National Security and Investment Bill

Lord Lansley Excerpts

Report stage
Thursday 15th April 2021 Lords Chamber

Moved by

[Lord Lansley]

1: Clause 3, page 3, line 9, at end insert—
“( ) details of the circumstances in which the application to an asset of any export control, transfer control, technical assistance control or trade control imposed under the Export Control Act 2002 and related provisions may affect the Secretary of State’s exercise of the power to give a call-in notice, and”

[Lord Lansley (Con)]

My Lords, it is a privilege to open proceedings on Report. I want to say generally that Members across the House, on all sides, are supportive of the principles of the Bill. It has been clear that all the amendments tabled have the intention of trying to make it as clear, effective and workable as possible, and—as we will discuss later—to make sure that there is proper accountability and transparency in the proceedings. Several of my noble friends have tabled amendments in that spirit. I know that Ministers in charge of the Bill have responded in kind with a willingness, even in the past few days, to supply additional material on how the workings of the national security and investment regime will be made more transparent and clear to those it affects, who are substantial in number.

I come to one of the issues in the two amendments in this group, both in my name, which relate to the interaction between the national security and investment regime and the export control licensing regime. Amendment 1 relates to the exercise of the call-in power by Ministers. Amendment 37 relates to the making of interim and final orders by Ministers. I start with the first amendment.

I quoted the 2018 White Paper at more length in Committee but it stated, on behalf of the Government, that

“where national security concerns relate solely or primarily to the export of goods, the Government expects that the export control regime would remain the primary means of protecting national security”.

In Committee, I asked the Minister responding to reiterate that expectation. He failed to do so, nor did he offer any specific assurance about how the two regimes would interact. I am grateful to Ministers because, since then, they have committed to the publication of guidance, which will include the interaction of the national security and investment regime with the Competition and Markets Authority, the Takeover Panel and the export control regime. We have not, of course, yet seen the text of that guidance. Nor is a reference to the export control regime being included in the draft statement, which has to be made under Clause 3, that will explain where and in what circumstances the Secretary of State will exercise his call-in power.

The importance of that is illustrated not least by the references from time to time in the consultation on the sectors in scope of the mandatory regime, in which a number of respondents made it clear that they thought there was a widespread interaction and overlap. For example, paragraph 3.76 said that one respondent suggested that the pre-existing export control licensing regime was appropriate, for which a number of businesses had robust and sophisticated compliance programmes, noting a significant overlap between the lists and a number of the other proposed mandatory sectors.

The noble Lord, Lord Grantchester, on the Front Bench opposite, in Committee instanced other references to that in the consultation response. Indeed, he may have looked at the strategic export control list, which is 309 pages long, and the sectors in scope of the mandatory regime for the national security and investment regime. The overlap is very large indeed. It is important to those affected that these two regimes interact positively and sensibly.

Amendment 1 seeks to require that there be such a reference in the Clause 3 statement and a commitment to explaining to people how the two regimes will interact. Why does that matter? First, given the nature of the assets in the strategic export control list, a change of control of the entities that own them will often be a notifiable acquisition and therefore be subject to a mandatory notification. But will the acquisition be called in? That question will be in the minds of those affected and will depend upon the level of risk. If the acquisition is by a hostile actor, it is a fair argument that the national security and investment regime adds an extra safeguard beyond the export licensing process. However, it will be important for those who own sensitive assets to know when that issue—the nature of the acquirer—is the prompt for a call-in, not simply the sensitivity and nature of the assets themselves, since they can be safeguarded for national security purposes through the export control licensing regime. Therefore, those asset owners need to be able to reasonably predict when a call-in will be made.

Secondly, the Clause 3 statement should offer clarity about the distinction between the use of an asset and its control. The national security and investment regime is about ownership and, hence, control of assets. Export controls are directed to their use, specifically outside the United Kingdom by way of export. However, we should consider what will happen if we follow the American lead. Following the enacting three years ago of the latest US legislation, there are circumstances in which the American export control regime, because it anticipates that a given ownership could lead to a transfer of technology within an entity, deems such assets to be exports. We already see an increasing overlap between the question of control and the question of use. The statement needs to be clear about that distinction, too.

