Lords Sitting of 3 November 1992

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

Lord Cooke of Islandreagh
Victor Alexander Cooke, Esquire, OBE, having been created Baron Cooke of Islandreagh, of Islandreagh in the County of Antrim, for life—Was, in his robes, introduced between the Lord Moran and the Lord Moyola.

Lord Hayhoe
The Right Honourable Sir Bernard John Hayhoe, Knight, having been created Baron Hayhoe, of Isleworth in the London Borough of Hounslow, for life—Was, in his robes, introduced between the Lord Hunt of Tanworth and the Lord Prior.
Lord Poltimore—Took the oath.

Forestry: New Planting
3 p.m.
Lord Taylor of Gryfe Lord Taylor of Gryfe asked Her Majesty's Government:
How they propose to achieve their target of 33,000 hectares of new planting of trees annually, and what levels have been achieved in each of the last three years.
The Minister of State, Scottish Office (Lord Fraser of Carmyllie): My Lords, the Government provide a range of incentives under the Forestry Commission's woodland grant scheme aimed at encouraging new planting by the private sector. Earlier this year we also introduced a farm woodland premium scheme as a successor to the farm woodland scheme. The Forestry Commission itself continues to have a programme of new planting. The general economic situation has nevertheless had a dampening effect on forestry investment. Planting activity can be expected to pick up, however, as the economy improves. Total new planting in each of the three financial years since 1989, to the nearest 100 hectares, has been 19,500 hectares,19,000 hectares and 17,100 hectares.
Lord Taylor of Gryfe: My Lords, is the Minister aware that the last time this Question was asked in this House was March 1991? His colleague who is sharing the Front Bench with him said at the time,
"I believe that the position will recover"—
There had been a regrettable downturn in planting—
"I have every confidence that the industry itself will increase the number of plantings in the course of the next few years".—[Official Report,27/3/91; col.1066.]
I had the Forestry Commission report on my desk this morning. Private planting has decreased by 1,000
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hectares; Forestry Commission planting has de-creased from 10,000 hectares 10 years ago to 3,000 hectares. A farm woodland grant accounts for another 3,000 hectares, making a total of 17,000 hectares. Is that not far short of the Government's target? Will the Minister cease running down the Forestry Commission and encourage its planting in order to recover some of the lost ground?
Lord Fraser of Carmyllie: My Lords, I am aware of what my noble friend said when the Question was last asked. It is indeed disappointing that new planting has not significantly increased. The policy remains one of encouraging forestry expansion as and when possible. It is important to consider the matter properly within its context. The total area of woodland planted or grant aided by the Forestry Commission in the year to 31st March 1992—including restocking of felled woodland—was well over 30,000 hectares. That is close to the average of the previous 20 years.
Lord Renton: My Lords, is my noble friend aware that there is a great need, for environmental and other reasons, for a larger proportion of trees planted to be deciduous rather than conifer? Can he say what the Government are doing to encourage the Forestry Commission and private owners to plant a higher proportion of deciduous trees?
Lord Fraser of Carmyllie: My Lords, in my original Answer I made mention of the farm woodland scheme which has now been replaced by the farm woodland premium scheme. My noble friend will be interested to know that under that scheme farmers have submitted applications to plant more than 15,000 hectares of trees. Over 11,500 hectares have been planted so far, with broadleaved species accounting for 75 per cent. of the area my noble friend's point is a good one. I trust that under that scheme and others there will be a concentration of effort on broadleaved species.
Lady Saltoun of Abernethy: My Lords, can the Minister say what percentage of our annual timber requirements we import and the value of those imports?
Lord Fraser of Carmyllie: No, my Lords, I cannot give a precise figure for that. However, as is appreciated, it is a very considerable sum. That is one of the reasons why we would like to see an expansion of forestry activity so that in future that very significant contribution to our balance of payments might be reduced.
Lord John-Mackie: My Lords, does the Minister agree that if the Government were to release the money that the Forestry Commission has collected in selling land since this Government came to power, it would have any amount of money to develop and, as the noble Lord said, to plant what we used to plant 20 years ago.
Lord Fraser of Carmyllie: My Lords, as I indicated, the Government's view is that it is appropriate for the private sector to take up that responsibility. That does not mean that the Forestry Commission is entirely without involvement in new planting. There are

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obviously good reasons for that; namely, to rationalise its existing estates and to maintain employment in some parts of the country where the employment position is fragile. The noble Lord may also be aware that in Scotland it has some involvement in acquiring small areas to encourage in a pump-priming way what are described as community forests.
Lord Palmer: My Lords, surely the best incentive in order to encourage more planting would be to get some tax incentive going, particularly where the private sector is concerned. Does the Minister not agree?
Lord Fraser of Carmyllie: My Lords, matters of tax relief are clearly for my right honourable friend the Chancellor of the Exchequer. However, I believe that as a general observation it has not done, and it would not do, the industry any good if it were simply to be seen as a tax haven. What is considered to be important is that the grants introduced under the woodland grant scheme were of such a level that they were more or less equivalent to the amount that was being invested because of the tax relief programme. There are also increases in the grants supplements paid for planting on better land. There has been the introduction of the £950 per hectare community woodland supplement, and there are also the grants for continuing management of woodland introduced earlier this year.
The Countess of Mar: My Lords, can the Minister say how the support given to private landowners for set-aside compares with that given for woodland planting? Does he agree that it would be a good idea for the two to be comparable so that more people were encouraged to plant woodlands?
Lord Fraser of Carmyllie: My Lords, certainly it would be desirable if more people were encouraged to plant. I appreciate that there is uncertainty caused to some farmers because of the change in the common agricultural policy. I am not sure how the set-aside proposals would tie in with new planting. I say to noble Lords that the Government take the view that woodland planting should be allowed under the rules for non-rotational set-aside when it is introduced next year.
Lord Carmichael of Kelvingrove: My Lords, can the Minister say what the Government's current position is as regards the future of the Forestry Commission? Is there a possibility that the Government have changed their mind over privatisation? If so, how will the current shortfall in planting be made good if the Forestry Commission is privatised either in whole or in part? For instance, would the specification put forward by anyone likely to buy into the Forestry Commission need to include a planting programme in the prospectus?
Lord Fraser of Carmyllie: My Lords, perhaps I may say very clearly, slowly and carefully that the Government have no plans at present to privatise the Forestry Commission.
Lord Elton: My Lords, can my noble friend tell the House whether there is any prospect that a proportion of the broadleaved trees in this programme will be varieties of elm which will be resistant to Dutch Elm disease and which would enormously help the landscape as well as the industry?
Lord Fraser of Carmyllie: My Lords, no. I do not have that degree of expertise as regards the types of species which might be introduced. I shall discover the answer and write to my noble friend.
Lord Gisborough: My Lords, does my noble friend agree that the planting of hardwoods has an inevitable negative cashflow return and that it would be utterly wrong to suggest to people that they should plant hardwoods as an investment as opposed to an amenity which is highly commendable? Therefore, where people are asked to grow hardwoods, does the Minister agree that they should be grown only in very small proportions among softwoods?
Lord Fraser of Carmyllie: My Lords, I believe that the essential premise on which the question is based is correct. It is for that reason that in dealing with an earlier question on broadleaved species, I focused on what is known as the farm woodland premium scheme. That would appear to the Government to be a very appropriate way by which the broadleaved species throughout the United Kingdom might be increased in number.
Lord Taylor of Gryfe: My Lords, perhaps I may help the Minister, in reply to the noble Lady, Lady Saltoun, by saying that the import bill for timber and timber products in this country is no less than £6.5 billion? Does that not make it an important industry in terms of the balance of payments?
Lord Fraser of Carmyllie: My Lords, it certainly does. That is why it remains the Government's policy to expand forestry wherever possible.

Food Shortages and Over-production
3.9 p.m.
Lord John-Mackie Lord John-Mackie asked Her Majesty's Government:
Whether, in view of the scarcity of food in many parts of the world, they approve of the withdrawal of a further one and a half million acres of land in the United Kingdom from food production.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, measures to cut surpluses, including set-aside, are intended to deal with the problem of over-production in Europe. Even when EC surpluses have been reduced, there will be ample food in the world.
Lord John-Mackie: My Lords, frankly I am astonished at that reply. There is reputed to be somewhere between 300 million and 1,000 million people starving in the world today—I think that those figures are correct. That is five times the population of

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America. Is the Minister really suggesting that the amount of surplus food in the world today would feed America five times?
Earl Howe: My Lords, the main problem is not the shortage of food but getting it to those who need it. It is often better to buy familiar foods from close to the affected area than to ship supplies from Europe. We must also be careful not to make other countries dependent on food aid to the extent that we destroy their indigenous agriculture.
Lord John-Mackie: My Lords, if that is the case, would it not be much better to produce here the temperate foods that we buy from Australia and New Zealand and to ask those countries to stop their ships on the east coast of Africa so that they can deliver the food there?
Earl Howe: My Lords, problems in getting food to famine areas are usually caused by an inadequate infrastructure, including poor transport, a lack of local resources and difficulties with distribution, but not because of a shortage of food wherever it comes from.
The Earl of Onslow: My Lords, is it not the case that dumping EC surplus agricultural produce onto the soi-disant third world would do nothing but ruin primitive agricultures and produce high exchange rates? The sooner that we cut down on over-subsidised European food, the better for everybody.
Earl Howe: My Lords, my noble friend is absolutely correct. It remains essential for the European Community to reduce the production of agricultural surpluses. Surpluses produced in de-veloped countries and dumped on world markets at artificially low prices have inhibited the development of farming in the third world and have reduced the ability of developing countries to feed themselves. That is one of the important reasons why we need a GATT agreement.
Lord Gallacher: My Lords, can the noble Earl tell us whether, in view of the possibility of less intensive farming in Britain, consideration can be given to schemes of practical training on farms for workers from third world countries to equip them for service when they return home?
Earl Howe: My Lords, that is a very interesting suggestion. Although it is slightly wide of the Question on the Order Paper, I shall nevertheless take it away with me.
Lord Gisborough: My Lords, are there any plans for passing on surplus food to help with the immediate problem of Yugoslavia this winter?
Earl Howe: My Lords, yes. The possibility of conveying food to Yugoslavia is being actively considered. Britain has so far given over £55 million to help the victims of the continuing conflict in that country. This is in addition to the Community's own contribution of £222 million, part of which—£56 million—has been allocated for food aid.
Lord John-Mackie: My Lords, it seems to me that every possible excuse has been produced for not getting food to the people who are actually dying, an enormous proportion of whom are small and young children. On the point that the Minister and his noble friend made about destroying markets in those countries, they should be taught to pay the deficiency payments the same as we did just after the war to ensure that farmers in those countries carried on producing food, as well as continuing to give food to the starving population.
Earl Howe: My Lords, I should not wish noble Lords to think that the United Kingdom was not playing its part in alleviating food shortages around the world. In the current financial year, for example, Britain has pledged 144,000 tonnes of food in cereals equivalent from the UK national food aid programme at an estimated cost of £28 million.

No.2 Marsham Street
3.14 p.m.
Lord Sefton of Garston Lord Sefton of Garston asked Her Majesty's Government:
Whether they will not proceed with the relocation of staff from, and the demolition of,2 Marsham Street until the Comptroller and Auditor General has examined the consequences of both decisions.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Strathclyde): My Lords, my right honourable friend the Secretary of State for the Environment has yet to announce his decision on relocation. It will be based on value for money for the taxpayer. The Comptroller and Auditor General will audit the department's expenditure on relocation in due course and may subject it to a value-for-money scrutiny.
Lord Sefton of Garston: My Lords, I thank the Minister very much for that Answer, but I am rather puzzled by the words "in due course". When one starts to talk about the demolition of a building which has been occupied for less than 20 years and which has been under the maintenance of the Property Services Agency, I would have thought that that would demand immediate examination. Perhaps I may suggest to the Minister that if it happened in local government some people would be talking about surcharging. The assurance that I want is that the Comptroller and Auditor General will look at the problem before any staff are moved. Like many others, I do not believe that it is necessary to pull this building down.
Lord Strathclyde: My Lords, the Comptroller and Auditor General is there to make sure that the taxpayers' money has been spent wisely once it has been spent. Before we made this decision, consultants, building engineers, accountants and various financial experts did of course give us the benefit of their advice. We are led to believe that the building that the

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Department of the Environment and the Department of Transport currently occupy does not have a very long-term life.
Lord Peyton of Yeovil: My Lords, will the Minister bear in mind the fact that not even the Comptroller and Auditor General has the miraculous powers that would be required to cure that horrible building?
Lord Strathclyde: My Lords, I think that my noble friend is absolutely correct and I hope that the noble Lord, Lord Sefton of Garston, heard him clearly.
Lord Mellish: My Lords, may we have a straight answer to the question about the staff of the Department of the Environment? I understand that they were originally moving to Canary Wharf, but that has since been both denied and reaffirmed in the press. Can we have it straight? Are they going or are they not?
Lord Strathclyde: My Lords, as I said in my original Answer, the decision has not yet been made. They may still go, or they may not.
Lord Taylor of Gryfe: My Lords, will the Minister confirm that before a decision to distribute these civil servants elsewhere is taken, some consideration of regional policy will be introduced so that we might have a wider distribution of civil servants, rather than adding to the congestion and the costs of London?
Lord Strathclyde: My Lords, the desirability of spreading civil servants around the country is well understood by this Government. The noble Lord will be glad to know that over 40 per cent. of the staff of the Department of the Environment are based outside London. However, the particular civil servants referred to in the Question are needed to advise Ministers regularly, which is why they should be based within a reasonable distance of Westminster.
Lord McIntosh of Haringey: My Lords, although I would certainly urge the demolition of 2 Marsham Street on aesthetic grounds, will the Minister confirm that it is the case, as reported in Building magazine, that the department has commissioned a six-week study of the cost of the refurbishment of 2 Marsham Street? If that is the case, will he publish the terms of reference, not merely in the general cause of open government, but because the Comptroller and Auditor General himself would wish to know the terms of reference and would wish to make them public?
Lord Strathclyde: My Lords, I cannot confirm that such a study has been commissioned, but I shall certainly find out. If the noble Lord will allow me to write to him about this, I shall certainly do so.
Lord Tordoff: My Lords, has not the noble Lord just told us that all of these people are kept in Marsham Street so that he can answer questions like that?
Lord Strathclyde: My Lords, that simply shows that sometimes even all of those very skilled civil servants let me down.
Lord Sefton of Garston: My Lords, I was amazed that the Minister should tell us that so many experts and consultants have looked at this matter because his own department has told me that only one—Arup Associates—has been consulted and that those consultants had recommended demolition. I do not know for certain—
Noble Lords: Question!
Lord Sefton of Garston: My Lords, noble Lords waste more time telling me to get to my point than I am taking. If the Minister is looking for somewhere to transfer his staff urgently, could I suggest that he looks—
Noble Lords: No!
Lord Sefton of Garston: My Lords, may I ask the Minister whether he will look at the problem of the old County Hall and see whether he can move the staff there?
Lord Strathclyde: My Lords, as I have said, many people have been asked to look at this problem. Ove Arup is one and Coopers & Lybrand Deloitte is another. There are many potential solutions. We are still looking at them. As soon as the decision is made, we shall let the House know.
Lord Mellish: My Lords, as the Minister is in a writing mood, will he be good enough to put me on his list as one of those who should receive a letter saying whether the staff will be transferred or not?
Lord Strathclyde: My Lords, when the decision is made, it will be put to the House.

GATT and Agriculture within the EC
3.19 p.m.
Lord Bruce of Donington Lord Bruce of Donington asked Her Majesty's Government:
Whether they will make urgent representations to the President of France with a view to the removal of the French veto on negotiated changes to the common agricultural policy, already approved by a majority of member states, designed to achieve a successful conclusion of the General Agreement on Tariffs and Trade negotiations.
Earl Howe: My Lords, no such veto has been applied: the Agriculture Council agreed the package of reform measures to the CAP in late May and the regulations giving effect to it are being implemented. So far as the GATT Uruguay Round is concerned, all EC heads of government endorsed the conclusions of the Birmingham Summit in October. Following these, the Commission is,
"to work within its existing mandate for an early, comprehensive and balanced GATT agreement by the end of the year".
There is no question of undoing the reforms of the CAP agreed earlier this year which will be fully taken into account in any GATT settlement.
Lord Bruce of Donington: My Lords, is it not the case that the successful conclusion of the present

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negotiations concerning the Uruguay Round of GATT is of far greater economic significance to the United Kingdom and indeed to the remainder of the EC than all this miserable talk about the farce of Maastricht? In view of the fact that there is a deathly silence from M. Delors, who is not normally reticent in criticising the governments of member states, will the Prime Minister exert his influence as president of the Community for the current six months in trying to get rid of the deadlock which arises because of the continued insistence by the French on maintaining the CAP intact?
Earl Howe: My Lords, I agree with the noble Lord about the vital importance of concluding the GATT round successfully. My right honourable friend the Prime Minister has been in regular personal contact with Community heads of government and with the United States President and he has also worked tirelessly within the EC presidency role to achieve a settlement. My right honourable friend Mr. Gummer is at this moment in Chicago to do what he can to bring the two sides together.
Lord Boyd-Carpenter: My Lords, is there any reason to believe that the French will by the end of this year give way sufficiently in respect of the over-support of European agriculture to enable the Uruguay Round to be completed? Is there any reason to believe that?
Earl Howe: My Lords, we certainly have cause to hope so in the light of the regular conversations which my right honourable friend the Prime Minister has had with the French President.
The Earl of Onslow: My Lords, does this not mean that it is the French tail wagging the European dog on this issue? I was under the impression—I hope that my noble friend will confirm that I am right—that the European Commission was given a mandate to negotiate. The European Commission wants to negotiate and the French are saying no. This is something up with which we should not put. It seems to be carrying subsidiarity to extreme cases, and illegally so as well.
Earl Howe: My Lords, M. Delors, as President of the Commission, must take account of the fact that any GATT deal needs to be acceptable to all member states. Opinions vary as to whether he has been over-cautious in the approach that he has adopted. But the fact of the matter is that the Commission has a clear mandate from all member states to work for an early and balanced settlement.
Lord Harmar-Nicholls: My Lords, my noble friend said that no veto has been applied. What is it that has been applied? The fact is that those concerned have not been able to come to an agreement which is vital to the world. Is not the lesson that we ought to keep in mind that self-interest is still a predominating instinct in all of these people and that it is as well to hear it in mind with future negotiations on other matters?
Earl Howe: My Lords, these are very difficult issues indeed. The recent agreement on CAP reform has strengthened the Commission's position in the GATT round negotiations. However, the CAP reform agreement does not address key issues for the GATT round; namely, import access and export subsidies. Work must continue on the round to ensure reductions in agricultural support worldwide.
Lord Stoddart of Swindon: My Lords, can the noble Earl confirm that Mr. Andriessen, who is in charge of the GATT negotiations, has been very critical of M. Delors, the President of the Commission, for taking an unduly pro-French stance in these matters?
Earl Howe: My Lords, the noble Lord knows as much as I do, having read the press reports on those matters.
Baroness Oppenheim-Barnes: My Lords, does my noble friend not find it ironic that when this country demurs in some small way we are accused of trying to destroy the Community but when one of our partners does something outrageous without sanction or censure that is all right? Does that not illustrate the real difference between first and second class membership of the Community?
Earl Howe: My Lords, my noble friend makes an interesting point, but it is not for me, on this day of all days, to rock the boat when the negotiations have reached such a critical stage.
Lord Gallacher: My Lords, can the noble Earl tell the House how far apart the parties now are? Is it just oilseeds or are there other issues still to be resolved? Is the fact that his right honourable friend the Minister is in Chicago a good sign or a bad sign? Finally, can he tell us whether all the difficulties between Australia and the United States of America have been resolved? I have in mind the complaint by Australia about America's export enhancement programme for cereals.
Earl Howe: My Lords, as to the last question, there has been no resolution of that issue. Three linked issues remain outstanding; namely, oilseeds, the targets for export volumes and rebalancing. The UK believes that some compromise is required on all three issues. Agreement close to the draft prepared by Mr. Dunkel should be possible.
Lord Elton: My Lords, my noble friend has referred three times to the mandate given to the Commission. Does he accept that a great many of us would be much happier if the Commission, as the body which should be answerable to the member states, had been given a directive which it was bound to obey?
Earl Howe: My Lords, I believe the form of words is that the Commission was invited to fulfil that mandate. To all intents and purposes that amounts to an instruction.
Lord Stallard: My Lords, would the Minister care to comment on the speech made this morning by the German Commissioner to the effect that if Maastricht

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is ratified completely that would mean the end of the veto? Would that not be a move towards majority voting in the future?
Earl Howe: My Lords, I am sorry but I am not aware of that press report. The noble Lord will have to forgive me.
Viscount Montgomery of Alamein: My Lords, does my noble friend think that the outcome of the presidential election in the United States will have any effect one1 way or the other on these negotiations?
Earl Howe: My Lords, I do not know about one way or the other. My understanding is that Mr. Bush has, so to speak, tried to play this with an entirely straight bat.
Lord Bruce of Donington: My Lords, is the Minister aware that his answer to the question asked by his noble friend Lord Boyd-Carpenter concedes that the French position is a stumbling block? May I therefore reiterate the necessity—
Noble Lords: No!
Lord Bruce of Donington: May I therefore ask the noble Earl whether he will cause the most urgent representations to be made to his right honourable friend the Prime Minister to use his influence, which is, I gather, formidable, to secure French compliance with something that is in the best interests of the Community as a whole?
Earl Howe: My Lords, the efforts made by my right honourable friend the Prime Minister to date, efforts which, I may say, continue, have been exemplary.

