Lords Sitting of 28 October 2002

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

The Lord Chancellor: Leave of Absence
The Lord Chancellor (Lord Irvine of Lairg): My Lords, before business begins, I take the opportunity to inform the House that I shall be giving a lecture at Durham University on Friday, 1st November, when the House will sit. Accordingly, I trust that the House will grant, me leave of absence.

Gibraltar
2.36 p.m.
Lord Blakerasked Her Majesty's Government:
What is their policy relating to the forthcoming referendum in Gibraltar on the proposal for shared sovereignty.
The Minister for Trade (Baroness Symons of Vernham Dean): My Lords, we have always been clear that there will be no change in the sovereignty of Gibraltar unless the people of Gibraltar agree to it, and that, if we can reach agreement with Spain on a comprehensive settlement, the whole package will be put to the people of Gibraltar in a referendum and they will decide.
The referendum now being organised by the Government of Gibraltar is a local initiative in which Her Majesty's Government are not involved. There
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will be no proposals on the table on which to vote. The question that the referendum will not answer is how to ensure a better future for Gibraltar.
Lord Blaker: My Lords, I am grateful to the noble Baroness for that reply. In the last referendum on sovereignty in Gibraltar, was there not almost a 100 per cent vote against any transfer of sovereignty? In view of the fact that, since then, Spain has pursued a consistent policy of making life difficult for the Gibraltarians, which will not have endeared Spain to them, was it not a serious blunder on the part of the Government—for the first time on the part of any United Kingdom government—to agree to the transfer of some parts of sovereignty?
If the vote in the referendum next week goes against the government proposals, will not the right course be for the Government to kick the issue into the long grass? Should they not persuade Spain that, in its own interest, the right course is for Spain to concentrate on persuading the people of Gibraltar that Spain is in favour of them and that it will help rather than harass them?
Baroness Symons of Vernham Dean: My Lords, let us be under no illusions. Everyone knows that the referendum will produce an overwhelming "no" vote. As the noble Lord pointed out, the last referendum on whether to accept Spanish sovereignty produced a "no" vote of some 99.2 per cent. On every occasion that we have discussed this matter in your Lordships' House, I have stressed that Spain must make any package of proposals attractive to the people of Gibraltar because of the clear undertaking by Her Majesty's Government that there will, indeed, be a referendum.
The noble Lord concentrated only on the issue of sovereignty. But my right honourable friend's Statement in another place on 12th July indicated a very broad set of principles: not only issues about sovereignty but about more internal self-government; the retention of British traditions, customs and way of life; the retention of British nationality; and of the

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freedom to retain institutions that the people of Gibraltar might want. If the referendum goes against us, then of course we shall have to consult again our colleagues in Spain. My right honourable friend last met his opposite number on 27th September and a further bilateral meeting is planned in due course.
Lord Janner of Braunstone: My Lords, first, I thank my noble friend for her reassurance that under no circumstances will any sovereignty over Gibraltar be handed to Spain without the consent of the people of Gibraltar. Secondly, will she tell the House what Her Majesty's Government are doing in the meantime to try to prevent the Spaniards making the lives of Gibraltarians a misery through interference with frontier crossings, through their refusal to recognise the Gibraltarians' international telephone code and through forcing calls to be rerouted through Spain?
Baroness Symons of Vernham Dean: My Lords, I reassure the House that Her Majesty's Government stand by the 1969 constitutional commitment not to enter into arrangements under which the sovereignty of the people of Gibraltar would pass to another state against their freely and democratically expressed wishes. That is an absolute undertaking. I reiterate it, as I have done on a number of occasions.
My noble friend may be interested to know that border delays have somewhat improved in recent weeks. I asked for an indication of that, knowing that I was to answer this Question in your Lordships' House this afternoon. I understand that delays in both directions have improved in recent weeks. However, my noble friend is right that there remain serious concerns over various telecommunications problems with Gibraltar. We are addressing those with the Government of Spain. But I am bound to say to my noble friend that it is only through engaging with Spain that we can improve on these issues. By turning our face away, we shall not help the people of Gibraltar.
Lord Howe of Aberavon: My Lords, does the Minister accept that I certainly endorse the legitimacy of negotiations on this topic? Does she recall that, not all that long ago, the Chief Minister of Gibraltar, Mr Caruana, himself recognised that one cannot expect to engage the Spanish in a process of dialogue in which they are not free even to raise the issue of sovereignty? Does she also remember the advice that I gave in an article about 12 months ago in which I said that only when the parties have been working together for some time on all the practical issues might they be willing to start considering proposals on the sharing of the powerfully mystical concept of sovereignty? Does she understand that that has been difficult not only because of the sustained inability of the Spaniards to recognise the changes that they need to make but also because of the recklessness—if I may use that word—
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with which Her Majesty's Government have been prepared to throw sovereignty on to the table in the way that they have.
Baroness Symons of Vernham Dean: My Lords, I have enormous respect for the views of the noble and learned Lord on the matter; he has been a most helpful source of wisdom in trying to find a way forward. When I have met with Mr Peter Caruana during the past five to five-and-a-half years, I have found him to be an able Minister for whom I have a great deal of respect. Having said that, the Government were not reckless in discussing the issue of sovereignty. The Spanish Government were bound to want to discuss it, and to have entered discussions without considering the issue would frankly have been disingenuous.
However, the noble and learned Lord is right to say that it is only when we can get people to work together that we can move forward. That is why we tried so hard to engage the Government of Gibraltar in the talks. Dialogue is not a threat but an opportunity for the Gibraltarians as both architects and builders of their future. The invitation to the Chief Minister to attend the Brussels process meetings remains open.
Lord Howell of Guildford: My Lords, the Minister speaks of a better future for the Gibraltarians. Is she aware that immediately after the forthcoming referendum—which, as she suggests, will probably reject by 100 per cent the current deal made over their heads—the Gibraltarians will produce positive ideas about how to advance a good future for Gibraltar? Those will involve all three parties instead of trying to bypass one of them. Will she undertake seriously to consider those proposals and encourage the Government to back them to produce some success instead of the present failure?
Baroness Symons of Vernham Dean: My Lords, perhaps I may correct the noble Lord on one point. He does not often make verbal slips, but this point is important: there is no deal. A set of principles has been agreed. No proposals flow from those principles. That was the point that I stressed in my Answer. Should the Gibraltarians make proposals suitable for discussion, I am sure that my right honourable friend will consider them constructively and want to discuss them with Spain. However, the dialogue must include the Government of Spain, who must also be persuaded that any such proposals are realistic.
Lord Thomson of Monifieth: My Lords, while recognising that, as has been said, the Government of Spain are obliged to seek to win the hearts and minds of the people of Gibraltar, are not the people of Gibraltar equally obliged to recognise the realities of the 21st century and the advantages for the peoples of Gibraltar, Spain and the United Kingdom in negotiating shared sovereignty within the European Union?
Baroness Symons of Vernham Dean: My Lords, let me put it this way. I would stress to the people of

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Gibraltar that a settlement would offer them an enormous prize: greater freedom, greater prosperity, more jobs, a better quality of life and a settled longterm future. Those things have been denied to them for a long time; I hope that they will recognise that it is in their interests to pursue them.

Disabled People: Equal Opportunities
2.46 p.m.
Lord Addingtonasked Her Majesty's Government:
Whether they are satisfied with the current arrangements to ensure equal opportunities and civil rights for disabled people in policy-making and legislating throughout Whitehall.
Lord McIntosh of Haringey: My Lords, we have an excellent record in this area. We consult widely and take on board the views of disabled people. As major employers, government departments place the recruitment and retention of disabled people at the heart of equality and diversity policies. As a service provider, the Government aim to make services as accessible as possible. Disabled people and their representative organisations influence policy-making and prospective legislation. They meet Ministers and officials frequently to ensure that their interests are at the centre of policy development.
Lord Addington: My Lords, I thank the noble Lord for that Answer. It is undeniable that things are better than they were, but that could have been said at any time during the past 10 or 15 years. In this parliamentary year, 681 Questions have been tabled. Another Bill on disability matters will be before your Lordships' House today. Much time has been taken up by a Bill introduced by the noble Lord, Lord Ashley of Stoke. Does that not suggest that, whatever we are doing in government, we are wasting vast amounts of parliamentary time but are not dealing with all the needs of the disabled? From his position in the Whips' Office, would the Minister like to suggest how much the need for parliamentary time would be eased by introducing a Bill or series of Bills over a Parliament that dealt with half of those problems?
Lord McIntosh of Haringey: My Lords, I am severely tempted to say that parliamentary time would be saved if more Members spoke briefly and to the point—on any given volume of legislation. Some measures can be enacted by secondary legislation under the Disability Discrimination Act 1995. Indeed, we plan to do so, as we announced last week. But some matters require primary legislation—for example, imposing a duty on the public sector to promote equality of opportunity or applying duties to public bodies, not just to services. Such things can be done only by primary legislation.
Lord Ashley of Stoke: My Lords, does my noble friend agree that the problems of disability to which the noble Lord, Lord Addington, referred are so vast
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and complex, covering many departments, that the Minister for Disabled People should be a senior Minister dealing solely with disability? Does he further agree that the best way to ensure equal opportunities and civil rights for disabled people is for the Government to undertake to implement all the recommendations of the Disability Rights Task Force?
Lord McIntosh of Haringey: My Lords, the Minister for Disabled People, Maria Eagle, is extremely able and I do not think that her rank affects her work. The recommendations of the task force are widely respected in government and are taken seriously. For example, I note that the Disability Rights Commission welcomed the White Papers on equality and diversity published last week.
Lord Peston: My Lords, I hope my noble friend does not insist too often that we should be brief and to the point because that would make life very difficult for a number of us. Will my noble friend emphasise the particularly important point here; namely, the role of your Lordships' House, which, I should have thought, compared with any other legislative assemblies in the world, has a remarkably large number of people suffering from physical disabilities who make a point of contributing on this subject in a very constructive way?
Is my noble friend aware that many noble Lords do not share the view of the noble Lord, Lord Addington, of the failure to speak up for the disabled'? Quite the contrary—this House does a remarkable job in making absolutely certain that nothing to do with the disabled is ever ignored in any piece of legislation that I have listened to in all my time here.
Lord McIntosh of Haringey: My Lords, I share the experience of my noble friend Lord Peston. I agree with him that the quality of debate and decision-making on matters affecting disabled people is very high in this House. That is, at least in part, because of the presence in the House of large numbers of people with disabilities. As to what that means for the future of the composition of the House, I leave that for the moment to Mr Cunningham and his colleagues.
Lord Morris of Manchester: My Lords, can my noble friend say what special arrangements are made to ensure that severely disabled people are fully and meaningfully consulted on policy-making on equal opportunities and civil rights, bearing in mind their difficulties often in securing even equality of access to the consultative process?
Let us reflect, for example, on the daunting difficulties of young people who are blind and prelingually deaf. Who could be more crucially affected by policy-making outcomes than them?
Lord McIntosh of Haringey: My Lords, my noble friend's record in this area is evidence of the changes that the Government have made and the contribution that he has made to them. Our document Towards

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Inclusion, published in March last year, which was itself a response to the Disability Rights Task Force, is evidence of that; as is the existence of the Disability Rights Commission, the very active part it plays and the close co-operation it has with government.
Lord Addington: My Lords, the point I was trying to make is that many of us who speak on disabilities are getting fed up with doing so. I am calling for the Government to try to get this right by taking on some major legislation, so we do not have to keep coming back and asking these questions.
Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Addington, is an idealist. All these things move on at best in an asymptotic curve. One never gets to the position where one does not need any more legislation and everything has been got right. My experience of politics is not like that.

Indonesia
2.53 p.m.
Baroness Cox Baroness Cox asked Her Majesty's Government:
What is their response to recent developments in Indonesia.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Amos): My Lords, the horrific attack in Bali on 12th October has focused the eyes of the world on Indonesia. I witnessed myself the appalling devastation. These events underline the urgency of our work to promote political and democratic reforms in Indonesia.
In addition to assisting the immediate police investigation into the bombing we are examining what further counter-terrorism assistance we can offer. We welcome the positive steps taken so far by the Indonesian Government in enacting anti-terrorist legislation.
Baroness Cox: My Lords, I thank the noble Baroness for that sympathetic and encouraging reply. Is she aware that the inter-faith parliamentary delegation to Indonesia last July was very encouraged by the Indonesian Government's attempts to promote reconciliation in the Moluccas and in Sulawesi, areas which have been torn by communal conflict exacerbated by Islamist terrorists, with many hundreds killed and hundreds of thousands displaced?
Is the noble Baroness aware—there has been the horrific attack in Bali to which she has referred—that there have been further attacks in the Moluccas and Sulawesi? What measures are the Government taking to help Indonesia promote the reconciliation which is desperately wanted by local Muslim and Christian leaders, and in rooting out the reportedly thousands of
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Islamist terrorists still in the Moluccas and in Sulawesi and operating training camps on the islands of Banda and Misool?
Baroness Amos: My Lords, I am aware of the visit of the inter-faith parliamentary delegation. In fact, I have seen a copy of the group's report.
The United Kingdom's assistance to Indonesia is some £4 million from the Department for International Development to help to establish a UNDP conflict prevention and recovery unit in Jakarta. The purpose of the unit is to built up capacity in conflict reduction and recovery in provinces which have been torn apart by conflict.
We also welcome the disbandment of Laskar Jihad and we hope that that will assist in the reconciliation process.
Lord Avebury: My Lords, is the Minister aware that the anti-terrorism measures which she welcomed, which have just been introduced by the Indonesian Government, have been widely opposed by some traditional parties? Does she think that it would be possible for us to go beyond simply sending police to assist with the investigation in Bali, to collaborate with the Indonesian authorities in reconciling the need for strict anti-terrorism measures with the preservation of human rights? Could we make available to the Government of Indonesia our experience in this matter?
Baroness Amos: My Lords, the noble Lord, Lord Avebury, is quite right: there have been concerns expressed about those anti-terrorist measures. In fact I was asked about them myself. We have said that we are available to give assistance to the Indonesian authorities on this matter, should they so wish. I entirely agree with the noble Lord: it is possible to have strict and good anti-terrorism legislation while at the same time upholding international human rights standards.
Lord Clarke of Hampstead: My Lords, while one can show optimism about the Laskar Jihad and the recent statements of withdrawal, that will be believed by the people of Indonesia only when the attacks on minorities cease.
What representations have the Government made to the Indonesian Government about the detention of the Central Sulawesi Christian leader, Reverend Damanik, believed to be falsely accused of possessing illegal weapons?
Baroness Amos: My Lords, our embassy in Jakarta is following developments closely in that case. Although we cannot intervene on an individual case before the courts, we continue to stress to the Indonesian Government the importance of a fair and transparent judicial system.
Baroness Trumpington: My Lords, is the Minister aware that I recently met President Megawati? She was on her first official visit to Europe. I consider her to be

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a very brave lady who needs all the help she can get, particularly in the face of what the past government of that country was made up of.
Baroness Amos: My Lords, I was not aware that the noble Baroness had met President Megawati. I met her when I was in Indonesia. I also met the vice-president and the Minister for Foreign Affairs. It was clear from my meetings with all three that there is a determination in Indonesia to tackle the issue of terrorism.
Lord Howell of Guildford: My Lords, following the question of the noble Lord, Lord Clarke of Hampstead, has the Laskar Jihad been disbanded? Have we any evidence or information on that? Is the noble Baroness aware that we are very grateful that Jemaah Islamiyah has now been proscribed here? Would it help the forces fighting against extremism in Indonesia if we also took a closer interest in, monitored and perhaps proscribed, the Laskar Jihad or what has replaced it?
Baroness Amos: My Lords, my understanding is that Laskar Jihad has been disbanded and the movements of members of Laskar Jihad have been tracked. With respect to JI, it was put on the UN banned list over the weekend. The Home Secretary has signalled his intention to put in place the relevant legislative mechanisms with respect to the United Kingdom on JI.

International Terrorism
3 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether they intend to form, or join, a coalition with other nation states, designed to eradicate international terrorism.
Baroness Symons of Vernham Dean: My Lords, the United Kingdom is, and will remain, at the core of the long-term effort to eradicate international terrorism. We have disrupted Al'Qaeda in Afghanistan and denied it bases there. We are confronting states that condone or harbour terrorism. We are helping vulnerable countries to develop better counterterrorism capacity. We are committed to Afghan reconstruction. We have pushed through United Nations measures to block terrorist financing, and we are tackling the underlying causes of terrorism.
Lord Campbell of Croy: My Lords, I am grateful to the Minister for that Answer. Are the Government making every effort, with others, to discover who was responsible for the bombs in Bali and also, now, in Moscow, which killed and injured so many? Are they ready to take counter-action when such information becomes available?
Baroness Symons of Vernham Dean: My Lords, I assure the noble Lord that we are making every effort. My noble friend Lady Amos gave comprehensive answers just now on Bali. As for the hideous events in Moscow at the weekend, it is clear that that was action taken on behalf of those who want independence for Chechnya.
The international community must pull together to counter terrorism. We have done that through our activities at the United Nations and by helping states that find it hard to deal with terrorism—possibly because they are failing states—to build the capacity to counter it.
Lord Wright of Richmond: My Lords, President Bush appears to regard the threat to invade Iraq as part of the war against terrorism. I find the conflicting objectives coming out of Washington extremely confusing. Does the Minister agree with the view of Prime Minister Mahathir Mohamed of Malaysia that war against Iraq would lengthen the anti-terrorist campaign and create more willing recruits to the terrorists' ranks?
Baroness Symons of Vernham Dean: My Lords, I am aware that there are those who would agree forcefully with the noble Lord. At the invitation of the most reverend Primate the Archbishop of Canterbury, I went to an inter-faith discussion last week. At that meeting, many people—those from the Middle East, for example—said that war against Iraq would lead to much greater bloodshed in the Middle East. I am aware of such views.
At the same time, we have a responsibility to deal with the threat posed by Iraq. The fact that the threats and problems—terrorism, on the one hand, and Iraq, on the other—have arisen at the same time causes difficulties. However, in dealing with terrorism, we should not let Iraq believe that it can go on producing weapons of mass destruction without the rest of the world trying to stop it.
Lord Judd: My Lords, does my noble friend agree that in the battle against terrorism the one thing we must all avoid is over-simplification? Most of the problems in which terrorism breeds are complex. It was reassuring to hear what my noble friend said about the causes of terrorism—economic, social and political injustice—but we must always seek to win as many people into the political process as possible, rather than pushing them into the arms of extremists.
Does my noble friend further agree that it is vital that we ensure that the essential domestic measures taken to deal with terrorism in any country, including ours, do not play into the hands of the terrorists by unnecessarily undermining the very qualities and principles that we defend?
Baroness Symons of Vernham Dean: My Lords, I agree with the consummate common sense of my noble friend's question. Of course, the genesis of terrorism is complex; we had an excellent debate on Vie issue in

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your Lordships' House, instituted, as I recall, by the noble Lord, Lord Dahrendorf. In that debate, the complexities of the issue were well aired.
It is important that we do not push individuals in different countries towards terrorism. There may be various reasons behind individual acts of terrorism, and individuals may find that their terrorism is allowed to flourish against a background of particular perceived social, economic and political exclusions. It is important that we try to deal with such issues. That is why the Foreign and Commonwealth Office has been working hard on the issue of failed states. Some worthwhile work has been produced on that issue, which was addressed by my right honourable friend the Foreign Secretary a couple of weeks ago.
Lord Wallace of Saltaire: My Lords, I think that I understood from the Minister's reply to the noble Lord, Lord Wright of Richmond, that the question of sanctions against Iraq—in connection with the production of weapons of mass destruction—is not necessarily connected with the struggle against terrorism. Can the Minister confirm that? The struggle against terrorism is a wider issue, which requires the use of non-military means as least as much as the use of military means.
Baroness Symons of Vernham Dean: My Lords, in the mind of some, the two issues—terrorism and Iraq—are very much connected. We have discussed the issues in your Lordships' House, and there is, for example, no direct linkage that we can see between Al'Qaeda and Iraq, although it is true that some Al'Qaeda terrorists have sought sanctuary in Iraq.
The issues must, of themselves, be tackled. We must tackle them at the same time because they have arisen now, and our international responsibilities dictate that we should tackle them both.
Lord Howell of Guildford: My Lords, we agree with the Minister's comment that, in the mind of many, there are links between terrorism and Iraq. We should approach the matter accordingly.
The Minister mentioned Afghan reconstruction. Can she say whether the reports in the weekend's newspapers that, since the fall of the Taliban, the output of opium poppy products in Afghanistan has increased by 18 times are true? That is despite the fact that the British Government have provided £40 million in an attempt to persuade Afghan farmers to reduce such production. It does not sound as though the war on drugs is going well in Afghanistan.
Baroness Symons of Vernham Dean: My Lords, the issue of poppy products is complicated. Although, under the Taliban, a lot of planting was forbidden, the processing of poppy products into heroin went ahead. As a result, about 80 per cent of the heroin used in this country came from Afghanistan. That figure has decreased. It is a complicated issue, and, if I may, I
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shall write to the noble Lord with better particulars of poppy products, on one hand, and heroin production, on the other.

Business
3.7 p.m.
Lord Grocott: My Lords, at a convenient moment after 3.30 p.m., my noble and learned friend the Leader of the House will, with the leave of the House, repeat a Statement on the European Council.

Commonwealth Bill
Lord Blaker: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.
Moved, That the order of commitment be discharged.—(Lord Blaker.)
On Question, Motion agreed to.

Private Hire Vehicles (Carriage of Guide Dogs etc.) Bill
Lord Ashley of Stoke: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.
Moved, That the order of commitment be discharged.—(Lord Ashley of Stoke.)
On Question, Motion agreed to.

Enterprise Bill
3.9 p.m.
Read a third time.
Lord Kingslandmoved Amendment No. 1:
After Clause 16, insert the following new clause—
"TRIBUNAL: REGULATIONS
(1) The Lord Chancellor and the Secretary of State may together make regulations—

(a) empowering the courts to transfer to the Tribunal for determination by it any issue arising in any civil proceedings the determination of which depends on whether provisions of Chapter I or II of the 1998 Act or of Article 81 or 82 of the Treaty have been infringed where, in the opinion of the court making the transfer, the transfer would be conducive to the efficient conduct of the proceedings;

(b) making any rules that the Lord Chancellor and the Secretary of State may deem to be appropriate as ancillary to the power to make such transfers or to be

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reasonably required in connection therewith and in particular, but without prejudice to the generality of the foregoing, to the effect that—

(i) on making such a transfer, the court making the transfer may state facts that the Tribunal shall then treat as established for the purposes of determining the issues transferred to it;

(ii) after having made its determination, the Tribunal shall remit the matter to the court that made the transfer to it, declaring the determination of that issue by the Tribunal, which, subject to any clarification or amplification by the Tribunal of its determination that may be requested by the court that made the transfer, shall then be treated as a determination of that issue by that court;

(iii) enabling courts that have made, or have in contemplation the making of, such transfers and the Tribunal to co-operate together in any way that they deem to be appropriate to enable issues arising in the proceedings before them to be determined as efficiently as possible.

(2) The Lord Chancellor may appoint as president and as chairman of the Tribunal judges of any of the courts provided that, before appointing a judge of the Court of Session or sheriff courts under this subsection, the Lord Chancellor shall first consult the Lord President of the Court of Session.

(3) In this section references to "the courts" are to the High Court of Justice and the county courts in England and Wales and Northern Ireland and the Court of Session and the sheriff courts in Scotland.

(4) The power to make regulations under this section is exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament."

The noble Lord said: My Lords, this amendment was tabled in Committee and on Report, and your Lordships spent a great deal of time debating it on both occasions. I have tabled it at Third Reading to try to extract from the Minister a stronger commitment than he was prepared to give on Report about dealing with the mischief against which the amendment was directed.
In responding to the Minister on Report, I said:
"I am slightly reassured by his reference to the possibility of using a power that the noble Lord believes he already has to cope with what is likely to happen in the European Community in the next two or three years".—[Official Report, 15/10/02; col. 788.]
Will the Minister give your Lordships' House a more powerful commitment? Will he undertake to include in this Bill the power the noble Lord thinks he has, but is not sure, to make delegated legislation under Section 2 of the European Communities Act 1972 in the future? I beg to move.
Lord Borrie: My Lords, despite having missed the opening remarks made by the noble Lord, Lord Kingsland, perhaps I may speak briefly to Amendment No. 1. I apologise to the noble Lord. To coin one of his phrases, he must have been even more telegraphic than usual in his introduction.
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When the noble Lord, Lord Sainsbury, dealt with a similar amendment on Report on 15th October, he said:
"it is realistic and desirable for the courts themselves"—
he meant the ordinary courts—
"to build up a specialist body of law in this area".—[Official Report, 15/10/02; col. 786.]
He went on to say that he did not want to see the "fragmentation" that the amendment would cause. I am not sure that those are good arguments.
There are several dozen High Court judges in the Queen's Bench Division alone and it is difficult to imagine how they could all build up expertise on competition law. Even when in future more cases are passed back to the national courts by the European Court of Justice, each High Court judge will sit alone. I cannot see how there could be a sufficient number of cases involving, for example, mergers or Chapters 1 and 2 of the Competition Act 1998 for such expertise to be spread and developed across the High Court in general.
As we all know, in many fields expertise is a matter of degree. However, in the Bill the Competition Appeal Tribunal is bound to build up a considerable amount of expertise. It will have the benefit of economists and others as members of the tribunal, not merely as expert witnesses in particular cases. They will help determine what everyone agreed when we last debated the matter are mixed questions of law, economics and fact and involve determining whether, for example, there is a substantial lessening of competition in a merger case. It is unlikely that a High Court judge, who may deal with a competition law case only once in a blue moon, can match the Competition Appeal Tribunal on that score.
I do not see how the amendment would cause "fragmentation". At the Report stage, the noble Lord, Lord Sainsbury, said that there would be fragmentation because,
"The consideration of civil proceedings would be split between the courts and the CAT".—[Official Report, 15/10/02; col. 787.]
But it is not the amendment that does that. The Government, in Clause 17, have given the Competition Appeal Tribunal jurisdiction to hear damages cases for breach of competition law as an alternative to going to a judge of the High Court. The amendment enables that judge, conscious perhaps of his own lack of expertise in the field, to transfer the matter to the Competition Appeal Tribunal. Is not that a useful improvement to the Bill?
3.15 p.m.
Lord McIntosh of Haringey: My Lords, the amendment would give the Secretary of State and the Lord Chancellor a power to make regulations allowing the courts to transfer to the Competition Appeal Tribunal issues arising in civil proceedings that require a determination of whether there has been an infringement of competition law. The tribunal's finding on the competition matter would then be binding on the court.

