Standing Committee G
Thursday 11 June 1998
(Morning)
[Mr. Peter Atkinson in the Chair]
Clause 5
Cancellation etc. of individual exemptions
10.30 am
Mr. Tim Boswell (Daventry): I beg to move amendment No. 13, in page 3, line 42, after `exemption', insert
`he shall first publish in full three months prior to withdrawal of the exemption the reasons why he considers that relevant, material change of circumstance has occurred and then.'.
The Chairman: With this it will be convenient to take the following amendments: No. 8, in page 4, line 2, and end insert--
`(1A) The Director shall give due notice of any intention to cancel the validation of an existing agreement, and where such a cancellation is made no penalties shall be payable retrospectively.'.
No. 4, in page 4, line 16, at end insert--
`(8) Before cancelling any exemption, the Director shall give the affected party sufficient opportunity to state the case for retention of the exemption, and the Director shall be under a duty to give consideration to such a case before removing an exemption.'.
Mr. Boswell: The amendments form a trio, which is designed to improve process and fairness when considering exemptions. They are consistent with the points that we made earlier about the need to be understanding when exemptions are appropriate. Above all, there is the need to be sensitive when an exemption is being withdrawn--a clawback power of the Director General of Fair Trading. The Minister will understand that there is some difference in practice, which I touched on earlier, between giving someone an exemption for a particular agreement, which should happen when it is appropriate, such as in relation to individual exemptions under clause 4, and rescinding an exemption that has been made.
If an exemption is made and then withdrawn, that puts the parties to an agreement in a difficult position. It may be possible to avoid retrospectivity but, in terms of the separate issue of process, it is important that the parties do not suddenly wake up one morning to find, perhaps from the newspaper, that their exemption had been withdrawn and that they are at risk of penalty having been given notice. I do not wish to taunt the Minister, but I do not believe that there is a difference in our general approach to the matter. Though neither of us are lawyers, we are talking about the legal doctrine of legitimate expectations in that parties carry on until they are told not to. In fairness, there must be an opportunity for proper consideration and representation in which they can be involved.
Amendment No. 13 is key to the withdrawal of the exemption and suggests that the director general should first publish in full three months prior to its withdrawal
``the reasons why he considers that relevant, material change of circumstances has occurred''.
It is explicit in subsection (1) that the director general has to have
``reasonable grounds for believing that there has been a material change of circumstance''.
It is not a matter of the director general waking up one morning and saying, ``I don't like this any more. I am going to rescind it.'' We must not tick off the assumption that he will consider grounds and give a reason for his decision. As a further protection, he must give notice in writing.
Under our proposal, the director general should first give three months' notice of the withdrawal of the exemption and give his reasons for the withdrawal. He must explain what had changed in the interim. That should not be impossible for him, given that he will have had to make some decisions and to have had reasonable grounds for doing so.
Mr. John Bercow (Buckingham): I can see the good sense of the amendment. Is it my hon. Friend's view that requiring three months' notice of the intended cancellation of the exemption would give the affected party the opportunity to make counter representations, which representations the director general would be obliged to consider?
Mr. Boswell: That is exactly the substance of amendment No. 4. However, I shall go through the amendments in sequence; one cannot always do that, but it works with this group of amendments.
Amendment No. 13 seeks to ensure that the reasons for any decision that the director general is minded to take should be published three months in advance. We must also remember the sensitivity of cancelling existing agreements.
Amendment No. 8 is a variant means of saying that the validation of an existing agreement should not be cancelled without notice. It goes on to say that penalties should not be payable retrospectively. If there is any question of going back on the validation of an agreement, the question of penalty arises, which seems manifestly unfair if one could not have known, until the director general changed his mind, that he, the director general, felt that something was wrong with it.
Next, as was pointed out by my hon. Friend the Member for Buckingham (Mr. Bercow), amendment No. 4 would require that, before an exemption is cancelled,
``the Director shall give the affected party sufficient opportunity to state the case for retention of the exemption, and the Director shall be under a duty to give due consideration to such a case.''
