Clause 19 - Power to require information

National Security and Investment Bill – in a Public Bill Committee at 2:45 pm on 3rd December 2020.

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Photo of Derek Twigg Derek Twigg Labour, Halton

With this it will be convenient to discuss amendment 21, in clause 20, page 13, leave out lines 17 to 20.

This amendment seeks to broaden the information gathering powers of the Secretary of State, in specific regard to witness attendance.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

I ought to explain to the Committee that the Opposition are under some multi-tasking pressures this afternoon, Mr Twigg. I should have been in the previous debate in the main Chamber on the future of coal, in my role as energy Front-Bench spokesperson for Labour. I managed to factor that job out to somebody else in order to be here in the Committee this afternoon, and I am sure that the Committee is delighted to hear that. Unfortunately, there was no such luck for the shadow Minister, my hon. Friend the Member for Newcastle upon Tyne Central.

Photo of Katherine Fletcher Katherine Fletcher Conservative, South Ribble

I thank the hon. Gentleman for highlighting that our time is precious in the House. I, too, was hoping to be in the future of coal debate, to highlight the importance of the West Lancashire light railway. I thank him for bringing it to the attention of the Committee.

Photo of Derek Twigg Derek Twigg Labour, Halton

I think we should stick to the business.

Photo of Derek Twigg Derek Twigg Labour, Halton

We are very grateful.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy) 3:00 pm, 3rd December 2020

The amendments relate to clauses 19 and 20. Amendment 20 might be regarded as slightly unusual, as it seeks to remove a number of sentences in the Bill: to be precise, lines 24 to 27 on page 12—it would remove clause 19(2), while amendment 21 would remove clause 20(2). The Minister might be saying to himself that Oppositions usually try to restrict Ministers’ powers, yet here we are trying to extend their powers through these amendments. I want to explain why we think that is important.

We want to hear from the Minister why he thinks those particular paragraphs should remain in the Bill, and how the restriction that they place on the Secretary of State’s activity is advantageous to the Bill’s main purpose. The paragraphs that the amendments would take out relate to the power to require information and the power to require the attendance of witnesses and seek evidence. I am sure that hon. Members can read clause 19 for themselves, but I will point out the key part:

“The Secretary of State is not to require the provision of information under this section except where the requirement to provide information is proportionate to the use to which the information is to be put in the carrying out of the Secretary of State’s functions under this Act.”

That is to say that unless it can be, or is, established that the requirement to provide information is proportionate to what the Secretary of State wants to do under the Act, the Secretary of State is not able to require the provision of information. That is effectively what the clause states.

We have already heard during evidence to the Committee that there may well be a complex web when it comes to getting information and working out what is and is not relevant, particularly if a hostile power or body is seeking to take over a company or gain access to its information and IP. The information may well not consist of what it appears to consist of, or there may be a number of paths by which that information can be obtained.

From our expert witnesses we heard some interesting examples of things they thought looked rather far from the central activity of information provision. For example, on academic projects, in his expert evidence, Charlie Parton from the Royal United Services Institute told us:

“It is quite difficult to distinguish some of these and to know about them all, but a few weeks ago The Daily Telegraph did a story on, I think, Oxford University and Huawei’s commissioning of research. I think there were 17 projects. I looked at those, and I am not a technologist by any means, but some of them rang certain alarm bells.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 6.]

He was suggesting that, of a number of those postgraduate and PhD projects, there were some that he might have put a question mark against and others not, but he was not sure which were which. Nevertheless he seemed to think that some of those research projects—although they were cited within the ordinary parameters of whatever the research project might be, and who might be collaborating with whom, and who might get what information out of that—might ring alarm bells. That was in terms of who was collaborating, how the information might be used and where it might be going.

Photo of Peter Grant Peter Grant Shadow SNP Spokesperson (Europe), Shadow SNP Deputy Spokesperson (Treasury - Chief Secretary)

I think I understand what the amendment is intended to achieve, but is not the hon. Gentleman concerned about the danger of almost explicitly building in a recognition that the powers in the Bill do not have to be used proportionately?