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We certainly do not disagree with the thesis that the devolution of the enforcement of EU competition law to national competition authorities and national courts is likely to increase competition-law-based litigation in the United Kingdom. Exactly what sort of impact it will have is unknowable at this stage, but there will undoubtedly be some. If the increase in litigation materialises, as the Bill stands the court system would have to deal with it. The key question is whether it is realistic and desirable for the courts themselves to build up a specialist body of law in this particular area.
I respect the views of the noble Lords, Lord Kingsland and Lord Borrie, that this is a matter of judgment. However, the present view of the Government is that it is, as my noble friend Lord Sainsbury said, both realistic and desirable for the courts to build up this expertise.
It is already the case that national courts are empowered to take decisions on Article 81(1) and Article 82 and they can apply the equivalent provisions of the Competition Act 1998. It is true that in future Article 81(3) issues will be added to the range of issues that the courts will have to deal with. But judges, particularly those in the High Court where we would expect the vast majority of these cases to be heard, are expected to handle and, if necessary, become expert on a wide range of areas of law as and when these come their way. They often have to weigh technical evidence, including that relating to economic effects, presented by experts in a variety of cases. Indeed, the fact that these judges have a broader rather than a very specialised and narrow expertise may well lead to better justice overall provided they have the necessary basic familiarisation with competition law issues.
There are practical ways in which the expertise of judges in competition matters can be enhanced. The Judicial Studies Board is there to ensure appropriate training on new areas of law. There have, I believe, already been training sessions on competition law for the higher judiciary.
It will also be possible, if the nature and volume of litigation justifies it, for judges to be nominated as specialists in competition law. That does mean that they would be engaged exclusively on competition law, but they would be preferred judges when they are available. We need to see what volume of litigation emerges following modernisation, but this would seem to be an eminently practicable way of addressing any possible knowledge gaps in the justice system without fragmenting—I do not apologise for using the word—the judicial framework.
I want again to mention the point made on Report by my noble friend Lord Sainsbury. The courts will be assisted, where necessary, by the Office of Fair Trading and by the European Commission. Under the modernisation regulation, the Commission will be empowered to submit written observations to the national courts on issues relating to the application of Articles 81 and 82. When we implement modernisation, we intend to provide a similar power
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for the Office of Fair Trading. Both bodies will also, with the permission of the court in question, be able to submit oral observations as an expert witness. That is an important source of advice for the courts.
The alternative, which the amendment would provide, would be to give the Competition Appeal Tribunal a new role and additional powers and it would have a number of significant disadvantages. It would entail an undesirable fragmentation of the judicial system. The consideration of civil proceedings would be split between the courts and the CAT. The competition issue will often be only one among many in the context of complex litigation such as a contractual dispute.
Therefore, it is possible that referring the competition issue could bring about delay because the court would have to wait for the determination of the CAT. The pressure of other cases will mean that the CAT will not always be able to provide the streamlined service that we expect. We fear, too, that providing judges with a discretion to refer parts of cases to the CAT will introduce inconsistency in the system and uncertainty for parties about the path a case would take. It would all depend on the readiness of the individual judges to refer matters.
There are other important technical difficulties with the amendment. It would be highly unusual for a tribunal to make decisions on an issue arising in a case before a High Court or Court of Session judge that is then binding on that judge, not least because tribunal decisions are subject to judicial review, with the court exercising the powers of judicial review. It is important not to lose sight of the fact that the CAT is a tribunal, not a court, and set up primarily as an appellate body to deal with appeals by individuals against the decisions of the competition authorities.
I should like to add one final point made by my noble friend Lord Sainsbury on Report, but well worth repeating. Although we do not believe that it would be appropriate to take the power contemplated in the amendment, if such a provision or something like it does prove necessary when we come to examine the implementation of the proposed EU modernisation regulation, we believe that it would be possible to use the powers under Section 2 of the European Communities Act, combined with those in Clause 204 of the Bill, to secure the goals of the amendment. In those circumstances, we believe that we could use those powers to give the CAT the jurisdiction it would need, and the courts the powers needed to enable matters or issues to be transferred for the CAT to determine, or for the CAT to assist the courts in appropriate cases. We do not want to send a signal that this is the direction in which we would have to go by taking a specific power, but an alternative power exists if it proves appropriate to use it to enable us to implement our Community obligations. In a practical

17
sense, therefore, the amendment is unnecessary. That does not mean, however, that I can give the noble Lord, Lord Kingsland, the undertaking that he seeks.
Lord Kingsland: My Lords, I am grateful to the Minister for his full response and to the noble Lord, Lord Borrie, for his apposite intervention on this topic.
Your Lordships' House will agree that legislation made under Section 2 of the European Communities Act 1972 is a much less desirable way of implementing these proposals than legislation under a statute. After all, legislation made under Section 2 of the 1972 Act would be delegated legislation and the House would have no opportunity whatever to amend it. Your Lordships would have to take it or leave it.
I do not understand why the Minister is so opposed to this proposal. After all, the amendment states that the Lord Chancellor and the Secretary of State "may" together make regulations. It is not mandatory, it is permissive; they may or they may not make regulations. So the discretion of the Minister and the Government is in no way constrained by what is proposed.
The Minister raised a number of matters of substance. I have dealt with most of them, both at Committee stage and at Report stage, but perhaps I may prevail on your Lordships' patience a little longer to deal with one or two of the points made by the Minister at this reading.
The first concerns the power of the OFT and the European Commission to make submissions to High Court judges. The Minister is right about that, but what good is it if the High Court judges do not have the experience to assess the merits of submissions put to them by the OFT and the Commission? Without the kind of expertise that judges in the Competition Appeal Tribunal will have, it will be all too easy for the OFT and the European Commission, on occasions to pull the wool over the eyes of the judiciary.
'The Minister referred to delay, but if he looks back at the history of the development of litigation in the High Court he will see that, by a process of evolution, specialisation has proved necessary in a number of areas: most notably in the commercial court, in the administrative court and in the Employment Appeal Tribunal.
Here we are proposing to short-cut that process by providing a ready-made specialised court to deal with the inevitable specialisation that will develop as a result of the rapid advance of competition law. Contrary to the Minister's assertion of slowing things down, having this facility to make references to the Competition Appeal Tribunal will speed things up.
The amendment has the great authority of Sir Jeremy Lever behind it. For that reason as well as the others, I should like to test the opinion of the House.
3.25 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 92; Not-Contents, 86.

Division No.1

CONTENTS

Aberdare,L.

Lawson of Blaby, L.

Addington, L.

Luke, L.

Anelay of St Johns, B.

Lyell, L.

Astor of Hever, L.

McColl of Dulwich,L.

Attlee,E.

McNally, L.

Avebury, L.

Marlesford, L.

Barker, B.

Miller of Hendon, B.

Beaumont of Whitley, L.

Monro of Langholm, L.

Biffen, L.

Monson, L.

Blatch, B.

Mowbray and Stourton, L.

Bledisloe, V.

Moynihan, L

Bradshaw, L.

Murton of Lindisfarne, L.

Brittan of Spennithrorne, L.

Noakes, B.

Brougham and Vaux, L.

O' Cathain, B.

Buscombe, B.

Oakeshott of Seagrove Bay, L.

Byford, B.

Oppenheim-Barnes, B.

Campbell of Alloway, L.

Peyton of Yeovil, L.

Carlisle of Bucklow, L.

Phillips of Sudbury, L.

Carnegy of Lour, B.

Pilkington of Oxenford, L.

Clement-Jones, L.

Platt of Writtle, B.

Cope of Berkeley, L. [Teller]

Rawlings, L.

Cox, B.

Razzall, L.

Cumberlege, B.

Redesdale, L.

Dahrendorf, L.

Rees-Mogg, L.

Dholakia, L.

Rennard, L.

Dixon-Smith, L.

Renton, L.

Elles, B.

Roper, L.

Elliott of Morpeth, L.

Rotherwick, L.

Elton, L.

Sanberg, L.

Ezra, L.

Scott of Needham market, B.

Fearn, L.

Seccombe, B.[Teller]

Fowler, L.

Sharples, B.

Garel-Jones, L.

Soulsby of Swaffham Prior, L.

Glentoran, L.

Strathclyde, L.

Goodhart, L.

Swinfen, L.

Hayhoe, L.

Thomas of Walliswood, B.

Henley, L.

Thomas of Monifieth,L.

Hooper, B.

Trefgarne, L.

Howe, E.

Trumpington, B.

Howe of Aberavon, L.

Wallace of Saltaire, L.

Howell of Guildford, L.

Walmsley, B.

Hunt of Wirral, L.

Watson of Richmond, L.

Jenkin of Roding, L.

Wigoder, L.

Jopling, L.

Wilcox, L.

Kingsland, L.

Williams of Crosby, B.

Lane of Horsell, L.

Williamson of Horton, L.

NOT-CONTENTS

Acton, L.

Cobbold, L.

Ahmed, L.

Corbett of Castle Vale, L.

Amos, B.

Craig of Radley, L.

Andrews, B.

Crawley, B.

Ashley of Stoke, L.

David, B.

Ashton of Upholland, B.

Davies of Oldham, L.

Bassam of Brighton, B.

Dean of Thornton-le-Fylde, B.

Bernstein of Craigweil, L.

Dormand of Easington, L.

Blease, L.

Dubs, L.

Boston of Faversham, L.

Elder, L.

Brennan, L.

Evans of Temple Guiting, L.

Brett, L.

Farrington of Ribbleton, B.

Brooke of Alverthorpe, L.

Faulkner of Worcester, L.

Brookman, L.

Filkin, L.

Carter, L.

Fyfe of Fairfield, L.

Christopher, L.

Gavron, L.

Clarke of Hampstead, L.

Goldsmith, L.

Clinton-Davis, L.

Goudie, B.

19

Gould of Potternewton, B.

Mitchell, L.

Graham of Edmonton, L.

L. Morgan, L.

Grenfell, L.

Morris of Manchester, L.

Grocott, L. [Teller]

Pendry, L.

Haskel, L.

Pitkeathley, B.

Hilton of Eggardon, B.

Rendell of Babergh, B.

Howells of St. Davids, B.

Richard, L.

Hughes of Woodside, L.

Rooker, L.

Irvine of Lairg, L. (Lord Chancellor)

Sewel, L.

Sheldon, L.

Islwyn, L.

Simon, L.

Janner of Braunstone, L.

Smith of Gilmorehill, B.

Jay of Paddington, B.

Stone of Blackheath, L.

Jeger, B.

Strabolgi, L.

Joffe, L.

Strange, B.

Jordan, L.

Symons of Vernham Dean, B.

King of West Bromwich, L.

Taylor of Blackburn, L.

Lipsey, L.

Thornton, L.

Macdonald of Tradeston, L.

Turnberg, L.

McIntosh of Haringey, L. [Teller]

Turner of Camden, B.

Warnock, B.

MacKenzie of Culkein, L.

Warwick of Undercliffe, B.

Mason of Barnsley, L.

Weatherill, L.

Massey of Darwen, B.

Whitaker, B.

Merlyn-Rees, L.

Whitty, L.

Milner of Leeds, L.

Williams of Mostyn, L. (Lord privy Seal)

Resolved in the affirmative, and amendment agreed to accordingly.

European Council, Brussels
3.35 p.m.
The Lord Privy Seal (Lord Williams of Mostyn): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Prime Minister on the European Council in Brussels on 24th and 25th October. The Statement is as follows:
"This European Council set the framework for the final stage of the enlargement negotiations. We are on course to finish those negotiations in December, sign an accession treaty with the candidate countries next spring, and welcome them into the European Union at the beginning of 2004.
"Enlargement has been a goal of successive British governments. It was an historic obligation to offer membership to those nations which won their freedom after the collapse of the Soviet Union. Their membership will establish a single market of 500 million people. We hope that these 10 countries will be joined by Bulgaria and Romania no later than 2007.
"The European Council also welcomed the reforms undertaken by the Turkish Government. The Council agreed that Turkish progress had brought forward the opening of accession negotiations. At the Copenhagen European Council in December we shall decide on the next stage of Turkey's candidature. For our part, the British Government look forward to Turkey's membership of the European Union in accordance with the conditions which all candidates have to meet.
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"The last stage of any negotiation is always the most difficult; and the last stage of this negotiation between the existing members of the European Union and the candidate countries is about money: what they pay into and receive from the EU budget, including structural funds and the common agricultural policy.
"The European Union will be generous to the new member states. It is right that we should be, given our own interest in their stability and prosperity. But at the same time we do not want to jeopardise the progress that has been made in reducing agriculture's share of the EU budget from over 60 per cent 20 years ago to 45 per cent now. The reforms agreed in Berlin in 1999 are worth 7 ½ billion euros to EU consumers and taxpayers. We want to extend that reform in two ways. Firstly, the Commission has brought forward proposals for the mid-term review of agriculture under paragraph 22 of the Berlin Conclusions of 1999 which, if agreed, would de-link agricultural subsidies from production for the first time in the history of the European Union. Secondly, we want to limit the growth of direct payments to farmers once the candidate countries have become full members.
"Before the summit, the main argument was whether enlargement could be blocked by the disagreement between France and Germany over limiting agricultural spending. Fortunately, before the summit, they reached agreement that future agricultural spending should be capped up to 2013 at the levels of 2006 envisaged by the Commission. In effect, because of allowances made for an inflation rate of only 1 per cent, this will mean a real terms reduction over and above the original Commission proposals. This agreement was welcomed by all.
"But there then arose the question of whether, in return for that, reform of the CAP prior to 2006 when the current financial perspective runs out would be postponed. This then dominated the latter stages of the summit.
"In our view, such a blanket opposition to reform would have been wholly unacceptable. It would mean effectively destroying the current reform proposals of the European Commission. It would seriously inhibit the offer the EU can make in the WTO Doha trade talks. Those talks are vital both for free trade and for the developing countries of the world. Those poor countries need agricultural reform in Europe and need it badly.
"Eventually, we agreed specifically that the limit on agricultural spending would be without prejudice either to the European Commission's mid-term review of agriculture based on paragraph 22 of the Berlin Conclusions, or to the Doha trade round. These issues can now be taken forward by the Agriculture Council, which, of course, operates by QMV. Despite the difficulty in negotiating this, it would have been quite wrong for the possibility of CAP reform to have been hindered in this way. As a

21
result of the summit outcome, enlargement remains on track and fundamental CAP reform remains on the agenda.
"During the European Council I also discussed with colleagues the issue of Iraq. We are all agreed on the need to ensure that Saddam has no chemical, biologic al or nuclear weapons programmes. We are working hard for agreement on the terms of a tough new Security Council resolution. The key point has to be that the weapons inspectors should return, free to do their jobs properly, without any of the restraints wrongly imposed before. Should there then be further a breach by Iraq, then I have no doubt action must follow.
"We also discussed the development of European defence. We agreed that Macedonia would be a good place to start and that we should therefore work urgently to complete agreement between the EU and NATO. In addition, we had a presentation from President Giscard d'Estaing on the Convention on the Future of Europe. In his speech today I am pleased to see both that the president makes it clear that Europe should co-operate as a union of European states, not a federal superstate, and I believe his proposals on subsidiarity, the role of national parliaments and on Council reform will be welcomed, at least here. We are well placed in this vital debate.
"Before concluding, I should like to update the House on the hostage crisis in Moscow that ended tragically with the loss of so many lives. At 9 p.m. local time on Wednesday, around 50 armed Chechens took several hundred hostages in a theatre in south-east Moscow. Among the hostages were three British nationals: Peter and Sidica Low and their son Richard. Peter Low and a few others were released on Thursday morning. I spoke to President Putin from Brussels on Friday. Britain sent a team of counter-terrorist experts to help. President Putin told me he had no doubt the terrorists were prepared to kill all the hostages, that they were heavily armed with explosives and that whatever decision he took was going to be immensely difficult. After the siege had ended at 5.30 a.m. local time on Saturday, I rang him again to welcome the ending of the siege. I asked him and he was able to tell me they had ensured the safe release of Sidica and Richard Low.
"It is yet too early to know the full facts of what happened. But I ask people to understand that when it was clear the terrorists were starting to execute the hostages, the Russian authorities had to act. I know how hard it will have been to make the right decisions. But there are no easy, no risk-free, no safe solutions to such a situation. And I hope people will understand the enormity of the dilemma facing President Putin as he weighed what to do, in both trying to end the siege with minimum loss of life and recognising the dangers of doing anything that conceded to this latest outrage of terrorism from Chechnya.
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"While it is clear that hundreds survived, many did not. The loss of each innocent life will be mourned not just in Russia but throughout the world, and we send our deep condolences to the Russian people at this time".
"The attacks in Bali, the occupation of the Moscow theatre, the other terrorist attacks around the world, and the murder of the American diplomat in Jordan this morning are all brutal and horrifying reminders of this new form of terrorist extremism. A deadly mixture of religious and political fanaticism is being pursued by those who have no compunction about taking human lives, no matter how innocent, and little about losing their own. The only answer is both to defeat them by security, intelligence and policing but also to take head on, especially within the Muslim world, their perversion of Islam in the cause of extremism. I remain of the view that it is not just the methods of extremism but their ideas that must be countered.
"Thanks to the outcome of the summit, the way is clear to finish the enlargement negotiations by December. In the worst days of the Cold War it would have seemed incredible that countries who were under Soviet rule for nearly half a century could find their freedom. But they did. It is this opportunity and challenge of enlargement that has helped them to catch up half a century in the past decade. I hope the House will welcome this important step towards a Europe united, democratic and free".
3.44 p.m.
Lord Strathclyde: My Lords, I begin, customarily, in thanking the noble and learned Lord for repeating the Prime Minister's Statement. We on this side of the House agree wholeheartedly with the sentiments that he expressed about the horrific terrorist outrage in Moscow and its dreadful consequences. It is still too early to judge exactly what happened, but it demonstrates yet again that terrorism knows no boundaries, physical or moral.
I also welcome what the Statement says about the continued progress towards the accession of new member states. That is important for the future stability of Europe, and we welcome the support offered for the decommissioning of dangerous nuclear reactors as outlined in the Presidency Conclusions. The Council agreed more than 200 million euros of support to Cyprus in 2004–06. In the words of the Presidency Conclusions, it is designed to enable the northern part of the island to catch up. Is that spending contingent on a political settlement in Cyprus? What do the Government think should happen if negotiations on the future of Cyprus are unsuccessful?
We also welcome the opening of the door to Romania and Bulgaria, and the more positive attitude towards Turkey. Many find the Commission's sometimes dismissive attitude towards that proud and loyal NATO ally deeply counter-productive. Will the Government urge on our EU partners that positive engagement with Turkey is vital for the future stability

23
and security of the Balkans and the Middle East? The Statement mentions Mr Giscard d'Estaing, who gave a progress report on the Convention on the Future of Europe. The Statement does not say what, if any, reservations the Prime Minister expressed about any of the ideas floated by Mr Giscard d'Estaing.
I turn now to perhaps one of the more controversial aspects of the summit: the reform of the CAP. The noble Baroness, Lady Williams of Crosby, and I have different perspectives on some aspects of European development, but we have both expressed scepticism about the Prime Minister's sometimes complacent statements that Europe is coming our way, or that success for his views is inevitable. With the CAP confirmed in place for more than a decade to come, and with resources rising year by year, will he now accept that such claims ring utterly hollow? Whatever we think of the deal between Mr Chirac and Mr Schröder, does not the fact that it happened before the summit even began show how completely the Prime Minister has been marginalised? Can he confirm No. 10's astonishing admission that he did not even know that France and Germany were going to broker this deal? What talks did the Prime Minister have with Mr Chirac and Mr Schröder in the weeks before the summit? A briefing given by a British spokesman asserted that Mr Schröder did not understand the details of the CAP agreement. Is that really our official assessment of the German chancellor? Why has No. 10 been talking up in its briefing the Prime Minister's rudeness to Mr Chirac? The Prime Minister lost the substance of the argument in Brussels. Spinning insults at other EU leaders is no way to recover from his isolation; it can only add to the long-term diplomatic damage.
How much money on the basis of the Brussels agreement will British taxpayers be contributing to the CAP until 2013? Does the additional one per cent per annum spending limit apply to rural development subsidies as well as farm subsidies? Will he accept that if he cannot give that assurance, the bloated budget of the CAP could soar far into the future? How will this be paid for, and what other EU budgets will be cut? Where does this leave previous statements by the Government that major reform of the CAP would have been agreed by 2004? Was this weekend's summit not a staggering setback for our key diplomatic objectives?
The noble and learned Lord will agree that the rebate secured in 1984 by my noble friend Lady Thatcher was a major achievement, and we welcome the Prime Minister's past defence of that. But can he confirm that Mr Chirac has now linked long-term reform of the CAP to a new look at the UK rebate? What is our assessment of support in Europe for that position? How resolute will the Prime Minister be in protecting British interests on this vital matter, which has been dealt with so successfully by successive British governments over the past 18 years?
Although I recognise that the Statement says that there was some discussion between colleagues on the issue of Iraq, it is equally plain that there was no
24
mention of Iraq in the Presidency Conclusions. EU failure to publish a conclusion on Iraq underlines the crucial importance of the US/UK relationship within the NATO alliance. Is it therefore not depressing that, as the Presidency Conclusions show, so much time was spent at the summit debating the footling fine-print of a European army when a clear and present danger is at our gates?
Was there discussion of the statement by President Prodi that the terms of the EU growth and stability pact were "stupid"? If not, why not? How can we be confident about the future framework for decisions on the euro if the president of the Commission and a number of heads of government are daily throwing the growth and stability pact into doubt? Is it not incredible that this was not discussed in the summit itself?
This was a summit that had nothing to say about CAP reform, nothing about Iraq or the war on terrorism, nothing about the growth and stability pact, nothing about the continuing slowdown in economic growth in Europe and nothing about free trade. It was a summit whose central decisions were decided by the big two before the other leaders even met. It was a summit where, I am sorry to say, the Prime Minister was sidelined and his arguments ignored. There are some very great questions before us in Europe of which enlargement, which we all so strongly support, is but one. Whatever our standpoint, should we not be disturbed that our Prime Minister resorts to carping on the fringes and seems to have no influence on the core?
3.51 p.m.
Baroness Williams of Crosby: My Lords, as one who sometimes disagrees with the Leader of the Opposition on matters concerning Europe, I should begin by agreeing with him in his thanks to the Leader of the House for the Statement. I also agree that, in terms of the United Kingdom Government's achievement, by any standard, this was a fairly mixed summit. I say that with some sorrow because, in many ways, the Prime Minister has been very effective in Europe and represented British interests very well. It would be difficult to conclude from the Statement that that is true of this summit.
There is, however, one great development to applaud—indeed, it would be a great historic mistake for us not to underline the significance of enlargement. Enlargement has been a long, slow, detailed and often difficult process. It has taken a very long time. At long last, however, we can say that it is certain—or as certain as anything can be—that, in 2004, some of the states attempting to join the European Union will do so, and that, by 2007, almost all the applicants from central and eastern Europe will become full members. It is perhaps worth saying in our cynical age that that is a very remarkable achievement indeed. For the first time in history—or at least for the first time since the Habsburg empire, which really was quite a long time ago—central and eastern Europe will be brought

25
together with western Europe. So, on that, let us congratulate not only the Prime Minister but the other 15 members of the European Union.
At this point, congratulations turn into great concern about the common agricultural policy, about which the Leader of the Opposition has also expressed his concern. The CAP disfigures the European Union in two ways. First, it has done extraordinarily little to help the smaller family farmers upon whom the health of the rural sector depends. A great deal of the money in the CAP has gone to very large farmers who have done very well from the CAP. Around those large farms, however, villages have disappeared and large tracts of countryside are no longer characterised by prosperity. All too often, even in our own case, there is prosperity for some in the countryside while small farmers go bankrupt. The argument for supporting the whole spectrum of rural development—agriculture, tourism and local industry—is far stronger than the argument for pouring money into guaranteed prices which benefit above all those who are already fairly well-off.
The second element of the CAP which is profoundly disturbing to noble Lords on all sides of the House is the fact that we are essentially backing away from what was promised to the third world at Doha. We have often been told—most recently in a debate in this House—that the single most important step we can take to help the now desperate third world is to remove the controls and protection extended to agriculture and associated industries in the EU countries. There is no longer any case whatever for the type of protection offered in the European Union. Moreover, there is a great temptation for the United States to follow those same procedures, and to point to the EU and say that we are not serious about helping the third world either.
I believe that we are serious about helping the third world and that the Government have tried very hard to do so. However, we have to be frank about this. The greatest single action we could take to help would be to undertake major reform of the CAP. At the moment, however, that seems to be off the agenda. Nothing in the Statement—with great respect to the Leader of the House—did more than imply the smallest moves toward CAP reform. A real-terms increase of 1 per cent rather than perhaps 2 per cent over the next 10 years is hardly a major reform.
Can the Leader of the House tell us anything at all about the Government's attitude to the Fischler reforms which now seem the sole remaining hope for sorting out this truly absurd policy? The Fischler reforms imply a major shift from supporting prices to supporting rural development in the widest sense. If the noble and learned Lord can tell us that the Government are committed to doing everything they can to bring the Fischler reforms into real operation, it would go a little way in mitigating the disappointment that both the Leader of the Opposition and I feel about the relative failure in this sphere.
I was pleased to hear about the further development on the possible accession of Turkey. I believe that Turkey still has some way to go, but that we would be
26
less than generous if we did not recognise that the Turkish Government have made some attempts to deal with the worries about human rights, prison policy, torture in prisons and other matters that disfigure that great country. I think that we all wish to see further reforms and advances. It is excellent that Turkey is advancing along these lines.
I shall touch briefly on two other issues, the first of which is Chechnya. Perhaps the Leader of the House can tell us the final assessment on the number of casualties. I am sure that all noble Lords will wish to extend their deepest sympathy to the Russian nationals and the British and other foreign nationals who have suffered so grievously as a result of this terrorist attack. My only comment at this point is that it would be immensely helpful if we were to do whatever we can to keep some kind of political channel open with Chechnya. The war in Chechnya between the Russians and the Chechens has been particularly brutal and bitter. It has now lasted many years. Surely we in this country know better than most that political processes are essential and that trying to crush a national revolt of this kind results only in revenge after revenge leading nowhere.
The final point which I wish to raise with the Leader of the House is a very important question on Iraq. Whatever our views on Iraq, all of us agree that the best possible answer lies in getting the inspect ors back, ensuring that inspections are effective, and gaining access to all the possible development sites for weapons of mass destruction. However, can he assure us that the decision on whether the terms of the resolution currently being debated at the United Nations in New York have been complied with will be based on the recommendations of the inspectors themselves, led by Hans Blix? I hope that everyone appreciates how serious it would be if any Security Council member—be it the United States, Russia, France or the United Kingdom—took upon itself the decision on compliance. I hope that the noble and learned Lord can assure us that that will be an independent judgment made by those who are accountable to the United Nations and not by those who are accountable to any member state, however important and powerful that state may be.
Many of us on these Benches are profoundly concerned about the possibility of moving our focus away from the need to fight terrorism. We are not yet completely convinced that the best way of dealing with terrorism is to concentrate so totally on the subject of Iraq.
4 p.m.
Lord Williams of Mostyn: My Lords, I am grateful, as always, to both the noble Baroness, Lady Williams, and to the noble Lord, Lord Strathclyde, for their responses. However, the noble Lord, Lord Strathclyde, rather overplayed his hand. It is always dangerous to underestimate the determination of a quiet man. If one looks at the matter objectively, as I always do on these occasions, the Prime Minister had an enormous series of successes. It seemed from the entirely synthetic drama that was puffed up for the

27
weekend newspapers as if the Franco-German alliance had reached conclusions and enforced them on the conference. However, nothing could be further from the truth, as even a second reading of the Statement indicates. I shall give some examples.
For years the Prime Minister has stressed the importance of the 10 candidate countries moving forward to full membership. He has succeeded in that. The overwhelming majority of those countries—Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia—as the Prime Minister said, have laboured under tyranny for 50 years. Within a short period of time they will be welcome to join us—if we have the largeness of imagination and heart within the European Union—to contribute to a democratic community.
The Prime Minister has always stressed the importance of Turkey. That has been recognised. The noble Lord, Lord Strathclyde, and the noble Baroness, Lady Williams, referred to Turkey. I endorse what the noble Baroness said; namely, that Turkey has taken significant steps. I refer to the abolition of capital punishment, which is not, apparently, universal among all those countries with which we deal; the treatment of the Kurds in terms of education; and the other aspects of which the noble Baroness spoke. Those are significant steps and they should never be undervalued.
The noble Lord, Lord Strathclyde, asked whether the moneys to Cyprus were specifically contingent. I do not believe that they were. Let us see what the Prime Minister said in the Statement. The question of CAP reform was never on the agenda; the presidency made that perfectly plain. The Prime Minister has said that as a matter of political judgment it is irresponsible and foolish to confuse enlargement, which was the agenda of the meeting, with CAP reform. I take up the observations of the noble Lord, Lord Strathclyde, and those of the noble Baroness. It was made absolutely plain at Brussels that there is no question of our giving up on further CAP reform before 2006 in return for EU agreement to put a ceiling on expenditure from 2006 onwards. The Brussels conclusions make plain that both the CAP mid-term review and the commitments under the Doha development round remain unaffected. I am happy to reaffirm that and perhaps to give a degree of comfort to the noble Baroness.
It was said in the newspapers—so it must be true—that Mr Blair was rude to M Chirac. I dare say that he was robust. Whether or not he was robust, he certainly maintained, sustained and delivered the United Kingdom's position. Speaking for my own part, having known the Prime Minister for a little while, I have never seen him be rude on any occasion, not even to colleagues, despite the provocation which the Chief Whip sometimes offers him. The question of the rebate stands intact. It was not open for discussion, as Jack Straw and the Prime Minister said. Our position on the rebate has not been touched in the slightest. Indeed, the 1999 Berlin position remains.
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There is a mention in the Prime Minister's Statement of Iraq. The noble Lord, Lord Strathclyde, and the noble Baroness, Lady Williams, referred to it. The noble Baroness, Lady Williams, asked about discussions on the proposed resolution at the Security Council. Those terms are still being debated, therefore, I cannot give any particular assurance on that, although I remind your Lordships that Secretary of State Powell said that he was hopeful that we would move to a resolution in the earlier part of this week. I simply transmit what Secretary of State Powell said. There have been delicate and long drawn out discussions.
As regards the casualties the noble Baroness mentioned, my most up-to-date information—I do not pretend that it is necessarily perfect—is that of the 117 casualties two were shot and 115 died as a result of gas. I underline that that is my present information. I stress that in the nature of things those cannot be more than tentative figures. I am trying to help the House as much as I can.
We hope for agreement on a resolution on Iraq. It is critically important that that situation should not be allowed to drift in limbo. I reaffirm what the Foreign Secretary and the Prime Minister have said so often; that is, that it is the policy of Her Majesty's Government to act only in accordance with and in conformity with international law.
The noble Lord asked specific questions about Doha and the WTO which I have already dealt with. The purpose of the Prime Minister's attendance was to protect United Kingdom interests in the wider context of the European Union. We believe—firmly I know that not everyone on all sides of the House believes this—that they are coincident, or are capable of being, and that they are not alternatives. If the Prime Minister's dream of the 10 candidate countries becoming full members by the beginning of 2004 is achieved, it will constitute a significant achievement and advance.
4.6 p.m.
Lord Biffen: My Lords, the noble and learned Lord the Lord Privy Seal has given a measured account of the recent discussions and inevitably has concentrated on the reform of the common agricultural policy. But, as with St Augustine thinking of perfection, it is always to be deferred. It seems to me that reform of the common agricultural policy is always being deferred. But, surely, it is unwise to suggest that there is not a link between reform of the common agricultural policy and the enlargement of the European Union. Is it not a fact that the aspirant countries for enlargement have living standards roughly between one-third and one-half of those of the existing European Union countries? Is it not also true that their economies are substantially dependent on agriculture in terms of economic considerations, but perhaps even more in