What I am really looking for from my noble friend on the Front Bench is, first, an assurance that these issues will be fully dealt with in the guidance to be published, and that there will be a specific reference in the statement to matters dealt with under Clause 3, even if that is supplemented in detail by the technical guidance.

Amendment 37 raises an important further interaction. When Ministers make interim or final orders, given the extent of overlap between assets in the scope of this regime and those in the strategic export control list, it is likely that the entities that control such assets may, if they pass into new ownership, be subject to such orders. Those orders are about not just the situation today but what should happen in future. There will be a temptation on the part of Ministers to make orders that, like contracts in law, provide for every set of circumstances in future.

My point is simple: when making orders, Ministers should always rely on the export control licensing regime to do its job effectively. They should not try to substitute for the export control regime in future by restricting, through orders, what entities are or are not able to do. Even though they have the power to do that, they should not do it. They should live up to the expectation of the 2018 White Paper that the export control regime is the means by which Ministers exercise control of the export of sensitive assets.

There are two units involved. The Export Control Joint Unit is made up of officials from the Ministry of Defence, the Department for International Trade and the Foreign, Commonwealth and Development Office, and there is the unit for the national security and investment regime. The interaction between the two units needs to be excellent. In the shape of my noble friend the Minister on the Front Bench, we have the embodiment of the relationship between the Department for International Trade and the Department for Business, Energy and Industrial Strategy. I hope that he makes sure that these two work together well.

We should not see orders under the NSI regime supplanting what should be licensing procedures under the export control licensing regime, not least because—I pre-empt an issue that we will come on to later—export control licensing is the subject of greater and specific parliamentary scrutiny by the Committees on Arms Export Controls in the other place. There is no such direct scrutiny of the orders being made under this NSI regime. I hope that I do not need to say that Ministers should not fall prey to the temptation to incorporate measures into orders under this regime because it entails less parliamentary scrutiny than would be the case for export licensing under the other regime.

When we get to Amendment 37, I hope that I will be able to rely on Ministers’ further assurances that they will not simply take account of the export control regime and will rely less on administrative law issues. It was slightly ironic that our debate in Committee was followed the following week by a debate on administrative law that suggested that statute should be as clear as possible about the requirements that people have to live up to and not rely on a general public law duty—but that is exactly what Ministers profess to rely on here. I would prefer Amendment 37 to be adopted by the Government and it to be very clear that Ministers will take full account of the export control licensing regime. Even if they are not happy to amend the legislation, I hope that what my noble friend says in response to this debate will make it clear that that will be the case. I beg to move Amendment 1.

[Lord Grantchester (Lab)]

I thank the noble Lord, Lord Lansley, for returning to the issue of the interaction of the NSI and export control regimes. He is correct to probe further with the explicit inclusion of Amendment 1, so that the new NSI regime is not buried within BEIS but works effectively across government, specifically across both regimes.

Amendment 37 underlines the need to recognise proper co-ordination in this regime. The Government had recognised only that the two regimes are distinct and would sit alongside each other, as the expression goes, yet they were concerned by activities that could circumvent the export control criteria. With the extent of the overlap to which the noble Lord, Lord Lansley, refers, this would be surprising.

Since Committee, further consideration has been given to the issue. We agree with the noble Lord in calling for greater clarity about the interaction needed with export controls, especially when a call-in notice has to be considered and when interim and final orders are being made. We are supportive of the intention behind these amendments regarding concerns about how this regime will interact with functions under the export control regime. Why does the Bill remain silent on the export control regime in its drafting?

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[Lord Grimstone of Boscobel (Con)]

I thank the noble Lord for that point. It is hard to give a black-and-white answer, because it would depend of course on the circumstances. Let us remind ourselves what the difference is. The export control regime, which is the licensing regime for certain controlled goods, is one important part of the safeguarding of our national security, and, of course, it sits well alongside the national security and investment regime. The two regimes are distinct and do not perform the same role. To give an example to clarify that, the export control regime does not provide the Government with the ability to scrutinise acquisitions of UK companies or the ability to direct the use of sensitive assets used in the UK, whereas the NSI regime would. In a nutshell, the precedence between these two regimes must and will depend on the circumstances that are being covered.