Criminal Justice Bill [H.L.]
3.29 p.m.
The Minister of State, Home Office (Earl Ferrers): My Lords, I beg to move that the Criminal Justice Bill be now read a second time.
This is an important Bill, which starts its passage through Parliament in your Lordships' House and which I am sure will be welcomed by your Lordships. The Bill covers a wide range of issues. Some of the provisions implement European Community directives. The United Kingdom has played an active role in negotiating those directives. They are, therefore, ones which we welcome. They enhance our existing law. They will neither harm legitimate business practice, nor will they impose unacceptable burdens on business.
The Bill, though, deals mainly with crimes of a financial nature—so-called "white collar crime": those who, for example, make huge profits from trafficking in drugs; those who help drug traffickers and other criminals to conceal the profits of their crimes or to take them beyond the reach of the law; those who take advantage of privileged information for the purpose of dealing on the financial markets; and those who take part in serious international frauds.
Part I of the Bill will fill some gaps in our courts' jurisdiction to try various offences of dishonesty when
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they involve a significant foreign element. As regards Part I, I should say that we owe a considerable debt of gratitude to the Law Commission, whose 1989 Report, Jurisdiction over Offences of Fraud and Dishonesty with a Foreign Element, offered a draft Bill on which our proposals are largely based.
The courts in England and Wales exercise what is called a "territorial" jurisdiction. That means that, with very few exceptions, they are only able to try people for crimes which have been committed here in our own country. Some other countries have a much wider jurisdiction. They try their nationals for offences which they may have committed anywhere in the world. But it is not the Government's intention to follow that path, and the Bill does not do so.
The main problem, which has given rise to Part I, is the very narrow way in which the common law decides whether an offence has been committed here. Many crimes of dishonesty involve very complex operations, which are deliberately designed to conceal dishonest conduct and to make their detection and conviction as difficult as possible. These frequently take place in several different countries.
Under our present law, none of the participants can be prosecuted here unless the very last act in the sequence of events, normally the realisation of the proceeds, occurs in England or Wales. I admit that that is not an easy concept to grasp. Perhaps your Lordships would find it helpful if I were to give a hypothetical example of the kind of case which might arise. A criminal in Birmingham might place an advertisement in a local newspaper which invites people to invest in a non-existent stud farm in France by paying money into a Paris bank account. A victim responds to the advertisement and instructs his bank to transfer £1,000 to the French bank. That money is then retrieved by the ingenious advertiser, who is in turn able to return to this country and bring back and flaunt his ill-gotten gains quite openly because, although your Lordships might think that that was a blatant case of fraud, in fact no offence has been committed under English law. It is the last event which counts and, in this example, the last event is the obtaining of the proceeds, which took place in Paris.
What that means is that elaborate frauds can he perpetrated in England and Wales; but, if the criminal obtained his proceeds outside this country, then our courts are not able to try him. I think that your Lordships will agree that that is not acceptable. We believe that we must fill that gap in our law—a law which was developed at a time when the global financial marketplace and the modern, sophisticated means of transferring money just did not exist.
There is, though, a balance to be struck and we have no wish to interfere in the affairs of other countries, nor to waste valuable court time in trying cases which have only a notional connection in this country. The Bill, therefore, provides a tightly-drawn list of offences which closely follows those which the Law Commission proposed in 1989. Those offences are referred to, for the sake of convenience, as Group A offences. Our aim has been to include those offences of dishonesty which have a wide application and which experience tells us are the sort of offences which

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are committed by the international fraudsters at whom the measure is aimed. In case experience should show that our selection was wrong, the Bill will allow the Secretary of State to add offences to the list, or to delete them.
For a fraud to be tried here, one of the elements of the offence will have to have occurred here. For example, in order to obtain a conviction in a case of obtaining property by deception, the prosecution has to prove both that a deception has taken place and that property has been obtained as a result.
Under the new rules, our courts would have jurisdiction in the hypothetical case which I gave because, even if the property was obtained in Paris, the deception occurred in Birmingham.
As well as seeking to bring within our courts' jurisdiction those who succeed in carrying out their crimes, we think that it is right that the law should catch those who fully intend to defraud others, but who actually may fail to do so. The hypothetical advertiser, therefore, would still be guilty of an offence here if the police spotted his advertisement and nabbed him even before anyone had sent any money to France; that is, if the Bill proceeds in the way suggested.
The Bill, therefore, provides a list of Group B offences which covers those who conspire, or who attempt to incite others to commit, one of the Group A offences and those who commit the common law offence of conspiracy to defraud.
Part II of the Bill contains a number of important amendments to the confiscation provisions of the Drug Trafficking Offences Act 1986. The provisions received all-party support when they were introduced. They have been a significant weapon in the Government's fight against the evils of drug trafficking, by threatening those who indulge in such unacceptable activities with the loss of their illicit gains. Those who trade in human misery and who profit from the drug dependency of others are left in no doubt of our determination to remove their principal motivating factor—that is, the lure of quick and easy money.
The Drug Trafficking Offences Act has already proved to be successful. Confiscation orders to the value of over £35 million have been made since its implementation. Although not all of this has yet been realised, a significant proportion of it has. Most of the rest is under restraint and is, therefore, out of circulation.
The Drug Trafficking Offences Act had a number of features which were new and which were quite radical when it was introduced—such as giving the courts discretion to assume that a convicted person's assets are derived from drug trafficking, unless the person could show otherwise. It is important to be savage with drug trafficking, and it is pleasing to see how well the Act has worked in practice. Part II of the Bill, therefore, addresses the few difficulties which have arisen. It will make life even more difficult for those who participate in drug trafficking. Perhaps I could outline for your Lordships the more significant changes.
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Under our present legislation, the confiscation proceedings are mandatory whenever the court convicts a defendant of a drug trafficking offence. That has led to the courts becoming involved in full confiscation hearings for many small, one-off cases of drug trafficking where, at the end of the day, no order is made, often because there is no realisable property. The Bill will enable the prosecutor to filter out those cases, by providing that a confiscation hearing has to take place only when notice is given by the prosecutor. The court will, though, be able to proceed without a notice if it should think it correct to do so.
The Bill also makes clear that the standard of proof, which will apply during the confiscation hearing, will be the civil standard—the "more likely than not" standard, as opposed to the criminal standard of "beyond reasonable doubt". That was always the Government's intention. But because it was not made crystal clear in the 1986 Act, the courts have held that the criminal standard of proof—the "beyond reasonable doubt" standard—should apply, not only to the conviction of the drug trafficker, as it is right that it should, but also to what is essentially a civil process; namely, the confiscation hearing which follows conviction. The Bill seeks to put that right.
Part III of the Bill makes an identical change to the 1988 Criminal Justice Act, which deals with confiscation of the proceeds of other serious crime. The 1986 Act also requires the courts to complete a confiscation hearing before sentencing drugs of-fenders. That has caused some concern, because of the time lapse which can occur between the trial and sentencing in complex cases. Therefore, in Part II, the Bill will allow the court to postpone the confiscation hearing so that further information can be provided, while allowing it to sentence the trafficker. Again, Part III makes an identical change to the arrangements for confiscating the proceeds of non-drugs crime.
Another way, in which the Bill will make the 1986 Act more effective, is to oblige the courts to apply a set of assumptions about the origins of the offender's property and expenditure, which have the effect of reversing the burden of proof. The 1986 Act made those assumptions available to the court but their use was discretionary.
We also propose to require the prosecutor to provide the court with a statement of information when a confiscation hearing is going ahead, and to increase the court's ability to request information from the defendant. Information is vital to the proper conduct of confiscation hearings, and these proposals will ensure that the court can get what it needs within a reasonable period.
The Bill will enable the courts to confiscate the proceeds of drug trafficking in some circumstances where confiscation is not now possible. At the moment, a confiscation order which is made against a convicted trafficker cannot be increased later if it should be subsequently found that the benefit from drug trafficking was actually greater than that which the court had originally supposed. Some traffickers are, unfortunately, clever enough to disguise how well they have done out of their evil trade.

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At present, we are powerless to act in cases when further profits come to light. The Bill aims to put that right. It will enable the prosecutor to apply for additional profits to be confiscated for up to six years after the trafficker's conviction. Some confiscation orders are made for very large sums. As a result of that, an increasing number of drug traffickers are choosing to serve additional time in custody rather than to pay the confiscation order in full. This leaves the trafficker free to enjoy his ill-gotten gains the moment he is released. We propose, therefore, to stop that by ensuring that the mere serving of a term of imprisonment does not expunge the person's financial debt.
At present, the law does not enable a confiscation order to be made where the trafficker has died or has absconded. The Bill will, though, permit the High Court to make a confiscation order in the case of traffickers who have been convicted but who then die or abscond before being sentenced. The Bill also permits a confiscation order to be made in the case of those who abscond after being charged with an offence but before being convicted. We also propose, in order to be fair, that there should be provision to pay compensation for any loss which results from confiscation should a person who has absconded return to face trial subsequently and then be acquitted.
As well as dealing with the confiscation of drug proceeds, the Bill also deals with the laundering of them. Our existing money laundering legislation meets most of the requirements of the recent European Community directive on the prevention of the use of the financial system for the purpose of money laundering, but we have to make a number of changes and additions in order fully to implement the directive. Those changes which need primary legislation are included in the Bill. There are, in this respect, four main changes: first, there will be a new offence of knowingly acquiring, possessing or using the proceeds of drug trafficking; secondly, we will create a new offence of failing to disclose the knowledge or suspicion of money laundering which is gained in the course of employment or business; thirdly, the existing offence of "tipping-off" will be widened, so that anyone who passes on information to another person, knowing or suspecting that that would be likely to prejudice a money laundering investigation, can be prosecuted; and, fourthly, we will give wider immunity from action for breach of contract or confidentiality requirements to those who disclose suspicions or knowledge of money laundering.
We have included defences and safeguards which are necessary to protect those who are genuinely innocent, or who have a legitimate need to carry out duties which may put them in breach of the new provisions. For example, we do not want to prevent a defence lawyer from being paid by his client for the work which he does in defending his client on a drug trafficking charge. We are also keen to protect bank employees from any unreasonable risk of committing the offences during their everyday work.
Part III of the Bill extends the scope of money laundering offences to cover the proceeds of all serious
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crime. At the moment, money laundering prosecu-tions can be brought only if the money which is involved is the proceeds of drug trafficking. I do not think that it can be right to allow those who, for example, disguise the profits of dealing in pornography, or who convert the profits of a major fraud or a robbery, to escape with impunity.
Part IV of the Bill amends and restates the law on insider dealing and, in so doing, it implements the European Community directive on the subject. Securities markets play a vital role in all our lives, whether as providers of capital for the companies on which our prosperity ultimately depends, or as the place where our savings are invested—whether directly, or by institutions which act on our behalf.
In order to operate successfully, those markets require investors to have confidence in their fairness. Insider dealing destroys that confidence. The Government made insider dealing illegal in 1980, and the United Kingdom played a leading role in negotiating the directive which the proposals in this Bill will implement. The proposals in the Bill extend our legislation to areas of conduct which are covered by the directive, which are not currently illegal, but which are nevertheless generally accepted as being wrong.
In implementing the directive we are anxious, though, to ensure that legitimate business practices will not be jeopardised. For example, nothing in this legislation will prevent the sort of contacts between companies and investors which quite properly take place today. Nothing in this legislation will require changes to the legitimate practices of investment analysts, or modification of underwriting arrangements.
The principal offence, created by this part of the Bill, is taking advantage of inside information by dealing in securities. The new legislation is in many ways similar to our existing law. It will continue to be an offence for an insider who possesses inside information, or someone who has obtained inside information from an insider—who is somewhat colourfully called a "tippee"—to take advantage of that information by dealing in securities with the intention of making a profit or avoiding a loss.
It will also continue to be an offence for an insider, or a tippee, to encourage someone else to undertake such dealing and for them to disclose inside information. The new legislation will, though, make significant changes to the scope of our existing law.
The Bill defines securities so as to embrace all listed debt securities, including now gilts and local authority stock. The existing legislation applies to company securities only.
Dealing is defined in broad terms in order to prevent loopholes which could otherwise be exploited. Dealing, therefore, embraces agreeing to acquire and to dispose of securities as well as actually acquiring or disposing of them. It also covers situations in which an insider does not deal directly on his own behalf but does so, for example, through a company which he controls.
The Bill redefines insiders so that someone with direct access to inside information will be an insider,

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even if he or she is not "connected" with a company, as our present legislation requires. We think that that change, which reflects the directive, is desirable because it is quite possible for someone to have direct access to price-sensitive information without actually being connected with a company.
The new legislation embraces all transactions which involve a professional intermediary, whether they are on-market or off-market. Our existing legislation applies to on-market transactions only: those which take place on a stock exchange. But the move from the old-fashioned trading floor to the modern practice of screen-based trading makes the concept of the market much more difficult to define than was the case when the earlier legislation was passed in 1980. The Bill therefore seeks to define the market in terms of those transactions which are likely to contribute to the price of a security.
One effect of extending the range of transactions in this way is that the new legislation will apply to dealings in Eurobonds, which are generally listed within the European Community, but which are traded off-market. Two further offences are also defined: disclosing inside information to someone else; and encouraging someone else to deal.
The Bill requires a territorial link between the conduct which will be prohibited and the United Kingdom, but it is done in a way which is rather broader than the existing legislation. The insider dealing offence will be committed if someone is in the United Kingdom when he deals, or when the dealing takes place on a market which operates in the United Kingdom, or if it involves a professional intermediary who was in the United Kingdom at the time. The offences of disclosing and encouraging require the person doing them, or the recipient of the information or encouragement, to be in the United Kingdom.
We think that Part IV of the Bill is a necessary and sensible extension of our insider dealing legislation. It will not affect legitimate activities, but it should make life more difficult for the wrongdoer.
Part V deals with a number of related issues. I shall mention only the two most important. Clause 42 completes the implementation of two important directives in the banking field. The second banking co-ordination directive represents the main element of the European Community single market in banking services. It will allow European Community incorporated credit institutions—roughly speaking, banks—to offer services and to establish branches throughout the Community on the basis of a single authorisation and to be overseen by a single supervisor.
The supervision of the credit institutions directive, which is also known as the second consolidated supervision directive, extends the scope of the European Community requirements for supervising banks. Both of these directives are to be implemented mainly by secondary legislation under the European Communities Act 1972, but the maximum permitted sentence for new offences, which may be created by regulations under the 1972 Act, is three months.
This is less than the maximum sentences of six months which are at present available for certain
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comparable offences in Sections 39,40 and 41 of the Banking Act, and it is these sections which give powers to the Bank of England in relation to information, documents and investigations.
This clause will allow the new offences, which will be created by regulations, to attract the same penalties as do the existing Banking Act offences. They will thereby provide the necessary support for other European Community supervisors when they assume responsibility for the operation of their banks in this country. Clause 43 extends the jurisdiction of United Kingdom courts where a fraudster takes part in, or organises in this country, fraud against the European Community budget in other Community countries. By enacting the clause, we will ensure that the United Kingdom takes action against fraud which is perpetrated against the Community, and we will help to allay fears which have been expressed previously in both Houses of Parliament.
As your Lordships may have observed, this is a wide Bill and a pretty technical one. I hope that its measures will nevertheless be welcomed by your Lordships and by another place. Indeed, I hope that they will be welcomed by the public at large—except, that is, by money launderers, drug traffickers, insider dealers and fraudsters! I beg to move.
Moved, That the Bill be now read a second time.—(Earl Ferrers.)
3.54 p.m.
Baroness Mallalieu: My Lords, I am grateful first that the Bill gives an opportunity to the House to hear the maiden speech of the noble Lord, Lord Williams of Mostyn. We look forward to it. His reputation precedes him here, and his legal expertise will be invaluable in dealing with pieces of legislation such as that which is proposed today.
May I at the outset begin by offering an element of support and encouragement to the noble Earl? We on these Benches welcome and support an attempt by Her Majesty's Government to clarify confusion in the existing law; to right anomalies in existing legislation; to harmonise British law with European law by implementing the two directives and to deal more effectively with crime which crosses international boundaries; and of course to prevent those who commit crime from retaining the proceeds of that crime.
However, sadly, the noble Earl has produced something of a curate's egg of a Bill: good, no doubt, in many parts—and I shall give him credit as I go through it, if I may—but in others I regret to say it is something of a botched job and a missed opportunity.
If Part I of the Bill dealing with jurisdiction stood alone, I should feel obliged to invite the Minister to change the title of the Bill from the Criminal Justice Bill to the Lawyers' Benefit Bill. I have sat long into the night poring over Clauses 1 to 6 with a selection of other lawyers. In the end, we all believed that we understood what they meant. But unfortunately we all understood different things. Until the noble Earl produced the Bill, we thought that the law on jurisdiction was quite clear. The noble and learned Lord, Lord Templeman, in a leading judgment of the

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Judicial Committee of the Privy Council only last year, had, it seemed, clarified the law beyond doubt. But the noble Earl now comes along, like a knight on a white charger, to the assistance of the legal profession in these hard times with a piece of legislation which is so confused and complex in its drafting that no layman could hope to understand it and few lawyers to agree on what it means.
Perhaps I may invite the noble Earl to settle a bet. It concerns what the Bill calls "Group B offences". I pause to say that a layman who wants to know whether an offence is a Group B offence and tries to look it up finds the following helpful definition under Clause 1(3) (f) of the Bill. It is, he will learn among other things,
"an offence which is triable by virtue of the new section IA inserted in the Criminal Attempts Act 1981 by section 5(2)".
I think that that is as clear as mud.
What I need the noble Earl's help with is this. Where a Group B offence is involved, is the present defence in relation to jurisdiction still the law? In other words, is the law unchanged or does the noble Earl's new Bill mean that a Group B offence can be prosecuted here when it was committed elsewhere in the world by the citizen of another country, with no relevant event occurring in England and Wales? I take those words because they are applied in the Bill only to Group A offences. In other words, where there is no connection whatever apparently with this country, can such an offence be prosecuted here? If so, are we planning to prosecute Mexican fraudsmen in the Snaresbrook Crown Court for frauds committed wholly in Mexico? If that is the noble Earl's intention, or even a by-product of his intention, the lawyers will be deeply grateful. But I doubt whether the taxpayers or the Mexicans will.
The public surely deserves clarity in the legislation which comes from this House. It may be that Part I of the Bill performs some useful purpose. Indeed, I suspect that there is a real gap in the law in relation to frauds which ought to be capable of being prosecuted here. But surely they deserve legislation which is expressed in English and not in legal gobbledegook.
We are fortunate in this House because the noble Earl is here to explain it all to us; but I fear that his commitments will not enable him to attend the Snaresbrook Crown Court to assist the judge and members of the Bar when the Mexican defendants' case is called on. Perhaps he would care to consider amendments in ordinary English so that we may all understand the provisions before the Bill reaches the Committee stage.
One feature of the Bill which is all too clear is that it provides in effect for the creation and indeed the abolition of criminal offences under the Bill by statutory instrument in Clause 1(4) and (5). That cannot be right. Any additions to the list of offences to which the Bill applies should be subject to the scrutiny of Parliament. It cannot be right that activities can be criminalised or decriminalised at the whim of the Secretary of State or his advisers and without an Act
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of Parliament. I hope that the noble Earl will think again about those provisions before the next stage of this Bill.
I now turn to Part II of the Bill which concerns drug trafficking offences. We on these Benches particularly welcome Clause 8 which, as the noble Earl has explained, seeks among other things to correct a disaster area which arose out of the implementation of the previous legislation. Those who practise in the criminal courts have almost without exception direct experience of the long delays, often of many many months, which currently occur after conviction and before a defendant can be sentenced because the court has to find the time to determine the Drug Trafficking Offences Act aspects of the matter. I am grateful that it would appear that this provision will allow unfortunate individuals to be sentenced and to know their fate without waiting for the courts to find time to deal with that aspect. As a matter of both justice and humanity it must be right that, if one is convicted or pleads guilty even to an offence of this nature, one has a right to know one's sentence and one's fate as soon as possible. We welcome that clause.
I am not so sanguine about the success of the drug trafficking legislation as the noble Earl. The whole operation of the present drug trafficking legislation is, it seems to me, flawed in a number of important respects. In its operation against the small fry, who are commonly women, it is draconian. Those women are usually couriers and young. They are often pregnant or have small children and they frequently come from third world countries. The legislation contains swingeing provisions as regards prison terms and there is little discretion permitted in practice for the sentencing judge by the guideline cases from the court of appeal. Usually the defendants I have been discussing have no money and therefore confiscation is academic. Traffickers who operate on a large scale are rarely caught because the international financial system makes it difficult to track financial flow effectively. Measures which are commendable in theory are in practice likely to he directed almost entirely against defendants with little or no assets. I would welcome some indication from the noble Earl—he indicated that there were substantial frozen assets—as regards what proportion of the assets which have been ordered to be confiscated have been realised.
These provisions are therefore welcome but unhappily they are likely to be largely cosmetic. Real progress in this area requires international co-operation which goes beyond the EC and back to the drug-producing countries themselves. Some of the provisions in this part of the Bill give us real concern. Where a man is convicted of crime he should, as I have already said in relation to another aspect of the Bill, know the penalty which he faces as a matter of certainty so that, hopefully, reform and rehabilitation can ultimately take place. However, Clause 12 of this Bill allows the prosecutor to keep returning to the court again and again without limit of time or number of applications to seek further compensation orders against the same defendant. Of course it is undesirable that anyone should be able to salt away the proceeds

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of his crime, but there must surely also be a limit to hounding a man who has been convicted. I hope the Minister will consider restricting the right of the prosecution to return with a time limit of perhaps five years from the date of the original determination. I hope he will also consider confining that right to those cases where there has been a deliberate failure to disclose assets on the part of the defendant.
Clause 13 is monstrous. The noble Earl cannot seriously intend to impose what is in effect a double sentence. That flies in the face of both common sense and justice, yet this provision requires a defendant both to pay what has been ordered by way of confiscation and to serve a sentence for his failure to do so. As far as I am aware, in no other branch of the criminal law is imprisonment for failure to pay a fine or compensation treated as other than an alternative to payment. One cannot surely have it both ways. The present law provides for the imposition of long periods of imprisonment for failure to pay. Contrary to the noble Earl's experience, mine is that where large sums are involved there is no question of it being worth the offender's while to do the time and keep the money because the court has extensive powers and uses them. Periods of imprisonment in default are frequently longer than those that were imposed for the offence itself. However, if I am wrong and my experience about that matter is untypical, the fault lies not in the powers which are available to the courts but in the use by them of the judges in sentencing.
Clause 13 runs counter to the principles of imprisonment for debt and to the whole of the rest of the English criminal law in this respect. It also seems to us to run counter to fairness. I hope that the noble Earl will think again about that clause. There are other aspects of this Bill which also trouble us. Clause 18 which creates the offence of failing to disclose to a constable knowledge or suspicion that another person is engaged in money laundering—that provision is echoed in Clauses 19,28 and 29—goes far beyond the Theft Act provisions which require knowledge or belief. If suspicion is insufficient to convict under the Theft Act, will the Minister confirm that it is really the Government's intention to extend the law in this dangerous direction?
At a time when so many people are occupied in trying to ensure that miscarriages of justice are avoided, does not the Minister agree that a provision such as this opens up a minefield of potential for wrongful conviction? There is concern also, particularly in the legal profession, that legal professional privilege is eroded by those provisions. They are drawn so widely that it is far from clear what conduct has to be reported. If the Bill passes in this form, it seems likely that there will be widespread reporting of transactions which are ultimately found to be innocent. There is also considerable concern about what the Government propose to do with information which is passed to them. Perhaps the noble Earl will give us some undertakings about the Government's intention in relation to such matters.
The noble Earl has already referred to Clause 16 which creates an offence of acquiring property knowing that it represents another person's proceeds
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of drug trafficking. He gave some reassurance to those of us at the Bar and those who practise as solicitors that we are to be exempt from prosecution for taking fees from someone who is accused of drug trafficking when, as is usually the case, they appear to have no means of support other than business profits. The noble Earl says there will be no such prosecutions, but as the Bill stands at present I can see no such defence. I would be grateful if the noble Earl could indicate where that defence is. It seems that unless a solicitor or a barrister can show that he acquired the fee for what the Bill terms "adequate consideration"—whatever that may mean—he is liable to a term of imprisonment of 14 years. Clearly that is not the noble Earl's intention but that appears to be what the Bill states as it is presently drafted.
We are even more concerned about the continuing attempts by this Government to erode the standard of proof that is required in criminal cases. That happened in legislation which was introduced in this House last summer and there is a similar attempt in this Bill in Clauses 7 and 24. The words which appear in the Bill are the following:
"The standard of proof … shall be that applicable in civil proceedings".
In our submission those words should not properly appear in a Criminal Justice Bill of this nature. If the Crown does not have evidence to secure convictions or confiscations using the criminal standard of proof, the law should not be bent to help the Crown out. I fear that these provisions in this Bill, as in precedents—some of those were introduced in this House by the noble Earl—reflect more a capitulation by the party opposite to the law and order lobby within its ranks than a commitment to ensure that justice is done and those who have not committed offences are acquitted.
Part IV of the Bill relating to insider dealing could well stand as Part II of the "Lawyers' Benefit Act". When the chairman of the Stock Exchange, the director general of the British merchant banking association, the Chairman of the Investment Committee of the National Association of Pension Funds, the chairman of the Institutional Fund Managers' Association, the president of the Law Society and the chairman of the Bar Council—who is shortly to speak—all say that there has not been proper consultation with those who understand this field, that the proposals are so unclear that they will impede legitimate conduct and, indeed, attempts to improve standards of corporate governance, and that the proposals themselves provide endless loopholes for the fraudulent, surely even the noble Earl's characteristically robust defence of whatever legislation he is required to introduce must falter.
I do not understand, and perhaps the noble Earl will tell us, what was the rush to introduce those proposals without proper consultation. I hope that it is nevertheless not too late for the noble Earl and his advisers to seek to correct much of what is wrong in terms of clarity before yet another piece of unsatisfactory legislation hits the statute book. If it is worth introducing further provisions in this area—and everyone seems to be agreed that they are much needed—surely it should be done properly and after

