a purely general one. I must apologise to your Lordships for having brought to you a case of this kind and in such detail. I do so because, like your Lordships, I seek always, wherever possible, fairness and justice. It is the policy of Her Majesty's Government to protect, wherever possible, the interests of what we will term the little man; the small business. In that desire to protect them we, on this side of the House, firmly agree.

Representations to the commission to refund the money as an amende honorable in such a shocking case as this have so far met with no response. A final question that I have to ask the noble Lord is what do Her Majesty's Government propose to do about this gross and scandalous injustice done to a small and reputable firm seeking to make its way modestly in the United Kingdom?

9.27 p.m.

Lord Lucas of Chilworth

My Lords, may I start by echoing what other noble Lords and noble and learned Lords have said in their remarks this evening and congratulate the noble and learned Lord, Lord Scarman, and his committee on the preparation of this report. The noble and learned Lord introduced the report clearly to your Lordships' House today.

The Government welcome the report, which provides a helpful analysis of the Commission's current powers of inspection and those new powers which are proposed in new measures which are under discussion in Brussels. The report draws attention to a number of particular areas of interest, as have other noble Lords in their contributions this evening.

Before responding to those remarks, may I make a few general observations? First, I am glad to be able to tell the House that the Government are in general accord with the conclusions of the report of your Lordships' committee. I listened most particularly to the noble and learned Lord, Lord Scarman, in his account of the informal discussion that he and his learned colleague, the noble and learned Lord, Lord Templeman, had with the Commission about the committee's recommendations. As the noble and learned Lord said, responsibility for the procedures discussed by the committee rest not with the Government but with the Commission, but I can assure the noble and learned Lord that we shall bring the report to the attention of the Commission as and when we have the opportunity.

I took particular note of what the noble and learned Lord, Lord Denning, had to say on the subject of the new powers. So far as these are proposed in measures before the Council of Ministers we shall take into account the committee's recommendations and the views that have been expressed this evening.

The main part of the report, and much of the debate, has focused on investigations under the competition rules of the Treaty of Rome. The Government support the aims of the competition rules, and we therefore believe that they need to be enforced effectively. The competition powers, and some of the others, already existed at the time we joined the Community. Other powers are newer but have all been supported by the Government as being in the national interest. For example, we benefit greatly from the Commission's inspectors being able to verify that the common fisheries policy is being implemented in an even-handed way.

However, the Government, like your Lordships, also recognise that the powers to enter a firm's premises and to examine its books should only be available when absolutely necessary and should be circumscribed by appropriate safeguards. I am, therefore, pleased that the committee has found that the Commission's power is necessary and that its existence is of benefit to our citizens and companies as a whole—even if a particular firm under investigation may not welcome the investigation at that time.

The noble and learned Lord, Lord Scarman, spoke at some length on the entry of premises issue, as did a number of other Lords. Power to enter private premises is always sensitive matter, and even more so if such powers are used to enter a person's home. The Select Committee noted that no inspections of residential premises have taken place, but the report raises the possibility that such inspections might take place in the future. The Government think that this is very unlikely; for example, under the competition rules it is only premises or land of undertakings that can be inspected. This would certainly not give a right, for example, to enter the home of a director of a company to look at his papers. I take note of what the noble Lord, Lord Shackleton, had to say with regard to people perhaps infringing, or alleged to have infringed, regulations, hiding behind that rule.

Having said that, my attention was drawn to paragraph 14 on page 25, where the committee reported on the proposed powers relating to battery hens. The report draws attention to the possibility of visits to private dwellings. It is of course the conditions of the hens' housing which would be inspected, and not the homes of their owners. However, we are certainly willing to emphasise to the Commission that we would expect such powers to be exercised only exceptionally, if at all. That authorisation would need very careful consideration by the commissioners.

Turning to the question of advance notice of inspections—again the noble and learned Lord, Lord Scarman. spoke specifically on this issue—I note that although your Lordships' committee recognises that notice should be and normally is given to a firm, it accepts that unannounced visits are sometimes necessary. I should like to emphasise that such visits under the competition rules have, in practice, been very few. The figures are in the report and show that there have been an average of only two such visits a year in the United Kingdom.