That is self-evidently in the interests of natural justice. As so often happens--perhaps I anticipate the Minister's reply--one can see possible cases--[Interruption.] No, I shall not try to read the Minister's speech upside down; I cannot see it from here. However, I am always ready to take over his Box.
I am making a serious point and I know that the Minister wants to respond. There are two possible qualifications. The first, which is not embodied in the amendment, is that, in a case of clear and immediate mischief, the director general might want to act immediately. I would not want to insist on three months' notice in such a case. Perhaps we can think about that. The second qualification is that, if it is open to the affected party to make representations, it is arguable, although I do not commit myself to this, that other interested parties, including disaffected competitors, might be able also to make representations to the director general.
Those are matters for consideration, but the substantive point remains; if agreements have been exempted, those exemptions, and the freedom from penalty conferred by them, should not be withdrawn without good reason and without notice. We are concerned to get the process right, and to ensure fairness to all parties.
Mr. Bercow: My hon. Friend is generous in giving way. Is it my hon. Friend's view that, once the director general has given due consideration to the representations made to him in support of continuing an exemption, he should be obliged to state the reasons for rejecting those representations? Should he be obliged to do so in writing? Clearly, a decision has ultimately to be made. The talking and the debate has to stop and a decision has to be made--and that decision must be final. Is it my hon. Friend's intention that the director general should be obliged at least to state his reasons for rejecting the representations?
Mr. Boswell: Indeed; it is embodied in amendment No. 13 that the director general should publish that information.
I foresee that a sort of dialogue could take place, particularly if other parties were involved. If representations were made, the director general might then have say why he took no notice of the representations, or say that they were misguided. It is a delicate matter. I am not sure that we need specify in the Bill that there should be a further round of responses to consultations to the director general. I am sure that the Minister will want to consider that. My point is simple: there should be no withdrawal of an exemption without due process, good reason, adequate notice on the opportunity afforded to make representation. Those simple points may commend themselves more widely across the Committee.
The Minister of State, Department of Trade and Industry (Mr. Ian McCartney): Good morning, Mr. Atkinson. Like Opposition Members, I think that this is one of the most important clauses in the Bill. I shall therefore respond specifically, answering not only the points that the hon. Member for Daventry (Mr. Boswell) has made, but also placing on record the process. If hon. Members want me to, I am happy to send a note to them, setting out the process, because it is one thing to put technical words on the record, but quite another to provide logistics of the proposals. I am also happy to be able in my response this morning more than adequately to cover all the hon. Gentleman's points in terms of both the principle and the structure in which he has placed his argument.
I accept entirely that if the director general proposes to cancel an exemption, a party to the agreement should be entitled to know why the director general proposes to act, and should be given the opportunity to make representations. I am also sensitive to the rights of parties to challenge a decision made by the director general. I believe that I can give the hon. Gentleman a satisfactory response to the legitimate anxieties that he raises. The Bill will enable ample provision to be made for such matters.
Under the Bill, requirements as to such procedural matters will be made under the director general's rules in clause 51. Schedule 9 elaborates on the kind of provision that the rules may make, signposting the matters that we regard as especially important. Hon. Members will see that paragraph 6 of the schedule makes explicit reference to the rules making provision as to the procedure to be followed by the director general when deciding whether to cancel an exemption, and as to the form and manner in which notice of such a decision will be given.
The director general must consult on the rules. The rules are subject to the Secretary of State's approval and to annulment by either House. That is how to deal with such matters.
The director general's rules will need to provide for reasons and an adequate period of notice to be given, and to allow for representations to be made and to be considered. As consultation has yet to take place, hon. Members will understand that I cannot give a firm commitment as to a specific period. However, I am happy to give the Committee an assurance that the rules will provide for reasons and an adequate period of notice to be given, and will make proper provision for representations.