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proper consultation. Assurances given here by the noble Earl are no substitute for clearly drafted and properly thought out legislation.
Above all else, the Bill is a missed opportunity. It is yet another Criminal Justice Bill which does not even make a pretence of addressing the real problem, which was illustrated by the recent crime figures. Recorded crime is now up 115 per cent. over the past 13 years. In the year to June this year recorded crime rose by 101/2 per cent., with particularly high increases in relation to robbery—24 per cent.—and burglary—16 per cent.—in the same area. There is no attempt in this Criminal Justice Bill to devise a national strategy to deal with crime or to co-ordinate programmes to prevent re-offending, which currently depend on isolated local initiatives and finance.
There is no attempt even to address the anomalies which are already arising as a result of last year's Criminal Justice Act. I must tell the noble Earl that confusion and resentment reign in the courts up and down England and Wales over the extent to which previous convictions may be taken into account by the judge in sentencing and the extent to which pre-sentence reports must be ordered by judges before sentence. The delays, and the consequent public expense, arising from the application of those parts of the Act are just beginning to be felt.
This is a cosmetic Bill. Its underlying principles are commendable but its form is not. Let us hope that the next Criminal Justice Bill goes to the heart of what concerns us all—namely, the reduction of crime—and does so after proper consultation, such as a White Paper. This little Bill, sadly, does not.
4.13 p.m.
Lord Wigoder: My Lords, I, too, am grateful to the noble Earl, Lord Ferrers, for the typically lucid way in which he introduced the provisions of the Bill. I am also grateful to the noble Baroness, Lady Mallalieu, for making a coherent Second Reading speech on a Bill with as many disparate parts as this one has. I shall not follow the example of the noble Baroness in examining the steady growth in the crime rate since 1945 and endeavouring to decide whether it is all due to a Conservative or to a Labour Government. I also welcome the imminent maiden speech of the noble Lord, Lord Williams of Mostyn.
At this stage, which after all is Second Reading and not Committee, I propose only to make one or two general comments about each of the parts of the Bill and then to deal in a little more detail with Part IV, which concerns insider dealing.
So far as concerns Part I, which deals with jurisdiction, I agree with the noble Baroness that it is not the easiest of provisions to understand. However, I must confess that I did not read it as giving jurisdiction to the Crown Court at the Elephant and Castle to try Mexicans who have committed an offence in Mexico to the detriment of other Mexicans. However, it may be that I have misread the provisions of the Bill.
What perturbs me about Part I is the point which the noble Baroness made about the existence, quite
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properly, of two lists of offences—Group A and Group B. Those are set out in subsections (2) and (3) of Clause I, which are followed in subsection (4) by the words:
"The Secretary of State may be order amend subsection (2) or (3) by adding or removing any offence".
On the face of it that is a remarkable power to give a Secretary of State. He would be able, by order, to include an offence in the clause which otherwise would not be there.
That is clearly a power of such significance that at the very least one would have expected it to be followed by a provision that it should be subject to the affirmative procedure. I am not one of those people who constantly harp back to the issue of affirmative or negative procedures. However, I should have thought that when the Secretary of State is being given the power in effect to create criminal offences, the power to impose jurisdiction where at the moment and after the passing of the Bill jurisdiction is not present, that power is such that at Committee stage we should consider carefully whether that is not an issue where the affirmative procedure would be appropriate.
The particular point to which I wish to draw attention in relation to Part II of the Bill, which deals with drug trafficking, is one which the noble Baroness mentioned. That is the fact that under Clause 7(2) the standard of proof is reduced from the criminal standard to the civil standard, and in Clause 9 there is a repetition of the existing position in the law relating to drug trafficking that the court may make certain assumptions to the detriment of the defendant unless the defendant is able to disprove those assumptions.
I fully recognise that there are cases—and drug trafficking may well be one of those cases—where there are certain matters so much in the defendant's knowledge that it is appropriate that the burden of proof should not be on the prosecution. All I say at this stage is that, wherever your Lordships find in a Bill a proposal in some cases to transfer the burden of proof on to the defence and in other cases to reduce the standard normally acceptable in a criminal case from being beyond reasonable doubt to the balance of probabilities, it is your Lordships' duty to consider the matter very carefully. Your Lordships should consider whether we are not encroaching, over and over again, on the principle, which I believe your Lordships would wish to maintain, that a defendant is presumed to be innocent until he is proved guilty and that in normal circumstances the burden of proof should be on the prosecution.
The other matter on which I wish to comment in relation to Part II of the Bill is Clause 18, which is repeated to some extent in subsequent clauses in Part III of the Bill. Under Clause 18 there is an obligation upon various people to disclose information to the authorities where they believe there is any question of the laundering of money which is the proceeds of drug trafficking. I do not complain about the principle, but the result is that a number of highly respectable practitioners in one trade or profession or another may come into possession of large quantities of information which it is their duty to hand over to the

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authorities. I do not complain about that. Much of that may be confidential information but not privileged information.
Where such information is passed over, perhaps in large quantities, what will happen to it? In particular, what is going to happen in cases where it is decided in due course that there should not be proceedings brought against the person to whom the information relates? Some authority is going to be left in possession of confidential, damaging and possibly quite inaccurate information to the serious detriment of an individual who is not being prosecuted. I hope that it is a reasonable question to ask what steps will be taken to deal with that information, and will the Government give an undertaking that it will be destroyed?
Part III of the Bill is in its way very similar to Part H. It largely extends the laundering procedures that arise from drug trafficking offences to offences of general criminal conduct. Again, a similar problem arises in the clauses—and the noble Baroness referred also to those—where there is the obligation to provide information to the authorities as to what is going to happen to that information if it is not used for the purpose for which it has been provided.
I come now to what in some ways is the most interesting part of the Bill, which is Part IV, which deals with insider dealing. I support at once what the noble Baroness said about the extraordinary lack of consultation over a highly technical subject. I can only think that the clauses would have been more clearly drafted if that consultation had taken place. As we have heard, the effect of this part of the Bill is that the present law of insider dealing in this country, which goes back to 1980, is to be repealed en bloc and the provisions are to be substituted in accordance with the European Community directive.
It is worth bearing in mind that since the 1980 Act common sense tells one—I have no evidence to prove if—that there will have been thousands of offences of insider trading or insider dealing committed in this country. In fact, in those 12 years there have been 21 people convicted of that offence, and indeed only 40 people have been charged with the offence. I suppose that there are two reasons for that. The first is that some of the wording of our existing legislation proved to be imprecise and there were loopholes through which various defendants managed to emerge.
I suppose the hope is that the wording of the new clauses will now be sufficiently precise to stop up those loopholes. I hope that that is right, though I must confess that any Act which as part of its new wording includes the creation of the word "tippee" is one which leaves me a total "fiabbergastee". I am full of gloom at the thought that in cases in which the issue is the status of the recipient of the confidential information, judges for generations to come will begin their summings up by being unable to resist the temptation to say "Members of the jury, tippee or not tippee, that is the question".
Getting the wording right is one matter, and we can seek to do that at Committee stage, but what in a sense is more fundamental is that the reason why so few prosecutions have been brought is not the wording of
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the present legislation; it is the realisation by the authorities of the difficulties of persuading the average juror to convict in a case of insider dealing. It is difficult to persuade them that it is a matter of gravity and that it is of sufficient gravity to warrant a conviction.
Your Lordships all know the true role of the City; the vital role which it plays in funding industry, commerce and the Government and in lubricating the wheels of international trade. Your Lordships are all aware of the intricate mechanisms that the various markets possess so that those fundamental tasks may be carried out. Your Lordships will accept without difficulty that it is highly important that there should be scrupulous honesty by all those involved in the City and in our markets. Many jurors see the matter very differently. I am sorry to have to say that many jurors think first of all of the yuppies and the discredit which they brought upon the whole of our financial system. Many people look around them and see takeover bids made not for the purpose of acquiring a company in order that it should be reconstructed and strengthened but in order that it should be destroyed in the hope that it will produce a profit on its break-up for those who have acquired it.
We all remember Black Wednesday and the activities of individuals who caused grave damage to this country, who would not for one moment claim, if they were asked, that they were acting in any sort of public interest but were simply there to line their own pockets. Many people will serve on juries in due course who believe that investors on the Stock Exchange for the most part have no interest in the activities of the companies in which they are investing; that they are simply out to make a fast buck in what people regard as largely a gaming transaction.
Where there are jurors who have that overall view of the City and its markets, it is hardly surprising if they take the view that if the people who are engaged in those activities happen to choose to score off each other by using confidential information it is all part of an elaborate game; that it is really not part of our criminal system; and that it is unreasonable to prosecute citizens of the country on that basis. This represents a very serious problem and no amount of amending the law on insider dealing will solve it. A much greater effort is required by the Government and by the City to present the true picture of the importance of the City to the general public. That is a campaign that has never really been undertaken, and it is urgently necessary.
It is equally necessary that it should be made clear that insider dealing is not a crime without a victim, as many people believe. In fact, it is very often a crime with thousands of victims. But at present there is the greatest difficulty in persuading members of the public that that is so.
I do not desire to go into any further detail about Part IV of the Bill, except to add one final comment, which is that it is right that we should seek to stamp out insider dealing. It is equally right—and we must again look at this with care at later stages in the Bill—that we should do nothing to prohibit the helpful and honest activities of, for example, analysts who are

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in the business of acquiring information and presenting it to the public in terms which are in the public interest.
There are many matters to be considered on this Bill. I and my colleagues on these Benches very much look forward to a constructive Committee stage.
4.29 p.m.
Lord Alexander of Weedon: My Lords, I welcome the broad thrust of the Bill. It contains well-intentioned proposals to improve the law dealing with commercial crime. However, those proposals are as yet, I believe, far from well thought through. There is a need for considerable further improvement. I should like to concentrate on one area only, that of insider dealing.
It is only comparatively recently that insider dealing has been clearly recognised as striking against the integrity of trading markets. This country and the City of London have taken the lead within Europe in prohibiting such dealings. In the 1970s the Takeover Panel, in its non-statutory code, outlawed insider dealings in connection with takeovers. The legislation of the 1980s applied that prohibition to insider dealings generally. By contrast, the record in other states of the European Community has been uneven. In some countries there has been a marked reluctance to recognise that there ought to be any specific remedy for insider dealing. So it was important that the European Community directives should impose minimum standards. I hope that it is not wholly out of fashion to say how welcome it is that the European Commission contributed to that process.
The London Stock Exchange—I should disclose that I am a non-executive director—has a particular interest. Over 90 per cent. of cross-border equity trading in Europe takes place in our own markets. The very importance of insider dealing, about which we all agree and, I am sure, would echo what was said by the noble Lord, Lord Wigoder, means that it is critical to make sure that it focuses on the right targets and that it is clear in its terms. It is here that the legislation has aroused wide-ranging concern—in the Stock Exchange, the British Bankers' Association, the Law Society, the Bar Council, the CBI and others.
One of the concerns initially voiced with considerable force was that the proposed legislation would lead to uncertainty as to the legality of essential and normal business practices, including the role of investment analysts and proper communication between companies and their major institutional investors. That was a particular fear with the draft clauses, which were initially exposed to what was described as "consultation", a process about which I should like to say a few words in a moment.
It is right to say to my noble friend, who so far has been given few plaudits for what has taken place, that in correspondence the Government have sought to give reassurance on that point. But there remain significant doubts. What troubles me about those doubts is the way in which it is said that they will be dealt with. In correspondence the Government have suggested that they will give guidance to allay doubts
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as to the meaning of the legislation. That may be better than nothing; but I was brought up to believe that the meaning of the legislation lay in the law laid down by Parliament as interpreted by the courts. I am very chary of the value of guidance as providing that degree of certainty to which all citizens should be entitled when they come to trade.
Therefore I ask the Government to accept that their confession that guidance is needed means that much better legislation is needed on this point. It is important that the legislation should state clearly what are recognised legitimate practices and what is unlawful conduct carrying the sanction of imprisonment, fine and loss of career and reputation for individuals.
There are a few specific areas of concern to which I should like to draw particular attention in general terms. First, it seems far from clear what will constitute what is described as "specific or precise" information. The explanatory memorandum states that information which is cast in general terms or is mere rumour is not inside information. But where is the boundary to be drawn?
Secondly, in the old legislation there is a definition of what amounts to the publication of information. That is entirely missing from the present Bill. It is apparently a concept that is too difficult to define. If it is too difficult to define, it is hard to see how those who seek to interpret the law can be sure as to how they can behave. The explanatory memorandum makes a virtue of suggesting that a definition in legislation may cause difficulty. In that case what will be caused by the absence of a definition? I believe that the concept of publication should be firmly defined. Without it, the effectiveness of the legislation could be undermined and those seeking to trade honestly would be in doubt as to what they can do.
Thirdly, the provisions with regard to the use of information during a takeover are unclear in their effect. The legislation has attempted to deal with that concern by providing a defence where someone relied only on market information and it was—I quote—"reasonable" for him to deal. I should not like to seek to deal relying on what will subsequently be defined as reasonableness or alternatively what may be decided to be unreasonable by a jury without any definition at all. We simply do not want a jurisdiction the length of the Chancellor's foot in this area. The concept of reasonableness is too shadowy. We ought to have a much clearer guideline.
Is the problem not magnified when the burden of proof of reasonableness is not imposed on the prosecution but on the person who dealt in the shares? There is a strong view that that could provide an inhibition to honest trading and proper market practices, of which I hope my noble and learned friend will take note. There ought to be detailed consultation on this part of the Bill. What the noble Baroness, Lady Mallalieu, described as a "lawyers' benefit" Bill is bad for the public, bad for the City and unfair and very expensive for those individuals who have to seek legal advice.
I have drawn attention to a few detailed points, but there are other interested bodies, such as the British

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Bankers' Association, who themselves have other detailed concerns about the legislation. I hope that those will be taken into consideration before the Committee stage.
I turn to two general points: first, the process of consultation; and secondly the means of enforcement. The consultation process over this Bill started, so far as concerns the Stock Exchange, at the end of July when it received the draft clauses. It was asked for comments by the end of August. So were the other bodies to whom the clauses were exposed for consultation. No doubt those who had invited the comments departed for their holidays in Olympian detachment from the fact that others too may take their holidays during the month of August. That is not a particularly user-friendly month for consultation. More seriously, it is not conducive to full consultation.
However, the Stock Exchange was privileged compared with the CBI. Some two years ago the CBI told me that it had indicated to the Government that it would welcome the opportunity to help when a Bill implementing the European directive came before Parliament. That offer was gratefully noted. But, so I am told, the draft consultation clauses were not even sent to the CBI for consultation. Given that it affects the functioning of dealings in regard to British industry, one finds that a somewhat surprising, indeed, one might almost say incredible, omission.
Surely the time has come for us all to recognise that proper consultation is the essence of good legislation. In no respect is that more true than for legislation which affects the City. To govern markets effectively needs a proper understanding of how they work and the law enacted needs to be both focused and clear. Uncertainty is had for the financial markets. That is why there is now being established in the City a financial law panel, sponsored by the Bank of England and the City of London Corporation and chaired by the noble and learned Lord, Lord Donaldson of Lymington. The primary purposes of the panel will be to identify uncertainties in the market, to give guidance of its own wherever possible and to act as a principal forum for proposing and consulting about draft legislation.
It is hoped that membership of the panel will include representatives of the Treasury and the Department of Trade and Industry, officially as observers but with full rights of participation. We believe that that will improve the quality of legislation and we hope very much that the Government will feel able to respond in the same spirit.
Perhaps I may next turn to enforcement of the law. It is very important to our financial markets that the laws governing them should set high standards. I believe that the insider dealing law has had a good deal of effectiveness. The existence of the law and the provisions relating to the regulatory regimes for compliance have meant that enforcement of the insider dealing laws has not been necessary in the way that is sometimes claimed by those who say that there have been thousands of cases. What is clear is that in general law enforcement in the City, when offences are committed, is unsatisfactory. It is widely perceived that the enforcement of the criminal law relating to
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commercial fraud is wholly unsatisfactory. Cases take a long time to come to trial and when they do the process is hopelessly cumbersome and expensive. The outcome is seen as being capricious and unpredictable and is no credit to the law. Indeed, in some recent cases we have seen that a fair trial was impossible.
A few years ago the Roskill Commission recommended that complex trials involving City issues should no longer take place before a judge and jury but before a skilled judge and experienced assessors. We in this country are markedly reluctant to depart from what the late Lord Devlin described as the age-old principle that jury trial is the lamp by which liberty lives. I understand that principle in most areas and would not seek to quarrel with it, but I doubt whether it is still so as regards complex commercial crime. I believe that the contrary may be so and I hope that soon we shall have a re-examination of whether there is wisdom in the recommendations of the Roskill Commission.
I turn to the specific record relating to the enforcement of the law on insider dealing. The truth is that the law has had a salutary effect in preventing most insider dealing. But during the five years, from April 1987 to April 1992, the Stock Exchange drew to the attention of the Department of Trade and Industry, as the prosecuting authority, more than 100 cases. In the same period there have been only 12 convictions and 15 acquittals. Against that background it is disappointing that the legislation does not consider other means of enforcement. One such means, which has considerable sympathy, is that an alternative remedy for insider dealing should be provided. Thereby, a City regulatory authority could have parallel jurisdiction to investigate suspected insider dealing and, if it were proved, order disgorgement of profits or possibly a multiple of profits and redress to any identified victim. That would mean that decisions on this difficult area of fact and law could be reached by an experienced tribunal imposing financial sanctions directly related to the seriousness of the case.
I do not suggest that the possibility of prosecution should be excluded. But obviously the fact that a determination and award had been made could be taken into account by the prosecuting authorities in deciding whether the rigours of the criminal law should invariably be invoked. I believe that that means of enforcement would provide a valuable additional remedy and would help to dispel the perception that the law in this area is not being adequately enforced.
Earlier, I was critical of the inadequacy of the time for consultation. However, it is right to say that in the ensuing months considerable amends for the short timetable have been made by the constructive way in which the Government have listened to, and discussed, the misgivings of the City and industry as to the initial draft legislation. I hope that that will continue. There is much scope for further improvement of the Bill. We all want a law which is fair, focused and clear.

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I sit down with greater pleasure because it gives the House the opportunity to hear the maiden speech of the noble Lord, Lord Williams of Mostyn.
4.45 p.m.
Lord Williams of Mostyn: My Lords, the late Capability Brown was of the opinion that every landscape or vista had the capability of improvement. If only he were able to scan the vast panorama of this Bill he would be exceptionally gratified by his posthumous vindication.
This is a muddled Bill which lacks coherence and is unlikely to be effective. I respectfully propose that the following questions could reasonably be asked. Is the new Bill on insider dealing better than what went before? What is the true mischief complained of? What is the true extent of that mischief? Can any offence or offences be more efficiently detected and prosecuted if the Bill becomes law? Ultimately, will the public have due and proper protection from the law, which is its entitlement? Those questions asked about this Bill raise serious issues of doubt.
I shall limit myself entirely to Part IV of the Bill which deals with insider dealing. I believe there to be general unanimity that the present law is ineffective; so ineffective as to be worthless. A worthless law condemns itself. As the noble Lord, Lord Wigoder, indicated, there have been few prosecutions in past years and few convictions. I know of no one in the City, in whatever capacity they serve or work, who believes that the present law works effectively. I submit that there is a moral: that legislation on a particular problem should be considered and, above all, the subject of the fullest consultation. As regards the Bar Council, consultation on Part IV has been vestigial. I respectfully suggest that the first law of effective legislation is, "Consultation good; haste bad". All the professional bodies which were consulted remain uneasy.
In the presence of my distinguished predecessor, the noble Lord, Lord Alexander of Weedon, I am about to commit a "disbarable" offence; it is to offer legal advice for nothing. The advice is directed towards insider dealers. They are constrained and described in Clause 35. The offence there specified is punishable by no fewer than seven years' imprisonment. That offence is insider dealing. According to Clause 39, the insider is not guilty unless he is within the United Kingdom, or the regulated market is treated as regulated within the United Kingdom, or the professional intermediary is within the United Kingdom at the time of the offence. Therefore, the modestly gratuitous advice that I offer is: insider, go to Paris upon the bus; sit upon the aeroplane to Maastricht; consider a long weekend in Damascus. I mention Damascus since it is the customary preferred destination for those who wish Pauline conversions—normally described these days as U turns.
Clause 36 deals with the disclosure of information, which is also a grave offence punishable by seven years' imprisonment. No offence is committed unless the giver of the information and the recipient—the
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donator and "tippee"—are both within the United Kingdom. I have done my best and scratched my head and I find no sensible basis for those exclusions.
Perhaps I may say how much I agree with the noble Lord, Lord Alexander of Weedon, that there is a serious case to be made for consideration as to whether insider dealing should he subject to civil sanctions with draconian fines against the insiders; multiple fines against their corporate employers; and severe disqualification from acting on any market or being a director of any financial institution. My own belief is that it is likely to be infinitely more effective than the two dozen cases or so which have not put an end to that mischief.
My Lords, I see the time on the Clock. Of course I took advice from my noble friend Lord Graham of Edmonton who said that seven minutes is good, but five minutes is better; and I shall shortly follow his advice.
I realise that I have been gloomy, but there is one beam of light amid the encircling gloom. Neither insider dealing nor disclosure of information on an insider basis applies to any policy with respect to the conduct of exchange rates, the management of public debt or the management of foreign exchange reserves. It would be very wrong of me at this time to intrude into private grief. Therefore, I shall not ask the noble Earl to indicate the reason for those exceptions
Perhaps I may say how grateful I am for the words of welcome which have been addressed to me by noble Lords and for the welcome which the whole House has given me.
4.52 p.m.
Lord Windlesham: My Lords, we have listened to a maiden speech which was trenchant and powerful. As noble Lords would have expected, the noble Lord, Lord Williams of Mostyn, has spoken with authority, with humour, and, as I hope the Opposition Chief Whip will agree, with fitting brevity. When he was appointed as chairman of the Bar Council, a press report about the noble Lord was headed, "Neat reformer follows radical volcano." The noble Lord has already shown himself to be a vigorous and articulate spokesman for the Bar. At the same time, his reforming instincts have been apparent; for example, in such delicate matters, in this House at any rate, as urging a judicial commission to make recommendations on judicial appointments and to review the performance of the judiciary. The noble Lord's gift for presenting arguments neatly—and I use the word from the press report—and persuasively, has been demonstrated to us today and, on behalf of the whole House, I congratulate him most warmly on his maiden speech.
The Bill before us is the ninth Criminal Justice Bill to be presented to Parliament since 1947. It is probably the narrowest in nearly half a century. What has distinguished the whole sequence has been the comprehensiveness with which a range of disparate proposals, originating from a wide variety of sources, have been brought together to bear on the conduct of