29
terms of social considerations? Therefore, surely it must be wise to think in terms of CAP reform and prospective enlargement of the European Union.
Lord Williams of Mostyn: My Lords, I hope that I did not imply to your Lordships that there was no link. I was careful to say that CAP reform was not on the agenda on this occasion, and that, indeed, the presidency had made that plain. Inevitably, as the noble Lord, Lord Biffen, said, there is a connection but it is wrong I o confuse the two issues and think that they are the same. However, they are plainly linked.
All governments of whatever complexion—certainly in the 10 years that I have been here—have constantly struggled with that matter but the runaway, out of control CAP budget is now capable of being controlled. That is an important step. Of course, economies such as that of Poland are significantly dependent on agriculture in a way that ours is not, and a much greater proportion of its citizens are dependent on agriculture in a way that ours are not. I reaffirmed Her Majesty's Government's commitment to the third world, as the Prime Minster mentioned in the Statement, and which the Doha round will continue. We cannot simply continue with the CAP; I do not think that any serious political thinker proposes that we should. Equally, we cannot abandon it overnight.
Lord Williamson of Horton: My Lords, does the noble and learned Lord accept that it is welcome that the mid-term review of the substance of the agricultural policy, including a greater emphasis on rural development, remains to be negotiated because comment before the summit implied that that might not be the case? Of course, budget limits, which were discussed at the summit, have a role, but we have a lot of experience of substantial underspending below the budget limits. Does the noble and learned Lord agree that the right policy for us is to continue as we were before towards the substance of change on the basis of the mid-term review in, if I may say so, a bulldog style?
Lord Williams of Mostyn: My Lords, the noble Lord, Lord Williamson, is absolutely right. The Prime Minister tried to stress that point in his Statement and I have tried to ventilate it a little more in answering questions. We want to shift spending from the old-style CAP—which was far too rigid and inflexible—to rural development.
Lord Grenfell: My Lords, I thank my noble and learned friend for the Statement. Like the noble Lord, Lord Williamson, I am pleased that the limit on agriculture spending will be without prejudice to the Commission's mid-term review of agriculture or to the Doha trade round and that the fundamental CAP reform that is obviously vital is still on the agenda.
This is not a popular subject on any side of the House, but I should like to ask about President Chirac's attitude towards the British rebate. My noble and learned friend may be aware that President Chirac is not likely to give up on this one over the years to come. My noble and learned friend may recall that in
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March 1999, in a unanimous report, the European Union Select Committee recognised that, as a major net contributor, the United Kingdom had a problem, but we considered that the rebate would not necessarily be the best way of solving it for much longer. We proposed that a realistic negotiating result for the United Kingdom would be an agreement to forgo the rebate on condition that—and only when—the loss could be made up permanently through the savings of a reformed CAP and stabilised overall expenditure.
When the time comes in 2006, when I am sure that the rebate will be back on the table, does my noble and learned friend agree that we might be able to turn the tables on President Chirac, assuming he is still there, by calling his bluff and saying that if he is prepared to reform the CAP properly, we will be prepared to put our rebate on the table, provided we are assured that the CAP savings will compensate us for forgoing or cutting our rebate?
Lord Williams of Mostyn: My Lords, I am grateful to my noble friend Lord Grenfell for that contribution, which is worth bearing in mind. The Prime Minister's adamant stance was that the abatement was not up for discussion or negotiation. That stance has succeeded. Without the abatement, the United Kingdom would have been paying 12 times more than the French, on an absolute or a per capita basis. We are a very generous contributor—more generous than France. France has benefited in a way that we have not. The whole structure of the CAP needs reform in the long term. As I said earlier, all governments have said in the past that they wish for reform. Undoubtedly, the timetable to which the noble Lord referred will be an important stimulus to reform, which must come one way or another. The policy is wholly ruinous in two ways. First, it does not bring about desired consequences. Secondly, it is an unjustifiable economic drain.
Lord Renton: My Lords, unless the CAP is reformed, how will those of the 10 new applicants whose economy depends mainly on agriculture know before they join how their economy will fare? Will they not be entering into a state of uncertainty?
Lord Williams of Mostyn: My Lords, in the nature of things, all political advance involves some uncertainty. That is what political judgment is about, as I am sure the noble Lord agrees—particularly following the 1997 election. There are some key messages on the financing of enlargement. There will be a significant amount of new money. That will be within the ceilings already agreed at Berlin. We will seek to ensure that no candidate is worse off after enlargement, but they cannot continue to expect to be subsidised by others indefinitely without change.
Lord Dahrendorf: My Lords, like others who have spoken, I particularly appreciated the brief but clear reference in the Statement to Turkey and its future. The key fact for me is not just that there have been recent changes, to which my noble friend Lady

31
Williams referred, but that Turkey is an Islamic country with a tradition of secular law. That is the key reason why we should decide that Turkey belongs in the community that we are forming in Europe. While I appreciate the Government's position, what reason is there to believe that they can prevail come December?
Lord Williams of Mostyn: My Lords, I am grateful, as always, to the noble Lord, Lord Dahrendorf. Her Majesty's Government's position has always been generally supportive of Turkish accession to the European Union. All such conclusions are partly altruistic and partly selfish. We firmly believe, not least because of the reason that the noble Lord, Lord Dahrendorf, gave, that Turkey becoming a full member would be of benefit to the European Union—and therefore to the United Kingdom. I accept that we are brought to that optimistic conclusion not simply because of the recent advances that Turkey has made, but those advances are very significant. The noble Lord referred to Turkey as an Islamic religious culture, but a secular state. That has been the position for a relatively short period—only since the end of the first quarter of the last century. These discussions have been beneficial to the European Union and to Turkey. There is plainly an advantage to Turkey in being a full member of the European Union. There is no doubt that the internal reforms have been assisted by the context of application for entry. It will undoubtedly be of benefit to the European Union if Turkey joins. The European Union is capable of being an oasis of stability in a world that is becoming increasingly fearful and uncertain.
Lord Stoddart of Swindon: My Lords, I shall also refer to Turkey. It is an important country that is already 60 million people strong and is projected to reach a population of 110 million in a few years. At the same time, Germany's population is projected to drop to 60 million. That means that Turkey will be a dominant country in the European Union. I hope that has been taken into account in discussions on Turkey's future in the European Union.
What are the Government's reactions to Mr Giscard d'Estaing's proposals? The noble and learned Lord touched on the issue. Are the Government really in favour of a written constitution? Are they in favour of abolishing the rotating presidency in favour of a semipermanent presidency? Are they in favour of the virtual abolition of the national veto and of the imposition—or, rather, introduction—of a legal personality for the European Union? What, in his view, would be the implications of such a legal personality?
Lord Williams of Mostyn: My Lords, I would not say that Turkey would become dominant, but, as the noble Lord, Lord Dahrendorf, implied, it will be extremely important. There is a distinction. It is important to bear in mind that Mr Giscard d'Estaing has indicated his preliminary views. He is not able to impose his views, nor does he seek to. The convention
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will not make its final report to the European Council until June 2003. At the moment working groups are producing their reports and four new groups are to be established in the autumn. Questions of legal personality and so on are matters for discussion and elucidation. To my noble friend Lord Stoddart I say that it is a mistake to believe that the expression of a preliminary conclusion necessarily binds the outcome.
The Earl of Sandwich: My Lords, I do not believe that the noble and learned Lord has commented on the point raised by the noble Lord, Lord Strathclyde, that there was no mention of the coalition against terrorism. Rightly, the Prime Minister spent some time on the Chechnya crisis, but why is it that European leaders cannot produce regular statements on the coalition against terrorism as opposed to other major concerns like Iraq?
Lord Williams of Mostyn: My Lords, I suppose one tries to focus on the agenda of a particular meeting. To my knowledge the discussions about the coalition against terrorism between the Prime Minister and his international colleagues continue on a weekly basis. That was not the focus of the agenda at Brussels, and the Prime Minister was reporting on the discussions at Brussels. There may be some value, but on a continuing basis I am unsure how much value there is in constant repetition from the European Union of what is well known to be the position.
Lord Monro of Langholm: My Lords, speaking as a farmer, does the noble and learned Lord appreciate that agriculture requires long-term planning which is not forthcoming from the Government? Can he be more specific? Do the Government have in mind that the present agricultural production grants will continue to 2006, plus or minus what may be decided after the Dohar discussions, and that thereafter to 2013 the grants will continue with a limited increase for the future? If not, can he spell out where they are going? It is all very well to say that the CAP will be reformed, but as no one knows what the reforms will be, agriculture is placed in an impossible position.
Lord Williams of Mostyn: My Lords, the allowances will continue up to 2006, but beyond that, to the year 2013, as the Statement indicates, future agricultural spending will be capped. Because of the effect of the calculations on a notional inflation rate of only 1 per cent, in real terms there will be a reduction from the original proposals.
Lord Richard: My Lords, I am sure that my noble and learned friend is aware that reform of the common agricultural policy is not exactly a new subject in European affairs. When I was a member of the Commission 20 years ago, we spent most of our time on two issues: first, the British budget rebate, and secondly, reform of the common agricultural policy. Does my noble and learned friend accept that, if the common agricultural policy is to be reformed, it will be carried out, not as the Conservative Opposition now

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suggest, by a crusade—one cannot avoid observing that they were not altogether successful at achieving it in their 18 years in office—but by what Sidney Webb said in another context, "the inevitability of gradualness"?
My figures may not be totally accurate, but I recollect that 20 years ago the common agricultural policy was taking around 75 per cent of the budget of the EEC. That figure is now down to 45 per cent. I hope my noble friend agrees that the way to handle the CAP is to recognise that it is a matter of some considerable importance to other countries in the Community, and to let the Commission and the process proceed in the way that it has.
After listening to the noble Baroness, Lady Williams, I cannot help but observe that it would be wrong—I hope my noble and learned friend agrees—to leave the decision as to whether or not Saddam Hussein was in breach to Mr Blix. If anyone has to decide that it should be the Security Council because it is a matter of the most enormous importance and surely cannot be left to United Nations' officials.
Lord Williams of Mostyn: My Lords, I am grateful to my noble friend Lord Richard. I was pleased to hear his citation of the "inevitability of gradualness" in the presence of the former general secretary of the Fabian Society. My noble friend is right to say that the proportion has reduced to 45 per cent. I agree with him in his adjudication of how further reform should be taken forward. In fairness to the former general secretary of the Fabian Society, I am unsure whether she said what my noble friend Lord Richard may have heard. I did not understand the noble Baroness to say that it must be left to the inspectors; I thought she said that it should not be left to a single interested participant, aka the United States of America.
Lord Phillips of Sudbury: My Lords, on the reference to the president of the European Union reassuring us once again that subsidiarity would come to our aid with regard to the bureaucratisation and centralisation of the European Union—subsidiarity runs like a leitmotif through the rhetoric of the European Union it is not always apparent where one can find concrete examples of the principle in action. Are the Minister and the Government concerned about the rate at which Europe continues to centralise and the rate at which it continues to legislate? For example, last year there were over 3,600 directives and regulations. Is the Minister concerned, as I am, that the countries in line to become members of the European Union—like everyone else I am extremely happy at that prospect—may have second thoughts, in the run up to the referenda that each of them will have to hold, about the impact on their democracies, sovereignty and autonomy of the direction in which the European Union is heading? Have the Government any concrete and specific plans to give some reality to the principle of subsidiarity?
Lord Williams of Mostyn: My Lords, I hope I can assist the noble Lord, Lord Phillips of Sudbury. This
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chimes with discussions we have had in your Lordships' House and in the European Union Committee, chaired by the noble Lord, Lord Brabazon, with the noble Lord, Lord Grenfell, as vice-chairman. One of the working groups to which I referred presented its conclusions. The conclusion on subsidiarity, which I shall paraphrase because of time, was the necessity of an agreement, as the noble Lord implied, on how to improve the enforcement of subsidiarity, not least through an early warning mechanism involving national parliaments. I know that that is a cause dear to the heart of the noble Lord, Lord Phillips, and I hope it is some reassurance.

Enterprise Bill
4.28 p.m.
Proceedings after Third Reading resumed. Clause 17 [Monetary claims]:
Lord Kingslandmoved Amendment No. 2:
Page 7, line 38, at end insert—
"( ) In section 46(2) of the 1998 Act, there is inserted after paragraph (h)—

"(i) to issue a notice under section 26 requiring the production of specified documents or information;

(j) to investigate premises without a warrant under section 27;

(k) to investigate premises with a warrant under section 28;

(l) not to investigate a complaint under Chapter I or II:

(m) not to grant interim measures under section 35.""

The noble Lord said: My Lords, Amendment No. 2 was tabled both at Committee and Report stages. None of the measures stipulated in the amendment is capable of being appealed to the Competition Appeal Tribunal, but each has significant effects for the party concerned and, at present, can be challenged only by judicial review. In my submission, it is entirely consistent with the Government's wish to have competition matters dealt with by bodies versed in competition law that the decisions listed above should go to the CAT and not to the courts.
In Committee, on 18th July 2002, at col 1429 of Hansard, the noble Lord, Lord McIntosh of Haringey, stated that the Government did not propose to add any category of new appealable decisions, with the exception of the category covered by paragraph (m),
"not to grant interim measures under section 35".
The noble Lord continued that the other proposed additions were not appropriate as they would extend the category of appealable decisions to intermediate or investigatory steps taken by the OFT. The noble Lord further stated that parties at the stage of intermediary investigatory steps could still use judicial review which carries with it the opportunity for interim measures.
As I suspect the noble Lord, Lord McIntosh, is by now aware, our view is that that approach is inconsistent. The Government have created a body with competition expertise and it is only sensible, therefore, that the body deals with all aspects of the OFT's handling of investigations.

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In response to the amendment on Report in your Lordships' House, on 15th October 2002, reported at cols. 750 and 751 of Hansard, the noble Lord, Lord Sainsbury, argued that granting a right of appeal on interim investigatory steps would increase the length of the OFT's investigation and generally slow down the whole process in a detrimental manner. In relation to the specific proposal concerning paragraph (1)—the proposal not to investigate a complaint—the noble Lord said that the OFT needed to have a discretion to deploy its resources appropriately.
We do not disagree with those observations. Our case is based on identifying the most efficient body to deal with those complaints. The Government recognised that those steps listed in the amendment might be reviewed under judicial review. That is a very time-consuming process. Our proposal is that the Competition Appeal Tribunal is better placed to ensure that the OFT's procedures are effectively and efficiently carried out with proper respect for due process and the rights of defence. The OFT, for example, might adopt a policy, as has the European Community Commission in the Automec case, not to investigate minor infringements. If it does, the CAT is better placed to consider whether a decision, in any case, is in accordance with that policy.
I note that Amendment No. 43 is grouped with the amendment, and I should like also to speak to that. Under the Competition Act 1998, a person who has applied to the OFT for a decision that an agreement or practice does not infringe Chapter 1 or 2, or is entitled to an exemption under Section 9, may apply to the High Court for directions if there has been undue delay on the part of the OFT to determine an application for a decision.
There is no similar procedure available to be used by a complainant who believes that there is undue delay in the handling of his complaint by the OFT. This clause is intended to remedy that. This clause also gives the jurisdiction to the CAT because it is believed that this is the appropriate body to regulate the activities of the OFT, both in terms of substance and procedure.
I moved a similar amendment on Report, on 15th October 2002, at cols. 746 and 747 of Hansard. The noble Lord, Lord Sainsbury, considered that the amendment would restrict the OFT's ability to prioritise its caseload and would hamper the investigation with alleged serious breaches of the Act. He indicated that, on occasions, the OFT is dependent on further information from third parties in order to progress an investigation.
With great respect to the noble Lord, that does not deal with the point. The Competition Act enables a party who has applied for a decision for an exemption to apply to the High Court if there has been a delay by the OFT in handling that decision. In dealing with decisions, the OFT will also have to take into account views and information received from third parties. It is not consistent, therefore, to say that there should not be any remedy or relief in complaints cases.
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Clearly, if a complainant has erred in making an application, the Competition Appeal Tribunal would no doubt make that clear and potentially award costs against the complainant. That would send a signal to those who might otherwise make an ill-founded application. I beg to move.
Lord McIntosh of Haringey: My Lords, Amendment No. 2 would add to the list of decisions by the OFT that could be appealed to the Competition Appeal Tribunal under the 1998 Competition Act. The amendment refers again to new Section 46(2) but it should refer—as it should have done on the previous occasion—to new Section 46(3).
New Section 46(3) lists a number of decisions of the OFT that can be subject to a full appeal to the tribunal and further decisions may be added by regulations under new Section 46(3). Strictly speaking, it is not necessary, therefore, to add these further rights of appeal on the face of the Bill.
The right of appeal at paragraph (m) in the amendment is already available under new Section 46(3) and it is not necessary to grant it again. I apologise that my noble friend Lord Sainsbury inadvertently misled the House when he stated last week that we had already agreed to add this further right of appeal to new Section 46(3) and to new Section 47. He meant to say only that such a right of appeal on interim measures was to be granted to third parties under new Section 47. It is already available to parties under investigation.
I turn to the remainder of the proposals. I wonder whether the repercussions of adding these further rights of appeal have been thought through. The proposal at paragraph (1) of the amendment would provide a right of appeal against an OFT decision not to investigate a complaint under Chapter 1 or Chapter 2 for a party to an agreement. I am not clear why a party to an agreement would wish for such a right of appeal. Surely an OFT decision of this kind would favour the party to the agreement.
I wonder whether it was intended to add a third party right of appeal which could be dealt with under Section 47. The noble Lord indicates that that is not so. That removes that doubt in my mind. Complaints are the main way in which the OFT uncovers anticompetitive behaviour and give rise to some 1,300 cases a year. Many are initiated as a result of multiple complaints which can number in the thousands. Of those 1,300 cases, only 5 per cent provide reasonable grounds for suspecting an infringement of the Competition Act prohibitions which would lead to OFT's more formal powers of investigation being used. It would be highly wasteful of the resources of both the OFT and the Competition Appeal Tribunal if we were to provide a right of appeal to every complainant, especially in view of the fact that many complaints either do not give rise to competition concerns or do not contain enough evidence to warrant further investigation. However, it is the 95 per cent who would be appealing.

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I hope that that serves to demonstrate that the OFT does not initiate use of its formal powers unless it has carefully considered the information before it and believes that there may be a case to be answered which warrants further investigation. The first step is almost always to ask for further information under Section 26 and the OFT is always conscious of the balance between placing a burden on business and the legitimate needs of competition law enforcement. In some cases, a request under Section 26 can bring the anti-competitive conduct to an end and the OFT will not need to take any further administrative action.
In other cases, the use of further investigative powers will be necessary. Cases in which the OFT deploys its powers to enter premises almost always run through to a final infringement decision. Where an investigation is undertaken under a warrant, the judge issuing the warrant must be satisfied that stringent criteria are met before issuing the warrant. The OFT's investigative powers, which were extensively debated before they were granted during the passage of the Competition Act, are not used indiscriminately or without good reason. The OFT uses them carefully where it believes that there may be an infringement of the Competition Act. The system also has the appropriate checks and balances and there is a further check available to parties under investigation before a formal infringement decision is issued. OFT is required to notify the relevant parties of its intended decision and there is then ample opportunity for those parties to make oral or written representations, which the OFT will take into account in reaching its final decision.
I am still convinced that the remaining proposals in the amendment—that is, those in sub-paragraphs (i) to (1)—should not be taken forward. I cannot see that adding further rights of appeal to intermediate steps in the OFT's investigative procedures on cases where the OFT believes that the test of reasonable suspicion has been reached would produce an efficient and effective system that balanced the interests of all parties. Those are not substantive decisions of the OFT and we would be creating further barriers to the effective enforcement of competition law.
Amendment No. 43 would provide persons who had submitted material to the Office of Fair Trading, alleging an infringement of the Chapter I and Chapter II prohibitions of the Competition Act 1998, to seek a direction from the Competition Appeal Tribunal that the OFT's investigation of the alleged infringement is determined without any unnecessary further delay, where the court is satisfied that there has been undue delay on the part of the OFT.
I have already explained that the majority of complaints received by the OFT are not progressed either because they do not give rise to competition concerns or because they do not contain sufficient information. The amendment does not distinguish between those complaints and other complaints that give rise to concerns and which lead to further investigation. The amendment would require the Competition Appeal Tribunal to determine whether there had been undue delay on the part of the OFT in
38
investigating those allegations. In my view, the CAT is not the appropriate body. At the earliest opportunity, we intend to bring into force paragraph 7 of Schedule 5 and paragraph 7 of Schedule 6 to the Competition Act, which would provide for an applicant aggrieved by the failure of the OFT to determine a notification under the Competition Act to apply to the courts seeking a direction requiring OFT to determine the application without unnecessary further delay. Those provisions were not to be commenced until the 1998 Act had bedded down. In view of that model in the Competition Act, it would not be appropriate to give a power to the CAT when a similar power has been granted to the courts. The amendment is to that extent defective.
Setting aside any deficiencies in drafting—one cannot have deficiencies in drafting at Third Reading in the second Chamber—I am firmly of the view that that amendment is not desirable. As my noble friend Lord Sainsbury said, in order to ensure that the most serious and harmful cases are dealt with effectively, the OFT needs to have the discretion to deploy its resources where they are most needed. If it is unable to judge the degree of priority that should be placed on individual complaints independent of external pressures, its ability to prioritise its caseload would he marred and investigation of serious breaches of the Act would be hampered.
As my noble friend said, many elements of an investigation are outside the control of the OFT, for example, where the OFT is dependent on further information from third parties. That can affect the time that it takes the OFT to gather the material necessary to further an investigation but it would not be assisted by that amendment. In other words, I cannot support the amendments.
4.45 p.m.
Lord Kingsland: My Lords, I am most grateful to the Minister for giving such a full explanation of his reasons for not supporting the amendments; that is much appreciated on these Benches.
I could reply in detail to the noble Lord's comments; these points have been well rehearsed by now in your Lordships' House. The fundamental deficiency with those points is rather like the fundamental deficiency of the noble Lord's approach to Amendment No. 1, on referring competition cases to the specialised tribunal. In the Competition Act 1998 and in the Bill, the Government have created a specialised body to deal with the judicial issues that arise out of anticompetitive practices. I remain puzzled about why the Government, having created that institution, persist in not allowing it to deal with all of the judicial issues that arise out of competition investigations and competition disputes. That appears to be wholly irrational.
I should very much like to test the opinion of the House on this amendment but we have already voted on Amendment No. 1. If we voted on every amendment about which I feel strongly, we should be here all night. I therefore hope that, after mature

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consideration, the Government will amend the Bill along the lines suggested in the amendment. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 19 [Findings of infringements]:
Lord McIntosh of Haringeymoved Amendment No. 3:
Page 11, line 3, leave out "In any" and insert "This section applies to"
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 4 to 7, 9 to 17, 21 to 24, 31, 45, 54 to 58 and 74.
These government amendments are technical and improving amendments which were identified following a final read through the Bill. We wrote to those who took part in these debates on what the amendments involve. They do not raise any issues of great substance but we believe that they are well worth making. They would improve the quality and internal consistency of the Bill as well as provide some additional future flexibility to deal with highly technical areas of the Bill. I shall focus my remarks on the more noteworthy of the amendments.
Clause 19 adds new Section 58A to the Competition Act 1998 to provide that infringement findings—for example, an OFT decision that the Chapter I prohibition has been breached—will be binding on the courts when the courts are considering damages claims. Amendment No. 7 clarifies that the new section does not apply in relation to infringement decisions that were made before the commencement of the section.
Amendment No. 17 to Clause 106 ensures the continued viability of the system by which the OFT offers confidential advice to parties considering a merger. Clause 106(1) currently requires the OFT to publish reasons for its decisions to refer or not to refer a merger. Clause 32(2)(b) states that the OFT may decide not to make a reference if the merger arrangements are not sufficiently advanced to justify it. The OFT would rely on that provision to avoid referring a merger in contemplation about which the parties had approached it for confidential advice. However, as the Bill stands, that would be a decision that the OFT is required to publish, which would undermine the confidentiality of the system. The amendment will ensure that the OFT will not be required to publish any decision not to refer where the grounds are those in Clause 32(2)(b).
Amendments Nos. 21 and 22 are minor amendments to Clause 120. They are designed to ensure that the Secretary of State has a similar power for determining turnover for the purpose of merger fee payments as is available for the jurisdictional turnover test in Clause 27. Amendment No. 9 deletes Clause 33 and replaces it with a power for the Secretary of State to make provision for the effective operation of Clauses 26 and 28. Clauses 26 and 28 enable the OFT to treat a sequence of transactions stretching over a prior period of up to two years—for example, the piecemeal acquisition of shares—as occurring
40
simultaneously on the date on which the latest of them is recorded for the purpose of a reference. However, where the latest of the transactions is anticipated and there is therefore no firm date for the last transaction, a notional date is required from which to work back the permitted two years. Clause 33 supplies that notional date by saying that Clauses 26 and 28 will apply as if the anticipated transaction had occurred immediately before the date of the reference. However, we now believe that treating all the transactions as though they had taken place on that date sits uncomfortably with Clause 32 and related provisions, which are formulated on the basis that the merger is anticipated.
This is a highly technical area where we believe that a power to make regulations and adjustments to accommodate the rare hybrid cases that are a mixture of completed and anticipated transactions is preferable to setting out the detail on the face of the Bill. Amendment No. 24 makes the exercise of that new power subject to the affirmative parliamentary procedure.
Amendment No. 58 is concerned with the special regime for water mergers. It is consequential to the mass of amendments made on Report to the general merger regime. Where a merger case is handled initially in Brussels but falls subsequently to the domestic regime, it will ensure that the domestic authorities are not time-barred from considering those cases. This latest amendment ensures that the power provided in Schedule 6 to adapt by regulations the general mergers regime for the purposes of the water regime is wide enough to allow for the extension of the four-month timetable in the circumstances where ECMR proceedings have delayed the domestic consideration of a water merger. I beg to move.
On Question, amendment agreed to.
Lord McIntosh of Haringeymoved Amendments Nos. 4 to 7:
Page 11, leave out lines 9 and 10 and insert—
"(1A) In such proceedings, the court is bound by a decision mentioned in subsection (2) once any period specified in subsection (3) which relates to the decision has elapsed."
Page 11, line 16, after "Tribunal" insert "(on an appeal from a decision of the OFT)""
Page 11, line 20, leave out subsection (3) and insert—
"(3) The periods mentioned in subsection (1A) are—

(a) in the case of a decision of the OFT, the period during which an appeal may be made to the Tribunal under section 46 or 47 or the EC Competition Law (Articles 84 and 85) Enforcement Regulations 2001 (S.I. 2001/2916);

(b) in the case of a decision of the Tribunal mentioned in subsection (2)(c), the period during which a further appeal may be made under section 49 or under those Regulations;

(c) in the case of any decision which is the subject of a further appeal, the period during which an appeal may be made to the House of Lords from a decision on the further appeal;

41
and, where any appeal mentioned in paragraph (a), (b) or (c) is made, the period specified in that paragraph includes the period before the appeal is determined."

