Enforcement of Community Competition Rules: ECC Report

HL Deb 21 March 1994 vol 553 cc528-53

4.54 p.m.

Lord Slynn of Hadley rose to move, That this House takes note of the report of the European Communities Committee on the Enforcement of Community Competition Rules (1st Report, HL Paper 7).

The noble and learned Lord said: My Lords, the prohibition on anti-competitive practices, which is set out in Articles 85 and 86 of the Treaty of Rome, has long been recognised as essential to establish the freedom of movement of goods, services and capital in the Common Market. It is no less essential that rules should have been established for the investigation and enforcement of those provisions. It is no less essential that if that were done by the Commission (as it had to be in view of the trans-national nature of many of the agreements and in view of the fact that many member states did not have a developed system of anti-competitive laws), those rules should be applied on a uniform basis.

By 1982, the backlog of cases before the Commission was considerable and there were many complaints by enterprises and their lawyers about the way in which the Commission was carrying out its tasks. For that reason, your Lordships' Select Committee on the European Communities conducted an investigation into those procedures and reported. Its criticisms were taken seriously by the Commission and, to a considerable degree, its recommendations were implemented. It was a remarkable achievement that that report was made and that its recommendations were so fully implemented.

Lately, however, there has been renewed concern about certain aspects of the Commission's procedures, as expressed by business enterprises and their lawyers. One reason—it is not the only one—is that, inevitably, the number of cases to be investigated by the Commission has increased. It is for that reason that the Select Committee decided to investigate the matter again and to see whether we could recommend further changes to avoid those difficulties. The committee has received very great assistance. We wish to express our appreciation to the many witnesses who gave evidence: the Bar, the Law Society, the Confederation of British Industry, the Director General of Fair Trading, the Monopolies and Mergers Commission and others. We should like to pay tribute particularly to Dr. Claus-Dieter Ehlermann, the Director-General of the Competition Directorate, not only for his evidence, but also for his open-minded consideration and reception of our proposals. We are also greatly indebted to Mrs. Eileen Denza, our legal adviser, for her considerable and valuable help in preparing our report.

I do not propose to detain your Lordships with an analysis of much of the detail that is set out in our report, but I invite your Lordships' consideration of four particular matters. The first concerns the structure of the Commission's teams. It is sometimes said that it is wrong that one body should set out to detect breaches of the treaty, to prosecute and then to take a decision about whether there have been violations of Articles 85 and 86. There is a superficial attraction in that approach and in saying that the same person should not be judge, prosecutor and policeman at the same time. However, in the end we were not persuaded that that was a necessary or desirable course. The setting up of one or more independent agencies would create problems. Even the setting up of separate directorates-general within the Commission would not be easy and we do not think that it would necessarily remedy the defects of which complaint has been made. We concluded that subject to the other changes that we recommend to achieve the goals of transparency, fairness and effective deterrence, it was not necessary to do that and that the function should be left with the Commission.

The second matter that we considered arose out of a number of very serious complaints that had been made by lawyers and business enterprises that they were being denied access to the Commission's files when their business affairs were under investigation. It is only fair to say that the Commission and, in particular, Dr. Ehlermann in his evidence, denied that there had been such a refusal. It appeared to the committee that it was essential that those enterprises which were being investigated should have access to material necessary for them to know the case made against them and to prepare their defence. However, we recognise that against that there has to be balanced the need for confidentiality and a justified claim by the Commission to preserve some of its internal working documents.

The task is not an easy one, but it seemed to the committee that it is essential that people should know where they are and to what they are entitled. So we have recommended that the Commission should publish a set of rules on access, making plain the limits of access and what types of documents are not to be made available. Equally we have recommended that there should be prepared an internal manual of procedure for Commission reporters to work to so that parties which are being investigated will know the rules. But we want to go much further than that.

After the last report in 1982, the post of hearing officer was created by the Commission. It was his job to supervise and to preside over oral hearings by the Commission and to make a report before a decision was taken by the Commission. The hearing officer has carried out an important function in relation to the oral hearings and the follow-up, and he has done that very well, but in the committee's view his function is too limited. We recommend that he should have interlocutory powers to resolve procedural disputes in the course of an inquiry.

If a company wants to get hold of documents, and the Commission refuses its request, it should be for the hearing officer to decide whether the Commission is right or whether access should be granted. We have recommended some time-limits for the conduct of those inquiries, and the hearing officer should be empowered to resolve those disputes if they arise. Moreover, we think it quite wrong that the hearing officer's report should not be given to the parties, and we recommend that in future that should be done.

That is a big new step, but we recommend an even further step. We do not believe that it is enough that the hearing officer should necessarily have the last word. Following the Single European Act 1986, the court of first instance was established. It has already done good work to the satisfaction of most enterprises in deciding important cases. It has given confidence to business enterprises that there will be a full review of Commission decisions, and that procedural rules will be clarified and enforced.

The committee recommends that there should be a right of appeal from a decision of the hearing officer to the court of first instance, either directly or via a decision of a single commissioner. Otherwise, it seems to us that the practice will continue that disputes about procedure which arise at a very early stage will be the subject of a judicial decision only at the end of the case, perhaps years later when a great deal of work will have been done and perhaps wasted. So we recommend that there should be set up a right of appeal to the court of first instance.

We realise that it might be said that that would take time and cause delay. There might be delay, but we consider that that delay can be reduced considerably if two steps are taken: first, the appeal should be with leave only, we suggest, of a single judge of the court of first instance or of the hearing officer; secondly, we believe that the matter should be dealt with not by the full court or even by a chamber, but by a single judge. That suggestion would require a revision of the Court of Justice's rules. We thought in our report that it might also need an amendment of Regulation 17—the basic regulation which sets out the Commission's rules—but the view has been expressed by a number of eminent members of the Bar that it would not be necessary to revise Regulation 17. We may have been overcautious, but that is something that can be looked into by the Commission's lawyers and, I hope, by the United Kingdom Government's lawyers.

Whether or not Regulation 17 needs amending, the committee strongly urges that that right of appeal to the court of first instance should be set up as soon as possible. We very much hope that whether or not it requires amendment of Regulation 17, the Government will support our proposal. We have every reason to think that it may be a proposal acceptable to the Commission, and we believe that it will be a crucial step in giving business enterprises the confidence to feel that these inquiries are being conducted properly

I can deal with the other two points more briefly. The third point concerns a document which is somewhat curiously called a "comfort letter". When the Commission finds that it is unable to conduct a full inquiry and come to a decision within a reasonable time, and when the case is perhaps a relatively simple one, it writes a comfort letter indicating to the business enterprise concerned that it does not really see that there has been a violation of the treaty, but without giving a firm decision. That is good in that it helps to keep down the backlog, but the committee considered that it would be very much better if comfort letters were made more effective, and led, in many cases, to a decision by a single commissioner on the basis of the comfort letter. It would give a great deal more comfort if a commissioner could take a decision on the basis of the letter, and again, if that were properly carried out we do not believe that there should be unnecessary delay.

The fourth matter which is important in the present climate and context is the relationship between the Commission and national competition authorities. There have been many suggestions that investigations into anti-competitive practices should be dealt with more frequently by the national authorities, and the Commission itself has strongly encouraged that as a policy. So far the Commission has given what has been called a notice on co-operation. We believe that many of the less complex cases can well be dealt with by national authorities. We have recommended that criteria should now be established in order to decide whether the case should be dealt with in the UK or in the Commission in Brussels.