On the question of legal professional privilege, the Government agree with your Lordships' committee that there is a strong case for extending such privilege to communications with in-house lawyers and with lawyers of non-Community countries. This was probably the principal question of the noble Lord, Lord Shackleton, and indeed I think it was his main point. We regret that the Commission has not felt able to include in-house lawyers either by administrative action or by proposing a change to Regulation 17. The Commission is more sympathetic in the case of independent lawyers of certain non-Community countries, and has now put proposals to the Council for the negotiation of reciprocal rights with the governments of those countries.

I hope that the legal profession will continue to seek changes. Certainly the Government will take any opportunities that are available to them to support those changes. However, I am afraid that change does not seem very likely in the short term, not least because some other member states whose traditions are different do not share our concerns on this issue. I think that I tend to agree with the noble Lord, Lord Shackleton, that perhaps there is some degree of misunderstanding about the position of in-house lawyers, particularly in this country. As well as seeking improved safeguards in existing powers of inspection, we shall also seek to ensure that similar safeguards are incorporated, as appropriate, in any new powers that may be granted.

I think that in the little time that is available to me I ought to turn to some of the more pertinent points and questions that have been addressed to me this evening. May I start with the important point raised by the noble Lord, Lord Bruce of Donington? I am grateful to the noble Lord for his having given me notice that he was intending to raise the Hasselblad case, but I have to say this to him. Certainly, I am not here to defend any party to that matter, neither the Commission nor the lawyers; and neither am I accepting the role which I thought the noble Lord took, that of friend of the accused. Nor do I particularly wish the Hasselblad case to overshadow the main purpose of our debate this evening.

But the noble Lord was kind enough to tell me he was going to raise a number of points. He asked me very specifically, towards the end of his description of the Hasselblad case, what the United Kingdom representative did on the Advisory Committee. He knows very well that I cannot tell him that because, in accordance with Council Regulation 17, I am not at liberty to divulge details of the proceedings of the Advisory Committee and neither would I wish to do so.

The noble Lord made a number of points about what is—and it is his own description—a complex case. These matters have been the subject of correspondence over some years between Hasselblad's lawyers and both the United Kingdom Government and the Commission. Some of the facts are disputed. The noble Lord referred to the alleged seizure of privileged documents from Hasselblad by Commission officials. I can only say that the recollections of the United Kingdom Government and Commission officials who were present differ markedly from Hasselblad's version of the event.

The whole issue was fully aired before the European Court of Justice, which has specific powers to review the appropriateness of fines. The court, while annulling part of the Commission's decision, concluded that there had been a serious breach of the Community's rules of competition and they set a fine taking into account both the size of the undertaking and the seriousness of the infringement.

In the circumstances, it would not be appropriate for the Government to take further the question of the fine. Having said that the Commission imposed a fine of around £90,000, we do not know at all how that relates to the size of the company's assets; but perhaps I should remind your Lordships that it is usual for the Commission to impose fines of no more than 4 per cent. of turnover, though they are also required to take into account the seriousness and duration of the infringement.

Lord Shackleton

My Lords, may I ask the noble Lord a question? Do transcripts exist of the proceedings of the court? Are they available for people to see, to read and to judge upon?

Lord Lucas of Chilworth

My Lords, my understanding is that they are. But the proceedings of the Advisory Committee are not. We have no specific knowledge of the way that Hasselblad's particular hearing was administered by the European Court other than what the noble Lord, Lord Bruce of Donington, has told us. But again he knows this, he knows that the court's deliberations are based mainly on written pleadings. The oral hearing can only amplify evidence already given in writing.

Having said that, as to whether there are some questionable features, as the noble Lord suggests, about the Commission's handling of the competition case involving Hasselblad, we are considering whether to make representations to them. I do not think that on this occasion there is any great purpose in my going further into this matter under the subject of the noble and learned Lord, Lord Scarman's, Motion——

Lord Shackleton

My Lords, I am sorry to interrupt the noble Lord but may I ask why is the noble Lord not prepared to go further into it? After the consideration the Government are giving, will he then make a statement as to their reaction to the situation?