[Lord Lansley (Con)]

I thank your Lordships for this very short but useful debate—useful not least in assisting those who will be affected by the regime. I am grateful to the noble Lords, Lord Grantchester and Lord Fox, for their contributions.

The point about the White Paper and the commitment to use the export control regime primarily to deal with national security risks relating to the export of these assets, and specifically the qualifying assets, is that the export control regime sets specific limitations on the export of specific items to specific persons and places. It is very targeted in that sense. As the Minister says, it does not bear upon the question of control of entities or the overall ownership of assets, so there is a compelling need now for this new regime; it just does not need to reproduce or trespass upon those things that are being achieved through the export control regime. That is what I understood the White Paper to say, and I understood the noble Lord, Lord Fox, to be asking for that to continue to be the expectation.

I hope that Ministers will make it very clear to those affected that, where they have a compliance regime in place for export control, that will continue to be sufficient for the purposes of the management of qualifying assets, because Ministers have made it clear that rarely would they expect to invoke the national security investment regime in relation to specific assets. It is really targeted on the ownership and control of entities and, by that route, the ownership and control of large-scale assets. I am sorry to have had to explain that again, but I do hope that Ministers will take it on board.

I am most grateful to my noble friend for going further than we were able to go in Committee, and, in particular, returning to Amendment 1, what he was able to say about the Statement under Clause 3 and the additional guidance has moved us on quite a long way from where we began. I am most grateful for that, and I beg leave to withdraw Amendment 1.

Amendment 1 withdrawn.

Moved by

[Lord Lansley]

2: Clause 6, page 4, line 15, leave out “or (6)” and insert insert “, (6) or (8)”

[Lord Lansley (Con)]

My Lords, I apologise for speaking to two groups in a row. It is how chance would have it with the structure of the Bill.

Clause 6 of the Bill is where there is a definition of “notifiable acquisitions”. This is linked to Clause 8, which sets out the circumstances in which entities come under the control of a person, and the link between these two, as I understood it, was that if somebody takes control of an entity by any of the routes described in Clause 8, that acquisition would be notifiable under Clause 6 if it relates to a sector in scope of the mandatory regime. Therefore, I was slightly surprised that the cases presented in Clause 8 relate, in the first three instances, to shareholdings in total, or voting rights. My noble friend Lord Leigh has secured a notable concession from the Government, which he will no doubt refer to in a moment—actually, he may not, looking at the list—that secured a change. However, on his behalf I thank Ministers and I congratulate my noble friend on securing that change in the Bill in relation to shareholdings over 15%. It is a sensible shift.

However, I was looking not at shareholdings or voting rights but material influence, as defined under the Enterprise Act 2002. On the face of it, it seems that if one acquires control by virtue of material influence over an entity, why would that not also come under the Clause 6 requirement that it be a “notifiable acquisition”? In a very helpful exchange of correspondence, Ministers have explained to me that their intention is that the mandatory regime should apply only where those affected can be very clear that there is a mandatory notification requirement. Material influence, by its nature, is a less clear test. It is a subjective test and of course it can vary dramatically over time. It is much better, in the view of Ministers, that it should be governed by the voluntary notification regime or the Ministers’ power to call in if they are concerned, rather than by requiring everybody who acquires material influence over a sensitive entity to notify any change of material influence. They have explained that to me and I am very happy—so, in that sense, I am not pushing Amendment 2 any further.

I suppose the point of this short debate is to enable Ministers to explain that point, because otherwise, of course, people could fall into exactly the same confusion that I did: namely, is it control or not? The answer is that, where material influence is concerned, it may be control of a kind—you may be able to influence the policy of an entity—but there should then be a subjective question in the mind of somebody who acquires that kind of influence over the policy of a relevant entity in scope of the regime, and they should think that they should make a voluntary notification rather than being required to make a mandatory one. It does not take them out of the regime, but it changes their interaction with it. I am content that the Bill achieves that, but it is useful to explain that to those who might be affected. Otherwise, I very much welcome the government amendments in this group, and for the moment, I beg to move.

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[Lord Callanan (Con)]

I will just say that, as always, I agree with my noble friend.

