Lords Sitting of 20 April 1989

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Newcastle): The LORD CHANCELLOR On the Woolsack.

Western Sahara Dispute
The Viscount of Falkland The Viscount of Falkland asked Her Majesty's Government:
Whether, during the Prime Minister's recent visit to Morocco, discussions took place on the war in the Western Sahara.
The Minister of State, Foreign and Commonwealth Office (Lord Glenarthur): Yes, my Lords. My right honourable friend the Prime Minister welcomed the efforts being made to find a solution to this dispute.
The Viscount of Falkland: My Lords, I thank the noble Lord the Minister for a most encouraging reply. I believe that all noble Lords will be pleased that his right honourable friend had occasion to bring up this subject. Can the Minister further tell me what Her Majesty's Government have done, or are intending to do, to implement the European Parliament's resolution passed on 15th March which urged all member countries to encourage direct negotiations between Polisario and the Moroccan Government?
Lord Glenarthur: My Lords, we certainly welcome that. We also welcome the efforts of the United Nations Secretary General to find a solution and the acceptance in principle of the referendum proposals by both parties to the dispute. Perhaps those measures together offer the best solution.
Lord Cledwyn of Penrhos: My Lords, the referendum of the population concerned has been proposed, but what information has the noble Lord concerning the position as regards that referendum? Can the Minister confirm that his right honourable friend the Prime Minister had talks with King Hassan on this subject when she visited Morocco? Can the Minister further say what initiatives the Government are taking to bring this sad and unnecessary war to an end?
Lord Glenarthur: My Lords, I cannot give the noble Lord chapter and verse concerning the referendum, but I can confirm that my right honourable friend did raise the matter with King Hassan when she visited Morocco. As I have said, we welcome the efforts of the United Nations Secretary General and we have joined the rest of the 12 in welcoming all the efforts to find a solution.
The Viscount of Falkland: My Lords, can the Minister say whether his right honourable friend the Prime Minister showed any concern during her visit
866
as regards arms that have been bought by Morocco from us? I believe that Morocco is a customer for arms from this country. I have no doubt that she feels that some of those arms may have been used in this conflict.
Lord Glenarthur: My Lords, the matter of arms was not raised by my right honourable friend. We shall be prepared to consider Moroccan purchases of British defence equipment provided that appropriate financing arrangements can be agreed and that any defence supply will not risk destabilising the area.
Lord Mayhew: My Lords, does the noble Minister agree that hope for the future rests on reaching agreement on the terms of the referendum? Will the Government encourage the United Nations to enter into the dispute concerning the terms of the referendum?
Lord Glenarthur: My Lords, as I said, I have not with me chapter and verse on that referendum, but I shall certainly look into that point.

Kurds: Deportation Allegations
3.4 p.m.
Lord McNair asked Lord McNair asked Her Majesty's, Government:
Whether they have any recent information that the Iraqi Government is continuing its policy of forcibly transporting large numbers of Kurds from their own villages to other parts of Iraq; and what representations, if any, they have made.
Lord Glenarthur: My Lords, we have studied recent reports alleging the forced eviction of Kurds from the towns of Qala Diza and Rania, and raised these with the Iraqi authorities. They have denied any deportations to the south of the country, but have admitted to some localised resettling on security grounds.
Lord McNair: My Lords, I thank the noble Lord for that Answer, the thinness of which I recognise is probably not his fault. The latest information that reached me a quarter of an hour ago is that the threat to Qala Diza and Rania is still there. Does the Minister not agree that this threatens deportation on almost a Stalinist scale and is utterly deplorable?
Lord Glenarthur: My Lords, we have made clear to the Iraqis that, despite the proximity of these towns to the Iran-Iraq border, there is no justification for the mass deportations which are alleged to have occurred. My honourable friend Mr. Waldegrave, the Minister of State at the Foreign Office, saw the Iraqi ambassador only yesterday. He raised this matter with him and it was a point that was taken on board. We use every possible opportunity to raise this and similar concerns with their authorities.
Lord Cledwyn of Penrhos: My Lords, the evidence that the Iraqi Government used chemical weapons against the Kurds on at least 10 occasions is now

867
well established. The noble Lord—or the noble Lord, Lord Trefgarne, in his place—expressed the concern of Her Majesty's Government about that matter. In addition, the evidence of the forcible transportation of entire populations is well established. In the light of this, can the Minister say to what extent the Government are proposing to attend the Baghdad arms fair? Is it not time that the British Government took the most condign action against the Iraqi Government for conduct which is as bad as that which Hitler used during the Second World War?
Lord Glenarthur: My Lords, as the House knows well, we utterly condemn the use of chemical weapons wherever that may occur. My right honourable friend the Secretary of State made a clear statement to that effect on 30th November last year. Perhaps the only sensible way of dealing with chemical weapons would be a globally verifiable ban, which would provide the answer to the threat of their future use.
There is some doubt as to whether the forcible deportations which have been referred to have taken place in quite the way that has been suggested. At the meeting that took place yesterday the ambassador gave clear reassurances that no mass evacuations to the south were taking place.
As regards the arms fair, British arms supplies to both Iran and Iraq continue to be governed by very strict guidelines preventing the supply of lethal equipment to either side. I can assure the House that these guidelines are scrupulously applied.
Lord Cledwyn of Penrhos: My Lords, can the Minister say what these guidelines are? If Her Majesty's Government know of the terrible things that the Iraq Government are doing against the defenceless Kurds, why are we having anything to do with that government at all? Can the Minister say whether it is the case that Her Majesty's Government have sent a trade representative to Iraq to seek to improve trade relations? Why should we have trade relations with a government who do these things?
Lord Glenarthur: My Lords, apart from the troubles in Iraq and accepting the concern that the noble Lord expresses, we have to maintain some kind of constructive relationship. The possibility of that through trade links is not inconsistent with the condemnation of the denial of human rights.
Lord Kennet: My Lords, do the Government not believe the assurances given to them by the Iraqi Government and their ambassador concerning the scale of evictions and expulsions of the Kurds? Can the Minister say whether the Government believe the statements made by the Iraqi Government that they have not used chemical weapons?
Lord Glenarthurr: My Lords, as I said in answer to the noble Lord, Lord Cledwyn, if, as may have been the case, chemical weapons have been used, then we deplore it. As regards the reassurances given by the ambassador, when my honourable friend spoke to him he made it plain that any mass evacuations of
868
the type that has been described would be a matter of very great concern to Her Majesty's Government. My honourable friend urged that British diplomats and journalists should be allowed to visit the area to see for themselves. As I understand it, the ambassador said that he would welcome journalists going to the south to prove that no mass deportations have occurred in that region.
Baroness Strange: My Lords, can my noble friend tell me whether the Iraqis are making their own chemical weapons or getting them from somewhere else?
Lord Glenarthur: My Lords, I cannot give an answer to my noble friend, but I shall certainly find out.
Lord Kilbracken: My Lords, is it not a fact that the present threat to Qala Diza and Rania is no more than a continuation of a systematic policy involving the movement of Kurds to other areas—the south of the country is not mentioned in the Question—and their transfer into what are no more than concentration camps? Has that not been happening for at least the past seven or eight years? I can confirm that, having seen it myself when I was in the area in 1981. Is this not all part of a systematic programme of genocide, under the definition provided by the United Nations, of the Kurdish people, and should it not be raised by the Government in the United Nations? Should we not take every action to bring it to an end?
Lord Glenarthur: My Lords, the noble Lord has a well known interest in this area. I can only repeat that when asked about this yesterday the ambassador gave clear reassurances that what is described as might have been taking place has not in fact happened. He went so far as to say, as I suggested, that journalists could go and see for themselves. Perhaps that is the kind of verification that is needed. I assure the noble Lord that wherever we have to raise this issue we will; I believe as what was said by my honourable friend yesterday bears that out.
Lord Mackie of Benshie: My Lords, I accept the Minister's reply to the noble Lord, Lord Cledwyn, that one must maintain relations of some kind even with detestable regimes. However, will he reply to the main part of the noble Lord's question as to whether this applies to the arms trade? Do the guidelines allow trade in arms with Iraq?
,Lord Glenarthur: My Lords, as I have said, the arrangements by which arms might be sold to either Iran or Iraq continue to be governed by strict guidelines which prevent the supply of lethal equipment. That applies to both sides. Attendance by British companies is a matter for their own judgment in the light of their knowledge of the strict application of those guidelines. One thing they do not do is to guarantee the availability at the end of the day of those goods for export.
Lord Mayhew: My Lords, in addition to the unilateral efforts the Government appear to be making, would they not act more effectively through the European Community as well?
Lord Glenarthur: Yes, my Lords, the matter was discussed in the Twelve only yesterday.
Lord Kilbracken: My Lords, the ambassador said that journalists would be welcome to visit the south of the country to see that nothing of this kind is going on. Is it not a fact that the south of the country is nowhere specified in the Question? It is now believed that this is going on not in the south of the country but in other parts of Kurdistan. Will the ambassador agree to me or to other journalists going to the Qala Diza and Rania areas? If so, I should be delighted to take him up on it.
Lord Glenarthur: My Lords, the noble Lord will have to ask the ambassador about that. While I referred to the south of the country, we have to respect Iraq's legitimate security concerns in the north.

King's Cross Area: British Rail Proposals
3.14 p.m.
Lord St. John of Fawsley Lord St. John of Fawsley asked Her Majesty's Government:
What steps they are taking to preserve the area of oustanding architectural and community value to the south-east of King's Cross which British Rail propose to demolish to facilitate railway works connected with the Channel Tunnel.
The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara): My Lords, British Rail is seeking statutory authority for its proposed works at King's Cross in the King's Cross Railways Bill, which is currently before Parliament. It will be for Parliament to decide whether BR's proposals are justified.
Lord St. John of Fawsley: My Lords, I thank my noble friend for that interim Answer. Does he not think that this is a case where the Government should make their views known clearly and at once? Does he not realise that British Rail is proposing an act of vandalism to sweep away 13 acres of good housing, shops, small businesses and offices which constitute a real community; not yuppiedom but a real, rooted, working class community? Is not the existence of such communities what living in a city is all about?
Lord Brabazon of Tara: My Lords, the Government are aware of the concern which has been expressed by my noble friend. We are considering the position. Ultimately, it will be for Parliament to decide the contents of the Bill.
Lord Strabolgi: My Lords, can the noble Lord confirm that the conservation area to the south-east of King's Cross, which includes Lloyd Square and Percy Circus and is of great artistic and architectural merit, will be preserved?
Lord Brabazon of Tara: My Lords, I cannot give details of the names of the streets concerned. I understand that the area has a number of listed buildings which might be affected. It will be for British Rail to explain why there is no alternative.
Lord Montagu of Beaulieu: My Lords, is my noble friend aware of the deep concern felt by English Heritage about Clause 19 of the Bill, which would virtually drive a coach and horses through all planning legislation to protect historic buildings and ancient monuments, and would provide a bad precedent for the future? Is he also aware that British Rail is challenging English Heritage's right to petition against the Bill?
Lord Brabazon of Tara: My Lords, we are aware of the concern about Clause 19, and we are considering the position. Parliament will wish closely to consider this point when the Bill becomes before the House.
Baroness Birk: My Lords, is not the noble Lord being slightly contradictory? When I first referred to Clause 19 of the Bill in a supplementary question to a Question on 23rd February, he gave the same reply as he gave just now to the original Question. He said that it was for Parliament to decide. He also said on 23rd February, in answer to other supplementary questions to the original Question asked by the noble Baroness, Lady Strange:
"I have said that British Rail have to go through the proper planning procedures if they want to demolish the building".—[Official Report, 23/2/89; col. 757]
If that is so, surely the Minister can be firmer on the Government's attitude to this clause, which, as the noble Lord, Lord Montagu, has said, will drive a coach and horses through the legislation on conservation and the protection of listed buildings. Will it not create a dangerous and damaging, precedent for British Rail, and also for the public utilities, to bring forward further Bills? I am sure that a great many listed buildings and conservation areas are getting in the way of their plans.
Lord Brabazon of Tara: My Lords, I cannot say any more than I have just said. We are aware of the concern about Clause 19, and we are considering the position.
Baroness Strange: My Lords, does my noble friend agree that buildings are listed in order to preserve them and not for British Rail to trample them down like a bull in a china shop?
Lord Brabazon of Tara: My Lords, I accept that they are listed for a purpose. We are considering this point at the moment and British Rail will have to justify its proposals.
Lord Stallard: My Lords, is the noble Lord aware that, in addition to the concerns in the area referred to by the noble Lord, Lord St. John, there is also a great deal of concern and anger among the local community about the use of the Private Bill procedure instead of the inquiry procedure? Is he further aware that an alternative site is available with

871
plenty of land and no historic buildings? Stratford council is asking for this development to be transferred and is prepared to co-operate. Would it not have been a better proposition to enter consultations about an alternative site and also to use the inquiry procedure normally laid down for developments of this nature?
Lord Brabazon of Tara: My Lords, I am afraid that the Private Bill procedure is the only procedure available for the authorisation of new railway works. Of course, objectors have the opportunity to petition against the Bill and to be heard by Select Committees in both Houses.
Lord Annan: My Lords, can the noble Lord confirm—or will he deny—that the reason British Rail is insisting upon this link being driven above ground is that the plethora of tunnels from the Circle and Northern Lines in that area prevent the link being put underground? Further, does not the Minister feel that this very negative attitude which is emanating from the department is rather disappointing to people who care about the environment?
Lord Brabazon of Tara: My Lords, as I understand it, the proposals involved in that area are for a subsurface link and not an overground link. However, the problem is that the development would involve demolition in order to put in the link, and then reinstatement of some kind would be necessary. That appears to be the issue at stake.
Lord Strabolgi: My Lords, can the Minister say how much travelling time will be saved by virtue of these sweeping proposals? Is it true that such saving will in fact be only about ten minutes?
Lord Brabazon of Tara: My Lords, if the noble Lord is referring to the proposed Channel Tunnel link, it is not just a question of time saved; it is a question of the overall capacity of the line.
Lord Tordoff: My Lords, does the noble Lord remember that when the House was discussing the Channel Tunnel we were told that Waterloo was the only possible terminus for that traffic? Why then has the proposal for the development of the King's Cross area suddenly emerged from the blackness? As the noble Lord will perhaps remember, we made suggestions on that occasion that there should be a split between the two. However, we were told then that we were talking rubbish.
Lord Brabazon of Tara: My Lords, the capacity of Waterloo station is not unlimited. Indeed, British Rail estimates that its capacity would be about 15 million passengers a year. However, British Rail feels that there is a need for a second terminal to cope with traffic growth beyond that figure.
Lord Elton: My Lords, will my noble friend agree that probably the proper time and place to discuss the merits of what is proposed in the Bill would be in a discussion on the Bill itself?
Lord Brabazon of Tara: My Lords, I very much agree with what my noble friend has said. In fact, that is what I have been trying to say in answer to many of the supplementary questions.
Lord Kennet: My Lords, nevertheless, since we are having something of a discussion now, will the Government agree that whatever special consideration is to be given to the very attractive area of (as it has been described) homes, shops, workshops and offices, the same degree of consideration should be accorded to another very attractive area—namely, Peckham—which consists of nothing but homes?
Lord Brabazon of Tara: My Lords, we are now going a long way beyond the scope of the original Question. The Peckham proposal is concerned with the fast Channel Tunnel rail link, and a Bill in that connection has not yet been submitted.
Baroness Birk: My Lords, I am well aware that the noble Lord is the Minister for transport, but can he tell the House whether this project has been discussed, or is constantly discussed, with his right honourable friend and his colleagues in the Department of the Environment? I ask this question because that department is the one which is responsible for the matter about which we have all shown great concern.
Lord Brabazon of Tara: My Lords, I can indeed confirm that discussions take place between the Department of the Environment and the Department of Transport on such issues. In fact, when I was briefed on this Question, I was briefed by officials from both departments.

Nature Conservancy Council
3.23 p.m.
Baroness Nicol Baroness Nicol asked Her Majesty's Government:
Whether they have received the report on the Nature Conservancy Council's review of its holdings which was expected by the end of 1988 and when they expect the Nature Conservancy Council to be able to resume its full range of activities.
The Earl of Arran: My Lords, the Government are considering the NCC's report, the contents of which my noble friend Lord Caithness discussed last week with the chairman of the Nature Conservancy Council, Sir William Wilkinson, and his colleagues. We expect to make an announcement very shortly about the Government's response.
Baroness Nicol: My Lords, I thank the Minister for his reply. I am glad to hear that the report has at last been received. However, can he say what consultations are likely to take place other than those with the Nature Conservancy Council? For example, will any of the voluntary bodies be concerned in the matter? Further, if it is decided to sell off any of the national nature reserves, will it be possible for such bodies to be helped to take them over?
The Earl of Arran: My Lords, in answering the question posed by the noble Baroness, Lady Nicol, I can reaffirm the commitment made to your Lordships' House by my noble friend Lord Hesketh in November; namely, that we shall be consulting all interested partners before any final decisions are taken. Such partners will include the RSPB, Wildlife Link and the Royal Society for Nature Conservation.
Baroness David: My Lords, can the Minister confirm that the matter is at present held so that nothing can happen while we are waiting for the Government's response to the report? When this issue was discussed previously, on 6th December last year, I asked whether the NCC would be able to acquire any sites during this waiting period. I asked especially about Caenlochan, which is a very valuable site and which the NCC would like to acquire. Can the Minister give me an answer in that respect?
The Earl of Arran: My Lords, it is important to realise that 234 national nature reserves have already been declared. Further, the NCC agreed last year that it would be sensible, as a rule, not to declare any more of them until the review was complete and future policy agreed with the Government. In the meantime, we have made it perfectly clear to the NCC that we would not object to declaration of future reserves if that was the only way to protect conservation sites of national importance which were under immediate threat. The council's other activities are not directly affected by the review.
Lord Cledwyn of Penrhos: My Lords, can the noble Earl tell the House whether the privatisation of those nature reserves in England and Wales is a possibility under the review? Is he further aware that, if that is the case and those nature reserves are put up for sale to any bidder, there will be profound concern and disquiet throughout the whole of England and Wales?
The Earl of Arran:My Lords, I can confirm to the noble Lord the Leader of the Opposition that as part of the review the NCC is considering the scope for transferring some of the sites owned by the council to other owners. We shall consider the NCC's proposals most carefully. However, it would be most premature and improper for me to comment on the matter in any detail at this stage. I repeat the assurance which has already been given. The Government will need to be satisfied about the future arrangements for protecting any sites the ownership of which might change.
Baroness David: My Lords, perhaps the Minister did not altogether understand my question. The question I asked was this. If a valuable site was put up for sale and was ready to be acquired, would the NCC be able to acquire it at present while the matter is under consideration? I also asked what had happened to Caenlochan.
The Earl of Arran:My Lords, I can confirm my previous answer that sites can be acquired while the moratorium is in progress.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Report stage of the Companies Bill will be adjourned at approximately 7 p.m. for approximately one hour and that during this adjournment the Second Reading of the Antarctic Minerals Bill will be taken.

Security Service Bill
3.28 p.m.
Report received.
Clause 2 [The Director-General]:
Lord Mishcon Lord Mishcon moved Amendment No. 1:
Page 1, line 25, at end insert ("and shall be kept free from any political bias or influence")
The noble Lord said: My Lords, in moving Amendment No. 1, I should like, if I may, to remind your Lordships that the Security Service Bill for the very first time puts the security service under statutory protection and under statutory duties. It is therefore very important that we read with care and legislate with care what the director general, who is responsible for the conduct of that service, should have as his duty in regard to ensuring that the security service properly carries out its duties.
In the Bill there is an amazing phrase which deals with the question of where the security service ought to stand in regard to politics, under the director general's supervision. In Clause 2(2)(b) is to be found the phrase:
"The Director-General shall be responsible for the efficiency of the Service and it shall be his duty to ensure … that the Service does not take any action to further the interests of any political party".
I can understand there being no reference to politics, and the Minister when he replies saying that that ought to be a matter that is taken for granted or that it ought to feature in some guidelines but not in primary legislation. However, the primary legislation does, in the wisdom of the Government, deal with the question of political activity, loyalty and action with regard to the security service. It states that the service must not take any action to further the interest of any political party. But what happens if the action is against a political party? What happens if the action does not further but is adverse to a political party? That is not a novel thought of mine, because it was in the mind of Sir David Maxwell Fyfe when he was Home Secretary. I am sure that your Lordships and the noble and learned Lord the Lord Chancellor will remember that he dignified the Woolsack later in his career.
Sir David Maxwell Fyfe gave some guidelines in 1952 which were deemed to be extremely carefully worded and were sacrosanct. As far as I know, they have been sacrosanct until now. In those guidelines he obviously used language that was not meant to be incorporated in whole in a statute. I wonder whether your Lordships will forgive me if I read one sentence from those guidelines. It deals with the political activity—rather should I say the non-political activity—of the security service. This is what he said:
"It is essential that the security service shall be kept absolutely free from any political bias or influence, and nothing shall be

875
done that might lend colour to any suggestion that it is concerned with the interests of any particular section of the community or with any matter other than the defence of the realm as a whole".
I and my colleagues who are associated with the amendment have merely borrowed those wise, carefully chosen words, which were used by the Home Secretary in those guidelines when he talked about the service being kept free from any political bias or influence. Those are the precise words which are used in the amendment. I say that they are necessary, because to leave the wording as it is creates not only a vacuum but an absurdity for legislators. It would leave the director general to see to it that the security service does not advance the interests of any political party, and of course do things which are adverse to the interests of a political party. I borrow the wise words of Sir David Maxwell Fyfe, as he then was, and I invoke that name in submitting the amendment to your Lordships. I beg to move.
Lord Annan: My Lords, I wonder whether there is not a difference here between a wise guideline and a clause incorporated in a statute. The first gives advice. In guidelines one gives the flavour one wants in a Bill. If this guideline was put in statutory form, surely one could envisage a case in which a party which is deemed to be inimical to democratic parliamentary government could claim that it was being unreasonably proceeded against by the security service.
Lord Hutchinson of Lullington: My Lords, I support the amendment. I say to the noble Lord, Lord Annan, that that is the very reason for having redrafted the amendment which was moved in Committee. I moved an amendment in Committee and merely added to Clause 2(2)(b), after "any action to further", "or hinder".
I should like to remind the noble and learned Lord of what he said when he replied to the amendment. He said that he respected and understood the intention of the amendment and that there was not a great deal of difference in regard to the basic aim and the spirit of the amendment between those who moved the amendment and himself.
The noble and learned Lord rightly pointed out what the noble Lord, Lord Annan, has pointed out: that the amendment as drafted would give complete immunity to any political group which intended to subvert the state or do something similar. The words of the amendment have therefore been chosen:
"and shall be kept free from any political bias or influence".
That is exactly what the noble and learned Lord meant when he said that there was little difference between the basic aim of those moving the amendment then and his own view. It would not catch the political group, as has been suggested.
Lord Boyd-Carpenter: My Lords, the amendment would place a difficult task on the director general. How is it possible to keep anyone free from political influence? How does one prevent an individual member of the service being approached and an attempt being made to influence him in any political
876
view? The proposal embodied in the amendment is somewhat impractical. I should have thought that to include it would weaken rather than strengthen the Bill.
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, as the noble Lord, Lord Mishcon, has said, the words of the amendment are taken from the guidelines prepared under the wise guidance ofa distinguished predecessor of mine on the Woolsack, although at the time he was Home Secretary. The noble Lord asked whether I remembered that distinguished occupant of the Woolsack. It so happens that on the first occasion that I was instructed to appear in the Appellate Committee of your Lordships' House —I should perhaps say, in the presence of the noble Lord, Lord Hutchinson of Lullington, that it was a Scottish appeal—he presided. He demonstrated his wisdom on that occasion because we won the appeal.
The point that the noble Lord, Lord Annan, has made, supported from a broader point of view by my noble friend Lord Boyd-Carpenter, is not yet met by the amendment. As I said before, there is little between us on how we envisage the way that the security service will work and the atmosphere within which we think it should work. I hope that I can persuade your Lordships that we have gone as far in statute as we sensibly can to deal with those matters, and that to introduce aseries of injunctions or exhortations will take us no further forward.
There is, as has been pointed out, a real difference between the drafting medium of a non-statutory directive and the drafting medium of a statute. Your Lordships have widely welcomed the Government's decision to move from the medium of a directive to the medium of a statute. For a statute to work, if it is to be honoured and not to fall into disrepute, it must say what it means and mean what it says.
To achieve that in this area I believe that the Bill has to be positive in its drafting. It must require that the security service can do as much, but no more, than is set down in statute. It is about actions, rather than atmosphere.
It is no accident therefore that the functions of the security service in Clause 1 are expressed in active terms. National security is to be protected from threats, from activities and from actions. The requirements and safeguards in Clause 2 are also expressed in terms of actions and operations; constraints are placed upon the work of the service, for that is what matters. The effect of this is that anything which falls outside the positive scope and responsibilities of the security service as set out in the statute can be of no interest to, or factor in, what it does.
It would not serve to strengthen this positive approach if we were now to change tack and start to try to identify in legislation the characteristics or attributes which the service should or should not display in carrying out its work. That is what this amendment proposes. It would overlay the positive provisions of the Bill with broadly phrased prohibitions of general but uncertain application. That is really the point to which my noble friend Lord Boyd-Carpenter referred. Although the amendment

877
is perfectly good for guidelines, it is surely of very uncertain application. How would the director general go about the task of keeping every member of the service free from any political influence?
Indeed, if we were to adopt this approach, in practice the amendment should be just the beginning of the task. For legislation to be effective it must be comprehensive. The full list of desirable attributes for the service would be long. So too would the list of prohibitions. The drafting would be complex. I am not sure, for example, that the concept of political influence which this amendment introduces is in any case sufficiently clear for the language of statute. We should always be driven back to acknowledging the functions of the service under Clause 1, which alone allow it to act, and the constraints already in Clause 2 which bear upon those actions. If we go down that road I believe that we would lose our way in a thicket of good intentions and would introduce a provision without the clarity which legislation of this nature undoubtedly requires.
I recognise that this amendment is really about creating the right atmosphere for the work of the service—the right ethos—with the right people. There is only so much that the legislation itself can do on such matters. I think many of your Lordships know that there have been considerable strides in the management of the security service in recent years. I pay tribute to the contribution which the Security Commission has made in this regard, as well as the service itself. These cannot be matters directly for legislation. They are matters properly for management. But I ask your Lordships not to underrate the very real effect which the clear and positive framework and safeguards at present in the Bill will have on these matters for the future. Their influence will be the greater because of the positive terms in which the Bill is drafted.
As the noble Lord, Lord Annan, has pointed out, if that kind of phrase were to be incorporated, there is at least a risk that some important activities of the security service, within the functions that have been described for that service in the Bill, would be inhibited or at least would be thought to be inhibited and restricted on the ground that they were political, notwithstanding that the very political influence that was under question was of a kind which might threaten the security of the United Kingdom as a whole.
I do not think it is desirable to confuse the clear structure and unequivocal message of the legislation with part of the language culled from a directive, however distinguished the author of the directive. I do not believe that the legislation will be helped by selective injunctions. This is not necessary in order to ensure that the service acts in the way in which all your Lordships would, I think, wish it to act. I hope therefore that the noble Lord will feel able not to press his amendment.
3.45 p.m.
Lord Mishcon: My Lords, I think that I should be lacking in my duty if I did not press the amendment, having heard all the replies to it. The noble Lord, Lord Boyd-Carpenter, said that he regarded it as quite impracticable that any director general should
878
be under a duty to see, within the wording of the amendment, that his service was kept free from any political bias or influence.
Lord Boyd-Carpenter: My Lords, I am sorry; I should correct the noble Lord. I did not say that it was impractical to protect the service from bias. I said, "from influence".
Lord Mishcon: My Lords, I am most grateful to the noble Lord. I say at once that he thought it was impracticable for the director general to say that the security service should be kept free of political influence. If it was impracticable, it is extraordinary that the directive of 1952, which said that that is exactly what the security service should be kept free of, was worded so carefully by so eminent a Minister in the noble Lord's own government that it has stood the test of time from 1952 until now.
I am also told—and this is quite extraordinary—by the noble and learned Lord the Lord Chancellor, who measures his words with such care, that everything is so clear in this Bill that when it becomes a statute everyone will know exactly what his duty is. It will be abundantly clear and there will be no impracticality about it. With the deepest possible respect, I ask the noble Lord, Lord Boyd-Carpenter, and the noble and learned Lord the Lord Chancellor kindly to look at the wording of Clause 2(2)(a). Let us see how practical that is from the point of view of the statutory duty of the director general. He has to ensure,
"that there are arrangements for securing that no information is obtained by the Service except so far as necessary for the proper discharge of its functions".
The practicality is this: does anyone in the Chamber think that when information first reaches the security service it has not got to be sifted for that which is necessary and that which is not necessary for the proper conduct of the security service in its obligations? "No", says the Bill, with the precision which the noble and learned Lord recommends. "With everybody knowing exactly what he has to do, it is the director general's duty to ensure that he has arrangements for securing that no information is obtained by the security service except what is necessary for its job".
It really is a nonsense. I would not mind so much if I were not dealing with a matter of great principle. If I thought that there was a history of the security service which all of us, on all Benches, respect, with never a suggeston of political bias or influence, I would not ask your Lordships so seriously to consider the amendment. Your Lordships know perfectly well whether the accusation was right or wrong. An inquiry was held because it was thought that the security service had been subjected to political bias or influence. Those associated with this amendment and I wanted to see, and I should have hoped that all your Lordships would have wanted to see, that the director general must ensure that there is no bias, no political bias or influence, in regard to the conduct of his department.
If it is practical that the director general must ensure that no action is taken to further the interests of any political party, I should like the noble Lord

879
Lord Boyd-Carpenter, to examine and analyse, with his usual careful, analytical brain, precisely what that means by way of practicality. Is the director general to question every action taken by the security service to see whether it, first, furthers the interests of a political party and, secondly, if it does, whether the main intention of the action is to further the interests of the political party, or whether that is purely incidental and accidental?
The words are clear. The Maxwell Fyfe directive contained those words. Neither I nor my colleagues have tried to introduce words which do anything other than clearly express, as the Bill now does, that the department and the director general should ensure that this matter is not supervised, except distantly by a Minister. They should also ensure that, first, actions are not taken to further the interests of a political party and, secondly, that no bias is shown and there is no influence by any political party in regard to security service activities. I must ask for the opinion of the House to be taken on this important amendment. I trust that in an amendment of this kind it will not be a political division that divides us.
3.51 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 71; Not-Contents, 122.

DIVISION NO. 1

CONTENTS

Addington, L.

Lloyd of Kilgerran, L.

Amherst, E.

Longford, E.

Ardwick, L.

Macaulay of Bragar, L.

Aylestone, L.

McIntosh of Haringey, L

Birk, B.

Mackie of Benshie, L.