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the criminal law; the powers and procedures of the courts; and the treatment, in the full sense of that word, of offenders.
Most of those Bills have started with a nucleus around which later additions proliferated. For example, in the legislation introduced in 1986– 87 the original intentions were to put the criminal injuries compensation scheme on to a statutory basis, and to enact the great bulk of the recommendations of the Roskill Committee on fraud trials, although not the most contentious one, which has been referred to already in this debate. In this way, criminal justice legislation has been a rolling stone which characteristically gathers many accretions as it travels down the Westminster hillside towards its final destination on the statute book.
When it finally obtained Royal Assent, the Criminal Justice Act 1988 had expanded to 173 sections, half as long again as the original Bill, allowing for the separate enactment of the provisions relating to fraud. These were early manifestations of the anxiety over white collar crime.
Onto those wide-ranging and comprehensive pieces of legislation were hitched debates on compelling aspects of criminal justice not covered in the Bills themselves; for example, the penalty for murder and life imprisonment. Such tactics have never been welcomed by governments of whatever hue, but they have been accepted as an unavoidable part of the periodic scrutiny of criminal justice by Parliament.
Noble Lords will recall the fine debates that we had in this House last year, in the summer of 1991, and the carrying, by large majorities, of amendments on murder and life imprisonment to what became the Criminal Justice Act 1991, later reversed in another place. Now, once again, a Bill on criminal justice is presented to Parliament, somewhat earlier than expected, bearing in mind that the main provisions of the 1991 Act came into effect little more than one month ago, on 1st October this year.
Once again we have a number of different strands drawn together and presented to the House under the title of a Criminal Justice Bill. As we have heard, the sources are two different European Community directives, a report of a Home Office working party on the confiscation of the proceeds of drug trafficking offences, and a Law Commission report on offences of fraud and dishonesty with a foreign element. Each of them is worthy enough as a policy objective, although we have heard strong criticism from my noble friend Lord Alexander of Weedon about the weakness of the consultative procedures.
As the list grew, it is not difficult to visualise the state of mind of the Home Office. How should such a disparate collection of topics be described? If the familiar Short Title of a Criminal Justice Bill were to be used, would it then run the risk of opening the door too wide, admitting unwanted additions by way of amendment and new clauses? That challenge to the draftsman is reflected in the carefully circumscribed wording of the Long Title of the Bill. The Minister of State will have been briefed to tell me that the Bill as drafted pre-empts any attempts to insert new provisions on murder, life imprisonment or any other
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matter outside the scope of the Long Title of the Bill. I accept that. But what a missed opportunity. As everyone who followed the debates last year knows, this is a nettle which must be grasped and which must be grasped before too long.
The differences in the release procedures for life sentence prisoners are already concentrating attention on the contrasting processes now applicable to mandatory and discretionary life prisoners. For the latter, including some of the highest risk cases of homicide as well as arson and the most serious sexual offences, the process incorporates the judicial characteristics required by the European Convention on Human Rights. The new procedure for discretionary life sentences came into effect on 1st October 1992. But for the mandatory cases of murder where the court has no discretion the executive branch of government, in the shape of Ministers and Home Office officials, still decides on the extent of punishment. The way that power is exercised, including the setting of the tariff in private, has been widely criticised, not least by the former Lord Chief Justice, the noble and learned Lord, Lord Lane, in a notable speech during the course of the previous Criminal Justice Bill.
The recent controversy over the defence of provocation, particularly as it applies to women abused in the home and mercy killing, has heightened the argument to return the sentencing decision in all forms of homicide to where it rightly belongs; that is, the High Court of Justice.
Before moving on to some other points I want to refer briefly to the recent case of Dr. Nigel Cox. Dr. Cox was the hospital consultant found guilty of the attempted murder of a terminally ill patient by giving her a lethal injection. He received a 12-month suspended sentence. If, on the facts, the injection had been found to be the cause of the old lady's death, the charge would have had to be murder and the sentence life imprisonment. Yet the act would have been identical; the intention the same. It cannot be right to allow discrepancy on that scale to continue.
Returning to the contents of the Bill, there are matters relating to the burden of proof, which have already been raised, maximum penalties, and the sentencing of certain couriers in the international drug trade, also mentioned by the noble Baroness, Lady Mallalieu, in her speech at the outset of the debate. All these will need to be followed up in Committee.
There is, however, one more general point upon which I would ask the Minister to reflect in all seriousness between now and the Committee stage. It occurs in Part IV of the Bill dealing with insider trading, the part which attracted the most attention in this afternoon's debate. It is the reference in Clause 34 to "tippees". A tippee is a person whose source of information is an insider—not a difficult definition. I do not argue that such people should not be brought within the ambit of the Bill. But I object to the expression. My noble friend Lord Ferrers described it as "colourful"; the noble Lord, Lord Wigoder, made a joke about it. But this is the vocabulary of P. G. Wodehouse; of Bertie Wooster and the Drones Club. It is wholly inappropriate for an Act of Parliament.

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In order to prepare myself more thoroughly I made inquiries of the Treasury. To the best of my knowledge, and that of my informants at short notice, the word does not appear anywhere on the statute book. We must at least be thankful for that. Nor is it derived from Euro-jargon. There is no mention of it in the EC draft directive of 1989 co-ordinating regulations on insider dealing (89/592). The status of a person receiving information from an insider is defined in Article 4, but neither the word "tippee" appears nor, if such a thing were conceivable, does any French translation of the word.
This is our Bill, as the noble Earl reminded us at the outset. It is a House of Lords Bill originating in this House, which will be sent on to the Commons for scrutiny and approval. It is not, as is more usual, a Bill sent from the Commons to this House. I doubt that I am alone in feeling that we would be able to take more pride in its contents if an expression, which has already been ridiculed by several speakers, were to be removed.
5.7 p.m.
Baroness Macleod of Borve: My Lords, we are all grateful to my noble friend the Minister for introducing the Bill this afternoon. Some of us may be mystified by it but we are all grateful for the lucid way in which he placed it before us.
I shall speak only briefly—others have covered the ground more than adequately in my view—on something about which I care deeply; that is, the drugs situation in Part II of the Bill. In my view, traffickers in drugs do more damage to all parts of society than anything else in the Bill. I regard those evil people as the scourge of our country.
Customs and Excise officers are increasing the numbers of people they are apprehending, though I am informed that the street value of the drugs has remained constant. We are informed today by my noble friend the Minister that the value is around £35 million per year. Cocaine is still the main drug imported, though the drug Ecstasy is spreading rapidly. All the drugs which are imported in that context are killers and therefore the drug traffickers are potential murderers. Those who are caught are normally sent to prison for a long term. However, the Bill is more interested in confiscating the drugs. In future courts will be able to try cases and pass sentence before the confiscation order is made.
Because drug trafficking is such a serious offence I am anxious that severe deterrents should be made widely known both abroad and in this country. For many years I was a member of a parole board. There were many traffickers in prison and we tried to ensure that they were kept there. If the traffickers abscond or die, the courts in future will be able to confiscate the assets, presumably the financial ones and the drugs. But it seems that the courts will be able to trigger confiscation procedures which have the result of excluding minor cases. Can my noble friend tell us what is a minor case within this Bill and the law? Will he also assure the House that all confiscated drugs are destroyed? I am sure that that is the case under
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another Act, but it would be very helpful to the public of this country if they knew that all the drugs were destroyed.
I have said only these few words because I care very deeply indeed about the tragedies which are caused by drug traffickers. It will be apparent to all noble Lords that I am not versed in the law. I wish I were. With these few words, I wish the Bill well.
5.11 p.m.
Earl Nelson: My Lords, I wish to confine my remarks this afternoon to Part II of the Bill and particularly to Clauses 12,14,15 and perhaps Clause 18. It seems only logical and in the public interest to confiscate drug proceeds wherever they can be found. If traffickers are permitted to enjoy drug proceeds, that is an encouragement to crime, adding public insult to the private injury inflicted on the victims. Moreover, proceeds are often reinvested in further drug trafficking, creating the tidal wave which is presently hitting Europe.
A few years ago who would have guessed that at the present time a tonne or more of cocaine could be seized on the European mainland? At the same time internal border controls are coming off, or at least being relaxed, which of course adds to the United Kingdom's vulnerability, particularly as some European Community countries have weaker drug enforcement regimes than we do. It is well documented, and there is no argument about it, that a large percentage of the drugs coming into this country at present are coming from other European Community countries. There is no doubt that this part of the Bill is certainly required to redress that problem.
I note with interest the provisions of Clause 12 which should help to ensure that, even if a convicted trafficker successfully deceives the court by concealing drug proceeds at the time of sentence, the mischief can be subsequently corrected if further information comes to light. However, if the convicted trafficker can still conceal the proceeds—we all know how easy it is; we were discussing money laundering and the like this afternoon—then I suggest that, if anything, we have not got this legislation quite right yet. Although she will probably not agree with what I am going to say, I believe that something of what I have to say might help with the problem which the noble Baroness, Lady Mallalieu, on the Opposition Front Bench mentioned a little while ago as regards people being pulled back time and time again over years.
For instance, why should the convicted drug trafficker be subjected to less onerous disclosures than the bankrupt? Under Section 288 of the Insolvency Act 1986 a bankrupt commits the offence of contempt of court by failing to submit a statement of affairs. The Insolvency Act also contains a wide range of criminal offences to catch the bankrupt who conceals from his statement of affairs any material information; who fails to disclose or deliver up property; or who even fails to produce any relevant books and records. For some offences the maximum penalty to which the bankrupt is liable on conviction is seven years' imprisonment.

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Given that, can anyone argue that the provisions appropriate for a bankrupt would not perhaps be appropriate for a convicted drug trafficker? Even after all the provisions of this Bill have been implemented the drug trafficker will still not be subjected to the rigorous regime of the bankrupt. Should we not insist that the convicted drug trafficker makes full disclosure of all his assets, with sentences which are at least as punitive for deliberate concealment? Indeed, would Clause 12, as presently drafted, be really necessary if we were not apparently allowing the trafficker the right to conceal his illegal activities? In part that applies also to Clause 7.
As regards Clause 14, I believe that the provisions are drawn too narrowly as they fail to catch the drug proceeds of a defendant who dies before proceedings commence or who dies between the commencement of proceedings and conviction. The drug proceeds of a trafficker who has already been convicted and imprisoned abroad or those of a defendant who is unfit to stand trial also seem to elude confiscation under this clause. If we do not forgo the right to seize their drugs, why should we do so with the drug proceeds? There seems no reason why confiscation would be unreasonable in that case. Again, what about the trafficker who dies after absconding? I am sure that these points merit some further consideration.
A similar logic may apply to Clause 15 as regards the compensation provisions. Criminals are more likely to abscond where the evidence is overwhelming and return when their crime is no longer open to prosecution. If the evidence is sufficiently strong for an order to be made in their absence, then there is no more apparent logic in returning such confiscated proceeds than there would be in returning the drugs. It is more logical that compensation decisions should be based on a review of the evidence, with the onus on the applicant to produce additional or rebuttal evidence to support his claim.
Perhaps I may turn now to Clause 18. I have read certain articles in the press in which members of banks and financial services were expressing certain reservations about making Clause 18 mandatory as regards reporting to the authorities. I contacted the police, who would be dealing with this part of the business, to see what their reaction was. I was told that they are pretty satisfied with the way things are running now that the Bank of England is dealing with the matter and that in-house training is taking place at various banks and financial institutions.
I was told that in 1987 about 500 offences a year were being reported and that this year the figure is likely to be 12,000. That is without any mandatory legislation. I realise that there are certain people who are not pulling their weight on this matter and I assume that is why Clause 18 has been put into the Bill. If the banks and the financial institutions that are now playing ball and doing everything they can suddenly have mandatory legislation pushed at them, to cover themselves are they not going to report every single thing that happens, and, as a consequence, is not the system, which is working well at present, going to be swamped?
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I know that there are certain people or institutions who are not doing things in the right way, but I am sure that that is an issue more for an educational programme than a mandatory one. I also realise that some of the points which I have brought up this afternoon are perhaps a little radical. I do not expect the Minister to be able to reply to them this afternoon. I ask that he bears them in mind in order to see where we can go from here.
5.19 p.m.
Lord Harris of Greenwich: My Lords. I should like to join other Members of the House in congratulating the noble Lord, Lord Williams of Mostyn, on his maiden speech. It was a speech of brevity and wit. He analysed one particular part of the Bill admirably and raised a number of fundamental questions to which we very much look forward to hearing the reply of the noble Earl, Lord Ferrers.
The Bill that we are discussing is a criminal justice miscellaneous provisions Bill. One part of it is the property of the Home Office and the other part is the property of the Treasury. In terms of consultation, one part of the Bill has, in my view, been done well while the other part has been done extremely poorly. Most of us would have no difficulty about the Bill's central purposes, which are to deal more effectively with insider dealing and to improve the legislative framework of the criminal law as it applies to money launderers.
I should like to deal first with the question of insider trading and the Government's proposals. The Bill creates, as I understand it, for the first time an offence of trading as an insider in bonds, gilts and gilts futures. Given the rest of this part of the Bill, that seems entirely reasonable. However, Clause 40 excludes from the scope of the insider dealing provisions,
"anything done—
(a) in pursuit of monetary policies or policies with respect to exchange rates or management of public debt or foreign exchange reserves".
Like the noble Lord, Lord Williams of Mostyn, I find that a little odd. As I am sure the noble Earl, Lord Ferrers, will appreciate, a leak of the trade or reserve figures can have the most direct implications in the foreign exchange and gilt markets. I can recall from my own days in the Treasury the very substantial adverse effects when there was speculation in the press, let alone hard information, about those figures. Why then, in these circumstances, and given the other provisions of this part of the Bill, is public sector information excluded? No explanation so far has been given, but I very much hope that we shall hear something from the noble Earl.
There appear to be other concerns about this part of the Bill, to which the noble Baroness, Lady Mallalieu, the noble Lord, Lord Alexander of Weedon, and my noble friend Lord Wigoder have referred. I read in the Financial Times of 29th October a report of an interview that had been given to Reuters by the Economic Secretary to the Treasury, Mr. Nelson. This indicated that, following protests from bankers, the Bill might be amended. Mr. Nelson said that,

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"the Government did not want to undermine financial services in London".
Well, coming from the Economic Secretary to the Treasury, it would be remarkable if the reverse was true.
Mr. Nelson went on to say that the consultation period leading up to the introduction of the Bill, which had been published only a few days before, had been too short to respond to all concerns. I am bound to ask the noble Earl, Lord Ferrers: what was the tremendous rush? Why were the various institutions and professional bodies not given adequate time to respond to the Government's proposals? Frankly, I do not think that this reflects a great deal of credit on the way in which this matter has been handled in the Treasury. I welcome what the noble Lord, Lord Alexander of Weedon, said and the fact that the consultations, which should have taken place many months ago, are now taking place. No doubt amendments will be tabled in Committee.
But there is another reason for my concern—and that is that Mr. Nelson's interview with Reuters also dealt with the issue of money laundering. I very much hope that the Home Office will not allow this part of the Bill substantially to be weakened as a result of any pressure from the Treasury. I am not referring now to the various matters of substance that were raised by the noble Baroness but I very much hope that that will not take place.
The reason for my concern and, I am sure, that of others is obvious. The drugs trade in this country is expanding even more rapidly than the rest of the economy is contracting. In 1980 the Customs and Excise seized 35 kilos of cocaine and 38 kilos of heroin. The street value was £10 million. By 1985 the value of the drugs seized by the Customs and Excise had more than quadrupled from £10 million to £43 million. Last year—1991—the seizures rose to 1,088 kilos of cocaine and 373 kilos of heroin. Their value was not £10 million, not £43 million, but over £200 million. In other words, in a period of just 11 years the value of drugs seized has multiplied by a factor of 20.
However, that is by no means the end of the story. The United States customs has told me that it estimates that it seizes somewhere in the region of 10 per cent. of the drugs destined for the United States market. Frankly, there is not much reason for us to believe that we are any more successful than the Americans. So we are probably talking about a situation in which last year drugs with a street value of up to £2 billion entered the United Kingdom.
I say that not because I believe that any legislation is now justified in these circumstances, however ferocious its effects and however damaging its secondary consequences—we certainly do not want panic legislation—but because we must recognise the dimensions of the problem that is now confronting us. Excluding terrorist action, drug trafficking is by far the most serious class of crime being experienced in this country. It can devastate the lives of tens of thousands of our fellow citizens.
The problem of the drug trafficker is an obvious one. He has to find some means of injecting huge sums
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of cash into the banking system. In Miami not so many years ago, long queues used to form outside the banks before they opened, with large men carrying even larger suitcases holding vast numbers of dollar bills. As a result of action by the federal authorities that no longer occurs, but very large sums still find their way into the international banking system.
Our experience in this country was summarised in a report by the House of Commons Select Committee on Home Affairs. Paragraph 20 of its seventh report stated:
"The National Drugs Intelligence Co-ordinator (NDIC) estimated that there is at least £1,800 million derived from drug trafficking in the United Kingdom. In its written memorandum, the NDIC noted that such vast amounts of money circulating within the legitimate banking system may have a destabilising effect on smaller financial institutions. The NDIC also indicated that, despite the Drug Trafficking Offences Act 1986, the United Kingdom continued to be a major centre for money laundering. Indeed, he said that the United Kingdom was 'regarded by the United States, Canada and some others as an offshore banking system'".
That is pretty disturbing stuff, coming from the most senior police officer at that time with responsibility for dealing with the threat posed by the international drug traffickers. I fear that our problems in this respect have not been made a great deal easier as a result of the general approach of the Bank of England. I shall reserve for a future occasion the unsatisfactory response of the Bank of England to the convictions of BCCI on money laundering charges in the federal court in Tampa. That matter has been dealt with in some detail in the report of Lord Justice Bingham and I am sure that we shall have an early opportunity to debate that report.
But it is today, given the Bill now before us, probably worth recalling the views of the Home Affairs Select Committee of the House of Commons in the same report when commenting on the report of the Bank. Paragraph 8 of the report states:
"The difficulties in securing convictions for money laundering offences raise the question of whether changes to the law are required. In the light of the dangers in Britain being perceived in North America as 'an offshore banking system' referred to by the NDIC, we asked the Bank of England and the Committee of London and Scottish Bankers how they believed the law against money laundering could be strengthened. We were extremely concerned that neither body, with their considerable combined expertise of the financial world, were able to propose any changes to the law in response to the scale of the threat facing the financial system. If bodies such as the Bank of England and the Committee of London and Scottish Bankers are as passive as appears to be the case in responding to the significant threat facing financial institutions from money laundering, the Government must take the initiative".
Rather more than two years later the Government have now done so. I find many of the proposals in this part of the Bill both reasonable and justified. The concerns of the noble Baroness, Lady Mallalieu, to which I have already referred can of course be discussed at the Committee stage. However, I think it is right, for instance, to compel a defendant to co-operate and provide information in a confiscation inquiry with inferences to be drawn in default and for confiscation orders to be imposed in the absence of the convicted defendant who absconds or from the estate of such a person if he dies.

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On one matter I did not agree with the noble Baroness, Lady Mallalieu. I refer to the question of whether the debt should be continued notwithstand-ing the fact that the defendant had served a period of imprisonment. In my view the noble Earl, Lord Ferrers, was entirely right. In a number of cases of which I am aware a defendant who had an order made against him for large sums of money chose to remain in prison and was then able to leave prison and derive substantial advantage from the money which had not been effectively confiscated. It seems to me that that is not acceptable. I would be concerned were these and some other important proposals in the Bill to be weakened. And I would strongly object if this was done as a result of any pressure from the Treasury. I make that point only because of the reference by Mr. Nelson in his interview published in the Financial Times to the fact that some of the issues relating to insider dealing were going to be looked at again and that this would also apply to the money laundering clauses of the Bill. If substantial government amendments are tabled to those clauses, we very much hope that we will be able to get one clear answer from the noble Earl, Lord Ferrers. That is all the more important given the fact that these matters have now been discussed between the Home Office and a large number of other organisations for a significant period of time. The question is whether the law enforcement authorities—the Customs and Excise, the National Criminal Intelligence Service and the Metropolitan Police—have agreed that any such amendment represents no significant weakening of the money laundering provisions of the Bill. To make my point a little more explicit I shall be asking not whether they have been consulted—we all know what consultation amounts to in many cases—but whether they agree that the impact of the new money laundering procedures has not been significantly affected.
I do not believe that the Customs or the police should have any right of veto on any proposed changes in the Bill. It would be an absurdity to make any such proposal. But we have a right to be told fully and in the clearest terms what their views are if amendments of substance to these clauses are brought forward. I have no doubt that the Bill will have some far-reaching effects on the criminal law. It is addressed to issues of high public importance, the integrity of our financial system and the campaign against the money launderers. It deserves both at Second Reading and the most careful scrutiny during its Committee stage.
5.35 p.m.
Lord Richard: My Lords, I start with the very pleasant task of welcoming my noble friend Lord Williams of Mostyn and congratulating him on his maiden speech to us today. It was lucid and penetrating and offered a powerful analysis. I hope that the Government listened very hard. As we share a country, a profession and a political allegiance it will not be any great surprise to the House to know that I sincerely hope that we shall often hear him expressing himself in the forthright way he did today.
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Much of what I want to say in winding up the debate was said by my noble friend Lady Mallalieu in her powerful and impressive opening speech. I share many of her reservations as to the precise terms of the Bill and the drafting and complexity of some of its provisions. Yet again this is one of those pieces of legislation where we can discern as through a glass darkly what it is the Government are trying to achieve, but because of the opaqueness of the glass it is difficult to give them more than one and a half cheers as they set out on this legislative path.
Let us take Clauses 1 and 2 of the Bill. In a Criminal Justice Bill it always seems to be Clauses I and 2 that cause the greatest trouble. In the most recent Criminal Justice Bill we spent a great deal of time, as the noble Lord, Lord Windlesham, will no doubt remember, trying to decipher the drafting. We went through three amendments in Committee before the drafting finally emerged in a form which was acceptable to the House. I am bound to say that I found it as difficult at the end as I had at the beginning. I put these two clauses in the same class.
There is a division of offences into Group A offences and Group B offences. There is then an attempt to deal with the jurisdiction in respect of Group A offences. The defence which is available now that a court may not have jurisdiction to try a particular offence in relation to Group A offences is removed. That should be read in conjunction with Clause 3:
"A person may be guilty of a Group A or a Group B offence whether or not—

(a) he was a British citizen at the time of the relevant event;

(b) he was in England and Wales at that time".