[Lord Lansley (Con)]

My Lords, it has been a helpful debate, not least from the point of view of helping those—I imagine that over time, there will be more of them than we imagine—who will look back and ask what the intentions were behind the Bill as it was brought forward. If I perhaps can say by way of comfort to my noble friend Lady Neville-Rolfe, the point that we have discovered going through the Bill is that there are two tracks here—I confess that my Amendment 2 was tabled originally not quite getting that point. First, there is mandatory notification, which is required in respect of a notifiable acquisition, so the definition of notifiable acquisition needs to be specified very clearly. Then there is voluntary notification but also the power of Ministers to call in any transaction. That is precisely the point that the noble Lord, Lord Fox, made very clearly and which my noble friend on the Front Bench reiterated.

The common theme here is that taking out the 15% threshold and, indeed, not including the material influence test in notifiable acquisitions, means that it is not subject to a mandatory notification requirement. As my noble friend said, we should not ignore the fact that under Clause 13(1):

“A notifiable acquisition that is completed without the approval of the Secretary of State is void.”


The risk associated with an unclear boundary between what is notifiable and what is not is that potentially large numbers of acquisitions that should be notified are not and therefore those transactions are void. We do not want to arrive at that position. We want people who run the risk of their transaction being a notifiable acquisition either being captured by the mandatory requirement or voluntarily notifying. Frankly, for many people voluntary notification will probably be the better and simpler resort.

Taking out the 15% threshold does not mean, in any sense, that those transactions are taken out of the scope of the regime but simply means that they are dealt with within the regime in a more flexible manner than would be the case through the mandatory notification requirement. Some of the press reports I have seen about this slightly miss the point. This is not a hard-and-fast threshold. It is a threshold for mandatory notification, not voluntary notification. The regime still applies.

My noble friend very helpfully responded to my Amendment 2 in precisely the way that I anticipated and quite correctly and, on that basis, I beg leave to withdraw Amendment 2.

Amendment 2 withdrawn.

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However, since I tabled my amendments, the Government have tabled their own, less granular, versions of annual reporting. We are due to debate these in a later group, so I will say no more about them at the moment. While transparency is better than no transparency, even better would be some changes to the Bill to give more certainty to the business community. That is why we have tabled these amendments, and I look forward to the Minister’s response. I beg to move.

[Lord Lansley (Con)]

My Lords, I am very glad to support my noble friend Lady Noakes in her Amendments 11 and 12. I am grateful to her and the noble Lord, Lord Fox, for adding their names to Amendment 13.

My noble friend explained Amendments 11 and 12 extremely well. Let me say why separately there is an additional amendment in relation to the voluntary notification separate from mandatory notification. It is precisely because our expectation must be that there will be a significant number of voluntary notifications, particularly in the early days as people involved in various sectors begin to understand how this regime is to act and under what circumstances they should make a notification. Our expectation would also be that, partly for precisely that reason and in the early days, there will be a significant number of voluntary notifications that do not lead to further action on the part of the Government because there is not a national security risk involved and they do not need to review it any further— that is, they do not need to take it through the call-in notice for an assessment.

For many of these transactions, because of the level of uncertainty associated with this—of course, these might be transactions where the seller brings them forward to the Secretary of State to understand under what circumstances they contemplate an acquisition, and whether they should proceed and how rapidly—there are a lot of reasons why this should happen quickly. In looking at Clause 18, about the voluntary notification procedure, our problem was that the review period had “30 working days” applied to it, but that period, as is the case with the mandatory one, follows two indeterminate periods. First, there is the period of time between a notification being made to the Secretary of State and the Secretary of State deciding whether to accept or reject it and, subsequently, the Secretary of State, after a period of time—this might be very short; I hope it would be very short—notifying each relevant person. The 30 working days, therefore, could be added to by two other periods.

The purpose of Amendment 13, therefore, is straight- forward. It is to say, “Let’s try to make sure that this is no longer than it needs to be, and that the pressure inside the Investment Security Unit is for what are essentially the bureaucratic processes”—in effect, saying, “We have received a notice. Is it compliant or not?”, then, “Okay, we have accepted the notice. Have we notified all the relevant persons?” Those things happen very quickly because the important thing is that the 30 working days are devoted as far as possible to the review period to get the decision right as to whether this potential trigger event should be called in or not. That is the crucial thing. All the time should be devoted to that review. Amendment 13 says that the 30 days start at the point at which a seller or an acquirer gives a notice to the Secretary of State. I hope that that is helpful.