Page 11, line 33, at end insert—
"(1A) Section 58A does not apply in relation to decisions made before the commencement of this section."
On Question, amendments agreed to.
Clause 22 [Relevant merger situations]:
Lord Hunt of Wirralmoved Amendment No. 8:
Page 13, line 21, leave out "£45 million" and insert "£100 million"
The noble Lord said: My Lords, I want to press the Government on this amendment. When we discussed the matter on Report, the noble Lord, Lord Sainsbury of Turville, supplied a number of figures for consideration. At the time, I said that I wanted to reflect on the information that he had put forward and consult more widely outside this House. Those with whom I have consulted, especially the CBI—and many others involved in industry and commerce in the wider sense—have urged me further to press the Government.
In the amendment I seek to delete the sum of £45 million and insert a reference to £100 million. When we debated the matter previously the Government admitted that they were dealing essentially with an informed estimate and that their method of calculation was not fool-proof. The CBI has reflected on the information put forward by the Government and has asked me to assert on its behalf the fact that it has carried out a considerable amount of research. The confederation sampled 522 companies, covering a wide range of industries, both high-tech and traditional. and produced a ratio of UK turnover to world-wide gross assets of 1.2:1. That ratio is supported by the rule-of-thumb test that turnover should he expected to exceed gross assets. Therefore, the new turnover figure should exceed the old £70 million gross assets figure. The Government's figure of £45 million fails the rule-of-thumb test.
I must also point out to the Minister that the Government have never responded to the proposal that allowance should be made for inflation, as the threshold was last set in 1994. They have used the old figure of £70 million in calculating an equivalent number of companies that would be caught by the new turnover threshold. Surely they should at least use the indexed figure of £85 million to calculate the number of affected companies.
On the Government's figures, about 7,500 companies would be caught by the £45 million threshold. If the Government were to accept the amendment and the £100 million threshold proposed by the CBI. that number would be cut in half and the regulatory burden on business would be reduced. That would also go some way towards making this a true enterprise Bill. I beg to move.
Lord Razzall: My Lords, I should like to make two general points while expressing my support for the noble Lord, Lord Hunt, and his amendment. I intended to make such observations when the previous
42
set of amendments was discussed. First, I know that I speak for my noble friend Lord Sharman, and others, on these Benches when I thank the Government for the way that they have dealt with the Bill. We have found this to be an extremely good example of your Lordships' House at its best. Indeed, that is in marked contrast to the way that another place treated the legislation.
Secondly, as the Minister will know, my noble friend and I have not intervened in debates on this issue as the Bill has passed through both the Committee and Report stages, although we have listened to the arguments. Having done so, it may come as a disappointment to the Minister to know that we believe that the noble Lord, Lord Hunt, is correct. We shall, therefore, be supporting him in the Division Lobby is he chooses to press the amendment to a vote.
Lord McIntosh of Haringey: My Lords, I am grateful to both noble Lords for the way in which they have approached the amendment. I respect the fact that the CBI has conducted research since we last debated the matter. The Government have undertaken a few inquiries in this respect. I acknowledge that the relationship between assets and turnover is not a straightforward one. If you are moving from an asset measure to a turnover measure—we are all agreed that that is the right approach—you must engage in a certain amount of approximation.
Our goal in selecting the level of the new turnover test is to bring within the scope of the merger regime broadly the same numbers of companies that currently qualify under the assets test. Our further research indicates that that is the case. It is not based on any rule-of-thumb relationship between assets and turnover; it is just a matter of looking at the turnover of British companies. You have to consider the situation sector by sector. Clearly, when considering property companies, assets will be very large and turnover need not be large according to whether they are disposing or acquiring. In the case of dotcom companies, the assets will probably be relatively small in relation to turnover. Indeed, for any company that is trading in high-value goods, the turnover will be high.
Whatever equivalence you make between assets and turnover, you will be excluding some companies in some sectors and including companies in other sectors that would not otherwise have been included. However, as one of the Bill's primary aims is the putting into place of an enhanced competitive regime, it would be very strange if we did what this amendment seeks to achieve and relaxed the regime for merger control from the outset by a significant reduction in the number of companies covered by the legislation. Anti-competitive mergers can result in significant harm to consumers and to the economy at large. That is the fundamental point. The OFT should be able to look at mergers that could give rise to such concerns.
The noble Lord, Lord Hunt, raised the question of indexing. I am not persuaded that this is a key point. When thresholds are revised, they are obviously intended to last for a period of time. They are not

43
intended just to fit the year in which the adjustment is made. For example, the adjustment to the assets figure prior to 1994 was made in 1984—a 10-year interval. We believe that the prudent approach is to make the transition from an assets to a turnover test, and then to keep that under review. I am perfectly prepared to say not only that there is a mechanism in the Bill to ensure that the threshold is kept under review, but also to make a specific commitment that the Government will review the turnover threshold within three years of the commencement of the new regime. However, if change is recommended before that time, we would consider the case for an earlier revision. I trust, therefore, that the amendment will not be pressed.
Lord Hunt of Wirral: My Lords, I have no wish to compare the Minister to Don Quixote, but I believe that he is being rather quixotically chivalrous in asserting the importance of inflexible approximation. That is, indeed, what he tried to put forward. Surely, it is important to start off with the right figure. However much one commits to review the figure, the important principle is to ensure that the figure that appears initially in the Bill is correct. That is why I want to press the amendment and test the opinion of the House.
5 p.m.
On Question, Whether the said amendment (N0. 8) shall be agreed to?
Their Lordships divided: Contents, 119; Not-Contents, 112.

Division No.2

CONTENTS

Aberdare, L.

Dahrendorf, L.

Addington, L.

Dean of Harptree, L.

Ampthill, L.

Dholakia, L.

Anelay of St Johns, B.

Dixon-Smith, L.

Astor of Hever, L.

Eccles of Moulton, B.

Attlee, E.

Elles, B.

Avebury, L.

Elliott of Morpeth, L.

Barker, B.

Elton, L.

Beaumont of Whitley, L.

Falkland, V.

Biffen, L.

Fearn, L.

Blake, L.

Fowler, L.

Blaker, L.

Fraser of Carmyllie, L.

Blatch, B.

Freeman, L.

Brabazon of Tara, L.

Garel-Jones, L.

Bradshaw, L.

Geraint, L.

Brougham and Vaux, L.

Glenarthur, L.

Buscombe, B.

Glentoran, L.

Butterworth, L.

Goodhart, L.

Byford, B.

Gray of Contin, L.

Campbell of Alloway, L.

Griffiths of Fforestfach, L.

Carlisle of Bucklow, L.

Hayhoe, L.

Carnegy of Lour, B.

Henley, L.

Cavendish of Furness, L.

Holme of Cheltenham, L.

Clement-Jones, L.

Hooper, B.

Cope of Berkeley, L. [Teller]

Howe, E.

Craig of Radley, L.

Howe of Aberavon, L.

Craigavon, V.

Howell of Guildford, L.

Croham, L.

Hunt of Wirral, L.

Cumberlege, B.

Jellicoe, E.

44

Jenkin of Roding, L.

Peyton of Yeovil, L.

Jenkins of Hillhead, L.

Phillips of Sudbury, L.

Jopling, L.

Platt of Writtle, B.

Kingsland, L.

Prior, L.

Laird, L.

Rawlings, B.

Lamont of Lerwick, L.

Razzall, L.

Lane of Horsell, L.

Reay, L.

Lester of Herne Hill, L.

Rennard, L.

Livsey of Talgarth, L.

Renton, L.

Lucas, L.

Roberts of Conwy, L.

Luke, L.

Roper, L.

Lyell, L.

Rotherwick, L.

McColl of Dulwich, L.

Scott of Needham Market, B.

McNally, L.

Seccombe. B. [Teller]

Marlesford, L.

Sharples, B.

Marsh, L.

Shutt of Greetland, L.

Mayhew of Twysden, L.

Smith of Clifton, L.

Monro of Langholm, L.

Soulsby of Swaffham Prior, L.

Monson, L.

Swinfen, L.

Mowbray and Stourton, L.

Thomas of Walliswood, B.

Moynihan, L.

Trefgarne, L.

Murton of Lindisfarne, L.

Trumpington, B.

Naseby, L.

Tugendhat, L.

Noakes, B.

Waddington, L.

Northesk, E.

Walker of Worcester, L.

Northover, B.

Wallace of Saltaire, L.

O'Cathain, B.

Walmsley, B.

Oppenheim-Barnes, B.

Watson of Richmond, L.

Park of Monmouth, B.

Wilcox, B.

Perry of Southwark, B.

Williams of Crosby, B.

Williamson of Horton, L.

NOT-CONTENTS

Acton, L.

Gavron, L.

Ahmed, L.

Gibson of Market Rasen, B.

Amos, B.

Gladwin of Clee, L.

Andrews, B.

Goldsmith, L.

Ashley of Stoke, L.

Gordon of Strathblane, L.

Ashton of Upholland, B.

Goudie, B.

Bach, L.

Gould of Potternewton, B.

Barnett, L.

Graham of Edmonton, L.

Bassam of Brighton, L.

Grenfell, L.

Bernstein of Craigweil, L.

Grocott, L. [Teller]

Bhatia, L.

Harrison, L.

Blackstone, B.

Haskel, L.

Blease, L.

Hayman, B.

Borne, L.

Hilton of Eggardon, B.

Bragg, L.

Hogg of Cumbemauld, L.

Brennan, L.

Howells of St. Davids, B.

Brooke of Alverthorpe, L.

Howie of Troon, L.

Brookman, L.

Hoyle, L.

Campbell-Savours, L.

Hughes of Woodside, L.

Carter, L.

Irvine of I airg, L. (Lord Chancellor)

Christopher, L.

Clark of Windermere, L.

Islwyn, L.

Clarke of Hampstead, L.

Jay of Paddington, B.

Clinton-Davis, L.

Jordan, L.

Cohen of Pimlico, B.

Judd, L.

Corbett of Castle Vale, L.

King of West Bromwich, L.

Crawley, B.

Kirkhill, L.

David, B.

Layard, L.

Davies of Oldham, L.

Lea of Crondall, L.

Dean of Thornton-le-Fylde, B.

Lipsey, L.

Desai, L.

Lofthouse of Pontefract, L.

Dormand of Easington, L.

Macdonald of Tradeston, L.

Dubs, L.

McIntosh of Haringey, L. [Teller]

Elder, L.

Evans of Parkside, L.

MacKenzie of Culkein, L.

Evans of Temple Guiting, L.

Mackenzie of Framwellgate, L.

Farrington of Ribbleton, B.

Mason of Barnsley, L.

Faulkner of Worcester, L.

Massey of Darwen, B.

Filkin, L.

Merlyn-Rees, L.

Fitt, L.

Milner of Leeds, L.

Fyfe of Fairfield, L.

Mishcon, L.

Gale, B.

Mitchell, L.

45

Morgan, L.

Stoddart of Swindon, L.

Moms of Manchester, L.

Stone of Blackheath, L.

Patel of Blackburn, L.

Strabolgi, L.

Pendry, L.

Symons of Vernham Dean, B.

Pitkeathley, B.

Temple-Morris, L.

Plant of Highfield, L.

Thornton, B.

Ponsonby of Shulbrede, L.

Turnberg, L.

Prys-Davies, I,.

Turner of Camden, B.

Rendell of Babergh, B.

Warwick of Undercliffe, B.

Richard, L.

Weatherill, L.

Roll of Ipsden, L.

Whitaker, B.

Rooker, L.

Whiny, L.

Sewel, L.

Williams of Elvel, L.

Simon, V.

Williams of Mostyn, L. (Lord Privy Seal)

Smith of Gilmorehill, B.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.
5.10 p.m.
Clause 33 [Supplementary provision in relation to anticipated mergers]:
Lord McIntosh of Haringeymoved Amendment No. 9:
Leave out Clause 33 and insert the following new Clause—
"SUPPLEMENTARY PROVISION IN RELATION TO ANTICIPATED MERGERS

(1) The Secretary of State may by order make such provision as he considers appropriate about the operation of sections 26 and 28 in relation to—

(a) references under this Part which relate to arrangements which are in progress or in contemplation; or

(b) notices under section 41(2), 58(2) or 66(2) which relate to such arrangements.

(2) An order under subsection (1) may, in particular—

(a) provide for sections 26(5) to (8) and 28 to apply with modifications in relation to such references or notices or in relation to particular descriptions of such references or notices;

(b) enable particular descriptions of events, arrangements or transactions which have already occurred—

(i) to be taken into account for the purposes of deciding whether to make such references or such references of a particular description or whether to give such notices or such notices of a particular description;

(ii) to be dealt with under such references or such references of a particular description or under such notices or such notices of a particular description."

On Question, amendment agreed to.
Clause 41 [Intervention by Secretary of State in certain public interest cases]:
Lord McIntosh of Haringeymoved Amendments Nos. 10 and 11:
Page 28, line 20, after "decision" insert "made by virtue of subsection (2)(b) of section 32 or a decision"
Page 29, line 44, leave out "and 33"
On Question, amendments agreed to.
Clause 58 [Intervention by Secretary of State in special public interest cases]:
Lord McIntosh of Haringeymoved Amendment No.12:
Page 45, line 30, leave out "and 33"
On Question, amendment agreed to.
Clause 66 [Intervention to protect legitimate interests]:
Lord McIntosh of Haringeymoved Amendment No. 15:
Page 52, line 21, leave out "and 33"
On Question, amendment agreed to.
Clause 67 [Scheme for protecting legitimate interests]:
Lord McIntosh of Haringeymoved Amendment No. 14:
Page 53, line 1, leave out "(read together with section 33)"
On Question, amendment agreed to.
Clause 69 [Water mergers]:
Lord McIntosh of Haringeymoved Amendments Nos. 15 and 16:
Page 54, line 37, at end insert—
"(5A) Regulations under subsection (4) above may, in particular, make provision enabling the Secretary of State or the OFT to determine matters of a description specified in the regulations (including any of the matters mentioned in paragraphs (a) and (b) of subsection (5) above)."
Page 55, line 19, after "Act" insert "and any provision made under section 33 of that Act"
On Question, amendments agreed to.
Clause 106 [Further publicity requirements]:
Lord McIntosh of Haringeymoved Amendment No. 17:
Page 80, line 29, at end insert "(other than a decision made by virtue of subsection (2)(b) of section 32)"
On Question, amendment agreed to.
Clause 119 [Review of decisions under Part 3]:
[Amendment No. 18 not moved.]
Lord Kingslandmoved Amendment No. 19:
Page 90, line 23, leave out subsection (4) and insert—
"(4) The Tribunal may confirm or set aside the decision which is the subject of the appeal and may—

(a) remit the matter to the OFT, the Secretary of State or the Commission as the case may be (the "original decision maker");

(b) cancel or vary any conditions or obligations imposed by the original decision maker;

(c) give any directions or take such steps as the original decision maker could have made; or

(d) make any other decision which the original decision maker could have made."

47
The noble Lord said: My Lords, I am rather puzzled by the way that Amendments Nos. 19 and 20 have appeared in the Marshalled List. Looking back to Committee stage, I believe that one of these two amendments was tabled by the noble Lord, Lord Razzall, in a group of Liberal amendments, and the other by Her Majesty's loyal Opposition. In my submission, although they refer to slightly different parts of the page in the Bill, the effect of them is similar. Therefore, I shall speak to Amendments Nos. 19 or 20, as the Minister wishes.
As your Lordships are well aware by now, in contrast with appeals under the Competition Act, this Bill provides only for a form of judicial review for decisions taken on mergers. Given that the Competition Commission is to take decisions about mergers, and where it thinks necessary impose conditions, we believe that its decisions should be capable of substantive review.
In Committee, the noble Lord, Lord Sainsbury of Turville, stated that in relation to merger investigations the Government continue to believe that a review based on judicial review is the right means for challenging a decision. That type of review by the court would ensure that the procedures followed by the authorities are fair and that the parties are given the opportunity to put their case. Such a review would allow the court to re-examine any decision taken by the authorities to determine whether it was reasonable.
Our view is that the Government are creating a Byzantine structure for competition issues, with some appeals going to the Competition Appeal Tribunal and others going to the High Court; the Competition Appeal Tribunal having jurisdiction over complex regulatory appeals but not mergers.
A merger will be referred to the Competition Commission if the OFT "believes" that it might lead to a substantial lessening of competition. The full analysis will be carried out by the Competition Commission, including such matters as market definition. In these circumstances, the only detailed review will be carried out by one body, in contrast to competition cases where there will be a review carried out by two separate bodies.
It is, in our submission, not sufficient for the court merely to decide if the Competition Commission has acted reasonably—in the sense that the word "reasonably" is used in judicial review proceedings. In our view, the appeal tribunal should satisfy itself that the parties, including the OFT and the Competition Commission, have correctly analysed relevant material. It may be said that, in mergers, time may not permit a full appeal; but that surely is for the parties to decide. Time considerations have not stopped significant appeals being heard by the European Courts which have shown themselves willing to hear more evidence than would normally be the case in judicial reviews.
48
Some experiences of the recent Airtours case show how important it is to have an in-depth examination by an appeal body. I refer by way of example to paragraphs 125 to 130 of the court of first instance's judgment of 6th June 2002, case T-342/1999 Airtours. In particular, the European Commission relied on what it called,
"a recent study for a major tour operator",
to show that demand growth had been low and was still to fall to zero. That statement is to be found at paragraph 125. The court of first instance found on analysis that the commission had not seen the full study, but had quoted from a one-page extract submitted by a respondent to a request for information. That emerges from paragraph 128. Moreover, the extract did not support the commission's interpretation—paragraph 29—and referred to,
"a massive increase in foreign holiday sales",
over the past 20 years. In the outcome the court of first instance held:
"It follows that the Commission construed that document without having regard to its actual wording and its overall purpose".
That conclusion is to be found in paragraph 130.
This amendment was discussed on Report. Since the decision in Airtours, the court of first instance has annulled a second EC Commission decision blocking a merger. That is case T-310/01 Schneider Electric SA. Here the court criticised the Commission's standard assessment, including its market analysis and its analysis of the so-called "portfolio power" of the proposed merged firm's brands. The court cited specific mistakes in relation to the Commission's analysis of the Danish and Italian markets.
In addition, the court criticised the Commission for a number of procedural errors. In those circumstances, we do not believe it is sufficient for the Government simply to say that the parties are entitled to a judicial review and not a form of appeal which allows a review of the substance of the decision. Time will of course be a factor; but the Competition Appeal Tribunal could adopt, as the court of first instance has done, a fast-track procedure which might be suitable for certain merger appeals. It should be noted that, although, technically, an appeal to the court of first instance is a form of judicial review, as noted above, the European courts have shown themselves willing to hear more evidence than would normally be the case in judicial reviews.
I apologise for speaking to this amendment at such length at this stage, but there have been important legal developments in recent weeks. I think your Lordships should have an opportunity to consider those. I beg to move.
5.15 p.m.
Lord Borrie: My Lords, I oppose Amendment No. 19 or Amendment No. 20, whichever it is we are discussing. One of the great merits of the merger provisions of this Enterprise Bill, and one with which Her Majesty's Loyal Opposition fully agree, is that as

49
a general rule the competition authorities—the Office of Fair Trading and the Competition Commission—will make the appropriate decisions without ministerial involvement. They will do so on the merits and, in particular, on the question of whether the merger is likely substantially to lessen competition in the appropriate market. Such a decision—first by the Office of Fair Trading and then, if it is so referred, by the Competition Commission—will require a large element of judgment and discretion. It is inappropriate for such a decision on the merits of allowing a merger to proceed or not to be made on the basis of law or precise judicial precedents.
Judicial review by the courts, for which the Bill provides, is important to ensure that bodies such as the Office of Fair Trading and the Competition Commission are accountable, that they remain within the law arid the rules of procedure laid down for them—including that the Competition Commission must give reasons—that they comply with the rules of natural justice and that everyone has had a fair opportunity to state his case. It is not appropriate to replace ministerial involvement—which we all agree should be discarded—with judicial involvement on the merits of the case. It is inappropriate for a judicial—body admittedly, as has been said, a specialized judicial body—such as the Competition Appeal Tribunal to substitute its judgment and discretion for that of the Office of Fair Trading and the Competition Commission.
Although I am as interested as is the noble Lord, Lord Kingsland, in recent developments across the water in Brussels and Luxembourg, neither previous governments nor this one have sought to move to a fully judicial system to determine whether mergers are allowed in the interests of competition. I therefore shall not go down the same road as the noble Lord of discussing the position there. The Commission may have the same name as our Competition Commission but, in Brussels, the Commission determines the matter initially and makes the decision at first instance. In this country, two bodies have, as it were, a separate go at it—at any rate, if the Office of Fair Trading considers that there is sufficient case to go to the Competition Commission. That is not analogous with the position in Brussels and Luxembourg.
It is highly appropriate that the Government should provide that the Competition Appeal Tribunal must ensure that those bodies act according to law, proper procedure and so on, but that the merits should be left to the Competition Commission.
Lord McIntosh of Haringey: My Lords, I am somewhat puzzled by the Opposition's approach to the issue here in Part 3 on mergers and in Part 4 on market investigations. The same criteria applied when we discussed those matters previously. Yet, lo and behold, we now have Amendment No. 18, which would restrict who can go to appeal, but is balanced by amendments that would widen the grounds for appeal. Amendment No. 18 has not been moved, so we are left
50
with the proposal to widen the grounds for appeal in Amendments Nos. 19 and 20, with no restriction on who can appeal.
On Thursday, by tabling Amendment No. 29 to Part 4, the Opposition proposed the restriction on who can go to appeal but no amendment to widen the grounds for appeal. Amendment No. 30 was then tabled at the last minute, so we now have provisions that seem to be in line with what was argued previously, but not with what has been argued today. So something strange is going on that is not entirely clear to me.
We listened carefully to what was said in Committee, on Report and today. We share the desire to give parties the tools that they need to challenge decisions made by the competition authorities and to have as much legal certainty as is practicable. We are just as keen that whatever review mechanism we introduce should be effective in holding the competition authorities to account. We have been prepared to consider whether we can provide greater legal certainty.
We are consulting on how long parties should have to bring an action. One starting point was three months, but we are now seeking views on whether that should be just one month in the case of a merger decision. We have not come to a final view but we are consulting and demonstrating willingness to modify the review mechanism in the light of concerns expressed in the House and by the business and legal communities.
We are puzzled by Amendment No. 20, which seems to mix judicial review with the characteristics of a full appeal by leaving subsection (4) untouched. We cannot see how that would work technically. Judicial review grounds focus on whether a decision is reasonable and whether the procedure followed was fair. In most cases, that would not provide the tribunal with the material that it would need to substitute the decisions of the original decision-maker.
However, even at Third Reading, I shall not concentrate too much on technical difficulties. I think that it is common ground that full appeal could be wider in scope than judicial review. We must ensure that parties have access to the justice that they need to protect their rights and that the competition authorities can be held to account for their actions.
The intellectual argument for judicial review is strong and compelling. First, decisions by the competition authorities in merger cases do not lend themselves to full rehearing. Such decisions are not right or wrong; they are reasonable or unreasonable. That is what must be assessed. A full rehearing would not necessarily lead to a more just outcome; it would just substitute one set of views for another. Secondly, judicial review-type appeals will ensure that parties' rights are protected. They will pick up any material procedural irregularities or material errors of fact that have led to an unfair process or conclusion.
Finally, this approach to appeals is based on an effective division of responsibilities between the competition authorities and the tribunal. The tribunal will become quick and expert in policing its decisions,

51
ensuring that the process is fair and the outcome reasonable. The actual taking of the complex case-by-case decisions will remain with the competition authorities, ensuring that they take greater responsibility for decisions and leading to greater consistency in decision-making.
The noble Lord, Lord Kingsland referred to the Airtours case at the court of first instance. But that was closer to a judicial review. It did not carry out a full appeal on the merits. The court may have gone into more detail than would the UK courts, but it considered similar issues: errors of law; fairness of procedures; and reasonableness of decision. That is what a competition appeal tribunal would do.
Similarly, the Schneider-Legrand case, to which the noble Lord referred, overturned the decision to prohibit the merger but again on comparable grounds to that of judicial review in this country. The court found errors, omissions and contradictions in the Commission's economic reasoning and that the procedure followed was flawed because there was a discrepancy between the initial statement of objections shared with the parties and the Commission's final decision. That left Schneider with no opportunity to propose appropriate corrective measures. Those are judicial review considerations, not what the amendments would achieve. As a result, Schneider may acquire Legrand by correcting what was a faulty decision—in what, for the court of first instance, is a relatively short time.
I can leave out what I was going to say about limiting the number of people who can appeal; that amendment has not been moved. However, I hope that it is clear that the analogies with Europe, the requirements for consistency and the extent of judicial review coverage mean that it would be a serious mistake to approve the amendments.
5.30 p.m.
Lord Kingsland: My Lords, I am grateful to the noble Lord for his response. In a way, his reaction to the amendment is consistent with his reaction to Amendments Nos. 1 and 2. Having created a specialised competition tribunal, the noble Lord is reluctant to give it any work to do. That is, perhaps, an exaggeration; but he is reluctant to give it all the work that taking the trouble to set it up merits.
If judicial review of a merger decision in the United Kingdom amounted to the same kind of review as that given to merger cases by the court of first instance in Luxembourg, I would reflect again on the wisdom of the amendment. However, our experience of commercial and competition judicial review in the United Kingdom leads to the ineluctable conclusion that judicial review—indeed, judicial review of commercial matters generally—is significantly less capable of investigating the kind of details that the court of first instance would investigate in a similar situation. That is because the judges have chosen not to trespass on the territory that has become so familiar to the court of first instance.
52
I shall not press the amendment to a vote. However, I hope that, between now and the time when the Bill goes to another place, the noble Lord will reconsider what he said—so that he can amend that part of the Bill accordingly.
As always, I listened with great care to the noble Lord, Lord Borrie. His experience of such matters is unsurpassed in your Lordships' House. I venture to take issue with the noble Lord to the extent that I believe that the United Kingdom has reached the stage at which it would be foolish for us to remain too far behind developments on competition matters in the European Community. It is clear that they are becoming more judicialised—for better or for worse—and we must also go down that path.
Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 20 not moved.]
Clause 120 [Fees]:
Lord McIntosh of Haringeymoved Amendments Nos. 21 and 22:
Page 92, line 3, leave out "(determined in accordance with the order)".
Page 92, line 7, at end insert—
"(4A) For the purposes of subsection (4)(c)(ii) the turnover of an enterprise shall be determined in accordance with such provisions as may be specified in an order under this section.
(4B) Provision made by virtue of subsection (4A) may, in particular, include provision—

(a) as to the amounts which are, or which are not, to be treated as comprising an enterprise's turnover;

(b) as to the date or dates by reference to which an enterprise's turnover is to be determined;

(c) restricting the turnover to be taken into consideration to turnover which has a connection of a particular description with the United Kingdom.

(4C) An order under this section may, in particular, in connection with provisions of the kind mentioned in subsection (4A) make provision enabling the Secretary of State or the OFT to determine matters of a description specified in the order (including any of the matters mentioned in paragraphs (a) to (c) of subsection (4B))."
On Question, amendments agreed to.
Clause 123 [Orders and regulations under Part 3]:
Lord McIntosh of Haringeymoved Amendments Nos. 23 and 24:
Page 93, line 27, after "section" insert "33 or"
Page 93, line 39, after "section" insert "33,"
On Question, amendments agreed to.
Clause 130 [Power of OFT to make references]:
Lord Hunt of Wirralmoved Amendment No. 25:
Page 100, line 28, after "competition" insert "to an appreciable extent"
The noble Lord said: My Lords, it may assist the House if I indicate that, in moving Amendment No. 25, I shall speak also to Amendments Nos. 27 and 28. Unless other noble Lords press the point, it is not necessary to have a separate debate on those amendments, as they seek the same effect.