It will be necessary though to ensure that there is some supervision of these matters by the Commission, and we hope that that will speed up the process and lead still to uniform decisions within the Community. It may well be that most of our recommendations can be put into place now, or very quickly, without an amendment to Regulation 17, but if amendments to Regulation 17 are needed, the committee urges that the Government should press for the amendment of Regulation 17. Of course it will take time, but that need not hold up our other recommendations.

Lord Clinton-Davis

My Lords, I thank the noble and learned Lord for giving way. As I shall indicate in the course of my remarks, I believe that he and his colleagues have done a tremendous service. However, I am a little puzzled by the omission of one aspect, to which he might later allude. No reference has been made to political influences which may affect the final judgments of members of the Commission. The noble and learned Lord will know that in a number of instances the Commission has divided on these issues by nine to eight or even on the casting vote of the president. Does not that give rise to some anxiety that perhaps the competition elements are subsumed by other political and even national considerations? Why did the committee not choose to take the evidence of a former commissioner with responsibility for competition or, indeed, of the present commissioner?

Lord Slynn of Hadley

My Lords, we did not deal with that matter because it was felt to be completely outside our remit. We were looking at the basic procedures of the Commission and of methods of judicial review. It may be that one of the other sub-committees of your Lordships' Select Committee might be competent to look into political influences and the way in which the Commission operates. However, it was not felt to be an appropriate subject for the sub-committee dealing with law and institutions. I understand the basis of the noble Lord's question, but on this occasion we felt that it was inappropriate to deal with that matter.

I hope that the Government will accept our recommendations. If Regulation No. 17 has to be amended, and if it it going to take time to amend it, the sooner we get on with it the better because it has been in existence for 30 years.

I have not dealt with many of the detailed and minor but important aspects of our report. That would be an improper use of your Lordships' time. I beg to move.

Moved, That this House takes note of the report of the European Communities Committee on the Enforcement of Community Competition Rules (1st Report, HL Paper 7).—(Lord Slynn of Hadley.)

5.12 p.m.

Baroness Elles

My Lords, I support the introduction to the debate, which was ably and comprehensively covered by the noble and learned Lord, Lord Slynn of Hadley. I join him in replying to the noble Lord, Lord Clinton-Davis. Our sub-committee deals entirely with law and institutions. It does not deal with political matters, which are outside the remit of the committee. I support the noble and learned Lord in his reply.

It is sometimes questioned whether the reports from your Lordships' Select Committee on European Communities have any positive effect. In the report before the House today the committee gave a unique opportunity for legal practitioners and others to raise the problems arising from the administration by the Commission relating to competition cases. The matter was initially raised in correspondence from the joint working party of the Bar and Law Societies of the United Kingdom and in evidence to the committee. I mention that in particular to show the basis on which the investigation took place; it came from practitioners in this field.

In 1982 the committee examined the subject for the first time. Many of the recommendations contained in its report were implemented. They involved administrative changes, including the appointment of a person who became known as the hearing officer. Later provision was made in the Single European Act 1986 to establish a court of first instance. That reflected the recommendation of the establishment of a new court subordinate to the European Court of Justice which would have the duty of hearing appeals on questions of law and fact from the decisions of the Commission in competition cases. That was included in the recommendations of the 1982 report. The court's role has proved invaluable in its reviews of Commission decisions relating to competition cases. I welcome the new task that has been given to the court of first instance in reviewing decisions relating to anti-dumping cases that was recently announced.

It should be stressed that in 1982 and recently in the examination of competition rules the Commission was most co-operative and helpful. I endorse what the noble and learned Lord said in relation to the full co-operation of the Directorate-General of DG IV, Dr. Ehlermann, who provided both written and oral evidence which assisted the committee to identify those areas in which changes can and will be implemented. The committee is extremely grateful to him and I strongly endorse the sentiments expressed by the noble and learned Lord.

The problems identified fall broadly into three categories. The first two require administrative action to meet specific difficulties. The first category, which has been generally a matter for anxiety, has been access to the files by a defendant. That was mentioned by the noble and learned Lord, but I wish to stress it because, in practice, they were sometimes available to defendants or to businesses involved in the cases either at the outset of the investigation or at other times only when the statement of objections was served. The procedure is clearly unsatisfactory.

The second category is to improve the conduct of proceedings. Evidence from practitioners showed that an increased role for the hearing officer would assist in dealing with procedural disputes during the course of the proceedings. It is understood informally that the Commission agrees to this proposal and is willing to implement it.

I shall not deal in more detail with the use of comfort letters and block exemptions. However, perhaps I may mention that they were strongly encouraged in the recommendations in our 1982 report in order to meet the vast backlog of notifications with which the Commission was faced. In 1982, approximately 4,000 notifications were waiting to be handled but at the end of 1992 the 22nd report on competition policy noted that approximately 1,560 notifications were waiting. Admittedly, that is a decrease but it is still formidable.

The problems with this form of comfort letter are that the measures are not legally binding and they can have consequences for third parties. Therefore the matter needs investigating. In the past few years dramatically increased fines have been imposed by the Commission without any apparent justification. We recommend that reasons for fines should be set out so that an element of transparency is introduced into the decisions.

The third category of recommendations requiring amendment to Regulation No. 17—a regulation that has governed the distribution of administrative powers between the Commission and national authorities in relation to Articles 85 and 86 of the treaty since 1962—would contribute to meeting many of the difficulties encountered at present. Among those that would be welcome is the imposition of a binding timetable, which was introduced informally by Sir Leon Brittan when he was responsible for competition policy. Deadlines can work; they were imposed by the 1989 regulation governing mergers and acquisitions. The task force appointed to handle such cases has operated effectively.

It must be observed that while the size of the staffing of DG IV cannot be the sole reason for failure to handle the large backlog of notifications, it was stated in the 22nd report that the number of staff was 407, of which only 44 per cent.—fewer than 200—were handling Article 85 and 86 cases. That appears in paragraph 125 of the report. The equivalent staffing in the US Department of Justice is more than 1,000; and that is without the added complication of receiving evidence in one or more of nine languages. There is a need to look at the staffing to see how it can be handled, in particular as a result of the enlargement of the Community to 16 countries. Presumably there will be an increasing workload on the Commission as regards competition cases. I do not see how it can manage with a staff of fewer than 200 and a large backlog of notifications.

In order to lighten the Commission's burden it issued a notice to give encouragement to national courts to hear more competition cases, to which the noble and learned Lord referred. Although our report supports that concept, it raises quite a number of problems: the question of which member state court is to be the forum of the complaint; increased costs arising from translation and interpretation services; the burden of costs on the complainant if the outcome is negative, which is not applicable in cases decided by the Commission; and the use of a block exemption as a solution being reserved to the Commission. Those matters may be overcome. If so, the Commission's task may well be lightened, but I believe that the matter needs much closer examination as it is possible also that recourse would then be had to the European Court of Justice under Article 177 of the EC treaty.

Whereas in most areas of Community law administration is left to member states, competition rules are administered directly by the Commission. I believe that the report has fulfilled a useful function in that the committee was able to have the benefit of discussions with experts in the field about the many anxieties which have been raised and which have faced practitioners in recent years.