I noted—no doubt we have a similar view—that the bureaucratic processes should be as short as possible, but the Government, as my noble friend Lady Noakes noted, have put forward their own amendments in a later group. The one that is relevant here is Amendment 27, which would tell us how long the period is between the receipt of a notice and the decision to accept or reject it, and tell us to report that in the annual report. Frankly, that is useful, but we would rather that the pressure was built into the statutory arrangements rather than simply through the question of what is in the annual report by way of performance against that.

[Lord Clement-Jones (LD)]

My Lords, in speaking to these three amendments, I am extremely fortunate to follow the noble Baroness, Lady Noakes, and the noble Lord, Lord Lansley. I do not think anyone could have explained more succinctly how these different timescales work for both the mandatory and the voluntary notification, so I will not go through it again. I really appreciate the persistence of both noble Lords, and the noble Lord, Lord Hodgson, in teasing out the real consequences of these very indeterminate timescales, which may differ between the voluntary and the mandatory notification procedures but create uncertainty in both cases. As the noble Lord, Lord Lansley, said in Committee,

“we want to ensure that the greatest possible certainty and the least possible delay intrudes into these processes for investors.”—[Official Report, 16/3/21; col. 229.]

That has been our common theme throughout this Bill.

We have heard some graphic phrases throughout, such as the noble Lord, Lord Hodgson, decrying both the “no man’s land” that we must not and do not want to fall into and the powers to “stop the clock”. We also heard the noble Lord, Lord Grimstone, try to reassure the Committee that the Secretary of State has

“no desire to push his peas around the plate”,—[Official Report, 16/3/21; col. 222.]

another phrase introduced by the noble Lord, Lord Hodgson; he will probably write a book at some stage with all these phrases included. However, that is not the same as the assurance and certainty contained in statute.

The noble Lord, Lord Callanan, said in Committee that

“the process of initially determining whether a valid and complete notice has been submitted is separate from fuller screening”.

We understand that, but there should be clear time limits in that case. He tried to give us a reassurance:

“I mention ‘maximum’ again because that is exactly what these deadlines represent. In many cases, we expect the Secretary of State to be able to review and clear notifications much more quickly.”—[Official Report, 16/3/21; col. 235.]


Businesses need certainty on whether to proceed with a transaction. A delay in the Secretary of State making a decision outside the time limits—because they can—would cause uncertainty over the validity of the transaction. This lack of a clear timescale could create uncertainty for investors, universities and businesses, making domestic and foreign investment less attractive and disincentivising industry in the process.

I heard what the noble Baroness, Lady Noakes, and the noble Lord, Lord Lansley, said about the later amendments on what should be contained in the annual report; I entirely agree that more transparency is very desirable, but that is not the same as specifying exactly what the timescales will be.

There is also the question of what I think the noble Lord, Lord Lansley, called the “bureaucratic processes”. There is not yet a great deal of reassurance on that basis. We do not know how the regime will operate. Throughout this, especially on these timescales, the impression is that all the cards are in the Government’s hands, not the hands of the potential investor. That could be a real deterrent. I hope the Government will respond to the very consistent view throughout the passage of this Bill that there needs to be a considerable tightening up in this direction.

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I would very much appreciate an assurance that material on timelines could in fact be added as a guidance product—that is an unfortunate designation; in my day we used to call it guidance. In his very helpful letter yesterday, the Minister set out his plans for a number of guidance products that would be added. It struck me that this is possibly a way forward, and that it would be possible to give a little more of the assurance that business is seeking in the guidance that is now envisaged by the department. So my fourth question is: is that right?

[Lord Lansley (Con)]

I can be brief. I acknowledge with thanks that the Minister has brought forward government amendments that respond both to my Amendment 81 in Committee, about the number of orders varied or revoked and, in part, to what the noble Lord, Lord Grantchester, had to say on Amendment 80 in Committee, including on the time taken to decide whether to accept or reject mandatory and voluntary notifications. I will not rehearse what my noble friend Lady Noakes had to say. Knowing more about the time taken, in addition to what is already intended to be in the annual report, will certainly give us reassurance about these administrative processes, which I think will be very important—especially at the outset, bearing in mind that we start with already potentially five months’ worth of relevant transactions that are within the scope of the regime but the legislation has not yet entered into force. Operating rapidly in relation to all those potential notifiable transactions will be really important, even in the first annual report.