And so far as one can tell, in relation to Group B offences, whether or not any relevant event at all took place in England and Wales. If that is right, the example given by my noble friend of Snaresbrook Crown Court trying a conspiracy between Mexicans which took place in Mexico is not too fanciful. I cannot believe that the Government ever intended that that should be the effect. I hope that the noble Earl will be able to tell us that that is not the effect and that once again those on this side of the House have misread the legislation which the Government are so benevolently bringing forward.
There are other aspects of the first part of the Bill about which I have considerable reservations. Clause 6 is an attempt to deal with a situation in which the defence wishes to raise the issue of whether or not the relevance of an external law point is applicable. That is a rare provision in the British Bill. Subsection (4) says,
"a condition … shall be taken to be satisfied"—
that is, that the prosecution can be taken to be all right and continue as it should do in accordance with all the rules without that defence being raised—
"unless, not later than rules of court may provide, the defence serve on the prosecution a notice—
(a) stating that, on the facts as alleged with respect to the relevant conduct, the condition is not in their opinion satisfied".
In other words, the defence now has the obligation in those instances to disclose to the prosecution in advance of the trial what the defence might be if the

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issue proceeds. I am bound to say that that goes somewhat too far. We shall return to the matter in Committee.
I turn now to the burden of proof. It seems to me that Rumpole's "golden thread" is being strained rather unduly by the Government, especially in Clauses 7 and 24. It requires the civil burden of proof only—that is, proof on the balance of probabilities, rather than proof beyond reasonable doubt—to be satisfied in determining questions as to the benefit which offenders have received from the proceeds of crime for the purpose of making confiscation orders.
We had thought that that issue had been settled by the case of Dickens in 1990 which established that, in relation to confiscation orders under the Drug Trafficking Offences Act 1986, an item must not be included as one of the offender's assets which is subject to confiscation unless the judge is satisfied beyond reasonable doubt that the item is indeed part of the proceeds of drug trafficking. Although the Explanatory and Financial Memorandum says that the Bill puts beyond doubt the fact that the standard of proof required is a civil one, the real effect of the clauses is to reverse the decision in Dickens. I believe that the House should seriously consider whether the confiscation of assets in such a case is really not such a severe penalty that the use of anything less than the criminal burden of proof is acceptable. Those provisions are indeed somewhat disquieting.
However, if I am disquieted by that, I must say that I am even more disquieted by Clauses 12 and 13, both of which were mentioned by my noble friend Lady Mallalieu. Clause 12 (in relation to drug trafficking offences provisions) provides that, having had one bite of the cherry immediately after the man is convicted in deciding what are his assets as a result of trafficking, the prosecution can come back and decide,"Well, we got it wrong the first time, but we'll have another go and see if we can't up the figure a little". Indeed, if the prosecution decides after the second go that there is scope for a third try, it can come back for a third time. The only limitation that I can see is that,
"No application shall be entertained by the court … if it is made after the end of the period of six years beginning with the date on which the defendant was convicted."
It is possible that there is scope for some flexibility in the way in which the provisions of the Drug Trafficking Offences Act are being used. But to have a period of six years within which the prosecution can come back on more than one occasion is, with respect, going a little too far than the interests of justice or the interests of dealing with crime require.
If I have a question mark over Clause 12, I have an even bigger one as regards Clause 13, which again was raised by my noble friend Lady Mallalieu. Clause 13 says that where "the defendant" elects to serve a term of imprisonment in lieu of paying the amount that he has been ordered to pay under the Drug Trafficking Offences Act, (that sentence having been fixed by the judge in lieu of payment) and he decides for very good reasons—or no reasons at all, or perhaps he would rather be in prison than have his house sold—that he
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will serve the extra term, that does not seem to have much effect under the provisions of the clause upon the confiscation order. The clause says:
"Where the defendant serves a term of imprisonment or detention in default of paying … that term does not prevent the confiscation order from continuing to have effect, so far as any other method of enforcement is concerned".
In that case, the defendant is caught not once but at least twice. First, he receives a sentence; secondly, he has a compensation order made against him and a term of imprisonment imposed in lieu of it: thirdly, he then serves the term of imprisonment in lieu of confiscation, but nevertheless finds himself in a situation where the confiscation order can be enforced. Again, I have to say that that goes a little too far. It is possible that in Committee one will be able to look at the provisions in the Act and perhaps modify them in a way which will make them more acceptable.
Clause 14 gives the authorities the right to chase the defendant even after his death. I suppose that there is an argument which says that if he dies possessed of money or assets which are the results of drug trafficking then, nevertheless, his estate should be deprived of those sums. We need to look at that proposition quite seriously. The detail of the wording is certainly something which I should like to concentrate upon in Committee.
We then have the offences in connection with money laundering in Clause 18. I do not object to those sections; indeed, I think that they make a great deal of sense in principle. But, on the other hand, there are certain ways in which words are used in the sections which again I think will cause us difficulty. The concept of a person suspecting someone is introduced:
"A person is to be guilty of an offence if—he … suspects that another person is engaged in drug laundering … [or] he does not disclose the information or other matter to a constable as soon as is reasonably practicable".
I also observe—and I would be most grateful if the noble Earl can tell me why—that the offence seems to be committed only if the information or other matter on which that suspicion is based,
"came to his attention in the course of his trade, profession, business or employment".
So I suppose that if an estate agent comes into possession of information which makes his suspect that the money which is being used to purchase a house represents the proceeds of drug trafficking he is under an obligation under the section to report it and, if he does not do so, he commits an offence. But if such information comes to him socially, or because he suddenly observes that his neighbour looks rather richer than he did before and he suspects that he may be a drug trafficker, does he or does he not commit an offence if he does not report it? It really cannot be suggested that one degree of suspicion is any the less culpable than another. Once again, it is a point to which we shall return in Committee.
There is no doubting the fact that Parts II and III which introduce the legislation to implement the Community directive on money laundering are causing disquiet and concern. New offences are being created which will oblige institutions, undertakings and professions to disclose to the police suspicions of the laundering of both the proceeds of drug trafficking

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and the proceeds of other criminal conduct. No guidance will be given by the Government as to what circumstances would give rise to a suspicion of money laundering. There is likely to be widespread reporting of transactions in an effort by institutions to avoid falling foul of the legislation.
So far as concerns the solicitors' profession, the Law Society is most worried about the provisions. The society says that it is an extremely unsatisfactory state of affairs and that solicitors will be brought into conflict with their duty to keep confidential their clients' affairs in many instances where, upon investigation, no criminal activity will be found to be involved. That is the thrust of the Government's legislation as we perceive it. On the whole we support it. The details of it as expressed in the Bill we find to be ill drafted. Considerable concentration, some of it lengthy, may be necessary in Committee.
I should like to say a few words about Part IV of the Bill on insider dealing. I have been furnished with a letter from the Stock Exchange. Perhaps the simplest way to make my point would be for the House to permit me to read two or three sentences therefrom. It states:
"Our first reaction is one of disappointment; the provisions may bring UK legislation in line with the EC directive on insider trading; the opportunity has not been taken to revisit the issue of how this and other abuses such as market manipulation can best he pursued and miscreants effectively penalised. The operation of the present insider trading law has thrown up numerous instances where attempts to bring cases to Court have been frustrated by ambiguity in the legislation and the problems of satisfying the high standard of proof required in criminal trials. The Exchange believes that the Government would have been well advised, in the period between the passage of the Directive in 1989 and the presentation of this legislation to the House, to investigate whether a different approach, perhaps using a special tribunal, would have provided a more effective means of combating this abuse".
The Stock Exchange then makes the complaint made by my noble friend about the absence of consultation by the Government on this important issue.
To sum up the attitude of this side of the House to the Bill, we perceive and welcome its thrust but find great difficulty in accepting some of the details and we shall return to them in Committee. I question whether the Government have given Part IV sufficient consideration before bringing its precise terms before the House. That will be something to which we shall have to return.
5.51 p.m.
Earl Ferrers: My Lords, this has been an interesting debate in so far as it has covered the great many complicated and detailed problems contained in the Bill. The debate was enhanced by the speech of the noble Lord, Lord Williams of Mostyn. He brings to the House a formidable reputation, not least, his ability as a lawyer. We heard that this afternoon. He spoke quietly, gently and most incisively. The Government might have preferred it to have been not so incisive, nevertheless he made well the points he wished to make. As a distinguished chairman of the Bar Council, he carries and will carry great weight in your Lordships' House.
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The noble Baroness, Lady Mallalieu, was, of course, in great form this afternoon. I thought that the Bill would be accepted by your Lordships, and that all your Lordships would think it to be an excellent Bill because it deals with wicked things such as drug trafficking and insider dealing. However, the noble Baroness fair set about it. She said that she would give it an element of welcome. She referred to it as a curate's egg and as a cosmetic Bill. She described me, in a most glamorous way, as a knight on a white charger making the law completely impossible to understand. She said that we were giving in to the law and order section of our party. I do not know whether that was a compliment or an insult. We are trying to make the law against drug traffickers, insider dealers and so forth a good deal harsher than it now is.
My noble friend Lord Alexander said that by the time he spoke the Government had not received many plaudits. He evoked a chord of sympathy. He then proceeded to give the Bill a good roasting in some respects. He said that if the Bill was a lawyers' benefit Bill it would be had for the bankers, bad for the City and had for members of the public. The whole point of the Bill is that it is supposed to be good for the hankers, good for the City and good for members of the public. I hope that in Committee we shall be able to persuade him that that is the case.
The noble Lord, Lord Williams of Mostyn, will note that we have some fairly loose rules of procedure in your Lordships' House. I was fascinated to hear my noble friend Lord Windlesham devote a large proportion of his speech to murder and life imprisonment. He acknowledged that that has nothing to do with the Bill, but just happens to come under criminal justice. He wanted me to confirm that if he did put down an amendment relating to murder and life imprisonment it would be without the Long Title. I believe that he knew the answer, but I shall just confirm that it would be outside the Long Title. I do not recommend that he do so, but of course he is a free agent and can do what he likes.
I was grateful to the noble Baroness, Lady Mallalieu, for welcoming Clause 8. I was grateful for any nuggets which fell from her lips on this occasion. Clause 8 allows the court to proceed to sentence and defer the confiscation hearing. I was intrigued when she said that she spent a great deal of time with her legal friends beavering away until midnight, trying to understand what the Bill meant. She then came out with the astonishing suggestion that the Bill would catch Mexicans trading in drugs in Mexico. We should be able to take them to court in some obscure place which she mentioned, which I wrote down but cannot remember. If that was the quality of the advice from her legal friends, I hope that she will find some other legal friends.
I was surprised when the noble Lord, Lord Richard, followed that point. He cannot have read the Bill that well. Had the noble Baroness done so—I am sure she must have done; it is merely her interpretation that I find so astonishing—she would have found that no Mexican would be prosecuted in the United Kingdom unless the case had some physical connection with the United Kingdom. The necessary

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connection is defined in various clauses: Clause 2(1) gives the relevant event; Clause 5(1) contains the test for conspiracy; Clause 5(2) lays down that the attempt must take place in England and Wales. I tell the noble Baroness now so that when she reads those provisions she will see the correct side of the argument.
Clause 5(2) provides:
"An agreement falls within this section if—

(a) party to it, or a party's agent, did anything in England and Wales in relation to it before its formation, or

(b) a part to it became a party in England and Wales (by joining it either in person or through an agent), or

(c) a party to it, or a party's agent, did or omitted anything in England and Wales".

The noble Baroness is well versed in the law. I have a great admiration for her ability, but even my modest, non-legal mind understands that one would not catch a Mexican dealing in drugs in Mexico and be able to prosecute him in England, if there was no connection with England. Perhaps we can leave that red herring which she, followed by her noble friend Lord Richard, tried to draw across the Bill.
The noble Baroness and my noble friend Lady MacLeod were worried about the amount of money realised from confiscation orders. I said that £35 million had been ordered to be confiscated under the Drug Trafficking Offences Act 1986. Up to May 1992, £15 million had been realised or was subject to receivership. The realisation of confiscation orders is a necessarily lengthy and complex business.
The noble Baroness referred also to the standard of proof. I can assure your Lordships that we are not seeking to change the standard of proof when determining guilt for the offence. That will remain the criminal standard (beyond reasonable doubt), but it was always the intention that the standard of proof for the confiscation procedure, which is not a criminal proceeding, should he the civil one (the balance of probability). Some confusion has arisen over that point as a result of a Court of Appeal case. We are seeking to correct that in the Bill.
When talking about the civil standard of proof, the noble Lord, Lord Richard, referred to the decision in Dickens. I can confirm that the Bill reverses that decision. Dickens interpreted the Drug Trafficking Offences Act 1986 in a way that was not intended. When the Bill was going through, the Government explained that the civil standard was the one that was meant to apply.
The noble Baroness was also worried that the Bill would catch the small fish only and not the big ones. She said that the big fish would get away. I disagree with her over that. The purpose of Clause 7 is to enable the prosecutor to refer to the court to make a confiscation order only where it is clear that the profits from the drug trafficking are substantial. This should result in orders being made only against the bigger fish.
The noble Baroness and the noble Lord, Lord Richard, were worried about Clause 12 relating to the discovery of further assets. The noble Baroness asked whether we could have a time limit of five years. Perhaps she omitted to read that part of the Bill also in the middle of the night, because there is a time limit
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of six years from the date of conviction, as the noble Lord, Lord Richard, discovered. By definition, the offender will have failed to disclose the existence of the proceeds, otherwise the courts would have been aware of them. Therefore, when the noble Lord, Lord Richard, said that we were having three bites at the cherry, I do not believe that that is so. Where a fresh determination is made, the court will only be taking away assets which it would have taken anyway, had it known of them when the original confiscation order was made, or assets which related to the drug trafficking up to the time of the conviction.
The noble Baroness, Lady Mallalieu, also waxed lyrical about Clause 13 which she said was iniquitous. The noble Lord, Lord Richard, went down the same path but he used more modified language. On this clause the noble Baroness said that the offender should not go to prison as well as being made to pay the debt. However, if the offender pays the confiscation order, he will not have to serve a term of imprisonment on default because there will have been no default; he would have paid up. Nevertheless, he must have had the proceeds in the first place for a confiscation order to have been made.
On Clause 16, the noble Baroness was worried about the liability of lawyers to prosecution. If a lawyer receives the market fee for his services, then he should have nothing to fear. He would only have to fear if the assistance which he gives the defendant is free or is in such a way that the drug trafficking is assisted. If that were so, it would be quite right that questions should be asked.
The noble Baroness was also worried about the Group B offences and asked whether the present law would apply. To convict a defendant, the law has not altered, but the Bill changes the law as regards making the case triable. That is where subsections (1) and (2) of Clause 5 apply, both of which extend the jurisdiction.
The noble Baroness and the noble Lord, Lord Wigoder, were worried about the statutory instruments procedure allowing the list of offences to be amended. At the moment, this is by negative resolution which I know always causes people anxiety. I shall consider the points made by both the noble Baroness and the noble Lord, Lord Wigoder, before we come to a later stage. Again, both the noble Baroness and the noble Lord were worried about Clause 13 relating to imprisonment and default. Some offenders who have very large amounts of money put away choose to serve the extra term in default rather than pay up. I was glad that the noble Lord, Lord Harris, agreed with the Government on that. The clause will not result in an offender being able to go to prison and then come out and live on the benefits of his drug trafficking earnings.
A number of noble Lords expressed anxiety about the consultation on insider dealings. We consulted on the general principles way back in 1989. We consulted on the draft clauses over the summer and the proposals which were put before the House reflect the valuable comments made by many people, including the Stock Exchange, the Law Society and others. Some noble Lords asked what was the hurry. We have

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to bring forward the legislation now because the EC directive should have been implemented by 1st June. Pressure on parliamentary time resulted in action not being possible before now and we therefore thought it important to do this.
The noble Lord, Lord Harris, and others were also worried about the consultation. My noble friend Lord Alexander said that the CBI had offered to help when the directives were going to be drawn up. He said that the offer was noted and nothing happened. I can only say to my noble friend that I apologise for it. I shall look into the matter because obviously if an undertaking is given, it should be considered. I am not sure whether an undertaking was given but I shall certainly look into the matter.
The noble Lords, Lord Wigoder and Lord Windlesham, were worried about the word "tippee". The former was quite amusing in saying that he would be a "flabbergastee". I think it was the noble Lord, Lord Williams of Mostyn, who said that it was a debarable offence to give free legal advice. I do not wish to be guilty of a debarable offence or even of a sacking offence. I have a certain amount of sympathy with my noble friend Lord Williams; I believe that "tippee" is a perfectly awful word and I questioned whether it was a good or suitable name. I was told that it was a normal name which was used; everyone knew it. There is a distinguished American who wrote a seminal book and who used the word "tippee". However, I shall take your Lordships' anxieties into account.
The noble Lord, Lord Wigoder, was also worried about the assumptions on the proceeds of drug trafficking going against natural justice. When the 1986 Act was debated, Parliament agreed that the application of the assumption was a necessary weapon with which to attack drug traffickers. Because drug trafficking is often a lifestyle offence, information about the benefits from drug trafficking is in many cases known only to the defendant. Removing profits from trafficking is an important element of the Government's strategy. Experience has shown that there is a need to make a full use of the assumption in order to ensure that the proceeds of drug trafficking do not remain within the drug trafficking system.
The noble Lord, Lord Wigoder, was also worried about confidential information. Information about suspicious transactions is passed by banks to a special unit in the National Criminal Intelligence Service. All information which it receives is regarded as confidential. Where an investigation takes places and there is no evidence of a criminal offence, the police will destroy the information which has been passed to them by the banks. This amounts to about 25 per cent. of the total of 12,000 reports per year. If the police are unsure whether a criminal act has taken place, the information is retained, reviewed and weeded out as and where appropriate.
My noble friend Lord Alexander was concerned about insider dealings. He suggested that a number of terms used in the Bill such as "precise" and "made public" should be defined. There are difficulties because those terms arc used in the directive and there
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would be a serious risk of incorrect implementation of the directive if the terms were defined. However, I shall be happy to consider the point in Committee.
My noble friend Lord Alexander was also worried about the special insider dealing tribunal. It is not clear what advantages it would bring. Insider dealing will always be difficult to prove because it essentially concerns the intentional misuse of information. I do not believe that establishing a special tribunal will change that. For example, it is not clear whether it would be appropriate for a tribunal like that to operate with anything other than the normal criminal standard of proof requirements if it were handing out what are in effect punishments. Anyway, it is not clear that altering the burden of proof to the civil standard would significantly increase the number of insiders successfully brought to book.
My noble friend Lord Alexander was also concerned about insider dealing takeovers. He said that the exemption for takeovers was not good enough. The provision does not set out to give a complete exemption of all dealing connected with a takeover. It depends on the circumstances of a case; in particular, the capacity in which a person deals will be significant. It would not be reasonable for an employee who knows that his employer intends to conduct a takeover then to deal in the securities if he deals in a private capacity and not for his employer. The legislation obviously could not spell out each and every circumstance when dealing is or is not a proper market transaction.
The noble Lord, Lord Williams of Mostyn, referred to territorial scope as regards insider dealing. He said an insider dealer could escape legislation by leaving the country. I do not believe that that is the case. If such a person wishes to deal in the United Kingdom on the United Kingdom stock exchange or through a United Kingdom broker, he will be caught even if he gives the dealing instructions when he is outside the United Kingdom. The noble Lord was also concerned about the civil sanctions against insider dealing. In our reply to the report of the Trade and Industry Select Committee and its accompanying investigations we made it clear in August 1990 what the Government's view was. Our view is that the regulator's action would be to impose a sanction on the basis that it was in the public interest to penalise individuals who conducted themselves in a particular way. That is the classic reason for creating a criminal offence. The Government accordingly believe that the criminal law remains appropriate. That is our view today.
My noble friend Lady Macleod of Borve asked what constituted a minor case of trafficking. The Bill does not let off all minor traffickers. They will be subject to the same stiff penalties as are major traffickers when they are convicted. However, the Bill will relieve the courts from the cumbersome procedure of making a confiscation order when there is no or very little benefit from trafficking. They will use their powers to fine instead. My noble friend was also concerned about the destruction of drugs. Section 27 of the Misuse of Drugs Act 1971 enables the courts to order that drugs can be forfeited after conviction. The

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court may direct how they are to be disposed of. Normally they are ordered to be destroyed. That is the usual course.
My noble friend Lord Nelson asked why we did not line up the trafficking procedures with the bankruptcy requirements. The Bill already gives the court new powers to make the defendant give the court such information as it thinks fit which will help the court to make a confiscation order. Clause 10 refers to that matter. My noble friend also asked why we did not confiscate proceeds in more cases of dead and "abscondee" traffickers. My noble friend made some valuable suggestions in that regard that I shall reflect upon before the next stage of the Bill. My noble friend also asked whether the reporting of suspicious transactions had to be mandatory. Institutions disclose information to protect themselves from existing money laundering offences. Only a small change is necessary to meet the terms of the directive; in other words to introduce a special offence of failing to disclose knowledge or suspicion of money laundering.
The noble Lord, Lord Harris of Greenwich, referred to the exclusion of monetary policies. It is essential to allow official dealings because Her Majesty's Government necessarily possess information which cannot be made public. Private dealings are not excluded. The noble Lord also referred to the report of the Home Affairs Select Committee. In response to that report the Home Office established an interdepartmental working group to examine confiscation legislation. The working group's first report was published in May 1991 and many of the proposals in this Bill stem from that report. The noble Lord, Lord Richard, asked why a money laundering offence was committed only in the course of trade or business. The new offence is structured this way because that is the requirement of the European Community money laundering directive.
I am grateful to all those who have taken part in this debate for their contributions. Those contribu-tions have been detailed and I have tried to reply to some of the points in detail. Clearly I shall take into account all the matters which have been raised. Some noble Lords may have doubts about the fine tuning of the Bill as it were but on the whole, despite what the noble Lord, Lord Richard, and the noble Baroness, Lady Mallalieu, have said, I believe they approve of the Government's determination to crack down on this matter. If the noble Baroness, Lady Mallalieu, cares to introduce any amendments which make any of the provisions of the Bill simpler to understand in legal language, I will gladly discuss those. However, those amendments must be well argued.
Lord Wilberforce: My Lords, before the noble Earl sits down, I hope I may ask him one question as regards the future progress of the Bill. Does he intend that the Bill should be committed to a Committee of the Whole House, or does he believe that some other procedure might be appropriate for part of it? When I heard the speech of the noble Baroness, Lady Mallalieu, particularly as regards Part I of the Bill, it occurred to me that that part at any rate might be
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suitable for disposal by a separate and special procedure. The noble Baroness made it clear that Part I is legally dense. Whether it is a lawyer's paradise, purgatory or hell I do not know, but it certainly calls for detailed legal discussion in the light of the Law Commission's report and in the light of a number of decided cases. I view with some dismay the prospect of that provision being debated in a full Committee at midnight perhaps. It may be better disposed of in some other way. I merely ask the noble Earl whether he will be good enough to consider that possibility, no doubt in consultation with the other side of the House, and not necessarily assume that the whole Bill should be dealt with in the ordinary way on the Floor of the House.
Earl Ferrers: My Lords, I am grateful to the noble and learned Lord, Lord Wilberforce, for his suggestion. However, I am bound to tell him that it was our intention that the Bill should proceed to a Committee stage on the Floor of the House, as is normal. Obviously any proposals or anything that the noble and learned Lord says will be considered. There might be some objections to the course he proposes but I am certainly prepared to consider it.
Lord Boyd-Carpenter: My Lords, before my noble friend finally sits down, will he also bear in mind that the view of the noble and learned Lord, Lord Wilberforce, is not shared by others?
Earl Ferrers: My Lords, that is rather what I thought might be the case. I shall certainly consider the suggestion of my noble friend Lord Boyd-Carpenter too. However, if this Bill is considered at 12 o'clock at night I hope that there will not be too many of the noble and learned Law Lords present to add to the controversy surrounding this complicated issue. They will, nevertheless, add to the excitement.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

National Treasures
6.17 p.m.
Baroness Elles Baroness Elles rose to ask Her Majesty's Government what are the outstanding areas of difficulty over the issues raised in the report of the European Communities Committee on the Control of National Treasures (6th Report,1992–93, HL Paper 17).
The noble Baroness said: My Lords, in under two months' time, in accordance with the provisions of the Single European Act, the arrival of the internal market will lead to the reduction, if not the total elimination, of border controls between the internal frontiers of European Community member states. However, since Article 36 of the EC treaty, which goes back to 1957, remains in force, member states will be able to retain the right to permit prohibitions or restrictions on imports, exports or goods in transit justified for,
"the protection of national treasures possessing artistic, historic or archaeological value".