Bruce of Donington, L.

McNair, L.

Carmichael of Kelvingrove, L.

Mishcon, L.

Mulley, L.

Carter, L.

Nicol, B.

Cledwyn of Penrhos, L.

Northfield, L.

Cocks of Hartcliffe, L.

Ogmore, L.

David, B.

Peston, L.

Dean of Beswick, L.

Ponsonby of Shulbrede, L. [Teller.]

Dormand of Easington, L.

Elwyn-Jones, L.

Prys-Davies, L.

Ewart-Biggs, B.

Reilly, L.

Ezra, L.

Ritchie of Dundee, L.

Falkland, V.

Sainsbury, L.

Fisher of Rednal, L.

Seear, B.

Fitt, L.

Serota, B.

Galpern, L.

Shackleton, L.

Gladwyn, L.

Shepherd, L.

Graham of Edmonton, L.

Simon, V.

Gregson, L.

Stallard, L.

Grey, E.

Stoddart of Swindon, L.

Hanworth, V.

Strabolgi, L,

Harris of Greenwich, L.

Tonypandy, V.

Hatch of Lusby, L.

Tordoff, L. [Teller.]

Hayter, L.

Turner of Camden, B.

Houghton of Sowerby, L.

Underhill, L.

Hughes, L.

Wallace of Coslany, L.

Hutchinson of Lullington, L.

Walston, L.

Irvine of Lairg, L.

Whaddon, L.

Irving of Dartford, L.

White, B.

Jeger, B.

Williams of Elvel, L.

Kirkhill, L.

Winterbottom, L.

Listowel, E.

880

NOT-CONTENTd

Ailsa, M

Joseph, L.

Airey of Abingdon, B.

Killearn, L.

Alexander of Tunis, E.

Kings Norton, L.

Alexander of Weedon, L.

Lloyd of Hampstead, L.

Ampthill, L.

Long, V.

Annan, L.

Lucas of Chilworth, L.

Arran, E.

Mackay of Clashfern, L.

Ashbourne, L.

MacLehose of Beoch, L.

Beloff, L.

Margadale, L.

Belstead, L.

Marley, L.

Bessborough, E.

Merrivale, L.

Blake, L.

Mersey, V.

Blatch, B.

Monk Bretton, L.

Blyth, L.

Morris, L.

Borthwick, L.

Mottistone, L.

Boyd-Carpenter, L.

Mowbray and Stourton, L.

Brabazon of Tara, L.

Moyne, L.

Brougham and Vaux, L.

Munster, E.

Butterworth L.

Nelson, E.

Campbell of Alloway, L.

Newall, L.

Campbell of Croy, L.

Newcastle, Bp.

Carnegy of Lour, B.

Nugent of Guildford, L.

Carnock, L.

O'Hagan, L.

Cathcart, E.

Orkney, E.

Cholmondeley, M.

Orr-Ewing, L.

Cork and Orrery, E.

Oxfuird, V.

Cottesloe, L.

Pender, L.

Cullen of Ashbourne, L.

Porritt, L.

Davidson, V. [Teller.]

Rankeillour, L.

Denham, L. [Teller.]

Reay, L.

Dundee, E.

Reigate, L.

Effingham, E.

Renton, L.

Ellenborough, L.

Renwick, L.

Elliott of Harwood, B.

Rodnev L

Elliott of Morpeth, L.

Romney, E.

Elton, L.

St. Davids, V.

Erroll of Hale, L.

Sanderson of Bowden, L.

Faithfull, B.

Seebohm, L.

Ferrers, E.

Selkirk, E.

Ferrier, L.

Sempill, Ly.

Fortescue, E.

Shaughnessy, L.

Fraser of Kilmorack, L.

Skelmersdale, L.

Gainford, L.

Slim, V.

Gisborough, L.

Somerset, D.

Glenarthur, L.

Strange, B.

Goold, L

Strathclyde, L.

Gray of Contin, L.

Swansea, L.

Greenhill of Harrow, L.

Terrington, L.

Hailsham of Saint Marylebone, L.

Teviot, L.

Thomas of Gwydir, L.

Hardinge of Penshurst, L.

Thomas of Swynnerton, L.

Harvington, L.

Thurlow, L.

Hemphill, L.

Trefgarne, L.

Henderson of Brompton, L.

Trumpington, B.

Henley, L.

Vaux of Harrowden, L.

Hesketh L

Westbury, L.

Hives, L.

Whitelaw, V.

Holderness, L.

Wise, L.

Hooper, B

Wolfson, L.

Hylton-Foster, B

Young, B.

Ilchester, E.

Zouche of Haryngworth, L.

Johnston of Rockport, L.

Resolved in the negative, and amendment disagreed to accordingly.
3.59 p.m.
Viscount Hanworth Viscount Hanworth moved Amendment No. 2:
Page 2, line 9, at end insert—
("( ) The Prime Minister shall appoint a Security Service Review Committee ("the Committee") consisting of five members of Her Majesty's Privy Council (at least one of whom shall be the nominee of the Leader of the Opposition) and one present or former Lord of Appeal in Ordinary. The Committee shall keep under review the exercise by the Service of its duties and functions as set out in section 1 above and shall report annually to the Prime Minister and the Home Secretary. If the majority of the Committee consider there is any matter which

881
should be brought to the attention of Parliament they may do so provided such an action is consistent with a duty to protect the security of the nation and not prejudice the functioning of the Security Service.
It shall be the duty of every member of the Service and of every official of the department of the Secretary of State to disclose or give to the committee such documents or information as the committee may require for the purpose of enabling the Committee to discharge its functions.").
The noble Viscount said: My Lords, this is not a slightly modified version of the amendment which we discussed for nearly two and a half hours in Committee. The first few lines, which seek to set up an impartial review committee to oversee the security services, are the same as those in the previous amendment. But in my amendment this review committee reports only to the Prime Minister and to the Home Secretary on a confidential basis. Only very exceptionally can any report be made to Parliament. I might have included the provision that there is no parliamentary right to see documents. To emphasise the point, I shall read out the relevant part of the amendment:
"If the majority of the Committee consider there is any matter which should be brought to the attention of Parliament they may do so provided such an action is consistent with a duty to protect the security of the nation and not prejudice the functioning of the Security Service".
There are just two major points in favour of the amendment. First, I maintain that neither the Prime Minister nor the Home Secretary has time to have adequate knowledge of what the security service is doing. Secondly, some independent surveillance is desirable. I may be wrong, but it is my understanding that this is the kind of arrangement which exists in other countries.
I earnestly hope that we can limit the length of speeches on the amendment to a very few minutes. All I want to know is whether, if the Government disagree with the amendment, it is worth dividing the House. I beg to move.
Lord Campbell of Croy: My Lords, as the noble Lord who has just moved the amendment pointed out, we had a great deal of discussion on a very similar amendment in Committee. We note the change which the noble Viscount has made to the wording. However, I believe that the overriding consideration should be that responsibility for the security service must remain, and must clearly be seen to be, with Ministers. I believe that in previous debates most noble Lords were agreed on that. A review body such as that now proposed, which would be permanently in existence, would appear to take on some of that responsibility.
I understand that that committee of Privy Counsellors would be within the veil of secrecy. That was the position in regard to the earlier amendment. How active would the committee be? It might do very little or the committee might feel that it was its duty to be continually following the main activities of the security service in order to,
"keep under review the exercise by the Service of its duties and functions".
In that event there would surely be some confusion as to who was in charge and who was responsible.
882
In the Bill the Government are introducing important new elements—a commissioner and a tribunal with functions involving warrants and complaints. They are to be within the veil of secrecy. That is the way chosen by the Government to increase accountability of the service and to meet public concern over the correctness of its conduct. If that proposed new system remains in the Bill—and so far I have detected no opposition in principle within your Lordships' House to that proposal—there does not seem to be a need for the proposed review body as well.
In the debate at Committee stage the noble Lord, Lord Callaghan, suggested that a committee of Privy Counsellors, as suggested in the earlier amendment, could act as a long stop. I listened to his speech and I read it later. I commend his speech to any who did not hear it as a masterly exposition of what relationships between Ministers, civil servants and the security service should be. His speech was backed by his experience and good sense. He came out, on balance, in favour of a review committee but clearly he had reservations concerning refinements of that proposal.
I hope that the commissioner and the tribunal proposed by the Government in the Bill will act as a long stop. I nearly suggested a fielder in another position but thought better of it. Cricket was discussed freely in our last debate. If the House will forgive a little levity, I should remind your Lordships that there is another player on the field who is expected to back up the wicket-keeper. However, his designation is unfortunate in the context of security and this Bill because his position on the field is third man.
I spoke in the first debate mainly because I was involved in the idea of a group of Privy Counsellors when the first such committee was appointed in the 1950s. I was made the secretary of the committee. That committee considered security in general after Burgess and Maclean had disappeared and then reappeared in Moscow three years later. Incidentally, neither Burgess nor Maclean was a member of the security service in case of any misunderstanding. That first ever committee of Privy Counsellors completed its task and reported within five months. Subsequent committees of Privy Counsellors appointed to consider such matters as telephone tapping and the Falklands war acted. in a similar way. They did the job, reported and then ceased to exist.
I believe that those ad hoc committees of Privy Counsellors have proved appropriate for the kind of inquiry that they have undertaken. I have said so before on other occasions in your Lordships' House in recent years and that is why I make my view clear in relation to the present proposals. I do not believe that a continuing review body of Privy Counsellors is appropriate or necessary in addition to the new arrangements which the Government are making in the Bill.
Lord Annan: My Lords, I was in favour of an amendment on these lines at Committee stage. However, I was surprised to see this amendment appear today because it seemed to me to resemble

883
the Ghost in Hamlet. This amendment seems to be popping up at every stage in the Bill, although we had a Division on it in Committee. Surely we ought to say to this amendment what Hamlet said to the Ghost:
"Rest, rest, perturbed spirit".
The Lord Chancellor: My Lords, that is also my sentiment.
The amendment considered in Committee was taken:
"as an example by which to test the principle and to determine whether any such body is possible within the framework of our service." — [Official Report 21/3/89; col. 624.]
Your Lordships looked carefully at the principle in Committee and decided, I believe rightly, against such a body.
The amendment now before your Lordships reinforces my belief that that decision was the right one. The drafting appears to water down the responsibility of the review committee to report to Parliament. At best that is a compromise which should please nobody.
The compromise is as follows. Those who look for some form of independent parliamentary oversight from the committee will look in vain. The members of the committee do not have to be Members of this House or of the other place. We know from the amendments and the debates in another place that the party of the Official Opposition would like such a parliamentary body and not the kind of committee proposed here. At best this is, for them, a half-way house.
If the principal purpose of the committee is now to assist Ministers, as the new amendment appears to suggest, it is not the kind of parliamentary oversight which some noble Lords have looked for. Indeed it is hardly parliamentary oversight at all.
Its primary justification must now be that the Home Secretary needs the help. The noble Lord, Lord Mayhew, referred in our previous debates to a degree of sharing of responsibility for any final decision. This is not an area where the responsibility can safely be shared in this way. The lines of responsibility and accountability must be clear. No Secretary of State should be inveigled into the false belief that he can let some review body do his work for him. My right honourable friend has certainly not requested that.
The review committee proposed in this amendment would have to have full access to every detail relating to the work of the security service. Indeed, the amendment obliges the security service to give the committee any document or information that it requires. The committee cannot deal in generalities. It must be able to know of and to be informed of all the operational details of the service. There is no other way in which a committee of this sort could responsibly seek to discharge the duties placed upon it.
A committee functioning in this way would therefore have to be fully cognisant of everything that the security service does, but ostensibly it would appear to have no responsibility for what the service
884
does. This would create a most unsatisfactory situation. In a matter so close to the heart of the nation's security, the power to know cannot be separated from the power to decide. By trying to keep them apart, the amendment would create powerful and conflicting pressures which I do not believe it is possible satisfactorily to resolve. The result would be an inherently unstable structure, constantly needing to be reviewed, constantly requiring change.
I believe that a review body constituted in that way would speedily prove a disappointment not only to itself but to those who have sought to have it set up. I hope that the noble Lord may feel encouraged, in the light of the responses that he has heard, not to press the amendment.
Viscount Hanworth: My Lords, I believe that my decision is an easy one. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
4.15 p.m.
Clause 4 [The Security Service Commissioner]:
Lord Elwyn-Jones Lord Elwyn-Jones moved Amendment No. 3:
Page 3, line 20, at end insert—
("( ) The annual report mentioned in (5) above shall include the following matters—

(a) the number of warrants issued under section 3 of this Act;

(b) the number of complaints referred to the Tribunal under section 5 of this Act; and

(c) the number of persons who have been refused employment or continued employment or any office or capacity specified by him as a result of information disclosed by the Service.").

The noble and learned Lord said: My Lords, this amendment proposes important additions to what is to be contained in the annual report that the Bill provides that the security service commissioner should make to Parliament.
Clause 3(1), which we have previously considered, gives to the Secretary of State and the security service exceptional—indeed awesome—powers to enter on or to interfere with a person's property. It reads:
"No entry on or interference with property shall be unlawful if it is authorised by a warrant issued by the Secretary of State under this section".
It is an almost unprecedented provision in our law. There is no qualification as to how entry upon the property may be achieved, so that, without the authority of the warrant, it could well amount not only to trespass but to breaking and entering. Then, when entry has been achieved, property within the premises may be interfered with—to use the language of the clause—and searched and investigated at the discretion of the members of the security service who perform the operation.
Clause 4(3) provides that the security service commissioner,
"shall keep under review the exercise by the Secretary of State of his powers under section 3".
Under Clause 4(5), the security service commissioner is required to,
"make an annual report on the discharge of his functions to the Prime Minister".

885
Clause 4(6) provides that the Prime Minister in turn,
"shall lay before each House of Parliament a copy of each annual report made by the Commissioner".
The amendment provides that three specific matters should be included in that report. These are: first,
"the number of warrants issued under section 3 of this Act";
secondly,
"the number of complaints referred to the Tribunal",
which is set up under Section 5 of the Act; and, thirdly,
"the number of persons who have been refused employment or continued employment or any office or capacity specified by him as a result of information disclosed by the Service".
Those three matters are all matters of importance. Parliament should know how the powers are operated, as should the public.
As is apparent, we are concerned here with great powers affecting fundamentally important liberties of the subject, his privacy and his property. It is therefore important that the public should know the extent of the usage of those warrants and that there should be a specific reference in the report to the number of warrants issued. I see no grounds for apprehension that the security of the state would be endangered by that requirement. Information about what goes on should be available to the public with regard to a power which potentially affects the public's rights and liberties so fundamentally.
The next proposal is that the report should include the number of complaints referred to the tribunal under Section 5 of the Act. Again, that is not only something that Parliament would be interested to know, but, bearing in mind its overall responsibility, is something that Parliament and the public should know.
The third element relates to a matter that has caused a great deal of concern to those who have been affected by what has been going on. They find themselves cut off from employment or the prospect of employment on the basis of information disclosed by the security service. I shall not venture to identify any particular cases, but they have caused great distress when they have occurred. It is therefore proposed that the annual report should also include the number of persons who have been adversely affected in their employment by reason of information disclosed by the service.
The measures are intended to reassure the public. The public should know whether the figures are reassuring; the public should be reassured. If the figures prove alarmingly excessive, the public should know that too and those in authority should have to be called to account in respect of them.
I submit that this three-part amendment is a useful addition to the rights and liberties of the subject and does not harm the security of the state. I beg to move.
Lord Hutchinson of Lullington: My Lords, perhaps I may support the amendment which was moved in Committee. As there has been a great deal of talk about cricket at this stage of the Bill, I should point out that the noble and learned Lord adopted what one might now call his Boycott stance. If only he
886
had rather better residential qualifications, he might well make the ideal opener for whom the English team has been looking for a long time.
The noble and learned Lord made two points. First, he said, "Leave it to the commissioner. Why put it in the Bill? Leave it to the commissioner to put in his report whatever he likes". That seems to be the reply of the Government to so many suggestions. They say, "Leave it to the Attorney-General" when it comes to prosecutions. They say, "Leave it to the Minister". They say, "Leave it to the commissioners". However, what happens if a commissioner includes nothing in his report of any interest at all and makes a totally anodyne report, as is likely to happen? What possible objection is there to at least setting out the minimum number of points that should appear in his report?
The second statement of the noble and learned Lord—a rather streaky shot, I suggest—was that if one discloses the number of warrants it might indicate the amplitude of the detection of the extent to which the activities of any person working against this country had been disclosed. The noble Lord, Lord Monson, who is not in his place today, answered that point, because it only has strength if there were one source. If there were more than one source the point does not apply at all.
I suggest that the commissioner is there to assure the public that to some extent the operation of the service is conducted according to law. He is only there, as we know, after pressure from the European Court, and because of the huge number of credible leaks that there have been in the past. This amendment simply ensures that the public are given the very minimum degree of information, which, I suggest, they are quite entitled to receive.
The Lord Chancellor: My Lords, I doubt whether a particularly attractive feature of an amendment is that it should be designed to ensure that the public are given the very minimum of information about the matter upon which the commissioner can report. The commissioner has the duty to report, surely, in what he considers would be an appropriate way. The commissioner is to be a person of considerable stature. I think one can see how this might develop by looking at the report by the commissioner under the interception Act. I do not know whether or not the noble Lord's assessment of that would be in accordance with what he predicts in respect of this particular report.
The only effect of the amendment is to require the commissioner by statute to produce certain statistics in his report to the Prime Minister. I suspect that the Prime Minister does not need a statutory power in order to find out these figures; nor does the commissioner in order to report them. If he thought these figures were useful and he had all of them available, no doubt he would consider it right to put them in.
If the commissioner is not able to exercise sufficient judgment to decide whether or not he should put these numbers in his report, then I think that your Lordships might fairly have little confidence in the way in which he exercises much

887
more delicate judgments. There is no need for statutory requirements which appear to take the commissioner's decisions for him. He must be in the best place to take such decisions in the light of the work which the legislation will require him to undertake. I have mentioned already the example of the interception commissioner.
There is no statutory requirement of the sort proposed in this amendment in the Interception of Communications Act 1985. Yet in each published annual report the commissioner has given figures of the number of complaints to the tribunal. He has also given certain figures relating to the number of warrants issued. For the first time this year he gave the number of warrants issued over the year by my right honourable friends the Home Secretary and the Secretary of State for Scotland, as well as the number in force at the end of the year. Therefore I believe that to date he has shown that he produces matters of interest in his report.
I think that your Lordships might agree that this shows that the provisions in the 1985 Act relating to the commissioner's report work sensibly and well, and in the way that many of your Lordships would wish. The Bill before the House follows the same path. I do not believe that it is necessary to add further embellishments. I would only add that the commissioner in practice could not meet all the requirements of this amendment because the security service does not always know when someone about whom it has reported has been refused a posting or employment, let alone the reasons for that refusal. Therefore the commissioner could not necessarily have the numbers of such refusals available to him.
I have laid it aside really, but there is a point about the amendment which I do not understand; namely the reference to "specified by him" in the penultimate line after the word "capacity". The amendment refers to,
"continued employment or any office or capacity specified by him as a result of information disclosed by the Service".
I am not sure to whom that refers. Obviously the wording could be adjusted to make it plain if any clarification is required. I answered the amendment as a matter of principle, and I hope that, in the light of the explantion that I have given, the noble and learned Lord will feel able to withdraw the amendment.
Lord Elwyn-Jones: My Lords, I think that "him" refers to the commissioner. I am now on my feet: if I had time I should be able to make the identification immediately. However, I think that that is the position. The reply of the noble and learned Lord the Lord Chancellor is disappointing. The initial point—namely, that the language:
"The annual report … shall include"
would be restrictive, is a doctrine which sometimes comes from Ministers. However, the amendment provides that the report shall include and not that it shall only include.
The Lord Chancellor: My Lords, I should perhaps say that I was simply taking up the concluding
888
remarks of the noble Lord, Lord Hutchinson. I was not necessarily implying that that was the proper construction of the noble and learned Lord's amendment; I should not like my remarks to be taken that way. I was perhaps following up too quickly what the noble Lord said and the way in which he expressed it.
Lord Hutchinson of Lullington: My Lords, perhaps I may say that I never suggested that this was all-inclusive. I think I used the words, "minimum information".
Lord Elwyn-Jones: My Lords, I do not think that we need to split any more hairs on that point. Clearly, it is not exclusive of everything else, but it is certainly inclusive of those three matters. I still submit to the House that these are matters of great importance about which the public is genuinely concerned. Perhaps the noble and learned Lord the Lord Chancellor can indicate—he may have had it in mind—that to be effective, the annual report could well, and should, include these matters without making it a statutory duty to do. I detect, perhaps too optimistically, that that is the mood which has emerged from the discussion of these amendments. I hope that I am right. In that hope and possible expectation, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 5 [Investigation of complaints]:
Lord Mishcon Lord Mishcon moved Amendment No. 4:
Page 3, line 36, at end insert—
("( ) Where, by reason only of the denial of a security clearance by the Service, a decision is made to deny employment to an individual or to deny any office or capacity specified by an individual, the Director-General shall (unless there be good reasons on security grounds for not so doing) send within 14 days after the decision is made a notice informing the individual of the denial of security clearance.").
The noble Lord said: My Lords, the noble and learned Lord the Lord Chancellor has already called attention to one error that may have occurred in the previous amendment. I myself noticed that there was a bracket that should not have been there. Perhaps I may also say that in the case of this amendment the bracket which occurs in line 4 after the word "shall" should indeed be completed by another bracket in the next line before the words,
"send within 14 days after the decision is made".
Perhaps noble Lords will kindly treat that bracket as being in the correct place. I shall briefly give the reason for moving this amendment.
At the very beginning of Schedule 1 the duty of the tribunal so sensibly set up under this Bill is made clear. The tribunal is to consider the cases of people who complain about being aggrieved about what the service has done in relation to them or to any of their property, and unless the tribunal finds that it is a vexatious application it is its duty to look into the matter. I suppose that one of the greatest interferences in someone's liberty would be that, as a result of somebody's action that he cannot properly answer, he has lost his job, or, if in a job, he has lost the chance of preferment which he ought genuinely to have.
We are considering a service which has a vetting procedure the extent of which is quite extraordinary. As noble Lords will know, there is a negative and a positive procedure. Perhaps I may take the positive procedure first; it is a procedure which is known. The negative procedure is not known; it is a secret one. With regard to the positive procedure I am told—I have no reason to think the information wrong—that it embraces about 600,000 civil servants and a number of other jobs in the nuclear industry, in British Telecom, in the Post Office and among defence contractors. No one can give noble Lords the figures that are likely for annual consideration under the negative clearance procedure. Therefore the possibility of human error with those numbers involved, quite apart from any question of misconduct, can be quite considerable.
This amendment has been very carefully worded. I have tried by anticipation to answer the objections that no doubt the noble Lord, Lord Boyd-Carpenter, will have. I hope that I am wrong in thinking that, and in thinking that I have an adversary to this amendment in the noble Lord, Lord Campbell of Croy. I have tried to cover all the points which they so usefully make for the delectation of the House and the good sense of the Bill. This amendment provides that where there is a denial of a security clearance by the service—that is, whether it is by positive or negative procedure—a decision is made to deny employment, preferment, or alternative office. That arises purely and simply because of the result of a clearance. The director general is required—but only required:
"unless there be good reasons on security grounds for not so doing" —
within 14 days after the decision to inform the individual, not of the reasons, but merely that a denial of security clearance has taken place.
This amendment covers the question relating to security: "How can the security service be expected to give its reasons for having said no to a security clearance?" That point is covered; they do not have to. What happens if merely telling somebody that security clearance has been denied will breach security? That is covered because if there are good reasons on security grounds he need not do so. However, where, as a result, employment has literally been terminated or refused, or a preferment has been refused, this amendment gives the individual the opportunity—and noble Lords may think very rightly so—to apply to a tribunal. The tribunal will then consider it within the very careful framework of Schedule 1, which safeguards security so adequately. He will be able to go before the tribunal saying, "The one thing that I know as a result of this notice is that I have been denied a clearance. I say that that is quite wrong, and please would you look into it?" I beg to move.
4.30 p.m.
The Lord Chancellor: My Lords, at page 3, line 36, at end insert the words as printed on the Marshalled List, with a bracket inserted after the word "doing".
Lord Mishcon: My Lords, the noble and learned Lord is most kind. Perhaps I may just consider that. The noble and learned Lord is right, as is so often the case, and I thank him.
The Lord Chancellor: My Lords, at Committee stage, I explained fully the role of the service in respect of vetting. I shall not go back over old ground. I am not in a position to say anything about the numbers that the noble Lord mentioned in moving this amendment. They do not make any difference in relation to the principle of the matter. There is also a passage in this amendment with which I have slight difficulty. There is reference to "specified by an individual". I am not quite clear how that is supposed to work.
I see from this amendment, however, that I have not made it clear to your Lordships that it is not, in this country, the responsibility of the security service to refuse employment to someone seeking work with another employer. That is a matter for the employer. I think your Lordships would agree that that must be the right approach. The judgement is with the employer. The security service should not be the final arbiter of these decisions. The consequence, however, is that in some cases the security service may not know what decision has been made on a person's employment. Nor would it always be in a position to know the reasons for any decision, let alone whether it was made only because of the information the service had properly provided, which is the only ground on which this amendment would operate. To create a statutory obligation on the security service would therefore extend the responsibilities of the service in the operation and administration of employment decisions.
I recognise that the amendment seeks to meet the problem of putting terrorists on notice that the service is aware of them. It therefore provides a discretion about informing an employee. But it leaves that discretion to the security service. The service may not be in a position fully to assess and decide on all the implications of a decision to inform an employee, since the final judgment will not have been theirs. I doubt if any of your Lordships would welcome increasing unnecessarily the responsibilities of the service in these matters.
This amendment would, I submit to your Lordships, operate in a rather unpredictable and arbitrary way. It would operate only where it was clear that that decision had been made solely on the basis of the security service's information. It would operate only where the security service itself had decided that the individual could safely be informed. It would appear to suggest that without a communication from the security service, it has not been involved, and that, as the amendment acknowledges, would not be so because of the bracketed portion.
I believe that, on reflection, many of your Lordships would therefore have grave doubts about an amendment which created such a statutory obligation on the security service, both because of the implications it would have for the nature of the responsibilities of the service, and the implications it might have for national security. Your Lordships may come from different points in approaching this

891
amendment, but I hope that you will all come to the same conclusion. I hope that in the light of that explanation the noble Lord will feel able to withdraw his amendment.
Lord Mishcon: My Lords, it is with some grief that I again come to the Dispatch Box to consider arguments against the amendment. Any disadvantages are far outweighed by the advantages and the fairness of agreeing with the amendment. The security service knows perfectly well that it has denied a clearance. We are talking about a security clearance in regard to members of the Civil Service and similar organisations. One knows perfectly well that there will be a response to the security service: "We note the lack of clearance here. In the circumstances we are not employing Mr. X". That would be necessary for the records of the security service. One has protected the question of security by saying that if there are good security reasons for not then serving the notice, the notice need not be served.
The noble and learned Lord immediately referred—and it is always an emotional reference but it is perfectly fairly made—to the terrorist. There are not many terrorists in the clearance activities of the security service. If it has to give clearance to a terrorist I should have thought that it would be an amazing example of its work on security clearances of this kind. What is the poor employee to do? He suddenly hears that his employment has been terminated, or it is not being renewed, or that a promotion is being denied him. He does not have the vaguest idea why, but thinks that a mistake might have been made by the security service because he knows he has had a positive clearance test by the security service. What is he to do? How can he go to the tribunal? He may feel—as may the tribunal—that the decision has been taken as a result of the fact that he turned up late for work three times in the previous week. How is he to know unless he is given this notice?
This is a gap in the Bill and a gap in fairness, in justice and in the protection of the rights of ordinary folk. We are told that the reason he is not being told this is because it would put a heavy duty on the director general and would create bureaucracy and so on, and that the director general and the security service would not know what was the result of their failing to clear on a security basis. I repeat that it would be an extraordinary security service that did not follow up what it had done so as to know whether the man was being employed or not. If he has been refused clearance the service had better keep a watch on him, one might think.
It is with terrific disappointment that I listened to the noble and learned Lord's answer to this amendment. But at this stage it would appear open to me only to beg leave to withdraw the amendment, to consider again what he said, possibly finding something that I did not appreciate, and, if necessary, coming back at Third Reading with something further on this matter.
Amendment, by leave, withdrawn.
Schedule 1 [Investigation of Complaints]:
Lord Mishcon Lord Mishcon moved Amendment No. 5:
Page 5, line 33, at end insert ("and that the service was so doing in the proper discharge of its functions").
The noble Lord said: My Lords, this amendment deals with the first schedule, to which I ventured to refer your Lordships when I was moving a previous amendment. That first schedule deals with the investigation of complaints by the tribunal. As the Bill stands, your Lordships will see in paragraph 3 that if the complainant,
"alleges that the Service has disclosed information" —
actually disclosed the information—
"for use in determining whether he should be employed, or continue to be employed … the Tribunal shall investigate whether the Service has disclosed information for that purpose and, if the Tribunal find",
that that disclosure has been made,
"they shall determine",
not whether the service had acted properly in making the disclosure as a result of which the man has lost his job, but,
"whether the Service had reasonable grounds for believing the information to be true".
That is the limit. There is no question of determining whether the information was true or whether the service, in disclosing, was doing so in the proper discharge of its functions.
It is in relation to those last words concerning the proper protection of the individual about whom this disclosure has been made, and as a result of which he has lost his job, that we say in the amendment that the tribunal shall at least consider the question whether in the making of the disclosure the service was doing it in the proper discharge of its functions. I beg to move.
4.45 p.m.
The Lord Chancellor: My Lords, as your Lordships know, anyone may complain to the tribunal if he is aggrieved about anything which he believes the service to have done in relation to him. This may, of course, include a complaint about the role of the security service in relation to some employment matter.
In all cases the tribunal must investigate whether the security service has made inquiries about the complainant and, if so, whether those inquiries were reasonable in the discharge of its functions. That applies to complaints about the security service's role in vetting matters as it does to any other. The tribunal address questions relating to functions under that head.
When it comes to looking specifically at the role of the service in respect of an employment matter, the question turns on the disclosure itself. The tribunal must investigate whether the security service has disclosed such information for employment purposes—and if it has, the tribunal must then decide whether the service had taken reasonable steps to check out the truth of what it has said. That is the central question for the tribunal in respect of the individual complainant. The amendment would require the tribunal to move into areas which are

893
more properly matters for the commissioner. The Bill at present provides a good and sound distinction between the work of the tribunal in relation to a particular complaint and the work of the commissioner, who can consider the wider issues and implications.
I do not believe that it would be right to ask the tribunal to get involved in the work of the commissioner, but that would be the effect of this amendment. The result would be a confusion of rsponsibilities. It would leave the tribunal grappling with issues which went well beyond the context of a particular complaint. It would not make for a fair, consistent or reasonable application of the provisions. Accordingly, I believe that the balance in the Bill concerning the individual complaint is correct and I hope that on this occasion the noble Lord will perhaps be even happier not to press his amendment.
Lord Mishcon: My Lords, I at once recognise, and immediately say, that the noble and learned Lord, in replying to my amendment, has given reasons which I find acceptable. I wish that that had applied to other amendments that I have moved. In those circumstances I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2 [The Tribunal]:
Lord Elwyn-Jones Lord Elwyn-Jones moved Amendment No. 6:
Page 7, line 37, leave out sub-paragraph (2) and insert—
("

(2) In the course of an investigation of a complaint by the Tribunal, the complainant shall be given an opportunity to make representations to the Tribunal, to present evidence and to be heard personally or by counsel.