Lord Lucas of Chilworth

My Lords, I have answered the specific questions which the noble Lord has addressed to me. He also spent some 25 minutes describing to your Lordships how he saw the case and the proceedings. Although he told me that he was going to bring this matter up, I certainly do not think it is my function to stand on the opposite side of the Chamber and make detailed comments on what he was told, and on what papers were put before him that have not been before me. I am not a lawyer, and I do not feel that your Lordships' House tonight, debating a Motion to accept a report of a Select Committee, is the vehicle in which the Hasselblad case should be discussed. If the noble Lord will just let me finish, I shall be happy to give way—I do not think that this is either the time or the place. I do not think that in this debate we should discuss Hasselblad, the Commission and the European Court within the context of this Motion. If the noble Lord will permit—and I say this with great deference—and if he is desirous of having a full-scale debate on how he sees the Hasselblad case, there are avenues open to him of which he is very fully aware.

Lord Bruce of Donington

My Lords, I am most grateful to the noble Lord for giving way. I think he will agree that I did not ask him to comment specifically on the matters that I raised. I asked him only two questions; and I do ask the noble Lord to bear in mind that one of the most cherished functions of your Lordships' House is, in one sense, to act as a last resort on behalf of a citizen or citizens of this country in securing what they regard, and what they are entitled to regard, as their due measure of fairness and justice. I did not ask the noble Lord to comment any further than he has commented. With his permission, I will give him the assurance that I am prepared to repeat outside this House (where I am privileged) what I have said inside tonight, because I have seen the documents and I speak on my own responsibility and on my own honour.

Lord Lucas of Chilworth

My Lords, I am most grateful to the noble Lord, Lord Bruce of Donington. Let me say straight away that I would be the last to suggest that anybody should have the right to speak in your Lordships' House removed, other than, of course, for a breach of our conventions. I made my remarks within the context of my answer to the noble Lord, Lord Shackleton, who asked me: "Why not?"—and I gave him the reasons why I was not prepared—

Lord Shackleton

My Lords, I am sorry to interrupt again but the noble Lord said that the Government were investigating. I am not suggesting that he need say it now, but presumably they will come to some conclusion at some stage: that is all. I was not saying that he need answer now.

Lord Lucas of Chilworth

My Lords, I did not in fact say that. What I did say was that, as to whether there were some questionable features about the Commission's handling of the competition case, we are considering whether to make representations to them. That is what I said.

If I may return to the subject matter of our debate and turn to a point which the noble and learned Lord, Lord Scarman. raised, he stressed the importance of the committee's proposals concerning enforcement inside the United Kingdom. I believe that the noble and learned Lord was referring in particular to the committee's recommendations in paragraph 65. The Government fully agree with this recommendation.

On the question of the means of overcoming obstruction, which was specifically raised by him, the Government fully agree with the committee. The procedures should be those normally adopted in the member states, and in the United Kingdom the normal procedure is to go to the courts. We believe that it is the right procedure for the enforcement of the Commission's powers, as it is for powers of entry granted under national laws. The Government fully agree that it is a matter of important principle that in the United Kingdom enforcement should be by means of judicial processes.

He also raised the question of a United Kingdom official always being present at inspections, and I can tell him that the Government recognise the value of the Select Committee's recommendations with regard to that point. Therefore, I am glad to be able to confirm, as the noble and learned Lord observed, that this is very much the normal practice in the United Kingdom. He also raised, as did the noble Lord, Lord Prys-Davies, the point that undertakings should be informed of progress on their cases within one year of an inspection. Again, the Government agree with this recommendation. We have felt for a long time that the Commission's decisions take too long and should be speeded up.

I do not believe that there will be any difficulty in finding out the current progress of a case, since my understanding is that it is already normally possible for a firm to find out at any stage by asking the Commission. In practice, however, I suspect that many firms are ony too happy to let sleeping dogs lie. Having said that, it does not make the position any better and I take the point which was raised.