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

The hon. Gentleman raises an important point. I will come to the word “proportionate” in a moment, because that is an important part of this clause. I hope I can satisfy him about my concerns about the word “proportionate”. He may want to come back when we have that discussion.

We heard from Sir Richard Dearlove, who said that,

“the Chinese are highly organised and strategic in their attitude towards the West and towards us. For example, some of the thousands of Chinese students who are being educated in Western universities, particularly in the UK and the United States, are unquestionably organised and targeted in terms of subjects”.––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 19.]

Before we go any further, perhaps I should say that I have nothing against Chinese students coming to the UK. On the contrary, I think that in general, Chinese students in UK universities is a very positive thing, and spreads a very good element of international learning into the process. I also think we might be reasonably confident that those Chinese students are getting as much from us, in terms of our way of life and our way of organising things, as we are from them. I do not think Sir Richard Dearlove’s point was partial towards Chinese students, but he made the point that he thought that some of those students may have targeted, or have been targeted towards, particular subjects and areas in the UK and the United States. Again, that is extremely difficult to find out and go forward on.

I am citing those particular expert witnesses in the context of this area of information, particularly concerning somebody—a company, an organisation, or indeed a state actor—that has hostile, malevolent intent towards the information that they have. It is not very likely that they will simply present that information in a ring binder with coloured markers, specifying where the various bits are; it is a very different process indeed. The clause therefore appears to very much limit the extent to which the requirement to provide information can be carried out, and it does so by requiring the provision of information to be proportionate to the use to which the information is to be put.

The word “proportionate” is very important here, and is potentially a real problem in terms of ensuring that the search for information that may be necessary by diverse means can be carried out properly. On the surface, looking at the ordinary language, one might say that the use of the word “proportionate” is a thoroughly good idea. If we apply the ordinary language test—what is the opposite of proportionate?—the opposite would be unproportionate; we would not want the Secretary of State to go about this in an unproportionate way. However, in legal terms, the word “proportionate” has rather a different context,

Proportionality as a legal term is a relative newcomer to the legal lexicon. It entered the legal arena—I am not saying that it had not been used before, but it was put forward as a concept around which a lot of other matters might turn—with the civil litigation reforms introduced in April 2013, known as the Jackson reforms. They covered the concept of proportionality in legal terms as it relates to costs in legal cases, but the question of proportionality was discussed in a wider context. The concept of proportionality, which had not been a particular issue in legal matters before, stuck itself firmly into the legal lexicon. Since then, there have been a number of debates about whether ways of apportioning legal costs were proportionate, even if they might otherwise be seen as reasonable.

Up until that point, the guidance on the issue of proportionality came from Lord Woolf in the Court of Appeal in—I am sure hon. Members will remember the case well—Lownds v. Home Office, where he concluded that if the legal steps that had been taken had been reasonable and necessary, the other party could not object to the cost of these steps on the grounds of proportionality. The test of reasonability and necessity overrode the question of the grounds of proportionality.

That is what changed in 2013 with the civil litigation reforms. An interesting commentary was made in an article published on 12 March 2014 in The Law Society Gazette, entitled “Proportionality and legal costs”—I am saying all this because I am not sure I will get the article to Hansard easily.

The author had this to say about the meaning of proportionality:

“However, the meaning of proportionality is not straightforward and the new rules do not provide clear guidance on how proportionality should be applied. The suggestion seems to be that a body of law will develop on a case-by-case basis until gradually the meaning will become clear. Until that happens, litigants, legal advisers and judges will have to guess at what costs will be considered proportionate in particular circumstances.”

I am keeping the attention of the Committee perfectly.

Photo of Peter Grant Peter Grant Shadow SNP Spokesperson (Europe), Shadow SNP Deputy Spokesperson (Treasury - Chief Secretary)

I fear that the hon. Gentleman is taking the definition of proportionality into a context very different from what is mentioned here in the Bill, because this is not about whether the costs of civil proceedings are justified by the likely outcome, or even how those costs should be divided among the parties.