(2A) The complainant shall be entitled to have access to any documents or information disclosed or given to the Tribunal unless the Tribunal considers that, in the circumstances, such access would be prejudicial to National Security.").

The noble and learned Lord said: My Lords, Clause 5 provides for the setting up of a tribunal,
"for the purpose of investigating complaints about the Service in the manner specified in Schedule 1 to the Act".
We on this side of the House welcome the concept of a tribunal to investigate complaints about the service. But, when one examines the schedule setting out the constitution of the tribunal and its procedure, there is not one word about the rights that are to be given to the complainant in stating, explaining or elaborating his complaint: not one word.
Additionally, Clause 5(4) shuts out the courts completely from the study and examination of the matter. It states:
"The decisions of the Tribunal and the Commissioner under that Schedule (including decisions as to their jurisdictions) shall not be subject to appeal or liable to be questioned in any court".
Apparently they cannot even be questioned on a point of law. Although we welcome the tribunal, these are important and significant elements which the House should consider.
My particular concern is that the elementary principles which are set out in the amendment are a statement of principles of natural justice which one would expect to be expressly provided for when
894
one is dealing with the creation of a new tribunal with a new jurisdiction. The amendment proposes that:
"In the course of an investigation of a complaint by the Tribunal, the complainant shall be given an opportunity to make representations to the Tribunal, to present evidence and to be heard personally or by counsel".
Secondly, the amendment provides:
"The complainant shall be entitled to have access to any documents or information disclosed or given to the Tribunal unless the Tribunal considers that, in the circumstances, such access would be prejudicial to National Security".
There is nothing revolutionary, startling or unprecedented about those rights. They are part of the provisions of any self-respecting tribunal and are applied in any self-respecting court.
I must confess that as a result of an answer given by the noble and learned Lord in Committee my surprise moved almost for the first time towards anger. I am sorry if it sounded like that but I fear that it was my response to what was said by the noble and learned Lord. I hope that the House will forgive me and I should like to read what the noble and learned Lord said. It was:
"I do not believe it is either necessary, nor would it be practicable to give a right of oral representation to every complaint to the tribunal. The tribunal must, after all, consider the reasonableness of decisions made by the security service. The complainant may give the tribunal what evidence he wishes to substantiate his complaint. There is no need for this amendment in order to achieve that. But equally, the complainant is under no obligation to offer any evidence to substantiate his complaint. He only needs to make a complaint. He does not need to offer evidence to substantiate it".
But what if he does? The noble and learned Lord continued:
"It is for the service, not the complainant, I o respond to the tribunal's investigations. That is surely the right focus of the tribunal's work; and, if that is right, it could only be time consuming and unhelpful to give each and every complainant a statutory right to put his grievances and allegations in person, or through counsel".—[Official Report, 21/3/89; col. 665.]
I am sorry to say that I detected an excessively authoritarian touch in those observations of the noble and learned Lord. They were quite out of keeping with his normal response. However, I may be wrong and I return to the merits of what I have said. I do so quite apart from any view on the way in which the serious matter was imperiously brushed aside with no indication of a serious examination of what was being claimed and asked for.
In those circumstances, and because of the total absence of any anger in my voice or demeanour, I hope that this time the noble and learned Lord will see the merits that the principles of natural justice should be incorporated into the terms of the proceedings and the procedure laid out for the tribunal. I beg to move.
Lord Hutchinson of Lullington: My Lords, I should like to support the amendment. Perhaps I can introduce a little anger into the proceedings. At the late hour of night when we discussed the matter in Committee I found it almost unbelievable to hear the words which fell from the lips of the noble and learned Lord. We are talking about a person who is aggrieved and has complained because he has been adversely affected by the activities of MI5. We are

895
talking of a member of the public who is aggrieved because, he says, MI5 has acted unreasonably and wrongly towards him. It has done him a severe injury on what was perhaps completely wrong information. Therefore he makes a complaint.
The simple suggestion in the amendment is that in those circumstances he shall have the normal civil rights and rules of natural justice as they then apply. He shall have the right of being given an opportunity to make such representations as he wishes and to present any evidence to support his case.
The noble and learned Lord said that it is for the service to respond to the tribunal not the complainant and that it is not the complainant who is being investigated. That is a play on words. It is the complainant who has raised the matter; it is the complainant who is the member of the public who has been injured; and it is not the tribunal which is being protected in the clause. However, it may be put in such a way that it is for the tribunal to respond.
The noble and learned Lord said that there is nothing to preclude the tribunal from hearing evidence if it wants to do so but that it may be time-consuming to give the aggrieved person these rights. Sometimes one has to protest over and over again because people's rights are being trampled on by the legislation which comes before Parliament. To suggest that it may be time-consuming for a member of the public who has been aggrieved and seriously injured to put forward his case and to be entitled to produce evidence in support appears to be taking matters very far indeed.
The noble and learned Lord said that it may be unwise for such a person to have access to any document concerned in the matter. Is that really where the rights of people have come to under this piece of legislation? As we have already seen, it is made extremely hard and even impossible for someone who is informed against perhaps on completely wrong evidence and perhaps because they fall into a class or group of people which the security services believe to be subversive. We know from many cases that people have lost their employment as a result of a total misapprehension of what they were doing or of the group to which they belonged.
There are the gravest possible dangers for the individual in the passing of such secret information. Sometimes that is absolutely right; sometimes that is absolutely wrong. If it is wrong then the very least a person should have are the rights set out in the amendment.
Lord Boyd-Carpenter: My Lords, I speak subject to correction but the amendment appears to give rights to the full court procedure in respect of any complaint to the tribunal. That is any complaint however trivial or irrelevant it may be. As I understand it, on an earlier occasion the noble and learned Lord said that in a serious case the tribunal could handle the matter as it thought fit, including hearing evidence and argument. But to give— —
Lord Hutchinson of Lullington: My Lords, will the noble Lord— —
Lord Boyd-Carpenter: My Lords, perhaps the noble Lord will restrain his impatience. On the other hand, the amendment appears to give the right to the court procedure in all cases, however trivial or small. I shall now give way.
Lord Hutchinson of Lullington: My Lords, I should like to point out to the noble Lord that they are not the full rights of procedure. They are limited because there is no right to cross-examine or to follow all the procedures in a normal court of law. The amendment gives a right and opportunity to make representations and to present any necessary evidence. That is all.
5 P.m.
Lord Boyd-Carpenter: My Lords, that is not quite all. It is also to be heard by counsel, and that is very largely introducing the mechanism of a court. It goes a great deal further than saying that a complainant may come and present evidence. He can be represented by counsel and plainly the purpose of that must be, if he is to go to that trouble and expense, that some legal argument should be presented on his behalf. Therefore, the noble Lord is not quite right, when it is merely for the complainant to make the complaint himself.
For that reason, it seems to me very doubtful whether we need burden the machinery of this tribunal with that universal right in the case of any complainant to have a procedure of that sort followed.
While I am on this point, I was rather amused to see that the complainant could, if this amendment is accepted, be represented by counsel. If we may touch on other matters which your Lordships have discussed recently and will discuss in future, the right of audience before this tribunal would be restricted to counsel and not allowed to a solicitor. In those circumstances I was rather surprised to see the name of the noble Lord, Lord Mishcon, on the amendment.
The Lord Chancellor: My Lords, perhaps I may be allowed to leave the last point for another occasion.
This is an important matter and I have certainly never treated it lightly. Whether or not my responses have produced anger is not particularly my responsibility. However, this is an important matter and I agree that we must look at it carefully.
It is vitally important to remember that this Bill puts a certain duty on the tribunal at Schedule 1 (1), which states:
"Any person may complain to the Tribunal if he is aggrieved by anything which he believes the Service has done in relation to him or to any property of his; and, unless the Tribunal consider that the complaint is frivolous or vexatious, they shall investigate it in accordance with this Schedule".
The responsibility is placed upon the tribunal to investigate any complaint that may be made to it unless it can exclude it as frivolous or vexatious.
The tribunal is set up under this Bill distinct from the ordinary courts of law. If it were appropriate for complaints of this sort to be investigated in accordance with ordinary procedure by the ordinary courts of law, what would be the point of having a

897
tribunal, and particularly a tribunal made up of very highly qualified lawyers? This is a tribunal which is different from our courts system and it is different from our courts system, generally speaking, in a most important feature; that is, that it has a duty of investigation. It is in the nature of an inquisitorial tribunal—and we have had discussions about that distinction in connection with other matters. That is the important matter. Every person who complains has a right not merely to be heard—that is not the important matter—but also to have his complaint investigated. If anything he has to say about it is relevant to that investigation, then that will be covered by the duty to investigate.
Your Lordships will see that there is not only the first part of this amendment but also a second part, which states:
"This complainant shall be entitled to have access to any documents or information disclosed or given to the Tribunal unless the Tribunal considers that, in the circumstances, such access would be prejudicial to National Security".
That describes the notion that underlies this amendment. This amendment tries to come as near to the ordinary courts as possible.
Lord Mishcon: My Lords, it is only because the noble and learned Lord rightly said how important this is that I take the liberty of intervening. He has talked in terms of the duty of the tribunal to investigate. If he will kindly refer to paragraph (2)(1) where the word "investigate" occurs, that is purely and simply limited to whether or not the complainant has been the subject of inquiries and not as to the nature of them or any other matter. If I am wrong, I know that the noble and learned Lord will say where I am wrong, but that is where the word "investigate" occurs.
The Lord Chancellor: My Lords, I am sorry, but the noble Lord is not correct. The word "investigate" first occurs in the passage which I read out in paragraph (2)(1) where it refers to "shall investigate". There is a duty to investigate the complaint in accordance with the schedule. There is no proposal to do anything other than investigate the complaint.
The amendment does not seek to enlarge the jurisdiction of the tribunal or anything of that sort. It merely seeks to add a responsibility on the tribunal to hear the complainant personally or by counsel, plus other matters about documents to which I have just referred. Therefore, with great respect to him, the noble Lord's intervention does not assist on this point. The obligation is to investigate the complaint in accordance with the schedule and this amendment only requires in addition to that that the complainant be heard. However, the idea must be that the complainant is heard for the purpose of enabling the tribunal better to investigate the complaint according to the schedule.
Lord Mishcon: My Lords, now I risk the noble and learned Lord being angry with me instead of anyone being angry with the noble and learned Lord. At all events, that is ambiguous and I am sure that he will see that. The duty to investigate is to investigate in accordance with the schedule; and the only duty in
898
the schedule to investigate relates to whether or not the complainant has been the subject of inquiries, and it goes on "if the Tribunal find" and so on. The duty to investigate in accordance with the schedule is set out as a duty in Schedule 1(2)(1). The investigation is as to whether the complainant has been the subject of inquiries by the service. I may be wrong in my submissions, but at the very least I believe that I can say that the matter is quite ambiguous.
The Lord Chancellor: My Lords, I am very sorry but for once I do not understand the point made by the noble Lord. The obligation on the tribunal is to investigate the complaint in accordance with the schedule, and there are subject matters for the investigation not only in paragraph 2(1) but also in later paragraphs of the schedule; for example, in paragraph 3 which states:
"If and so far as the complainant alleges that the Service has disclosed information for use in determining whether he should be employed, or continue to be employed … the Tribunal shall investigate whether the Service has disclosed information for that purpose and, if the Tribunal find that it has done so, they shall determine whether the Service had reasonable grounds for believing the information to be true".
Therefore, it is not correct to say that the complaint is restricted to whether or not inquiries were being made.
Even if the noble Lord is right, that does not help in relation to this amendment. The point in this amendment is that the responsibility for investigation is put upon the tribunal and that distinguishes it from the court. The court is there to hear what is put before it. Generally speaking, that is an adversarial system and is part of the principle of natural justice as applied to an adversarial system when each of the adversaries must have a chance to say what he or she wants to say. However, where the duty is on the tribunal to investigate, the situation is different.
I must say that I believe that this amendment is important in relation to the tribunal and its constitution. This tribunal is given an investigative role because that is the approporate way in which investigations should be carried out in relation to security matters.
The creation of a complaints machinery raises peculiar problems when it is a complaints machinery related to security matters. They are problems that mean that we cannot rely on the normal courts or indeed the normal procedures of the courts. This is because the material that the tribunal must handle must not become public knowledge. It must not, in particular, be made available to the person to whom it relates.
The conventions and procedures followed by a court cannot therefore be applied directly. That is the reason for having a tribunal. The adversarial model is not the one that we are able to follow for dealing with this sort of complaint. It is not possible for both sides to be given all the available information, for both sides to argue their case and for the court to decide. That is why we have established not an adversarial but an investigative tribunal. It is not its job to sit back and decide on the basis of the evidence put before it; its job is to investigate and to look into every relevant part of

899
the complaint with which it has to deal. The Bill clearly gives the tribunal the power to do so. The onus is on the tribunal, not on the complainant.
I do not believe any other system would work as well in this area; nor would it be able to work with any assurance that complaints could be investigated and resolved without vital secrets being divulged. I do not believe it is possible or consistent with the necessary principles on which the tribunal is established under the Bill to graft on aspects of an adversarial procedure such as are proposed in these amendments. To do so would create a presumption that a complainant should know the security service's case; a presumption reinforced by the modified right of access to information given by sub-paragraph (2A) of this new clause. A right to be heard adds little of substance or relevance unless there is also a right to know.
That is not the way the security service tribunal can or is intended to work. Under the structure that the Bill proposes the complainant can put as much or as little information to the tribunal as he likes. Unless his complaint is frivolous or vexatious, the onus is then on the tribunal to conduct its own investigations and to get at the truth. The security service is obliged to give it all the information it needs and can do so in the confidence that the information will not be divulged. The tribunal can ask the complainant for more particulars, it can certainly ask to see the complainant in person and it can of course, if it would help, agree to his being represented. That is in no way restricted. The complainant too has the assurance in the Bill that his confidences to the tribunal must be respected and not divulged to the security service.
In order to work satisfactorily it must be the Tribunal's investigation. It must be the responsibility of the tribunal to get at the truth. There is therefore an important point of principle here that goes to the very heart of the complaints procedure in the Bill and to the reasons for having a tribunal in place at all. The amendment, if it were given effect to, would detract from the central responsibility of the tribunal. It would tend to put the onus on the complainant to make his case, to substantiate his concerns and to bring along evidence to try to show the position. The tribunal might be tempted to judge the strength of the complainant's case on the basis of what he had represented, however thin or poor the representations might be. That would weaken rather than strengthen the complainant's position.
It was for similar reasons that your Lordships approved the special investigative structure of the interception tribunal under the 1985 Act. For much the same reasons, I ask your Lordships to approve a similar structure in the Bill.
This is an important matter, as I say. It is important to realise that the principle upon which the tribunal must work is a very different one from the ordinary principle that the courts of law have to follow. We have tried to make available a procedure that will be effective and put responsibility for the investigation where it properly belongs—clearly on the shoulders of the tribunal.
900
I hope that the noble and learned Lord who moved the amendment will feel able in the circumstances to accept the argument. The matter is of sufficient principle that, if he is not able to do that, one should seek to have it decided.
5.15 p.m.
Lord Hutchinson of Lullington: My Lords, perhaps I may ask the noble and learned Lord whether he makes a distinction between the adversarial court and the investigative tribunal which is getting at the truth, so that in an investigative tribunal, say, one that is seeking to find the cause of an accident, these rules of natural justice do not apply.
The Lord Chancellor: My Lords, the distinction is between a tribunal that has the duty to investigate and a tribunal that has the duty only to adjudicate between cases presented to it. Consequences flow from that distinction. It is on these consequences that I have sought to rely.
Lord Elwyn-Jones: My Lords, I can only regret the response of the noble and learned Lord the Lord Chancellor. The field with which we are concerned responsibly today is an important and delicate one, and we should be able to carry Parliament and the public with us.
Here is a power that is given in precise language in the Bill that we are considering:
"No entry on or interference with property shall be unlawful if it is authorised by a warrant issued by the Secretary of State".
It is a statement of authority and power which, so far as I know, has no equivalent in our law. That power is given to the Secretary of State, the state and its representatives. As to the citizen, foreigner or whoever may be concerned, he can be affected most fundamentally in his career and in his life by the decision of the security service. It can ruin his life, especially if he is innocent. There is a man who may well claim that he is wholly innocent.
Merit is made of the fact that at any rate a tribunal has been set up, and I welcome it. The fact that it is a tribunal does not exclude or leave out—this is the procedure to deal with complaints—the necessity for the complainant to be given the fullest opportunity that he seeks, not that the tribunal thinks it right to give him, to state his case, to state his complaint and to give evidence to support his claim.
I am very willing to reconsider in all the surrounding political circumstances the somewhat tactless reference to "counsel". I am very willing to substitute "a representative of his choice". That should embrace all lawyers and non-lawyers.
I come to the serious matter that we are considering. What is proposed is modest; it is minimal. It is proposed that there shall be written into the procedures to be applied by the tribunal two elementary requirements of natural justice. In the course of an investigation of the complaint the complainant shall be given an opportunity to make representations to the tribunal, to present evidence and to be heard personally or by counsel. It is surely not to be tolerated that the fact that it might take more time should be a factor governing so important a

901
decision and so important a situation for him. For him in those circumstances to be given the fullest opportunity within reason to be heard and to make representations on his behalf is a minimal right. He should also have the right of access to all the relevant documents.
To allow this amendment will inspire confidence in the security service and not detract from it. At this critical stage in our affairs it is important that we are serious in dealing with the threat of terrorism and the rest of it. We in this part of the House are as eager to sustain that battle as anyone else. To reject the amendment will damage the standing of the legislation and do a disservice to the security of the country. It is on the basis of that approach that I invite the House to come to a conclusion.
5.20 p.m.
On Question, Whether the said amendment (No. 6) shall be agreed to?
Their Lordships divided: Contents, 51; Not-Contents, 107.

DIVISION NO.2

CONTENTS

Amherst, E.

Hutchinson of Lullington, L.

Ardwick, L.

Irvine of Lairg, L.

Aylestone, L.

Jeger, B.

Blackstone, B.

Listowel, E.

Bottomley, L.

Lloyd of Hampstead, L.

Broadbridge, L.

Lloyd of Kilgerran, L.

Bruce of Donington, L.

Longford, E.

Carter, L.

McIntosh of Haringey, L.

Chorley, L.

McNair, L. [Teller.]

Cledwyn of Penrhos, L.

Mishcon, L.

Cocks of Hartcliffe, L.

Nicol, B.

David, B.

Ogmore, L.

Dean of Beswick, L.

Ponsonby of Shulbrede, L. [Teller.]

Dormand of Easington, L.

Elwyn-Jones, L.

Ritchie of Dundee, L.

Ewart-Biggs, B.

Serota, B.

Falkland, V.

Shackleton, L.

Galpern, L.

Shepherd, L.

Gladwyn, L.

Stoddart of Swindon, L.

Graham of Edmonton, L.

Tordoff, L.

Grey, E.

Turner of Camden, B.

Hardinge of Penshurst, L.

Wallace of Coslany, L.

Henderson of Brompton, L.

Walston, L.

Houghton of Sowerby, L.

White, B.

Howie of Troon, L.

Williams of Elvel, L.

Hughes, L.

Winterbottom, L.

NOT-CONTENTd

Abercorn, D.

Butterworth, L.

Airey of Abingdon, B.

Buxton of Alsa, L.

Aldington, L.

Caithness, E.

Alexander of Tunis, E.

Campbell of Croy, L.

Ampthill, L.

Carnegy of Lour, B.

Arran, E.

Carnock, L.

Ashbourne, L.

Carr of Hadley, L.

Belhaven and Stenton, L.

Cathcart, E.

Beloff, L.

Clitheroe, L.

Belstead, L.

Coleraine, L.

Bessborough, E.

Cork and Orrery, E.

Blake, L.

Cottesloe, L.

Blatch, B.

Cox, B.

Blyth, L.

Craigavon, V.

Boardman, L.

Craigton, L.

Boyd-Carpenter, L.

Cullen of Ashbourne, L.

Brabazon of Tara, L.

Davidson, V. [Teller.]

Brougham and Vaux, L.

Denham, L. [Teller.]

Buckinghamshire, E.

Digby, L.

902

Dundee, E.

Monk Bretton, L.

Elibank, L.

Morris, L.

Elliot of Harwood, B.

Mottistone, L.

Elliott of Morpeth, L.

Mountgarret, V.

Elton, L.

Moyne, L.

Faithfull, B.

Munster, E.

Ferrers, E.

Nelson, E.

Ferrier, L.

Newcastle, Bp.

Fortescue, E.

Orkney, E.

Fraser of Carmyllie, L.

Oxfuird, V.

Fraser of Kilmorack, L.

Pender, L.

Gisborough, L.

Rankeillour, L.

Glenarthur, L.

Reay, L,

Goold, L.

Renton, L.

Gray of Contin, L.

Renwick, L.

Greenway, L.

Rippon of Hexham, L.

Hailsham of Saint Marylebone, L.

Romney, E.

Rootes, L.

Havers, L.

St. Davids, V.

Henley, L.

Sanderson of Bowden, L.

Hesketh, L.

Skelmersdale, L.

Hives, L.

Strathclyde, L.

Holderness, L.

Terrington, L,

Hooper, B.

Teviot, L.

Hylton-Foster, B.

Thomas of Gwydir, L.

Jenkin of Roding, L.

Thomas of Swynnerton, L.

Johnston of Rockport, L.

Torrington, V.

Joseph, L.

Trafford, L.

Killearn, L.

Trefgarne, L.

Long, V.

Trumpington, B.

Lucas of Chilworth, L.

Vaux of Harrowden, L.

Mackay of Clashfern, L.

Whitelaw, V.

Margadale, L.

Wise, L.

Merrivale, L.

Young, B.

Mersey, V.

Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.

Companies Bill [H.L.]
5.28 p.m.
Lord Strathclyde: My Lords, I beg to move that the Bill be now further considered on Report.
Moved, That the Bill be further considered on Report.—(Lord Strathclyde.)
On Question, Motion agreed to.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 147E:
Before Clause 105, insert the following new clause:
("Merger References.
At end of section 64(5) of the Fair Trading Act 1973 (merger situation qualifying for investigation) insert the words "and in his discretion to any matters to which section 84 of this Act may apply to which his attention or that of the Director has been drawn in writing" ").
The noble Lord said The noble Lord said: My Lords, we are now dealing with an amendment to Section 64 of the Fair Trading Act 1973 which, as your Lordships will realise, is concerned with a,
"merger situation qualifying for investigation".
A merger reference may be made to the commission by the Secretary of State. Before the Secretary of State makes the reference, the Director General of Fair Trading will have examined the situation in accordance with his duties under Section 2 of the Act. The object of the amendment is to introduce an element of increasing fairness into the arrangements before the Secretary of State and the Monopolies and Mergers Commission decide upon the merger position and to introduce an elementary principle

903
of natural justice. It is also intended to remove uncertainty.
Perhaps I may briefly refer the House to the duties of the registrar under Section 2 of the 1973 Act. He has a comprehensive agenda to his duties. According to Section 2(1)(a), he has to keep under review,
"the carrying on of commercial activities in the United Kingdom which relate to goods supplied to consumers in the United kingdom",
and so on. That is a wide duty. Under subsection (1)(b) it is his duty,
"to receive and collate evidence becoming available to him with respect to such activities as are mentioned in the preceding paragraph".
In many ways this is a curious function for a director. He has to receive—that is simple. He has to collate the evidence—again, that is simple. What evidence? It is the evidence becoming available to him with respect to such activities as are mentioned in the preceding paragraph. He will receive evidence in writing or perhaps orally for a large number of reasons, not only because people are interested in the merger per se but perhaps for reasons of pure commercial help to the person who is writing to the director.
Section 64(5) reads:
"In determining whether to make a merger reference to the Commission the Secretary of State shall have regard, with a view to the prevention or removal of uncertainty".
That is one of the objects. Let us not forget that the Secretary of State will have been advised by the director of the position generally as a result of collecting evidence which came to him in any form or in any way. Section 64(5) continues:
"to the need for making a determination as soon as is reasonably practicable".
My amendment would add the words:
"and in his discretion"—
the Secretary of State's discretion—
"to any matters to which section 84 of this Act may apply to which his attention or that of the Director has been drawn in writing"
Section 84 refers to the public interest and sets out items which are considered to be relevant to the public interest in these circumstances. Under my amendment, if the director receives something in writing he will pass it to the Secretary of State who in his discretion should refer it to the tribunal. It may be said that it is not necessary, having regard to the terms of Sections 64 and 84, for my amendment. However, it is necessary again to emphasise the curious nature of the jurisdiction of the director. He can get information from anywhere and from anybody. One of the principal parties to the merger whose case is to go to the Monopolies and Mergers Commission may not know anything about that. That is totally unfair. Statements of considerable consequence to the party to the merger may have been made. The party to the merger should have the opportunity to know what that information is.
This would be in line with what is happening in regard to investigations under the Treaty of Rome. I had the honour for a couple of years to be a member
904
of a working committee of the EC. There I found that many of the investigations carried out by the commission under Sections 85 and 86 of the Treaty of Rome were the result of even anonymous information sent to the appropriate committee or the appropriate directorate of the EC. Some of the investigations arose as a result of letters and documents sent by outsiders without the knowledge of the other parties concerned. In order to try to modify and clarify some of the procedures we tried to give an opportunity to a person, an institution or a company that has been referred to in such documents sent privately to the directorate to know what was being held against them.
In my opening remarks I referred to principles of natural justice. It would be appropriate, where under Section 64 there has arisen a merger situation qualifying for investigation, that not only relevant matters concerning competition or matters principally relevant to Section 84 but any matter which is indirectly of consequence to the parties of the merger should be disclosed to the tribunal. Therefore the Secretary of State should submit to the Monopolies and Mergers Commission such matters as had been drawn to the director' attention in writing. I beg to move.
Lord Williams of Elvel: My Lords, we support the amendment not least on the ground which we argued in Committee that there is a discrepancy between the criteria the Secretary of State has to use, which are up to him, when he makes a merger reference and the criteria which the Monopolies and Mergers Commission has to use under the statute which are contained in Clause 84. The criteria of the Secretary of State on reference seemed to us to be determined by ministerial statements from time to time. I believe that the ministerial statement still in operation is the one which refers to the competition issue. On future occasions other ministerial statements drawing attention to other issues may be the basis of a merger reference.
The noble Lord, Lord Lloyd, seeks in an elegant way, if I may compliment him on his amendment, to introduce into the issue of whether there should be a merger reference other matters which have been drawn to the attention of the Secretary of State or of the director and relate to Section 84. We argued in Committee for a parallel procedure between the director, the Secretary of State and the Monopolies and Mergers Commission. We said that all of them in their individual capacities should have regard to Section 84 of the Act which defines the public interest. That proposition was rejected by the Government and I believe that the amendment moved by the noble Lord is probably the best we can achieve under the present circumstances. Accordingly, we support the amendment.
Lord Brabazon of Tara: My Lords, I have read with interest the discussion in Committee on the similar amendment moved by the noble Lord, Lord Peston. It appears to me that there was, and is, little between us. As my noble friend the Secretary of State explained, since the matters in Section 84 are ones to which the MMC must have regard, he must

905
inevitably have them in his mind in deciding whether to refer mergers to the MMC. The intention, it seems, is merely to make this explicit. The noble Lord, Lord Lloyd of Kilgerran, is I know always anxious to make the legislation what might be called user friendly so that its provisions are clear to companies affected by it. As a general principle, we are all in favour of this.
But in this instance is there really any doubt on the point? My noble friend has on numerous occasions, in your Lordships' House and elsewhere, explained the considerations which he applies in deciding whether to refer mergers to the MMC. People involved in mergers have a pretty good idea what are these considerations, of which the main one is the effect on competition. That some people would like to see greater certainty in the way these are applied is another matter. As has been said before, this is not easily compatible with a discretionary system, and could only be achieved by a loss of flexibility. Which considerations he should apply has also been questioned sometimes, but again that is another matter.
In the circumstances, explicitly mentioning the Section 84 criteria at this point is unnecessary. However, it is more than that, because bringing them in implies a more rigorous examination of mergers against public interest criteria at the reference stage. As my noble friend said in Committee, this would pre-empt the role of the MMC. The legislation leaves it to the MMC to judge whether something is against the public interest. The Secretary of State's role is to decide whether there is an issue which should be subjected to such a judgment.
There clearly is a link between the criteria applied by the MMC and the Secretary of State's decision to refer a merger, but this amendment is not needed to spell it out and could in fact confuse it. There is a further aspect. This area of the law is at issue in a case at present being considered by the juducial committee of your Lordships' House. It would be wrong for me to say any more than that, but I submit that it would be curious to amend the legislation at the very moment when its meaning is being established conclusively. There might then be those who would like to see the law changed, but that is another matter and is not I think the question at present. For all those reasons, I hope that the noble Lord will agree to withdraw the amendment.
Lord Lloyd of Kilgerran: My Lords, I am most grateful to the noble Lord, Lord Williams of Elvel, for his support and for his use of the word "elegant" in respect of my introduction to the amendment. I am also grateful to the Minister for pointing out that part of the reason for my activities in this House as regards Bills which relate to industry—especially legal Bills—is that I would like to see such legislation become more user-friendly. He was also most encouraging when he said that there did not seem to be much difference between us. However, perhaps I should say at once that I did not understand his rather vague allusions to a case at present being considered by the Judicial Committee of your Lordships' House. For my part, I had no idea that any issue which arose from my amendment could
906
become the subject of some decision of the Judicial Committee. Indeed, the noble Lord did not emphasise, and nor did he indicate, what the issue was. Therefore I am in the dark on the matter.
I had only two reasons for putting forward the amendment: the first was to remove uncertainty in the interests of natural justice; the second was to add another parameter of fairness to the investigations which arise under Sections 2 and 64 of the Fair Trading Act 1973. This is the Report stage of the Bill. Despite the kind words which the Minister said about me (in respect of my wish to make legislation more user-friendly and that there is very little difference between us) and despite the fact that the substance of the amendment has not been discussed before, I am tempted to take certain action which will decide the matter one way or the other, unless he has anything further to say. However, I pause here for a moment to see whether my seductive words have failed to convince the Minister. I see that they have. In those circumstances, I must ask the House to decide the issue.
5.45 p.m.
On Question, Whether the said amendment (No. 147E) shall be agreed to?
Their Lordships divided: Contents, 43; Not-Contents, 100.