He also asked about a publicly available guide. I can tell him that the Commission have published a guide to the competition rules, which are specifically designed to meet the needs of small and medium-sized companies. But I noted again what the noble and learned Lord, Lord Denning, said about the volume and complexity of Community law; and certainly my noble friend Lord Campbell of Alloway underlined that in his remarks.

The question of overcoming obstruction was specifically raised by the noble and learned Lord, Lord Denning. Again, the Government fully agree with the committee. The procedures should be those normally adopted in the member states, and of course in the United Kingdom the normal procedure is to go to court. I think that in a rather convoluted way that point was also underlined by my noble friend Lord Campbell.

I think that those are the major points and questions that have arisen out of our very interesting debate this evening, but I should not like to finish the debate without saying this. In recent years, we have not found the Commission unreceptive to proposals for meeting criticism of their procedures in competition cases. Since your Lordships' House debated the Select Committee's earlier report on competition practice in 1982, in a debate that was also initiated by the noble and learned Lord, Lord Scarman, a number of improvements have been introduced. They have been directed both towards reducing delays in competition cases and towards ensuring the fairness of procedures. Although it is too early to assess the effectiveness of all the improvements, it is clear that the Commission recognise the need to carry out their duties speedily and in a way which is seen to be fair.

Finally, I am not a lawyer. I am not even in the quasi position by which the noble Lord, Lord Bruce of Donington, described himself. But I have very much enjoyed listening to all the contributions emanating from the opening remarks of the noble and learned Lord, Lord Scarman, and I hope that I have been able to do justice to the questions and points which have arisen.

9.50 p.m.

Lord Scarman

My Lords, I welcome the speech of the noble Lord, Lord Lucas of Chilworth, outlining the Government's general agreement with the recommendations and proposals contained in the report. Towards the end of the noble Lord's speech it was clear that the specific recommendations to which the committee attached enormous importance—those concerned with the enforcement of powers of investigation and inspection inside the United Kingdom—were specifically accepted by the Government. I have no doubt that the acceptance by Her Majesty's Government of those proposals will mean that very serious attention indeed will be paid by the Commission to the recommendations contained in this report and to the arguments adduced in support of them.

I noted what was said during the course of the debate about the limitation under Community law of legal professional privilege to outside lawyers and the refusal to extend that privilege to in-house lawyers. I certainly hope that this debate, together with some comments in the report, will ultimately lead to a European Court of Justice decision extending privilege to cover in-house lawyers. There is not the slightest doubt that sufficient arguments have now been adduced as to the position and integrity of in-house lawyers to enable the European Court of Justice to make that extension to its ruling, if it sees fit. I am by no means pessimistic about the prospects of that extension. I have some experience, as does the noble and learned Lord, Lord Denning, of the extension of legal principle by judicial decision, case by case. That is what English law is all about, and that is what I hope the European Court of Justice may be learning from this member state.

I am sure that the noble Lord, Lord Bruce of Donington, will appreciate that I am in no position to comment on the matter which occupied a great amount of his speech: the investigation of a certain company and the results of that investigation. It would be quite improper for me to make any comment, since I am in no position to do anything about it, anyway. But it occurred to me that the difficulties which arose for the company, and perhaps for the officials and for the Commission in that case, could have been ameliorated if the proposals for procedure in the handling of competition cases, which are to be found in the Select Committee's report on competition practice to which reference has been made, had been implemented.

I was encouraged to hear, towards the end of the speech of the noble Lord, Lord Lucas of Chilworth, that steps have been taken along the lines of those recommendations. But I would direct the attention of the Government and, perhaps indirectly, of the Commission to the recommendations contained in paragraph 42 of that report under the sub-heading Procedural reforms not needing a change in the law. Those reforms were designed to let in some sort of independent examination, at various stages, of a competition case as it passes through the hands of the Commission. We had discussed in the report the appointment of an independent person to conduct the investigation. We appreciated that that was impossible without a change of Treaty law. We made this specific recommendation: The committee suggest that the creation of an additional post of director in DG IV should be considered. The director so appointed would enter the case at the stage of the preliminary meeting, over which he would preside. He would also preside over the oral hearing and would assume within Directorate-General IV responsibility for the subsequent conduct of the case". I do not know whether that has been done. I rather fear that it has not. I am pleased to give way to the Minister.

