HL Deb 03 November 1992 vol 539 cc1388-422

6.17 p.m.

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". 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 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 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 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 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 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.

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 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 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 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 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 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 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.

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 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 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 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 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 —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 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 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 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 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 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 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 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 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.

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 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 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, 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 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 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.