53
The amendment would add a degree of materiality in deciding whether to open what are potentially lengthy and costly investigations. The wording of the amendment is consistent with the Competition Act 1998 and with European competition law. I must admit that borrowed that language, so that the clause would be consistent with the Act and EC competition law, both of which require an effect on competition to be appreciable for an adverse finding to be made. I hope that the Minister will accept the amendments.
So far, the Government's position has been that it is unnecessary to add the qualification because it would be unreasonable for market investigation references to be used for trivial competition policy. The OFT's draft consultation paper on market investigation references, which was published last July, does not specifically say that references will be made only if competition is distorted to an appreciable extent. If the policy is that there should be some sort of threshold in practice, the joint working party's view is that the legislation should say so. I beg to move.
Lord McIntosh of Haringey: My Lords, I shall not make a point about the fact that we are now discussing the word "appreciable", whereas we previously discussed the word "significant". There is no significant or appreciable difference between the words. The arguments that were used against the word "significant" can be used equally well against "appreciable". The noble Lord, Lord Hunt of Wirral, gave us the benefit of a repetition of the arguments that were used. Those arguments are true.
Market investigations exist to investigate and, where possible, rectify potentially significant competition problems. They are not a way of launching huge data-gathering exercises on a whim. The OFT has explained in its draft guidance, which is in the Library, what factors it will take into account when considering a possible market investigation reference. It will not use those powers lightly. Only when the OFT's preliminary inquiries suggest that there are potentially significant or appreciable—whatever word we use—competition concerns will it be justified in subjecting the industry to the more rigorous scrutiny of the Competition Commission. If the OFT were to refer what appeared to be a trivial case, as the noble Lord suggested, it would find itself having to defend the reasonableness of its decision before the Competition Appeal Tribunal.
What would we add by putting that in the Bill? We are concerned here with principles of economic analysis that cannot be reduced to statutory language. In ministerial statements of policy, we can explain properly how the reference powers will be operated. We can take account of materiality concerns, but we do not think that such matters can be more accurately or usefully conveyed by incorporating them into the clause. It could be said that the words "to an appreciable extent" would introduce an element of confusion. By themselves, they would not enshrine in statute all the matters that the OFT might be expected to take into account when deciding whether it had identified possible competition problems. Even if we
54
were to add explicit references to all those matters, we would still be left with the fact that the OFT was operating a discretionary power of reference and must use its judgment in each case to decide what weight to give to all the various factors.
Our approach is broadly in keeping with the Competition Act 1998, Article 81 of the EC treaty and the existing monopolies regime. None of those explicitly requires that there should be a significant, substantial or appreciable effect on competition. The question of materiality, to which the noble Lord, Lord Hunt of Wirral, referred, has been a matter for case law and guidance, rather than the drafting of primary legislation.
As regards Amendments Nos. 27 and 28, I cannot add much to what my noble friend Lord Sainsbury said. I can deal with the comparison which the amendments raise between market investigations and the provisions in Article 81 of the EC treaty and Section 2 of the Competition Act. Those provisions prohibit anti-competitive agreements where they prevent, restrict or distort competition to an appreciable extent. That qualification exists as a result of case law and guidance rather than being explicit on the face of the legislation concerned. There are reasons—I could go into them in detail but I will not—why it would be inappropriate to put a similar qualification into the clause.
Conformity with the Competition Act and Article 81 does not justify the amendments, nor dot they have anything to commend them. I am sorry to be negative about the matter but we have debated it on a number of occasions and the argument for the amendment is no stronger.
Lord Hunt of Wirral: My Lords, the Minister has made a significant concession, which has moved me to an appreciable extent. I therefore beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Phillips of Sudburymoved Amendment No. 26:
Page 101, line 22, at end insert—
"( ) In this Part the words "prevents, restricts and distorts competition" are to be given the same meaning as the equivalent words in the Competition Act 1998 (c. 41).""
The noble Lord said: My Lords, Amendment No. 26 seeks to add a subsection to Clause 130 to make clear what the noble Lord, Lord Sainsbury of Turville, conceded in Committee when I moved Amendments Nos. 95, 102 and 105 to what were then Clauses 126 and 129.
The noble Lord, Lord McIntosh, made a facial gesture when I said that the noble Lord conceded the point, but it will become clearer why we have tabled the amendment.
Lord McIntosh of Haringey: My Lords, perhaps the noble Lord, Lord Phillips, will allow me to intervene. I become suspicious when people talk of concessions. I made no concessions to the noble Lord, Lord Hunt,

55
and I do not believe that my noble friend Lord Sainsbury made any concessions to the noble Lord, Lord Phillips.
Lord Phillips of Sudbury: My Lords, it will become clear what I mean. The amendments tabled in Committee were designed to clarify that the making of any market reference in relation to the legal profession should take into account the special public interest considerations relevant to the supply of legal services. They were, as proposed in the amendments, to be able to take account of the interest of the sound administration of justice, the interests of the consumers of justice and of those lacking the same. In reply, the noble Lord, Lord Sainsbury, recognised the importance of the issues raised and said:
"The sound administration of justice and the promotion of access to justice are matters of the utmost concern to this Government".—[Official Report, 15/10/02; col. 818.]
He also recognised that the rules of the legal profession would be more appropriately dealt with under the Competition Act 1998 rather than by way of a market reference under the Bill. He nevertheless accepted that such rules were capable of being subject to a market reference under the provisions of the Bill—now in Clause 130—but concluded that the amendment was unnecessary on the grounds that the sound administration of justice and access to justice were capable of being addressed under the customer benefit provisions of the Bill. That is why I said that the noble Lord, Lord Sainsbury, conceded the points of the amendments moved in Committee.
However, both the Law Society and the Bar Council, which are taking a direct and close interest in the amendment, regard it as undesirable for such issues to be addressed only in that context. Under the scheme of the Bill, customer benefits fall to be considered in the context of remedies once an adverse effect on competition has been identified. Clause 130(2) provides that an adverse effect on competition arises if any feature of the market prevents, restricts or distorts competition.
As regards professional legal rules, these may well restrict competition while having effects that are purely beneficial, as the European Court of Justice found in the Wouters case (C-309/99). The effect of such rules should not be treated, therefore, as "adverse effects on competition", as they apparently would be in the light of Clause 130. We believe that the key words,
"prevents, restricts or distorts competition",
in Part 4 of the Bill should be interpreted in the same way as the equivalent words are interpreted in the Competition Act and under Articles 81 or 85 of the EU treaty. Then it would be clear that in circumstances such as those of the Wouters case, which was a partnership between lawyers and accountants, rules reasonably considered necessary for the proper practice of the legal profession were not to be treated as preventing, restricting or distorting competition.
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We also believe that the Bill should contain provisions that make it explicit that this is the intended basis of interpretation, just as the Competition Act in Section 60 makes clear that it is to be interpreted consistently with the corresponding provisions of Community law. Section 60 states:
"At any time when the court"—
that is to say, the English court—
"determines a question arising under this Part, it must act … with a view to securing that there is no inconsistency between—

(a) the principles applied, and decision reached, by the [English] court in determining the question; and

(b) the principles laid down by the Treaty and the European Court".

However, both the Law Society and the Bar Council strongly believe that the presence on the face of this mammoth Bill of an explicit provision such as that in the amendment would give a great deal of clarity. It would also avoid the prospect of different interpretations being used with regard to the words concerned. Above all, especially given the Government's repeated commitment to clarity of drafting and accessibility, it will make it abundantly clear on the face of the Bill that there should be a read-across to the relevant Euro law and the Competition Act 1998.
The amendment is wholeheartedly supported by the two professional bodies not out of self interest but because it should make the Bill, which is difficult enough, more comprehensible even to lawyers. It has the merit, which I hope the Government will see, that whereas in Committee the three amendments referred specifically to the legal profession, Amendment No. 26 does not. It applies to any body coming before the OFT or the Competition Commission and there avoids that criticism. I beg to move.
5.45 p.m.
Lord Brennan: My Lords, I support the amendment. At the Report stage, which unfortunately I was unable to attend, a debate took place which the noble Lord, Lord Phillips, led on the balance to be struck between the interests of competition as an economic principle and the interests of the community to have quality of justice. The one should not be invoked at the cost of the other.
During the debate, as I read it, my noble friend Lord Sainsbury, in a clear and forthright manner, accepted the strength of the argument that we should be careful not to damage the quality of justice by remorseless pursuance of market principles of competition. If to describe that as a concession is to demean the quality of his agreement, I will not use the word "concession". It was plain to be read as no doubt it was plainly said.
But the important issue is this. If a profession such as the law—or indeed any profession—wants to give quality of service to the public, there are certain features of that task which self-evidently cost money and which must be paid for through the fees that people charge. The examples are obvious. The desire for people to be properly qualified by continuous professional development and education must be in

57
the public interest. The need to regulate by discipline those who breach the standards the public would expect to be observed has to be paid for. Within my own profession—the Bar—the fact that we are now debating a levy against existing barristers which will be used to allow people from poorer backgrounds to become barristers is surely an acceptable expense within that profession. It meets a good public objective.
If any of those practices, which all involve cost, are to be regarded as necessary, they should be taken into account if and when any questions of competitive practices arise within the legal or any other profession. That was recognised in the Competition Act 1998, where the prohibition under Section 2 against anticompetitive practices was coupled with an exception in Schedule 4 for all the main professions, the structure of the Act meaning that those professions could, if they were able to establish a public interest, justify practices which might at first sight appear to be anticompetitive.
That was recognised in that Act; that Act sought to be compatible with our European treaty obligations; and, as I understood the debate on Report, my noble friend the Minister made clear that should competition practices in the law or any other profession be investigated, it was most likely to be done under that Act. If that is correct, the assurance which all professions would seek is that the present Bill should not provide some other route for investigation of professional practice if the Competition Act already fulfils that requirement.
If there is some further area of competition principle which this Bill deals with but the Competition Act does not, I am sure that my noble friend the Minister will make that clear. If there is no such extra dimension, I am sure that he will make it equally clear that we fall to be dealt with under the other Act and that if and when the Bill and the Act ever came to be considered, they would each be given the same meaning. All we seek on behalf of the professions is legislative consistency and sense, an objective with which I have no doubt my noble friend the Minister will agree. I am sure that he will show an equal measure of clarity and forthrightness in his acceptance of our arguments as did his noble friend the Minister on the previous occasion.
Lord McIntosh of Haringey: My Lords, the amendment: is more subtle than the ones put forward in Committee and on Report. It is particularly subtle in that although it is evidently concerned with the legal profession it does not actually say so. I admire that in a way.
There are two levels to the amendment. At a simple level, the amendment proposes that references to the prevention, restriction or distortion of competition are to be interpreted in the same way as the same references in the Competition Act. Our only objection to that at a simple level is that it is superfluous. The formulation "prevent, restrict or distort" has no
58
special meaning here which it does not have in the Competition Act, the monopoly provisions of the Fair Trading Act or in Article 81(1) of the treaty.
The OFT, in its draft guidance on market investigation references, notes that,
"EC case law and the past practice of the CC both indicate that the phrase should be interpreted broadly to encompass any reduction or dampening of actual or potential competition".
In our view, references to the prevention, restriction or distortion of competition already are to be given the same meaning as references to those concepts in the Competition Act because in both contexts the words concerned are used in the ordinary and natural meanings.
I could stop there, but to do justice to the amendment I have to refer to the question of legal professional rules because that is what the supporting speeches were about. Broadly speaking, the rules governing the provision of legal services in the United Kingdom are of two kinds: those made by statute and those made by the Bar Council and the Law Society. Rules made by statute are not the concern of this amendment. They do not fall within the Competition Act prohibitions or their EC equivalents and it is not within the power of the Competition Commission to change them in any way. Any action to modify such rules would be taken by the Government and Parliament.
Legal professional rules made by a body such as the Bar Council are likely in many cases to be considered to be decisions of undertakings within the meaning of Article 81(1) of the EC treaty. I understand that the Bar Council has agreed that that is the case. If the rules restrict competition to an appreciable extent and have an effect on trade between member states of the European Union, they may be prohibited under Article 81. There are a number of ways in which they may escape being prohibited, but the important thing to note is that it will be impossible for the Competition Commission, following a market investigation, to use its powers under Clause 160 to prohibit any rule which falls within the ambit of Article 81 but is not prohibited by it. This is because of the provisions of the draft new regulation for the application of Articles 81 and 82, which will implement the so-called "modernisation" of European Community competition law. We expect this to come into force before any investigations under Part 4 have been concluded.
The new regulation is expected to provide that national competition authorities must always apply Articles 81 and 82 where they are applicable and may only apply national competition law in such cases if the result of the national law proceedings is compatible with the result under Community law. So a professional rule which falls under Article 81(1) but would not, for whatever reason, have been prohibited under Article 81, will not be capable of being prohibited as a result of a market investigation. On the other hand, if a professional rule is prohibited under Article 81, no provision of national competition law can save it.

59
The only situation in which the Competition Commission will be empowered to take remedial enforcement action in respect of a professional rule is where that rule is not made by statute and is not a decision of an association of undertakings within the meaning of Article 81(1). Given the case law of what constitutes an association of undertakings, it may be that no legal professional rules at all fall into this category. However, in case there should be any such rules, I shall review the possible outcomes of the Competition Commission's analysis of them under Part 4.
In the normal way, assuming no public interest intervention, there are essentially four possible outcomes. The first is that the Competition Commission may find that the rule in question does not prevent, restrict or distort competition at all. The second is that the commission may find that a rule has both adverse and beneficial effects for competition. Having identified the adverse effect on competition, the commission would be bound to consider what could be done to remedy it. If the pro-competitive effects of the rule outweigh its restrictive effect, and if the rule could not be modified in such a way as to preserve its pro-competitive consequences while removing its restrictive effect on competition, then it would not be reasonable to seek to change it. On the other hand, if it were possible to modify a rule in that way, then it would be reasonable.
A third possible outcome is that the Competition Commission is certain that a rule has, overall, an adverse effect but decides not to take action to remedy that adverse effect because the rule concerned also has positive consequences, not in terms of competition but because it gives rise to relevant customer benefits—a point made by both the noble Lord, Lord Phillips, and my noble friend Lord Brennan—within the meaning of Part 4. These benefits would consist of services being provided, whether generally or to particular groups of customers, at a lower price—a point that was not made—to a higher professional standard, more innovatively or in a way which gives customers greater choice. Given the circumstances of the legal profession, and the kind of rules that might be under investigation, the concept of "customer benefits" may be found to be a more permissive one than the Article 81(3) exemption criteria were found to be in the Wouters case. That case related to rules of the Dutch Bar. I do not think that we can read across directly to the rules of the Bar Council.
Finally, the Competition Commission may simply decide that the rule restricts competition, that it has no redeeming features in terms of distinct pro-competitive effects, and that it either gives rise to no relevant customer benefits or that those that it does produce are not such as to outweigh the adverse effect that it has on competition. It will then be for the commission to consider what steps it is reasonable and practicable to take to remedy, mitigate or prevent the adverse effect on competition and any detrimental effects on customers.
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Of the four possible outcomes, three are likely to leave the hypothetical professional rule intact, while only one is likely to threaten it. If the supporters of this amendment are correct in their assessment of the value of legal professional rules—it is a wider subject than I want to enter into now—this last outcome is all but inconceivable. In any event, we do not think that the likelihood of any of the above outcomes would be affected one way or the other by making this amendment.
I must apologise for the length of my response, but when dealing with lawyers we have to go into a certain amount of detail.
To summarise, the words,
"prevents, restricts and distorts competition",
have no special meaning here or in the Competition Act. The legal professional rules made by statute fall outside competition law altogether. The fate of rules which constitute decisions of associations of undertakings will be decided not by the Competition Commission but in accordance with Article 81. Any rules which do not fall into either of these two categories will be subject to remedies by the Competition Commission following a market investigation only if the Competition Commission determines that they do not in fact bring the benefits which their supporters claim for them. All of this would still be the case were the amendment to be accepted, and it would add nothing to the Bill. I ask the noble Lord to withdraw it.
6 p.m.
Lord Phillips of Sudbury: My Lords, first, I should express considerable gratitude to the Minister for his detailed response. It will cause a little reading late into the night and, heaven knows, might even induce a little sleep. It was an important speech. Clarity, so far as one can have it in this sphere, is very important.
The crucial point, as the Minister twice made clear, is that if this amendment were on the face of the Bill it would not change the Bill's effect. He refuses to accept the amendment solely because it is unnecessary; it is superfluous. That was precisely the position taken on Report by the noble Lord, Lord Sainsbury of Turville. I apologise for referring earlier to the Committee stage; we discussed this matter on Report. That, at least, has been made abundantly clear by the exchanges that we have had in this House and that will be valuable and important.
The Minister made reference to Wouters, saying that the case related to the Dutch Bar and that there is no read across. In a literal sense, no, there is not; but the ratio of the decision is directly relevant to the interpretation of this Bill and of the Competition Act. It was to make clear that and similar points that we wanted this provision on the face of the Bill. It would have helped in its future interpretation. However, in the circumstances, I do not think that there is any question of dividing the House. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.

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Clause 133 [Questions to be decided on market investigation references]:
[Amendments Nos. 27 and 28 not moved.]
Clause 178 [Review of decisions under Part 4]:
Lord Kingslandmoved Amendment No. 29:
Page 135, line 14, at end insert—
"( ) For this purpose "any person aggrieved" shall mean any person who is a subject of the reference or possible reference and who is directly affected by the decision."
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendment No. 30.
Although I am moving Amendment No. 29, it has been spoken to sufficiently both in Committee and on Report for me to remain silent on it at Third Reading. I misled the Minister with respect to the equivalent amendment under Part 3 of the Bill. I had meant to move it but to say that I should not speak to it for the same reasons as I shall not speak to it in relation to market investigations.
The Minister is aware that the intention of Amendment No. 30 is to provide for a substantive appeal on the merits from decisions of the Competition Commission rather than the more limited form of judicial review proposed in the Bill. In contrast with appeals under the Competition Act, this Bill provides only for a form of judicial review for decisions taken under the new market investigation powers.
This amendment has some similarities to the amendment that we tabled to Part 3 of the Bill in respect of mergers. However, in my submission, it is of even greater importance. The degree of initial consideration given to potential market investigation is much less than the degree of consideration given at an initial stage to proposed mergers.
In Committee, the noble Lord, Lord Sainsbury of Turville, stated that, as with mergers, the Government continued to believe that a review based on judicial review was the right means of challenging decisions taken on market investigations. As with mergers, discretion is given to the authorities and I accept that in the Alconbury case suggests that, to a limited extent, material error could be grounds for intervention in judicial review cases. These arguments are to be found at col. 1528 of Hansard for 18th July.
However, in our view, the effect of the Bill as drafted is that in these cases, there will be only one examination—by the Compeitition Commission—with no other body empowered to check and confirm the facts as found or the conclusions drawn by it. The Office of Fair Trading will not have carried out any detailed review before making the reference to the commission: this is made clear by the draft guidelines on market investigation references published in July 2002. Under Clause 126, there is a relatively low threshold for making market investigation references: the OFT must have "reasonable grounds for suspecting"' that competition is prevented, restricted or distorted in some markets in the UK. In paragraph 3.7 of the draft guidelines the OFT states that it,
"will not attempt to make more than a preliminary analysis",
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before making a reference. This is borne out by paragraphs 2.11 and 2.19.
As I have noted, the route taken by the OFT will have a fundamental impact on the rights of the parties concerned and, in particular, on their right of appeal. There is no logic in creating an expert competition appeal tribunal if significant competition cases are required to be heard by the High Court under judicial review—a refrain that the Minister has heard on more than one occasion during today's debates. Moreover, as I have noted in connection with mergers, we very much doubt that judicial review will give the courts sufficient jurisdiction to ensure that the evidence has been correctly analysed and the appropriate conclusions drawn.
The Minister's reaction on Report did not change. It was, in substance, the same as that in relation to merger references. Yet the arguments are even stronger in relation to market investigations than they are in relation to mergers, for two reasons. First, although no fine would be imposed, should the outcome of a review be adverse to a particular company the remedies which may be available are extensive and include divestment of a business. Secondly, in some cases, the OFT will have the choice between a Chapter 2 investigation and a market investigation with, as already observed, significant differences in relation to the rights of the parties concerned and in particular their right of appeal.
Moreover, as in the case of mergers, judicial review will not necessarily offer redress against areas in relation to, say, market definition, degree of competitiveness in a market and the many other aspects involved in an investigation. I beg to move.
Lord McIntosh of Haringey: My Lords, nine-tenths of what I could say now I said on the earlier amendments on mergers. The arguments for judicial review as opposed to a total rehearing are unchanged, and it would be unfair of me to subject the House to them again.
I ought to refer to the point that the noble Lord, Lord Kingsland, raised today and in correspondence with my noble friend Lord Sainsbury; that is to say, the choice that the OFT might have between a market investigation and a Competition Act 1998 decision. I do not think that the noble Lord used the word bias, but he suggested that the OFT might be tempted to use one method rather than another because of the nature of the appeal proceedings. I think I understood the noble Lord correctly on that matter.
When the noble Lord raised the matter in Committee, my noble friend Lord Sainsbury sought to reassure him that no such bias would arise because the two different types of appeal were appropriate to two different types of decision. My noble friend wrote to the noble Lord on the 30th September with a copy of the guidelines that the OFT intends to publish on when it would pursue a market investigation and when a Competition Act decision. The clear message from the OFT is that it will always consider action under the Competition Act first, and that no account will be

63
taken of the relevant appeal mechanism. I hoped that that would satisfy the request for objective guidelines and that the noble Lord would be prepared—I think he used these words himself—to move away from this amendment.
I do not expect the noble Lord to be satisfied with the judicial review arguments in the more general sense, but we have had that argument and passed beyond that stage. I hope that this amendment will not be pressed.
Lord Kingsland: My Lords, I think I made it clear in my initial observations that I regard the case against judicial review in market investigations to be even stronger than in the case of mergers.
That is partly for the reason on which the Minister has reassured me, for which I thank him. But, more importantly, it is also because the initial stage of the investigation of a potential market distortion is, in my submission, little short of derisory. There is only one real bite at the cherry, and that is insufficient.
Given the approach of the courts to commercial judicial review, I have little hope that the kind of review that will be offered to a complainant will look properly at the substance of the decision taken. It is important that the substance of decisions is looked at carefully. Quite apart from the issue of fairness, it will keep the investigator on his toes. For that reason, although I did not call a vote on mergers, I wish to test the opinion of the House.
6.14 p.m.
On Question, Whether the said amendment (No. 29) shall be agreed to?
Their Lordships divided: Contents, 72; Not-Contents, 113.

Division No. 3

CONTENTS

Anelay of St Johns, B.

Fowler, L.

Attlee, E.

Geddes, L.

Baker of Dorking, L.

Glentoran, L.

Beaumont of Whitley, L.

Goschen, V.

Biffen, L.

Griffiths of Fforestfach, L.

Blaker, L.

Hayhoe, L.

Brooke of Sutton Mandeville, L.

Henley, L.

Brougham and Vaux, L.

Hooper, B.

Byford, B.

Howe, E.

Campbell of Alloway, L.

Howe of Aberavon, L.

Carlisle of Bucklow, L.

Howe of Idlicote, B.

Carnegy of Lour, B.

Howell of Guildford, L.

Cavendish of Furness, L.

Hunt of Wirral, L.

Colwyn, L.

Jenkin of Roding, L.

Cope of Berkeley, L. [Teller]

Jopling, L.

Craig of Radley, L.

King of Bridgwater, L.

Craigavon, V.

Kingsland, L.

Dean of Harptree, L.

Lamont of Lerwick, L.

Dixon-Smith, L.

Lang of Monkton, L.

Eden of Winton, L.

Luke, L. [Teller]

Elles, B.

Lyell, L.

Elliott of Morpeth, L.

MacGregor of Pulham Market, L.

Elton, L.

Forsyth of Drumlean, L.

Marlesford, L.

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Masham of Ilton, B.

Rawlings, B.

Mayhew of Twysden, L.

Reay, L.

Monro of Langholm, L.

Rees, L.

Mowbray and Stourton, L.

Renton, L.

Moynihan, L.

Rotherwick, L.

Murton of Lindisfarne, L.

St John of Fawsley, L.

Noakes, B.

Sharples, B.

Northbrook, L.

Shrewsbury, E.

Northesk, E.

Taylor of Warwick, L.

O'Cathain, B.

Trumpington, B.

Park of Monmouth, B.

Tugendhat,L.

Peyton of Yeovil, L.

Waddington, L.

Walker of Worcester, L.

NOT-CONTENTS

Acton, L.

Hughes of Woodside, L.

Ahmed, L.

Hunt of Chesterton, L.

Amos, B.

Irvine of Lairg, L. (Lord Chancellor)

Andrews, B.

Ashley of Stoke, L.

Islwyn, L.

Ashton of Upholland, B.

Janner of Braunstone, L.

Bach, L.

Jeger, B.

Barnett, L.

Jordan, L.

Bassam of Brighton, L.

King of West Bromwich, L.

Bernstein of Craigweil, L.

Kirkhill, L.

Bhatia, L.

Layard, L.

Billingham, B.

Lea of Crondall, L.

Blackstone, B.

Lipsey, L.

Blease, L.

Lofthouse of Pontefract, L.

Borne, L.

Macdonald of Tradeston, L.

Bragg, L.

McIntosh of Haringey, L. [Teller]

Brennan, L.

Brookman, L.

MacKenzie of Culkein, L.

Burlison, L.

Mason of Barnsley, L.

Campbell-Savours, L.

Massey of Darwen, B.

Christopher, L.

Merlyn-Rees, L.

Clark of Windermere, L.

Milner of Leeds, L.

Clinton-Davis, L.

Mitchell, L.

Corbett of Castle Vale, L.

Morgan, L.

Crawley, B.

Morris of Aberavon, L.

David, B.

Parekh, L.

Davies of Coity, L.

Patel of Blackburn, L.

Davies of Oldham, L.

Pendry, L.

Dean of Thornton-le-Fylde, B.

Pitkeathley, B.

Desai, L.

Plant of Highfield, L.

Dixon, L.

Prys-Davies, L.

Dormand of Easington, L.

Radice, L.

Dubs, L.

Randall of St. Budeaux, L.

Elder, L.

Rendell of Babergh, B.

Evans of Parkside, L.

Richard, L.

Falconer of Thoroton, L.

Rooker, L.

Farrington of Ribbleton, B.

St. John of Bletso, L.

Faulkner of Worcester, L.

Sewel, L. Sheldon, L.

Filkin, L.

Simon, V.

Fyfe of Fairfield, L.

Stone of Blackheath, L.

Gale, B. Gavron, L.

Strabolgi, L.

Gibson of Market Rasen, B.

Symons of Vernham Dean, B.

Gordon of Strathblane, L.

Taylor of Blackburn, L.

Goudie, B.

Temple-Morris, L.

Gould of Potternewton, B.

Thornton, B.

Graham of Edmonton, L.

Turnberg, L.

Gregson, L.

Turner of Camden, B.

Grenfell, L.

Walker of Doncaster, L.

Grocott, L. [Teller]

Warwick of Undercliffe, B.

Harris of Haringey, L.

Weatherill, L.

Harrison, L.

Whitaker, B.

Haskel, L.

Whitty, L.

Hayman, B.

Williams of Elvel, L.

Hilton of Eggardon, B.

Williams of Mostyn, L. (Lord Privy Seal)

Hogg of Curnbernauld, L.

Hollis of Heigham, B.

Winston, L.

Howie of Troon, L.