It is hoped that the recommendations made by the report will achieve what are considered to be the desirable objectives of fairness, transparency and speed. It is perhaps worth pointing out that, although the proposals are based almost entirely, though not wholly, on evidence produced by British experts, they will benefit all those who practise in the field throughout the European Community. I shall listen with great interest to the Minister's reply, particularly in relation to the possible amendment of Regulation 17.

5.21 p.m.

Lord Bruce of Donington

My Lords, the House will be extremely grateful for the report prepared under the chairmanship of the noble and learned Lord, Lord Slynn of Hadley, and will be grateful also to the committee which produced the report that we are now discussing.

I should say at the outset that although, as will emerge, I agree with many of the observations made in the report, I have the most profound misgivings concerning certain aspects of existing procedures and structures and, more particularly, profound unease as to the role of the Council, the Commission and, in some cases, the Government in connection with these extremely important matters.

believe that it will be agreed—and I hope that the noble and learned Lord agrees—that the report has certain limitations. I am not saying that that diminishes its importance or the cogency with which the arguments are conducted. However, in the main, those limitations are connected with the procedures and, indeed, the structures that carry out the procedures, starting from the commencement of the investigation until the solution of the case:. A certain amount of time elapses before the investigation commences. I hope to persuade your Lordships that that is a matter of some importance.

The next limitation of the report is that it deals with Articles 85 and 89 of the Treaty of Rome, which still applies even after the amendments of Maastricht. However, it does not deal with the enforcement powers applicable to infringements of the Treaty of Paris of 18th April 1951 in connection with, in particular, the payment of illegal subsidies. That question and the whole question of the status of the Treaty of Paris is not dealt with at all in the report. As your Lordships will see, that may be extremely germane to the views which I hold about the recommendations made in the report.

The committee's report lays down quite correctly the objectives of law enforcement which are to be found at paragraph 96 which states: The objectives of law enforcement are that it should be fair—justice must be done; transparent—justice must manifestly be seen to be done; swift—justice delayed is justice denied", and your Lordships will observe at a later stage of my remarks that I shall return to that point. The paragraph continues: and deterrent—the sword in the right hand, as well as the scales in the left". As the committee's conclusions are directed at Articles 85 and 89 and at the procedures in connection with them, I agree entirely with many of its observations. It is desirable that national courts should be brought into a wider sphere and be given encouragement. It is desirable that the court of first instance should be used more extensively and I shall have more detailed observations about that. Pending any changes—and I shall certainly recommend some—I agree that Directorate-General IV should have more lawyers and accountants in it in order to carry out more satisfactorily its tasks. In general, on the assumption that no fundamental changes are made, I am in substantial agreement with the report, subject to one thing only: I think that it is highly undesirable that the functions of investigation, prosecution, judgment and, ultimately, punishment or acquittal should be in the hands of one body. That is extremely undesirable. I am known to have somewhat definitive views on the EC and some of its operations. However, having discussed the matter with a number of noble Lords who are learned in the law I am fortified in tie view that that is generally undesirable.

That brings me to the point made by my noble friend Lord Clinton-Davis concerning the nature of the Commission. In essence, the Commission is not a judicial body: fundamentally, it is a political body. If justice is to be determined within the sense that most of us—and some of my lawyer friends—understand it, then it must be done within an atmosphere which is essentially judicial and not political. As I hope to be able to prove later in the course of my' remarks, being an intentionally political body, with the atmosphere of politics permeating it from top to bottom, the Commission is not really the ideal body to arrive at judicial decisions, even within the political context of the Treaty of Rome or the Treaty of Paris.

Although the law undoubtedly has political flavouring at all levels of the Community, I recommend that the judicial process—that is the process of determining results based upon the law—should be left to the court of first instance; and that cases should be referred to the judgment of that court rather than to any branch of the Commission.

I am well aware that that would entail extensive new recruitment of lawyers and their staffs for the court of first instance. Indeed, there would, perhaps, have to be opportunities for hearing in front of a single judge, and so on, because not all cases are of equal gravity or dimension. However, I put it to noble Lords that, however it is accomplished and without wishing to cast any adverse reflection on anyone, judicial functions ought to be taken out of the hands of the Commission.

If anyone doubts the political atmosphere pervading the Commission, one only has to look at reports in today's newspapers where it can be seen that commissioners are taking an overtly critical view of the United Kingdom's attitude towards the current voting procedure discussion. It has become commonplace over the past few years, especially since the advent of M. Delors, for commissioners to take sides with some member states against another member state. I believe that it is within the knowledge of your Lordships to observe that over the past few years endeavours by individual commissioners to place the United Kingdom "in the dock" have grown both in number and intensity. Therefore, I suggest that, in some form or another, the judicial function ought to be taken out of the hands of the Commission. I do so for the reasons stated in part by my noble friend Lord Clinton-Davis and partly for the observations that I shall make.

Baroness Elles

My Lords, before the noble Lord sits down, does he support the idea that it should be for national courts to hear such cases? Does he endorse that particular view?

Lord Bruce of Donington

Yes, my Lords; I have already indicated that I support those recommendations. As long as such cases are solved judicially, as opposed to having deep political overtones and undertones, I would be happy with the situation. I may not be happy with all the judgments and I may even reserve the right of the ordinary citizens to criticise judges. I see that my noble friend wishes to intervene. I give way.

Lord Clinton-Davis

My Lords, I am much obliged. While I have gone some way along the road with my noble friend, I certainly do not find myself in the broad thoroughfare of his argument. Is it not right that, ultimately, the court has supervision of the matter? I shall argue for greater transparency in the process of decision making other than that which the court now ultimately has as regards supervision of the matter.

Lord Bruce of Donington

My Lords, that is right as regards the end process rather than the process of justice itself. I am not anxious to bring my noble friend all the way with me in such matters. Indeed, that would be out of tradition with the relationship that I enjoy with my Front Bench which I am most anxious not to disturb unduly. However, I welcome my noble friend's support periodically.

I revert now to the Treaty of Paris. I do so because the competition rules also apply to it. Indeed, as the noble Lord, Lord Ezra, reminded us in the course of the debate which took place in your Lordships' House on 25th October 1993 on the steel industry: Article 4 of that treaty states that certain acts are recognised as incompatible with the Common Market and shall accordingly be abolished and prohibited. Item (c) in that list is: 'subsidies or aids granted by states, or special charges imposed by states, in any form whatsoever'."—[Official Report 25/10/93; col. 719.] Further, Article 54 of the treaty lays on the "High Authority" (which at a later stage became the Commission) powers to carry out certain duties. It reads: The 'High Authority' may facilitate the carrying out of investment programmes by granting loans to undertakings or guaranteeing other loans. However, if the High Authority finds that the financing of a programme or the operation of the installations therein planned would involve subsidies, aids protection or discrimination contrary to this Treaty, a decision to this effect by the High Authority shall have the effect of prohibiting the undertaking from drawing on resources other than its own funds. Undertakings which disregard such prohibition may be fined up to an amount not exceeding the 'improperly devoted' funds". That is further reinforced by Article 95 of the same treaty.