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Apparently in order to assist member states to safeguard their national treasures in the light of the new situation, the Commission has proposed two instruments, a regulation and a directive, which have been the subject of scrutiny by the European Communities Select Committee. There is a further instrument, the seventh VAT directive, which will affect imports specifically but which has not yet been scrutinised by the committee. I shall not therefore touch on that particular draft directive further tonight.
By way of initial explanation I should say that the committee's inquiry was severely constrained by the early rise of the House in the middle of July—for many of course that was a pleasure but it made the committee's life difficult—and the need for the results of the inquiry to be published before the meeting of the Internal Market Council in September. I wish to take this opportunity of thanking on behalf of the committee the legal adviser and the staff who were able to produce a report under great pressure. As a result of those constraints it was possible to hold only one day's session to take oral evidence. We express our gratitude to the officials of the Department of National Heritage and the Treasury Solicitor's Department for their considerable help.
I should like to re-emphasise that the report does not pretend to be as comprehensive as all our members would have wished, both as to the pursuit of certain identified issues and the range of expertise required to cover the many interests involved. For example, we should have liked to have heard from representatives of museums, owners of national treasures, archaeologists and others. However, tonight your Lordships will have the benefit of the considerable and expert knowledge of noble Lords who are good enough to take part in the debate on the Unstarred Question which I have tabled on behalf of the committee. A similar comment was made in the reply just received from the Department of National Heritage last weekend.
The committee acknowledges the seriousness of the impact which the new provisions will have on the United Kingdom art market, which is one of the most important globally and without doubt the most important among the 12 member states, having a 75 per cent. share of art exports from the Community. The report draws attention to some, if not all, of the issues causing anxiety, and the committee concludes that the fears expressed within the United Kingdom art market do not appear to be exaggerated. The efforts being made by the department in the process of negotiation reflect the anxiety that the proposed instruments will produce great uncertainty in the United Kingdom art market unless they are substantially modified. It might be helpful, therefore, if I outline briefly some of the matters raised in our inquiry in the hope that the Government can alleviate the anxieties of those engaged in the art market, while acknowledging that the department has already had some success in responding to some of the issues at stake which have been raised by those in the trade.
First, under the regulation a common export licence is envisaged for any cultural good exported
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from any member state to a third country, subject to category and value limitations. The committee queried the zero rate value applied to certain categories. It would appear that that would lead to an immeasurable number of export licences being required, for instance, for Roman coins. Indeed. I was shown one small coin which was being circulated with the comment that the coin was of less value than the stamp on the envelope. The financial burden on national administrations and the consequent delays in the completion of the licences appear mind-boggling—not a word normally used in our European Communities Select Committee, particularly the sub-committee on law and institutions.
That problem could he met in part by the raising of the threshold of the value set out in the annexes to the regulation and the directive, so reducing the predictable strains on national administrations with responsibility for providing export licences. One example would be that the value limitation for prints and drawings should be 50,000 ecu instead of the present 15,000 ecu. That approach would be somewhat akin to the policy of the Commission in regard to the introduction of the merger regulation, whereby a threshold was imposed which had the effect of limiting the number of cases to come before the Commission, with the option to review the figure in the light of experience.
I should like to mention a further point in relation to the regulation. I should like confirmation from my noble friend that, as I understand in the light of his speech in this House on 10th June (Official Report, col.1298), the Waverley rules, a system which has worked well for the past 40 years, will remain in place in the United Kingdom. That is to be welcomed. It would appear that the system has been generally recognised by other member states. It might be a valuable contribution to their own export control procedures if that system were to be imitated.
The directive raises issues of concern. The committee recognises both the efforts of the negotiators and the anxieties of the United Kingdom art trade in relation to the proposal for a procedure which would allow a member state to request the return of a national treasure removed unlawfully from its territory from another member state where the treasure is believed to be. There are four points raised in the report concerning that proposal which I should like to touch on.
The first is the burden of proof. Can my noble friend inform the House of the measures now required to be taken by the requesting state? Would the burden of proof now lie with that state to provide prima facie evidence that the object is located in the requested member state and as to its exact whereabouts? There would be reluctance to deal in an art market where, after the purchase of an object in good faith, an individual could be subject to investigation by the competent United Kingdom authority at the request of another member state concerning the origin of the object in his possession and there was the threat of its removal.
Secondly, it is understood that the time limit within which a requesting state must notify the requested

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state has been reduced to two months. That is certainly an improvement on the original text, but is it envisaged that that time limit might be reduced further, to one month? Potential delays of that kind are for a genuine purchaser, to say the least, an impediment to enthusiasm.
Thirdly, the related questions of costs and compensation do not seem so far to have been satisfactorily resolved or even addressed. The objective should surely be that the requesting state should deposit with the requested state a sum adequate to cover both costs and compensation. Even the threat of the costs of protecting his innocence falling on the individual could he a deterrent to a bona fide purchaser. That would apply throughout the European Community. This is not a matter which will affect only markets within the United Kingdom. It is hoped that other member states in the European Community will recognise the deterrent effect of those provisions.
My final point relating to matters raised by the committee concerns the procedure over which it expressed most disquiet, namely the procedure which imposed an obligation on the requested member state to resort to the use of the power to search and enter in order to trace or locate an object—in the terms of the directive—unlawfully removed from another member state.
It is generally accepted as a point of principle that such a power is exercised only where there is at least a suspicion of a breach of United Kingdom law. In the cases envisaged there might well not be such a breach. While there may be limited examples where that principle is overridden, such as in the special case of Anton Piller orders, such a power should not be used without at least being authorised by an order from a national court.
The committee also draws attention to the decision of the European Court of Justice in a recent case which makes a distinction between private and public premises and the right of protection against powers of search, in this case by the European Commission. I mention the case not in order to take up the time of the House but in view of the fact that, as I understand it, many dealers in the art market carry on their trade from their own homes. There is therefore a need for clarification of the power of search in relation to private premises. It was suggested by the committee that:
"There should be no requirement to provide powers to search private (as opposed to business) premises unless evidence was provided that the treasures being sought had been dishonestly acquired".
The issues I have outlined, raised in both oral and written evidence to the committee, are such that a statement from my noble friend the Minister as to the development of the negotiations would be extremely helpful. I accept, of course, that my noble friend may be constrained by the number of meetings taking place at present in another place, both of Select Committees and Standing Committees. We are grateful that he is here to answer as many questions as are put to him.
Overall, it must be admitted that the impression given by the two instruments, and particularly the
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draft directive, is of a very wide net being woven in an attempt to catch as many objects as possible, be they minor or major, with the result that really important items may well escape as a result of overburdensome administration. Is my noble friend able to inform the House whether other member states, even those so-called "victim states", have made any attempt to recognise that detrimental effects on the United Kingdom art market, in view of its importance, could have serious and severe repercussions on their own markets; and that the European Community art market as a whole, with its worldwide reputation, could move outside the Community to Japan or other markets in the Far East?
The committee warmly appreciated the efforts being made by the Government to modify the Commission's proposals, affecting as they do not only the United Kingdom art market but also the markets of other member states. I ask my noble friend whether the Government will be able to continue to effect the changes and improvements which are needed to ensure a flourishing art market both here and in the 11 other member states.
6.30 p.m.
Lord Strabolgi: My Lords, I am sure we are all grateful to the noble Baroness, Lady Elles, for tabling this Unstarred Question. We are also indebted to the noble Baroness and to Sub-Committee E, as well as to the expert witnesses, for this searching and far-reaching report.
The Commission's proposals for a regulation and a directive are an attempt to come to terms with the fact that next year there will be a free movement of works of art and antiques between EC countries, with no customs, or few customs, checks at borders. This is a fine ideal, with the aim of enabling the people of the Community to possess and to enjoy their common artistic heritage without undue bureaucratic interference.
As the report says, in order to protect the Community's external borders it is planned that artistic items above a certain value being exported outside the Community should be subject to the usual export procedures.
Different EC countries have varying degrees of control at present, ranging from Italy, which controls all art exports, however low in value, to Belgium, which has no controls at all. It is feared that loopholes such as that would result in a drain of art treasures to countries outside the community, although it is not clear to me why Belgium has not herself suffered a significant art drain through her own liberal policy. Be that as it may, the regulation brings in a measure of control for items leaving national borders if those are above a certain value. The values of the different categories are, in many cases, much the same as those in our own Open General Export Licence limits—the so-called OGEL limits that is £100,000 or 150,000 ecus for paintings, and £35,000 for most other categories, with a zero rating for manuscripts, as we have in this country.
I realise that the Government may have reservations about the no value limits for archaeological

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material, whether from a site or on the market. As the noble Baroness said, they may make it difficult for the coin trade and for dealers generally. I shall be interested to hear what the noble Viscount, Lord Astor, will have to say about that matter.
The Government are to be congratulated on persuading our EC partners to accept those basic financial limits rather than to attempt to control the movement of every cameo between countries within the Community. That should be a help to the art trade, to museums and to private collectors generally. However, I hope that I am not being unduly optimistic as it is clear from the report and from the evidence given by the expert witnesses—which impressed me greatly—that national rules can still remain in force after 1992.
Will the Southern EC countries such as Italy and Spain continue with their present strict controls? I noted from the evidence given to the sub-committee that a lady who is a British MEP was not allowed to take out from Italy an Annigoni portrait of herself as it was deemed to he an Italian national treasure. I must therefore ask the noble Viscount, Lord Astor, how free the free market is going to be for cultural objects below the monetary thresholds.
There are further problems when we come to the directive, which is considered in the art world generally to be unacceptable in its present form. The noble Baroness, Lady Elles, touched on some of the problems.
The directive requires a member state, upon application by a requesting member state, to seek out a specified cultural object that is alleged to have been unlawfully removed from the requesting state's territory. The requirement would include far-reaching powers of entry and search—powers that are normally granted under United Kingdom law only if there is a suspicion that an offence has been committed under our law. It appears that those powers would extend to all such allegations whether the goods had been stolen or bought openly and in good faith.
I am glad to note that the United Kingdom has secured an important revision to ensure that a cultural object may be defined as a national treasure, both before and after its removal from our own territory, without it having to be listed to qualify. I think that most people agree that the disadvantages of listing outweigh the advantages. That was evident in the debate in your Lordships' House in the summer, and the Government have wisely rejected listing. I can also say that listing is against official Labour policy.
In its present form the directive will have an adverse effect on our leading auction houses and on the British art market generally, where about 60 per cent. of objects passing through our market are imported for sale and re-export. I understand that more than half of those come from EC countries. With the prospect of goods being seized and held, there would be a disincentive both for sellers and purchasers. One result may be that the market will move to countries outside the EC such as the United States, as the noble Baroness said.
Although we all want to see stricter controls over smuggling, it should surely be the responsibility of
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each EC country to police its own borders and not to expect another country to take on draconian powers in cases where no offence had been committed under that country's laws. Therefore, I hope that the Government will be able to secure some further revisions to the directive which will be fairer and more realistic.
6.36 p.m.
Lord Carrington: My Lords, I rise briefly to support my noble friend Lady Elles in what she said, and also the noble Lord, Lord Strabolgi. I shall be brief because there is no point in repeating what has been said so forcefully.
In doing so, I must declare an interest as Chairman of Christie's, but I think that my noble friend sitting beside me, who I believe has an interest in another auction house, would agree with me that neither his auction house nor mine is directly concerned in this matter, in that we can sell in New York, Hong Kong, Geneva or wherever. What concerns me, and I am sure him also, is the effect that this will have upon London as the art centre of Europe. I believe that this proposal will he extremely damaging.
Having said that, allow me to make it plain that I think it is quite right and proper that each country in the European Community should have a duty to preserve its national heritage as it thinks fit. Indeed, I think all the countries concerned do so. We certainly do it under the Waverley rules, which on the whole act fairly both for the vendor and the buyer, and for the nation. In so far as they do not, it is the fault of the Government, in that they do not provide the money with which to buy those articles which are considered to be part of the national heritage. If they are part of the national heritage the nation has the obligation to pay.
I agree with the noble Lord, Lord Strabolgi, that we in this country, whether we be dealers or auctioneers, should not be asked to share the burden of policing different rules which different countries have for preserving their own heritage. Why should they lump it on us if they have much stricter rules, as the Italians and the Spanish will? They should have the onus of policing their own regulations.
I believe that this proposal will be both damaging and at the same time unworkable, in that it will increase bureaucracy; the number of export licences will be multiplied many times; and it will have a direct effect upon both buyer and seller in so far as there is an eight-week period in which a sale can be delayed without any prima facie evidence at all. That would not be fair on the buyer or the seller; nor would it have a settling effect upon the art market. Coupled with a 5 per cent. VAT tax on imported works of art, which is also proposed by the Commission, it could cripple the London art market, which, incidentally, brings a very great deal of money to the Exchequer and a great deal of prosperity to London. I cannot think that that is what the Government want. I hope and expect that they will stand firm in opposition to this proposal.
6.40 p.m.
The Earl of Gowrie: My Lords, it is a great pleasure to follow my noble friend and, at risk of sounding like the two Ronnies or the Morecambe and Wise of the auction world, I have to say that I profoundly agree with him. As a loyal Maastrichtian, I feel that the closer we get to the workings of the European Community, the harder it becomes to love it. I agree with my noble friends Lord Alexander of Weedon and Lord Sainsbury of Preston Candover, who, when writing with other industrialists this week in support of the Maastricht Treaty, said that their support:
"should not be used as support for aspects of the Community as it is or for the performance of the Commission. On the contrary, we believe that single market directives are not evenly enforced across the Community and many British businesses resent the intrusive and sometimes erratic approach the Community takes to regulation and legislation".
Those are very wise words which are most appropriate in the context of my noble friend's Unstarred Question. I should like to congratulate her and the Select Committee on the heroic work that they have done.
In 1971, naively perhaps, we voted for a measure of vision and promise. We believed that we were to enter a Community of sovereign states committed to the principles of open markets, free trade, cultural exchanges and peace. But as it has turned out, the Community is riven between the global instincts of the North and the protectionist instincts of the South. Under the banner of worthy attempts to create level playing fields for trade, it seems that the protectionist instincts are starting to win. The most serious issue is the threatened breakdown of the GATT negotiations. This evening we may be debating a more local issue, but it is one which, in some aspects at least, is no less serious for one of the few trades that Britain in general and, as my noble friend said, London in particular, still dominates; namely, the art market.
I do not need to repeat what others have said, and said better, about the importance of the art and antiques trade to the British economy. People do not come to this country for the sun. Our trade is not only a successful generator of employment, income, tax revenue and reputation; it has huge implications and knock-on effects for our tourist, hotel and financial services industries. Indeed, some of the biggest new patrons and philanthropists for our hard pressed public institutions—one thinks of the admirable Mr. Hotung, who has just given so generously to the British Museum—made their first real contact with the London art world through the London art trade.
There is also a connection which is perhaps more important than mere trade, a connection with the living springs of our culture. Since 1955 London and New York have been the leading cities of the Western world so far as the art market is concerned. But they are also the cities which, over the same period of time, have nurtured the greatest painters and sculptors. To my mind it is no coincidence that the decline of the Parisian art market, thanks to restrictive practices in the Parisian auction trade, coincided with the decline of Paris as the great source of contemporary art.
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Britain's position in the world art market is threatened by two Community provisions. One is VAT on imports, as distinct from VAT on the commission earnings of imported works of art. We all grumble about paying VAT on anything, including our commissions, but we accept that we should pay it. However, the former is like a tax on the sun. It even acts, nonsensically, as a disincentive tax for the repatriation of the European heritage. The second threat, with which we are more concerned this evening, is the directive about the free movement of works of art. In particular it has to do with the return of cultural treasures considered to have been unlawfully removed from one member state and taken to another.
There are even suggestions that the legislation—the directive—should apply retrospectively. If that is taken to its logical conclusion one is back in the old and discredited territory of returning the Elgin marbles. No serious member of the London art trade wants to traffic in stolen goods. To do so is not only immoral; it is deeply unprofitable. The profitability of any market always depends on its credibility and integrity.
It is my view that the Community could play a useful and constructive part in establishing ground rules for the conduct of trade, particularly where the difficult areas of antiquities and archaeological items are concerned. The Community could also provide fierce disincentives for smuggling. But to do so needs a lot more time and much more sense. What is now proposed is a smuggler's charter, particularly where the southern states are concerned. The legislation that exists in Italy—which, by the way, was introduced by Mussolini and to a less extent in Greece and Spain is so restrictive that it has lost all credibility within those countries themselves. In effect, the laws do not consider works of art to be private property; yet the system shrinks from the expensive economic consequences of wholesale nationalisation.
Unable to police the legislation themselves, our partners would like the art trade in the Community, where London predominates, to act as customs, civil servants, tax gatherers and police in respect of rules which few of their own nationals are inclined to obey. That is an altogether different task from our proper business, which refuses to handle stolen goods, makes restitution when mistakes made in good faith occur and guarantees the authenticity of the goods we offer. The noble Lord, Lord Strabolgi, made the point extremely well.
In our trade we cannot deal with situations where the world outside the Community recognises title because it recognises private property, and the world inside the Community finds itself bullied into doing the reverse. If we get this directive wrong, the result will be a rush of sales in Geneva and New York, to the detriment of the Community in general and London in particular.
There are disquieting rumours—I hope that they are no more than that—that, given the sensitivities of the presidency, the Government may accede too quickly and too easily to some of these proposals. I have heard it said that there is pressure on the

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Government because 1st January 1993 fast approaches. There is no way that the necessary domestic legislation could be in place by then, unless things are very different from the time when I was first a Government Whip in your Lordships' House 21 years ago.
There has also been far too little consultation with the trade. There have been four changes of Minister since a consultative body was set up to take representations from the trade. The consultative body has in fact met only three times. I beg the Government to take this issue seriously. It goes far beyond the corporate interests of Sotheby's, which was founded in London almost 250 years ago, or of that upstart newcomer to the scene which came along 20 years later and which, I am sorry to say, is very ably led by my noble friend. Of course I declare my own interest but I ask your Lordships to remember that Sotheby's and Christie's and Phillips and Bonham's and indeed many of the larger dealers are international organisations. If there are uncomfortable changes we can advise our clients to sell in Geneva, Hong Kong or New York. That would not be bad for us but it would be had for the Community, for Britain and for London. I urge the Government to handle the matter with the closest care and attention. I am confident that they are aware how much is at stake and I am confident that they will do so.
6.50 p.m.
Viscount Colville of Culross: My Lords, it was interesting to take part in the short investigation led by my noble friend Lady Elles. It was of great value to have the evidence of the officials who were then engaged in negotiating the text of the draft directive and regulation. For all I know they still are, because if one matter is certain it is that the text which appears in the report that is the subject matter of this Unstarred Question is by no means the final text.
The short answer to my noble friend's Question about the outstanding difficulties is that there must be a great many. I cannot begin to embark upon that issue as did the two previous speakers with extraordinary insight and experience. I am not sure why, among all the issues of the free market which will start on 1st January, this must be given so much priority by comparison with many others that we cannot afford the proper length of time to discuss it. Another issue will he discussed in respect of the legislation which has just been given a Second Reading by your Lordships. Nevertheless, I shall try to make constructive comment about what this country should do in the face of the proposals with which it appears we must deal at this stage.
By way of advance notice I asked my noble friend Lord Astor two questions. As it has already been established that an enormous proportion—approxim-ately 50 to 75 per cent.—of the trade in the EC takes place in London presumably it must be to our advantage that, in so far as we have national treasures and seek to protect them, which according to the evidence we have not done much about as yet, we ought to set about taking such advantage as we can of these measures. We have prided ourselves upon
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establishing the proposition that we can continue to trace British national treasures, which are also cultural objects, after they have been exported. One of the questions I asked my noble friend was: if such treasures have not been the subject of the Waverley rules because they have not been the subject of an application for an export licence, what machinery do we propose to employ in order to persuade the countries to which they have been exported to recognise them for what they are and what material will we put before the authorities in the rest of the EC in order to have them returned?
In the opposite direction I also asked my noble friend what we have by way of information about the various rules and regulations which the other countries in the Community have on their statute book—or, as it may be, do not have—which would be of great relevance to us if we were asked to trace for them and to return what they claimed to be national treasures which had been exported to this country.
We have the proposition of a common format for export licences and we are told that we can rely on the alertness of members of the art trade as to the provenance of what they seek to sell in order to protect their buyers. In addition, we rely upon a set of regulations passed in 1981 which include matters which are the subject of this Question under the Customs regimes. Will my noble friend tell the House a little more about the extent to which we have gone into the question of what may and may not be lawfully exported by way of a national treasure and cultural object in all the other EC countries so that, if we have to rescue and return such works, we may at least be upon sound ground and will know the details that we must place before the courts in due course.
That leads to the issue of the powers of search, which was one of the three issues particularly identified by the sub-committee. We have been told that the United Kingdom has a large preponderance of the market and therefore an enormous burden for searching will fall on us. We recognised that there would be burdens upon art dealers and we recognised that there would be difficulties about the powers of search. However, I note that, in the material which was before the sub-committee and in the explanatory memorandum, the Commission stated that the system was inconceivable without co-operation in matters such as search and identification. The written evidence from DG III anticipated search warrants in this country by an extension of the normal methods which we use in our domestic procedures.
We shall need to get the position right, not least because of the substantial financial and manpower implications which underlie the whole of the matter. It is true that the requesting state will be expected to pay the costs involved in an individual application for a national treasure to be returned. That provision is in the report. I am not sure how the costs are to be recoverable but no doubt that can be negotiated. However, that does not deal with the great amount of bureaucracy involved in searching sales catalogues, general research upon the laws of other European states within the Community, notifying the other

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member states of the Community and general procedural methods which will have to underpin the whole system.
I note that in the regulations on which the National Heritage Department relied as providing us with the necessary information—it is Regulation No.1468 of 1981—Article 21 requires all member states to waive the fees and expenses for co-operation in this respect. I understand therefore that we must bear that burden from our own financial resources. Accordingly, it seems to me that we should be absolutely certain that we are in full command of the export requirements in the other members states, so that we know precisely what it is that we have to follow up and what it is that we do not.
One thing I know is that entry and search into other people's private premises is a sensitive subject. I have looked at the law under the Police and Criminal Evidence Act, which is the main area where that currently occurs in relation to the commission of suspected criminal offences. I note that not very long ago the Divisional Court described that power of search—in that case in relation to searches of solicitors' offices and their papers, although I believe it applies more widely than that—as a serious inroad into the liberty of the subject. That is not just a United Kingdom view. In the Hoechst case, referred to in the report, it was suggested to us by the noble and learned Lord, Lord Slynn, who was one of the judges in Luxembourg at the time when this matter was decided, that it is noticeable that the Advocate General suggested that there should be for business premises a right of inviolability on the lines of the European Convention on Human Rights with regard to privacy of the home equivalent to that for private premises. Although the court did not adopt that opinion, it said that it should confirm the general approach in Community law, which followed the general principle that inviolability with regard to business premises should not be overlooked, even if it was not to be subscribed to to the extent to which private homes should be protected.
I have seen the Government's response to the sub-committee's report. Therefore, I believe it is right to say that there must be parallel power of search for business premises as well as private premises. However, if that is so, we must look extremely carefully at the terms under which it can be allowed. That will be for the purposes of our implementation of the directive if and when it is finally agreed.
The sub-committee was told that that will be carried out through regulation under the European Communities Act. That will be done by statutory instrument which cannot be amended. Therefore, this will probably be the only opportunity which the House will have to consider what should go into the regulation.
On the basis that this is not a criminal matter—certainly not in the United Kingdom—the first filter for an application to search and enter should be to a circuit judge rather than to the magistrates, because there will be more consistency between circuit judges
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and more opportunity in a Crown Court to argue about those matters than there is in a magistrates' court.
There is the question of what should trigger any application. Presumably there will be a certificate from a Minister of the Crown. I have looked at some extremely interesting ancient legislation under which, if a ship in a dockyard in this country was thought to be in the service of a foreign state at war with a state which was friendly to us, the Secretary of State might by warrant empower entry and search of the ship. Probably more useful is the Criminal Justice (International Co-operation) Act 1990, which enables a search of premises to take place and to be authorised on the authority of the Home Secretary, which he may give as a result of being persuaded that a criminal offence has been committed in another country within the Community. That fulfils one of the conventions and agreements which we have reached with our fellow member states in the Community.
There must be some device whereby not only will a court at a suitable level be given the necessary information but there will also be a method which will allow those who are subjected to such an imposition to check it out. Therefore, that goes back to my earlier question about what information will be available about the rules under which the goods in question must have been exported from other member states.
I suggest also that, if we are to have entry and search, the draftsman of any statutory instrument, in order to give effect to the directive, might like to look at the 1991 statutory instrument made under the Criminal Justice (International Co-operation) Act. That enables a police constable who is carrying out a search under the legislation to be accompanied either by an officer of Customs and Excise or by any other expert. Otherwise, I am not at all sure how the police officer would recognise the national treasure when he finds it in one of my noble friends' cellars or showrooms. That does not automatically happen unless provision is made for it.
It is strange that this debate should take place immediately after the Second Reading of the Criminal Justice Bill, because Clause 43(2) (d) contains an implication that there will be an offence in this country of aiding, inducing or attempting to induce an offence of exporting goods or other national treasures in defiance of the customs legislation of other member states. Therefore, that will be triable in this country, quite apart from anything we have looked at under the directive.
It appears to be an afternoon of some significance for the purposes of the art world. I suspect that we have not yet heard the end of the negotiations. However, many questions not only from my noble friends but also from myself remain unanswered. I shall look forward to listening to my noble friend's reply.
7.8 p.m.
Lord Hacking: My Lords, some of your Lordships may have noticed that I am not addressing your Lordships from the Benches from which I have addressed this House for the past 20 years. I make it