Woolmer of Leeds, L

Resolved in the negative, and amendment disagreed to accordingly.
6.25 p.m.
[Amendment No. 30 not moved.]
Clause 180 [Orders under Part 4]:
Lord McIntosh of Haringeymoved Amendment No. 31:
Page 136, line 38, at end insert—
"(8A) If, apart from this subsection, an order made by the Secretary of State under section 152(3) would be treated for the purposes of the standing orders of either House of Parliament as a hybrid instrument, it shall proceed in that House as if it were not such an instrument."
On Question, amendment agreed to.
Clause 187 [Cartel offence]:
Lord Hunt of Wirralmoved Amendment No. 32:
Page 143, line 8, at end insert—
"(1A) "Dishonestly agrees" means, for the purposes of subsection (1), making an agreement knowing that it has one or more of the consequences set out in subsections (2) to (6) in breach of the prohibition contained in section 2 of the 1998 Act (the prohibition) and not meeting the criteria in section 9 of the 1998 Act (the criteria for individual and block exemptions), with the dishonest intention of causing detriment to consumers or customers."
The noble Lord said: My Lords, we have debated the issue previously. I do not propose to set out the arguments in detail again. I shall merely say that there should be a clear definition of what constitutes a dishonest agreement.
Although we have attempted to define "dishonestly agrees" in the amendment, I hope the Minister understands that our prime purpose is to say that there ought to be a proper definition. If the Government can find a better one than ours, we should be very pleased to hear from them.
Clause 187 sets out the cartel offence. I can imagine defence counsel arguing that an agreement cannot be dishonest if it is exempted under UK competition law. That is a further reason why we need to provide a clear boundary for the criminal conduct. In doing so, surely the best way forward is to have linkage to the Competition Act in the definition.
In keeping with the principles of better regulation, the new offence should be set out in the clearest possible terms so that those affected can readily understand what they need to do, or not to do, to avoid committing a criminal offence. I beg to move.
Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Hunt, for—if the noble Lord, Lord Kingsland, will allow me to steal the word—the telegraphic way in which he introduced the amendment. I do not want to go over the ground again.
The definition in the amendment is not workable. In fact. it is worse than unworkable, because the offence would be effectively unprosecutable. The definition includes a requirement to prove knowledge of a breach of the Competition Act 1998. It would be extremely
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difficult, if not impossible, for the Crown to prove beyond reasonable doubt that the defendant who had concluded a cartel agreement did so knowing that he was breaching particular sections of the Competition Act 1998. Our objective of creating real deterrence against cartels would be undermined. I am utterly unconvinced by that part of the wording of the amendment.
I am also unconvinced because, just like the previous amendment on the subject, it includes the word "dishonest". In other words, it is circular. Trying to define dishonesty with the phrase,
"with the dishonest intention of causing detriment",
takes us to a chicken and egg situation. I cannot see how we can get out of that. That is not just a debating point. It would be a debating point in Committee or on Report, but this is Third Reading. The provisions have got to be right now and this is wrong.
There is a perfectly good definition in case law—the Ghosh test meaning of dishonesty. As the noble Lord, Lord Hunt, did not go into any detail on that, I shall not do so either. It is all on the record. I hope the amendment will not be pressed.
Lord Hunt of Wirral: My Lords, I thought that the noble Lord, Lord Razzall, dealt with the Minister's point about the Ghosh case in the last debate, so I did not want to repeat that.
I greatly regret that the Minister is still unwilling to move on providing a proper definition in statute law. He relies solely on the definition in case law, which is not adequate. However, in the circumstances, as he is not willing to move, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 33 not moved.]
Clause 188 [Cartel offence: supplementary]:
[Amendment No. 34 not moved.]
Clause 189 [Cartel offence: penalty and prosecution]:
The Deputy Speaker (Lord Murton of Lindisfarne): My Lords, before I call Amendment No. 35, I must tell the House that if it were to be agreed to, I could not call Amendment No. 36 owing to pre-emption.
6.30 p.m.
Lord Kingslandmoved Amendment No. 35:
Page 144, line 40, leave out subsection (2) and insert—
"(2) In England and Wales and Northern Ireland, proceedings for an offence under section 183 may be instituted only by the Director of the Serious Fraud Office with the consent of the OFT."
The noble Lord said: My Lords, in moving Amendment No. 35, I intend also to speak to the amendments in the group beginning with Amendment No. 33 and the group beginning with Amendment No. 35. As the Minister may be aware, the Public Bill Office drew to my attention the infelicities of some of the amendments in these groups. On mature reflection, I must say that I agree with the Public Bill Office. I am

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therefore very happy not to move or speak to Amendments Nos. 33, 34, 37 and 38. However, in moving this amendment, I shall also speak to Amendments Nos. 36, 39 and 40.
This matter has been well rehearsed in Committee and on Report. The issue is the degree to which the OFT should become involved in criminal investigations. In the Government's response—of December 2001—to consultation, it was stated that they had decided that the SFO should be the lead prosecutor. The Minister is well aware that we agree with that. In our submission, however—and I believe that this view is shared by noble Lords on the Liberal Democrat Benches—the Bill does not reflect the Government's statement as it gives equal powers to the OFT and the SFO and also gives the OFT extensive criminal investigation powers.
The powers of the OFT to investigate civil infringements committed by companies under the Competition Act 1998 are very different from the criminal powers under this Bill. The rights of defence differ as well as the procedures. As the noble Lord, Lord McIntosh, has heard me say before, giving the OFT both sets of powers will lead to confusion, particularly as most criminal investigations are likely to stem from an initial investigation under the Competition Act. We question whether the checks and balances within, and the experience of, the OFT are sufficient to prevent confusion of the two roles.
Moreover, we do not accept the Government's view as stated in another place that an individual's trial would not be prejudiced by an adverse finding in respect of substantially the same matter against his employer company by, say, the Commission in Brussels under Article 81.
Nor do we think it appropriate that the chairman of the OFT, who has no experience of criminal investigations and prosecutions, should authorise surveillance on application by one of his officials under the Regulation of Investigatory Powers Act 2000. Instead, if the OFT is to have surveillance powers, application should be made to an independent judicial authority such as the Attorney General or a High Court judge.
In Committee, the noble Lord, Lord McIntosh, stated that the SFO and the OFT would work together in both cartel investigations and also decisions to prosecute. However, the noble Lord went on to say that it will be the SFO who will undertake any prosecution in England, Wales and Northern Ireland. The Government no doubt believe that this method will link the SFO's expertise in criminal prosecutions with the OFT's expertise in competition investigation. The noble Lord, Lord McIntosh, was anxious to underline that the Government do not expect a large number of prosecutions. He said that on 18th July 2002 at col. 1542 of the Official Report.
I moved this amendment again on 15th October 2002 on Report. Although the Government stated in Committee that they did not envisage that the OFT
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would take on the role of prosecutor unless there was a change of circumstances in the future, the noble Lord, Lord McIntosh, said:
"The OFT would have to take time to develop the necessary capability and resource before it could take on a prosecution role".—[Official Report, 15/10/02; col. 841.]
That implies that it is intended that the OFT will in due course become a prosecutor.
Although it was argued that the OFT could have, in effect, Chinese walls to separate the investigatory from the prosecutorial function, it is a fundamental principle that distinctions in roles are transparent and capable of being understood by those affected by them. Given that the internal structure of the OFT can be changed at the instance of the management of the OFT, there is no guarantee for individuals that the internal divisions will be maintained, or maintained at an appropriate level.
As the noble Lord, Lord Razzall, pointed out (at col. 840 of the Official Report of 15th October 2002) the Government have resisted some amendments on the ground that they cover eventualities that might not arise. Here, the Government are specifically catering for a situation which they say is unlikely to arise.
I apologise to the noble Lord, Lord McIntosh, for returning to this matter, but we feel that there is a real risk of confusion of powers. It is crucial on an issue affecting the fundamental rights of the citizen that the Government ensure that the procedures laid down in the Bill are as fair as they possibly can be. I beg to move.
Lord McIntosh of Haringey: My Lords, I am not entirely clear from what the noble Lord, Lord Kingsland, said at the beginning whether he is speaking only to Amendments Nos. 35 and 36 or speaking also to Amendments Nos. 39 and 40, which are concerned with the Regulation of Investigatory Powers Act. If it is the latter, I should reply to all four amendments.
Lord Kingsland: My Lords, I apologise to the noble Lord. I dealt with the group beginning with Amendment No. 33 and then spoke to Amendments Nos. 35, 36, 39 and 40. I thought that I had made that clear. I said that I would speak to both groups because I noted that the group beginning with Amendment No. 33 includes Amendments Nos. 37 to 41. I think that that is consistent with what I said.
Lord McIntosh of Haringey: My Lords, the misunderstanding was my fault. I shall deal first with Amendments Nos. 35 and 36 and then go on to Amendments Nos. 39 and 40.
As has been said, Amendments Nos. 35 and 36 are similar if not identical to earlier ones which have been identified. The core of the accusation, if I may put it that way, is that it is inappropriate for the Office of Fair Trading to have concurrent investigation and prosecution powers with the Serious Fraud Office. The Bill provides for the SFO and the OFT to prosecute the new offence in England, Wales and Northern Ireland,

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but the expectation of the Government, the SFO and the OFT is that the SFO will carry out all prosecutions initially. The noble Lord, Lord Kingsland, has correctly quoted me as saying something like that on Report. The SFO has the necessary resources and experience for the criminal prosecution of this type of case, having prosecuted other white-collar crime such as insider dealing for many years.
Amendments Nos. 35 and 36 seek to amend the arrangements for the prosecution of the new offence. The effect is the same in both cases. I presume that the reference in Amendment No. 35 to Clause 183 should be to 187 under the new numbering. Both amendments would make the SFO the sole prosecutor, but subject its prosecutorial role to the consent of the OFT. On the latter point, it would be neither workable nor appropriate to give the prosecution role to the SFO but to deny it the discretion to take the final decision on which cases to prosecute. Of course, the SFO will work closely with the OFT on cartel cases which look likely to lead to criminal prosecution, but the final decision will rightly be theirs.
The noble Lord, Lord Kingsland, cast doubt on the kind of conflict that he claims might exist within the Office of Fair Trading as between its different responsibilities. The Director-General of Fair Trading commissioned an independent review to consider changes to OFT procedures required by the introduction of criminal sanction for cartels. That review was conducted by Sir Anthony Hammond, the former Treasury Solicitor, and Roy Penrose, Queen's Police Medal. They concluded that if the OFT were to prosecute,
"it would [also] be possible to ensure, by creating suitable internal structures, the separation of the investigatory from the prosecutorial function, thus complying with what has become known as 'the Phillips principle' ie: that those taking the legal decision to prosecute should be seen to be separate from and independent of the investigators".
That is not just their opinion. They talked to officials from Customs and Excise and the Inland Revenue, both of which have investigatory and prosecutorial powers. Therefore, I cannot accept that part of the argument of the noble Lord, Lord Kingsland.
As I have said, the OFT role initially will be solely as investigator. However, the Bill allows the flexibility for the OFT to take on a prosecutorial role at some time in the future, if that becomes appropriate. That might be the case if the number of cartel prosecutions created a conflict with other SFO priorities, although I should emphasise that we do not expect a large number of prosecutions. Again, the noble Lord, Lord Kingsland, reflected correctly what I said on Report. Before it could take on a prosecution role, the OFT would have to develop the necessary capability and resource. None of this is a new element of government policy—we said all this in our response to consultation in December 2001. We said that the SFO should be the,
"lead prosecutor in England, Wales and Northern Ireland with the OFT as an additional named prosecutor".
The clause as it stands is consistent with this policy. I hope that Amendments Nos. 35 and 36 will therefore not be pressed.
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The noble Lord, Lord Kingsland, spoke also to Amendments Nos. 39 and 40. I could respond also to Amendment No. 41. These amendments concern powers of investigation. They would simply take out certain clauses. They would remove the power for the OFT to investigate the offence; the power to seek documents under notice; and any powers given to authorised persons. Some of the powers remain, but they are meaningless in the light of the proposed amendments. These powers are necessary to investigate the offence by the most appropriate investigatory body for such an offence—the Office of Fair Trading. These clauses authorise the OFT to investigate cartel offences and exercise important powers of investigation if there are reasonable grounds for suspecting that an offence under Clause 187 has been committed. The powers are intended to be tough and effective yet provide safeguards for those being investigated. They are broadly modelled on investigatory powers conferred on the Serious Fraud Office by the Criminal Justice Act 1987. The SFO is the intended prosecutor for this offence and may at a later stage of an investigation carry out some follow-up or additional investigation. For that reason it is necessary to align the OFT investigatory powers with those given to the SFO. The investigatory powers are restricted to this offence only; that is, cartels. The OFT will continue to investigate infringements of Chapters 1 and 2 of the Competition Act 1998 using powers specifically granted under that Act. Those powers are intended to facilitate civil investigations against undertakings.
The OFT can carry out an investigation if there are reasonable grounds for suspecting that an offence under Clause 187 has been committed. The powers of investigation cannot be used unless that threshold is met. Whether there are reasonable grounds for suspicion will depend on the information available. To remove those powers would make an investigation impossible and would render the new offence meaningless. For the new offence to carry a deterrent effect and to eliminate existing and future cartels appropriate powers of investigation are necessary. Those powers need to be accompanied by appropriate safeguards and also provide for the power to hold those responsible who obstruct justice and fail to comply with an investigation. The clauses provide the necessary powers of investigation, adequate safeguard and appropriate offences.
I did not say this when I referred to the definition of "dishonesty" earlier, but, frankly, if we had agreed to the definition of "dishonesty" proposed in the earlier amendments, we would have taken the heart out of the cartel provisions in Part 6 of the Bill. If we take away the investigatory powers provided in the Bill by removing the clauses we are discussing, we effectively take the heart out of the cartel part of the Bill. It is impossible to conceive how we could have an effective regime against hard-core cartels of the kind which are targeted in this part of the Bill unless we have the parts of the Bill which would be removed by these amendments.

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My understanding has always been that both opposition parties supported the criminalisation of cartels. However, that is not shown in the amendments we are discussing. If the House were to accept them, we would lose this important part of the Bill and this important protection for the consumers of this country.
6.45 p.m.
Lord Kingsland: My Lords, I am most grateful to the Minister for his detailed reply. I have heard large parts of it before but that is not his fault. He has had to listen to large parts of my submissions on this subject as well.
If it were the intention of the Opposition to achieve the effect with respect to investigative powers that the Minister suggests, I would wholly agree with his conclusions about our inconsistency. But the Minister knows very well that that is not the purpose of these amendments. The purpose of these amendments is to make it absolutely clear that where criminal prosecutors are concerned, it is the SFO that is the responsible body and not the OFT.
The reason for that is as follows: to seek to give coterminous responsibilities, or to blend the two in some way or other, would give, in the case of a criminal prosecution, an unfair advantage to the prosecutor, and place the potential defendant at a serious disadvantage. These difficulties could be overcome in the ways that the Opposition have suggested in the course of the Committee and Report stages of this Bill. The Minister has to see our amendments in that context. They are certainly not wrecking amendments. Of course, we accept that the SFO would have to have full investigative powers in circumstances where it proposed to undertake a criminal prosecution.
However, the Minister is sticking by his guns. I am not, on balance, inclined to take the opinion of the House. Therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 36 and 37 not moved.]
Clause 190 [Extradition]:
[Amendment No. 38 not moved.]
Clause 191 [Investigation of offences under section 187]:
[Amendment No. 39 not moved.]
Clause 192 [Powers when conducting an investigation]:
[Amendment No. 40 not moved.]
Clause 194 [Exercise of powers by authorised person]:
[Amendment No. 41 not moved.]
Clause 198 [Surveillance powers]:
[Amendments Nos. 42 and 43 not moved.]
Clause 203 [Disqualification]:
[Amendment No. 44 not moved.]
Clause 208 [Reform of community competition law]:
Lord McIntosh of Haringeymoved Amendment No. 45:
Page 158, line 3, leave out "or transitional" and insert " transitory, transitional or saving"
On Question, amendment agreed to.
Clause 242 [Overseas disclosures]:
[Amendment No. 46 not moved.]
Clause 252 [Liquidator's powers]:
Lord Kingslandmoved Amendment No. 47:
Page 187, line 6, at end insert—
"3B. Power to bring or defend any action or other legal proceedings in the name and on behalf of the company"
(2) Paragraph 4 in Part I of Schedule 4 to the Insolvency Act 1986 (c. 45) shall cease to have effect."
The noble Lord said: My Lords, I apologise to the Minister for returning to this matter. On Report he will have heard me say that I would not return to it; but on reading Hansard I noted that the Minister drew my attention to the Lewis case. As soon as I reflected on the point, I realised that there had been some misunderstanding between the noble Lord and myself about the basis upon which the amendment was tabled on Report. Therefore, I return to it now.
On Report, I proposed an amendment that would have had the effect that a liquidator would need the sanction of the court, or the liquidation committee, to take legal proceedings under Sections 213, 214, 238, 239 or 423 of the Insolvency Act 1986 in a compulsory liquidation; but that there would be no such need in a creditors' voluntary liquidation.
The reason behind that amendment was that Schedule 4 to the Insolvency Act 1986 presently provides that a liquidator has power to bring or to defend any action or other legal proceedings in the name of, and on behalf of, a company and must seek the sanction for doing so in a compulsory liquidation, but not in a voluntary liquidation. My view was that proceedings under Sections 213, 214, 238, 239 or 423 of the Insolvency Act should be treated in exactly the same way.
The clause, as presently drafted, makes the distinction between proceedings in the name of, and on behalf of, the company, on the one hand, and proceedings under Sections 213, 214, 238, 239 or 423, in the name of the liquidator, on the other. The former do not require any sanction in a voluntary liquidation; but the latter would require sanction in a voluntary liquidation. I can see no rationale whatever for the distinction. Therefore, I have tabled an amendment putting all such proceedings on an equal footing.
The noble Lord, Lord McIntosh, attempted to answer my amendment but, through no fault of his own, and doubtless because of the inept way in which I put the point, he missed the point. He thought that my amendment was connected with the Lewis case, otherwise known as Floor Fourteen. Although that case has some relevance to this clause and to my amendment, it is more concerned with the costs and

73
expenses of proceedings under the various sections rather than the actual power to proceed. However, in answering me on Report, the Minister said:
"We would not want any"
funds for unsecured creditors,
"to be used by the liquidator in pursuing legal action unless the creditors approve. After all, it is a commercial decision for the creditors to choose between, say, a five pence in the pound dividend payable now, or whether to allow the liquidator to pursue a claim which may result in a 50 pence in the pound dividend at a later stage".—[Official Report, 21/10/02; col. 1131.]
I have thought carefully about what the noble Lord said. His arguments are compelling not just as regards proceedings under Sections 213, 214, 238, 239 or 423, but also about proceedings in the name of the company. The same point applies to both kinds of proceedings. Funds should not be used by the liquidator in pursuing legal action, be it under the relevant sections or in the name of the company, unless the creditors approve. That is a commercial decision for the creditors in both cases.
Therefore, on this occasion, I have tabled a different amendment. This shows the value of debate. The effect of my amendment is to put proceedings in the name of the company on exactly the same footing as proceedings under these various sections. In all such proceedings, the liquidator will need the sanction of the court or of the liquidation committee in a compulsory liquidation; and the sanction of the court, the liquidation committee or the company's creditors in a voluntary liquidation. I beg to move.
Lord McIntosh of Haringey: My Lords, I have no objection to the noble Lord, Lord Kingsland, tabling an amendment when he said he would not. That is his privilege. Unless I misunderstand him totally, I am puzzled to find him tabling an amendment that is the exact reversal of that tabled on Report. I want to ensure that I understand him correctly.
The present position is that liquidators in compulsory liquidations need the sanction of court or creditors prior to defending or bringing actions in the name of or on behalf of the company. The previous amendments were tabled to amend this section and to make all antecedent recoveries pursuable by voluntary liquidator without sanction as is the situation with bringing and defending all other legal actions at present.
This amendment would mean that liquidators in voluntary liquidation must also obtain sanction for such actions. We have provided that for antecedent recovery action in respect of fraudulent or wrongful trading, preferences, transactions at under value and transactions defrauding creditors, and those actions are not in the name of or on behalf of the company, in all liquidations sanction will be required.
We have heard no evidence from insolvency practitioners or creditors or other interested parties that they feel that there is a problem with not having to have sanction to bring or to defend legal proceedings in the name of the company. As things stand in the Bill a voluntary liquidator will have to have sanction to pursue proceedings where they are
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seeking to restore the company to the position it would be in if some kind of wrongdoing had not taken place, but not to bring or to defend other legal action. Other legal proceedings are not analogous to the legal actions that the Bill proposes should require sanction.
The reason that sanction should be sought by a voluntary liquidator regarding an antecedent recovery action—for example, seeking to impugn a prior transaction as a transaction at an undervalue—is that this is an action that seeks to restore the company back to the position it should be in, and this is a decision which may use up available funds. The creditors should have the power to decide whether they wish to pursue the action in the hope of receiving a larger dividend than they would receive if no remedy was sought.
I caught a glimmer of that in what otherwise was to me a rather confusing speech. I am sure that when I read it the pure, pristine logic will become apparent. I do not believe that this change is any more desirable than that proposed on Report.
Lord Kingsland: My Lords, I am grateful to the Minister for responding so sportingly to an amendment that has first appeared at Third Reading. It would be churlish of me, having given the Minister an initial glance, to press the matter to a vote. This may be a matter to return to in the course of fresh legislation somewhere down the road. Meanwhile. 1 beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
7 p.m.
Clause 255 [Duration of. bankruptcy]:
Lord Hunt of Wirralmoved Amendment No. 48:
Page 188, leave out lines 16 to 19.
The noble Lord said: My Lords, unless any noble Lord has an objection, in moving Amendment No. 48, I shall speak also to Amendments Nos. 49, 50, 51, 52 and 53. The amendments relate to the significant worries which have been raised by these Benches about the bankruptcy provisions.
A similar amendment to Amendment No. 48 was tabled in Committee and was the subject of extensive debate on Report. It is disappointing that the Government have not listened to the widespread and real worries raised in connection with the current provision in the Bill which would effectively allow a bankrupt to be discharged within months or, as I understand an official in the noble Lord's department estimated, eight weeks of his bankruptcy.
On Report, we had an extensive debate over the compelling research published by the Centre for Economic and Business Research which predicted that there could be an increase in the number of bankruptcies of over 50 per cent as a result of the proposed changes in legislation. The Minister was not sympathetic to that view. One of the Government's main arguments in favour of a much reduced bankruptcy period is that it would be countered by the introduction of a tougher regime of bankruptcy

75
restriction orders designed to apply to those whose conduct has been irresponsible, reckless or otherwise culpable. However, it appears that the criteria listed as grounds for making such restriction orders set out in Schedule 20 are aimed almost exclusively at business bankrupts. It is difficult to understand how they could apply to consumers. It is clear that in the Government's attempt, which we support, to encourage a more entrepreneurial business culture, they have given virtually no consideration to how those reforms will impact on consumers and will be perceived, in particular by those consumers who abuse the system.
There is a clear risk that many, in particular those with little to lose from bankruptcy, will see the possibility of getting out of bankruptcy in a matter of months or weeks as an easy option. That will surely appeal to many consumers struggling with credit card debts. There is still a question mark over student loans. The position has not been properly clarified. Many of those consumers have few assets and would find it relatively painless and appealing to give up the struggle to repay debt and be free to start again within a few weeks. Those actions will come at a huge cost to both the borrowing and lending communities.
The Minister's response was to ask: if we believe that, why are we not coming forward with stronger amendments? On reflection, perhaps we should have gone further. But that is not an argument for rejecting this group of amendments. They preserve the spirit and aims of the Bill but seek to limit abuse and the negative effects that will surely follow if the Government do not move.
In Amendment No. 53, as a last resort we have now said to the Government "If you believe so much in what you set out in the legislation, then you should at least have a proper investigation". One of the criticisms put forward by the Minister of the compelling research published by the Centre for Economic and Business Research—I understand that the Minister's officials have had further discussions over that research—was that they were not persuaded by it. But the Government have not had independent research of their own. They are proceeding with this important legislation when there has been little consultation over the effect of this part of the Bill and little research—none by the Government—into its effects.
New Section 289 is contradictory. It imposes on the Official Receiver a duty to carry out an investigation of the bankrupt's affairs. However, in subsection (2) it permits the Official Receiver to decide for himself that it is not necessary to comply with that duty.
Instead of firing slings and arrows of outrageous insults across the Chamber, perhaps the answer is for the Minister to say, "Yes, support us on this because we believe that we are right. But we shall have a full and independent investigation"—as is proposed in Amendment No. 53—"a rolling study of the effects of the personal insolvency aspects of the legislation following the third anniversary of this Act coming into
76
force". That is surely a reasonable approach. I hope that the Minister will respond positively. I beg to move.
Lord Phillips of Sudbury: My Lords, I support the amendment and Amendment No. 53. At Second Reading, I said that I was amazed by the contents and philosophy underlying this mammoth Bill. I conjectured that had it been brought forward in the latter days of the former Conservative administration, those Benches which are now the Government Benches would have been in uproar.
The noble Lord, Lord Hunt, properly and fairly describes some of the defects of the bankruptcy provisions. Perhaps I may briefly allude to my 26-year stint as the "legal eagle" on the Jimmy Young Show. Nothing so enrages the so-called ordinary citizen as some of the effects of bankruptcies and liquidations. The circumstances often cause a local scandal. I would not have reduced the discharge period to a year.
Amendment No. 48 seeks to exclude subsection (2) of new Section 279. That could work in a bizarre way. The Official Receiver can file with the court a notice saying that his investigation is unnecessary or has been concluded. In that event, the bankrupt is discharged when the notice is served. That seems an extraordinarily advantageous arrangement. How quickly the investigation is dealt with will depend on how many clerks serve in the Official Receiver's office. How quickly or slowly the bureaucrats move on the matter seems an inadequate basis on which to determine the period during which a person is bankrupt. It gives an advantage to bankrupts whose affairs are simple. There may be a single creditor. For example, Nick Leeson has a single creditor for £670 million called Barings Bank. Mr Young had a single creditor for about £700 million: Morgan Grenfell. The conduct of his affairs could be dealt with quickly, perhaps within a fortnight, with a notice saying, "Over and done with", and he is free. It is a hopelessly inadequate method of dealing with a section of our law which has an element of public disapprobation attached to it.
When fundamentally changing such a basic aspect of business and personal life, at the very least it must make good sense to set up a commission, as anticipated in Amendment No. 53. I hope that the Government believe that there is good sense in doing so. It will be an opportunity for us all to take stock of the changes in a more informed way. I hope that the Government will accept that proposal and the other amendments in the group.
Finally, the Bill's changes in law as a whole are designed to make our entrepreneurial culture even more entrepreneurial. I begin to wonder whether Mr Meacher—and, I understand, Mr Bercow—in the other place may be more in tune with public concern about not the lack of entrepreneurialism but the