It is quite clear that over a number of years there have been wholesale violations of the Treaty of Paris condoned by the Commission. In support of that, perhaps I should draw noble Lord's attention to another report by the Select Committee of this House. It is entitled Restructuring of the EC Steel Industry (HL Paper 30) and was published on 1st March. Of course, it was too early to have been taken into account by the noble and learned Lord's committee which was dealing purely with Articles 85 to 89. The findings of the committee are astounding. Perhaps I may just give your Lordships a flavour of what the committee said. Paragraph 5 on page 5 reads: As part of the package, and at the United Kingdom's insistence (Q 10), a more rigorous monitoring system was set up, which requires the Commission to report directly to the Council, to identify illegal subsidies". I shall have some observations to make as to why the Council should, at this very late stage, seek to persuade the Commission to do something which it ought to have done long ago. The Commission has been aware of the situation for some time.

I should like now to refer to some of the evidence in that respect which the committee considered. For example, I refer noble Lords to Mr. Moffat's views given in evidence on 27th January. He is the leader of the steel industry in the UK. He said: In our view, the Commission has a duty to police the industry to ensure that ECSC law is not flouted … If a Government feels strongly enough about a situation, by not agreeing, in effect, it uses the veto". The Commission has done nothing and the Government have not exercised any veto. Therefore, the illegal subsidies which have been going on for years, still continue. In case the Minister is a little embarrassed, I should point out that at a later stage the Government agreed with Mr. Moffat, so it is no good saying that such views are not those of the Government. Indeed, I shall deal with the Government's views in a moment. Mr. Moffat continued: We still have a situation now, for example, in Germany, that a company that was made bankrupt, a company called Saarstahl in the Saar, whose main shareholder walked away from it, which was a State-owned company incidentally, was subsequently declared bankrupt and the Government of the Saar quite openly since then has been propping it up with State money to the extent of even paying the wages. The Commission to date, despite protests from British Steel among others, to our knowledge has not formally challenged the situation and yet it is a month now since the Council of Ministers meeting where words like that were spoken". At that stage in the proceedings, the noble Viscount, Lord Mersey, made an intervention by saying: In that context, where a Member State makes a complaint to the Commission that State aid is enabling one of the aided companies concerned to under-price, the Commission will launch an investigation, in particular under Article 60 ECSC". However, it has done nothing of the kind, despite the fact that those illegal subsidies are openly published in German newspapers. Then Mr. Moffat described the meeting with the Minister, Mr. Sainsbury, stating: I met with Mr. Sainsbury two of the United Kingdom's largest constructional steel companies who are customers of British Steel, not very long ago, pointing out where subsidies are existing, and the fact that they are in competition with people who are being subsidised". Yet nothing at all was done about that. That prompted the noble Earl, Lord Lauderdale, to comment on this matter at a later stage, saying, Can I get one thing absolutely clear? I have understood, correctly I hope, that this was not subject to QMV? It was a situation which Britain could have vetoed if we had had the guts". The QMV in that quotation refers to qualified majority voting. The answer to that question was "Yes".

The Government's own position on this matter is made abundantly clear on page 9 of the evidence when Mr. Sainsbury, on 10th February, replied to a question from the chairman. Mr. Sainsbury stated: I think the most important part of the agreement is the emphasis on the elimination of future running cost subsidies and the monitoring arrangements to control that agreement … and the attitude of the Commission to those are I think much stronger than anything in the past, together with the important point that the Commission have to come before the Council to report on their monitoring". The first meeting with the Council is 24th April.

I could give further examples of the present situation and I could record, while I am about it, the attitude of Her Majesty's Government within the Council of Ministers. Mr. Sainsbury records his account of the meeting of the Council of Ministers on 17th December. In referring to a lack of support of his arguments from Germany and France, Mr. Sainsbury stated: I have to say that at the end their support was, perhaps, not as robust as one might reasonably have expected, but other factors come into play and maybe other Community activities which they were concerned about influenced their eventual decisions". He concludes, So every time I looked along hoping to get a bit of support, it was silence. I am afraid". This is what happens, apparently, even after Maastricht when we are supposed to be right at the heart of Europe. We look for some support to persuade the Commission to take action, as it is required to do under the Treaty of Paris, and we receive no support from anyone, possibly of course because other deals have been done and the non-intervention of the Commission is probably part of some package deal.

I suggest to your Lordships that this is wrong. I am suggesting—as I indicated that I would—that there must be speedy justice because justice delayed means that justice is not done. In this case three or four years have passed since the Commission became aware—this was documented and relayed to the Commission—that certain member states were in breach of the subsidy requirements of the Treaty of Paris and yet the Commission has done nothing. In the next few days, possibly tomorrow, we shall be able to determine how much esteem and resolution the Government can muster in support of their position, allegedly at the heart of Europe. We shall probably know the position after tomorrow. In the meantime your Lordships ought to give serious examination—I put it no higher than that—to the degree to which the Commission is either competent or has the political will to enforce the law of competition in cases where it does not suit it, for other reasons, so to do.

5.45 p.m.

Lord Holme of Cheltenham

My Lords, I shall be brief not only because I do not have the depth or detailed familiarity on this matter of the noble Lord, Lord Bruce of Donington, but also because we on these Benches in general warmly support the recommendations of this report. It is important to put the report in the wider perspective of the ever-growing pressure of international competition particularly from Japan and the Asia-Pacific region but also from North America.

It is right that the single market should be unambiguously competitive. It is worth referring to the political issue that both the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Clinton-Davis, mentioned. Of course the European Commission is full of politics, just as the British Government are full of politics, but I am glad to see that the concept of fortress Europe cosseting its European champions, giving special protection to those who would fight on Europe's behalf, seems to have largely given way to a Europe which will be internally and internationally competitive.

As the noble and learned Lord, Lord Slynn of Hadley, and the noble Baroness, Lady Elles, have said, the evidence of Dr. Claus-Dieter Ehlermann of Directorate-General IV and the attitude of DGIV towards the work of the committee are encouraging and indicate the substantial commitment of the Commission to competition in an enlightened and rational way. The sub-committee, which was so ably chaired by the noble and learned Lord, Lord Slynn of Hadley, and of which I had the honour to be a member, had to grapple with the tension between competition administrators and business. Mr. Daniel Goyder of the MMC put it well when he alluded to the necessary compromise between competition administrators, who want a tough law, and industry, which wants a relatively liberal law. I believe that what industry actually wants—this is apparent from the CBI's evidence—is speed and natural justice. Industry wants things to be done properly. The key issues which the noble and learned Lord, Lord Slynn, referred to, of access and procedures and the strengthened role of the hearing officer, will greatly contribute towards the ability of companies to obtain what they see as greater natural justice.

I address my next remark to the Minister. I know that the Government are dedicated to subsidiarity. Of course it is relatively easy in the case of mergers to see how subsidiarity operates. I, personally, am glad that the review of merger control has been postponed for another three years and that therefore the triggering threshold is unchanged. However, I wish to ask the Minister a specific question on that. The threshold is, of course, in no way index linked. Are the Government at all concerned about the attrition—if one cares to call it that—of the threshold as a result of inflation?

However, subsidiarity on other competition issues is much less easy to discern. I was struck by the evidence of Sir Bryan Carsberg who took a positive attitude. He thought that, by and large, there was no tension between national competition authorities and European competition authorities. However, it is true to say that competition law is far less well developed in some other countries of the European Community than it is in Britain. I should be interested to hear the Minister's observations on that.