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plain to your Lordships that I have not lost my way, at least knowingly. I should also make it plain to your Lordships that I have not moved to these Benches in anticipation of political change in order to get a better view of the Conservative Party in Opposition. When I was in your Lordships' House in the 1970s I had a very good view of the noble Lord, Lord Carrington, the noble Viscount, Lord Colville of Culross, and the noble Earl, Lord Gowrie; and pleasurable though that experience was, I have not moved to the Conservative Benches to renew that experience.
I hope that there are times in all our lives of strong political conviction, even in a long-serving Cross-Bencher like myself. At this time my strong political conviction is that the Maastricht Treaty should be ratified and that we should play a central role in the further development of the European Community, of which we should remain a full member. In my judgment, the place in which to express that conviction at this time is from these Benches. Nevertheless, I leave the Cross-Benches with some sadness after 20 happy years among noble Lords there. I can tell your Lordships that I am still on speaking terms with my former fellow Cross-Benchers.
As a member of the committee chaired so ably by my noble friend Lady Elles, I have four principal reservations about the proposed Council directive and the draft Council regulation which was the subject of our report and is now the subject of our debate. Those four anxieties are: first, the timetable; secondly, the impact of the proposed powers of search and entry—and I refer to Article 4(1); thirdly the impact of the proposed proceedings for the return of cultural objects—and I refer to Articles 5 and 8 of the proposed directive; and fourthly, the impact of the proposed licensing requirements in the draft regulation.
Several noble Lords have referred already to the timetable. Perhaps I may be more specific. The proposed Council regulation and Council directive was presented by the Commission to the Council on 10th February of this year. The Government's Explanatory Memorandum was published on 16th March of this year. The matter was due to come before the Council in June and July and, as my noble friend Lady Elles mentioned, under severe constraints of timetable, your Lordships' Sub-Committee E moved with remarkable speed, greatly assisted by our most helpful and able staff, to report to your Lordships on 16th July.
As my noble friend Lord Colville mentioned, one of the blights of the scrutiny role which your Lordships play is that the texts change during the time that the deliberations are being carried out. True to form, the text of this directive has changed between the time at which your Lordships received our report and now.
As we know, the new texts are now to go before the council for an internal council meeting on 10th November. Matters are proceeding at a positive gallop. I noted with interest the letter sent to my noble friend Lord Boston, who is now the chairman of our Select Committee, by the new Secretary of State for National Heritage. In the letter he excused the slightly slow response to our report by saying that it was
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thought right, with the agreement of the committee, that the response from the Government should be delayed because of the report of the Fine Art Trade Working Party. He then went on to say that that extension was acceptable to your Lordships,
"in order to take into account what became a very fast moving and changing picture. Although this continues to be the case on a day to day basis, I now enclose the Government's response."
The question therefore is why it is moving at this great gallop. I am aware that there is a proposed implementation date for the directive of 1st January next year. But as other noble Lords pointed out, there is no realistic hope of member states putting in place national legislation, particularly if we are to introduce part of the measures by primary legislation—as I believe should be the case relating to the search and entry requirements.
Also on the EC front there is no hope of the proposed EC Cultural Goods Committee being in place in accordance with Article 8 of the draft regulation. Indeed, in their response to the Select Committee, the Government seemed to be resigned to leaving over to another day further consideration—a review in three years' time by the council—of a number of features in the proposed directive which are still clearly troubling them. I refer to Articles 4,5 and 10.
In moving the measure too fast we raise the overall concern of proportionality; that the measure is out of proportion to the matter it seeks to remedy. With that there is the possibility of an application to the European Court by a member state which cares to take up that point.
I wish to join with my noble friend Lord Gowrie and others in asking the Government to give more time to the matter. We are not so much concerned with the opening up of the market but as to how Article 36 should be applied. As has already been mentioned, member states can continue perfectly within their rights to have their own national legislation to control the export of works of art.
The search and entry powers under Article 4 have already received much attention from your Lordships. But I ask my noble friend to pay particular attention to Article 4(1) of the draft directive. As my noble friend Lady Elles commented, it provides an extremely wide net. It also provides a net where contemporaneously requests for searches could be made in one, two, three or even more member states.
Another disturbing feature of Article 4(1) as currently drafted is that in order to make the application, the requesting member state does not need to provide evidence that the cultural object is covered by the directive. Also it is an application that need not be made to a court. While the Government say in their response that they anticipate that an application for entry and search will be made to a court, it is not in the directive and it is well within the realms of possibility that other member states with other jurisprudences will not make that requirement. Finally, the requesting member state is then given two months under Article 4(3) to check whether or not the application was well founded.

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I venture to make similar points of criticism concerning the court proceedings proposed under Article 5. Those court proceedings can be commenced without proof or evidence that the cultural object falls within the meaning of Article 1(1)—a similar situation to that in Article 4. There is an interesting change of text between the time when your Lordships considered the matter in Sub-Committee E and the present time. In Article 5 two clear requisites are set out. The first is for the application to be,
"accompanied by a document describing the object covered by the request and stating that it is a cultural object within the meaning of Article 1 (1)."
It is interesting that when the matter was before your Lordships' sub-committee the word "stating" was not used; the word "certifying" was used. The standard of proof therefore has somehow dropped since your Lordships considered the position in Sub-Committee E.
Secondly, proof is not required under Article 5—which, after all, relates to court proceedings—upon the cultural object being unlawfully removed from the territory of the requesting state. The Government concede that the court proceedings could be prolonged—that is one of their points of anxiety in paragraph 15 of their response—and yet they can proceed forward without proper proof.
Several noble Lords mentioned the licensing procedures and the significant increase in licence applications and the strain both in time and cost that they will impose upon national regimes, to say nothing of the heavy burden that they will place upon those in the marketplace dealing with works of art. I have drawn specific attention to the provisions in the hope that the Government will give them careful consideration and, above all, in the hope that the Government will give the matter more time.
7.17 p.m.
Lord Poltimore: My Lords, it is most refreshing to hear the voice of the noble Lord, Lord Hacking, on this side of the Chamber. The last time my voice was heard in your Lordships' House was in 1986 when I made my maiden speech on the British art market. As I did then, I declare an interest as I also work for Christie's. The noble Viscount, Lord Tonypandy, gave me good advice when he advised me to speak only on what I know. He remarked that no one likes a know-all. Thus I hope that it will help your Lordships if I provide some information on the workings of the art market in which I have been involved for over 15 years.
Since the French Revolution London has remained the centre of the world art market, and only in the past decade has that undisputed position been challenged by New York. But it is not just history and tradition that makes the London art market unique. It is the ability to attract works from sellers all over the world—vendors abroad who are impressed by the international art trade in London. They have confidence in our expertise and ability to sell their treasures in the best possible environment.
The benefits of that unique art market to the United Kingdom are not only artistic and cultural but also
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fiscal. I know that it has been said before but I shall repeat it, for it is a point worth drumming home. The size of the UK market is immense, even in these recessional times. In 1991 alone imports were approximately £1.17 billion and exports approximately £1.45 billion. Over half the imports were from outside the European Community—largely from Switzerland, the Far East and the United States of America.
Invisible earnings from foreigners who buy and sell in our country are difficult to estimate, but I can assure your Lordships that hotels, shops, restaurants, taxis, airlines, packers, shippers, restorers and insurers all benefit from our art market. We work hard to maintain that position and that is why I, like many others in my profession, spend a good deal of time on aeroplanes and one of the reasons—probably much to your Lordships' relief—that I have not spoken in your Lordships' House since 1986.
I cannot condone the draft directives. It is one thing to lose our market centre by our own incompetence. But to lose it by ill thought-out legislation seems a tragedy. I would like to stress that those involved in the open and legitimate art trade are entirely supportive of sensible measures to combat crime and to protect national treasures. I quote from a letter to The Times of 26th October 1992 written by my noble friend and chairman, Lord Carrington, my noble friend Lord Gowrie; Mr. David Posnett, chairman of the Society of London Art Dealers and Mr. Anthony Spink, president of the British Antique Dealers Association. They say in their letter:
"Whilst we sympathise with measures taken by member states to prevent the illegal export of their national treasures, the present proposals are unnecessarily unwieldy and bureaucratic. The measures would also introduce uncertainty which would add further discouragement to owners of works of art from outside the Community from selling their property on the London art market".
That uncertainty—that is the important word—will be absent from art centres outside the Community and hence benefit them. As they stand, the measures that the EC has proposed are out of all proportion to the problem which it is trying to solve, which is the control of movement of national treasures.
That uncertainty, together with proposed VAT on all works of art entering the Community in 1993, poses an unprecedented threat to an area of trade in which Britain excels and in which it is unlikely to excel if these flawed proposals go ahead without major amendments.
7.21 p.m.
Lord Renfrew of Kaimsthorn: My Lords, I welcome very warmly the Unstarred Question tabled by my noble friend Lady Elles and commend her and her colleagues warmly over the sixth report. I also commend the Government in agreeing these measures which I shall argue are both necessary and well-judged. Perhaps I may first add what a pleasure it is to speak after my noble friend Lord Hacking, following his first speech from these Benches. He has been a personal friend for more than 30 years. I remember him as a member of the Cambridge University Conservative Association and as an active

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speaker at the Cambridge Union Society. He has been a member of your Lordships' House for over a decade as a Cross-Bencher. Therefore I am delighted to be able to refer to him henceforth with propriety as my noble friend.
Lord Hacking: My Lords, thank you very much.
Lord Renfrew of Kaimsthorn: My Lords, I have been surprised at the principal concern of the committee and at much of this debate; for it has not been to curtail the large-scale illicit trade in looted antiquities which is the product of vandalism—that is to say, the vandalism of clandestine excavation. I am extremely surprised that not one speaker this evening has referred to clandestine excavations or referred with disapprobation—although it may be felt it has not been expressed—to the trade in looted antiquities arising from those excavations. No doubt one wishes to avoid difficulties for the fine art and antiquities trade, but it must be stated that among some members of that trade are those who, in their handling of antiquities of doubtful provenance, are perhaps no better than they ought to be.
It is ironic therefore that the committee and its counterpart in another place, which has been taking evidence today on the same topic, has taken it exclusively from auction houses and antiquities traders. More specifically, it has taken no evidence whatever from museum curators, English Heritage, the Institute of Field Archaeologists or from those whose concern is with the heritage other than commerce, although I am happy to add that evidence has been taken from the Department of National Heritage and the Treasury.
It is a sad loss that the committee has not done so. I ask my noble friend Lord Astor who will wind up this short debate whether the Government have indeed taken any measures to obtain advice from such quarters. Not to put too fine a point on it, I feel that most of the evidence in the matter of control has come from those who might in some cases be regarded as poachers and none at all from the gamekeepers.
There has been much discussion—and very properly so—on the desiderata for a buoyant fine art trade. I am sure that we all share that objective as long as a clear distinction is drawn between a legitimate art trade—I have no doubt that much the greater part of it is legitimate—and an illegitimate art trade. There is no doubt that some parts of it are illegitimate.
It is important that the case is well made for the need to curtail the scale and extent of clandestine excavation in Britain, the European Community and beyond, and the subsequent export or import of antiquities arising from them to the very considerable detriment of the world heritage through the irreparable loss of information about our past.
In my view, noble Lords risk forgetting why these objects which we are discussing have value. I am restricting my remarks principally to antiquities. I refer to vases and sculptures. They are not simply intrinsically valuable like gold. Their value springs from their meaning and that derives from context; from what we know of them and how we have learnt to understand their beauty which has not been
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obvious to earlier generations. There are indeed parallels between the trade in smuggled antiquities and the trade in endangered species which has been outlawed internationally.
Therefore, the first point to establish is the extreme seriousness of the loss caused not so much by the export of the antiquities as by the destruction of information caused by the clandestine and unpublished nature of their discovery. The main reason for preventing the illicit export of antiquities is to reduce the scale of clandestine excavation as much as to prevent movement of the finds per se.
The scale of this trade should be emphasised. It has been estimated to be second only to drug dealing in the field of organised crime. The extent to which the art trade actively participates in this trade, in breach not only of the UNESCO convention, but of the code of practice nominally followed by London dealers and auction houses, should be emphasised. I have given my noble friend notice that I would refer to the manner in which Sotheby's advertised the Sevso treasure as a case in point. I would argue that it is difficult to see how anyone encountering this remarkable collection of Roman silver, hitherto unknown to scholarship, could other than suspect it to be the product of clandestine excavation and therefore possibly of illegal export from its country of origin, whatever that may be.
It is because of incidents like that and because the code of practice is not observed consistently even by some of our leading houses in this and other countries, that the directive and the regulation are indeed needed. So let me commend therefore Her Majesty's Government for their participation in the discussions that have led to this position.
Let us also not forget the extent to which antiquities originating in Britain are now being illegally exported on an increasing scale. Reference should be made here to the Icklingham bronzes which is one of the most famous recent cases.
As regards the directive for the return of national treasures, it should be remembered that that will apply in a limited number of cases to those objects which are specifically declared to be treasures so one hopes that the directive should not, in terms of volume of work, be administratively inconvenient. I take the other points which have been raised in discussion where there may be many problems in the application. I hope that we can strongly support the intentions behind the directive. We should applaud the British proposal that the declaration as to what is a national treasure can be made after export and sale on the grounds that it is axiomatic that looted antiquities cannot be classified as national treasures until they have come to light. Let us remember that clandestinely excavated materials are by nature secret and unknown until they appear on the market wherever that may be after a succession of smuggling activities. Therefore they can only be declared national treasures at the end of that process.
As regards Article 8, I am sure that we should continue to insist that five years should be the minimal period allowed for the initiation of return proceedings after recognition. We should counter any move to shorten that. Likewise the limit of 30 years after

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export should not be reduced. I was interested to hear the remarks of my noble friend Lord Colville about entry and search. I thought them to be entirely realistic. There are problems there which will have to be addressed, but I believe that the principle is an important one. The point also applies when we are talking about the onus of proof. There are arguments for continuing to believe that the onus of demonstrating honest acquisition should rest with the owner rather than there being a need by the government in question to show that the objects were dishonestly acquired. Here the logic is the same as that which I mentioned a moment ago. The fine circumstances of looted objects are, by definition, unknown and are therefore very difficult for a national government to document.
As regards the regulation on the control of exports, here again I am speaking only about archaeological remains and antiquities. There may be a case, which has not been sufficiently explored, for legislation in the future trying to distinguish on the one hand between archaeological remains and antiquities where context is of paramount importance, and other categories of art works and valuables where context may not be so important, as in a painting or a modern work of art.
We should note that the British Museum trustees have argued recently that export licences should not normally be granted at all for archaeological material originating in Britain unless certain specific conditions are fulfilled—normally, that they have been offered first for sale to museums. The trustees have argued that the first of the three Waverley criteria should be interpreted in this way. Although we are not talking about VAT this evening, perhaps I may say in passing that I fully support the view on VAT of the art and antiquities trade. I am sure that anything that can be done by such means to support the role of the London art market is to be welcomed.
In relation to the regulation, I learnt today that it is proposed to exempt coins from the requirement of an export licence. It is the case that in this country they are exempt at present. More serious perhaps is the proposal to change the proposed zero-rating on antiquities and to bring in a threshold. Zero-rating would mean that all antiquities and archaeological objects would require export licences. I see the bureaucratic logic of that when tens of thousands—maybe hundreds of thousands—of very small value antiquities are likely to come up for export. It is important, I would argue, that the level of that threshold should not be unduly high. I certainly see that a threshold will reduce the number of applications for export licences. In my own thinking, a threshold of the order of £1,000 or of roughly 1,200 ecu would be appropriate. I was disappointed to see in the Government's response that a level of £10,000 was considered low value. It may be low value to some, but I should much prefer to see a lower threshold than that and so, I believe, would many in the heritage world if they had been asked during the course of these discussions.
Let me emphasise that the proposals before us are not wished on us by the southern states of Europe
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—and nor by European bureaucrats. They are very much desired by many in this country who value the world's archaeological heritage in terms other than commercial, and they are necessary to reduce the large trade in looted antiquities and, more particularly, to reduce the level of looting which is by far the largest current threat to our world's historic heritage today. One hopes that the London art market will maintain its primacy but, in my view, in order to do so it would do well to look again at its legitimacy. These measures, carefully applied, can only enhance that legitimacy. To oppose them is, I believe, doubtful wisdom.
The Earl of Gowrie: My Lords, before my noble friend sits down, perhaps I may point out to him and to the House that it is not quite true, as he said, that no one in the debate has mentioned the special problems of antiquities. I myself said—and I feel this very strongly—that the European Community has a role to play in this very fraught and difficult area. I wish that it would concentrate some of its efforts in that area.
As to the case with which I was involved which my noble friend mentioned—he was kind enough to tell me that he would mention it—I am sure that, as a most distinguished archaeologist, he must be cheered up by the fact that the Sevso treasure, which was submitted to every country in the world from which it could conceivably have come, is now the subject at least of debate about where it might have come from rather than lingering in various offshore cellars.
7.34 p.m.
The Earl of Onslow: My Lords, I think it is a pity that a rumour has got about that there is an urge from the Government to get this directive under their belts. Rather as with trophies in big game hunting, the Foreign and Commonwealth Office says,"Yippee, we have managed to pass 25 directives". That is not a sound basis for decent thought. I have a suspicion, which has been borne out by the introduction to the Government's reply which states:
"If there had been more leisure, the Government considers that it would have been useful to have had an input from the museum world and from others in the art trade as well as owners, collectors of cultural goods etc."
That is what my noble friend Lord Renfrew of Kaimsthorn was saying.
I suppose that I must declare an interest in that I have a very small collection of Roman antiquities and I was put up to this by the company from which I occasionally buy them. I can promise your Lordships that they are very cheap because I cannot afford very much, but I enjoy them quite extraordinarily. The idea that was advanced by my noble friend Lord Colville of Culross of an uneducated PC Plod going to look for a Greek urn and asking, "What's a Greek urn?" and the answer, "Seven and sixpence", being given seems rather worrying. I am sure that that point is well worth making. It is unfair to say, however, that Greek antiquities have not been appreciated. They have been appreciated for years and years. What about Keats' "Ode on a Grecian Urn"?
There are difficulties about national treasures—there must be. On my farm we have discovered one or

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two run-of-the-mill coins stamped with the head of Constantius. As your Lordships know, Constantius was a later Roman emperor and his capital, I think, would have been Constantinople. I believe that the Roman mint was in Lyons and the coin was dropped in Surrey. Is that a Turkish, Yugoslav or English national treasure—or even a Roman national treasure? There are difficulties with this. It is rather like Zulu cultural weapons, such as the friendly cultural AK 47.
There is also the interesting case of the Nelson property in Sicily, where the family concerned negotiated the gift of the house to the Italian Government, which they duly made. However, they were not allowed to take back some of their furniture. The Italian Government said, "This is an Italian national treasure", but it had actually been made by Mr. Chippendale. There are grave difficulties with this.
My noble friend Lord Renfrew was rightly worried about illegal excavations. If one puts a blanket ban on any excavation and gives people the incentive, which has already been mentioned, to do nothing other than to say that there is no legitimate trade by this process, one will ensure only that the making of the proper notation, records and footnotes giving the perspective of the article's history and the place whence it came will be lost. It seems to me that the Italian, Greek and Spanish rules are such as to invite that sort of muddle. We have very good rules in this country—the Waverley rules. It would be miles more sensible if other countries adopted the Waverley rules rather than us being asked to introduce and enforce rules that are nothing but an encouragement to illicit digging and illicit exporting. Of course, it is vital that scholarship should he encouraged and that we should know where articles come from and the rest of it. That is how it seems to me.
The question of the burden of proving that something has been illicitly exported seems odd. It should lie with the accuser, not with the person who owns the article. If we say that it is for the police to prove that stolen goods are stolen goods, then it seems totally unfair that if a person has bought something in good faith, that person then has to prove the good faith rather than the authorities concerned. That goes against British law. I suspect that if we go on doing these niggly little bits of what could be classed as "Community directive legislation", which go against the grain of what we have been used to, it will bring the whole of the European Community into disrepute. My noble friend Lord Gowrie made that exact point earlier.
With regard to search and entry, I was speaking on the telephone, literally just before the debate started, to Gerald Kaufman, who chairs the Select Committee in another place. He informed me that the committee has unanimously decided to encourage the Government to think again, especially on the powers of search and entry. I had hoped to have the actual wording put forward by the Select Committee but it appears that it is not yet ready. It would be a terrible mistake to rush bald-headed at this simply to chalk up another directive for our presidency. It is better to do
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it slowly, carefully and quietly and to get it done properly. After all, most of these objects are fairly old and it really does not matter whether we get it right in the next month or two.
I have one final point to make. If by any chance the old issue of the Elgin Marbles is reopened I am sure that if we have to return them we shall return them to the Government who gave us a permit to export them. That would mean sending them back to Constantinople or Turkey.
7.41 p.m.
Baroness Robson of Kiddington: My Lords, I rise to speak now although there is a large open space for other speakers between the noble Earl, Lord Onslow, and myself. I was under the impression that on an Unstarred Question there was no such thing as speakers below the line. Perhaps I may therefore say that I am speaking purely as a member of the committee and for myself and not on a party political basis.
I am grateful to the noble Baroness, Lady Elles, for putting down this important Question. I am also grateful to the Government for giving me their response to the report which I was handed after I took my seat for the debate. I regret that I have not been able to read it in detail and therefore cannot comment on the Government's response.
I agree with all speakers that it is regrettable that the time constraints imposed by the proposal to adopt the directive and regulation on the control of national treasures prevented your Lordships' Select Committee from conducting a more in-depth inquiry into what is a very important issue. One cannot help wondering why there is this urgency. People have implied that it is to chalk up another directive. Why is there this urgency? Is it because of the abolition of border controls? How often have your Lordships had your luggage searched when coming out of Italy, Spain or France to see whether you have any hidden national treasures in your suitcases? It is never done. It is done only on a random basis and usually because there has been a tip-off. There is nothing to prevent this taking place after the abolition of border controls. The argument for urgency is not really there.
However, I also agree with previous speakers that the implications of the proposed legislation are greatest for the United Kingdom. The United Kingdom trade is therefore particularly vulnerable to any uncertainties resulting from the proposals and they could have dire consequences for our leading auction houses and for the markets in this country. There is an additional threat to the reputation of London as the centre of the world of art. Because we have been the centre of the market in Europe, or in the world, we have acquired a reputation as experts in the history of art and teaching. More and more of that expertise is at present in the hands of experts employed by the auction houses. We could lose some of those if the trade were forced to move to some other part of the world.
The stated aim of both the regulation and the directive is to find a balance between the wish of member states to retain their national treasures and