[Lord Clement-Jones (LD)]

My Lords, I shall speak to the amendments tabled by the Minister, and I thank him for doing so. I shall also speak to those tabled by the noble Baroness, Lady Noakes, and Amendment 34, tabled by the noble Lord, Lord Grantchester, which I have signed and strongly support. The noble Lord, Lord Lansley, has highlighted the extra importance of transparency in the annual report in these circumstances where we already no doubt have a backlog of potential action.

I thank the Minister for responding to concerns in Committee and in the meantime and for taking us towards greater transparency. While the noble Baroness did not use the expression “half a loaf”, since it is perhaps three-quarters of a loaf, it goes some way towards giving us a greater understanding of how effective the regime is, particularly given the Government’s desire to keep these rather uncertain timescales that we were talking about in Committee.

In Committee, I hoped to persuade the Government to undertake a regular review of whether the Act was achieving its aims. It seems good practice to make sure that we have the right balance between the investment climate and national security concerns. The Government were unpersuaded by that, but I hope they will take on board the contents of the amendment by the noble Lord, Lord Grantchester, particularly new paragraph (p),

“the impact on levels of foreign investment in the United Kingdom brought about under this Act”,

which would be inserted as a requirement in the annual report. Currently, the annual report does not go far enough. Surely, seen in the round, one of the most important factors is the impact of the Bill on foreign investment. Is this not a key indicator that should be included in any annual report? How can we judge how the balance of the Bill’s requirements are working? Is foreign direct investment not sufficiently important to be included in the annual report? I hope that the Minister can perhaps explain, if there is no explicit reference to it, why not, and if not, whether there will be a description of how the regime is operating.

Other aspects of the amendment from the noble Lord, Lord Grantchester, are extremely important. The noble Baroness, Lady Noakes, mentioned the average staff resource allocated to the operation of reviews and so on. That resource aspect is going to be very important so that we can see transparently what resource is being devoted. Then there is the whole aspect of SMEs, which potentially could be impacted very heavily. The noble Baroness, Lady Neville-Rolfe, talked about this. I think that is a very important aspect too.

The way that the regime in the Bill impacts is extremely important. The Minister has given us some transparency, but I very much hope that he will accede to further requirements that could be included in the annual report really without very much difficulty.

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I remind the House that the amendment of the noble Lord, Lord West, does not require such an annexe in every case, but only in those cases where it is necessary because the underlying information is of such sensitivity that it cannot be published. In that case, the amendment provides that it should be made available to the specialist committee established by Parliament for that purpose, which can then advise Parliament and the BEIS Committee, as appropriate. What can the objection to such a provision possibly be? There can be no valid objection and I urge the Government to accept these necessary and very reasonable amendments. If they do not, the noble Lord, Lord West, has said that he will test the opinion of the House, and I hope that the House will passes the amendments.

[Lord Lansley (Con)]

My Lords, I express my support for the amendments presented by the noble Lord, Lord West of Spithead, and his colleagues. Curiously, we seem to have four on the front row, but I am perfectly happy where I am, because I am quite a big chap and used to play left lock, so that will be fine.

Colleagues will recall that I had an amendment in Committee to extend the remit of the Intelligence and Security Committee under the 2013 Act. I think the place we have reached on Report is right; my amendment was unnecessary and might have led to precisely the criticism which my successor bar five as Leader of the House of Commons has put to the chair of that committee—that it is expanding the role of the committee beyond its original statutory function. Jacob Rees-Mogg has expressed this criticism about where we are now, but I am afraid he is plain wrong. That is precisely not what this amendment seeks to do; it seeks to ensure that the Intelligence and Security Committee can fulfil the role it was given in precisely the terms that the noble Lord, Lord West of Spithead, set out in introducing his two amendments. I very much support him.

