European Takeover Directive (Hansard, 19 July 2001)

§ Lord McIntosh of Haringey
My Lords, it is for the European Commission to decide whether to start the legislative process again with a new proposal for a takeover directive. The Government will decide what approach to take on the issue after consulting interested parties in the United Kingdom.

§ Lord Hodgson of Astley Abbotts
My Lords, I thank the Minister for that reply. I declare an interest as chairman of an investment bank in the City. Will the Minister give the House a categorical assurance that, if and when the directive is brought back, there will be root and branch opposition to any inclusion of "poison pills" and artificial devices, such a s occurred in the earlier drafts of the first directive— the sole purpose of which is to strengthen the power of management and thereby to deprive shareholders of the value that is rightfully theirs? Secondly, will the Minister talk in terms to the German Government—who have conspired with German industry to defeat the directive—making it clear to them that, if they want to have a pan-European capital market, it will require a level playing field everywhere, not just in the areas that suit Germany and the German Government?

§ Lord McIntosh of Haringey
My Lords, it seems most likely that if the Commission were to reintroduce the directive it would reintroduce it in its final form—in other words, the form in which it was presented to the European Parliament for Third Reading and rejected—although by 273 votes to 273. We should certainly resist strongly any attempt to delete the improvements that were made to the directive as it went through the European Parliament and before. We are concerned in particular to see that it retains the key shareholder protections that were introduced: the requirement to bid for all shares where a control has been achieved, and the prohibition on frustrating action which the noble Lord referred to as a "poison pill". We should also be very strongly opposed to any weakening of Articles 4.5 and 4.6 referring to derogations from the rules and help to prevent tactical litigation.

§ Lord Watson of Richmond
My Lords, does the Minister agree that this is a clear case where European legislation is required if we are to receive the benefits of the single market? Surely much of the opposition to this directive is, in fact, nothing less than protectionism.

§ Lord McIntosh of Haringey
My Lords, I am pleased that all parties from the United Kingdom, including Conservatives, Liberal Democrats and Labour MEPs, supported the directive when it came before the European Parliament. I believe that we are all united on that front. However, it would not be appropriate for me to comment on the motives of those who are opposed to the directive.

§ Lord Pearson of Rannoch
My Lords, further to the reply that the Minister gave to my noble friend Lord 1587 Hodgson, does the noble Lord agree that, even in its final form, the proposed takeover directive would have crippled hostile takeovers in this country by allowing target companies to take refuge in the courts? Therefore, does not the noble Lord further agree that the European Parliament has on this occasion, just for once, done something helpful to the British economy?

§ Lord McIntosh of Haringey
No, my Lords; I disagree 100 per cent with the noble Lord. There are minor defects in the final directive—for example, I do not believe that the provisions on jurisdiction are entirely clear. However, if I had to choose between the noble Lord, Lord Pearson, and the noble Lord, Lord Watson of Richmond, I would plump for the latter. This is a thoroughly good directive. It is not perfect, but it deserved and achieved our support.

§ Lord Inglewood
My Lords, I should, first, declare an interest as a Member of the European Parliament, and as the Conservative spokesman on legal affairs who dealt with the matter. Is it not the case that the German Government welshed on the deal that they made in the Council when they changed their position, and their attitude, towards this directive? Further, is it not a fact that this directive was very popular among significant sections of German business that wanted to see a European market opened for their business, just as for every other country's business? Therefore, is it not true that the German Government have let down a large number of their citizens and their own financial institutions?

§ Lord McIntosh of Haringey
My Lords, I have resisted any pressure to criticise the motives of those who took a different view from the one that we expressed, especially other governments. I shall continue to resist such pressure. I suggest that the noble Lord, Lord Inglewood, should have a few words with the noble Lord, Lord Pearson, on the subject.

§ Lord Pearson of Rannoch
My Lords, perhaps I may press the Minister to answer the question that I put to him. I repeat: did the proposed takeover directive in its final form allow target companies to seek refuge in the delay of the courts, or did it not?

§ Lord McIntosh of Haringey
No, my Lords. It did not. Article 4.6 of the directive has been specifically placed within it to deal with tactical litigation. In this respect, the noble Lord, Lord Pearson, is right to suggest that tactical litigation is to be deplored. That is why we have the agreement between the Financial Services Authority and the Takeover Panel about tactical litigation.

§ Lord Chalfont
My Lords, can the Minister say whether he accepts the use of the word "welsh" in the pejorative sense?

§ Lord McIntosh of Haringey
My Lords, I believe that that is a question for the noble Lord, Lord Inglewood, rather than for me.