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decline in probity, trust, honesty and public confidence in our life. All of the amendments would tilt the scales back a little in that direction.
Lord McIntosh of Haringey: My Lords, I shall attempt to deal with this rather disparate group of amendments. I do not object to them being grouped together; do not get me wrong.
Amendment No. 48 seeks to remove the provision that will allow bankrupts to be discharged within one year after the date of bankruptcy where the official receiver has concluded that further investigation of the conduct and affairs of the bankrupt is unnecessary. We have heard suggestions from the Opposition—we heard them again today—and representatives from the credit industry that the early discharge provisions will lead to an increase in the number of bankruptcies. That was referred to—not at length—by the noble Lord, Lord Hunt, when he moved the amendment. He mentioned the CEBR research. I shall say a little about that later.
Other countries that have reduced their discharge periods are often cited as examples of what will happen. We took those accusations very seriously because if it had been true—if the Opposition had been convinced that there would be anything like a 50 per cent increase in the number of bankruptcies as a result of the provisions of the Bill—the Opposition would have wished, I should have thought, to oppose very many more of the provisions on bankruptcy than they have done. The same is also true of us. If we thought for a split second that there would be anything like a 50 per cent increase in bankruptcies as a result of the Bill, we should not have put forward this legislation. That is not an intended, expected or even possible result; it is certainly not likely. When the matter was raised for the first time—on Report last week—we took it very seriously. We had further meetings with representatives of lending organisations, including the Maryland Bank of North America, which commissioned the research that has been quoted. We have not in any way neglected the arguments that were advanced.
Some people said during the passage of the Bill and in the press—the Financial Times has reported this view on a number of occasions in the past few days—that the Government's desire to reduce the stigma of bankruptcy will be seen as making bankruptcy a soft option or a rogues' charter. I am not sure who used that phrase; was it the noble Lord, Lord Hunt? I have no hesitation in repeating the Government's position, which we have put most strenuously here and in the other place. Even after the Bill is implemented bankruptcy will not be a soft option. We want to reduce the stigma of bankruptcy for those who have failed through no fault of their own, but in so doing we would not want to relieve them of the consequences of bankruptcy. Bankruptcy and its consequences are the option of last resort for almost everybody and they should remain so.
Let me repeat the consequences on somebody who becomes bankrupt: I refer to both business and consumer bankrupts. They lose their assets. Any assets
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that the bankrupt has at the date of the bankruptcy order will vest in the trustee, whether or not they are disclosed to the trustee. They remain vested in the trustee even after discharge. They lose a large part of their surplus future income. The official receiver or trustee will ensure that where bankrupts have surplus income beyond that which is needed to meet their and their families' reasonable domestic needs, they will be expected to make contributions towards their debts for three years, notwithstanding discharge. That is why I resist the emphasis that has been placed, today and last week, on the period of discharge. Discharge is not the only consideration.
The Bill will introduce income payments agreements as an out-of-court route to secure such payments where the bankrupt consents. If the bankrupt does not consent, an income payments order can be sought. Their credit records are severely affected. Details of the bankruptcy will continue to be advertised in newspapers and the London Gazette. Details of the bankruptcy order, and any subsequent bankruptcy restrictions order, will be recorded on the publicly available individual insolvency register and will also be reflected on the bankrupt's credit record. That will severely affect their ability to obtain credit in the future. When one thinks of how difficult it is for someone who has had a Crown Court judgment against them to obtain credit, imagine how much more difficult it will be for anyone who has been bankrupt, even if the discharge is of a year or less than a year.
7.15 p.m.
Lord Phillips of Sudbury: My Lords, does the Minister accept that the difference between the theory, which he has perfectly correctly read out, and the practice on the ground, in terms of disabilities and so on, is very wide indeed?
Lord McIntosh of Haringey: No, my Lords, I do not accept that. I had not finished my response.
Bankrupts risk losing their home. If a bankrupt owns or jointly owns an interest in a property, that interest falls within the bankruptcy estate and the trustee will seek to realise any equity. That can be done up to three years after the bankruptcy, irrespective of discharge. The bankruptcy will also make it very difficult to obtain a mortgage in the future. They could lose their job. The very fact that they are made bankrupt could lead to their dismissal; for example, being bankrupt can lead to one's being excluded from this House.
I do not accept what the noble Lord, Lord Phillips, said about the differences between the theory and what is on the ground. He did not present relevant arguments; but we cannot have that debate across the Chamber now. However, if I accept, for the sake of argument, what he said, that still has nothing to do with the period before discharge. That is the position.
I have been describing the position under current law, and it will not change. We are also retaining the current low exemption levels for assets and ensuring that in a bankruptcy or an individual voluntary

79
arrangement, all of a debtor's assets can be taken into account, including future income. In fact, by introducing income payments agreements, we are providing an out-of-court route that will be quicker and more easily varied than the current system. An individual can enter into an individual voluntary arrangement only with the agreement of the creditors.
We are strengthening the bankruptcy regime to deal with the irresponsible or reckless by introducing the bankruptcy restrictions order regime. I say to the noble Lord, Lord Hunt, that the grounds listed in Schedule 20 for a bankruptcy restriction order, which he says are geared towards business, are not exhaustive; they mean that the courts can consider any misconduct. There are also grounds that could be used by consumers. Subparagraphs (h), (i), (j) and (m) could equally apply to consumers.
If the culpable are under any illusions that they will be able to use bankruptcy as a way to get in, get rid of their debts, and get out, they are mistaken. As I said, bankruptcy restrictions orders will impact on consumer and business bankrupts. The bankruptcy restrictions order regime will mean that instead of experiencing the effects of bankruptcy for three years, as is now the case, they could potentially experience most of those effects for up to 15 years. Those effects will include being unable to incur credit over the prescribed amount—it is currently £250—without disclosing their status and being unable to act as a director of a limited company. The fact of their bankruptcy restrictions order will be recorded on a freely available public register. That will no doubt be reflected on their credit record. Under those circumstances, can anyone seriously believe that bankruptcy is a soft option and that there will be a significant increase in the number of bankruptcies as a result of the changes?
The noble Lord, Lord Hunt, referred to the CEBR research. I do not want to give a full response but I stress that we took that criticism very seriously. Last week, we commissioned independent research into the significant part; that is, section 6 of the CEBR research. We commissioned it from Professor John Van Reenen of the department of economics at University College, London. The professor concluded that,
"the econometric work contained in Section 6 is so seriously flawed that it should not in any way be relied upon to judge the impact of the Enterprise Bill on personal bankruptcies".
I could continue on that theme, but I shall not do so because I believe the point has now been fairly made.
We have heard about the potential cost to the credit industry. We have listened most carefully to what has been said and have considered the wide range of factors that impact on a debtor's decision to enter bankruptcy. In particular, we have listened to the concerns expressed over early discharge. We have taken account of the views expressed both during the consultation and the parliamentary process. We have made changes to the proposed discharge period from the original six months to 12 months. We were only too
80
willing to accept sensible suggestions to improve the bankruptcy proceedings provisions. We did so by way of government amendments.
I repeat: we do not expect all bankrupts to be discharged before the automatic 12-month period. It will happen only in those cases where the bankrupt was not at fault, where he has co-operated with the Official Receiver, where he poses no risk to the public or commercial community, and where all the investigative and administrative matters have been completed. Further, creditors will have the opportunity to object to such early discharge; indeed, we are committed to talking to interested parties on the draft rules. All this serves to convince us that the measures we propose to reduce the discharge period are more than balanced by our proposals for dealing with culpable bankrupts and for ensuring that those who can pay, do pay.
I am sorry that I have taken so long with my response, but clearly we are discussing one of the most important matters associated with this Bill. I turn, finally, to Amendment No. 53. I wish to comment on the way in which we propose to evaluate, monitor, and report on our proceedings. I have sympathy with the concept that new legislation should be monitored and evaluated. In fact, for many years I earned my living by doing just that for government. The Government have a manifesto commitment to more systematic reviews of major pieces of legislation. We are currently considering how best to achieve that aim.
As part of that process, we are committed to reviewing the Enterprise Bill not after three years, as Amendment No. 53 suggests, but within three years of implementation. In paragraph 11.2 of the regulatory impact assessment, we made it clear that the effectiveness of the new legislation will be monitored after it has been in force for a period of three years. I improved on that a short time ago by saying that that would be "within" three years of the Bill's implementation.
Therefore, without any hesitation, I can give the House a commitment that the substance of Amendment No. 53 can and will be implemented without any need for the matter to be on the face of the Bill. Indeed, it could not be on the face of the Bill in the form set out in Amendment No. 53. I am not at all sure that a "rolling study" is the correct definition of what needs to be done. Similarly, I am not at all sure that the matters set out in paragraphs (a) to (c)—with an "and" in between them—are the only considerations that apply. I do not know whether much of the amendment's wording would be appropriate. However, I am sure that we can carry out a review within a period that is no worse than the time-scale proposed in the amendment. That review will cover the points that I know the noble Lord, Lord Hunt, seeks to cover in Amendment No. 53. With that assurance, I hope that none of these amendments will be pursued.
Lord Hunt of Wirral: My Lords, I take note of the Minister's response to these amendments, especially the commitment that he would like to make about the commissioning of further research. There is widespread concern, which I recognise the noble Lord does not share, about the effects of these provisions—the lack of independent research, and the lack of any real consideration of the effect on consumer bankruptcies.
I note that the Minister has some contextual concerns about the amendment, but it is perfectly possible for him to seek to amend the proposed new clause in the other place should be choose to press his concern about the wording. However, such is the level of concern that I feel I must press Amendment No. 53. In the meantime, I beg leave to withdraw Amendment No. 48.
Amendment, by leave, withdrawn.
[Amendments Nos. 49 to 51 not moved.]
Clause 257 [Investigation by official receiver]:
[Amendment No. 52 not moved.]
Lord Hunt of Wirralmoved Amendment No. 53:
After Clause 271, insert the following new clause—
"COMMISSION OF BODY TO STUDY THE EFFECTS OF ACT

(1) The Secretary of State shall commission a reputable and appropriate qualified body to carry out a rolling study of the effects of the personal insolvency aspects of this Act in sections 255 to 271 and Schedules 19 to 23 on—

(a) numbers of personal bankrupts;

(b) cost to unsecured lenders; and

(c) effect on lending rates and on access to credit.

(2) Following the third anniversary of this Act coming into force, and annually thereafter, the Secretary of State shall arrange for an annual report of the findings of the study commissioned in accordance with subsection (1) to be laid before Parliament."

The noble Lord said: My Lords, I beg to move.
7.25 p.m.
On Question, Whether the said amendment (No. 53) shall be agreed to?
Their Lordships divided: Contents, 61; Not-Contents, 103.

Division No. 4

CONTENTS

Anelay of St Johns, B.

Geddes, L.

Attlee, E.

Glentoran, L.

Barker, B.

Hanningfield, L.

Beaumont of Whitley, L.

Harris of Peckham, L.

Brooke of Sutton Mandeville, L.

Harris of Richmond, B.

Brougham and Vaux, L.

Henley, L.

Byford, B.

Holme of Cheltenham, L.

Campbell of Alloway, L.

Hooson, L.

Carnegy of Lour, B.

Howe, E.

Clement-Jones, L.

Hunt of Wirral, L.

Cope of Berkeley, L. [Teller]

King of Bridgwater, L.

Craigavon, V.

Kingsland, L.

Dean of Harptree, L.

Lester of Herne Hill, L.

Falkland, V.

Linklater of Butterstone, B.

Fearn, L.

Liverpool, E.

82

Livsey of Talgarth, L.

Plumb, L.

Luke, L.

Rawlings, B.

Lyell, L.

Razzall, L.

MacGregor of Pulham Market, L.

Renfrew of Kairnsthorn, L.

Rennard, L.

Maddock, B.

Renton, L.

Mancroft, L.

Roper, L.

Masham of Ilton, B.

Rotherwick, L. [Teller]

Monson, L.

Scott of Needham Market, B.

Moynihan, L.

Shrewsbury, E.

Newby, L.

Shutt of Greetland, L.

Noakes, B.

Smith of Clifton, L.

Northbrook, L.

Taylor of Warwick, L.

Northesk, E.

Thomas of Walliswood, B.

Phillips of Sudbury, L.

Waddington, L.

Pilkington of Oxenford, L.

Walmsley, B.

NOT-CONTENTS

Acton, L.

Hogg of Cumbernauld, L.

Ahmed, L.

Hollis of Heigham, B.

Amos, B.

Hughes of Woodside, L.

Andrews, B.

Irvine of Lairg, L. (Lord Chancellor)

Ashton of Upholland, B.

Bach, L.

Islwyn, L.

Barnett, L.

Jordan, L.

Bassam of Brighton, L.

King of West Bromwich, L.

Bernstein of Craigweil, L.

Kirkhill, L.

Bhatia, L.

Layard, L.

Billingham, B.

Lea of Crondall, L.

Blease, L.

Lipsey, L.

Borrie, L.

Lockwood, B.

Brookman, L.

Lofthouse of Pontefract, L.

Burlison, L.

Macdonald of Tradeston, L.

Campbell-Savours, L.

McIntosh of Haringey, L.[Teller]

Christopher, L.

Clark of Windermere, L.

McIntosh of Hudnall, B.

Clinton-Davis, L.

MacKenzie of Culkein, L.

Cohen of Pimlico, B.

Mason of Barnsley, L.

Corbett of Castle Vale, L.

Massey of Darwen, B.

Craig of Radley, L.

Milner of Leeds, L.

Crawley, B.

Mitchell, L.

David, B.

Morgan, L.

Davies of Coity, L.

Parekh, L.

Davies of Oldham, L.

Patel of Blackburn, L.

Dean of Thornton-le-Fylde, B.

Pendry, L.

Desai, L.

Pitkeathley, B.

Dixon, L.

Plant of Highfield, L.

Donoughue, L.

Radice, L.

Dormand of Easington, L.

Rendell of Babergh, B.

Dubs, L.

Renwick of Clifton, L.

Elder, L.

Richard, L. Sawyer, L.

Evans of Parkside, L.

Simon, V.

Falconer of Thoroton, L.

Stone of Blackheath, L.

Farrington of Ribbleton, B.

Strabolgi, L.

Faulkner of Worcester, L.

Symons of Vernham Dean, B.

Gale, B. Gavron, L.

Taylor of Blackburn, L.

Gibson of Market Rasen, B.

Temple-Morris, L.

Goldsmith, L.

Thornton, B.

Gordon of Strathblane, L.

Turnberg, L.

Goudie, B.

Turner of Camden, B.

Gould of Potternewton, B.

Walker of Doncaster, L.

Graham of Edmonton, L.

Warwick of Undercliffe, B.

Grenfell, L.

Whitaker, B.

Grocott, L. [Teller]

Whitty, L.

Hardy of Wath, L.

Wilkins, B.

Harris of Haringey, L.

Williams of Elvel, L.

Harrison, L.

Williams of Mostyn, L. (Lord Privy Seal)

Haskel, L.

Hayman, B.

Winston, L.

Hilton of Eggardon, B.

Woolmer of Leeds, L.

Resolved in the negative, and amendment disagreed to accordingly.
7.35 p.m.
Schedule 4 [Tribunal: procedure]:
Lord McIntosh of Haringeymoved Amendments Nos. 54 to 56:
Page 211, line 30, leave out from second "the" to end of line and insert "direction may be enforced as if it"
Page 214, line 3, at end insert "or
"(ii) such recovery or inspection of documents as might be ordered by a sheriff;"
Page 214, line 20, leave out from "than" to "of' in line 21 and insert "proceedings under section 47A or 47B"
On Question, amendments agreed to.
Schedule 5 [Proceedings under Part 1 of the 1998 Act]:
Lord McIntosh of Haringeymoved Amendment No. 57:
Page 217, line 8, after "or" insert "as to".
On Question, amendment agreed to.
Schedule 6 [Schedule to be inserted in the Water Industry Act 1991]:
Lord McIntosh of Haringeymoved Amendment No. 58:
Page 220, line 31, at end insert—
"(2) This paragraph is without prejudice to the power of the Secretary of State to provide in regulations made under paragraph 1 above for extensions of the four month period; and, if any such provision is made in such regulations, the provision which is to be made in regulations under paragraph 1 above by virtue of subparagraph (1) above or paragraph 6 below may be adjusted accordingly."
On Question, amendment agreed to.
Schedule 16 [Schedule BI to Insolvency Act 1986]:
[Amendments Nos. 59 and 60 not moved.]
Lord Hunt of Wirralmoved Amendment No. 61:
Page 286, line 22, leave out "harm" and insert "prejudice"
The noble Lord said: My Lords, we return to the argument about "harm" or "prejudice". In relation to these specific amendments, on Report the Minister, the noble Lord, Lord McIntosh of Haringey, suggested that there was no real distinction between the terms "harm" and "prejudice" and that he preferred the word "harm" as part of his solo drive to simplify legal language.
I can only reiterate that use of the term "harm" instead of "prejudice" will cause confusion and difficulty for both practitioners and courts. If they try to interpret how to apply the word "harm" in this new context, there will be no case law whatever to guide them. Will the Minister accept that I strongly support his drive for simplified language but that, in this case, the use of the word "prejudice" is far from complicated or archaic?
I understand that the noble Lord's officials are reviewing this issue with the assistance of parliamentary counsel. Therefore, I hope that he will accept this relatively simple amendment and at least give it proper consideration. I beg to move.
Lord McIntosh of Haringey: My Lords, I do not know who told the noble Lord, Lord Hunt, that we are
84
reviewing the matter with parliamentary counsel. Such matters are usually treated with the utmost confidentiality. But now that he has blown the gaff, so to speak, I can tell him that we have reviewed the matter with parliamentary counsel, who do not want us to change the word "harm".
This is not a solo campaign to update legal language; it is a campaign led by my noble and learned friend the Lord Chancellor. I wish that he had stayed for a few minutes to support me but, in the circumstances, I shall have to do it by myself.
Of course, there are circumstances in which one has to use special words for legal purposes. But the word "prejudice" has two totally different meanings. It has one meaning in common language, such as in the term "racial prejudice" or other forms of prejudice of that kind, and it has a totally different legal meaning, as in "without prejudice". For this purpose, "harm" means the same as "prejudice".
I said it before; I say it again; and I say it in full knowledge of the consequences of the judgment in Pepper v Hart. I have been advised, and I see no reason to doubt, that there is no distinction between "harm" and "prejudice". But until we start to use this and other more up-to-date words and phrases, there will be no opportunity for case law to attach and develop. "Harm" is a commonly used word which is far more likely to be understood not only by the courts and practitioners, for whom the noble Lord, Lord Hunt, is concerned, but by the professional advisers and, above all, by the public. I resist the amendment.
Lord Hunt of Wirral: My Lords, I must rise to defend the noble and learned Lord the Lord Chancellor from the strictures of the government Deputy Chief Whip, who criticised the fact that he did not stay or daily for a few moments. I know that the noble and learned Lord will have extensive further duties to perform and I believe that the noble Lord was being very unfair. Otherwise, I accept his guidance. I am very grateful for his response and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 62 to 68 not moved.]
Schedule 18 [Schedule 2A to Insolvency Act 1986]:
Lord Hunt of Wirralmoved Amendment No. 69:
Page 316, line 36, leave out paragraph (a) and insert—
"(a) it involves the grant of a security interest by a party to the arrangement to another party to the arrangement (whether as principal, agent or trustee), or"
The noble Lord said: My Lords, Amendment No. 70 was debated in Committee and on Report, and Amendments Nos. 69 and 71 are in the alternative and designed to achieve a similar aim. On Report, I had the opportunity to emphasise the great significance of this amendment for the structured finance market in the United Kingdom. The non-political, technical and, I would contend, sensible nature of the amendments makes it very difficult to understand why the Government should be so opposed to them. However,

85
the Minister suggested on Report that if a further meeting was necessary to discuss this or similar amendments with city lawyers, one could be held.
I understand that last week such a meeting was held between members of the City of London Law Society and officials within the Department of Trade and Industry to discuss the scope and reasoning behind these amendments. I understand that the meeting was very helpful to all sides, with the result that progress appears to have been made. I hope that the Government can give some reassurance in response to these amendments. I beg to move.
The Deputy Chairman of Committees (Baroness Turner of Camden): My Lords, I must tell your Lordships that if Amendment No. 69 is carried, I cannot call Amendment No. 70 by reason of preemption.
Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Hunt, for tabling these amendments so that I have an opportunity to explain the Government's intentions. I am also grateful to the City of London Law Society for being able to meet, at short notice, with officials to discuss the matter, as the noble Lord said.
On further clarification from the City of London Law Society it is clear that its concern lies in the fact that while paragraph 1(1)(a) currently provides an exemption for traditional capital market structures, there are in fact transactions at large in the market which utilise other structures, which will not be exempt.
We should like the opportunity to reflect further on the issues raised and to take soundings from other interested parties for example, investment bankers—who have so far remained silent. We shall need to consider whether a broader definition of a capital market arrangement would open up the possibility of "normal corporate lending" being able to mould itself into a capital market arrangement. Also we need to consider the impact of such an amendment on other legislation; specifically, the new moratorium company voluntary arrangement procedure introduced by Section 1 of the Insolvency Act 2000, which includes the same wording for this provision.
We believe that further consideration is needed on this matter and that it would not be appropriate to rush through this amendment at this late stage. We have the power in Clause 249 to make an amendment if it is deemed appropriate following the further consideration I have outlined. I hope that on that basis the noble Lord, Lord Hunt, will be able to withdraw his amendment.
Lord Hunt of Wirral: My Lords, I am grateful to the Minister for that positive response and reassurance. I readily join him in thanking those who have done so much hard work in such a short time on this important issue. I accept his assurances.
I am grateful to the noble Lord, Lord McIntosh of Haringey, and his colleagues for having sought with these Benches to try and improve the wording of the
86
Bill. Naturally we are hopeful that the amendments made in this place will not be challenged in another place. These may be my final words on the Enterprise Bill; therefore I want to thank the noble Lord. In view of the comments he has made, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 70 and 71 not moved.]
Schedule 20 [Schedule 4A to Insolvency Act 1986]:
[Amendments Nos. 72 and 73 not moved.]
Schedule 24 [Transitional and transitory provisions and savings]:
Lord McIntosh of Haringeymoved Amendment No. 74:
Page 340, line 43, at end insert—
"Supplementary
22 Any provision made by any of paragraphs 1 to 21 shall not apply if, and to the extent that, an order under section 275(2) makes alternative provision or provides for it not to apply."
On Question, amendment agreed to.
Schedule 26 [Repeals and revocations]:
[Amendment No. 75 not moved.]
Lord McIntosh of Haringey: My Lords, I beg to move that this Bill do now pass. I should respond to the kind words of the noble Lord, Lord Hunt. I should have done so on moving an amendment in order to avoid debate. I am grateful to him and all other colleagues who have taken part in the deliberations on the Bill.
Moved, That the Bill do now pass.—(Lord McIntosh of Haringey.)
On Question, Bill passed, and returned to the Commons with amendments.

Heritage Assets
7.45 p.m.
Lord Freybergrose to ask Her Majesty's Government what is their policy on classification, publication, valuation, retention and disposal of antique and heritage assets (operational and non-operational) held by government departments, and also those same items held outside the United Kingdom.
The noble Lord said: My Lords, before getting started, I should like to repeat what the noble Lord, Lord Peyton, said last Thursday. He said how fortunate we are to have a Minister in the form of the noble Lord, Lord McIntosh. He has been speaking this afternoon and has continued to do so this evening.
The recent concern over the sale of Privy Council silver on 29th October 2001 has drawn attention to the huge quantity of antiques and heritage items owned by the various government departments. Subsequent Written Questions have highlighted their lack of classification and curatorial care, along with the absence of proper and responsible procedures for selling or disposing of them.

87
Equally worrying, a new 6 per cent capital charge on every asset held by government departments is due to be levied from January 2003, which can only have the effect of encouraging departments to get rid of more valuable objects—which often means historic—for instant economic relief rather than as a properly thought-out decision. Unless this policy is reversed or these effects ameliorated, this change in accounting procedures is likely to have a destructive effect.
Since taking an interest in this subject, I have come up against a series of related problems. First, there is poor and inconsistent knowledge as to each department's assets; some possess detailed lists while others appear to have only a general idea. This inevitably raises the question of what has been disposed of already.
Secondly, for many years now there has been no curatorial input for thousands of often important works of art, raising questions about both condition and documentation. And finally, there is a lack of guidelines, both for classification which determines whether an item is subject to the capital charge or whether it can be sold—and for disposal of historic assets. Who, for example, is responsible for identifying objects to be sold? And why up until now have there been no cross-departmental guidelines on this matter? Can the Minister confirm that new guidelines are now in place, and can he explain what they are?
Although there is a cultural property unit at the DCMS, this was not, I believe, consulted when the Treasury decided to dispose of its silver. Similarly, the Foreign and Commonwealth Office last month announced in a Written Answer that it is disposing of,
"a small number of antique and reproduction pieces … [that] … are not considered to be historically important to the FCO".—[Official Report, 24/9/02; col. WA179.]
Those will be replaced with modern furniture, a potentially costly exercise. But who has decided that they are not historically important to the Foreign and Commonwealth Office? One hopes it is not the same people who decided that the Treasury silver was not historically important because it was not of the same stature as,
"Stonehenge and Nelson's Column".
This was the Answer I was given to a Written Question on 23rd July 2002.
In fact, I believe that the DCMS's cultural property unit is the right sort of body to consult when it comes to the first stage of disposing of antique or heritage assets. It would be in a position to approach the relevant expert, who could make a transparent assessment of the object's importance in a historical context. Is such a consultation part of the new guidelines?
Since 1997, departments have been encouraged to get rid of so-called "surplus" assets to such a degree that in 1999-2000 alone some £1.3 billion was raised. I am not qualified to assess the prudence of individual sales of buildings and land, but I do know that getting rid of the historic, cultural and political assets owned by departments of state will diminish them and that
88
once lost they can never be replaced. Sometimes works of art are not important but are historically appropriate and have become part of the fabric of the building. It seems irresponsible to get rid of these things for no real reason other than to meet the criteria of an accounting manual.
The danger of imposing the capital charge is that departments may be rushed into selling assets without proper assessment. In addition, the demand by resource accounting and budgeting that every asset be valued will impose an enormous burden on departments, rather than helping to save money—the reason that the capital charge was levied in the first place.
I should explain that works of art in government departments are classified into three types. The first two are operational and non-operational heritage assets, which are recognised as having special cultural or historical associations, and are not lightly disposed of, which range from tables and chairs in everyday use—operational assets—to paintings and sculptures: non-operational assets. The third category is antiques, which are not considered to have special cultural or historical associations with the relevant departments.
Of the three types, only non-operational heritage assets can be exempt from the new charge—and only if they meet the resource accounting manual's definition of a heritage asset. The department can assert that valuing them would be too costly. But here comes the arbitrary bit; namely, how the classification is made. At present, that is in the hands of the department itself. A Written Answer revealed that,
"the entity holding the asset"—
the department—
"is solely competent to decide which are heritage assets … they are free, but not obliged, to seek expert independent advice".—[Official Report, 11/4/02; WA114.]
Worryingly, there is no consistency between departments about what constitutes a heritage asset and what is simply an antique. Items of historical value among the Privy Council silver, such as the 12 candlesticks valued at £600,000 and a set of three inkstands valued at £450,000 and made especially for the Privy Council in the reign of William of Orange, were categorised simply as antiques by the Treasury, whereas an apparently undistinguished mid-19th century oak bookcase in the Supreme Court Circuit Office, valued at £1,410, is treated as a heritage asset by the Lord Chancellor's Department. Surely, the only reason for classifying historically important works of silver as antiques would be to facilitate a sale?
The sale of the Treasury silver is still baffling. Was the Treasury trying to set a good example in realising valuable but non-operational assets? If so, why was it so secretive about the sale? By shying away from publicity, it risked selling the silver at a far lower rate than it merited. In fact, had the media not alerted us to it, would any of us have known anything about it at all?
Worryingly, in that instance, the Treasury chose as its expert advisers and valuers the saleroom that was later contracted to sell the silver. That strikes me as a