I fear the noble Lord, Lord Butler of Brockwell, may have hit on why the Government are resisting this; not for the reasons they have expressed, but because it will enable the quality of some of those decisions to be examined in detail, including with reference to the security risks that must be incorporated into this decision-making. Perhaps they do not wish that to happen, but that is why we have parliamentary oversight and why, in particular, the Intelligence and Security Committee was originally instituted. I was not a Member of the other House at the time it was instituted, but I was director of the Conservative Research Department and my deputy director is now chair of that committee—as my mother would say, as these things go around, they come around. I am very happy to support their role.

I will mention one other thing. He is not with us this afternoon, but in Committee the noble Lord, Lord Janvrin, made an essential point about the Government’s argument that the ISC can go after the information it is looking for and make inquiries of whoever. He said:

“I think we would all argue that effective scrutiny leads to better decision-making. The Minister in another place said that there is nothing to stop the ISC calling for evidence on a specific decision. That may be true, but is it practical? It calls to mind Donald Rumsfeld’s ‘unknown unknowns’: how does the ISC know which decisions to examine in detail? I question whether such a hit-or-miss approach to scrutiny would lead to better decision-making.”—[Official Report, 16/3/21; col. 250.]


We do not want a hit-or-miss approach. Even less, frankly, do we want the ISC to have to go out on fishing expeditions to try to find out on what the intelligence material on which decisions were made was based. I would far rather it was done in a well-constructed manner. I support these amendments for that reason and hope my noble friend, at the very least, will be able to say that the Government will bring back their own amendments at Third Reading to serve this purpose or amend the memorandum of understanding in the right way. If not, I will have to support these amendments this afternoon.

[Lord Fox (LD)]

My Lords, the fact that such esteemed Members on all sides of the House have coalesced on this amendment speaks volumes for your Lordships’ concern about this issue.

It has been a heavyweight debate, with all due respect to the four amigos who have been speaking. I will now bring it down to earth with a bit of politics. It has been an authoritative debate and, all other things being equal, we would expect and hope that it causes the Minister not just to listen but to act. However, I fear his hands—metaphorically if not actually—are tied behind his back by other things. A couple of previous speakers mentioned the letter from the Lord President of the Council, Leader of the House of Commons, to wit, the right honourable Mr Jacob Rees-Mogg. This seems to indicate the bindings the Minister is currently under.

In this short tome, as we have heard, Mr Rees-Mogg tells the right honourable Dr Julian Lewis MP, who is, as we know, chairman of the ISC, that decisions regarding committees’ roles and remits should not be made on an ad hoc, Bill-by-Bill basis, and that there needs to be careful consideration.

I suggest this is a patronising view of the proceedings of your Lordships’ House. When have your Lordships’ considerations not been careful? The most reckless behaviour I have seen during the course of this Bill has been the Minister’s wholesale consumption of sugar-based products, so where is the carelessness that the right honourable Member for North East Somerset speaks of? We should be a little outraged by that suggestion.

This Bill is written by BEIS, and it is understandable that BEIS would want to favour its own Select Committee. I am sure that is how we set out along this route. I think it was the noble Lord, Lord Butler, who said that we have set out in the wrong direction. I feel sure that is what happened. Good governance would be to understand that, take advice and make changes.

It would not be so bad if the BEIS Committee had not been so obviously exposed by the comments we have heard today to be the wrong committee to do the security part of the scrutiny of this very important Bill. It is absolutely clear that it is the wrong committee. If the Minister cannot make or promise changes, I believe he can undertake to accurately reflect both the strength of feeling of your Lordships’ House and the facts, rather than the assumption of the facts that appears to be driving the letter that Jacob Rees-Mogg has written.

I ask just one question of the Minister. If the Bill in considered by the Government to be an ad hoc process, what is careful consideration? What does careful consideration look like if it is not the careful scrutiny of legislation?

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I very much hope that my noble friend the Minister will consider the amendment that I have put forward in that light, or perhaps write to us afterwards with some further thoughts on it.

[Lord Lansley (Con)]

I am very glad to support Amendment 35 in the name of the noble Lord, Lord Grantchester, so ably moved by the noble Lord, Lord Rooker. It follows a debate in Committee led by the noble Baroness, Lady Hayter, which I thought drew out some of the issues for the higher education and research sector very well.