My reading is that subsection (2) is there to prevent a future Secretary of State—obviously, no one in the present Government would ever do this—from imposing extremely onerous requirements on a business, when it was perfectly possible for the Secretary of State to do due diligence and do the checks he needed to do without that information’s being provided.

I have not heard anything from the hon. Gentleman that would explain why he wants that protection to be taken out. He has said a lot about Chinese students, who may or may not collectively be working against our national interest, but this clause does not protect against that. What does the hon. Gentleman have against the idea that the Secretary of State is not allowed to put unreasonable and onerous demands on businesses when there is no clear benefit to national security of those demands’ being made?

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

I hope that the hon. Gentleman will bear with me a few moments longer. Having unpacked “proportionality” in legal rather than colloquial terms, I want to put it back into the clause and see how it works, as far as the concerns of the Secretary of State go.

Indeed, the hon. Member for Glenrothes has questioned what we want to do on this clause in terms of the colloquial understanding of “proportionality”. I have mentioned how “proportionality” has come into the legal arena, specifically in terms of costs. Nevertheless, “proportionality” is now loose in the legal arena, so there is an interesting area of debate about it in general in the legal arena. That is not necessarily solely attached to the question of costs and civil litigation.

The problem is that there is virtually nothing to define that wider issue of proportionality in case law at the moment. Placing that word back into this particular clause suggests to us that the Secretary of State is restricted considerably on how that information may be gathered. The hon. Member for Glenrothes talked about research projects and various other things listed to us by our expert witnesses. I emphasise that I do not want to undermine those research projects or the presence of Chinese students. All I want to underline from that is that, on occasions, the process of getting hold of information and requiring people to give evidence can be convoluted. Indeed, it may require seeking information by going down paths that are not immediately apparent. As I say, it is not a question of someone turning up with a ring binder of things that can be perused.

In this clause, it appears that the Secretary of State may well have denied him or herself the ability to get hold of information, because it states that it has to be

“proportionate to the use to which the information is to be put in the carrying out of the Secretary of State’s functions under this Act.”

But he or she will not know about that information until it has been obtained. If there are difficulties in getting hold of the information, he or she will never know whether it is useful for carrying out his or her functions, because there is already a limit on getting the information in the first place.

I have brought the rather wobbly legal status of proportionality into the debate because it is potentially actionable through an obfuscation or refusal to put information forward by those actors. An actor who was required to give information could say, “It appears to me, your honour, that this request for information is not proportionate.” Of course, the Secretary of State may have a different point of view about what is proportionate from the person who is required to give the information.

There is also a vagueness in the application of the term “proportionate”. Although we think we know what it means in common language, that is not the case in the courts. That could be an additional issue that affects the Secretary of State’s ability to get the required information to make a judgment, over and above the fact that he or she may not know that until the information has been collected. So there are two procedural problems in the clause.

The hon. Member for Glenrothes said to me, to put it bluntly, “What exactly are you driving at? Perhaps it is not a good idea to appear to enable the Secretary of State to act disproportionately.” Of course, that is not what we are saying. We know that the Bill is more or less a giant amendment to the Enterprise Act 2002. Indeed, if hon. Members look at the back of the Bill, they will see that that is the only Act amended by it. Several amendments are made to the 2002 Act, but that is it—it is still sited within that Act. That Act was drawn up before the civil litigation changes to proportionality were put in place. The test set out in that Act, which is not amended by the Bill, is one of reasonableness, which is well understood, widely commented on and pretty clear.

If hon. Members consult the 2002 Act, they will see in clause 55 that the Secretary of State, in terms of enforcement, shall take such action

“as he considers to be reasonable and practicable to remedy”.