Finally, I turn to comfort letters. They have been a considerable success as a decongestant of a rather gummed up system. They precisely illustrate the tension which I believe the noble Lord, Lord Bruce of Donington, was getting at between a quasi-judicial procedure and an administrative procedure. Naturally our committee, which had several distinguished lawyers on it, tended to say that we should make comfort letters more judicial, as it were, make them in some way more binding and give them greater authority. I am not sure this is the right way to proceed. I believe the merit of comfort letters is that they are a thoroughly practical way of stopping the system becoming gummed up. My slight fear is that, if we make them more formal and more legalistic, they will not perform that useful function. As the noble Baroness said, fairness, transparency and speed are the object of the exercise, but I hope that in relation to comfort letters the Government will not take the report of our committee too literally.

5.49 p.m.

Lord Clinton-Davis

My Lords, I begin by reiterating the congratulations which I offered earlier, in an intervention, to the noble and learned Lord, Lord Slynn, and other noble Lords who served on the Select Committee. They have produced a formidable and influential report.

The noble and learned Lord paid a wholly justified tribute to Dr. Ehlermann, who is a very distinguished director-general of DG IV, which deals with competition affairs. He is a gentleman whom I have known for some considerable time, and I claim to be a friend of his. I find him a very impressive man indeed. I am confident that he will be receptive—as I hope commissioners will be—to the proposals for change which have been adumbrated in the report.

I wholly support the areas of change on which the noble and learned Lord concentrated in his opening remarks. All of them are constructive, and it is to be hoped that they will not require any amendment of Regulation 17. However, if they do the opportunity will arise in the not too distant future. The opportunity will also arise to reconsider the suggestion that there should be an organisation independent of the Commission to deal with these issues. As my noble friend Lord Bruce of Donington recognised, that opportunity will occur in 1996 when the Maastricht Treaty falls to be reconsidered. Having said that, I agree with the conclusions reached by the committee on that point.

The Commission has been extremely receptive in the past to ideas that have come forward from your Lordships' House. That bodes well for the future. The Commission has tried to avoid the possibility, so far as is conceivable, of amending Regulation 17 and certainly of amending the treaty. That is the art of the possible, as the noble and learned Lord put it on page 167 of the report.

The objectives of law enforcement are set out succinctly in paragraph 96 of the opinion of the committee. Even if the Commission falls short of those objectives in some measure, ultimately the court is in a position to supervise the position. Therefore, many of the apprehensions of my noble friend Lord Bruce of Donington can be put at rest. The important point is that in the overwhelming majority of cases these are issues which can and should be dealt with by the Commission, although the requirement for transparency may be missing in one material respect, namely the one to which I referred in my intervention and to which I wish to return in a moment.

The emphasis upon consistency of approach and equality of treatment is correct. That goes to the heart of the purpose of Regulation 17, which requires effective co-ordination and liaison between the Commission and the competent authorities in member states.

I am pleased that the report recognises that the Commission overall has emerged well from this test of balance at a time when it is being obliged to assume even greater burdens of responsibility in this field. I am also pleased that the report stresses that the effectiveness of the implementation of the principles depends largely on the level of resources provided to the Commission as well as the procedures which are laid down. There can be little doubt that, with the additional burden of responsibility which the Commission has had to assume in this regard, as in so many other regards, it is as well to recognise that the resources available to the Commission in terms of its officials are very slender. If the member states want to see these procedures working better they have to give attention to that factor. That will not please my noble friend Lord Bruce of Donington, but it is a reality of life.

I return to the point which the noble and learned Lord indicated was not within the remit of his committee. I find it very difficult to see how one cannot reflect, when thinking in terms of the enforceability of competition law, on the way in which the Commission goes about its business at the level of the decision of the college. I have some reservations about that which I believe can be cured by greater transparency on the part of the proceedings when they reach the college. Those two issues—the quasi-judicial and the political—are inseparable.

Major issues can arise which affect certain member states, or there may be an issue of Community interest as it is perceived by members of the college—and I assure my noble friend that it is not always a matter of Satan at work because genuine views are held about the question of what is a Community interest, which is fundamental in this regard. In such cases the commissioner himself or herself, unless it is the commissioner with responsibility for the dossier, is unlikely to have read the file and is certainly unlikely to have read the evidence. The commissioner will rely very heavily upon some measure of scrutiny which is undertaken by a responsible member of his or her cabinet, and upon a resume of the case which is prepared by that person. That may be an unsatisfactory way of dealing with matters.

In addition, there is no doubt that from time to time deals are struck. That is not done ignobly. That happens when governments undertake quasi-judicial or administrative determinations. I believe that the answer would be for much greater transparency where divisions of that kind occur so that the parties to the dispute and the public know what arguments have been canvassed in the college of commissioners in pursuit of their ultimate finding. In any event, that is a matter over which the court can exercise its jurisdiction to ensure that ultimately justice is done. That approach would be wholly in pursuit of the argument of greater transparency which the Commission has adopted in its express views about Maastricht. I see nothing untoward in that regard.

In relation to the question of co-operation between the national courts and the Commission in applying Articles 85 and 86, I have taken the opportunity to have some interesting discussions with a colleague of mine—who will be known to the noble and learned Lord—Stephen Kon, who is a former chairman of the Solicitors' European Group and who is a notable practitioner in this field of law. He had some interesting things to say, which I should like to rehearse to the House, in relation to the difficulties which a practitioner encounters in dealing with these issues, particularly in making a choice between advising a client to refer a matter to the Commission or to the national court.

I think that the Commission notice fails to address fundamental problems concerning the application of Regulation 17. In a sense, it tinkers at the edges. The real problem which is avoided lies, in my view, in seeking to approximate the laws of member states as regards both the substantive and the procedural application of Articles 85 and 86 by the national courts and the Commission respectively. The notice endeavours to finesse the system without dealing with the substantive or procedural rules. The net result is that major difficulties in the domestic enforcement of the competition rules are likely to persist.

The first point I would make in underlining that position is that perhaps the most acute difficulty arises in relation to the Commission's sole jurisdiction in being able to grant an exemption under Article 85(3), pursuant to Article 9(1) of Regulation 17. The only truly effective means of enforcing European Union competition rules before the domestic courts would be for the domestic courts to have jurisdiction to apply Article 85(3). It has been argued that that would prejudice the uniformity of application of that article, even though people who frequently argue the point seem to accept the unsatisfactory nature of its enforcement. In his evidence to the Select Committee, Mr. Jeremy Lever QC argued that the Commission had been unable to provide the public law service required in applying Article 85(3), rarely granting exemptions and using no formalised procedure for comfort letters, many of which are not preceded by Article 19(3) notices or by publication in the official journal. I note what the noble Lord, Lord Holme, said in that regard, but I happen to disagree with him.

Additionally, Commission decisions granting exemptions are not binding as to fact or law on national courts and they are able to refer any finding as to the legality or validity of those decisions to the European Court of Justice under Article 177. It has been held in the European Court that national courts are competent to assess the legality of any European Union instrument. It has also been established that negative clearances are not binding on national courts.

So even if the Commission gives priority to exemption cases which are before domestic courts, any Commission decision can be no more than persuasive before the domestic courts. Moreover, since European law forms part of English law, a formal decision of the Commission cannot provide evidence which is admissible in the United Kingdom, and the same must apply to a Commission opinion given at the request of a national court.