DIVISION NO. 4

CONTENTS

Arran, E. [Teller.]

Fraser of Carmyllie, L.

Belstead, L.

Glenarthur, L.

Boardman, L.

Henley, L.

Brabazon of Tara, L.

Hooper, B.

Carnock L.

Mackay of Clashfern, L.

Denham, L. [Teller.]

Skelmersdale, L.

Dundee, E.

Strathclyde, L.

Elliot of Harwood, B.

Trumpington, B.

976

NOT-CONTENTS

Cocks of Hartcliffe, L.

Tordoff, L. [Teller.]

Hacking, L.

Williams of Elvel, L.

Ponsonby of Shulbrede, L. [Teller.]

Moved accordingly, and, on Question, Motion agreed to.

Resolved in the negative, and amendment disagreed to accordingly.
5.53 p.m.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 147F:
Before Clause 105, insert the following new clause:
("General functions of the Director.
. In section 2(2) of the Fair Trading Act 1973 leave out "uncompetitive" and insert "Anti-competitive" ").
The noble Lord said: My Lords, this is a simple amendment. It amends Section 2 of the Fair Trading Act 1973 and is designed to bring it up to date having regard to the Competition Act 1980 and to the position that has arisen since the date of that Act with regard to how mergers are being dealt with.
It has been emphasised many times in Committee, and even this afternoon, that the Monopolies and Mergers Committee is concerned largely with competition. I read part of Section 2 of the Fair Trading Act 1973 when I dealt with the previous amendment. I shall now refer your Lordships to subsection (2), which provides:
"It shall also be the duty of the Director so far as appears to him to be practicable from time to time, to keep under review the carrying on of commercial activities",
and then:
"ascertaining the circumstances relating to, monopoly situations or uncompetitive practices".
The term "uncompetitive practice" can mean that the commercial activities which the director has to investigate are not competitive. It is an absurd phrase to have in a section, these days at any rate, because it could include the investigation of commercial activities in relation to the manufacture of—if I may say so—lavatory pans, and firms which are making silicon chips.
In the Competition Act 1980 the word to be found is "anti-competitive". The commercial activities that are to be investigated are those that the director may think are anti-competitive, not uncompetitive. This is not a question of semantics. It clarifies the position of mergers in this country and even activities under the Treaty of Rome, in that what the Director General of Fair Trading, the Secretary of State concerned with such matters, and the Monopolies and Mergers Commission are concerned with is anti-competitive issues.
I never express much confidence when dealing with these matters because I know that Ministers, especially in regard to this Bill, are so tied to their briefs that it requires a certain amount of courage for them to diverge from them. It has been done. The noble Lord, Lord Strathclyde, has done it on several occasions. I hope that the Minister leading for the Government this afternoon will come along with me and let me have the amendment. In this modern age, we cannot leave the director appointed under the Fair Trading Act to deal with such an extensive variety of uncompetitive commercial activities. He must, however, deal with them if they introduce an aspect of anti-competitiveness. I beg to move.
Lord Brabazon of Tara: My Lords, again, I have read with interest the discussion in Committee about Section 2 of the Fair Trading Act. At that time, my noble friend Lord Strathclyde was trying to persuade the noble Lord, Lord Lloyd, that any additional reference there to "anti-competitive practice" was unnecessary. That obviously succeeded so well that he is now suggesting adopting the term in Section 2 as it stands. It may therefore seem rather churlish of me if I say that that remains in our view unnecessary, and indeed a possible recipe for confusion.
If I may briefly remind noble Lords, we are talking here of the duty of the Director General of Fair Trading to keep commercial activities under review. He must do so, among other things, with a view to becoming aware of monopoly situations or uncompetitive practices. He can then take appropriate action under the other provisions of the Act, to investigate those matters, or, under the Competition Act, to investigate anti-competitive practices. There is nothing to stop him looking at anti-competitive practices merely because that is not the precise term used here. Far from Section 2 having nothing to do with anti-competitive practices, it in fact describes the director general's basic duty, from which, in a sense, all his other activities stem.
My noble friend Lord Strathclyde said in Committee that the term "uncompetitive practice" was perhaps less graphic than "anti-competitive practice". I think that is right, but that does not mean that there is anything terribly wrong with it. It is a term whose general sense is fairly obvious, which has a precise meaning as defined in Section 137 of the Act, and which is used in several other places in the Act. It occurs, for example, in Section 48, in the context of monopoly references, and in Section 78, which deals with general references.
The definition in Section 137, although very similar to that of "anti-competitive practice" under

909
Section 2 of the Competition Act, differs from it in a number of respects. It relates to commercial activities, which means,
"the production and supply of goods in the United Kingdom, the supply of services in the United Kingdom and the export of goods from the United Kingdom".
Anti-competitive practices, in the context of the Competition Act, relate to the supply but also the acquisition of goods or services in the UK alone, and also in any part of the UK. Adopting in the Fair Trading Act a term which has its own meaning in the Competition Act could result in confusion. Bringing the two Acts fully into line would entail looking at all the relevant definitions and at all their occurrences throughout the legislation. This would be a major exercise of, I would suggest, limited value.
As I said on the last amendment, the noble Lord is, I know, concerned about the intelligibility of legislation, as far as possible, to the layman. There is nothing magical about one term or another, as he knows; it is all a matter of how they are defined. The term "anti-competitive practices" and the definition were obviously felt to be right for the provisions of the Competition Act in 1980. Perhaps, if we were looking at the Fair Trading Act again, we should try to adopt the same terminology and definitions—though not necessarily, as the provisions have different purposes. However, there is no evidence that the existing term in the Fair Trading Act gives rise to any great confusion in practice; that is, we have no evidence. If the noble Lord has any, he will no doubt let us know.
As we said during Committee, we should not rule out the possibility of a more thoroughgoing review of all this legislation at some stage. I merely ask the noble Lord to consider, in the light of what I have said about the extent of the consequential amendments, whether the parliamentary time which these would require is justified for the sake of what seems, with respect, tinkering with the terminology of provisions that otherwise work well. I submit that the answer has to be no.
Lord Lloyd of Kilgerran: My Lords, I am very much obliged to the noble Lord for reading his brief so carefully and, if I may say so, with such elegance. That is a term which was quite unjustifiably applied to me a little earlier. I shall not delay the House any longer on the matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 105 [Restriction on references where prior notice given]:
[Amendment No. 147G had been withdrawn from the Marshalled List.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 147H:
Page 106, line 2, leave out ("twenty-eight days beginning with the first working") and insert ("twenty days, determined in accordance with subsection (7) of this section, beginning with the first").
The noble Lord said: My Lords, with the leave of the House I shall speak to Amendments Nos. 147H, 147J, 147K and 147M. At Committee stage my noble
910
friend the Secretary of State agreed, in response to an amendment tabled by the noble Lords, Lord Williams of Elvel and Lord Peston, to look again at the use of "Working days" in the definition of the period allowed for consideration of prior notice of a merger.
The noble Lord, Lord Williams of Elvel, referred at the time to the possible difficulties which a period based on calendar days could cause if one of the longer public holidays intervened. The competition authorities would have less time to consider prenotified mergers where this was the case. The Government's intention in framing the original provision in calendar days was to make calculation of the relevant period as simple and straightforward as possible. The number of days lost due to Bank Holidays would not of course be very great and would not have seriously jeopardised the prenotification system; particular problems which might arise over Christmas, for example, could have been dealt with by using the power to extend tile notification period.
However, in response to the concerns expressed in Committee, we are prepared to accept that a period of working days rather than calendar days might be considered clearer for all concerned. Amendments Nos. 147H and 147J therefore replace the prenotification period in new Section 75B(2) of 28 calendar days starting and ending on a working day, with a period of 20 days. Subsection (7), as amended by Amendment No. 147M, provides that such periods are to exclude days not normally considered working days; that is, Saturday, Sunday, Good Friday, Christmas Day and any day which is a Bank Holiday in England and Wales. Similarly, Amendment No. 147K replaces the possible extension period of 14 calendar days with a period of 10 days, excluding weekends, etc.
I am pleased to be able to bring forward these changes in response to the concerns that have been raised. These amendments will clarify the calculation of the prenotification period while retaining the same basic period. They show, I think, that we are always open to constructive suggestions for improvements to the Bill, and that the debate in your Lordships' House can be most valuable in clarifying our minds on such matters. I beg to move.
Lord Williams of Elvel: My Lords, I am most grateful to the noble Lord, Lord Brabazon of Tara, for introducing these amendments which respond to the problems that I raised in Committee. I am also grateful to him for saying that the debates in your Lordships' House sometimes serve to clarify the Government's mind, because I have found on certain occasions that the Government's mind is not entirely clear.
The amendments understandably reduce the number of days, and, as we agreed in Committee—I think that the noble Lord the Secretary of State and I agreed—we could not keep the 28 days if we were going over to working days. The number of working days would have to be fewer than the calendar days. I am grateful to the noble Lord for bringing these amendments forward and we are happy to accept them.
Lord Mottistone: My Lords, the CBI has considered this matter and it supports the amendment. We believe it to be a definite improvement.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 147J and 147K:
Page 106, leave out lines 7 and 8.
Page 106, line 14, leave out ("period of fourteen") and insert ("ten").
The noble Lord said: My Lords, I have already spoken to Amendments Nos. 147J and 147K, and with the leave of the House I beg to move them en bloc.
On Question, amendments agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 147L:
Page 106, line 33, after ("misleading") insert—
("(aa) he suspects that it is not proposed to carry the notified arrangements into effect").
The noble Lord said: My Lords, this amendment responds to another commitment given in Committee by my noble friend the Secretary of State. In response to an amendment moved by the noble Lord, Lord Williams of Elvel, he ageed to look at the possibility of enabling the Director General of Fair Trading to reject a prenotification where he suspects that there is no intention to implement the notified arrangements. That is what this amendment does.
The power would be used where for one reason or another it becomes clear that it is not intended to proceed with a prenotified merger but the notice is not withdrawn. It sometimes happens that merger proposals, in which there may be a great deal of interest, in the end come to nothing. The power would have to be exercised reasonably. The director general could not just arbitrarily decide that an application was not serious but would have to have good reason to think so.
This is a small but useful procedural improvement which will help to ensure that resources are concentrated on those mergers where there is a clear intention to proceed. I beg to move.
Lord Williams of Elvel: My Lords, again, I am grateful to the noble Lord, Lord Brabazon of Tara, for bringing this amendment forward. It responds to points we made in Committee.
There is only one small question I have about the drafting, and that is the use of the word "suspects". It seems to me to be a slightly odd expression: if the director suspects something. I should have thought "has reason to believe" would probably be a better expression, but perhaps the noble Lord can convince me that I am wrong. I do not wish unduly to prolong the discussion on the amendment. I am sure that the noble Lord is giving much thought to what I have just said. In the course of time he will be able to respond to my point, perhaps without undue delay. I believe that the noble Lord, Lord Lloyd of Kilgerran, also wishes to intervene.
Lord Lloyd of Kilgerran: My Lords, I had the same difficulty about the word "suspects", but perhaps the noble Lord now has some advice about the word. I think this is a useful amendment and I feel that I ought to congratulate the noble Lord, Lord Williams, on having clarified the mind of the Government so well with regard to the last two amendments.
Lord Brabazon of Tara: My Lords, we are always open to useful suggestions. I understand that the word "suspects" is quite commonly used in legislation; therefore I see nothing unusual about using it in this case. However, if I find that there is any reason to change that opinion I shall certainly write to the noble Lord.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 147M:
Page 106, line 39, leave out from ("In") to ("(a)") in line 41 and insert ("determining any period for the purpose of subsections (2) and (3) of this section no account shall be taken of").
The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 147H. I beg to move.
On Question, amendment agreed to.
[Amendment No. 148 had been withdrawn from the Marshalled List.]
Lord Mottistone Lord Mottistone moved Amendment No. 148A:
Page 107, line 14, at end insert ("provided that the merger with one enterprise other than an enterprise to which these arrangements relate creates a merger situation qualifying for investigation or which clearly affects the impact of the notified merger.").
The noble Lord said: My Lords, new Section 75C(1)(d) as at present worded provides that the expiry of the merger notice will not prevent a subsequent reference, if meanwhile any intervening merger is completed by any party. The CBI, which advised me, appreciates the concern to avoid condoning intervening mergers which change the nature and effects of the merger under consideration. However, care should be taken not to create an opportunity for tactical frustration of a merger notice by the target completing a non-material merger.
I consider that the exception allowed under new Section 75C(1)(d) should be limited to intervening mergers which themselves qualify for investigation, or which materially affect the impact of the notified merger. The object of the amendment is to achieve that qualification to the existing wording. I am not sure whether the Government have given thought to this problem; I think it is a serious one which deserves consideration. I beg to move.
Lord Brabazon of Tara: This amendment relates to one of the exceptions which will make it possible for the Secretary of State to refer a merger to the Monopolies and Mergers Commission even after it has been prenotified and the period for consideration has expired without a reference. There may seem to be rather a number of these exceptions, but the intention behind them is simply to leave the authorities no worse off than they are at present. It must be borne in mind that otherwise, once the

913
period for consideration ends, the power to refer a merger has gone for good. We want to help business with this new procedure, but not at the expense of creating loopholes through which mergers which should be scrutinised can slip.
Following automatic clearance of a merger on the expiry of the pre-notification period, the parties will have up to six months to complete it. Before it takes place, one of the parties could merge with another enterprise, outside the notified arrangements. This merger might or might not qualify for investigation on its own. What is of potential concern is the previously unforeseen combination which will then come about when the pre-notified merger finally happens. For example, if A has a 15 per cent. share of a market, and notifies a merger with B which has no presence in that market, there will probably be no problems. If B then merges with C, which has a 15 per cent. share in that market, again there are unlikely to be grounds for intervening. It is when A and C eventually come together, through the merger which has already been cleared, creating a 30 per cent. market share, that problems could arise. New section 75C(1)(d) simply enables us to examine that new situation, if necessary.
It will be a matter of judgment for the Secretary of State whether there are new factors which justify re-opening a case in these circumstances. If there are none, then the decision will be unchanged, and he will not need to exercise the power to refer the merger. Indeed, his decision would be open to challenge if he did so. Only where the new merger might alter the view taken of the pre-notified merger would there be any grounds for exercising the power. This is likely to arise only very rarely, and I take it that my noble friend would not question the substance of the provision to deal with such cases.
The amendment moved by my noble friend Lord Mottistone would limit this power to cases where the second merger itself qualified for investigation or where it clearly affects the impact of the notified merger. Whether the second merger qualifies is beside the point; it is the impact on the original, pre-notified, merger which is important.
My noble friend has suggested that this provision would lend itself to companies wishing to forestall a pre-notified, contested merger. I am not sure how likely this is; they would have to move rapidly to merge with another firm, the merger of which with the bidder could lead to a reference. No doubt there are other forms of "poison pill" available to companies who are really determined. Besides, only 10 per cent. or so of mergers are contested, and pre-notification, though it is open to all, is likely to benefit primarily the great majority of straightforward, uncontested mergers.
In any case, for the reasons I have explained, this possibility would not necessarily be eliminated by my noble friend's amendment. The Secretary of State will still only change his decision where there are significant new factors, such as a potential competition problem, which did not exist before. In that case, it is quite right that it should be possible to take another look at the case. Merger control does not exist to help one side or the other, but to deal with the effects of mergers on the public interest.
914
Under the provision as amended, the impact on the notified merger would still remain a matter of judgment for the Secretary of State. We therefore question whether in practice it makes any real difference. Either way, only the Secretary of State can decide, on the advice of the Director General of Fair Trading, whether the new situation should be referred to the MMC. Either way his decision must be a reasonable one. He cannot arbitrarily re-open a case. While recognising the concern which underlies this amendment, we are not sure that in practice there is much of a problem here, or that, such as it is, we can do much about it. I hope that, in view of my remarks, my noble friend will be prepared to study what I have said and will withdraw the amendment.
6.15 p.m.
Lord Mottistone: My Lords, I am most grateful to my noble friend for explaining at such length the thinking behind not accepting my amendment, and indeed for explaining the thinking behind this part of the Bill. It sounded to me as if his argument was a good one, but naturally I shall need to study it with great care. It is possible that the matter may be re-opened at a later date. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 148B:
Page 108, line 9, after ("withdrawn") insert ("and").
The noble Lord said: My Lords, in moving Amendment No. 148B, I shall, with the leave of the House, also speak to Amendments Nos. 148C and 148D. What is and is not appropriately left to secondary legislation has been much debated in your Lordships' House and in Committee. But I think there would be agreement that some matters are best dealt with in regulations. These include many of the details of the pre-notification system which do not affect the essential principles. Many of these are matters where requirements could change over time, or in the light of experience.
The powers in new Section 75D already enable us to provide when merger notices from pre-notifiers are treated as received, and the manner in which notices and information are to be given to or by the Director General of Fair Trading. Amendment No. 148D fills a small but significant gap by enabling us to provide when information is treated as given as well as the manner of doing so. Information supplementing the original merger notice, whether requested by the director general or not, must be provided in good time for the authorities to act on it, and provision for this is made in new Sections 75B(6)(b) and 75C(1)(c). The time at which information is provided could, therefore, be critical, so we must be able to say when this is regarded as occurring, just as we can for merger notices. It is in companies' interests that this should be clear, as failure to disclose information in time could leave a merger open to further scrutiny.
Amendments Nos. 148B and 148C are drafting amendments. They divide the paragraph concerned,

915
which would otherwise become rather long and cumbersome, into two paragraphs. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 148C and 148D:
Page 108, line 11, leave out ("and") and insert ("(bb) provide for").
Page 108, line 14, at end insert ("and the time at which such information is to be treated as provided or disclosed".
The noble Lord said: I beg to move Amendments Nos. 148C and 148D en bloc. I have just spoken to these amendments.
On Question, amendments agreed to.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 148E:
After Clause 105, insert the following new clause:
("Functions of Director in relation to mergers.
( ) In Part V of the Fair Trading Act 1973, in section 76 (functions of Director in relation to merger situations) at end insert—
"(c) to satisfy himself, before making recommendations under (b) above, that—

(i) if there are issues other than the competition issue, interested parties are aware of his concerns and have had reasonable opportunity to comment on them;

(ii) reasonable time-limits have been given to interested parties for comment before he makes his recommendations;

(iii) the roles and responsibilities of parties appearing before him are properly identified and defined;

(iv) the facts of the matter before him have been fully established; and

(v) advisers giving evidence to him have done so as though section 47 of the Financial Services Act 1986 (misleading statements and practices) had applied, namely that it is a criminal offence to—

(a) make a statement, promise or forecast which the adviser knows to be misleading, false or deceptive or dishonestly conceals any material facts; or

(b) recklessly make (dishonestly or otherwise) a statement, promise or forecast which is misleading, false or deceptive." ").

The noble Lord said: My Lords, when the noble Lord, Lord Young of Graffham, made his statement in response to my Private Notice Question on 3rd April I indicated that I would table an amendment to this Bill which reflected some of the recommendations made by the inspectors in what I take to be the House of Fraser report. I say "I take to be" because I have no copy of the House of Fraser report and I only know what I know as a result of reading certain newspapers.
I tell noble Lords frankly that I have addressed the problem of how far it is proper for me to refer to the report, or what I take to be the report. I have taken advice on the matter. My conclusion and the advice I have received is that I should refer to the report only as strictly necessary in order to explain the amendment which I am moving this afternoon. I propose to observe that rule.
At present, when the director is required to exercise his functions in relation to mergers there is no onus on advisers to verify information that they give to him. There is no onus on advisers to substantiate the assurances they may give to the director, or
916
to the Secretary of State. There is no indication anywhere in the statute that the advisers, or the principals, should apply the same standards of behaviour in making representations and providing information to the authorities as they do under the Financial Services Act when issuing a prospectus. That seems to me to be a serious gap in the present legislation which the House of Fraser report exposed.
The inspectors expressed the hope that it was rare for deception of regulatory bodies to be practised on such a grand scale. I hasten to add that they found no fault with the Director General of Fair Trading or his staff, but they pointed out that the comfort taken by the Office of Fair Trading from the assurances of the advisers was greater than the comfort those advisers thought they were giving. The inspectors said that that lack of meeting of minds on the giving and taking of comfort in this or any other case must be overcome in future if healthy Government-City reliance and trust was to prosper.
I believe that that is the important point. It is the point that I am addressing in moving the amendment. There is confusion about the role of advisers when they make representations to the director. There is confusion about the status of discussions between interested parties and the Office of Fair Trading. Above all, there is confusion about how much weight should be placed on the assurances given by advisers, and by principals, to the director in order to allow him to exercise his function in making a recommendation to the Secretary of State as to whether or not a merger should be referred to the Monopolies and Mergers Commission.
I said earlier that the Secretary of State is also vulnerable in this respect. A press notice was issued by the Department of Trade and Industry on 14th March 1985 about the House of Fraser takeover in which the Secretary of State of the day announced that he took into account the statements made, and assurances given and the support given to those statements and assurances by Kleinwort Benson Ltd., which was one of the advisers to one of the parties in the transaction. The Secretary of State himself relied on the advisers to do their homework with due diligence and to make sure that they got all their facts right.
The amendment tracks the recommendations of what I take to be the House of Fraser report almost in its entirety, with the exception of paragraph (v). Taking paragraph (i) first, the inspectors recommended that,
"If there are issues other than the competition issue" —
which is the major issue to which the Government address themselves when deciding whether or not to make a mergers reference—
"interested parties are aware of his [the director's] concerns and have had reasonable opportunity to comment on them".
There have been occasions when the director has expressed concerns about issues other than the competition issue. It seems a sensible recommendation that the parties concerned should be aware of the director's thinking and should be allowed to comment.
Secondly, they should be allowed to comment within a reasonable period of time. They should not

917
be asked to comment overnight as to whether their company is too highly leveraged, whether they are in breach of some patent regulation, or whatever the director may be worried about.
Thirdly, the roles and responsibilities of parties appearing before the director should be properly identified and defined. If a party comes before the director as an adviser the director should be able to satisfy himself that the role of adviser is properly defined—this is the merchant bank and the lawyer —so that there is no doubt as to who is playing what role.
Finally, paragraph (iv) sets out the inspectors' recommendation that the facts of the matter before the director should be fully established. Any material which is put before the director should be properly researched and properly verified, as is the normal course in the case of a prospectus or another document in a takeover.
Paragraph (v) is not a recommendation of the inspectors in what I take to be the report. It goes further than those recommendations. The Financial Services Act 1986 lays down that anybody who makes a misleading statement or recklessly makes a statement which is false or deceptive which induces an investment or a transaction leading to investment is guilty of a criminal offence. If that is the case with regard to a prospectus it should be the case for information given and submissions made to the director in regard to mergers and takeovers.
Your Lordships may wish to ask yourselves how the director satisfies himself that that is the case. I believe that the director could properly say to advisers, "I should like you to sign a piece of paper saying that the information you have given me is in accordance with the Financial Services Act requirement". I am perfectly certain that any reputable adviser signing that piece of paper would understand the rules of the game; namely, that the information communicated to the director must be of prospectus validity and must be properly researched.
I believe that the amendment plugs an important gap in our existing system for regulating mergers. That gap was demonstrated in the case that I have mentioned. I believe that the director has a right to be able to satisfy himself that what he is told is the truth, the whole truth and nothing but the truth. The Government would do well to attend to the inspectors' recommendations and to what I have put forward this afternoon. I beg to move.
Lord Lloyd of Kilgerran: My Lords, I rise to make a contribution after the noble Lord, Lord Williams of Elvel, with some surprise because I had not realised that in regard to these amendments he would, to use his happy phrase, track his argument on the case of the House of Fraser. I do not approach the amendment having in any way regard to the House of Fraser; I am totally ignorant of any matters associated with it. I shall certainly not read from anything that has been published or support my arguments regarding the amendment by reference to the vague generalisations that have been floating around in connection with the House of Fraser.
918
I looked at the amendment objectively because parts of it—sub-paragraphs (c)(i) to (c)(iv) inclusive—are associated with the earlier amendment that I put forward invoking, perhaps rather pompously, questions of public interest and fairness. I believe it is important that when there are matters before the Director General of Fair Trading or the Secretary of State and where,
"there are issues other than the competition issue, interested parties are aware of his concerns and have had reasonable opportunity to comment on them".
I support sub-paragraph (i) on purely basic grounds of common sense and fairness. The same applies to sub-paragraph (ii), which refers to "reasonable time-limits", to sub-paragraph (iii) which provides that,"
"the roles and responsibilities of parties appearing before him are properly identified and defined",
and to sub-paragraph (iv) which provides that,
"the facts of the matter before him have been fully established".
It seems to me that those four suggestions are perfectly proper and should have been adopted by the Government irrespective of whatever happened in the House of Fraser.
6.30 p.m.
Lord Brabazon of Tara: My Lords, as the noble Lord, Lord Williams of Elvel, explained, this amendment is concerned with the statements and comments made to the Director General of Fair Trading before he submits his advice on a merger to the Secretary of State. It raises a number of different issues and, in dealing with them, I propose, like the noble Lord, Lord Lloyd of Kilgerran, to concentrate on the substance of the amendment and not on a widely publicised case which may or may not have prompted it.
Given that the inspector's report has not been published, as the noble Lord made clear, he will not expect me to reveal whether it contains any of the matters to which he referred. That will no doubt emerge in due course, but, as I said, I shall deal with the amendment on its merits. Should a case be made for further changes to the legislation or to procedures, we shall consider it in the same way. This is not the appropriate time to go into questions about a particular case even were aspects of that case not before the Judicial Committee of this House. Noble Lords have had the benefit of a full statement on the report on House of Fraser which my noble friend the Secretary of State made on 3rd April. I have certainly nothing to add to what he said then.
Perhaps I may now return to the amendment. Before making recommendations to the Secretary of State, the director general is to satisfy himself upon a number of points, set out in sub-paragraphs (i) to (v). The first is that, if there are issues other than competition, interested parties are aware of the director general's concerns and have had a reasonable opportunity to comment on them. The second is that interested parties have been given reasonable time to comment.
This amendment in fact anticipates Amendment No. 148L which will give the director general a duty to consider representations from interested parties.

919
That results from a commitment that my noble friend the Secretary of State gave during Committee, which was welcomed by the noble Lord, Lord Peston, as responding admirably to the Committee's concerns. Since our amendment responds to those concerns, it is a little strange that the noble Lord, Lord Williams, has tabled a similar amendment.
That is by the way; the point is that the director general must consider representations by interested parties, whether on competition or on other issues. Our amendment would reinforce that duty. In doing so, he must act reasonably; so it follows that he must allow adequate time for comments. If he did not do so, he could be regarded as failing in his duty. There is obviously a balance to be struck here between allowing time for comments and enabling the Secretary of State to reach a decision as soon as practicable, as the law also requires. Mergers should not be unduly delayed, consistent with the proper carrying out of the authorities' functions.
Indeed, one of the aims of the pre-notification system is to help expedite simple cases. The noble Lord, Lord Williams, was himself concerned about the power to extend the period for consideration indefinitely. Limiting the number of extensions is indeed something that we are considering, but of course that would mean comments having to be submitted promptly if a decision is to be taken within the specified period.
Up to this point, then, we believe that the noble Lord's concerns are already met by the legislation as we propose to amend it in this Bill. But, to the extent that sub-paragraph (i) goes further and requires the director general to tell interested parties about concerns which he may have relating to a merger, then we have reservations. Where the director general has concerns on particular points, he will naturally, where appropriate, seek comments on those within the limits imposed by confidentiality. So, to that extent, this point too is already met. But what is appropriate and proper will depend on the case, and the rigid requirement proposed could not take account of that.
Moving on to sub-paragraph (iii), the question of the roles of the persons appearing before the director general is of course primarily a matter for them to resolve among themselves. Naturally, it is desirable for the Office of Fair Trading to know in what capacity people are acting, what their responsibilities are and who may be in the lead. This is something we shall want to ask in the context of the pre-notification system. But this is essentially a procedural matter; it can be established under the law as it stands and it is difficult to see how it can be legislated for.
As to sub-paragraph (iv), naturally it is desirable fully to establish the facts relevant to the public interest before advice is given to the Secretary of State; that goes without saying. If, in the event, it proves that there were material facts which had not been made public and of which the Secretary of State or director general were unaware at the time, then the law provides that a reference to the Monopolies and Mergers Commission can still be made, provided that this is done within six months of the new material facts emerging. This, together with the
920
new offence, to which I shall come in a moment, should enable the authorities to rely on information that they are given without having to seek independent verification on every point, which would be a practical impossibility.
I should remind the noble Lord that it was not in doubt that my noble friend the Secretary of State had the power to refer the takeover of House of Fraser to the MMC on the basis of new material facts revealed by the inspectors' report. In fact, he decided, in accordance with the director general's advice, not to do so. It is that point which is at present before the Judicial Committee of this House.
Sub-paragraph (v) as it stands would merely require the director general to satisfy himself that advisers had acted as though subject to Section 47 of the Financial Services Act. How he is to do that, and why advisers should oblige, is not clear. I take it that the noble Lord actually wants to subject them to Section 47. As he knows, the Bill itself introduces a new offence of giving false or misleading information to the competition authorities—not just the director general, but the Secretary of State and the MMC as well. That would apply to anyone who gives information either knowing it to be false or misleading in a material particular, or recklessly gives it; that is, disregards whether it is true or not. It would apply to principals or advisers. Moreover, those who supplied information for the purpose of giving it to the authorities would be similarly caught.
There was some discussion about Section 47 of the Financial Services Act in Committee following which my noble friend Lord Strathclyde wrote to the noble Lord. As he said in his letter, Section 47 deals with the very different and, in our view, more serious matter of making false statements to induce people to make investments. Given the general offence that we are already introducing, a further offence here is quite unnecessary.
The sole additional point with which the noble Lord's amendment is concerned, it seems, is the severity of the maximum penalty, which is seven years' imprisonment for Section 47, but only two years for the new offence and, for that matter, for the comparable offence in Section 200 of the Financial Services Act. During Committee, however, the noble Lord did not, as I understand it, want the penalty for the new offence increased. If so, I cannot understand why he should have changed his mind. It surely cannot have been as a result of something that he may have read. Ever since my noble friend was advised by the Director General of Fair Trading that there were new material facts in a certain case, it should have been clear that there was some question whether the authorities had previously been given misleading information.
I should add that we are not introducing this offence in response to any particular case. We like to see things in perspective and it has in fact been our intention to introduce this new broader offence for some time. We are doing so simply because it seems to us wrong that people should be able to give false information to the competition authorities with impunity. Nothing has happened to change our view that two years is an appropriate maximum penalty for an offence of this kind.