Therefore, we are not saying that the Secretary of State by acting disproportionately should act unreasonably. We are suggesting that the test that should be carried out is one of reasonableness, and should be in this particular clause. As the Enterprise Act already does, that would indeed prevent the Secretary of State going on fishing expeditions and undertaking actions that are wholly disproportionate because they would be unreasonable in terms of the definition of the Act. Our suggestion is to stick by that definition, which would be good enough to restrict the Secretary of State under the different circumstance that we are in today, in terms of seeking information. At the same time, it would give the Secretary of State the ability to take a path—I have said it is often a convoluted one—to obtain information that can be judged and used for the purpose of this Bill. I hope that the Minister will be favourably inclined towards that slight, but constrained, addition to his powers under this legislation.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

I am very pleased to be able to respond to the hon. Member for Southampton, Test on these well-intentioned amendments. I assure him that the Government and the Secretary of State will not be relying on a ring binder with highlighted paragraphs, because we have some of the best security and intelligence agencies in the world that would input into that process. It is an absolute joy to see Her Majesty’s Opposition play such a constructive role in the scrutiny of legislation, and to hear such a thoughtful speech.

Amendment 20 would remove subsection (2) of clause 19, through which the Secretary of State will be able to request information only through an information notice, where such requirements to provide information are proportionate. I agree with the hon. Member for Glenrothes on the issue. We have debated the fact that it is actually up to the courts to interpret if a particular acquirer feels somehow hard done by as a result of the process, and that there is a process to go through. The requirement to provide information is proportionate to the use to which the information is to be put in carrying out the Secretary of State’s functions under the Bill.

Amendment 21 seeks to remove subsection (2) of clause 20. Clause 20 enables the Secretary to require the attendance of witnesses and the giving of evidence. Therefore, clause 20 is complementary to clause 19, as it provides, for example, for the Secretary of State to receive expert explanation in person from those involved in a trigger event where the information previously provided does not give sufficient clarity. Clause 20(2) has a similar effect to clause 19(2). It means that the Secretary of State will be able to request information only through an attendance notice where requirement to give evidence is proportionate to the use to which the evidence is to be put in the carrying out of his functions under the Bill.

In response to both amendments, and mindful of the time, I can say that it is our view that any power of the Secretary of State to require the provision of information under clause 19, or to require the attendance of witnesses under clause 20, must be proportionate—indeed, the information-gathering powers are already significant. The Secretary of State may require information from any person in relation to the exercise of his functions under the Bill, which includes various stages of the procedure both before and after the call-in power is exercised. This may include requiring the provision of personal and commercially sensitive information about the parties in relation to a trigger event. There is good reason to include the restriction that any information required by the Secretary of State is proportionate to the use to which it is to be put in carrying out his functions. It is important that there are the safeguards for business. I have to say that I did not expect to be in the position of arguing against greater powers for the Executive from the legislature. It is clear to me, though, that business confidence and our reputation for being open for investment require it.

I hope that I have provided sufficient points of reassurance on these matters, and encourage the hon. Gentleman to withdraw his amendment.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy) 3:30 pm, 3rd December 2020

I appreciate what the Minister has had to say. He is clearly confident that the fine print of this clause is not going to be a problem. I slightly beg to differ: I think it may be. I also wonder whether the Minister has considered the extent to which what is already there—or, should I say, what I think is already there—in the Enterprise Act 2002 effectively restricts the Minister in his actions, in much the same way as this clause does, except that the restriction is much clearer from a legal point of view. That is to say, by relying on the restrictions that are already in the Enterprise Act, the Minister would probably not act any differently from how he would under this particular clause, but by relying on that element of the 2002 Act, his actions would be far less potentially actionable.

Before the Minister gets carried away by the idea that the legislature, or in this instance the Opposition, is clamouring for the Secretary of State to have far more powers, that is not our case. Our case is that it would be rather wiser to restrict what the Secretary of State may do through clearer legal definitions, which are already there, than through the rather woolly definition that is in the Bill. Before the Minister goes home thinking, “I have free rein to do whatever I like now”, that is not so: it is not so according to the Enterprise Act 2002, and it is something we want to stand strongly by. We do not want to underscore the idea that the Minister can act unreasonably, especially since the phrase “acting unreasonably” has a long pedigree, both in terms of civil action and administrative law over a long period of time.

