Foreign Corporations Bill [H.L.] (Hansard, 3 July 1991)

§ The Lord Chancellor (Lord Mackay of Clashfern)
My Lords, I beg to move that the Bill do now pass. I am grateful for the welcome that has been given to this Bill and, in particular, for the contributions made by my noble and learned friend Lord Wilberforce and by the noble Lords, Lord Mishcon and Lord Kennet. I am also grateful to the Law Society for the interest it has shown in the Bill and its support for it.
I should like to say a few words about the question of the recognition of states, which was raised in Committee by the noble Lord, Lord Kennet. He suggested that because the Bill, explicitly or implicitly, requires a territory to have a legislature, an executive and a judicature, that is tantamount to the recognition of that territory as a state. However, the accepted international criteria in accordance with which Her Majesty's Government recognise states also include a settled population and a defined territory, as well as some prospect of permanence of all these indices. The territories to which the Bill applies are not recognised states, because not all of these criteria are met, and the Bill does not alter that.
In cases where recognition as a state is withheld, the rule traditionally followed by our courts—although the law cannot be said to be clear—is that, because of that withholding of recognition, they will not give effect to the creation or dissolution of corporations in the unrecognised territory. What the Bill does is to enable our courts to determine the status of corporations in accordance with commercial realities, instead of making them dependent upon unconnected issues of foreign policy.
Our foreign policy is unaffected by the Bill. I must make it quite clear that the Bill does not accord any form of recognition of any territory as a state and should not be read as doing so. It is simply concerned with the legal personality of corporations which come here and how we are to regard them under our law. We need to determine that and to clarify the present position.
I should also mention briefly two matters raised by the noble Lord, Lord Mishcon, and by my noble and learned friend Lord Wilberforce, and which have now been resolved following helpful discussions with the Law Society. First, it was suggested that the phrase used in subsection (1)(a) of Clause 1, the laws of a territory", was inadequate to deal with a situation where two conflicting systems claimed that their laws were the 989 laws of a specific territory. I am satisfied that when the subsection is read as a whole it achieves its purpose and that no amendment is necessary.
Secondly, it was suggested that the test laid down by the Bill that there must be a settled court system in a territory at the time when a specific question arises should also be satisfied if there had been a settled court system at an earlier time. In my view we should not legislate so as to require our courts to answer a question as though a previous state of affairs remained true. The Bill cannot offer absolute certainty in relation to the future, whatever changes in circumstances arise.
The Bill is necessary to settle the law as to the status of certain foreign corporations and it does so by adopting an approach which is consistent with commercial reality.

§ Lord Cledwyn of Penrhos
My Lords, on behalf of my noble friend Lord Mishcon I apologise for his absence abroad. He asked me to thank the noble and learned Lord for the clarification he has given of the points raised by my noble friend during the debates on this important Bill. I am extremely grateful to the noble and learned Lord.

§ Lord Kennet
My Lords, in relation to the other question on recognition, the House is most grateful to the noble and learned Lord the Lord Chancellor for the clarifications he has been able to put on record this afternoon. If it were to come about that cases were brought in our courts and use was made of the Act, as it will be, the Polly Peck case, because of the non-recognition of the illegal regime in North Cyprus, might be the first test of the distinction between, on the one hand, our courts hearing a company registered in a territory we do not recognise and, on the other hand, the continued non-recognition of that territory.

§ Lord Wilberforce
My Lords, I express my appreciation of what has just fallen from the lips of the noble and learned Lord and of his courtesy in replying to a suggestion which I ventured to make after the Committee stage and which I hoped would simplify the Bill. I appreciate that the noble and learned Lord is not able to accede to the suggestion, which, although possibly defective, at least clarified the Bill. Though comprehensive, the Bill remains somewhat obscure. It has to deal with a variety of cases—namely, split states, federal states and places like Taiwan which are not recognised states—all in one phraseology. That may be too ambitious an attempt.
I indicated to the noble and learned Lord that I did not intend to pursue my suggestion. All we can do is to leave the matter with confidence to the judiciary.

§ The Lord Chancellor
My Lords, I am grateful to my noble and learned friend and to the noble Lords, Lord Kennet and Lord Cledwyn, the Leader of the Opposition. I am sorry that it has not proved possible to hold this Third Reading on a date when the noble Lord, Lord Mishcon, could be present. I understand 990 that, with his usual generosity, he agreed that the Bill should proceed, having regard to the fact that we have reached an understanding on the matter.