921
I apologise that it has been necessary to take up so much of your Lordships' time, but there are a number of separate points here which deserve careful consideration. I hope that I have shown why many of the points are already adequately provided for in the legislation as it is or as it will be amended by the Bill. Therefore, as I have explained, the changes in the amendment do not seem to us at present to be necessary. I hope therefore that the noble Lord will be satisfied with my reply and feel able to withdraw this amendment.
Lord Lloyd of Kilgerran: My Lords, in an endeavour to clarify my mind about the Government's views in regard to paragraphs (i) to (iv) of subsection (c), which were the subject of my address, perhaps I may point out that in the course of his presentation the Minister referred to Amendment No. 148L tabled in the name of the noble Lord, Lord Young of Graffham. I should like to ask him this question. Does he in effect have some sympathy (I shall not put it any higher than that) with the four parts of paragraph (c) in Amendment No. 148E, and are most of those matters to be dealt with in other amendments put forward by the Government?
Lord Brabazon of Tara: My Lords, we shall obviously be coming to Amendment No. 148L in a moment or two. I considered the different paragraphs in the amendment of the noble Lord, Lord Williams, and commented on each one of them, in particular that one which, as I said, would come up again with Amendment No. 148L.
Lord Lloyd of Kilgerran: My Lords, before the noble Lord again sits down, I did not gather what his position was. I heard his comments in relation to those four paragraphs, but he was reading rather quickly and I did not quite understand the position. Rather than delay the House, perhaps it will be best for me to read what he said in Hansard.
Lord Williams of Elvel: My Lords, I am sorry to have paused but I thought that the noble Lord had received by carrier pigeon a message which he wished to convey to the noble Lord, Lord Lloyd of Kilgerran. Obviously I was mistaken.
I am grateful to the Minister for responding fully to this amendment and to the noble Lord, Lord Lloyd, for his commentary on it. For myself I find it hard to understand how Amendment No. 148L which the Government are proposing covers my points. I think that the noble Lord, Lord Lloyd, agrees with me that there are certain disparities between the two amendments.
Perhaps I may go through the Minister's explanation. I understood him to say that in the normal course of events the director would make interested parties aware of his concerns. That was obviously not the case in one important instance and that is why the inspectors who produced this report, which I have not seen, made what I believe to be a recommendation to that effect. The Minister then said that it was possible for the roles of the different parties that appeared before the director to be established by the law as it stands. Having looked at the law and having been a practitioner under the
922
law as it stands for some considerable time, I find it difficult to see where the law allows the director to determine exactly who is doing what and in what role. No doubt the Minister will be able to point me to that section of the law as it stands which allows the director to do that.
As regards the verification of the facts, I accept what the Minister says and that the Bill amends the status of the information that is to be provided to competition bodies. That is welcome and I am glad that the Government have accepted that particular recommendation. Nevertheless, the point that I was trying to make in Committee—and the noble Lord referred to it—concerned penalties. I was not trying to increase the penalties but simply trying to align them to make sure that the offence of providing misleading information or making a misleading statement or recklessly making a statement which would be false or deceptive carried the same penalty whether an organisation was making it to a private investor and inducing an investment decision or to a competition authority. It seemed to me very odd that there was a discrepancy between the two penalties. However, I shall not pursue that point very far. I made it in Committee and make it again to the Minister; it is just a question of alignment of penalties under what I regard as similar types of offence.
I am glad that the Government have given careful consideration to these anonymous recommendations which have been reproduced in my amendment. I believe we shall have to look at what the noble Lord has said. He has been kind enough to address himself, as the noble Lord, Lord Lloyd, quite rightly mentioned, to the generality of the problem. It is not a problem of a particular instance; in my view it is a problem of a general nature. I shall certainly look as what he has said. Having heard the debate on Amendment No. 148L, we may if necessary come back to the problem at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.45 p.m.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 148EA:
Before Clause 106, insert the following new clause:
("Employee representations
"84A. In carrying out an investigation on a merger reference the Commission shall seek representations from relevant employees and employee organisations and from relevant consumer organisations." ").
The noble Lord said: My Lords, in moving this amendment, which is tabled in my name and that of the noble Lord, Lord Peston, it may be for the convenience of the House if I also speak to Amendment No. 148L. Our discussion in Committee referred to employee organisations and relevant consumer organisations. The Government undertook to look at this general problem and they have come forward with Amendment No. 148L, which instructs the director to:
"take into consideration any representations made to him by persons appearing to him to have a substantial interest".

923
We welcome Amendment No. 148L but wonder whether Amendment No. 148EA in either words that track the wording of Amending No. 148L or in my wording would be appropriate. After all, if the director must take into consideration various matters, it seems to us to be only right that the commission also should do that. Because the commission deliberates at much greater length (obviously, under the system) and with much greater thoroughness than the director can possibly do in the time available and because the commission has this responsibility, it seems to us necessary to ensure that the commission actively goes out and seeks representations from the bodies which are most concerned. Certainly the director can rightly take into consideration any representation made to him, but we believe that the commission should go out and seek representations from similar bodies. It seems to me that if the Government have conceded on the director point, they should also concede on the commission point. I beg to move.
Lord Lloyd of Kilgerran: My Lords, briefly I should like to welcome the government amendment, Amendment No. 148L, for the reasons given by the noble Lord, Lord Williams. It seems to me that Amendment No. 148EA tabled in the name of the noble Lords, Lord Williams and Lord Peston, fills a gap which is essential to be filled in the present practice in relation to the position of the commission. New Section 84A rightly suggests that:
"In carrying out an investigation on a merger reference the Commission shall seek representations" —
and seeking representations is an important matter-
"from relevant employees and employee organisations and from relevant consumer organizations".
I support this amendment.
Lord Mottistone: My Lords, I was told that, not long ago in a case that shall be nameless, the trade unions concerned wrote to the commission and were not rebuffed. There were other interested parties who did the same. There was apparently no need for legislation to make this possible. Even if it is a question of importance that people should be sought out, I should have thought that the amendment provided a little "nannying". If people have a strong view about a merger in relation to their company it is up to them to take the initiative. If they do not have such a feeling, then jolly bad luck. But I do not think that one needs to have legislation which provides that these people are sought out. The other people involved in the case I mentioned would not be covered by this amendment, but they still took the initiative and were not rebuffed.
Lord Lloyd of Kilgerran: Before the noble Lord sits down, is he saying on behalf of the CBI, therefore— —
Lord Mottistone: My Lords, although this is the Report stage, perhaps I may say that I am not speaking on behalf of the CBI. I am speaking from personal experience.
Lord Lloyd of Kilgerran: My Lords, I may surely ask a question of the noble Lord, Lord Mottistone, before he sits down. Is he saying that that is not in order?
I am asking the noble Lord before he sits down, speaking as he is, in his own personal capacity, and not on this occasion for the CBI, whether he is saying that employees and employee organisations and consumer organisations will know what is going on. Is it not a duty of the commission—which does not have great publicity associated with it—to seek representations that are relevant?
Lord Mottistone: My Lords, as I obviously have not sat down, the answer is that I am quoting from personal experience. I should have thought that the situation which I have experienced could well happen again. I do not think that one needs to use the legislation to help people along in the way that is intended, as I said earlier.
Lord Lucas of Chilworth: My Lords, I had not intended to get involved here. However, my noble friend Lord Mottistone is now suggesting that there is some "nannying" involved in the amendment. Since by statute we have set up both the Office of Fair Trading and the commission, it seems to me that it should be charged with all relevant responsibilities. In the light of changed circumstances over the past few years, I believe that those responsibilities should be considered. This amendment seeks to look at them again. In the complexity of company share movements today, with mergers of subsidiaries by other foreign-owned companies, there would be many, notably employees, who would not necessarily be aware of the direction in which the company might be moving or, more certainly, might not have the ability to raise the questions with which an office would be charged were the amendment accepted.
As the noble Lord, Lord Lloyd of Kilgerran, says, this fills a very small gap. I believe that there is more right on that side of the argument than in the argument of my noble friend Lord Mottistone.
Lord Brabazon of Tara: My Lords, with permission, not only shall I reply to Amendment No. 148EA, but I shall speak also to government Amendment No. 148L, because both these amendments arise from the same debate in Committee on amendments moved by the noble Lord, Lord Peston. Those amendments were designed respectively to give the Director General of Fair Trading and the Monopolies and Mergers Commission a duty to seek representations on mergers from relevant employees, employee organisations and consumer organisations.
In replying to that debate, my noble friend the Secretary of State agreed to consider giving the Director General of Fair Trading, in advising on mergers, a duty to take into consideration any representations received from interested parties. Amendment No. 148L imposes such a duty and is in fact drafted in very similar terms to the existing duty on the Monopolies and Mergers Commission under Section 81(1)(a) of the Fair Trading Act.

925
My noble friend explained why he was not prepared to go further, either in respect of the director general or the MMC. It would be far too onerous to require the director general to seek out representations, and invidious to single out particular persons or groups to be approached. Nevertheless, the amendment would clearly include within its scope, where relevant, employees and trade unions, and consumer organisations, which were the groups about which noble Lords opposite were particularly concerned.
The noble Lord, Lord Peston, said on that occasion that my noble friend had responded admirably to his concerns. Given that we have done exactly what we then undertook to consider, I have to say that we were surprised, and perhaps a little disappointed, to see that the noble Lord, Lord Williams, had after all retabled the amendment applying to the MMC. The reply then had seemed to suggest that the noble Lords were satisfied with our response on the MMC.
As I have indicated, the MMC is already under a duty to take into consideration representations from anyone with a substantial interest in the subject matter of a reference, and bodies which are representative of such persons. This is in Section 81(1)(a). The fact that the noble Lord has tabled this amendment as an amendment to Section 84 leads me to wonder whether he has looked sufficiently carefully at Section 81. If he does, he will see that in addition to the provision I have just mentioned, the MMC must give interested parties the opportunity of an oral hearing, unless that is impracticable or unnecessary. The concerns of employees and consumers are thus already well catered for.
Furthermore, turning to the point raised by my noble friend Lord Mottistone, the MMC already takes appropriate steps to alert interested parties to the reference and to invite them to submit views. This is in addition to publishing the reference, which the Secretary of State is required to do. As well as advertising its inquiries in the press, the MMC writes to persons and organisations it considers may wish to give evidence, bearing in mind the nature of the merger. In practically all merger inquiries, these include the CBI and relevant employee organisations, and, depending on the subject matter, any relevant consumer organisations. By way of example, I would refer noble Lords to paragraph 5 of Appendix 1.1 of the report on Elders' bid for Scottish and Newcastle.
As with the director general, it would be invidious to single out certain groups for special treatment. That would imply that they had some special right to have their views heard, and that these carried more weight. As my noble friend said in Committee, this would exclude many other groups which might have as great or greater interest in a merger, such as industrial suppliers, competitors and customers. Those with an interest will obviously vary from case to case. Under Section 81, it is for the MMC to decide who has a genuine interest in a particular case. It is also for it to weigh up the views of all these particular interests and arrive at a balanced assessment of the overall public interest. By placing certain interest groups above others, the amendment
926
would detract from its role as the neutral arbiter of the public interest.
For these reasons, while we believe Amendment No. 148L represents a small but useful improvement to the legislation, we continue to believe that Amendment No. 148EA is misconceived. I very much hope that the noble Lord, Lord Williams will consider what I have said and will agree to withdraw the amendment.
Lord Williams of Elvel: My Lords, I am grateful to the noble Lord for his lengthy explanation of Section 81 of the Fair Trading Act, which I have read a number of times over the past few years. The difference is between passive acceptance of representation and actively seeking representation. That is the major problem. We are grateful to the Government for accepting our point on the role of the director. Nevertheless we believe that the commission should go out actively and seek representation instead of relying on Section 81(1) and passively accepting such representations as appear to it to be acceptable. Nevertheless, we are coming up to the witching hour of dinner. I do not propose to carry this matter any further. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Strathclyde: My Lords, I beg to move that further consideration on Report be now adjourned. We shall not return to this Bill before eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.

Antarctic Minerals Bill [H.L.]
7 p.m.
Lord Glenarthur: My Lords, I beg to move that this Bill be read a second time.
The main purpose of the Bill is to enable the United Kingdom to ratify the convention on the regulation of Antarctic mineral resource activities, adopted at Wellington on 2nd June 1988 and signed on behalf of the United Kingdom on 22nd March 1989. The Bill will prohibit mineral activities in Antarctica by British companies and nationals, except prospecting activities authorised by the United Kingdom Government or another contracting party to the minerals convention, and will enable the Secretary of State to grant licences for prospecting activities in accordance with the convention.
It may be helpful to your Lordships to consider the background against which the Bill is set. Although traces of a wide varie1y of hard rock minerals have been found in Antarctica, none has been found which would be economically exploitable, even if situated next door to markets for them. Public attention has focused more on Antarctica's potential hydrocarbon resources than on hard rock minerals. I should emphasise, however, that it is not known whether any hydrocarbon resources exist in economically exploitable quantities. If they do exist, they are probably located offshore where the technical problems of exploiting them would, in any case, be far greater than those currently being faced in the

927
Arctic. While their exploitation is probably a long way off, the same may not be true of prospecting for them.
The Antarctic treaty makes no provision concerning the mineral resources of Antarctica. From the outset of the minerals convention negotiations, Britain has shared the view of its Antarctic treaty partners that it would be difficult, perhaps even impossible, to reach agreement to regulate minerals activity in the political circumstances peculiar to Antarctica once commercially viable quantities of minerals had been located.
Perhaps I may describe in detail some of the basic provisions of the convention. Its fundamental purpose is to prohibit the carrying out of any Antarctic mineral resource activity except in accordance with its provisions. The convention provides for three stages of mineral activity: prospecting, exploration and development. Prospecting is aimed at identifying areas of mineral resource potential and excludes deep dredging or excavations, or drilling to depths exceeding 25 metres. Exploration is aimed at the identification and evaluation of specific mineral resource occurrences or deposits. Development is aimed at the exploitation of specific mineral resource deposits.
The convention establishes two permanent institutions: a commission on which will be represented all Antarctic treaty consultative parties and other qualified states; and a scientific, technical and environmental advisory committee composed of all parties to the convention. If an area of the Antarctic is opened for exploration and development, the commission shall also establish a regulatory committee composed of 10 members of the commission, including the claimant or claimants (if any) whose territory is included in the area.
The operation of the convention is based crucially on a distinction between prospecting on the one hand and exploration and development on the other. Prospecting is defined so as to ensure that it should have no greater environmental impact than scientific research activity of a similar character. For that reason, prospecting is not subject to authorisation by the convention's institutions, although it must be carried out in accordance with the convention, including any relevant measure the commission may adopt. It is the responsibility of the prospector's state to ensure his compliance with the relevant provisions of the convention.
The convention recognises, however, that exploration and development give rise to potential environmental consequences of an altogether greater magnitude and provides for stringent environmental controls and operator liability. For that reason no exploration or development can begin until it is unanimously agreed that it should do so. The Bill before your Lordships, by providing only for prospecting, takes account of this crucial difference. I shall return to this point in due course.
Some may ask whether it was necessary to conclude the convention at all and whether its entry into force would give rise to another gold rush which might have unwelcome consequences for the fragile
928
Antarctic environment. No one knows for sure whether or not there are economically exploitable mineral resources in Antarctica, but that is not to say that at some point in the future there may not be those who will wish to go there to find out. Given the existence of opposing views as to whether sovereignty can or cannot be exercised in the Antarctic, any unregulated search for minerals would certainly give rise to disputes which would threaten the peace in Antarctica and the maintenance of the Antarctic treaty. It was with this possible threat to the peace in mind, much more than any desire to exploit Antarctic minerals, that the Antarctic minerals convention was negotiated.
It would not be true to say, as has been said in some quarters, that it is the convention itself which will give rise to the risk of environmental damage in the one remaining area of the world which is generally regarded as pristine. On the contrary, it was the fear of the damaging consequences which would result from an unregulated scramble for minerals which prompted the Antarctic treaty consultative parties to negotiate the convention. Moreover the convention arrives at no conclusion as to whether Antarctic mineral activities are acceptable or not. Instead, it provides for an assessment to be made, case by case, as to whether they are acceptable and, if so, provides for their detailed regulation.
Had the convention not been negotiated, or were it not to enter into force, there is no guarantee that minerals activities in Antarctica would not take place. Such uncontrolled activity would have far graver consequences for the Antarctic environment than would be the case if the convention were given effect. Thus, it is not the convention which will give rise to temptation: it was the recognition of the possibility of temptation which gave rise to the convention.
It may be asked whether this Bill will benefit British industry. The convention provides a framework within which British industry can make decisions in the light of market forces leading to the prospect of benefiting from Antarctic minerals, but which will at the same time require industry to meet the full costs of their activity and of any environmental consequences. While UK industry continues to see no present commercial justification for minerals activity in Antarctica in the foreseeable future, it was consulted throughout the negotiation of the convention and I believe that the political factors which have led to the conclusion of the convention are well understood. The combination of generally low market prices for hard rock minerals and hydrocarbons, the high costs and logistic difficulties of operating in Antarctica, together with a paucity of reliable data, at present act as a deterrent to serious commercialinterest.
But the cornerstone of the Antarctic treaty system is foresight. What might be a matter of negligible interest now might well become important in years to come. It is therefore necessary to put a mechanism in place now designed to take account of a possible change of attitude in the future, either here or in other countries. While the likelihood of UK industry wishing to prospect for Antarctic minerals soon

929
appears now to be remote, it would still be a sensible precaution, by taking the necessary legislative action now, to enable industry to do so if competitors in other countries show interest.
I should remind your Lordships that the Bill provides for only the relatively benign activity of prospecting. Exploration and commercial development are prohibited until such time as a separate protocol on liability has been negotiated. This protocol will set out detailed rules and procedures relating to the operator's liability for damage caused to the environment, elaborating upon the convention provisions on this matter which will apply to prospecting. These negotiations have not yet begun and are likely to take some years to complete. When completed the Government will return to Parliament with another Bill seeking to implement the liability protocol and to provide for exploration and development in accordance with the convention. Thus Parliament is not being asked at this stage to enact legislation enabling British operators to undertake mineral exploration and development in the Antarctic. That may come later.
I should refer to the matter of United Kingdom sovereignty over the British Antarctic territory. There are two particular points which I wish to make. They refer to possible revenues from Antarctic mineral activity and to the issue of Argentine and Chilean claims to parts of the British Antarctic territory.
It has been our objective throughout the negotiation of the convention to ensure that the UK, as a claimant state in Antarctica, should have the largest possible share of any benefits from minerals activity within the British Antarctic territory. The financial provisions of the convention require that the costs of operating the institutions of the convention are to be the first call on revenues resulting from mineral resource activities. If there is a surplus of revenue beyond that which is required to finance the minerals commission budget, the convention provides that:
"The commission shall ensure that the interests of the members of the regulatory committee, having the most direct interest in the matter in relation to the areas in question, are respected in any disposition of that surplus".
The meaning of this provision in the convention, which your Lordships might be excused for viewing as somewhat opaque, is that in respect of any surplus deriving from mineral and hydrocarbon activity in the British Antarctic territory, the United Kingdom is one of the members of the regulatory committee,
"having the most direct interest",
and whose,
"interests are (to be) respected in any disposition of that surplus".
The same meaning is accorded to this provision by other claimants in respect of their claimed territories. Moreover, the convention provides that in the preparation of management schemes an important aspect is the question of:
"payments in the nature of or similar to taxes, royalties or payments in kind",
from which of course we expect to benefit.
Secondly, the regulation of mineral activities through procedures which involve the relevant
930
claimant state having a special role in relation to its claimed area causes a particular problem in the Antarctic peninsula where the UK, Argentina and Chile have over-lapping claims. For the minerals regime to work properly in that region it will be necessary for the three countries to work together, or at least to co-ordinate their individual actions. Both Argentina and Chile understand this and we agreed with them a common statement relating to future consultations which all three made on signature of the convention. I shall place a copy of the UK statement in the Library.
I now turn to the main provisions of the Bill. Clause 1 prohibits any activities in Antarctica for, or for purposes connected with, the exploration or exploitation of mineral resources, except for prospecting activities authorised by the United Kingdom Government or by another state party to the convention. Mineral activities going beyond prospecting will for the time being be prohibited altogether. As I have already said, this is because such further activities, called in the convention "exploration" and "development", cannot take place until a separate protocol on liability has been concluded, which will require separate primary legislation.
Clause 2 excepts from the prohibition in Clause 1 prospecting activities authorised by the United Kingdom Government or by another contracting party to the convention. The term "prospecting activities" is defined so as to reflect the definition of prospecting in the convention.
Clause 3 empowers the Secretary of State to grant licences for prospecting activities. It is chiefly through licence conditions that the Government will be able to secure compliance with the convention, including its environmental provisions, by licensees. A licence is not to be granted unless the Secretary of State is satisfied that the carrying on by the applicant of the activities authorised by the licence would be consistent with the international obligations of the United Kingdom. Thus the requirements of the convention must in each case be satisfied, as must any other international obligations binding on the United Kingdom, such as those arising under the Antarctic treaty.
Clause 4 regulates the transfer of licences and enables the Secretary of State to revoke, vary or suspend a licence for non-compliance with a licence condition or with regulations to be made under the Bill, or where necessary to comply with any international obligation of the United Kingdom. These are important powers which may in particular be needed in order to secure compliance with the convention, but otherwise a licensee will be able to invest in prospecting activities in the secure knowledge that his right to do so will not be interfered with.
Clause 5 obliges a licensee to indemnify the Government against any claims brought against them in respect of loss or damage arising out of the licensee's authorised activities.
Clauses 6 and 7 empower the Secretary of State to make regulations and give directions, and the Government will thus also be able by these means

931
to ensure compliance with the requirements of the convention.
Clause 8 enables the Secretary of State to appoint inspectors for the purpose of the Bill.
Clauses 9 and 10 provide for a number of offences so that the Bill can be enforced.
Clause 12 and the schedule apply, as part of the law of the United Kingdom, certain convention provisions relating to strict liability for specified types of loss or damage, in particular damage to the environment.
Clauses 11, 13 and 15 to 20 deal with a number of supplemental matters, but I should like to say a few words in explanation of Clause 14. This clause empowers Her Majesty the Queen by Order in Council to confer on specified courts in England and Wales criminal or civil jurisdiction in respect of matters arising under the law of the British Antarctic territory. This clause is not directly related to the convention or its implementation, but it owes its inclusion to the prospect of mineral activities in the British Antarctic territory, however remote they may now appear.
There is at present very little risk of serious crime or need for civil litigation in the territory. But if mineral activities were to commence on any significant scale the risk would obviously increase. It would be impractical for a court actually sitting in the territory to deal with any but the most trivial cases. Alternative venues must therefore be found. The most obvious one is the Falkland Islands, and powers already exist in the British Settlements Acts to provide for its courts to try matters arising under territory law. But no powers exist to allow United Kingdom courts to do the same, and there may be circumstances in which this country would be the most appropriate forum. Clause 14 is designed to fill this gap in case the need should arise at some time in the future.
As I said, the main purpose of the Bill is to enable the United Kingdom to ratify the Antarctic Minerals Convention. The convention fills an important and long-awaited gap in the Antarctic treaty system, the continued success and stability of which will be secured by the convention's early entry into force.
Moved, That the Bill be now read a second time.—(Lord Glenarthur.)
7.19 p.m.
Lord Cledwyn of Penrhos: My Lords, the House is grateful to the noble Lord, Lord Glenarthur, for his helpful explanatory speech. In my view this is a most significant Bill which, as noble Lords know, has its complexities. Behind it lies a great continent and many years of difficult discussion and negotiation. To begin to obtain international agreement on so sensitive a subject is in itself an important achievement.
Many people deserve congratulation for that, including officials of the Foreign and Commonwealth Office. I should like to mention Mr. Christopher Beeby, the deputy secretary of New Zealand foreign affairs and the chairman of the
932
meeting which negotiated the convention. The convention, which was adopted in Wellington on 2nd June last year, was opened for signature for one year on 25th November last. However, before it becomes operative, 16 ratifications or accessions are necessary, and that includes the United States and the Soviet Union. However, there are 20 possible ratifications and I should be grateful if the Minister would say a little more about that to us.
Presumably 16 ratifications are the minimum laid down by the convention. May we take it that all the governments concerned are likely to add their signatures? I note that 38 countries adhere to the Antarctic Treaty and that 22 of those are consultative parties under it. The latter are to be members of the commission set up by the convention. As the noble Lord explained to us, the other institutions are the advisory committee, the regulatory committee and the special meeting of parties. It is essential that those four institutions should work smoothly. The convention can succeed only if the parties to it wish it to do so.
The commission's work appears to be crucial in that it has the task of identifying an area of Antarctica as one within which applications for exploration and development rights may be considered. The so-called special meeting of parties referred to by the noble Lord will later also consider that. As we look at this Bill, we are all conscious that from the very outset, and certainly from 1959 when the 12 countries with an obvious interest in Antarctica met in Washington on the initiative of the United States, they were embarking on a major task. The Antarctic Treaty stemmed from that historic meeting, but the problem then—and it still lurks in the background—is that of sovereignty. The noble Lord touched on that in his speech. Nationalism, national pride, an aggressive foreign policy motivated by varying causes and also, one regrets to say, greed combine to make lasting solutions very hard to find.
Seven of the countries represented in Washington, including our own, had over a long period made claims to sovereignty in Antarctica and we recall that that factor asserted itself during the Falklands conflict. That problem was not resolved in Washington, and we must note that it has not been settled by this convention but sovereignty has been put on the shelf or, to coin a suitable phrase, in the freezer.
Article IV of the 1958 treaty says that neither the treaty nor the Acts which flow from it shall prejudice the position of countries which claim sovereignty or others not recognising such claims. However, we must acknowledge that that was a big step forward because it helped to reach agreement on other aspects of the treaty and it was then agreed that Antarctica should be demilitarised and used exclusively for peaceful purposes. Therefore, it is good to know that on this great continent there are to be no military bases or fortifications, no weapon testing, no nuclear explosions and no disposal of radioactive waste. On the other hand, a system of inspection was set up to ensure that the agreement is observed.
As the House knows, there are other constructive provisions in the treaty, but I repeat that it was an

933
historic milestone for here is a vast uninhabited continent, with incalculable resources which presents a temptation to the greedy and to the megalomaniac, and history ancient and modern has not been short of such people. Mr. Beeby very properly commented that:
"the single most significant feature of the Treaty was that it very greatly reduced the potential for tension, rivalry, dispute and conflict that was inherent in the pre-existing situation".
However, the treaty did not deal with resources and some countries, in particular New Zealand, have been increasingly concerned that a lack of internationally agreed regulations and discipline could end in disaster. Once again, the Falklands conflict pointed in that direction because it showed that a reckless and stupid leader like Galtieri could upset the delicate balance. Furthermore, a disorgansied scramble for minerals could not only damage the environment but also revive the sovereignty issue.
The convention with which we are concerned in this debate is clearly a compromise between the parties and, while I recognise the achievement, I still have a slight feeling of unease and I have some questions to put to the noble Lord in a moment.
Personally I should like all countries to agree to leave Antarctica alone and not to prospect and mine for minerals there. It is to New Zealand's great credit that it made that proposal early on in the negotiations. As the noble Lord knows, it did not receive much support for its proposal. I should be grateful if the noble Lord would comment on that and on the British Government's reaction to the New Zealand initiative.
The noble Lord has dealt with the distinction between prospecting and exploration and development. There is of course the commitment in the convention to the protection of the unique Antarctic environment and of its dependent and associated ecosystems, and we must hope that the safeguards which have been laid down in support of those will be respected, for there are perils such as damage to the environment as a result of such operations. The convention defines the:
"unqualified and unlimited obligation of the operator to take necessary and timely response action".
All that is laudable but still leaves open the question of what action can be taken against a ruthless operator who refuses to observe the injunctions of the convention. Perhaps the noble Lord will also comment on that.
We must not be too euphoric. This Bill is very important but it does not give us the assurance that unregulated minerals exploitation will not take place. However, I hope that the British Government will now take the lead with New Zealand in Antarctic environmental protection. The Exxon oil spill in Alaska demonstrated the terrible impact of such accidents on polar regions. Should such an incident occur in the Antarctic, the inaccessibility of the continent would exacerbate the situation and there could be a huge ecological disaster. Can the Minister say whether he is satisfied that everything is being done to strengthen the environmental controls outlined in the convention?
934
Perhaps I may give some examples of stricter measures which could be included. First, mandatory environmental impact assessments should be carried out before a licence is issued. That is Clause 3(3). Secondly, a mandatory inspection system should be set up. Thirdly, there should be provision for private prosecution of an operator for failure to comply with the terms of the Bill when it becomes law or the convention. That is Clause 10(3) Fourthly, the statutory maximum fine of £2,000 for offences under this Bill seems to me to be inadequate and I believe that it should be increased. We must also be concerned about the difficulty of regulating multinational companies over this Bill and I should appreciate the Minister's comments upon that.
Ideally, Antarctica should be vested in the United Nations, but short of that we must welcome the convention. It takes the Antarctic treaty a substantial step forward and gives hope that the last great undamaged continent will remain stable and peaceful. We welcome the spirit of co-operation which made possible the convention and we support this Bill and will assist its passage throughout all its stages.
7.28 p.m.
Lord Buxton of Alsa: My Lords, noble Lords have already spoken on a wide range of issues and others will follow. With a reputation as a conservationist and as one who has been to the Antarctic, I believe that it would be wrong for a debate to take place without sufficient reference being made to the very strong feelings of conservationists led especially by my lifelong friend Sir Peter Scott. I: have no doubt that the conservationists would have the support of the vast majority of the public if the issue was put to them. I should like to reassure my noble friend Lord Glenarthur that I support the Bill; I believe it expedient that it should be introduced. Nevertheless, it would be unfair to disregard what is so widely felt by so many people.
I welcome the Bill because it probably provides the only hope of discouraging the worst excesses by the human race, such as Valdez experienced recently, in the last unspoiled part of our planet. Having seen the beauty of the Antarctic myself, I support the Bill without enthusiasm and accept it as recognition of man's inability to leave anything in the world free of exploitation. I recognise the ultimate horror that could occur ecologically there, as the noble Lord, Lord Cledwyn, said.
My instincts and sympathy are entirely with those who would like to see the Antarctic continent protected as a world park. Peter Scott has made many comments and public statements to that effect. Such a step is of course right in principle. We should hang our head in shame that we all belong to the most unprincipled and avaricious species in nature. Sadly, man is what he is at the present time. It is obvious when one reads all the papers that there is no hope, there is not a single chance, of getting universal agreement to the creation of a world park now.
I want to reassure people like Peter Scott and all those who support him that we are merely being pragmatic. We have to be pragmatic because I