I turn to focus on the issue of the Commission and the national courts, because clearly there is a need to add greater efficiency to the proceedings. One of the declared objects of the notice which the Commission has issued is better to define relationships between the Commission and national courts so as to increase the dialogue between them and to enable the Commission to focus on those proceedings which have a sufficient Community interest. However, given the Commission's monopoly of granting exemptions under Article 85(3), parties whose agreements are subject to domestic court proceedings will find that there is little alternative but to await the outcome of the Commission's consideration of a request for an exemption. Together with the encouragement given by the notice for national courts to ask questions and seek guidance from the Commission, it may well result—and that is acknowledged in the report—in a backlog of cases both before the domestic courts and before the Commission while the parties wait for a decision as to exemption pursuant to Article 85(3). Alternatively, they may wait for the Commission's response to questions referred by a national court.

In its notice, the Commission stresses that it will not accede to requests for information unless they come from a national court, either directly or indirectly, through parties which have been ordered by the court concerned to provide certain information. In the circumstances, it is possible to foresee serious log-jams, with everyone waiting on the Commission. That is the very problem which the notice is intended to resolve.

The dilemma for legal advisers is to decide whether to advise their clients to opt for deliberation before the national court or before the Commission. Given the limited number of cases where the Commission will have sufficient interest to intervene and the very slow and unsatisfactory procedures before the. European Court of Justice, there are likely to be only a limited number of cases where a party will be well advised to complain to the Commission.

Even if a case has a European Union interest and the advice would generally be to take the matter to the Commission in the first instance, if the primary object of taking such proceedings is to claim damages, it must be right, subject to Article 85(3) considerations,. to take the matter to the domestic courts directly, since a Commission decision would be of only limited use because it does not bind, as a matter of fact or law, the national courts.

Working on the basis that legislation is not to be introduced in the near future at European Union level to amend Regulation 17 and to approximate national laws, what can domestic courts do to make the application of the notice as effective as possible? It would appear that perhaps the right way forward is for the court itself to take the lead to deal with some of the fundamental procedural difficulties by way of a practice direction in providing guidelines in an appropriate case as to the way the courts in this country, for example, intend to apply the notice. The guidelines may have to be changed in the light of experience.

There are a number of fundamental matters upon which guidance can be necessary. Whether the domestic courts will, as a matter of practice, seek the advice of the Commission or request the Commission to intervene in proceedings as amicus curiae and, if so, in what circumstances are clearly matters which need to be determined. Some have expressed the view that in legal and jurisdictional terms it would be unsound for a domestic court to seek the views, opinion or advice of an administrative authority. I am not convinced by that but it is an issue that will have to be decided.

If the domestic courts are to seek the advice of the Commission, then there are serious evidential issues that have to be considered. Quite rightly, the courts here have been reluctant to accord any authority to statements of objection. There is no reason why greater authority should be given to the views of a Commission official.

Those are difficult issues but ones which have to be dealt with by the domestic courts. The domestic courts have a limited knowledge of the application of those articles. The question, therefore, is how they can become better informed. It is not a new matter because, particularly in relation to issues like the difficulties of discovery and the general difficulties of judges dealing with complex economic issues, those are issues which are dealt with already in the patent courts. Perhaps, just as in the commercial courts there is a commercial users' committee which can deal with special procedural requirements, it might be worth while following that route.

Finally, there is no good reason why national courts should not take a pro-active and dynamic approach in applying Article 85(1) to determine on their own account that an exemption will or will not be given. If they require the aid of the Commission, they should seek such aid in accordance with strict time limits. Article 177 could be used to seek legal interpretation. Such an approach should avoid unnecessary delays and encourage the Commission to speed up its own procedures, and as regards Article 177 the parties will remain free to appeal to a higher court and ultimately to the European Court of Justice.

I have taken some time, I fear, in dealing with the matter but I thought it was as well to put the issues on the record. Having done that, I conclude as I began by congratulating the noble and learned Lord and his colleagues on an excellent piece of work.

Lord Bruce of Donington

My Lords, before the noble Lord sits down, will he give the House the benefit of his observations for the record? What action should be taken in the event, as has already happened, that the Commission has known about breaches of the Treaty of Paris of 1961, has known about them for the past three years, has all the details in its possession and so far has neither investigated them in detail nor endeavoured to prosecute them? What action would the noble Lord recommend that either national parliaments or anybody else should take in order to ensure that the Commission itself makes an active endeavour to enforce the law in this respect on the basis of information that has been in its possession for a long, long time?

Lord Clinton-Davis

My Lords, that is one of the easiest questions that my noble friend has ever asked. I suggest that all that he has to do is to write to Dr. Ehlermann. Perhaps he will get a reply in the not too distant future.

6.10 p.m.

The Minister of State, Department of Trade and Industry (Lord Strathclyde)

My Lords, it is always a pleasure to respond to one of these debates, and particularly so after the introduction and contribution of the noble and learned Lord, Lord Slynn of Hadley. I very much welcome the opportunity that this gives me to respond.

I am pleased to welcome this thorough, thoughtful and clear report. In the Government's view, competition enforcement is a central element of Community policy. An effective competition regime is essential to the success of the single market and—as the noble Lord, Lord Holme of Cheltenham, said—the competitiveness of Community industry.

The Government have delivered to the House a written response to the Select Committee's report. Our written response addresses each of the Select Committee's specific recommendations, and I hope that noble Lords have had sufficient opportunity to consider it.

Perhaps I may also say at the outset, in response to the intervention that was made by the noble Lord, Lord Clinton-Davis, right at the beginning of this debate, that the Select Committee concentrated on procedure in institutions rather than on Community policy. Accordingly, I too shall confine my remarks to those subjects.

The noble Lord, Lord Bruce of Donington, again entertained the House at some length with his views of the European Community, its institutions and some of its faults. The noble Lord particularly concentrated on illegal subsidies under the Treaty of Paris, which is a very interesting subject. But it is very much outside the remit of the Select Committee report, so if the noble Lord does not mind I shall not address that issue.

The committee's conclusions are aimed at remedying perceived defects in the fairness, transparency and speed of European Commission procedures in competition cases. The Government fully endorse that objective. We are committed to removing unnecessary regulatory burdens from the shoulders of business—whether from the United Kingdom authorities or from the European Commission. Any procedural unfairness constitutes an unnecessary burden; so does lack of transparency; so do delays in case handling—until a case is disposed of, businesses cannot be certain whether their transaction is permissible or prohibited, and they are left in a state of lingering commercial uncertainty.

For those reasons the Government are actively involved with other member states and the Commission in seeking ways to improve procedural fairness and to speed the handling of cases under Community competition rules. The Select Committee report is an extremely valuable contribution to that continuing debate.

In considering various options, the Government need to bear in mind other considerations as well. We are determined to remove unnecessary burdens on business. But we are also committed to ensuring that this should not prejudice the effective and consistent enforcement of the rules—because it is in everyone's interest that serious anti-competitive practices should be stamped out. Consumers benefit from the increased choice and lower prices which effective competition enforcement can offer. Industry and commerce benefit from the opportunities for enterprise, and the stimulus to greater productivity and innovation. These fundamental points must never be lost sight of when we consider these matters. And the rules must be applied consistently throughout the European Community. There must be no suggestion that the competitiveness of British businesses is suffering because the rules are being applied more stringently in this country than elsewhere.