Lord Lucas of Chilworth

My Lords, perhaps it would be helpful to the House if I said that that recommendation has not been fully implemented, although a hearing officer is now required to hear all oral evidence in cases. That will ensure that the rights of defendants—if I may use that expression—are properly heard. It does not go all the way to the recommendation but certainly it is a move in the right direction.

Lord Scarman

I am pleased to hear that, my Lords. However, I remain incorrigible in my view that difficulties of the kind to which the noble Lord, Lord Bruce of Donington, referred will occur if some independent element at a fairly high level in the administration of DG IV is not let in. I will say no more about that matter.

The noble Lord, Lord Shackleton, referred—I thought with perfect justification—to the dangers of an investigation or inspection deteriorating into a fishing expedition. This is not an easy problem about which to make proposals but the committee did attempt a beginning—but it is certainly not a conclusion—to solving the problem outlined by the noble Lord. That beginning will be found in the Summary of Conclusions, in paragraphs 55 and 56. The committee recommended that the document authorising an investigation—that is, the document that has to be given to the commercial undertaking before the investigation takes place—should contain, information about the scope and objectives of the investigation with the maximum possible particulars. Where possible it should identify documents and other evidence sought, contain information about the inspector's powers, point out that he must treat as confidential any information obtained, and set out any rights of non-disclosure or appeal available to those inspected". That would be a beginning.

The other important safeguard to which the noble Lord, Lord Shackleton, also helpfully referred, is that a proper opportunity should be given to the undertaking to get its lawyer there before the inspection or investigation begins. If one then had the combination of that with a fully-detailed and helpful document of authorisation which could be shown to the lawyer, then it may be that the fishing expedition character of any such investigation, if it showed signs of developing, could be stopped.

The noble and learned Lord, Lord Denning, absolutely rightly, referred to the supremacy of Community law. This, we have to accept. As the noble Lord, Lord Campbell of Alloway, pointed out, the inevitable conclusion of that supremacy is that our courts—that is to say, the courts of the United Kingdom and of other member states—cannot question the necessity for the investigation. That would be to call in issue in the courts of a member state the validity of the decision; the decision being the formal Treaty Act which authorises the investigation. Decisions can be reviewed by the European Court of Justice, not by national courts. We have to live with it. But we can live with it and it may well be that under our judicial procedures there will be certain safeguards before entry into premises against the will of the occupier of those premises.

I should like to conclude, dealing with the points raised in this debate, with a reference to paragraph 46 in the report and to the way an English judge would probably go about the question of whether or not to authorise an entry. Please forgive me for quoting it, but it will probably be quicker at this time of night than if I try to paraphrase it. It reads: When giving effect to a Commission Decision, the judge would be precluded by the paramount and directly applicable effect of that Decision in Community law from examining the reasons or justification for the inspection". That was the point raised by the noble Lord, Lord Campbell of Alloway, and I respectfully agree with him. That is a matter for the determination of the Commission which can only be challenged before and reviewed by the European Court". Now comes the sentence which is interesting: The judge in the United Kindon would need to be satisfied of the authenticity of the Decision and of any facts regarding the actual or likely conduct of the undertaking which would justify granting an injunction". I leave this debate which has been interesting, and strangely enough in the latter stages quite exciting, with a general comment. I am no longer, unfortunately—time will take its toll—a member of the Select Committee or chairman of its legal subcommittee. This therefore is almost certainly the last time on which I shall be introducing one of the Select Committee's reports. I know now from personal experience the very high reputation enjoyed by the reports of this committee throughout the member states of the Common Market and in the institutions of the Common Market. I think we are the only Parliament which produces regular reports of scrutiny, review and recommendation such as are produced by the Select Committee of this House. It is yet another illustration of the value to the United Kingdom and to the Common Market of the activities, the energy and the devotion of this House.

On Question, Motion agreed to.