935
believe that the Antarctic may well become a natural world park one day. I emphasise "one day" because at times over the last 40 years it has been a lonely road for conservationists; yet today most people in the world are alert and exercised about all aspects of environment. I fear that it is due not so much to principle or conscience but to pure fright. Few worried overmuch about destruction of habitat, marine pollution, acid rain, and so on, but when the threat to the atmosphere hit the headlines and people suddenly realised that one day future generations might not be able to breathe, everyone was stopped dead in their tracks and wanted to know more.
The remarkable transformation in public attitudes over only 40 years has exceeded any conservationist's wildest expectations. Suddenly, conservation of environment and protection of habitat has become the in thing, a rolling world-wide movement. If human attitudes can change to that extent over the last 40 years, I predict greater change and yet more enlightment over the next 40 years. If the growth in enlightement or, if you prefer so to call it, just fright and fear increases at only the same rate, world opinion—the will of the masses in all parts of the globe—may conceivably forbid the exploitation of the Antarctic in the 21st century. World opinion needs time, but is consolidating fast. The Antarctic, as has already been said, is a very sensitive part of the globe and crass mismanagement could occur unless the nations in the convention are very careful.
Since I suspect that it may not be feasible, commercial or economic to mine mineral or get oil from the Antarctic possibly within 40 years or at the earliest 20 years, it seems to me likely that the world—as we so presumptuously call ourselves—may well have turned against fouling up the Antarctic before the exploiters start to operate. Governments may then be obliged to restrain the exploiters. The Bill at this point is therefore simply essential to provide some ground rules and control well in advance before any reckless or ill-conceived activities can occur in the meanwhile.
The more time that we allow to pass the more difficult it may become to provide ground rules and put controls and restraints into place. It will be much more difficult to introduce legislation after a country or industry has foolishly started activities. That could lead to the break-up of the convention, as has been said. We should then have the worst of all worlds. The Bill is the best step that can be taken at present. The Bill—I shall press this with my conservation colleagues elsewhere—in my view is not an exploiters' charter, but by introducing strict ground rules it may well discourage them.
Conservationists need and should never give up the campaign to preserve the Antarctic. They should see the Bill as a useful instrument through which to monitor the convention's success or otherwise, especially in supervising environmental impact effectiveness. I therefore commend the Bill to the conservation movement.
I congratulate the Government on taking this expedient step. I am delighted to add congratulations to those already expressed by the noble Lord, Lord
936
Cledwyn of Penrhos. However, I impress upon my noble friend that it will not be such an easy ride when we start talking about exploration and development. In view of the panic that may then be around the globe, it may possibly never happen.
7.35 p.m.
Lord Shackleton: My Lords, like the noble Lord, Lord Glenarthur, I have just come back from the celebration of the 25th anniversary of the founding of the European Space Agency. It is not so unrelated to the Antarctic as noble Lords may think. Indeed, when I initiated a debate over 30 years ago asking Her Majesty"s Government to sign the convention for the Antarctic treaty, we visualised it perhaps as an initial practice against the time when the problems of sovereignty in space would arise. I shall not follow that now, however.
The Bill is not simply about minerals; nor is it simply to prevent mineral development or to encourage it. It is to maintain the peace of the Antarctic. This is a crucial point. It was the original purpose of the Antarctic treaty.
When I initiated the debate 30 years ago in an Unstarred Question, we had more time. I am appalled to find that I spoke for 45 minutes on that occasion. I shall not follow the precedent that I then set. Indeed, when the right reverend Prelate the Bishop of Norwich introduced the Bill that gave effect to the Antarctic treaty the debate was long, with many noble Lords taking part, among them the noble and learned Lord, Lord Denning.
The Bill is continuing the process that was developed in the setting up of the Antarctic treaty. Here was a continent in which shots had actually been fired and the Argentine, Chile and Britain had made overlapping claims. It seems an absolute miracle to have that treaty. My noble friend Lord Cledwyn of Penrhos paid tribute to the officials who have been responsible. I remember in those days people like Brian Roberts. This is being continued by officials like John Heap and others who know the Antarctic treaty and are themselves committed conservationists.
I am very glad that the noble Lord, Lord Buxton of Alsa, made that speech so that conservationists like my friend Peter Scott, whom I know is worried about the Bill, will recognise that it is far and away the best that can be achieved. I do not believe that it is possible—much as one would like to see it—to have the Antarctic as an area of total conservation. Unless there is agreement and a power to regulate, there are real dangers not just to the environment but to the peace envisaged and achieved through the Antarctic treaty.
The Antarctic treaty does not solve the problems of sovereignty; it gets round them. As to the experience of the operation of the Antarctic treaty and the co-operation achieved by countries such as the Argentine, the great majority of countries in the world, China, Russia, and many small countries, are signatories to the treaty. This development is a further contribution to peace.
Like the noble Lord, Lord Buxton of Alsa, I have been to the Antarctic. Three years ago I had the

937
tremendous luck to go to McMurdo Sound and to see Scott's hut and my father's hut that the New Zealanders are trying to conserve. With American help I was able to go the South Pole and, above all, to see the incredible beauty of the Antarctic. The one thing that one would like to do is preserve it. Thirty years ago it was already threatened by tourists.
The Bill is only one measure. There will have to be other measures to regulate tourism in the Antarctic. I do not think we can regard this as the answer to the problems for ever, but it is a useful step in the right direction. I wish that noble Lords on all sides of the House could see how lovely it is. I prefer the Antarctic because I suffer from seasickness and there you do not have to undertake such an amount of sea travel. Now that you can fly to the Antarctic it is a tempting place for tourism. That business needs to be regulated also.
There are a number of legal points that will need to be looked at during the Committee stage. Perhaps the noble Lord may care to make some comment. We have had some very interesting comments from Lady Fox of the British Institute of International and Comparative Law as regards the extent to which some of these measures are secret or provide for secrecy even at the prospecting stage. As someone who has been involved in the minerals industry, I know that you do not keep mineral discoveries secret for very long whatever the secrecy laws have to say on the matter. I shall be grateful if the noble Lord will comment on this and also on the application of law within the English courts without comparable regulations. It may be that that particular proposal has been misunderstood.
There are similar points that I hope the noble Lord will refer to, since otherwise we shall have to have a fairly detailed Committee stage in order to consider them. When it comes to the conclusion of what views we should take, I say that this measure is a real contribution to peace. I believe that it was Dick Laws, the Director of the British Antarctic Survey, who called the Antarctic a continent for science. Everybody is now aware of the importance of that continent for science. I pay tribute to the Prime Minister herself, who has strongly supported— sometimes with others who are not so keen on Antarctic research—the research that is so valuable in that area and which has to continue. I do not believe that the Prime Minister has done that for any party political purposes.
The British Antarctic Survey carries out by far the most cost-effective and efficient research of any country in the world. We are pre-eminent in this and great tribute should be paid to the work. I should like to continue for the further 40 minutes that I had 30 years ago, but it not possible. I remember a colleague in the other place who travelled a great deal. He wanted to get his lecture printed so he used the whole of an adjournment debate in order to get Hansard to print it. He then brought the reprints of it. I believe that the noble Lord, Lord Cledwyn, will remember that. I do not intend to do that.
I want to conclude my remarks by emphasising the importance of the agreements. I particularly wish to make a few remarks on the comments made by
938
governments, including those who were consultative members and those who were not concerning the signing of this convention. I was particularly struck by the statement of Mr. Alberto Daverede, the Argentine representative and the head of the delegation. The British, the Chileans and the Argentines were all rivals in claiming the same area of the Antarctic. I do not believe that the British will ever make good their claims and I do not really mind. I want the British down there because they help to keep the peace.
Mr. Daverede said:
"Mr. Chairman, today we have come to the end of a long journey, having achieved the adoption of a Convention that constitutes a real challenge to the imagination. We are sure that the system established in the Convention will contribute to the strengthening of the Antarctic Treaty, to which it will be subordinated and of which system it will form an integral part. We believe that, as for other components of the Antarctic Treaty system, we have obtained by consensus"—
I stress the word "consensus" because this is an agreement which could not have been achieved without consensus. Those who wish for more stringent measures endanger what has been achieved by consensus. Mr. Daverede continued:
—"an instrument that respects the premises of that Treaty in its entirety, and that therefore it will result in being acceptable to all the States that make up the system, without prejudice to their juridical positions towards Antarctica".
Bearing in mind that Argentina has passionate views about its Antarctic claims, that is a statement that deserves wide publicity. I am very glad to pay tribute to the Argentine delegation on this occasion.
There are many areas that we can talk about and particularly the question of publication of information which perhaps the Minister can briefly deal with. I commend this Bill to all noble Lords in all parts of the House as a most valuable contribution to peace as well as to conservation. I do not believe that anyone will go mining in the Antarctic. This is a pretty bureaucratic measure and it will be very difficult for people, under the rules and regulations, to see much attraction in mining in the Antarctic. I hope that, effectively, the Bill will achieve the result that the Antarctic is really a park of preservation and beauty.
7.46 p.m.
Lord Craigton: My Lords, my noble friend Lord Buxton spoke of those who object to this Bill. Some would like to see a complete ban on exploitation for any purpose of the Antarctic. Five times between 1972 and 1979 the Antarctic Treaty consultative powers tried but failed to agree to a moratorium on the exploitation of Antarctic minerals. I agree with my noble friend Lord Buxton because I too am a conservationist. I have been chairman of the All-Party Conservation Committee of both Houses for the past 17 years. I too am a friend of Peter Scott and we all feel the same way. My noble friend has expressed absolutely what we feel.
I agree entirely with the provisions of this Bill, which now limits prospecting for minerals so that we can know whether, if it has to be done, that it will be wise and safe to mine. My noble friend Lord Buxton spoke about the future. Who knows what the coming years may bring? Minerals from the

939
Antarctic may benefit man but we must know whether the environmental risks will be acceptable. That we cannot know unless we have obtained the facts which this Bill will obtain for us. The noble Lord, Lord Cledwyn, spoke of the "Exxon Valdez", which ran aground in Prince William Sound and fouled 16,000 square miles of water and 800 miles of shore. A lesson like that will help to ensure that the environmental impact assessment which I understand must accompany every application to prospect will include the immediate availability of disposal equipment. If I am wrong about that, I hope the Minister will tell me. I believe that that answers the question of the noble Lord, Lord Cledwyn.
Given these risks, the convention is without doubt the strongest measure for environmental protection that has ever been included in an international agreement. If on any point there is no agreement by consensus then there is no decision at all. Unlike fishery agreements, where a harmful activity continues unless it is decided that it shall be modified or stopped, this activity cannot even start unless the promoters can show that their proposed actions will not cause significant environmental damage.
I now turn to the Bill. As the Minister said, the important provision is the prohibition of all Antarctic mineral mining activity by British interests except prospecting activity as authorised, as a member of the convention, by the Secretary of State, who must be satisfied that such prospecting will not injure the environment. Here, the vigilance of the non-government organisations, the voluntary bodies, will be essential in guiding the Minister. The representation on the convention itself of the non-government organisations is limited by Article 34 to observer status only, and then only to those NGOs which are international. I hope the Minister will assure us that, so far as is within his powers, our representation on the commission and advisory committee will press the claims of such as the Worldwide Fund for Nature and the ICBP.
This Bill and the convention concern only the mineral exploitation of the Antarctic. Considering the costs involved and the nature of the terrain, it is unlikely that mining, if it takes place at all, will happen for many years. The convention originates from the Antarctic treaty, which does not deal with resources, whether living or mineral. The treaty powers wisely saw the need for a closer control here than it gave them. So for the foreseeable future the world must rely on the Antarctic treaty which, while ignoring territorial claims—or putting them in the fridge, as the noble Lord said—now deals with environmental protection, telecommunications, meteorology, transport, tourism and protected areas. Furthermore, only members of the Antarctic treaty can be members of the convention.
So though the convention is essential to the protection of Antarctica, it is the Antarctic treaty that matters perhaps even more to the peoples of the world, and that includes us. Considering the importance to us of the Antarctic treaty I am surprised to find that Clause 14 of the Bill, a clause that in no way relates to the implementation of the Antarctic Minerals Convention, has been put in to
940
achieve a minor tidying up of jurisdiction which has up to now been the responsibility of the Falkland Islands. I understand that the Antarctic treaty laws are due for revision. If that is so, Parliament should be able to consider such revision in its entirety, including Clause 14. Will this lessening now of a small measure of responsibility be understood by the Falkland Islanders?
It is not as though there will be an immediate flood of potential troublemakers into the area. Even the preparation of the environmental impact assessment and detailed arrangements for prospecting will take a considerable time. I can see no justification for introducing this irrelevant and minor provision into this important Bill at this time, unless of course the Minister can assure us that no other revision of the Antarctic treaty laws is necessary or intended within the next two or three years, in which case I gladly withdraw my objection.
7.53 p.m.
Lord Morris: My Lords, I congratulate the Government on their wisdom and expedition. The convention was drawn up in Wellington on 2nd June 1988 and was signed only recently by the Government. The time from signature to the drafting of the Bill shows what can be done where there is a political will. I congratulate the Government on the expedition with which they have brought the Bill to the House. It is none other than a domestication of a treaty obligation, and as such is extremely welcome. I cannot do better than support the points made by the noble Lord the Leader of the Opposition, the noble Lord, Lord Shackleton, and my noble friend Lord Buxton. In the short time available to me I should like to ask my noble friend two short questions which will no doubt do nothing other than demonstrate ignorance on my part but which might save time in Committee.
As I understand it, the South Orkney Islands are approximately 1 degree south of latitude 60 degrees south and presumably come within the ambit of the Bill and of the Antarctic treaty. I refer of course to Laurie Island, Powell Island, Coronation Island and Signy Island. Allied to that point I should like clarification with regard to the definition in the Bill of the term "Antarctica". I understand that the treaty obligation covers all land to the south of latitude 60 degrees south. However, the Bill itself speaks of,
"all areas of continental shelf which are adjacent to that continent or those islands".
What precisely does that mean? It refers of course to the continent of Antarctica. Would this impinge on South Georgia? I do not think that it would but it might do.
I welcome the Bill and again congratulate the Government on the expedition with which they have brought it forward. I also congratulate the experts who have done everything they can to assist the Government in that excellent endeavour.
7.57 p.m.
Lord Glenarthur: My Lords, I am grateful to noble Lords who have taken part in the debate for giving the Bill such a good welcome. It has been a useful

941
debate and has highlighted a number of important points to which I shall return in a moment. Perhaps I may begin by apologising for going into the Bill at such length but I felt it was important to set the scene for it. I hope that noble Lords will have borne with me for that. I hope also that that explanation has given some reassurance about some of the intricacies and reasoning that lay behind it.
I am grateful to the noble Lord, Lord Cledwyn, for his plaudits for those in the Foreign and Commonwealth Office and in New Zealand who have done so much to take forward the whole process. I am grateful also to my noble friend Lord Buxton for his understanding of why the Bill is necessary and for his magnanimous endorsement to the conservationists of what the Bill is all about. I too am very much a conservationist and share much of the thought which lies behind his remarks. The noble Lord, Lord Shackleton, paid a sound tribute to the Antarctic survey, for which I am grateful as I am sure it will be, and to my right honourable friend the Prime Minister for the role that she has played.
The noble Lord, Lord Cledwyn, and my noble friend Lord Craigton asked about the environmental impact assessment. This is a most important point. I can assure both noble Lords that environmental impact assessments will be required before any licence is given.
The noble Lord, Lord Cledwyn, asked me about the New Zealand proposal for a world park. My noble friend Lord Buxton endorsed this as a possible solution to the problem. I agree that it is an interesting concept. I think that there are those who feel that perhaps such a suggestion was based more on emotion than on a rational or scientific approach. We do not accept that world park principles are necessarily irreconcilable with utilisation of Antarctic resouces. The purpose of the Antarctic Treaty system is to ensure that utilisation is pursued rationally. That is an important point. The Antarctic comes close to any practically conceivable world park, so far as any of us can possibly imagine.
As regards the important point about the environment and acidents, which is so very topical at present following the tragic accident in Alaska, there will always be a risk of such things happening. The convention requires that,
"technology and procedures are available to provide for safe operation and that there exists the capacity to respond effectively to accidents, particularly those with potential environmental effects".
Both my noble friends Lord Buxton and Lord Craigton referred to that fact; indeed, they referred to it in the context of the accident in Alaska. There is always the human element to contend with in any accident. However, I think that the convention goes so far as it can to avoid environmentally damaging consequences.
Lord Shackleton: Perhaps the noble Lord will allow me to intervene. I hope that he will bear in mind the point I made that it is not only mining which is threatening the Antarctic. That is probably the least of the threats. Although this does not come under the Bill, recent accidents show what risks humanity creates and the dangers in the Antarctic.
942
Therefore, I hope that some further action will be taken on the whole question of access to the Antarctic and to tourism. On that matter I do not believe that those who advocate not signing the convention make any contribution to the conservation of the Antarctic.
Lord Glenarthur: My Lords, I entirely take the noble Lord's point. I visited Christchurch about a year or so ago; I was given a thorough briefing there by the New Zealand authorities on the concerns they had about such matters. There are a whole range of different aspects which could have an impact. I think that the noble Lord is on to a very good point.
Perhaps I may clear up one point in connection with the idea of a world park—although it is not the same one—which was raised by the noble Lord, Lord Cledwyn. The point dealt with the United Nations' control of Antarctica. I must say to the noble Lord that the Antarctic Treaty has worked effectively now for over a quarter of a century. United Nations' moves to replace the treaty might risk unravelling demilitarisation and nuclear control provisions. When it comes to UN resolutions, it is possible that they could be prejudicial to the good management of Antarctica. It is not the United Nations' role to oversee international treaties negotiated outside its ambit. We and the treaty partners have registered our common disapproval by taking the unusual step of not paticipating in successive UN General Assembly votes on the matter.
The noble Lord, Lord Cledwyn, raised many points. One of them concerned the way in which ratification would come about. Assuming that by "ratification" he means entry into force, perhaps I may say to him that the treaty will enter into force when 16 out of the 20 consultative parties which participated in the adoption of the convention have ratified it. The 16 ratifications must include all those countries which assert claims to territorial sovereignty in Antarctica, together with the United States, and the Soviet Union. The 16 must also include five developing and 11 developed countries. Those who have signed so far are Argentina, Brazil, Chile, Denmark, Finland, the Republic of Korea, New Zealand, Norway, Poland, South Africa, Sweden, Uruguary, the USA, the USSR and the United Kingdom. The fact that the convention was adopted by consensus leads the Government to expect that other governments will sign in due course.
When the noble Lord asked whether everything possible was being done to strengthen environmental controls outlined in the convention, I can tell him that for the time being, and until the convention enters into force, nothing can be done under the convention itself. However, that is not to say that nothing can be done. Environmental impact assessments—which I have already mentioned—play an important part in the convention. Such assessments are also required under the Antarctic Treaty. The Government have prepared the first of such assessments in relation to proposals to build an air strip at Rothera, a British Antarctic survey station. The assessment has been circulated to all

943
Antarctic Treaty consultative parties for comment and it has been made available to the NGOs for comment. The Government place considerable importance on those procedures and believe that further use of them by Antarctic Treaty governments will develop consciousness and experience in such provisions and procedures and will indirectly strengthen the environmental controls of the convention.
It has been suggested that the statutory maximum of a £2,000 fine is too low. Under Clause 10, that is the penalty for summary convictions—that is to say, minor cases. I hope that the noble Lord will be reassured if I tell him that in serious cases Clause 10 provides for unlimited fines for conviction on indictment. As regards countries, organisations or individuals transgressing the convention, and also in relation to the matter of regulating multinationals, perhaps I may say to the noble Lord, taking both topics together, that each minerals operator, including a multinational company, must have a sponsoring state under the convention. It is the responsibility of the sponsoring state—that is, the state with which the operator has a genuine connection through being subject to its jurisdiction and control—to ensure compliance under its law. The Bill provides the necessary licensing powers and criminal penalties to enable the United Kingdom to control its own operators and to deal with those who breach the convention.
The noble Lord, Lord Shackleton, who has enormous experience, both personally and through family history by virtue of his father's work, concentrated—rightly, to my mind—on the international aspects of the Bill and the reasons lying behind their importance. I very much endorse what he said in respect of the Bill. The noble Lord said that it was about keeping the peace; indeed, that is an all-important aspect of which we must not lose sight. He asked for clarification of the effect under our domestic law of measures adopted by institutions established by the convention. He also asked whether such measures would be accessible and published. Indeed, he referred to them as perhaps being secret, and I am most grateful to him for giving me notice of those points.
The Bill would not make such mesures automatically part of UK law, nor would it make breach of such a measure a criminal offence. No such offence is included in the list of offences created by the Bill under Clause 10. The Bill provides various means by which the Government may secure compliance with measures adopted under the convention which constitute international obligations of the United Kingdom. For example, if the minerals commission adopted a binding measure prohibiting prospecting activity in a particular area of Antarctica, the Secretary of State could give effect to it under our law in a number of ways. He could do so by means of regulations under Clause 6(1)(b); or he could incorporate the prohibition in a condition of a prospecting licence under Clause 3, or by varying an existing licence condition under Clause 4; or, especially in an urgent case, he could issue a direction under Clause 7. An offence would only be committed
944
if there were then a failure to comply with the regulations, the licence condition or, as the case may be, the direction which implemented the commission measure by virtue of Clause 10(1)(d), (c) or (e) respectively. No offence would be committed if the commission measure had not been given effect in United Kingdom law in one of those ways. I hope that that information is useful to the noble Lord.
As regards publicity and accessibility to commission measures, none of course yet exists, but we envisage that they would be published by the Government and laid before Parliament as Command Papers. That is already the practice for measures adopted under the Antarctic treaty at meetings with consultative parties.
As to the scope of Clause 9 and the disclosure of information, the clause reflects the balance achieved between competing interests in the convention, especially in Article 16. The industrial interest was to ensure that commercially valuable information should not be disclosed, at least for an initial period, while environmentalists and others would like the greatest possible disclosure.
Clause 9 will protect potential or actual licensees from the disclosure of information supplied by them except in the circumstances set out in subsection (2). One of those is paragraph (d), which allows disclosure,
"in accordance with the convention or regulations made under Section 6".
The convention requires a great deal of information to be supplied to the institutions, in particular the commission, and for such information to be made publicly available subject only to specific rules designed to protect commercially valuable information. That openness is obviously desirable and necessary if environmental effects are to be properly assessed.
Compliance with the convention will therefore lead to the disclosure of a great deal of useful information. Moreover, provided that regulations under Clause 6 are compatible with the convention, Clause 9(2)(d) will enable them to require or permit the disclosure of information where that is considered necessary or useful; for example, for environmental protection purposes. I hope that the noble Lord will be able to study those complex explanations. I should be delighted to clarify them if I can be of any further use to him.
My noble friend Lord Craigton questioned the inclusion of Clause 14 in the Bill, and asked for an assurance that no other revisions of the Antarctic treaty laws are necessary or intended within the next two or three years. I readily give such an assurance. Although the Antarctic treaty is open to review as from 1991, there is no obligation upon the parties to do so. Even if there were such a review, which is far from certain, we cannot yet predict whether there would need to be primary legislation to amend the Antarctic Treaty Act 1967. In those circumstances we thought it a sensible precaution to seek the powers provided in Clause 14. While I understand my noble friend's doubts, I hope that I explained in my earlier remarks the connection that Clause 14 has, if only indirectly, with the convention and the prospect of minerals activity in the British Antarctic territory. I

945
also pointed out that the Falkland Islands will remain an alternative venue for the trial of cases arising under British Antarctic territory law. I hope that that will have allayed my noble friend's concerns.
My noble friend Lord Morris asked whether the South Orkney Islands fell within the ambit of the Bill and the convention, in the general welcome that he gave the Bill and his remarks about the speed with which it has come forward. The answer in short is, yes. He asked whether the definition of the Antarctic and the continental shelf would include South Georgia. The short answer to that is, no. I could elucidate further, but I had better not delay the progress of the next piece of business.
In summary, the Bill will enable the United Kingdom to ratify the Antractic minerals convention to fill a gap within the Antarctic treaty system and to fulfil our commitment to the treaty. Following careful consideration, the Government are convinced that the convention meets our interests in strengthening the Antarctic treaty system as the guarantor of peace and stability in the region. It will adequately provide for the orderly regulation of any minerals activity that may take place there and protect the unique Antarctic environment.
I am grateful for the welcome the Bill has received. I understand the concerns which have been expressed on every aspect of it. I shall study with care the remarks that have been made. Again, I am grateful for the endorsement the Bill has been given. I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Companies Bill [H.L.]
8.15 p.m.
Consideration of amendments on Report resumed.
Clause 108 [Temporary restrictions on share dealings]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 148F:
Page 114, line 327, at end insert—
("(4M) Nothing in subsection (4A) of this section makes anything done by a person outside the United Kingdom unlawful unless he is—

(a) a British citizen, a British Dependent Territories citizen, a British Overseas citizen or a British National (Overseas),

(b) a body corporate incorporated under the law of the United Kingdom or of a part of the United Kingdom, or

(c) a person carrying on business in the United Kingdom, either alone or in partnership with one or more other persons.").

The noble Lord said: My Lords, the amendment provides for the extraterritorial application of the prohibition on share acquisitions following a merger reference. Outside the United Kingdom, it will apply only to the various classes of British citizens or United Kingdom companies and persons carrying on business in the United Kingdom. I beg to move.
On Question, amendment agreed to.
Lord Morris Lord Morris moved Amendment No. 148G:
After clause 109, insert the following new clause:
("Public Interest.
. In section 84(1) of the Fair Trading Act 1973 delete the words "among other things".").
The noble Lord said: My Lords, it is not often that one rises confident that one is moving an amendment that will be accepted by Her Majesty's Government. I am confident because all I am attempting to do is to amend the present law to fall in line with the apparent interpretation by the commission of its duties and functions within the law.
As your Lordships will be aware, Section 81(1) of the Fair Trading Act 1973 states that the commission,
"in determining for any purposes to which this section applies whether any particular matter operates, or may be expected to operate, against the public interest, the Commission shall take into account all matters which appear to them in the particular circumstances to be relevant and, among other things, shall have regard to the desirability",
of paragraphs (a), (b), (c), (d) and (e), which refer in the main to competition.
The noble Lords, Lord Williams of Elvel and Lord Lloyd of Kilgerran, in earlier discussions today, suggested that competition was the main prong of the functions and duties of the Monopolies and Mergers Commission. With respect, I believe that position is wrong because the competition element of the functions comes within "among other things"; in other words, at best it ranks in importance pari passu with any other relevant matters which appear to the commission to be against the public interest.
As recent history has made clear on numerous occasions, it is apparently the view of the Monopolies and Mergers Commission and Her Majesty's Government that the only matter that should excite the public interest is competition. I shall give one brief illustration. My noble friend Lord Erroll of Hale asked my noble friend the Secretary of State for Trade and Industry whether it was in the public interest to ensure that those who endeavoured to take over a company should be seen—in his colourful phrase—as squeaky clean. My noble friend's bland answer to that was, no. What he meant was that the question of probity was absolutely central to the public interest in the determination of whether a merger or takeover should be referred to the Monopolies and Mergers Commission.
That is the kind of issue which I believe is causing much concern in the country. However, since that is the position of Her Majesty's Government and appears to be the position of the Monopolies and Mergers Commission, I think that the only decent thing to do is to get the law right, to rewrite the law so that it is in line with that somewhat strange policy which Her Majesty's Government appear to be following. That is the effect of the amendment, as I see it, to delete the words "among other things" because Her Majesty' Government's view with regard to competition is not that it is "among other things", it is that it is the absolute central plank of their thinking. I do not feel that there is any matter of public interest which Her Majesty's Government wish to be considered other than competition. I beg to move.
Lord Williams of Elvel: My Lords, the noble Lord, Lord Morris, has drawn our attention to what I always thought was a drafting point. He has explained that it is not a drafting point but a point of central interest. I am bound to say that I have read Section 84 of the Fair Trading Act 100 times or 200 times in the course of my career. It has never occurred to me that the expression "among other things" inserted in it demotes the various criteria in Section 84 to matters which can be considered along with other things which are unspecified. It seems to me that the noble Lord has produced an amendment which the Government would do well to accept.
Lord Brabazon of Tara: My Lords, there were a number of discussions during the Committee stage about the public interest test set out in Section 84 of the Fair Trading Act. Many of your Lordships will therefore know that the section requires the Monopolies and Mergers Commission, in deciding whether something is against the public interest, to take into account all matters that appear to it to be relevant. It goes on to give a list of particular matters to which it must have regard. The list is inclusive, not exclusive. This amendment seems designed to remove the inclusivity so that the MMC would be required only to have regard to the desirability of those matters specified.
The list is quite wide-ranging: it includes maintaining and promoting competition, promoting the interests of consumers, promoting the development of new techniques and new market entry, maintaining and promoting the balanced distribution of industry and employment in the UK and promoting competitive exports. But it is not comprehensive, and was never designed to be. There will from time to time be matters which clearly concern the public interest but which are not mentioned here.
If I could mention one or two, there is the question of leveraging, which I know concerned some of your Lordships. The MMC looked at that in a case a couple of years ago and took the view then that the leveraging involved would not make the merger operate against the public interest. But this was a view on balance, as all its findings must be, weighing one factor against another. The amendment would make it difficult for the MMC— —
Lord Williams of Elvel: My Lords, I am sorry to intervene, but does "leveraging" come under the heading of "other things"? Is that what the noble Lord is saying?
Lord Brabazon of Tara: Yes, my Lords, that is what I am trying to explain. It is something which must or could be taken into account, and it was on this occasion. But this amendment would make it more difficult for the MMC to base an adverse public interest finding on a factor not listed here, and so less weight would be attached to such factors.
Another instance, about which I know my noble friend has been concerned, is evidence emerging from an inquiry under the Companies Acts. Given the interest of my noble friend in one particular case, I was in fact rather surprised by his amendment. As my noble friend the Secretary of State explained
948
during Committee, if such an inquiry were to reveal new material facts concerning a merger, he would have the power to refer the merger back to the MMC. He might or might not choose to exercise that power. But the effect of this amendment could be to hamper the MMC in assessing the public interest in the light of these new facts, if they did not fall under one of the existing factors. This would of course be relevant to my noble friend's consideration of whether to make a reference. There would be little point in his doing so if the MMC were then precluded from reaching an adverse public interest finding on the basis of these new facts.
Noble Lords will say that if there are other matters which could be relevant, let them be spelled out as well, so that the list is exhaustive. But no list of this kind can ever be exhaustive. Other matters will crop up from time to time to which it would be desirable to have regard. If I could tell your Lordships what they all were, we would not need the generality in the section at present. To return to leveraging, that is a relatively recent phenomenon; it would simply not have entered anybody's mind in 1973. I am sure that there will be others in the future, but by definition I do not know what they are. Naturally, since the references are usually made on competition grounds, that is what the MMC will look at, but it needs to be able to look at other factors, including benefits which offset any damage to competition.
The test as it stands has stood the test of time, and we need to be wary of making changes without very good reason. My noble friend's amendment, by making it harder for the MMC to take into account matters put to it outside those specified, would limit its flexibility to deal with new or unusual issues. It is difficult to see how that could help anyone, and I very much hope that, with the explanation I have given, my noble friend will feel able to withdraw the amendment.
Lord Morris: My Lords, of course I shall be able to withdraw the amendment. I am astonished that my noble friend thought that I would not be aware of the flaw in the drafting of the amendment. It was quite deliberate, in the sense that I had no intention whatsoever of limiting the ability of the Monopolies and Mergers Commission to look at these matters.
I merely wished to highlight the fact that it appeared that the commission did not look at these matters in the way that I read the legislation, as providing that it had a duty so to do. In light of what my noble friend and other noble Lords have said, I shall of course withdraw the amendment. However, I wish to state again that there is considerable concern that not only the City but Her Majesty's Government will bring themselves into serious difficulties if mergers are allowed to proceed at the same time as the Department of Trade and Industry is investigating matters under other parts of the statute. I believe that the matter needs to be looked into very carefully. With those short remarks, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
8.30 p.m.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 148H:
After Clause 109, insert the following new clause:
("Takeover bids

(1) The Secretary of State shall designate a Takeover Panel, (in this Act referred to as "the Panel") for the regulation of takeover bids and other general bids to the holders of securities or the securities of a particular class or classes of any United Kingdom public limited company.