I shall return to what the hon. Gentleman said, but we should not include such a time period in the Bill at this point. The purpose of consulting with interested parties, including stakeholders in business, who may be affected by the proposal, is to ensure that questions such as the hon. Gentleman raised can be properly addressed. The hon. Gentleman himself said that three months' notice may not be possible in some circumstances. He makes my point genuinely.
Consultation is vital so that when the proposals are finalised, the time scales are the culmination of debate with the business community so that it has some sense of ownership to the proposals and a sense that the proposals presented in secondary legislation meet the requirements of people involved in the process. That is not an attempt to avoid specifying something in the Bill in terms of parliamentary debate. It is a genuine attempt to ensure that, in the process of implementing it at the coal face, those who will be affected by it have a genuine say in how the director general will proceed in such matters in terms of time scales. The debate today will ensure that the director general and his colleagues receive such an input as part of the response that the director general will look for in his consultation.
Apart from the rules requiring the Secretary of State's approval, clause 51(10) enables her to direct that rules be made about a particular matter, while clause 51(9) enables her by order to vary or revoke any rules. So if a problem arises at any stage, the matter can be returned to, to ensure that the rules operate effectively.
Before I come to amendment No. 4, I will set out the process--this is the information that I will circulate to the Committee. The director has two issues to consider: first, whether he has
``reasonable grounds for believing that there has been a material change of circumstances''
since he granted the exemption; second, whether he has
``a reasonable suspicion that the information on which he based his decision''
to grant the exemption was materially incomplete, false or misleading. If he decides that he has either reasonable grounds or reasonable suspicion, the director must first notify the parties and give them an adequate period of notice. As I said, the length of that period of notice will be a matter for consultation.
In the second part of the process, the parties make representations to the director. If the director changes his mind at that point, no action will proceed. However, if the director is not convinced by the representations, the next stage is that the director, by notice in writing, cancels the exemption. At the next stage, a party can appeal to the appeals tribunal.
10.45 am
At the outset, the director must state clearly the grounds on which he seeks to revoke the exemption. He must then notify the parties and give an adequate period of notice. He must then receive representations, and if he is satisfied at that point, he can exit the process and no further action will be taken. However, if he believes that he has either reasonable grounds or reasonable suspicion, he moves to the next stage by giving notice in writing cancelling the exemption. A party can then appeal to the appeals tribunal.
At that stage, the appeals tribunal is constituted and will consider the appeal on the basis of the notice of appeal and of written and oral representations made by the parties. The tribunal may decide to suspend the director's decision to cancel the exemption pending the conclusions of its proceedings. So even at the tribunal stage, there is a range of opportunities for consideration to protect the interests of the parties concerned.
The appeals tribunal can vary or set aside the director's decision. If the tribunal confirms the director's decision, the party may appeal to the Court of Appeal on points of law or, in different circumstances, on the level of penalty. A clear and specific set of arrangements is built into the process. At each stage, the parties concerned will be engaged and the appeals process will be protected. The director general can exit the process if he is satisfied with the evidence provided by the accused. Therefore we have more than met the concerns that the hon. Gentleman has expressed.
Amendment No. 4 states:
``the Director shall give the affected party sufficient opportunity to state the case for retention of the exemption''.
I think that I have proved that we have provided for that. I have told the Committee what I expect the director's rules to provide, but the hon. Gentleman may have in mind a right to an oral hearing. Regulation 17/62 gives concerned undertakings a right to a hearing if the Commission proposes to cancel an exemption. Again the hon. Gentleman's well made point is covered in the regulations.
I would not necessarily expect the rules to give an absolute right to an oral hearing, although the director may well agree to see the parties. That question needs to be considered in the context of the much fuller provision for appeals made in the Bill than exists at Community level. So we are not just taking the Community-level approach; we have significantly extended and expanded the provision. I therefore hope that, having heard that explanation, the hon. Gentleman will be satisfied and will withdraw the amendment.
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