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conflict of interest. To prevent such a fiasco ever happening again, it is imperative that a proper set of guidelines be laid down. Alas, the continuing saga of the Treasury silver confirms that something is wrong with the system. The charge will only add to the confusion.
On 12th July, it was announced that the Treasury had agreed to transfer the items concerned—the silver withdrawn from auction—to the Department for Culture, Media and Sport. Although the DCMS is loaning the silver to the Victoria and Albert Museum, it will still be charged £6,000 per year because the silver has not been reclassified as a non-operational heritage asset. In other words, even objects loaned to museums are now subject to the capital charge. Meanwhile, the Treasury will be required to pay £72,000 a year—6 per cent of £1.2 million—to retain the rest of its silver collection.
The only satisfactory solution would be for all heritage assets to be permanently exempt from the charge and for antiques to be exempt to allow a proper assessment to be made of what departments hold. For an inventory to have any validity, it must compiled by an independent expert. Precedents already exist in resource accounting and budget's current exemptions: no assets that have been donated are liable for the charge, nor are national museums and gallery collections nor certain other non-operational heritage assets. Exemption from the capital charge would not only remove a major incentive for departments to dispose of their heritage objects, it would bring the treatment of their works of art into line with those held in collections of national museums and galleries.
The absence of a useful cross-departmental policy on works of art is a comparatively new problem. Until the late 1980s, government buildings came under the control of the Department of the Environment, while their furnishings were looked after by Crown Suppliers. Cleaning contracts required specification on how works of art were to be treated. However, Crown Suppliers was disbanded under the noble Baroness, Lady Thatcher, and the task of dealing with furnishing in departments fell to accommodation officers, who were expected to buy in outside expertise and services as required. Contracts respecting works of art should be reinstated.
Professional curators look after everything historic in the Palace of Westminster and in the Government Art Collection, but no similar provision exists to oversee the rest of the Government's heritage objects. Will the Government consider extending the remit of the Government Art Collection, where specialist expertise and inventories already exist? The Government Art Collection works across all departments and has relevant experience in tracking, conserving and maintaining works. It would be relatively straightforward to add additional applied art posts.
Until that expertise is in place, departments will remain unable to look after their assets in an appropriate way, however good their intentions. I urge the Government to put their house in order so that
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future generations can enjoy some of the good things that previous generations of government have passed down to us.
7.56 p.m.
Lord Strabolgi: My Lords, we are grateful to the noble Lord, Lord Freyburg, for initiating this short debate. I agree with every word he said. I also congratulate him, together with the National Art Collections Fund and the Silver Trust, on ensuring that that silver has been saved. There was a public outcry that has made the Government think twice, but we face great problems in future, which I shall endeavour briefly to describe.
The Privy Council silver, which the Treasury was going to sell at Bonhams, is, happily, now on longterm loan to the Victoria and Albert Museum. The Treasury has transferred the silver to the Department for Culture, Media and Sport—I shall have more to say about that later. It was important 17th century silver, which is rare by any account, but which also carried the royal arms of William and Mary and Queen Anne. The silver is of heritage value and belongs to the nation, not to the Treasury. The Treasury had no business selling it without asking anyone.
Why did the Treasury want to sell? It was hoist with its own petard, because that was the result of its own accounting scheme, called resource accounting and budgeting. That means that departments must pay a capital charge of 6 per cent on every asset that they hold. That insensitive scheme requires every public asset to pay its way. No account is taken of the life-enhancing value of a work of art. Everything must he viewed in cold accounting terms.
The decision to transfer the silver to the DCMS will cost that department £6,000 a year. Departments must surely have every inducement to sell to escape that tax. What will happen if many more assets are transferred to the DCMS, which will have to pay enormous sums in tax? I understand that the Treasury retains silver that has been valued at £72,000. It will have to pay 6 per cent of that to itself, which is ridiculous.
I am glad to see that my noble friend Lord McIntosh of Haringey is to reply; it will be like old times. However, I must ask him who is responsible for identifying objects to be sold? Who decides whether an object is of heritage value or is an antique? Objects of heritage value can, apparently, be sold, provided that they are not too valuable; antiques can be sold with impunity. Will departments call in outside experts before decisions are made? Departments lack the curatorial experience to look after the national heritage items that they own. The officials concerned may have expertise and be efficient in other directions, but they are not art experts.
One solution to the mess would be to use the in lieu system, whereby government departments could be excused tax, if the object were on loan to a museum or could be seen by the public, in the same way as private collections are treated for inheritance tax. I hope that my noble friend will let us have his views on that suggestion.
8.1 p.m.
Lord Renfrew of Kaimsthorn: My Lords, we are once again indebted to the noble Lord, Lord Freyberg, for bringing to the attention of the House an important heritage issue. I apologise to him and to the House for arriving a little late. He kindly gave me advance sight of a draft of his speech, so I know its content.
The strange case of the Privy Council silver is one of those curiosities of government administration which it would be difficult to invent. That a government department, under Treasury instructions, should invite a well known auctioneer and saleroom to value items that are clearly a significant part of Britain's cultural and historic heritage and then set out to offer them for sale through the same saleroom, without, so far as is known, seeking the advice of the Department for Culture, Media and Sport, its cultural property unit, any of the national museums or, so far as is known, of any qualified curator or heritage expert is astonishing. It brings to mind Harold Macmillan's dictum about the nation selling the family silver.
Can we please be told why the Privy Council silver. now on loan to the Victoria and Albert Museum, is subject to a 6 per cent levy, reputedly the sum of £6,000 per annum, paid by the Department for Culture, Media and Sport to the Treasury, while the Government Art Collection Fund—I think that this is correct—is not subject to such a charge? The Minister may reply that the Government Art Collection has been placed in the notional category of non-operational heritage assets. That sounds appropriate. Under the Treasury's resource accounting guidelines, that is the only category that can be exempted from the 6 per cent capital charge. However, if the objects are used to furnish ministerial offices and embassies overseas, in what sense are they less operational than the William and Mary candlesticks of the Privy Council sitting in a glass case in the Victoria and Albert Museum'? Such strange notional accounting procedures do not make sense.
Could we have an assurance that any historical items or moveable heritage items that the Government propose to sell will be considered first by the cultural property unit of the DCMS? If the items are considered important by the cultural property unit, they should he placed before an appropriate body, such as the Reviewing Committee on the Export of Works of Art, on which there are experts enough to avoid such foolish mistakes.
But now, my Lords, I turn to a piece of news that seems to me to be of a graver order altogether. I learnt this month through the Council for British Archaeology that the Ministry of Defence had entered into a commercial treasure-hunting contract with an American underwater salvage company to recover and sell—yes, sell—bullion, coins and other antiquities to be raised from the late 17th-century wreck of HMS "Sussex", which lies in deep water off Gibraltar. The president of the Council for British Archaeology has stated that it contravenes UK commitments to international conventions, as well as the basic principles of the Government's heritage policy. The
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director of the Council for British Archaeology called it a blatant piece of heritage stripping. It is clear that the matter falls within the terms of the Question asked by the noble Lord, Lord Freyberg. Clearly, antiquities and valuables from HMS "Sussex" are the property of Her Majesty's Government, as the contract or agreement acknowledges. The noble Lord's Question refers explicitly to heritage assets overseas.
I found it difficult to imagine that the Government would undertake a treasure hunt involving the plundering of a historic wreck for straight commercial gain in a way that UNESCO and national governments have worked to prevent. So, I looked up the note of the agreement on the website of Odyssey Marine Exploration Inc. of Tampa, Florida. The website address is www.shipwreck.net/pam. Can the noble Lord, Lord McIntosh, confirm the status of the published document and place a copy in the Library? Will the noble Lord confirm that the British Government have entered into a commercial contract with Odyssey Marine Exploration Inc. of Tampa, Florida, with the following sharing arrangements:
"Odyssey and the Government have agreed upon the following sharing arrangements with respect to the aggregate amount of the appraised values and/or selling prices of the artefacts, net of agreed selling expenses.
Range i $0–45 million: Government 20%; Odyssey 80%
ii $45 to 500 million: Government 50%; Odyssey 50%
iii above $500 million: Government 60%; Odyssey 40%"?
Is the noble Lord aware of Article 2, subsection 7, of the UNESCO Convention on the Protection of the Underwater Cultural Heritage, to which the Government subscribe in principle, although they have not signed it, for various detailed reasons? It states:
"Underwater cultural heritage shall not be commercially exploited".
As the Government are on record as supporting the principles underlying that convention, can the noble Lord explain the apparent disparity? Why, before taking steps to recover heritage materials from a historic wreck, have the Government not openly and publicly discussed these matters with the heritage community? Has the Ministry of Defence or the Department for Culture, Media and Sport made any public announcement about a new underwater archaeology policy? Why did archaeologists and undersea specialists learn about it only from the protests of the Council for British Archaeology and the website of Odyssey Marine Explorations Inc of Tampa, Florida?
At a time when the historic wrecks of the world are being plundered by all kinds of piratical and shady companies, why do the Government give every appearance of behaving in the same way? How would such a procedure, practised off Gibraltar, differ from the straight looting of historic wrecks for commercial gain, against which Parliament recently legislated, when those wrecks are in British territorial waters? How could such a procedure be other than in direct contravention of the Valletta convention—the Council of Europe's European Convention on the Protection of the Archaeological Heritage—which, he

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will recall, deals with material remains, whether situated on land or under water. That convention was signed in 1992 by the UK Government and subsequently ratified.
The circumstances suggest what I dare to call maladministration of the first order, not only flying in the face of the Government's policy on care for the heritage, but seemingly contravening international law to which the Government are a party. One is puzzled as to why clause 12 of the published agreement, whose accuracy I have invited the noble Lord to confirm, states:
"The Agreement contains a confidentiality clause governing the release of information concerning the Agreement and all documents relating to its execution".
Would the Minister explain how such secrecy conforms with the principles of transparency which the Government affect to support?
I have the greatest respect for the noble Lord, Lord McIntosh of Haringey. We are fortunate indeed that he is representing the Government today and I acknowledge that he has undertaken a long stint as he was representing the Government in the earlier proceedings before the House. He is exceedingly well informed about cultural matters—I dare say better informed than any other Treasury spokesman—and he knows the Treasury better than any Minister in the Department for Culture, Media and Sport. He is therefore in an excellent position to unravel these mysteries for us.
One suspects that this extraordinary gaff by the Ministry of Defence comes from the same Treasury mindset which nearly led to the sale of the Privy Council silver and which now insists on those weird accounting procedures that we have been discussing. These incidents might suggest that we are in thrall to a Government who know the price of everything and the value of nothing.
Is the noble Lord in a position to give an assurance that the Government will try to formulate a coherent policy on the application or, better, non-application of resource accounting and budgeting to Britain's cultural assets? Will he also seek to ensure that the Government do not give the green light to the worldwide looting of the underwater cultural heritage by undertaking what on current information looks like a commercial treasure hunt?
8.11 p.m.
Viscount Falkland: My Lords, the House will be grateful to the noble Lord, Lord Freyberg, for introducing the debate. As has been mentioned by several noble Lords, the noble Lord introduced into this House that which had been revealed in two leading newspapers about the Privy Council silver. However, I shall not add to what has been said.
Today we are talking about part of the Treasury's balance-sheet mentality as applied to the resource accounting and budgeting procedures which were introduced when the MoD had items which needed to
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be listed, valued and sold where appropriate. Many of the procedures, principally depreciation. do not concern us.
All such assets, whether those we are debating today or others, are contained in a weighty tome called the National Asset Register. The noble Lord, Lord McIntosh, will be familiar with it, but I saw it for the first time only today. It is dated 2001, the previous one being dated 1997. Presumably it is published every four years or so.
I first read the foreword to the 1997 register, signed by the Chief Secretary to the Treasury, which contained the confident and breezy sentence:
"The National Asset Register is an international landmark in transparency and accountability in Government. For the first time anywhere in the world, Government and the public have a complete picture of the country's assets".
The writer of that may be needed in all kinds of areas, tourism not least. However, the tome is interesting because the relevant items are grouped under the heading "Antiques". The noble Lord, Lord Freyberg, has dealt with many items which are not relevant.
I randomly turned up one page of the register which came under the Chancellor's department and dealt with "Antique Assets", amounting to five lines, and "Library Legal Collection". The five lines begin:
"The Department's inventory includes around 250 items of furniture; fittings and artefacts classified as antiques. W & F C Bonhams & Sons undertook the valuation of the antiques on 31 March 2000. This valuation was based on market value".
The name of Bonhams has come up since the beginning of the story and I am not sure why. Were Bonhams appointed by some open and transparent procedure? Why not other auctioneers? Should we not be told?
Silver, pictures and items which have come into the possession of government departments, likely, we are told, to be charged annually a capital amount of 6 per cent, do not have a clearly listed provenance in the asset register. Do those in the Chancellor's department know what they have? Can they tell us accurately what the 250 items are? One thing we do know is that they are de facto owned by the nation. They are mainly items that have been commissioned over hundreds of years—for instance, the silver—for various purposes, or given as gifts by foreign governments. Where is the inventory in the departments? Should it not be available for public scrutiny? On the face of it, the whole thing is very unsatisfactory, but I dare say that the noble Lord, although he has had a heavy day, will be able to enlighten us.
The valuation idea is also curious. One can value furniture, fittings and so forth and use normal accounting procedures to depreciate them where possible, but let us take, for example, an elaborate pen made of gold and silver which has been used to sign a famous treaty; let us say the Treaty of Utrecht, which now has a great deal to do with Gibraltar. Is that listed as a gold and silver pen valued for its gold and silver and age, or is its context taken into account; its historical importance used for signing such a treaty? We do not know.

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The problem about the whole issue is that we just do not know. And looking at the asset register, it appears that the departments of state do not know. Certainly the Treasury does not know. So how does it know that it is worth doing this exercise in the first place? What will be the cost of the 6 per cent it is about to levy on all the items valued by Bonhams? There are a number of questions to be answered.
The Government have been rightly keen on assets, treasures and so forth held by the national galleries and museums. Indeed, they have insisted that there is online and other public access. Why do we not have a system whereby some of these items, which may be of greater importance than we now realise, come under scrutiny so that they may go online and be available to public access? It is a very muddled picture.
Furthermore, I see from looking through the papers that many of these antiques in government departments, about which we know little except for an overall number in the example of the Chancellor's department, are under the care of a person, male or female, who is described as a facilities manager. I do not know what a facilities manager is; I doubt whether many noble Lords do. What does a facilities manager do? What are his or her qualifications? As we know that the keeping of many of these items has been contracted out to cleaning agencies—and I have been told that many of the silver items are cleaned with Brasso—an extraordinary lack of expertise and care appears to be given to these items about which we know so little.
The reality is that we have got ourselves into a muddle that reflects a certain casualness—which, I am afraid, occurs in British life—in relation to our history and the treasures which have emerged from it and which now lie in government departments. These departments must be in a terrible fix in regard to how they will get rid of items in order to reduce the 6 per cent capital charge. Presumably they must be thinking how they can sell them—through Bonhams presumably. That was the way the silver was intended to go until the livelier newspapers and the noble Lord spotted it. We are now promised an almost satisfactory result.
I shall not go on. The Minister will, in his usual doughty way, produce some persuasive answers. I am sure that he is sympathetic with what I say, even though he may not be allowed to say so. He takes a sharp intake of breath but, after all, the Treasury is the Brigade of Guards of government departments. It looks down the slanted peak of its cap at the lesser departments of state, such as the Department for Culture, Media and Sport, and the Minister may find himself in a difficult position.
However, no one knows about the history or the importance of all these items. It is time that systems were put in place to find out what they are, where they are, how much they are worth and whether they should or should not be sold. This is an unbelievable muddle. I am sure that a situation such as this occurs in very few advanced countries in the world. It makes us look ridiculous.
8.21 p.m.
Lord Luke: My Lords, I first declare an interest in that I am a dealer in watercolours—with no connection whatever to the current debate. I thank the noble Lord, Lord Freyberg, for initiating this short debate, which has allowed us to revisit this important and interesting subject. I am also grateful to the Library of your Lordships' House and to the National Art Collections Fund for their briefs, which I, too, have seen. The speeches of all noble Lords have been interesting. As the noble Lord, Lord Strabolgi, said, I agree with everything that has been said so far and I shall not repeat the points that have been made.
It is quite clear that the United Kingdom Government and their various departments are in reality one vast museum—a museum with many branches, some efficient and effective, some, sadly, not. I recently read—or at least glanced through—the National Asset Register mentioned by the noble Viscount, Lord Falkland. To give your Lordships some idea of the size of it, here it is: it is like a telephone directory. It is said to be a thorough inventory of all the assets held by government departments on our behalf. Again paraphrasing what the noble Viscount, Lord Falkland, said, it is not at all thorough, certainly in regard to works of art. It is merely a broad assessment of quantities of objects and their overall value in some departments, with no attention to individual items.
The noble Lord, Lord Freyberg, told us that there are three categories into which works of art are classified—heritage operational, heritage non-operational, and antiques with no discernible heritage provenance. The question of which are liable to the capital levy is quite extraordinary, and I can quite understand the urge of some departments to sell some of their assets which are subject to this charge—and to sell them quickly, too. It is quite mad. But, as is so often the case with this Government, I believe that it was a good initial idea for accounting reasons, but badly thought through and, sadly, indifferently carried out.
Perhaps I may ask the Minister one or two questions. Is there any jewellery in the Government's assets? I believe that there must be, but where I do not know. Is there any jewellery? If there is, is it antique, heritage operational, and heritage non-operational all at the same time? It must be, if one thinks about it.
What about HMS "Victory"? She does not belong to a museum or any establishment like that; she is still commissioned in the Royal Navy. She must therefore be operational. But, at the same time, she is not suitable for launching against Iraq. Therefore, she is also non-operational. She is also, most definitely, an immensely valuable antique.
Really effective guidelines must now be laid down and real valuations of every single heritable item must be carried out by independent experts. I may be being silly, but I do not understand how items can be properly insured unless they are first valued—or perhaps they are not insured? The Minister shakes his head, so perhaps I am being silly.

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It has been suggested that the Government Art Collection, which is properly inventoried, curated and administered by the Foreign and Commonwealth Office, should be made the vehicle for looking after all government works of art. What does the Minister think of that suggestion, which has been made twice today? After all, it already has £31 million-worth of items to look after; or it may be that the DCMS, with its cultural property division, would be more appropriate. I understand that the Government are thinking of this.
The noble Viscount, Lord Falkland, referred to the Chancellor of the Exchequer's department, which has a small but proper inventory of 250 items. I understand that it is regularly revalued every five years. This sounds much more efficient. Presumably it is revalued for insurance purposes—but perhaps not. If they are not insured, why are they revalued? For possible sale? Why should not other departments perform in the same efficient way?
A large proportion of works of art belonging to the Government adorn public buildings. It is right and proper that this should be so as such buildings are often visited by important foreign visitors, who sometimes need to be impressed, and by at least some members of the public.
There are 11,500 items in the Government Art Collection, most of which are distributed in 471 sites across the world, but I understand that many are in storage. Perhaps an establishment should be set up where those items that are not being looked at could be accommodated in such a way that the general public could have access to them. After all, we can see what has been achieved with the Royal Collection at Buckingham Palace.
Some rather gilded cans of worms have emerged on this subject in recent years and have been re-emphasised during the debate, particularly in regard to underwater archaeology, an issue referred to by my noble friend Lord Renfrew. I look forward, as always, to hearing what the noble Lord, Lord McIntosh, has to say.
8.28 p.m.
Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Freyberg, and to all noble Lords who have taken part in this short debate. It had to come because the matter of heritage assets came to public attention more than a year ago. Although the solution that was found to the problem of the Treasury silver has met with general approval, it has raised the wider issues described, very properly, by the noble Lord, Lord Freyberg.
I shall first set out the position in regard to the subject of the Question,
"classification, publication, valuation, retention and disposal of antique and heritage assets".
We have a good story to tell and I am pleased to have an opportunity to do so.
The Government have a clear and open policy in relation to the management of their assets, regardless of whether they are considered to be antique or
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heritage assets. When I say "regardless", I mean when they are and when they are not; I do not mean that we do not pay regard to them. The policy applies to assets owned by departments, whether held inside or outside the United Kingdom. That is not an issue so far as concerns this debate.
In recent years, with all party support, the Government have been making an effort to ensure that assets are managed effectively. This includes knowing for the first time what assets we have, publishing a full list of assets in the National Asset Register and preparing departmental balance sheets.
Within the overall system careful consideration has been given to the management of heritage assets. The Government are very concerned to ensure that such assets are carefully looked after, and I shall go on to explain what arrangements have been made.
There are, as has been said, two kinds of heritage asset: operational, which are used by departments in delivering services and treated in the same manner as other assets used in a similar way; and non-operational heritage assets, which have been clearly identified as such and are not subject to any additional charges as a result of the introduction of resource accounting and budgeting.
I do not know how much noble Lords wish me to say about resource accounting and budgeting. I do not know whether any noble Lords who are present took an active part in the Government Resources and Accounts Act 2000. I had the privilege of taking it through the House two and half years ago. Of all the Bills I have introduced in this House, it is the one of which I am most proud. It means that we are way ahead of other countries in the proper consideration of public finances. To over-simplify grossly. as the Treasury used to do, in old terms with cash accounting, £1 of revenue and £1 of capital, if added together, equalled £2. That would be utterly unacceptable in private business and it is now unacceptable to government. Over a period of some 10 years—this is a non-party matter—we have been moving to resource accounts rather than cash accounts. It is in the last financial year that resource accounts have come into their full application, although there are changes still to be made in the next year.
One of the implications of resource accounts is that if you are going to have capital amortised over a period of years, you have to have capital in a balance sheet, and you have to have assets valued and in a balance sheet. That is what resource accounting does, and that is what has now been applied to heritage assets.
What is a heritage asset? The term can be applied to a range of entities, from historic buildings and works of art to archaeological sites. I can tell the noble Lord, Lord Luke, that it certainly can be applied to jewellery. Whether there is any jewellery is not a question that I can answer off the cuff.
It is up to each department to determine whether a particular item is a heritage asset. To do this, departments are required to apply criteria laid down in the Resource Accounting Manual— the manual

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whereby government departments ensure that they are adhering to generally accepted accounting practice. It is the way in which private accounts are drawn up and it ensures that we have comparable accounting in the public sector.
The Resource Accounting Manual describes a heritage asset as something that is intended to be preserved in trust for future generations. That could be due to its cultural, historical or environmental associations. It goes on to point out that heritage assets typically display the following characteristics: their value in cultural, environmental or historical terms is unlikely to be fully reflected in any financial value derived from a market mechanism or price; in many cases they have restrictions or prohibitions on their sale; they are often irreplaceable and their value is likely to increase over time even if their physical condition deteriorates; their life is measured in hundreds of years; and they may require significant maintenance expenditure so that they can continue to be enjoyed by future generations.
Departments are required to review whether assets meet these criteria and this decision is subject to scrutiny by the National Audit Office.
The noble Lord, Lord Strabolgi, asked who decides whether an item is classified as a heritage asset. I hope that what I have set out in some detail is a good answer to that question. He asked who decides whether heritage assets should be sold. It is the responsibility of the departments concerned to decide whether to sell assets. Departments are aware that they need to take into account all aspects, not merely financial ones, when deciding whether to dispose of an asset. The Department for Culture, Media and Sport will advise about individual disposals.
The noble Lord, Lord Freyberg, raised the issue of publication. A full list of the Government's assets is published in the National Asset Register, which the noble Lord, Lord Luke, lifted with great difficulty and waved at us. This includes antiques, works of art and heritage assets held by departments. It also includes, where available, details of the value. Some items are grouped together in the register because it would be impracticable to list every item owned by the Government. For example, the Government Art Collection alone contains over 11,500 works.
The noble Viscount, Lord Falkland, cast some scorn on the National Asset Register and on the claims made for it. I reject that. I am well advised that the National Asset Register is unique in providing the public with a list of the assets owned by central government. No other country in the world has access to a register of this kind. In addition, departments provide details of certain heritage assets in their balance sheet. If a heritage asset is not included on a balance sheet, a description of the asset must be included in the notes to the accounts.
The importance of the National Asset Register is not only, as I have said, as an essential element of resource accounting—proper accounting, as I would call it—in
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the public sector, but it incidentally provides an enormously valuable source of information on the heritage assets held by government in this country.
What about valuation? Clearly, the Government Resources and Accounts Act requires that there should be valuation. It states that a department's accounts must,
"conform to generally accepted accounting practice subject to such adaptations as are necessary in the context of departmental accounts".
Financial Reporting Standard FRS I 5, "Tangible fixed assets", does not specifically single out heritage assets for differing treatment. However, the Government's Resource Accounting Manual contains specific information on the valuation of both operational and non-operational heritage assets. Operational heritage assets not only provide benefit from a heritage point of view, but are also used by departments for other activities and to deliver services. An example would be a building used both as offices and for ceremonial purposes. I guess that the Foreign Office would fall into that category. It is therefore proper that these should be valued, in line with generally accepted accounting practice, and appear on a department's balance sheets.
Non-operational assets are those which are retained only for their historical or cultural value and have no other use. It may be considered that it is not practical to value some assets. There may not be enough information, or there may be no similar items. Examples would be Stonehenge or Nelson's Column. Scorn was cast on that, but I reject that. It is still worth doing. Some assets have not been valued because it would not be practicable to do so because of the number of different items. But from 1st April 2000, departments have been required to record additions to collections on their balance sheet using the purchase price as a basis for valuation. That is best practice in the not-for-profit sector as laid down by the charities' Statement of Recommended Practice. The independent Financial Reporting Advisory Board has raised some questions about this which are being debated with the Accounting Standards Board.
I turn to retention and disposal. Government accounting requires departments to maintain a register of their assets and inventories of works of art are required to be maintained in line with advice provided by the Government Art Collection. With the introduction of full resource budgeting in 2003–04—I think I was a year in advance in what I said earlier—departments will be charged a cost of capital within their budgets to reflect the cost of holding assets. That is what caused so much disturbance among noble

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Lords. This is line with commercial accounting practice. It provides better incentives for departments to manage their assets more effectively and dispose of those that are no longer required. However, the point is that this is not a tax. To ensure that departments are neither better nor worse off by the introduction of this non-cash charge, they were included in the full resource budgets announced in the 2002 spending review settlement. In addition, no such cover is required for non-operational heritage, as it is charged at a nil rate.
The change does not force departments to sell assets. They must only consider whether they are still needed or whether funds would be better reinvested elsewhere. The fact that heritage assets are designated as such implies that they warrant special consideration when determining how, where and if they should be kept. Departments are aware that they must take into account considerations beyond the purely financial when determining their future. I hope that that answers a point raised by almost every speaker in this debate. There is no obligation on departments to sell, and there is no financial penalty in the form of the capital charge. It is an in-and-out calculation made for the purpose of resource accounting.
Clear rules are laid down in government accounting guidelines on how assets should be disposed of and the resulting receipts accounted for. The DCMS is happy to advise departments when they are considering the retention and disposal of heritage assets other than those in the Government Art Collection. I hope that the lesson from the case of the Treasury silver is, as everyone recognised, that because nobody had to account for the items of silver, they sat in a cupboard for many years. The snuffers and other items are now on display as part of the silver collection in Room 66 of the Victoria and Albert Museum.
I will not be able to respond to all the points made by the noble Lord, Lord Renfrew of Kaimsthorn, so I will write to him in detail. He rightly described the contents of the HMS "Sussex" agreements between the Ministry of Defence and Odyssey. It is not certain that what Odyssey has discovered is HMS "Sussex", and nothing that has been brought up confirms whether it is. Some cannon have been brought up. It is a very deep wreck—one mile deep. It cannot be accessed by divers; it is accessible only by robots at enormous expense. The wreck is in international waters, but it belongs to the Ministry of Defence, because the ship was going to India, where a ruler was to be bribed not to take part in the war of Spanish succession.
If we did not have such an agreement, what would happen? Odyssey would excavate by itself, and we would be unable to stop it unless we stationed a frigate on top of the wreck continuously. It would take the items back to its base in the United States, where it has
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legal advice that everything would belong to it. We have legal advice that we could challenge it, but we might not win in the United States courts. As part of the agreement, Odyssey has undertaken to excavate the gold coins with great care to avoid damaging anything else. If there were no agreement, someone else could scoop everything up and destroy the ship.
What is the better, or least bad, solution? Surely we should make a deal with someone who would follow best archaeological practice. There has been no secrecy; we have consulted the British Museum, the National Maritime Museum, the Mary Rose Trust, the Royal Naval Museum, English Heritage and the DCMS cultural property division.
Lord Renfrew of Kaimsthorn: My Lords, I am grateful to the noble Lord for giving away. Although I am aware that some organisations were consulted recently, does he not find it peculiar that the public announcement about the arrangements, which still seem dubious to many of us, come from the Odyssey website?
Lord McIntosh of Haringey: My Lords, if that is so, I shall have to think about it and write to the noble Lord. I am not sure that it is as secret as he claims. In any event, we have a problem of commercial in confidence, but because of American disclosure provisions not least, we have not been secretive about it. The publication in this country came in a press notice on the MoD website, www.disposalservices.agency.mod.uk—noble Lords can find the address in Hansard—so that is not the problem.
The choice is between getting nothing and having a proper archaeological exploration, even with robots, from which we get a share of what is our own property, which we could not get by ourselves because we are not in the treasure hunting business. There is a specific provision that any items of heritage significance—a significance other than simply being gold or silver coins from the 17th century—will be kept aside and made available for museums in this country. I hope that the noble Lord, Lord Renfrew, will think that the agreement has been entered into honourably and to the benefit of the people of this country. I hope to be able to spell it out in more detail when I write to him more fully.
There are still problems about the advice given to departments on the retention and disposal of antiques—particularly antiques that have some other intrinsic value. We are still considering how to improve on that. There are certain points to remember. Non-operational heritage assets are not subject to any additional charges. Operational heritage assets are generally government buildings protected by listing and planning regulations. That is true of the Foreign Office, the Treasury, No. 10, and so on. Antiques are not necessarily formally classified as heritage assets under resource accounts and budgeting. The

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important point is that the introduction of resource accounts and budgeting has meant that departments are now more aware of the type of assets that they own and better equipped to make decisions about their care and use. Many of the things that speakers this evening have had in mind are not heritage assets that need to be held in trust for future generations. It is right that they should be treated in the same way as any other.
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I hope I have given the assurances about genuine heritage assets that have been called for. If I have missed anything—I am sure I have—I will prepare a further note to send to noble Lords who have taken part in the debate and I shall place copies in the Library.
House adjourned at eleven minutes before nine o'clock.