(2) The Secretary of State shall choose the members of the Panel in consultation with the Governor of the Bank of England either as full time members or as part time members.

(3) The Secretary of State shall publish a Code of Practice setting out general principles relating to the functions of the Panel and the status and terms of office of such members and staff as is considered desirable in the prevailing circumstances.

(4) No appeal shall lie from the final decision of the Panel save that such decision may be subject to judicial review.").

The noble Lord said: My Lords, I feel that I ought first to say why I put down this amendment relating to takeover bids. There were two reasons. The action arose because of my careful reading of what happened at the Committee stage, particularly on 21st February and 6th March. A number of distinguished members of the Takeover Panel, like the noble Lords, Lord Elton and Lord Boardman, and the noble and learned Lord, Lord Roskill, spoke about its activities. I examined what they said very carefully, and that was my first reason for putting down the amendment.
The second reason was that the noble Lord, Lord Williams, and I had drawn the attention of the Government at certain times during the Committee stage to Article 6 of the thirteenth directive which, as I understand it, is under discussion. Under the heading "Supervisory Authority", Clause 1 says:
"Member States shall designate the authority or authorities which must discharge the functions specified in this directive".
I ought to have mentioned that I have read the speech of the noble Lord, Lord Cockfield, on 6th March to which I shall refer later. It may be helpful if I indicate the salient points of my amendment. The first subsection of my proposed new clause states:
"The Secretary of State shall designate a Takeover Panel".
That complies with what Article 6 of the thirteenth directive indicates. The first subsection continues:
"for the regulation of takeover bids and other general bids to the holders of securities or the securities; of a particular class or classes of any United Kingdom public limited company".
I say at once that I am in no way denigrating the work that has been carried out by the present Takeover Panel over the past 20 years, nor of course any of the members of that distinguished panel.
The second subsection of the proposed new clause states:
"The Secretary of State shall choose the members of the Panel in consultation with the Governor of the Bank of England either as full time members or as part time members".
The present position, I understand, is that the Takeover Panel is appointed by the governor general alone. Under the thirteenth directive it is suggested that member states should designate the authority or authorities which are to deal with this matter. Therefore it seems to me to be proper that, somehow or other, the Secretary of State should be brought
950
into these matters, and that he, in collaboration with the Bank of England, should choose the members. That does not go very far away from the present position, except that the Secretary of State is brought in as a kind of titular head, and he has to consult with the Governor of the Bank of England.
The third subsection of the proposed new clause of my amendment states:
"The Secretary of State shall publish a Code of Practice".
He would of course do that in collaboration with the panel. My amendment continues:
"setting out general principles relating to the functions of the Panel and the status and terms of office of such members and staff as is considered desirable in the prevailing, circumstances".
It concludes with the words:
No appeal shall lie from the final decision of the Panel save that such decision may be subject to judicial review".
I shall deal with subsection (4) in my proposed new clause first. I had thought that I had misunderstood what the noble and learned Lord, Lord Roskill, had said on the position of the Takeover Panel as regards judicial review. A number of attempts had been made, according to the noble and learned Lord, to undertake a judicial review of some of the decisions of the panel. I understood that it was not considered that judicial review would apply to the panel.
Having heard whit the noble and learned Lord the Lord Chancellor said in reply to a Question earlier this week, I think I am wrong about that, and from an informal talk I had with him during supper tonight, I believe he felt that, although judicial review is a creation of judges, it does apply to the panel.
I wish to draw attention to the words of the noble Lord, Lord Cockfield, when intervening in the course of a long discussion arising out of an amendment on takeover offers moved by the noble Lord, Lord Williams of Elvel. The noble Lord, Lord Cockfield, referred to the thirteenth directive and said:
"Without wishing to debate the directive in. detail, we must bear in mind that Community legislation applies to all 12 member states. It is one thing to have a voluntary system for ourselves, but there are very soon complaints about voluntary systems operated by other people. It is for that reason that we need at least a minimum framework of Community law. The thirteenth directive set out to provide no more than the absolute minimum framework that was required".—[Official Report, 6/3/89; col. 1295.]
Suggesting that the Takeover Panel should be designated by the Secretary of State, in collaboration with the Bank of England, seems to me to be appropriate in the present circumstances.
The next point to which I think it is worth while drawing noble Lords' attention is the speech made by the noble Lord, Lord Alexander of Weedon, as referred to in a recent copy of The Times. I apologise that I do not have the date of that article, but it appeared fairly recently. The article stated that the noble Lord highlighted:
"areas of potential conflict between European Commission proposals for policing takeovers and Britain's non-statutory system in which the Panel plays a central role"
The article was written by Mr. John Bell, the City editor of The Times. It quotes the noble Lord, Lord Alexander of Weedon, who describes Britain's takeover regime as:
" 'arguably the world's most effective'".

951
The article continues:
"Lord Alexander expresses confidence that a way forward will be found which leaves the essence of the Panel system intact".
In my submission, my amendment leaves the essence of the panel system intact because all I am doing is seeking to bring the Secretary of State, as a designated authority, to collaborate with the Bank of England for the appointment of the members of the panel.
In conclusion, I crave in aid what the noble Lord, Lord Hesketh, said as recorded in Hansard on 22nd March 1989, when your Lordships were discussing the matter of non-elected body appointments—known as "the Patronage Bill". I apologise for the fact that I did not notify the noble Lord that I was going to bring him into the arena, as it were, by this, but it will not be too dangerous for him. In closing the debate on non-elected bodies he said:
"I can only reiterate that we believe we have made a contribution towards reducing the number of quangos in the country".—[Official Report, 22/3/89; col. 726.]
Naturally, the noble Lord is speaking on behalf of the Government there. He continued at column 726:
"Further, we believe that there is a misconception that the setting up of bodies is in some sense undemocratic. The Government's actions give effect to the wishes of the people who elected them with a majority".
I pass over that fairly quickly, as noble Lords will expect. Now I come to the really crucial point in the noble Lord's speech which I crave in aid. He said, again at column 726:
"Moreover, the Government continue to be answerable to Parliament, and to the electorate, for what they do. That includes justifying the decision to set up new bodies and the appointments made to them".
If my amendment includes a new body, it is a new body which the noble Lord has approved. He has just entered the Chamber and is looking with astonishment at me. I assure him that I have been very kind to him and that I have supported wholly what he has said. I shall go down in posterity as having craved the support of a distinguished Minister of this Government. I am much obliged to him.
However, all I am suggesting in the amendment is that the Secretary of State should collaborate with the Bank of England. If we must call that a new body, let us do so. However, it is a reasonable new body and conforms with the basic framework of the thirteenth directive. I beg to move.
Lord Williams of Elvel: My Lords, we support the noble Lord, Lord Lloyd of Kilgerran, in his amendment. Before he started speaking, I had no idea he would pray in aid words of the noble Lord, Lord Hesketh. It was an intervention that I can only describe as almost divine that the noble Lord happened to enter the Chamber at the point at which the noble Lord, Lord Lloyd of Kilgerran, was praying him in aid. I am sorry that he is not going to take up his position on the Government Front Bench to respond to the points that the noble Lord made.
The arguments in favour of this amendment have been rehearsed a number of times. I cannot add to them other than to say that in our debate in
952
Committee we discussed the membership of the panel. It was significant that a number of noble Lords opposite, and indeed noble Lords to my left were members of the Takeover Panel, but I could not discover any member of the Takeover Panel on my Benches, or indeed on the Benches to my right. I think that there is a problem here which needs to be addressed. The Takeover Panel is not simply a City body composed of people who happen to be friends of the Governor of the Bank of England. It is meant to be a body which exercises a judicial and quasi-judicial function.
I hope very much that the Government will pay attention to what the noble Lord, Lord Lloyd, has said. Even if they cannot accept his amendment, I hope that they will indicate that there will be a widening of the membership of the panel to meet the arguments that we put forward in Committee and to make sure that consumers, employees and others have a proper voice on the panel.
8.45 p.m.
Lord Boardman: My Lords, I have to declare an interest as a member of the Takeover Panel. I am sorry that the chairman of the panel, my noble friend Lord Alexander of Weedon, has had to leave the Chamber and is unable to be here because I know that he wanted to take part in the debate.
I am surprised that the noble Lord, Lord Lloyd of Kilgerran, has introduced the amendment. It is a point of principle which was debated very fully in Committee and the amendment put down by the noble Lord, Lord Williams of Elvel, was overwhelmingly defeated when put to the vote. The issues that have been raised today were raised and debated on that occasion.
The second reason why I am surprised that the noble Lord, Lord Lloyd, introduced the amendment is that on this occasion he has gone even further than the noble Lord, Lord Williams, and introduced the Secretary of State. I should have thought that he would find the greater bureaucracy which would inevitably result even more offensive than the introduction of the SIB which the noble Lord, Lord Williams proposed.
The noble Lord expressed concern in Committee, as he has today, about the effect of the thirteenth directive. I am not sure that when he quoted my noble friend Lord Cockfield he quoted the part of the intervention which was most relevant. The point that worried him seemed to be that the directive would mean that the Takeover Panel as it now operates would cease to have an effective role. I suppose that there is no greater authority in this House on EC directives than my noble friend Lord Cockfield. He said:
"I am sure that once a directive is examined in detail it will be seen that it does not undermine the operations of the Takeover Panel. We went to quite extraordinary lengths to ensure that the Takeover Panel was left untouched as far as possible by the thirteenth directive".—[0fficiat Report 6/3/89; col. 1295).
I should have hoped that would have consoled the noble Lord in respect of that point.
Another point with which the noble Lord, Lord Lloyd of Kilgerran, was concerned at Committee

953
stage was that, according to the wording of Article 6 of the draft directive:
"the authorities and, where appropriate, the associations or private bodies referred to … must have all the necessary powers to ensure that this Directive is put into effect".
I should have hoped that the noble Lord would have recalled what my noble friend Lord Young of Graffham said at Committee stage. On that very important point he said:
"The SIB and the self-regulatory organisations have made it clear that their sanctions are available to be used against authorised persons who show themselves not to be 'fit and proper' by breaking the takeover code. They have adopted 'cold-shoulder' rules requiring investment businesses not to act for individuals or companies who the businesses have reason to believe will not comply with the code. They also have rules requiring authorised persons to co-operate with the panel's inquiries and investigations".—[Official Report, 6/3/89; col. 1300.]
The powers of enforcement of the Takeover Panel are substantial and in practice have proved to be very effective.
There remains a great deal of discussion on the thirteenth directive. I assume that those discussions are taking place between the Government and Brussels, and the Takeover Panel, the authorities in Brussels and the Government. I am sure that they are very sensitive discussions and I do not know what line they are taking. But it is right and important that we should have a system here that is not distorted by the thirteenth directive.
The point was made very forcefully by the noble and learned Lord, Lord Roskill, in Committee that the directive was not as powerful as the powers of the Takeover Panel. We believe that London, as a great financial centre, should have strict and well enforced rules, but those rules should include the degree of flexibility and power to adjust which is necessary to match the highly changing scene in the financial world.
There have been very few complaints. The appeals tribunal, on which the noble and learned Lord, Lord Roskill sits, has had to consider very few, if any, appeals. The noble and learned Lord pointed out that there is the possibility for judicial review. He referred to there having been three cases which have gone to judicial review: two were not accepted and one failed. The power for judicial review exists but the extent to which the appeals procedure has had to be invoked shows the acceptance by all parties—despite disappointments—of the fairness with which people believe assessment has been made.
The noble Lord, Lord Lloyd of Kilgerran, referred to appointments to the panel. He suggested that it was insufficient that they should be made by the Governor of the Bank of England. I do not know how the system works, but I am confident that the Governor would make appointments only after very full consultation with all interested parties. Appointments are made on a representative basis; for example, I serve on the panel as a representative of the clearing banks—the CLSB. Similarly, members of the panel represent the insurance industry, the CBI and similar bodies. I should have thought that representation was highly satisfactory.
Lord Williams of Elvel: My Lords, can the noble Lord say which member of the panel represents the Trades Union Congress?
Lord Boardman: My Lords, I do not recall seeing a representative of the Trades Union Congress on the panel. However, I stand open to correction and I am sure that the noble Lord will check whether or not that is the case. The panel's members represent a broad selection of people with knowledge and experience in the interests of those for whom the panel was set up, namely for the defence and protection of the investors.
I shall not go over the ground which was covered in Committee except to say that I believe that the panel does a very good job. It has that flexibility which is necessary in a changing financial scene. The noble Lord himself said that he had no cause to denigrate what the panel has done. There is the old saying, "If it's not broke, don't fix it". I believe that that applies here, provided one is not complacent. That is not the case; it is an evolving situation. Rules are changed and introduced to take account of developments in the financial market.
With all the prejudice of one who is privileged to sit on the panel now and again, I believe that it does a very good job. Let us not interfere with that unless we have some really good cause to do so. Let us leave it to try to work out with government, and with Brussels, how to meld in with the directive to make sure that nothing destroys the effectiveness of what I believe is an extremely effective panel.
Lord Lloyd of Kilgerran: My Lords, did not the noble and learned Lord, Lord Roskill, say that the Takeover Panel is at the present time actively considering fundamental changes in its procedures?
Lord Boardman: My Lords, no. I believe that I prompted the point that was raised; namely, that a working party had been looking at a whole variety of changes that may be necessary. Earlier in today's proceedings, reference was made to leverage bids. If such measures are introduced, it is necessary to look at the rules and see what changes are required in order to cope with them. This is a continuing process. There are a number of areas that have caused concern in the last year or so. I know that those matters are being reviewed. The panel is not making any fundamental changes of structure, but it is making sure that its rules evolve and develop to meet the changing conditions of the financial world.
Lord Morris: My Lords, my noble friend Lord Boardman took the noble Lord, Lord Lloyd of Kilgerran, to task for raising this issue at Report stage. With great respect, my noble friend is quite wrong to take issue with that. He has confused the rules of procedure for the Report stage of the Bill with those for the Third Reading of the Bill. The noble Lord is absolutely at liberty to bring in a new series of amendments which raise points related to the original point.
I support the amendment. I have a great deal of sympathy for those who say that there should be self-regulation rather than regulation by government. However, if one looks at the composition of the Takeover Panel, I do not think that one could blame the man in the street for coming to the conclusion that it certainly looks as though the City of London

955
has been judge and jury in its own courts. By that, I am in no way suggesting bad faith. Given that, as happened recently, the Takeover Panel came to a decision at 9 o'clock in the morning and the Government came to a totally different decision at 9.30 in the morning, it would not be a bad thing if the Takeover Panel had a good look at its procedures and practices—as it no doubt has a regulatory means of doing—and, above all, its membership. It must do so in an attempt to maintain the good name of the City of London, which is critically important, but which does not at the moment look too good if one examines the City press on a daily basis.
Lord Brabazon of Tara: My Lords, as noble Lords have said, we are back on familiar ground which was debated in Committee as to the status of the Takover Panel and the takeover code. The main purpose of the amendment moved then by the noble Lord, Lord Williams of Elvel, was that there was difficulty in running two systems—one under the Financial Services Act and one operated by the panel—in parallel. My noble friend the Secretary of State for Trade and Industry and other noble Lords with experience in these matters explained that in fact the arrangements for co-operation between the two systems worked excellently. The amendment before us now is not designed to tackle that issue. It provides for a Takeover Panel to be designated by the Secretary of State, not by the Securities and Investments Board. The panel would continue to operate outside the ambit of the Financial Services Act. However, the essential issue that noble Lords are asked to consider is the same as that discussed in Committee. It is whether there is a need to change the status of the panel from that of a voluntary body to one which operates under statute.
I recognise that the amendment of the noble Lord, Lord Lloyd of Kilgerran, has, in common with that discussed in Committee, the intention of maintaining the existing relationship of the panel with the courts, together with all the advantages which that entails. The Government believe that there are a number of reasons why it is unnecessary and undesirable to give the panel a formal basis under statute while attempting to limit the role of the courts.
The amendment is unnecessary for the reasons given by my noble friend the Secretary of State in Committee. The panel has operated effectively since it was established in 1968. It has gone from strength to strength under the chairmanship of my noble friend Lord Alexander of Weedon and I am sure that it will continue to do so under its new chairman when he takes office. I am sorry that my noble friend Lord Alexander of Weedon was not able to stay for this part of the debate. There is no need to give the Secretary of State responsibility for the membership of the panel or for the general principles that it operates under. The members of the Takeover Panel are appointed on a non-party basis and the general principles of the takeover code are expressly designed to carry out the purpose of protecting the interest of shareholders. Bringing the panel under statute will not make the system work any better than it does at present.
956
The absence of any need for a change in the system would, of itself, be a sufficient argument against the amendment. I believe, however, that the consequences of the amendment could in themselves be undesirable. The difficulties relate principally to subsections (3) and (4) of the proposed new clause. Subsection (3) proposes that the Secretary of State should publish a code of practice setting out general principles. The assumption is that the panel would then make rules which are consistent with the general principles. The general principles may address not only the type of conduct to be followed in takeovers, but also the status of the members and staff of the panel. Nothing is said, however, as to the legal effect which either the code or any rules will have; they might be legally binding or they might not. They might give rise to actions in the courts if they are breached or they might not. Their status is left wholly unclear and that is undesirable in itself.
Lord Lloyd of Kilgerran: My Lords, in subsection (4) of my amendment, I say:
"No appeal shall lie from the final decision of the Panel".
That would therefore limit any court action. I withdrew the second part of that provision, to the effect that it was not necessary to include the fact that the panel should have been the subject of judicial review. I misread what the noble and learned Lord, Lord Roskill, said. However, legal matters can come to an end. There are no court proceedings, except judicial review, which can lie from the final decision.
Lord Brabazon of Tara: My Lords, I was just about to come to subsection (4) which is an attempt to constrain the ability of the courts to intervene on panel decisions. The important point is that the subsection would not necessarily achieve its apparent objective of preventing tactical litigation during takeovers. The Court of Appeal has set itself guidelines as to how it will consider applications for judicial review of panel decisions. It has constrained itself from attempting to reverse decisions made by the panel. It is not simply a matter of attempting, as the amendment does, to limit the role of the courts to that of judicial review. The crucial question is the extent to which, if the arrangements proposed by the noble Lord were adopted, the courts would, in undertaking judicial review, be disposed to reverse panel rulings. I hope that that explanation clarifies the point about which the noble Lord was concerned.
I do not think, therefore, that it is possible to be confident that the amendment or any similar provision would be successful in preventing tactical litigation during takeovers. Given the fact that the current system operates well, and that the new clause would add nothing of benefit to it, I do not see the justification for running the risk of upsetting the prevailing approach of the courts to takeover regulation.
Perhaps I may deal briefly with the 13th directive to which the noble Lord, Lord Lloyd of Kilgerran, and my noble friend Lord Boardman referred. The effect of the directive on the Takeover Panel was discussed in Committee where my noble friend the Secretary of State made clear our view that the

957
directive should allow for non-legally binding rules. This is something that we shall continue to discuss with the Commission and with other member states. The comments of my noble friend Lord Cockfield in Committee have been quoted. He noted in Committee that it was premature to be discussing implementation of the directive. There is a long way to go in Brussels before a text of a directive can finally be agreed. It would be curious for Parliament to attempt to legislate for a Commission proposal which has not even been considered by the Council of Ministers, let alone adopted.
I believe that the amendment takes us no further than the one discussed in Committee. It does not avoid the pitfalls of the previous amendment, nor does it add anything beneficial to the existing system of regulation. The question for noble Lords is essentially the same as that which was answered by the Committee. Is there a case now for tinkering with a system which has and continues to operate well? The answer is that there is not.
Lord Lloyd of Kilgerran: My Lords, I am sure that the House will be grateful to the noble Lord, Lord Boardman, for having given us his valuable time, staying behind after dinner to explain once again what an admirable organisation is the Takeover Panel. I am sure that his one voice is equivalent to the voices of all the members of the panel who were present earlier but found other more important matters to deal with than speaking about this panel. However, when any cause has a champion such as the noble Lord, Lord Boardman, who else is wanted to support it?
The Minister of course is confused by what was said by his Secretary of State on another occasion for other reasons on a totally different amendment. My amendment is quite different from the one put forward by the noble Lord, Lord Williams. Other than saying that the Government did not want to take the risk of upsetting the panel, the Minister made little contribution to the scope of my amendment. It is interesting to note that the only difference in my amendment in relation to the panel is that the Secretary of State should be involved. The Minister obviously feels that there would be a great risk of upsetting the panel if the Secretary of State were brought in, as I have said, in a consultative capacity.
I am very grateful to the noble Lord, Lord Morris, for his support and am equally glad of that of the noble Lord, Lord Williams. The noble Lord, Lord Morris, indicated one aspect of the views of members of the public in regard to the City. I do not subscribe to all those views but feel that, if the Government could have taken more time to consider my amendment, irrespective of what was said at Committee stage, they would have found it to be a very good measure in the public interest or at least would have had some sympathy with it.
I was glad to hear the Minister and the noble Lord, Lord Boardman, say that they are looking forward—I think that that is the right word to use—to the directive being considered again and that they will be collaborating with the Secretary of State and EC officials in trying to improve (if that
958
is possible) the Takeover Panel. I hope that in those circumstances they will have some regard to my words and those of the noble Lord, Lord Williams, in this field. I do not propose to delay the House any longer. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9 p.m.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 148J:
Page 117, line 39, at end insert—
("(11) References in this section to Part V of the Fair Trading Act 1973 and to merger references under section 64 or 75 of that Act or under that Part include sections 28 and 29 of the Water Act 1989 and any reference under section 29 of that Act.".
The noble Lord said: My Lords, this amendment brings water mergers referred to under the new provisions of the Water Bill within the scope of the fees provisions. I beg to move.
Lord Williams of Elvel: My Lords, I wonder whether the noble Lord can tell the House whether it is proper to refer to the Water Act 1989 when in fact there is a Water Bill before this House?
Lord Lloyd of Kilgerran: My Lords, it is not the same thing. It refers to the Water Act but there is no such measure as the Water Act. It might be possible to say what is in the Water Bill of 1989 but not what is in the Act. In any case amendments will be tabled to modify Section 29 of that Bill, not that Act.
Lord Brabazon of Tara: My Lords, I can assure the House that it is certainly not the first time that a measure of this kind has been put forward before a Bill becomes an Act. It is quite common. I cannot personally remember the last time that I experienced it but I have certainly known it to happen. Obviously it is just a matter of convenience to do this at this stage now rather than waiting for something else to happen.
Lord Williams of Elvel: My Lords, before the noble Lord sits down can he tell us how he knows that they will be Sections 29 and 30 of the Water Act? Many new clauses may be put into the Bill in this House, Can he explain how it happens that "1989 c. 00" appears in the rubric?
Lord Brabazon of Tara: My Lords, certainly I cannot explain the last point made by the noble Lord, no. However, I imagine that if the sections of the Water Act change it will be possible to make amendments to this Bill to take care of it.
Lord Lloyd of Kilgerran: My Lords, before the Minister sits down again does he agree that it would be a good idea to withdraw this amendment?
Lord Brabazon of Tara: My Lords, there will be a Water Act by the time this Bill is passed. If the section number is changed by the insertion of other clauses, the number in this Bill will also be changed.
On Question, amendment agreed to.
Schedule 15 [Amendments about mergers and related matters]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 148K:
Page 206, line 42, at end insert—
("4A. In section 67(2)(a) of that Act. for the words from "any enterprise" to the end there is substituted—

"(i) any enterprise which remains under the same ownership and control, or

(ii) if none of the enterprises remains under the same ownership and control, the enterprise having the assets with the highest value, and").

The noble Lord said: My Lords, this amendment clarifies the meaning of part of Section 67(2)(a) of the Fair Trading Act relating to the value of assets taken over.
As many of your Lordships will know, a merger qualifies for investigation under the Fair Trading Act if it creates or enhances a 25 per cent. market share, or if the assets taken over exceed a certain amount—at present £30 million. Section 67(2)(a) indicates how the assets taken over are to be calculated. In most cases, it is a matter of deducting from the total assets involved those of any enterprise which remains under the same ownership and control. This reflects what happens in most mergers, where ownership and control of one or more enterprises is transferred to one or more others whose ownership and control is unchanged.
Sometimes, however, it is more complicated, and none of the enterprises remains under the same ownership and control. This occurs in particular when partnerships merge, as a new partnership is then created out of the old ones, so none of the merging partnerships retains its original identity. The section therefore provides a different method of calculating the assets taken over, where no enterprise remains under the same ownership and control. This is not often the case, so the alternative method of calculation is seldom used.
It has been pointed out to us that the wording of this section in this respect is ambiguous, owing to the way it is set out and punctuated. On one interpretation, the assets of the largest single enterprise alone are looked at. This view has been adopted in certain cases in the past but has the effect of catching takeovers of, for example, very small partnerships by very large ones. We very much doubt whether this was what was intended when the Fair Trading Act was passed. On the other interpretation, the assets taken over are calculated by deducting those of the largest enterprise from the total assets. This is the interpretation that we believe was originally intended. It is the one which we are now applying, and this amendment simply puts it beyond doubt. It provides a small but useful clarification of the Fair Trading Act. I beg to move.
Lord Williams of Elvel: My Lords, will the noble Lord tell us whether ownership and control is defined by Part I or Clause 103 of the Bill?
Lord Brabazon of Tara: My Lords, no. I shall have to write to the noble Lord.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 148L:
Page 207, line 19, at end insert—
("8A. At the end of section 76 of that Act there is added—
"(2) In exercising his duty under this section the Director shall take into consideration any representations made to him by persons appearing to him to have a substantial interest in any such arrangements or transactions or by bodies appearing to him to represent substantial numbers of persons who have such an interest." ').
The noble Lord said: My Lords, I have spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 148M:
Page 210, line 7, at end insert—
("(2) The Monopolies and Mergers Commission (Performance of S.I. 1989/122. Functions) Order 1989 shall have effect as if sub-paragraph (1) above had come into force immediately before the making of the Order.").
The noble Lord said: My Lords, the Monopolies and Mergers Commission (Performance of Functions) Order 1989 reduced the minimum size of groups appointed to carry out MMC investigations from five to three. Your Lordships may recall that, when my noble friend Lord Strathclyde moved the approval of the order, he explained that it did not extend to references made under the Telecommunications Act 1984. This was because the power to amend Schedule 3 to the Fair Trading Act, which deals with MMC procedures, by order was not applied in the Telecommunications Act. This omission is rectified by paragraph 21 of Schedule 15 to the Bill. I beg to move.
Lord Williams of Elvel: My Lords, noble Lords will be aware that when the order was first moved by the noble Lord, Lord Strathclyde, in Committee I opposed the reduction from five to three. I opposed it in Committee; and I oppose it even under the new dispensation for British Telecom. I oppose it now. I feel that the Monopolies and Mergers Commission, which is now required to conduct industrial policy more or less across the whole range of industry in this country, should have a proper balance. A proper balance means more than three on a panel.
The noble Lord, Lord Strathclyde, will be aware that we went though these arguments in Committee. I shall therefore not detain the House any further. However, I do not believe that the Government have got this right.
Lord Brabazon of Tara: My Lords, I am well aware of the concern of the noble Lord, Lord Williams, about this matter. However, I am sure that the noble Lord would agree that it would be undesirable to have an anomaly of this kind in this instance which would mean that the change extended to all references made to the MMC with the sole exception of those under the Telecommunications Act. The amendment merely removes that anomaly. I hope therefore that, although the noble Lord may not agree with the principle, he will recognise that it would be silly to leave an anomaly in this instance.
Lord Williams of Elvel: My Lords, before the noble Lord sits down, will he not agree that it is better to remove the anomaly in the other direction by reinstating the five place of the three-member panels?
Lord Brabazon of Tara: My Lords, no. This issue has been debated at some length. That would be a matter of—I am searching for the expression—the tail wagging the dog. I shall leave it there. The noble Lord knows what I mean.
On Question, amendment agreed to.
Clause 113 [Introductory]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(1):
Leave out Clause 113.
The noble Lord said: My Lords, each of the government amendments to Part VII begins with the prefix 148M. It may be for the convenience of the House if I omit this prefix and refer to each amendment by the number that follows. With leave, I should like to speak to Amendments Nos. 1, 2 and 94.
These are paving or consequential amendments relating to three new clauses. Those new clauses raise substantive issues and I do not propose to debate them at this point. We shall come to those amendments in due course.
The first two amendments replace the existing Clause 113 with a new introductory clause, setting out the purpose of the Part. The purpose remains to safeguard the operation of certain financial markets. But the new clauses make it appropriate to relate that purpose expressly to the rights and remedies dealt with in the new clauses. Those rights and remedies relate to certain property provided as cover for margin in relation to transactions in the market, or to property subject to a market charge.
Amendment No. 94 is consequential on the three new clauses. Those clauses are to be capable of extension, as appropriate, to contracts and charges brought within the scope of the Part by regulations. That applies the same approach as the regulation-making powers already applying to existing provisions in the Bill. I beg to move.
9.15 p.m.
Lord Williams of Elvel: My Lords, it is very welcome to see the noble Lord, Lord Strathclyde, at the Government Dispatch Box yet again, particularly on a subject with which he is familiar, the issue of insolvency. Perhaps I should make clear what is the Opposition's attitude to these amendments, because I do not wish to speak at length on the various amendments as they come forward since there are only two major points that I want to make. I shall make one of them now.
The Government produced a Bill without consultation and have now had to rewrite Part VII. I understood what they were saying when they said that they could not go out to consultation because problems might be associated in the market. Nevertheless, insolvency practitioners have felt aggrieved that the Government produced a Bill and
962
then went out to consultation. Consultation was inevitable once the Bill was produced and so we have had a complete new redraft of this part.
The original draft—I call it a draft but one should really call it the original Bill—seemed to override the whole pari passu principle. That was the argument that the noble Lord, Lord Strathclyde, and I, had in Committee. It seemed to do so by creating a new preferential class of creditor, namely investment exchanges and clearing houses. When in Committee, the Bill appeared to allow for a clearing system to operate when a market organisation became insolvent. That would give market organisations priority over other general creditors. We objected to that. The Government explained that it was not really their intention to bring this into effect. Their intention was simply, as I understand it, to clarify and make certain what is already an accepted practice, namely that a set-off should occur on a bilateral basis at the time when a market organisation becomes insolvent. So far so good, as I understand it.
The only difference is that this one-to-one set-off procedure between insolvent market organisations and other market organisations with which it has market contracts would now occur when the default is declared rather than on the commencement of insolvency. The Bill did not seek to allow for multilateral or pool clearing systems to operate between market organisations.
We believe that with their new amendments the Government have made their intentions—which I have just expressed and which I hope I have expressed fairly to the Government—more understandable and have removed the wholesale abrogation of the pari passu principle. All this could have been avoided had the Government consulted in the first place. There are plenty of good ways of doing that.
My first major point is that I and my advisers believe that the Government have moved towards a principle which is much more coherent with the general principle of the Insolvency Act, which is the pari passu principle. For that reason we generally welcome the amendments, although I have other points to make.
Lord Lloyd of Kilgerran: My Lords, I generally welcome most of these amendments and, like the noble Lord, Lord Williams, I shall save time by indicating what my position is on them.
When I looked through these amendments I looked back at what I refer to as the old numberings of the Bill when it was at the Committee stage. With Amendment No. 148M(43) the Government seek to leave out Clause 119. That was Clause 111 at Committee stage. I could not correlaite how "After Clause 119"in the Marshalled List fitted in with the remarks of the noble Lord, Lord Strathclyde, when dealing with Clause 119, in the form of Clause 111, in the Bill at that stage.
There are a number of these. New clauses have been put in which are totally different in basic principles and many details from what the noble Lord, Lord Strathclyde, said at Committee stage. I

963
shall not cite them. Unless I am tempted to speak I shall say nothing until the House comes to deal with Amendment No. 148M(109). I am glad that I have support for that statement. I hope that noble Lords will not think me discourteous if I disappear for a few moments.
Together with the noble Lord, Lord Williams, I find the new clauses to be a great improvement. I understand from the noble Lord that since producing the original draft the Government have, for the first time, taken advice from insolvency law specialists.
I complain rarely but I should like to put on record the fact that the way in which the Government have dealt with this part of the Bill has caused me to waste a great deal of time in trying to discover the difference between what the noble Lord, Lord Strathclyde, said in Committee and the scope of the various new clauses.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(2):
After Clause 113, insert the following new clause:
("Introductory.
This Part has effect for the purposes of safeguarding the operation of certain financial markets by provisions with respect to—

(a) the insolvency, winding up or default of a person party to transactions in the market (sections 114 to 128),

(b) the effectiveness or enforcement of certain charges given to secure obligations in connection with such transactions (sections 129 to 133), and

(c) rights and remedies in relation to certain property provided as cover for margin in relation to such transactions or subject to such a charge (sections (Application of margin not affected by subsequent interests), (Priority of market charge over unpaid vendor's lien), (Proceedings against market property by unsecured creditor) and (Power to apply provisions to other cases)).").