As with all proposals for deregulation, a balance has to be struck. Let us remove regulatory burdens, yes; but not to the detriment of effective and even enforcement of competition rules. And while it is desirable to speed up case handling, that must be balanced against ensuring proper procedural protection for all the parties involved. It is within that basic framework that the Government are approaching these issues.

I now turn to the Select Committee's specific recommendations. Noble Lords will have noted that the committee very sensibly divides its recommendations into first, those which involve practical reforms requiring no legislative change, and second, those which could only be achieved by the Council agreeing to amend Regulation 17.

Perhaps I may make one point about the Government's attitude to the recommendations. We think that all the recommendations in the committee's report are worth considering. But in the immediate term we would prefer to see whether those which require no significant legislative change can be made to work before the Community and member states have to embark on the process of negotiating a revised version of Regulation 17. Past experience shows that such negotiations can be very time-consuming indeed. We would be concerned if time and energy were to be diverted away from the immediate, and necessary, task of implementing practical improvements in the Commission's enforcement procedures. Both the noble and learned Lord, Lord Slynn of Hadley, and my noble friend Lady Elles asked specifically about that matter. I hope that that is helpful.

As I have mentioned, the Select Committee sees its recommendations as addressing perceived defects in the fairness, transparency and speed of European Commission practices. Taking those issues in order, I should like to comment briefly on the committee's main recommendations.

First, in relation to fairness, the Select Committee had to address itself to complaints from business and practitioners that, in competition cases, the European Commission is—as the noble and learned Lord, Lord Slynn, and the noble Lord, Lord Bruce of Donington, said—"simultaneously the detective, the prosecutor, the negotiator and the decision maker". That was perceived to have a potentially adverse effect on the Commission's impartiality—and in particular, on the feeling of a company under investigation as to whether it is being given a fair hearing. As my noble friend Lady Elles said, there are worries about disputes over access to the Commission files.

The committee's suggested remedy focuses on the role of the hearing officer. The Select Committee recommends that the hearing officer's functions be widened so that he can perform a similar role in disputes: about whether (and when) a company under investigation should be allowed access to the Commission's files on the case; about time limits in the procedures; and so on. The Select Committee also recommends that more hearing officers should be appointed, and that at least one should be of a higher grade.

The Government agree with the Select Committee on the need for internal reforms within the European Commission -to improve impartiality and fair treatment in its procedures. The Commission must be fair, and be seen to be fair. There needs to be a clear and consistent commitment from senior officials in the Commission's competition directorate to ensure that. Precisely how it achieves these reforms is essentially a matter for the Commission. But the Select Committee's proposals certainly represent one possible way forward, and we urge the Commission to consider them. Initial responses from the Commission have been favourable, and welcome that. If the hearing officer's role is to be enhanced in this way, we believe that its functions will need to be clearly defined. As I said in my opening remarks, care will need to be taken to strike a balance between, on the one hand, protecting the interests of the company under investigation, and, on the other, ensuring that elaborate procedural protection cannot be abused by parties so as unreasonably to delay effective enforcement.

As a further recommendation, the committee suggests that there should be a right of interlocutory appeal from a ruling of the hearing officer to the European Court of first instance. The report says that a change to Regulation 17 would be desirable to achieve that. But while we welcome examination of that proposal, so far as possible we would prefer to see whether internal reforms worked before deciding on the need for reforms involving an amendment to Regulation 17. One would also have to bear in mind that the merits of any interlocutory procedure would need to be balanced against the risk of possible further delays in competition enforcement—in particular where appeals without real substance might be lodged. If, as the noble and learned Lord, Lord Slynn, suggested, a way could be found of instituting interlocutory appeals and deterring appeals without substance, without having to amend Regulation 17, the Government would wish the proposal to be very seriously considered.

Turning now to transparency in Commission procedures, the Government believe that, in this complex area, it is essential for businesses and practitioners to be as clear as possible about how things work, and the implications of the decisions that they take. Greater clarification on those points should ease the regulatory burdens that they face.

We therefore look to the European Commission to take steps along the lines of those recommended by the Select Committee: updated guides to competition procedures; and, where fines are imposed, a Commission statement of the reasons for the particular fine. On that last point, we note the anxieties expressed to the Select Committee about similar infringements being punished by fines of a different level. We understand that it has become practice to set out the reasons for fines fully in Commission decisions. In the interests of certainty, and of retaining confidence in the system, we believe it essential that the application of fines should be consistent and be seen to be consistent.

Moving now to the Select Committee's recommendations for improving the speed of Commission case handling under Articles 85 and 86, the Government believe that there are a number of practical measures which could be taken to reduce the Commission's backlog of cases and thus help speed up case, handling. All options should be carefully considered on their merits.

One method is to use comfort letters as an alternative to a formal decision when companies apply to the European Commission for clearance or exemption, provided that the companies indicate their willingness to accept that. Issuing comfort letters requires a less formal procedure. So it is quicker and reduces the case backlog.

We endorse the Select Committee's view that comfort letters cannot be expected to provide legal certainty against third party liability. The committee makes practical recommendations for enhancing the legal status of comfort letters, so as to provide more legal certainty. The noble and learned Lord, Lord Slynn of Hadley, referred to the recommendation for comfort letters to be followed by a formal decision. We have set out our specific comments on those recommendations in our written response. I should like to make the general observation that, again, a balance needs to be struck. Enhancing the status of comfort letters requires more procedural formality, which inevitably reduces some of the advantages in terms of speed.

The Select Committee also recommends the publication of further block exemptions in appropriate cases. We agree that consideration should be given to further block exemptions, provided that it would not prejudice the effective application of the competition rules. We understand that the European Commission intends to carry out an empirical study to identify new categories of agreement that could be granted block exemption. We welcome that.

Another possibility for practical reform would be the institution by the Commission of systematic monitoring of incoming competition cases. This would allow the Commission to prioritise cases according to their commercial, economic and legal importance. In this country, we already have some experience in this area with the codes for enforcement authorities which we have established. Targets are set, the attainment of targets is monitored and it becomes possible to set more challenging targets in subsequent years. We believe that such codes are easily implemented, and would quickly repay the effort devoted to introducing them. Indeed, this January the Office of Fair Trading published a Code of Practice on Enforcement which set new self-imposed time targets for various stages in its handling of competition cases. We commend this approach and would see it as a way of increasing efficiency in case handling at Community level.

In general, the Government believe that these practical reforms ought to be explored and tested before more radical steps to speed case handling, involving legislative change, are explored. But I emphasise that we do not wish to rule out any option.

I note the committee's anxieties about resourcing. My noble friend Lady Elles and the noble Lord, Lord Clinton-Davis, have today reiterated similar worries. But I do not need to remind noble Lords that the decisions on resourcing and recruitment need to be made against a background of severe constraints on public expenditure, not only in this country but throughout the Community.

I welcome the realism shown on that point by Dr. Ehlermann the head of DG IV when he appeared before the Select Committee (paragraph 68 of the report). Experience shows that there is scope for increasing the effectiveness of staff deployment in DG IV. The Commission's latest reports on competition policy show that during 1992, the last full year for which we have records, the Commission's case backlog under Articles 85 and 86 was reduced by more than 30 per cent. while the numbers of staff allocated to such cases rose by 4 per cent. The proposals to which I have referred for increasing efficiency and reducing the case backlog could help to alleviate many of the resource problems which DG IV now faces.

