[Part II]

Enterprise Bill – in a Public Bill Committee on 23rd April 2002.

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[Derek Conway in the Chair]

[Continuation from column 220]

On resuming—

Photo of Derek Conway Derek Conway Conservative, Old Bexley and Sidcup

As the Committee will know, it is customary to break for an hour and a half for dinner, but to facilitate our deliberations we broke for an hour. I am grateful to those who serve the Committee for cutting short their refreshment break, and I offer them our thanks.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

I beg to move amendment No. 116, in page 140, line 30, leave out '15' and insert '5'.

When we discussed amendment No. 115, I explained how, to my mind, the reasons behind disqualifications for civil prohibitions and criminal-related disqualifications differed. The law currently provides for a maximum of 15 years for disqualifications, and it is good and correct that that period is available to the courts. In the context of disqualifications for civil-type prohibitions, however, it is felt that 15 years is excessive in the extreme. That is particularly true of section 9B of the Company Directors Disqualification Act 1986, which relates to disqualifications agreed under deals with the OFT. The length of the disqualification period is unsuitable, and, once again, the Government's proposals are out of kilter with provisions in other European countries. I would be grateful if the Under-Secretary explained whether any other countries have such provisions.

As with criminalisation and personal liability for directors, there is concern that foreign investors will be unhappy if they believe that they can be disqualified in this country in circumstances that would not apply in other European countries. We therefore suggest that the 15-year period be reduced to five years.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

The amendment would reduce the maximum period of disqualification that may be specified in a disqualification undertaking from 15 years to five years. I am not sure, however, that the hon. Gentleman dealt with the issue: clause 195 is intended to reduce red tape, but the amendment seems to increase it.

The purpose of providing an alternative means of disqualifying directors is twofold. First, it protects the public by allowing for the quicker and earlier disqualification of unfit directors. Secondly, it avoids unnecessary court proceedings and reduces costs where parties agree on an appropriate length of disqualification. The Bill's provisions are modelled on those introduced into the Company Directors Disqualification Act by the Insolvency Act 2000. The Insolvency Act has generally been agreed to be

successful, and I mentioned the disqualifications in it earlier.

If competition undertakings are to be successful, the period of the disqualification undertaking must be proportionate to the seriousness of the case. The OFT and a director might agree that the director's conduct merited disqualification and that the appropriate period was, for example, six years. That would, however, fall outside the scope of the amendment, which would restrict the ability to deal with the matter by means of a disqualification undertaking. The OFT would have to make a disqualification application to the court, which would increase the costs for all concerned. That would be unnecessary, because an agreement could be reached outside the court.

Having explained the effects of the amendment, which might not be entirely what the hon. Gentleman expected, I hope that he will withdraw it.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

I had certainly anticipated the effect of the amendment . I take the Under-Secretary's point that it does not cover non-undertaking disqualifications. However, as I said earlier, my concerns are particularly relevant in relation to new section 9B—the exact provision that the Under-Secretary was just explaining. I am still concerned that the maximum period for disqualification is too long, but in the light of what the Under-Secretary has said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I beg to move amendment No. 174, in page 142, line 2, at end insert—

'(3A) In section 8A (variation etc of disqualification undertaking) after subsection (2) there is inserted the following subsection—

''(2A) Subsection (2) does not apply to an application in the case of an undertaking given under section 9B, and in such a case on the hearing of the application whichever of the OFT or a specified regulator (within the meaning of section 9E) accepted the undertaking—

(a) must appear and call the attention of the court to any matters which appear to it or him (as the case may be) to be relevant;

(b) may give evidence or call witnesses.''

(3B) In section 8A for subsection (3) there is substituted—

''(3) In this section ''the court''—

(a) in the case of an undertaking given under section 9B means the High Court or (in Scotland) the Court of Session;

(b) in any other case has the same meaning as in section 7(2) or 8 (as the case may be).''.'

Photo of Derek Conway Derek Conway Conservative, Old Bexley and Sidcup

With this, we may also consider Government amendment No. 175.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

As I have a long note on the amendments, it would be best to find out whether hon. Members are interested in debating them. If they are, I will save my note for later in the discussion.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

It is clearly correct that circumstances will change and new information may come to light. As such, it is right that the Secretary of State should be able to vary disqualification orders or undertakings. Amendment No. 174 states that the OFT or a specified regulator can appear in a hearing for such a variation. That is wrong. Although I can understand that the Government want a consistent approach, it is wrong that the OFT, and certainly

wrong that a regulator, should be given such a power in the first place. The OFT will comprise a collection of economists, business men and competition experts. Why should those people be given the power to decide who should be disqualified or for how long? Those matters should be left to the courts.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I was hoping that we would not need to go into the matter in such detail, but perhaps I can help the hon. Gentleman with a few short remarks. It would be inappropriate for the Secretary of State to have to deal with cases in which the OFT or sectoral regulator made the disqualification application or accepted the disqualification undertaking. In those circumstances, it is appropriate that the OFT or relevant sectoral regulator should appear before the court, which is the only effect of the amendment.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

The Under-Secretary said that the Secretary of State need not be responsible, but I believe that it is appropriate that he should be responsible for issues such as the disqualification of directors. That is an important issue, which will have a significant impact on an individual's life and ability to earn a living. Will the Under-Secretary spend a little time explaining how the process would work? Will there be a court or tribunal process?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

The amendments relate to variation, for example. Amendment No. 174 relates to the variation of undertakings, and amendment No. 175 relates to applications for leave to act. At present, an anomaly—the result of an oversight—requires the Secretary of State to appear at a hearing for the variation of a competition disqualification undertaking or leave to act in respect of a competition disqualification order. We believe that the most appropriate people to attend such hearings are those who have the best knowledge of the cases. In competition cases, the OFT will be the relevant regulator, who will already be acting in other stages of the process. The amendment will ensure consistency and prevent the rather odd intervention of the Secretary of State in a stage of the process that should be carried out, as is envisaged in the rest of the Bill, by the OFT or sectoral regulator.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

Once again, the distinction between the OFT as investigator and prosecutor is blurred, as it is in many other parts of the Bill. I do not think that that is a healthy approach; it will not give clarity or transparency to the legal system and it is not a good idea.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

Where an undertaking has been agreed by the parties concerned outside the courts but a variation needs to be made, application must be made in court. However, that does not involve any prosecution in the traditional sense in which I think the hon. Gentleman is using the term. The procedure merely ensures that agreements work properly.

Amendment agreed to.

Amendment made: No. 175, in page 142, line 19, leave out from 'there' to end of line 22 and insert 'are inserted the following subsections—

''(6) Subsection (5) does not apply to an application for leave for the purposes of section 1(1)(a) if the application for the disqualification order was made under section 9A.

(7) In such a case and in the case of an application for leave for the purposes of section 9B(4) on the hearing of the application whichever of the OFT or a specified regulator (within the meaning of section 9E) applied for the order or accepted the undertaking (as the case may be)—'.[Miss Melanie Johnson.]

Clause 195, as amended, ordered to stand part of the Bill.

Clause 198 ordered to stand part of the Bill.

Clause 200 ordered to stand part of the Bill.