On Question, amendment agreed to.
Clause 114 [Market contracts]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(3):
Page 118, leave out lines 35 and 36.
The noble Lord said: My Lords, I should like to thank the noble Lord, Lord Williams, for welcoming me back to the Dispatch Box— —
Lord Lloyd of Kilgerran: My Lords, I am sorry that I forgot to do so because I was engrossed with what I wished to say relating to the Bill.
Lord Strathclyde: My Lords, I am glad that both noble Lords generally welcome the amendments. I know that they understand the reason why it has been necessary to bring back so many at this stage.
With permission, I should like to speak to Amendments Nos. 148M(3), 148M(5). 148M(30), 148M(31), 148M(34),148M(35), 148M(38), 148M(39), 148M(42), 148M(48), 148M(50), 148M(51),148M(52),148M(55),148M(59), 148M(60), 148M(65), 148M(97) and 148M(98).
964
These amendments have in common that they make miscellaneous drafting and tidying-up amendments to the provisions of the part relating to recognised investment exchanges and recognised clearing houses. I would mention particularly some changes to the provisions of Clause 122 relating to the report which an exchange or clearing house must produce on the completion of default proceedings. This report specifies the sum due to or from each creditor or debtor of the defaulter, and these are the sums which are then provable in any insolvency proceedings or available for incorporation in a set-off.
At present Clause 122 provides for a single report to be made on the completion of default proceedings. We now propose that it should be open to the exchange or clearing house to make an interim report or reports from time to time as proceedings are completed in relation to transactions affecting particular debtors or creditors. We think that this facility will be particularly useful in a case in which most of the contracts can be sorted out fairly quickly, but a relatively small number of more difficult cases remain to be dealt with. The issue of an interim report will enable the office-holder to make substantial progress with the rest of the insolvency proceedings without having to wait for the resolution of the difficult cases.
The amendments also seek to protect investors' confidentiality by narrowing the scope of the provisions for inspection of the report. It is obviously important that a debtor or creditor of the defaulter should be entitled to inspect that part of a report which relates to the sum owed to or by him, including the means by which it was calculated. But there is no reason why he should be able to inspect the information relating to other persons' transactions, which may well be commercially sensitive. For the same reason, it is not appropriate that the report should be open to general public inspection. We have therefore brought forward an amendment to remove the provision for public inspection. A copy of the full report or reports will, of course, go the relevant office-holder.
The amendments also make clear that the function of making regulations under the part is not capable of transfer to the Securities and Investments Board.
I should add that in the memorandum I sent to the noble Lord, Lord Williams, we indicated our intention to table an amendment to Clause 127 concerning the precise forms of international link between exchanges and clearing houses which could fall within the scope of the clause. We have not yet tabled such an amendment, but the Government intend to bring an amendment forward at a later stage. I beg to move.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(4):
Page 118, line 43, leave subsection (6).
The noble Lord said: My Lords, with permission, I will speak to Amendments Nos. 148M(4), (32), (62), (63), (66), (67), (75) and (99) together. The amendments tidy up the provisions in the part

965
conferring regulation-making powers. Amendment No. 148M(99) introduces a new clause after Clause 135 which provides that regulations made under the part may make different provision for different cases and may contain such incidental, transitional, and others supplementary provisions as appear to the Secretary of State to be necessary or expedient. This flexibility is desirable to deal with the wide variety of cases which could arise. I beg to move.
Lord Williams of Elvel: My Lords, I understand why the Secretary of State wishes flexibility but Amendment No. 148M (99) gives him almost total flexibility to do whatever he wants whenever he wants without having to come back to your Lordships' House or, indeed, another place. Yet again, we find primary legislation writing powers in for the Secretary of State to change what he likes, when he likes and how he likes. Even at this stage of the Bill, I find that rather hard to swallow.
Lord Lloyd of Kilgerran: My Lords, this is one amendment to which I was proposing to speak. It seems to me that the Secretary of State can do what he likes. It is one of the most extended forms of regulation I have ever seen.
Lord Strathclyde: My Lords, perhaps I can briefly say that it is necessary for the order-making powers to be widely drawn precisely because of the complexity to which I have referred and the wide variety of markets and procedures for which it may be necessary to cater. However, I draw attention to the importance of Clause 113 in this connection. That makes clear the purpose of the part. We consider that the regulation-making powers are constrained by that purpose. If they were used for any other purpose, their exercise might be successfully challenged. That is an important safeguard which I believe should meet any concerns about the apparently broad scope of some of the powers and I hope that noble Lords will agree.
On Question, amendment agreed to.
Clause 115 [Additional requirements for recognition: default rules, &c.]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(5):
Page 119, line 19, leave out from ("that") to end of line 29 and insert ("any of those requirements is not met in the case of such a body, he shall within one month of commencement give notice to the body stating his opinion.
(4) The Secretary of State shall not—

(a) take action to revoke the recognition of such a body on the ground that any of the additional requirements is not met, unless he considers it essential to do so in the interests of investors, or

(b) apply on any such ground for a compliance order under section 12 of the Financial Services Act 1986,

until after the end of the period of six months beginning with the date on which notice is given under subsection (3).
(5) The Secretary of State may extend, or further extend, that period if he considers there is good reason to do so.").
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(6):
After Clause 115, insert the following new clause:
("Changes in default rules
.—

(1) A recognised UK investment exchange or recognised UK clearing house shall give the Secretary of State at least 14 days' notice of any proposal to amend, revoke or add to its default rules; and the Secretary of State may within 14 days from receipt of the notice direct the exchange or clearing house not to proceed with the proposal, in whole or in part.

(2) A direction under this section may be varied or revoked.

(3) Any amendment or revocation of, or addition to, the default rules of an exchange or clearing house in breach of a direction under this section is ineffective.").

The noble Lord said: My Lords, with permission I shall speak to Amendments Nos. 148M(6), (33), (58) and (61) together. These amendments leave out Clause 117 and add three new clauses concerned with procedural requirements and powers of the Secretary of State, or the Securities and Investments Board, in relation to recognised investment exchanges and recognised clearing houses. Their purpose is to provide a range of safeguards in connection with the exercise by exchanges and clearing houses of the additional functions they acquire by virtue of the part
The main effect of these amendments is to give the Secretary of State power to give directions to a recognised investment exchange or recognised clearing house in various circumstances. Although primary responsibility will lie on those bodies to deal with defaults, it is desirable that in the last resort there should be a power of direction.
We would normally expect default action to be initiated before an insolvency office-holder is appointed, but it is possible that at the time of his appointment, no action has yet been taken. In such circumstances he will need to establish quickly whether default action is or is not to be taken. He may require the Secretary of State to issue a direction to the body. And the Secretary of State must then choose between directing that action be taken or that no action be taken. I beg to move.
On Question, amendment agreed to.
Schedule 16 [Additional requirements for recognition]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(7) to 148M(29):
Page 210, line 13, leave out ("rules ("default rules")") and insert ("default rules").
Page 210, line 15, leave out ("the settlement forthwith") and insert ("for the taking of action in respect").
Page 210, line 16, leave out ("as principal").
Page 210, line 18, leave out from beginning to ("rules") in line 21 and insert—
("

(2) The action provided for must be such as to secure the settlement of the unsettled market contracts—

(a)in accordance with rules complying with paragraph 2 below, or

(b)where or to the extent that the exchange provides its own clearing arrangements, in accordance with rules corresponding to those required by paragraph 9 below in the case of a UK clearing house.

(3) The

").
Page 210, leave out lines 24 to 45.
Page 210, line 46, leave out paragraph 2 andinsert—
("Content of rules
2.—

(1) The rules referred to in paragraph 1(2)(a) must provide for all rights and liabilities of parties to an unsettled market contract to be discharged and for there to be paid by one party to the other such sum of money (if any) as may be determined in accordance with the rules.

(2) The rules further provide—

(a)for the sums so payable in respect of different contracts between the same parties to be aggregated or set off so as to produce a net sum, and

(b)for the certification by or on behalf of the exchange of the net sum payable or, as the case may be, of the fact that no sum is payable.

(3) The rules may make special provision with respect to, or exclude from the provisions required by sub-paragraphs (1) and (2), contracts of any description prescribed for the purposes of this sub-paragraph by regulations made by the Secretary of State.

(4) The above provisions do not apply to contracts to which the defaulter is party as agent.").

Page 211, line 11, leave out from ("(1)") to ("rules") and insert ("The").
Page 211, line 15, leave out ("under its default rules").
Page 211, line 17, leave out ("adversely") and insert ("be likely adversely to").
Page 211, line 18, at end insert—
("(3) a person shall not be so designated without his consent; and if a person so designated withdraws his consent, the designation shall cease to have effect.").
Page 211, line 22, leave out from beginning to ("are").
Page 211, line 29, at end insert—
("(2) This paragraph does not apply to a market contract whose performance is ensured by a recognised clearing house or in relation to which the exchange provides its own clearing arrangements.
In the latter case the exchange must have arrangements complying with paragraph 13 below.").
Page 211, line 36, leave out from ("State") to ("and") in line 38 and insert ("any relevant office-holder").
Page 211, line 42, leave out paragraph 7 and insert—
("7. Where the exchange provides its own clearing arrangements and margined transactions are effected, paragraph 16 below applies as it applies in relation to a clearing house.").
Page 212, line 9, leave out ("rules ("default rules")") and insert ("default rule").
Page 212, line 11, leave out ("any market contract") and insert ("one or more market contracts").
Page 212, line 12, after ("all") insert ("unsettled").
Page 212, line 13, leave out from ("(2)") to ("rules") and insert ("The").
Page 212, line 16, leave out from beginning to end of line 20 on page 213 and insert—
("Content of rules
9.—

(1) The rules must provide for all rights and liabilities of the defaulter under or in respect of unsettled market contracts to be discharged and for there to be paid by or to the defaulter such sum of money (if any) as may be determined in accordance with the rules.

(2) The rules must further provide—

(a) for the sums so payable by or to the defaulter in respect of different contracts to be aggregated or set off so as to produce a net sum;

(b) for that sum—

(i) if payable by the defaulter to the clearing house, to be set off against any property provided by the defaulter as cover for margin (or the proceeds of realisation of such property) so as to produce a further net sum, and

(ii) if payable by the clearing house to the defaulter to be aggregated with any property provided by the defaulter as cover for margin (or the proceeds of realisation of such property); and

968

(c) for the certification by or on behalf of the clearing house of the sum finally payable or, as the case may be, of the fact that no sum is payable.

10.—

(1) The reference in paragraph 9 to the rights and liabilities of a defaulter under or in respect of an unsettled market contract includes (without prejudice to the generality of that provision) rights and liabilities arising in consequence of action taken under provisions of the rules authorising—

(a) the effecting by the clearing house of corresponding contracts in relation to unsettled market contracts to which the defaulter is a party;

(b) The transfer of the defaulter's position under an unsettled market contract to another member of the clearing house;

(c) the exercise by the clearing house of any option granted by an unsettled market contract.

(2) A "corresponding contract" means a contract on the same terms (except as to price or premium) as the market contract, but under which the person who is the buyer under the market contract agreeds to sell and the person who is the seller under the market contract agrees to buy.

This sub-paragraph applies with any necessary modifications in relation to a market contract which is not an agreement to sell.").
Page 213, line 23, after ("to") insert ("unsettled").
Page 213, line 32, leave out from ("State") to ("and") in line 34 and insert ("any relevant office-holder").
Page 213, line 39, leave out from ("that") to end of line 41 and insert ("the requirements of any relevant regulations under section 55 of the Financial Services Act 1986 (clients' money) are complied with as regards property provided as cover for margin.").
Page 213, line 46, at end insert—
(3) Sub-paragraph (2) does not apply to a charge or lien in favour of the clearing house itself.").
The noble Lord said: My Lords, in moving Amendments Nos. 148M(7) to 148M(29), I wish to speak also to Amendment No. 148M(100). Except for Amendment No. 148(100), the amendments all relate to Schedule 16, which lays down additional requirements for recognised investment exchanges and recognised clearing houses. I beg to move.
On Question, amendments agreed to.
Clause 116 [Modification of the law of insolvency]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(30):
Page 119, line 33, leave out ("following provisions of this Part") and insert ("provisions of sections 118 to 125").
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(31) and 148M(32):
Page 119, line 37, leave out ("following provisions of this Part") and insert ("provisions mentioned in subsection (1), and any other provision of this Part as it applies for the purposes of those provisions, or provide that those provisions have effect subject to such additions, exceptions or adaptations as are specified in the regulations.").
Page 119, line 39, leave out subsection 4.
On Question, amendments agreed to.
Clause 117 [Duty to initiate default proceedings upon notice of insolvency]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(33):
Leave out Clause 117.
On Question, amendment agreed to.
Clause 118 [Proceedings of exchange or clearing house take precedence over insolvency procedures]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(34) and 148M(35):
Page 120, leave out paragraph (b).
Page 120, line 28, at end insert—
("(c) the rules of a recognised investment exchange or recognised clearing house as to the settlement of market contracts not dealt with under its default rules.".
On Question, amendments agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148(M)36:
Page 120, line 30, leave out ("or").
The noble Lord said: My Lords, in moving Amendment No. 148M(36) I wish to speak also to Amendments Nos. 148M(37), 148M(40), 148M(41), 148M(43), to148M(47), 148M(49), 148M(53), 148M(54), 148M(56), 148M(57), 148M(81), 148M(82), 148M(101), to 148M(103), 148M(105) and 148M(107). The amendments are concerned with clarifying the extent to which certain provisions relating to insolvency legislation apply in the context of the part as a whole. I beg to move.
Lord Williams of Elvel: My Lords, I wish to speak against Amendment No. 44. The costs of assisting the financial market in default proceedings in our view should be borne by the market itself. The Bill appears to allow for such costs to come out of the estate and hence to be borne at the expense of non-market creditors. That does not seem right. If there is to be an arrangement for a market clearance system that overrides the normal insolvency procedures, the Government surely have to justify the costs being borne by the non-market creditors rather than the market itself.
Lord Strathclyde: My Lords, Amendment No. 148M(44) introduces a new clause in effect similar to Clauses 119 and 120, which are deleted by Amendments Nos. 148M(43) and 148M(45). The new clause imposes a duty on any person who has control of any assets or documents relating to a defaulter to give such assistance as it may reasonably require to a recognised investment exchange or recognised clearing house.
In the light of comments received on the scope of those clauses, the new clause differs from its predecessor in two main ways. First, subsection (2) provides that information or documents subject to legal professional privilege cannot be subject to the requirement that they should be produced to an exchange or clearing house. Secondly, the new clause makes more explicit provision about the expense of an office holder who is required to give assistance under the clause. He is entitled to make a reasonable charge for any time and care. Where the defaulter's estate cannot meet such expense, the exchange or clearing house will have to agree to meet it before an office holder is required to undertake the work.
The noble Lord, Lord Williams, asked about justification. I do not want to repeat exactly what I said in Committee. The clause is essentially about co-operation. In practice, in the case of a default the exchange or clearing house concerned and the office
970
holder are going to need to work very closely together. It is unlikely that the expenses incurred will be significant. I suggest that in most cases it will be no more than a question of exchanging information on the telephone. As the assistance will be reciprocal it seems right that the costs should be borne where they fall on either side.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment Nos. 148M(37) to 148M(42):
Page 120, line 31, after ("1985") insert ("or section 123(3A) or 124(3) below").
Page 120 line 33, leave out ("of a market contract").
Page 120, line 35, at end insert ("of a market contract not dealt with under its default rules, or").
Page 120, line 37, at end insert ("; but this does not prevent the court from afterwards making an order under section 123(3A) or 124(3) or any such order or decree as is mentioned in section 125(1) or (2).").
Page 120, line 39, leave out ("subsection (2)") and insert ("the above provisions").
Page 120, line 46, at end insert—
("(5) For the purposes of subsection (4) the default proceedings shall be taken to be completed in relation to a person when a report is made under section 122 stating the sum (if any) certified to be due to or from him.").
On Question, amendments agreed to.
Clause 119 [Duty to give assistance for purposes of default proceedings]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(43):
Leave out Clause 119.
On Question, amendment agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(44):
After Clause 119, insert the following new clause:
("Duty to give assistance for purposes of default proceedings
—

(1) It is the duty of—

(a) any person who has or had control of any assets of a defaulter, and

(b) any person who has or had control of any documents of or relating to a defaulter,

to give a recognised investment exchange or recognised clearing house such assistance as it may reasonably require for the purposes of its default proceedings.

This applies notwithstanding any duty of that person under the enactments relating to Insolvency.

(2) A person shall not under this section be required to provide any information or produce any document which he would be entitled to refuse to provide or produce on grounds of legal professional privilege in proceedings in the High Court or on grounds of confidentiality as between client and professional legal adviser in proceedings in the Court of Session.

(3) Where original documents are supplied in pursuance of this section, the exchange or clearing house shall return them forthwith after the completion of the relevant default proceedings, and shall in the meantime allow reasonable access to them to the person by whom they were supplied and to any person who would be entitled to have access to them if they were still in the control of the person by whom they were supplied.

(4) The expenses of a relevant office-holder in giving assistance under this section are recoverable as part of the expenses incurred by him in the discharge of his duties; and he shall not be required under this section to take any action which involves expenses which cannot be so recovered, unless the exchange or clearing house undertakes to meet them.

971

There shall be treated as expenses of his such reasonble sums as he may determine in respect of time spent in giving the assistance.

(5) The Secretary of State may by regulations make further provision as to the duties of persons to give assistance to a recognised investment exchange or recognised clearing house for the purposes of its default proceedings, and the duties of the exchange or clearing house with respect to information supplied to it.

The regulations may add to, amend or repeal the provisions of subsections (1) to (4) above.

(6) In this section "document" includes information recorded in any form.").

On Question, amendment agreed to.
Clause 120 [Duty to supply and return documents]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(45):
Leave out Clause 120.
On Question, amendment agreed to.
Clause 121 [Supplementary provisions as to default proceedings]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(46) and 148M(47):
Page 122, line 17, after ("sections") insert ("10(1)(c),").
Page 122, line 17, after (",11(3)") insert (",126, 128,").
On Question, amendments agreed to.
Clause 122 [Duty to report on completion of default proceedings]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(48) to 148M(52):
Page 122, line 22, leave out subsections (1) and (2) and insert—
("

(1) A recognised investment exchange or recognised clearing house shall, on the completion of proceedings under its default rules, report to the Secretary of State on its proceedings stating in respect of each creditor or debtor the sum certified by them to be payable from or to the defaulter or, as the case may be, the fact that no sum is payable.

(2) The exchange or clearing house may make a single report or may make reports from time as procedings are completed with respect to the transactions affecting particular persons.

").
Page 122, line 27, leave out subsection (3).
Page 122, line 34, leave out ("its report") and insert ("every report under this section").
Page 122, line 35, leave out from first ("any") to end of line 36 and insert ("relevant office-holder acting in relation to him or his estate").
Page 122, line 37, leave out subsections (5) and (6) and insert—
("

(4) When a report under this section is received by the Secretary of State, he shall publish notice of that fact in such manner as he thinks appropriate for bringing it to the attention of creditors and debtors of the defaulter.

(5)An exchange or clearing house shall make available for inspection by a creditor or debtor of the defaulter so much of any report by it under this section as relates to the sum (if any) certified to be due to or from him or to the method by which that sum was determined.

(6)Any such person may required the exchange or clearing house, on payment of such reasonable fee as the exchange or clearing may determine, to provide him with a copy of a report which he is entitled to inspect.

").
On Question, amendments agreed to.
Clause 123 [Net sum payable on completion of default proceedings]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(53) to 148M(55):
Page 123, line 11, leave out ("or winding-up") and insert ("the date on which the body corporate goes into liquidation (within the meaning of section 129 of the Insolvency Act 1986) or, in the case of a partnership, the date of the winding-up order").
Page 123, line 22, at end insert—
("

(3A) However, where (or to the extent that) a sum is taken into account by virtue of subsection (2)(b) or (3)(b) which would otherwise have been excluded from set-off—

(a) by virtue of its arising from a contract entered into at a time when the creditor had notice that a bankruptcy or winding up petition was pending, or

(b) by virtue of its arising from a contract entered into at a time when the creditor had notice that a meeting of creditors had been summoned under section 98 of the Insolvency Act 1986,

the value of any profit or benefit to him arising from the sum being so taken into account (or being so taken into account to that extent) is recoverable from him by the relevant officeholder unless the court directs otherwise.

(3B) Any sum recoverable by virtue of subsection (3A) ranks for priority, in the event of the insolvency of the person from whom it is due, immediately before preferential debts.

".
Page 123, line 23, leave out subsection (4).
On Question, amendments agreed to.
Clause 124 [Disclaimer of property, rescission of contracts, amp;c.]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(56) and 148M(57):
Page 124, line 6, leave out ("has the same") and insert ("ranks for").
Page 124, leave out line 8 and insert ("immediately before preferential debts").
On Question, amendments agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(58):
After Clause 125, insert the following new clause:
("Directions by Secretary of State.
.—

(1) Where there has been made or passed in relation to a member or designated non-member of a recognised investment exchange or a member of a recognised clearing house—

(a) a bankruptcy order or an award of sequestration of his estate, or an order appointing an interim receiver of his property, or

(b) an administration or winding up order, a resolution for voluntary winding up or an order appointing a provisional liquidator,

and the exchange or clearing house has not taken action under its default rules in consequence of the order, award or resolution or the matters giving rise to it, a relevant office-holder appointed by, or in consequence of, the order, award or resolution may apply to the Secretary of State.

(2) The Secretary of State shall, not later than three business days after the day on which the application is received, direct the exchange or clearing house to take or not to take action under its default rules.

For this purpose a "business day" means any day which is not a Saturday or Sunday, Christmas Day, Good Friday or a bank holiday in any part of the United Kingdom under the Banking and Financial Dealings Act 1971.

(3)If the Secretary of State directs that no action shall be taken, sections 118 to 125 above (and any regulations under section 116(2)) do not apply in relation to market contracts to which the member or designated non-member in question is a party or to anything done by the exchange or clearing house for the purposes of, or in connection with, the settlement of any such contract.

973

(4) where a recognised investment exchange or recognised clearing house has decided, or been directed, to take action under its default rules, the Secretary of State may direct it to take or not to take such action (being action which it has power to take under its default rules) as is specified in the direction.

(5) A direction under this section is enforceable, on the application of the Secretary of State, by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988.").

On Question, amendment agreed to.
Clause 126 [Adjustment of prior transactions]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(59) and 148M(60):
Page 124, line 41, at end insert (", with the exception of his functions with respect to the making of orders and regulations").
Page 125, line 4, leave out from ("transferring") to end of line 5 and insert ("to that agency all the functions which may be transferred by virue of this section").
On Question, amendments agreed to.
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M (61):
After Clause 126, insert the following new clause:
("Supplementary provisions.
("—

(1) Section 61 of the Financial Services Act 1986 (injunctions and restitution orders) applies in relation to a contravention of any provision of the rules of a recognised investment exchange or recognised clearing house relating to the matters mentioned in Schedule 16 to this Act as it applies in relation to a contravention of any provision of such rules relating to the carrying on of investment business.

(2) The following provisions of the Financial Services Act 1986—

section 12 (compliance orders), as it applies by virtue of section 37(8) or 39(8).

section 37(7)(b) (revocation of recognition of UK investment exchange), and

Section 39(7)(b) (revocation of recognition of UK clearing house),

apply in relation to a failure by a recognised investment exchange or recognised clearing house to comply with an obligation under this Part as to a failure to comply with an obligation under that Act.

(3) Where the recognition of an investment exchange or clearing house is revoked under the Financial Services Act 1986, the Secretary of State may, before or after the revocation order, give such directions as he thinks fit with respect to the continued application of the provisions of this Part, with such exceptions, additions and adaptations as may be specified in the direction, in relation to cases where a relevant event of any description specified in the directions occurred before the revocation order takes effect.

").
On Question, amendment agreed to.
Clause 127 [Certain overseas exchanges and clearing houses]:
Lord Strathclyde Lord Strathclyde moved Amendments Nos. 148M(62) and 148M(63):
Page 125, line 33, leave out paragraph (b) and insert—
("(b) provide that the provisions of this Part apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient.").
Page 125, line 36, leave out subsection (6).
On Question, amendments agreed to.
Clause 128 [Listed money market institutions]:
Lord Strathclyde Lord Strathclyde moved Amendment No. 148M(64):
Page 125, line 40, leave out from ("contracts') to ("as") in line 42 and insert ("of any specified description in relation to which settlement arrangements are provided—

(a) by a person for the time being included in a list maintained by the Bank of England for the purposes of this section (a "listed institution"), or

(b) by the Bank of England itself,").

The noble Lord said: My Lords, this amendment does two things. First, it makes it clearer that the clause is concerned with contracts where settlement arrangements are provided by a person on a list kept by the bank. This was not immediately apparent from the earlier wording, which made no reference to settlement arrangements. Secondly, it extends the scope of the clause to contracts in relation to which settlement arrangements are provided by the Bank of England itself. The arrangements of the Central Money Markets Office, currently under development, will be of this kind. The amendment is therefore necessary to ensure that it will be possible to make regulations under the clause in connection with the Central Money Markets Office and any other arrangement which the bank might operate in future if that is thought appropriate. I beg to move.
Lord Williams of Elvel: My Lords, I know that the list was in the Bill before this amendment was tabled, but can the noble Lord expand a little on what this list means? Who will be on it and what are the criteria for getting on the list?
Lord Strathclyde: My Lords, the noble Lord raises an interesting point. The clause is intended to deal with systems dealing wholly or predominantly with transactions in markets which it is appropriate for the Bank of England to supervise. It may be desirable to make this plainer in the clause itself. The Government will consider bringing forward an amendment to this effect. In principle it is right that any system operated by the bank should be subject to the same regime as an equivalent system operated by an institution on its list. I believe that I have said enough on this point.
Lord Williams of Elvel: My Lords, before the noble Lord sits down, did he imply that the Government are going to bring forward an amendment to clarify what this list is about?
Lord Strathclyde: My Lords, the point is that at present there is no actual system, but there may be one in the future. The criteria will be set by the bank and approved by the Treasury. As regards the specific question, the Government are considering bringing forward an amendment to make matters clearer.
Lord Williams of Elvel: My Lords, I am sorry to abuse the Report procedure because I do not wish to do so. Can the Minister expand on what he is saying? Are the Government going to bring forward an amendment to define the criteria by which the bank includes people on the list? What: is it all about and when are the Government going to bring forward this amendment?
Lord Strathclyde: No, my Lords. I thought that I had made myself quite plain. I apologise to the noble Lord because I thought we had been going so well so far. I maintain that the Government are considering further amendments and will look at this matter again in the light of what the noble Lord has said. We shall see what can be done. However, I must make it plain that there will be no amendment to define the criteria themselves. It may be made plainer in the clause itself where the clause is intended to deal with systems relating wholly to transactions in markets which it is appropriate for the Bank of England to supervise.
9.40 p.m.
On Question, Whether the said amendment (No. 148M(64)) shall be agreed to?
Their Lordships divided:
9.48 p.m.
The Deputy Speaker (Lord Cocks of Hartcliffe): My Lords, as it appears that fewer than 30 Lords have voted, in accordance with Standing Order No. 55, I declare that the Question is not decided, and that further proceedings on the Bill stand adjourned.
Lord Denham: My Lords, I beg to move that the House do now adjourn.
House adjourned at eleven minutes before ten o'clock.