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the rights of owners freely to dispose of their property and the rights of art dealers to conduct a lawful trade. The original proposals included the obligation on member states to publish a list of their national treasures, whether in the hands of the state or in private hands. The United Kingdom Government objected to that proposal on the grounds that this would amount to a form of wealth tax on private owners as they would be unable to sell except to residents of the United Kingdom. The Government were successful in removing that requirement from the proposed directive but as a quid pro quo, I suppose, they have accepted that a cultural object may be defined as a national treasure before or after unlawful removal from the territory of the member state. Are the Government satisfied that this change has improved the directive? Does it not instead give rise to complete uncertainty since it will enable member states to designate objects as national treasures after unlawful removal? This means that purchasers and auction houses in other member states will have to check provisions in the state of origin to see whether removal was unlawful. That is not really practical.
The proceedings for restitution have been improved in Article 8(1) where it is provided that return proceedings may not be brought more than one year after the requesting member state becomes aware of the object's location and the identity of its possessor or holder. This is a real improvement but still leaves a long period of uncertainty for both purchasers and auction houses.
There is another matter which has been brought to my attention. I wonder what will be the situation for works of art and national treasures that have emanated from countries in Eastern Europe. At the moment, so I am told, there is quite a trade in what are national treasures from those poor countries into countries in Western Europe. Those treasures are then put on the art market. They are not national treasures of Germany, France or whichever country is putting them on the market. How long is the period in which those countries can reclaim those treasures? How long might that period of uncertainty exist within the art market of the Community.
The removal of internal borders within the Community at the end of 1992 has given rise to the need to strengthen the external borders of the Community against unlawful exports of works of art. This is all the more important since the legislation at present in existence in the various Community countries need not be harmonised. Some countries like Italy and Greece have by far the most stringent laws but on the whole fail in their enforcement procedures. Others like Ireland, Belgium and Portugal have no legislation prohibiting the export of art treasures. There will therefore be a natural inclination to transfer goods to those countries where the Community rule alone will prevail.
It is therefore important for the United Kingdom, which has a completely different control system, to examine carefully the proposals since the regulation has immediate effect without the need for national legislation. For example, the lack of automatic
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exemptions for goods recently imported will have a devastating effect on the art market in the United Kingdom. Hitherto, articles imported in the previous 50 years were entitled to an automatic export licence. It is difficult to understand how articles imported within the past 50 years could be called national treasures, and that will inevitably encourage dealers to transfer their activities to places with less stringent legislation, thus posing a threat to the supremacy of London as the leading centre for the sale of works of art.
Finally, the regulation and the directive will impose both additional expense and an increased time commitment on both government departments and the trade. The question of search and seizure has been very expertly dealt with by the legal brains of your Lordships' House. I agree with all that the noble Viscount, Lord Colville, said on the subject. I hope that alterations can be made to the directive before it is too late and that haste will not be necessary.
7.51 p.m.
Baroness Hilton of Eggardon: My Lords, like the noble Baroness, Lady Robson, I, too, was not expecting to speak below the gap in the Speakers' List. I am grateful to the noble Baroness, Lady Elles, for providing us with the opportunity to discuss the report of the European Communities Committee on the Control of National Treasures. I understand that it would be difficult for the Minister to give definitive answers to the questions raised because the directive is still in draft form and discussions are still continuing at a furious pace.
The overall objectives of the proposed directive are to be welcomed as it aims to protect works of cultural and national importance from the otherwise free movement of goods across national boundaries that will come into effect within the Community from 1st January 1993. If the directive also serves to strengthen the controls across external borders of the Community, it may help to prevent the loss from Europe of incomparable masterpieces and the looted antiquities referred to by the noble Lord, Lord Renfrew. It may also discourage the smuggling of cultural artefacts into the Community from places in Eastern Europe, such as Czechoslovakia, where there is a thriving market in religious relics and other cultural objects.
Despite some welcome alterations—for example, on listing—a number of difficult questions have been raised by the proposed European Community directive. Many of the points I had intended to make have already been made by other speakers with greater knowledge of European law and the art market.1 should only like to add a comment about those at the opposite end of the market; namely, the great auction houses. They have already been badly hit by the recession. During the past two years, I am told that a record number of art dealers have committed suicide as a result of bankruptcy. The prospect of having to take additional precautions to avoid selling goods that have been illegally exported from another Community country, and the threat of police searches, would only add to their burdens. Therefore, like other noble

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Lords, I should like to add my voice to those asking the Minister what plans the Government have further to protect and alleviate the anxieties of the art market in this country.
Other speakers addressed the difficulties that are discussed at length in the report of the Select Committee concerning the proposed powers of search for another country's national or cultural treasures that might have been illegally exported. Clearly such a power would need to be severely restricted by the requirement for a search warrant and for magisterial authority—not least for the sake of the police officers who, in the exercise of their powers, will yet again be portrayed as insensitive Philistines.
There is one tangential issue that I should like to raise with the Minister as it relates loosely to national treasures and the problem of listing works of art. It is in relation to the Inland Revenue forms that are lodged with the Victoria & Albert Museum, and in similar locations in Scotland, Wales and Northern Ireland, which list heritage items that have been accepted in lieu of inheritance tax on condition that there is public access. I do not intend to pursue the question of general public access which might raise difficulties with security and invasion of privacy. However, I should like to suggest that at least the spirit of the law might be observed and that there is a sound case for limited access to this material by scholars and art historians.
At present that is very difficult because the Inland Revenue forms are merely filed in date order in ring binders with no index to the heterogeneous lists of heritage items. Without some form of index, it is very difficult for even the most diligent student to locate all the works of a particular artist. Can the Minister say whether it would be possible to provide the means—a few thousand pounds would be sufficient—to pay for a small computer and a cataloguer so that the benefit of the tax exemption could become more apparent? The cheapest way to achieve that aim would he for those wishing to be included in the tax exemption scheme to pay for the privilege. The sums involved would be very small.
Finally, I should like to turn to the major issue that the European Community directive attempts to address—that is, the potential loss to this country, among other European countries, of national or cultural treasures. The idea of listing all such objects has, quite properly, been rejected by the Government. But apparently there is a government assumption that the Waverley rules have proved wholly satisfactory as an alternative. The noble Viscount, Lord Colville, pointed out some of the defects in the Waverley rules and in the granting of export licences.
However, as purchase grants for works of art have been frozen for several years and the reviewing committee that applies the Waverley criteria estimates that the current annual shortfall is about £15 million to £20 million, it is clear that the Waverley rules cannot be sufficient to prevent the export of some of our national treasures. Of course, I realise that we are in the middle of an extremely stringent public spending round, but I should like to ask the Government whether there is any hope that the grants
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available to apply the Waverley rules effectively are likely to be increased at any stage in the future, and thus prevent some of our great national treasures being sold to Japanese or American buyers.
7.55 p.m.
Viscount Astor: My Lords, your Lordships have now received the Government's response to the succinct and useful report of the Select Committee chaired by my noble friend Lady Elles. I thank her, and indeed her committee, for that very clear report on what, to say the least, is a most complex subject.
The answer to the Question before the House this evening must be put forward on two levels. The first is the outstanding issues which are on the table for resolution before the draft directive and regulation can move forward to agreement so far as concerns the United Kingdom. The second is the difficulties which are inherent in such a complex subject, and which are not ideally dealt with in the drafts so far as the Government are concerned, but which may need to be tested in practice over the next three years if a qualified majority emerges and the measures are accepted on 10th November.
Taking the second level first, I should like to set out briefly for your Lordships' benefit how it was that the drafts were proposed by the Commission. The Treaty of Rome allows member states to define their national treasures, and take measures for their protection, especially where unauthorised movement of them outside the territory of each state is concerned. Those measures should not be disproportionate to the duties, under Articles 30 to 34, to promote freedom of trade between member states. The Commission, late in the day so far as the completion of the single market was concerned, took an interest in the operation of Article 36 as it affects national treasures. The Internal Market Directorate proposed an interpretation, based on this country's Waverley procedures, which defined "national treasures" by value and age limit. This was resisted by most member states. The Culture Directorate responded to the fears of several member states that the removal of internal frontiers would lead to wholesale evasion of national controls, with certain proposals: for example, for mutual recognition of each other's laws; for certificates of movement for all cultural goods in trade; for restricted customs posts for the exit of cultural goods from the Community; and for minimal compensation for the bona fide possessor of another country's national treasure.
We have come a long way since then. The texts before the House are the result of tough negotiations by all the member states, and especially this country. Certificates of movement are out, value and monetary limits are in. Mutual recognition is confined to whether or not an item is a national treasure, with penalties left to the requesting state according to its laws. Costs of the action, and compensation to the bona fide possessor, are well established and left to national implementation. The burden of proof now is not entirely on the accused, and will be in accordance with national court procedures.
But difficulties remain. This is not a piece of legislation tailored to our licensing needs, our respect

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for detail and clarity, and our wish for certainty in its effects. It represents a compromise between the excessively restrictive export controls of some, mostly southern, states and the more liberal ones such as ourselves, Germany and the Netherlands. And, as your Lordships have pointed out, the legislation touches on politically sensitive areas, such as respect for private property rights and freedom of trade.
I turn to the immediate difficulties remaining in the texts of the proposals. The United Kingdom supports Belgium in seeking further clarification on the burden of proof, and Germany in its wish to see all the elements of compensation provided for in the event of a claim for restitution. We have three concerns: the most important is to find a practical solution to the problem recently identified—the large volume of licences which would be needed for coins and antiquities of low value. The second concern is to put a definition of a "public collection" in the directive, and the third is a technical amendment to Article 2 of the regulation, to allow the licensing of goods originating from outside the Community. All three have been put before the Commission and member states for urgent consideration. I shall go into more detail on each of those matters in a moment.
My noble friends Lady Elles, Lord Renfrew and Lord Onslow, all talked about the burden of proof. Proceedings for the return of an object may be brought by a requesting member state only where there is documentation describing the object covered by the request and stating that it is a cultural object within the meaning of Article 1, and a declaration by the competent authorities of the member state that the cultural object was unlawfully removed from its territory after 1st January 1993.
It will be for the implementing legislation and national courts to develop subsidiary procedures. There is no reason to suppose that the person seeking to resist a request for the return of an object will be unable to challenge the assertions of a requesting state. Generally, in English law the burden of proof is on those who assert a claim. The onus, therefore, would be on the requesting state. It would be a matter of evidence for the requested person to show that the assertions of a requesting state were incorrect and not sufficiently made out.
Similar considerations apply to the issue of good faith. Under Article 10, the court must award such compensation as it deems fair according to the circumstances of the case, provided that it is satisfied that the possessor exercised due care and attention in acquiring the object. That formulation does not cast an express burden of proof upon the requested person to show his good faith. That is an improvement on the previous version of the text. It leaves the issue of good faith on an even basis. The court must be satisfied that the acquirer exercised due care and attention. Courts generally start from the premise that the parties act in good faith. In this case however an acquirer seeking compensation will no doubt wish to assert in the pleadings that he has shown such care and attention, buying from a reputable auction house or dealer
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which itself operates under a code of good conduct. That would be likely to be held to satisfy a court of the acquirer's good faith.
Belgium has sought an amendment to the text of the directive, saying that the burden of proof may be prescribed in implementing legislation and national courts. In our view, that would probably follow anyway on the general basis of subsidiarity, but we support Belgium's request. The Commission has so far resisted an amendment to the text, but has offered a minute declaration to confirm Belgium's understanding.
My noble friend Lady Elles asked about the period of two months and whether it might be too long or too short a period to allow a member state to confirm whether an object is a national treasure. We should have preferred a shorter period. However two months has at least removed the potentially vexatious element arising from the absence of any time limit from the original draft of the proposals. We accept that from time to time there may be occasions when even two months could be detrimental—for example, when an object has to be withdrawn from auction and its value is blighted—even if it is eventually discovered that the object is not the one sought.
Another related safeguard is the requirement for a requesting member state to bring proceedings before a court within 12 months of it becoming aware of the location of the cultural object and identity of its possessor or holder unless settled beforehand by some agreed arbitration. We accept that the proceedings may seem lengthy but it is important that the requesting member state cannot leave its claim in limbo.
Time limits of 30 years and 75 years have been mentioned tonight. Again, we should have preferred shorter periods in line with our present limitation period of six years. But those time limits are part of the overall political compromise. They are seen as an important element by certain member states and were a necessary concession to achieve movement in the annexes away from the original over-restrictive proposals.
Viscount Colville of Culross: My Lords, I do not know whether my noble friend has come to the end of the time-limit point. If he has, perhaps I may ask him a question. A number of my noble friends and I were disturbed by what he said about the burden of proof. I do not understand how it will work. Perhaps I may make a suggestion. Since the point is not, I think, in the directive or the regulations as such, it may well be that it does not have to go into the regulations under the European Communities Act which will be needed to implement the directive; it might be dealt with by rules of court, which would give us a very much more flexible arrangement. It would enable the matter to be discussed by people who understand these things in practice and would not then crystallise at a stage when we could not amend it.
Viscount Astor: My Lords, I take the points made by my noble friend. I had not left the subject. I shall try to answer the points that he has made when I have finished dealing with the present matter.

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We should bear in mind that the longer the period of time since the unlawful removal, the more difficult it will he for a requesting member state to prove the date upon which that unlawful removal took place; that is, whether it was before or after 1st January 1993. Regarding objects from public collections, we are currently discussing with the Commission and other member states the definition of what constitutes a public collection with a view to restricting the scope of such items. Further, the preamble to the directive requires member states to notify Interpol of any objects which have gone missing from a public collection. That latter provision will enable the art trade to check with the competent authority the source of any object whose provenance gives rise to doubt.
Where a claim made by a requesting member state for the return of an object is not successful, the member state would, under the normal principles of civil litigation, be liable for costs. The directive does not define in detail what a national court should award by way of compensation. It will be for the national courts, subject to any guidance given in implementing regulations, to adjudicate on that matter. The cost of funding a court application for the return will he borne in the normal way, and subject to any award of costs by the adjudicating national court, by the requesting state. In implementing the directive, the Government will try to ensure that bona fide owners are not out of pocket if proceedings are taken against them.
If a member state does not succeed in its application to have an object returned, is there a way of recovering costs? The requesting member state could he obliged to pay for the cost of preserving the object even if no court proceedings were commenced or court proceedings did not lead to the return of the object. If the requesting member state did not pay up it would be in breach of the regulations and liable to action before the European Court of Justice, although other costs—for example, cataloguing costs—are not provided for.
My noble friends Lord Colville and Lord Hacking, and the noble Lord, Lord Strabolgi, asked me about entry and search. It is accepted that the requirement in the directive—Article 4(1)—to seek a specified cultural object notified to it by a requesting member state, will require powers of entry and search to be exercised by the competent national authorities. How this will be implemented is a matter, on the general principle of subsidiarity, for the national authorities. It will be dealt with in the implementing legislation as a statutory instrument under Section 2(2) of the European Communities Act 1972. The Government's present intentions, in consultation with the Home Office, the Lord Chancellor's Department and any other relevant authorities, are that entry and search will be permitted only pursuant to an order of a national court. There is no intention to confer any rights of search or entry on EC officials or officials of non-UK member states. Nor is it anticipated that they will be involved in carrying out any search and entry procedures under the implementing regulations.
My noble friend Lord Colville made further points, some of which I shall answer. I hope he will accept
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from me that I am unable to answer all the legal points that he made this evening, but I shall make sure that the Secretary of State and officials in the Department of National Heritage take close notice of everything he has said this evening.
He asked me about defining national treasures after unlawful removal. This will allow member states to designate objects as national treasures after they have been exported. The extra wording "or after" was introduced at the request of the Government to allow the Waverley system, under which objects are declared national treasures only after an application for an export licence and a hearing of the Reviewing Committee on the Export of Works of Art, to continue in place. In the case of an unlawful export of a UK work of art, it would only be in retrospect after a hearing by the committee that a work of art could be considered to be a national treasure.
The alternative would be a system of listing, which was considered by the reviewing committee in a report in 1991 and rejected by the Secretary of State, indeed rejected by almost all your Lordships in the debate that we had in this House. It is not considered that the introduction of the words "or after" would enable countries with systems under their national legislation which designate or categorise national treasures in advance to extend these designations or categorisations in retrospect. An object whose export was not prohibited at the time of its export would not be unlawfully removed within the meaning of the directive. That sounds complicated, but I hope that I have explained the matter to your Lordships.
The noble Baroness, Lady Robson, in the points she made, spotted the significant changes that have been made by the Government. She is correct in saying that some pay off has been necessary. The Government cannot bludgeon 11 other member states into accepting our unique points of view, but we have tried the best we can.
My noble friend Lord Colville also asked me about the basis of the directive and regulation. It is mutual co-operation and we are already exchanging copious documentation and updates on each other's national laws on the protection of national treasures. They will continue and it is central to the operation of the directive. The Waverley system will continue and the systems of any other countries will continue. If the Italians wish to continue listing almost everything in Italy, that will continue. National laws will continue in parallel, just as our Waverley criteria and rules will continue.
The noble Lord, Lord Strabolgi, asked about it. The simple answer is yes, that will happen. Two sets of systems will continue. For example, in Italy the system could be challenged by the Commission, or on complaints by individuals, if the Commission considered that these laws were disproportionate to the protection of national treasures allowed under Article 36. However, that may or may not happen in the future. No doubt the Italians would fight their cause as hard as they have always fought in the past.
We have been and are worried about the effect on the art trade. Richard Luce, when he was Minister for the Arts, set up a consultative group specifically to

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advise him on the subject. Membership includes representatives of the art trade as well as heritage interests and owners. We have consulted members of this group at all stages and have given them every opportunity to comment on the various drafts of the proposals which have been issued by the Commission.
We are concerned about the point and it was reiterated by my noble friend Lord Poltimore. We said in our evidence to your Lordships' Select Committee that there would be an effect on the UK art trade, introducing an uncertainty—which exists at present—but not with the specific remedies proposed in the directive. Those were, namely, the return of the cultural object with appropriate compensation. We would expect that for most goods and commerce provenance will be clear. Thus the uncertainty will relate to objects which over a number of ensuing years will not be able to be so easily traced in relation to the date on which they left another member state.
If the seventh VAT directive is adopted there will be no easy way of knowing what effect VAT on imports will have in future. It will be difficult to see whether that immediate and detrimental effect has any spin-off onto the effect of other rules coming in. I can tell my noble friends that the Department of National Heritage has made strong representations to the Treasury. The committee in another place will hear further evidence on Thursday.
It should also be borne in mind that the directive requires a heavy burden on the requesting member state in terms of proof of legal export and the high cost to be borne in undertaking proceedings before a British court. We disagree somewhat with the art trade. We consider that vexatious applications should be few in number. If they are not, it will be taken notice of in the three-year review. The directive is based on mutual co-operation between member states and not antagonism.
The directive is not retrospective. Article 14 provides that it applies only to cultural objects unlawfully removed from the territory of a member state on or after 1st January 1993. The Elgin Marbles are safe, I can give that assurance to my noble friend Lord Onslow.
I must welcome the noble Lord, Lord Hacking, now my noble friend, to our Benches. I am sure that his new perspective will be an improvement for us on these Benches. He asked me when the regulations of the directive will come into force. If the directive is to come into force, it will need to complete the consultation process in the European Parliament and will then need to be implemented in national legislation. Last June the Commission proposed that it should come into effect by 1st July 1993. Assuming that agreement is reached before the end of this year, we might look at 1st January 1994. Although there will be no legal mechanisms in place through which a member state can request return of an object, all interested parties, both government and trade, will be aware of the intention to implement the directive so that the goods which come on to the market after 1st January 1993 can be the subject of future action. It will be enacted by statutory instrument, as I said before,
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under the European Communities Act and not by primary legislation. The regulation could be enacted almost immediately and it has been agreed, given the parallel work on the implementing regulation now under way.
My noble friend Lord Hacking also asked me about the number of licences issued and the number we expect to issue. We currently expect to issue about 4,000 or 5,000 licences each year. The latest published figures show that 3,872 licences were issued during the period 1st July 1991 to 30th June 1992. During the previous 12 months 5,138 were issued. But, prior to the granting of Open Individual Export Licences to Christie's and Sotheby's, under which they may re-export any object imported into the UK during the past 50 years, we issued about 9,000 licences each year.
Regarding the regulation officials from my department gave evidence to the National Heritage Committee this morning that, excluding archaeological items and coins, we anticipated issuing about 30,000 licences per annum. However, this figure was quoted as a result of some confusion between the number of individual objects that will be licensable and the number of actual licences that will need to be issued. I would remind noble Lords that one licence can cover more than one object. I should therefore like to correct the assessment given earlier today. We anticipate that the number of potential licences under the regulation will be of the order of 16,000 each year, excluding archaeological material and coins. These latter two categories cannot presently be assessed as we are discussing, with other member states and the Commission, the possibility of a monetary threshold for such items. I shall return to that matter in more detail in a moment. The archaeological trade has advised us that a zero limit would involve the licensing of 200,000 or more coins per year, and about 20,000 antiquities. The Government are anxious about the magnitude of this problem which is why we are pressing for a monetary threshold. We have proposed a monetary threshold for archaeological material and coins because, with a zero limit, both the Government and the art trade would be unable to cope with the sheer volume of export licences that would be required. We regret that we failed to identify this problem earlier. We were not aware of that problem and the trade did not bring it to our attention. Under our present export system we require an individual licence for all archaeological material of UK origin; but we do not require a licence for objects from elsewhere unless an individual item is worth more than £35,000. This £35,000 limit also applies to coins, unless known to have come from a UK archaeological site.
However, under the regulation, all archaeological material regardless of origin and regardless of monetary value will require a licence. This will include any coin that might at some point have come from an archaeological site, even if it might have done so several hundred years ago. Clearly such a situation would become administratively unworkable and we have therefore proposed a monetary limit in order to take out of the control a large tranche of objects of low

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financial value. We have proposed a threshold level of 15,000 ecu, that is about £10,000; but we are open to consider other practical solutions.
My noble friend Lord Renfrew asked me who had given evidence to the national heritage committee. My noble friend gave evidence earlier today along with Dr. John Cherry from the Society of Antiquaries of London. Mr. Graham Greene, the chairman of the Museum and Galleries Commission has given evidence, as has the assistant director of collections at the Victoria and Albert Museum. The department has received advice from the National Gallery and the British Museum.
I should correct something that my noble friend Lord Renfrew said when he talked about a period of five years. I believe my noble friend must be looking at an earlier text. We are now talking about a period of one year in which to bring proceedings once the object and owner are known. We are talking about a period of 30 years for goods from private sources during which an application could be made for restitution once the object is identified and a period of 75 years for objects from public collections. I am grateful to my noble friend for the support he has given to the work we have done on the directive. However, it is not for me to comment on his remarks about auction houses.
We firmly believe that an open art trade does not hide abuses; in fact the reverse is true. It is the underground black market in Europe that makes the problem so acute. The noble Baroness, Lady Hilton, asked whether we would provide an index of items held on the V& A list. The list of conditionally exempt items comprises in its present format some 13 files of items. No index to those items is currently available. However, the Inland Revenue together with the Department of National Heritage have been reviewing the way in which the list is maintained and have been reviewing public awareness of its existence. The report of this review is expected by the end of the year. While
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I do not wish to anticipate the findings of the review, I am sure the relevant Ministers will look for improvements in this area.
The noble Baroness also asked me about purchase grants for the national museums and galleries which have been frozen since 1985. In the light of priorities identified in the corporate plans of the national museums and galleries, successive Ministers have decided to allocate the extra resources available towards running costs and building works. The Government maintain the view that resources must be directed to where they are needed. The noble Baroness would not expect me to comment any further on that matter as the public expenditure round is in progress.
The important point to consider is what we are going to do now. The proposals are based on qualified majority voting. Two large states and one small state can block the agreement. Equally, if that does not occur. the agreement can go forward on its own. The momentum created by the Portuguese presidency and the wish of most member states to see the proposals agreed before 1st January has helped the Commission to focus on individual objections by individual member states and deal with nearly all their points to their satisfaction. Therefore it is not clear how long the existing blocking minority can be sustained.
It is not necessary in this country's best interest to lose the control which the presidency can give us. If we do not play our part in Europe, other states will go ahead without us. We must play our full part in these negotiations. We take careful note of the parliamen-tary attention that has been given to these texts here and in another place. We shall take careful note of everything that your Lordships have said this evening. I cannot give our final view on how we will handle the Internal Market Council. A standing committee will meet tomorrow and there are continuing negotiations in Brussels and in other capitals on this matter. We shall work hard to produce the best possible result.
House adjourned at twenty-eight minutes past eight o'clock.