I am sorry that the Minister does not accept our case, with all the caveats on it, although it may be that he is less inclined to accept the case now that we have highlighted the fact that there are caveats on what the Minister can do. I do not think we want to press this amendment to a Division, but we do so rather more in sorrow than in anger, because we think this could have been a prudent way to proceed with this Bill.

Photo of Matt Western Matt Western Opposition Whip (Commons)

As always, my hon. Friend is making important points. I was surprised to see the letter from the Chair of the Intelligence and Security Committee, which dates back to its 2013 report. Does my hon. Friend agree that if that Committee had been involved and consulted before this legislation was drawn up, some of the issues he is raising could have been brought out into the open and addressed better?

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

My hon. Friend is right. I think that, because things have changed so substantially over the past decade or so, we tend to see things in a way that we may not have easily seen them just a few years ago. Indeed, the expert witnesses who were before us made considerable points on the question of how naive we had been on some previous occasions; we had not really taken into account some of the implications of what we were doing, because we did not have a clear picture of the consequences of those actions.

My hon. Friend is right—I suppose this is to some extent wisdom of the stairs—that if we could have considered things at that particular point the way we see them now, we would have expressed ourselves in much firmer and more watertight ways. However, I do not think the fact that we did not do so then is any particular excuse for continuing not to do so now. The idea that we may miss out on the ability to get proper information that can point us in the direction we want to go, albeit possibly by very roundabout means, and that we deny ourselves that particular possibility because we have written something in the legislation that stops us doing it does not seem to me to be fully learning the lessons that we might have done from 2013 onwards.

However, far be it from me to lecture the Minister or otherwise on the wisdom of these things; I am sure he is able to decide that subsequently for himself, just as I have challenged him about the wisdom of the Secretary of State’s investment agreements a little while ago concerning Bradwell. I am sure he knows in his heart that that is an appallingly naive thing to have done in those circumstances, and we might have thought differently had that taken place even today. That is the spirit in which we are moving this amendment. As I say, we do not wish to press it to a vote, but I hope the Minister will be able to consider those points and think about how this section might best be applied in the circumstances we have before us today. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

Clause 19 gives the Secretary of State the power to require the provision of information in relation to the exercise of his functions under the Bill. The Bill provides for an investment screening regime for national security purposes—a purpose that we all agree merits appropriate tools. As such, it is essential that the Secretary of State is able to gain access to information to arrive at decisions that are fully informed. This clause provides for an information notice that the Secretary of State may issue to require any person to provide information that is proportionate to assisting the Secretary of State in carrying out his functions.

Any information notice may specify a time limit for providing the information and the manner in which the information must be provided. An information notice must specify the information sought, the purpose for which it is sought and the possible consequences of not complying with the notice. There is a range of scenarios in which the Secretary of State will need to require the provision of information, and I will provide some examples to illustrate them.

The first scenario is when the Secretary of State has reason to suspect that a trigger event that may give rise to a risk to national security is in progress or contemplation. That could be where an acquisition has not been notified but the Secretary of State becomes aware of it through market monitoring. In that situation, this clause enables the Secretary of State to require the provision of further information to inform a judgment on whether to call the acquisition in.

Secondly, when a party has submitted a voluntary or mandatory notification to the Secretary of State and that notification has been accepted, the Secretary of State may require additional information from the parties to decide whether to call in the trigger event. Thirdly, when a trigger event has been called in, the Secretary of State may need to require that parties provide further information to help to inform decision making. Information notices will allow the Secretary of State to gather evidence to support accurate and timely decision making. Hon. Members will agree that it is entirely proportionate for the Secretary of State to have recourse to this power as part of the investment screening process provided for in the Bill.

Question put and agreed to.

Clause 19 accordingly ordered to stand part of the Bill.