My noble friend Lady Elles referred to the Select Committee's recommendations for the introduction of mandatory time limits for cases under Articles 85 and 86. Last year the Commission introduced self-imposed time limits for consideration for certain types of joint venture under Article 85. This new procedure, which required no legislative change, seems to have worked well. We welcome the Commission's willingness to consider extending the system to other types of case. But the important point is not whether time-limits are self-imposed or mandatory but that effective steps should be taken to ensure that the Commission in practice is able to accelerate its procedures.

The Select Committee's report also recommends that investigation and assessment of appropriate cases should be delegated to national authorities. The Government see decentralisation of cases under Articles 85 and 86 as one possible way of speeding case handling and one which ought to be and is being fully considered. As part of that consideration, various issues will need to be looked at and properly addressed, including the kind of cases which could appropriately be delegated, the extent to which delegation of such cases would reduce the Commission's caseload and so help to speed up procedures and how to safeguard consistent application of the Community rules between member states.

We are not seeking here to reject the suggestions out of hand. On the contrary, we want this and other proposals for reform to be fully considered. In any event, we believe that there is a wider role for national authorities to play in providing information to the Commission on local market conditions in their territory. But to reiterate, we believe that it is essential to assess each proposal on its merits, to see how effective it would be in achieving our desired objectives.

Regarding the notice on co-operation between the Commission and national courts, the Government broadly endorse the Select Committee's assessment and recommendations. In general terms we welcome the notice; but for various reasons, such as the costs of litigation, and, as the noble Lord, Lord Clinton-Davis, said, the courts' inability to take exemption decisions under Article 85(3), we agree with the Select Committee that it cannot be expected to reduce the Commission's case backlog significantly. We believe that it is premature to make the legislative amendments needed to grant to national courts the right to grant Article 85(3) exemptions. As I said earlier, we would be concerned at the implications of a consistent application of Community rules.

I should like briefly to turn to the point made by the noble Lord, Lord Holme of Cheltenham, on merger control. The Government believe that it is premature to he considering a change in the level of the turnover thresholds either up wards or downwards. The regulation has been in force for little more than three years and we consider that further experience needs to be gained before amending it.

There is here a considerable agenda for reform. While many of the Select Committee's recommendations are for the Commission to implement, the Government are participating fully and will continue to participate fully in the debate about how best to achieve the desired improvements.

We sent a copy of the Government's response to the Competition Commissioner and we asked him to give serious consideration to the points that we make. I am pleased to be able to tell you that Mr. Van Miert has replied very fully and positively. He too welcomes the report and has indicated his intention to implement many of its recommendations, while sharing our hesitations about others.

Last October, the Commission and the directors general from the various national competition authorities discussed ways to increase effectiveness of the competition rules through the involvement of national authorities and by improving Community procedures. A working party was set up at official level to consider these issues, and report back. The UK is on the working party, and in that forum the UK is putting across many of the points that I have been making.

The report of the Select Committee, and the views expressed by noble Lords here today, offer valuable and stimulating contributions to the continuing debate. I have also mentioned the positive attitude of the Commissioner. The Government intend to take all these points fully into account as discussions with the Commission and other member states progress.

Lord Bruce of Donington

My Lords, earlier, the noble Lord mentioned that he proposed not to deal with the matters that I raised in the course of the debate in regard to the steel industry. From that, are we to take it that the authoritative representations made on 25th October 1993 by the noble Lord, Lord Ezra, supplemented by representations of the British steel industry, are to result in no action being taken on behalf of Her Majesty's Government? Does the noble Lord think that the steel industry should be entirely exempt from the competition rules? If it is not to be outside the competition rules, why the inaction of the Government in relation to the Commission's deliberate refusal to initiate investigations ?

Lord Strathclyde

My Lords, the noble Lord, Lord Bruce of Donington, is to assume nothing of the kind. We have discussed the situation in the European steel industry many times; notably, just before Christmas when my noble friend Lord Goschen responded to a debate similar to that that we have had today on the steel industry; we have also had numerous Questions dealing with he steel-industry. My point was simply to state that the report we are considering today had little to do with some of the more general points in regard to the European Commission's work and particularly steel policy. It is for that reason that I did not specifically respond to those questions.

6.30 p.m.

Lord Slynn of Hadley

My Lords, I thank the Minister for his reply and the other noble Lords who took part in the debate. It is gratifying for the committee that the Minister accepts a substantial number of its recommendations. The last time I came with a report from the Select Committee I was virtually told that the Government liked the style but not the content. This time I go away with greater cheer.

I want to comment on just three points. The first is of considerable importance. I understand that the Government would prefer changes which can be made without amending Regulation 17. But at the heart of our report and our recommendations is the proposal that the decisions of the hearing officer should be subject to judicial review. I ask the Minister to bear in mind that that recommendation—perhaps to my surprise—was warmly received by the legal profession, by, I believe, the Commission and by those members to whom I spoke at the Court of First Instance.

This is the moment when this proposal is likely to gain support. It would be extremely unfortunate if it were allowed to lapse merely because nobody was prepared to look again at Regulation 17. T hope the Government will feel that it is the right course for the United Kingdom Government to take the point forward to the Council if it is found to be necessary for Regulation 17 to be amended. That is at the heart of our report.

Secondly, the noble Lord, Lord Bruce of Donington, said that we had left out some matters. Certainly we did. We left out mergers, subsidies and state aids, and that was quite deliberate. We were trying to ensure that business enterprises can be protected in the way their affairs are investigated but at the same time that the competition rules are enforced. Those are all different matters which fall for another day.

Thirdly, the suggestion was made by the noble Lords, Lord Clinton-Davis and Lord Bruce of Donington, that the Select Committee should have looked at the difficulties arising from possible political divergencies and influences in the Commission. They persuaded us no doubt that there is a problem here. But they convinced me totally that it was not a problem which falls to be considered by the Select Committee under this heading. It is plainly a general question and not one related purely to competition procedures. In any event, the question seems both to overlook the role of the staff of the Commission in the work that they do and to underestimate the supervisory role of the Court of Justice.

In the discussions leading up to the Maastricht Treaty Germany alone proposed that there should be an independent agency to take the decisions in this area. Other member states opposed it. What is important is that the Court of First Instance and the Court of Justice are there to supervise decisions of the Commission from the point of view of their legality. I should like to refer to one answer given by Mr. David Vaughan, QC, during the oral hearing. He said, I think one of the things that the Court of First Instance has done is to make it very clear to everyone that whether they are a tribunal, a court, or whatever they are, they expect them to comply with Article 6 of the Human Rights Convention. I think that clearly will lead the Commission, if they continue on that jurisprudence, to think very carefully about whether in fact their structures are right to deal with this question and whether they should not have a better system for arriving at the right answer". Finally, the relationship between the Commission and national authorities is a difficult question which will require profound and detailed consideration by the Commission and by member states. In our report we put forward a number of suggestions which we believe need to be dealt with first. I hope that the Commission and the Government will carry them forward. But it must not be forgotten that in dealing with those matters we are not simply considering the United Kingdom; we are considering other member states which may have different systems of competition procedures. I thank your Lordships for the attention given to the report of the committee.

On Question, Motion agreed to.