I am really pleased that our noble friends on the Front Bench have responded that they will provide guidance. I was originally looking for what amounted virtually to a safe harbour for higher education and research institutions, which I accept may be a stretch too far, but there is a substantial range of transactions that the higher education sector is concerned may be within scope.

When one looks at the consultation on the scope of the regime and the range of assets that are in scope, one sees that its concern about it is entirely justifiable. What it really comes down to is understanding through guidance and the sort of scenarios that the noble Lord, Lord Rooker, was referring to, how this is actually going to work. One of the central issues is that this is a regime about ownership and control, not about use. I am sorry; I have not given my noble friend notice of this question so if he wants to write to me about it subsequently I will completely understand, but I will take one example, which is non-exclusive licensing.

There are instances, and I think they are reasonably frequent, where the licensing process will allow people the use of an asset but will not allow them control of it, which remains within the higher education institution. It would be really helpful if the Minister were able to say, “Yes, the guidance will cover that and our expectation is that non-exclusive licencing would not be within the likely call-in”, not least because if the assets were to be used outside the United Kingdom and by particular persons outside it then, coming back to my earlier point, the export licensing regime would catch that use. The two regimes, working alongside each other, would work in harmony in that sense but would focus on the control and ownership of the technology in question rather than trying to capture all its potential uses.

With that said and with that question asked, I am glad that the Minister was able to give us some guidance —I should not say “guidance about the guidance”—or some expectation of the use of the guidance in the way that we wanted that to happen. I am very glad to support Amendment 35 but hope that, in reiterating that expectation, the Minister will allow this to be withdrawn.

[Lord Clement-Jones (LD)]

My Lords, it is a pleasure to speak on this group of amendments because of the progress that has been made. It is also a pleasure to follow the noble Lord, Lord Rooker, in his new Front-Bench incarnation. Long may it last.

On Amendment 35, I declare an interest as chair of the governing body of Queen Mary University. As I said in Committee, although the Bill does not directly reference universities, given the width of the sectors included in the scope of the Bill, it is clear that there is an intention to capture partnership entered into by universities. Elements of the Bill, while introducing measures to protect national security, could have unintended consequences for future investment in UK R&D and could cause BEIS to be overloaded with references from the university sector. That would add to lead-in times and create red tape for both universities and businesses, and that would not be to the benefit of R&D in our universities. I am delighted that the Government have now accepted the case that there is a need for specific guidance for higher education when the trawler of the noble Lords, Lord Grimstone and Lord Callanan, goes by. It is really about the specificity that the noble Lord, Lord Lansley, mentioned; the nature of the guidance needs to be specific.

In Committee the noble Baroness, Lady Bloomfield, assured us that

“we do not generally expect the acquisition of qualifying assets for exclusive use by UK-based research or higher education institutions to give rise to national security concerns. Indeed, to go further, the use of assets where there is no acquisition of a right or interest resulting in control over a qualifying asset would not even constitute a trigger event”.

I hope that kind of thing is going to be spelled out. Similarly, the noble Baroness pointed to the three levels of risk set out in the draft statement on the Secretary of State’s call-in power. She said:

“I am confident that higher education and research institutions will be able to assess their activities and decide in which of these three areas of risk they fall.”


Again, I very much hope that that is spelled out in the guidance. The summary certainly looks quite promising in terms of talking about the scenarios that are going to be outlined. She concluded:

“The Government very much appreciate the Russell group’s ideas on inclusion for guidance”,—[Official Report, 9/3/21; cols. 657-58GC.]


and I very much hope that they will continue to listen. I see that the Russell group is represented on the expert group, and I think that is extremely helpful.

I think we can be much more confident that the Government will turn that appreciation into tangible guidance, but I hope that the Minister will—in the way that the noble Lord, Lord Rooker, mentioned—give further comfort on the nature of the consultation, the timing and with whom it will take place, in respect of that particular set of guidance.

Turning to Amendment 36, I am delighted to follow the noble Lord, Lord Leigh. I declare an interest as a member of the advisory board of the corporate finance faculty of the ICAEW. Of course, it follows that the noble Lord, Lord Leigh, and I have been very carefully following the correspondence between the noble Lord, Lord Callanan, and David Petrie of the ICAEW. Again, I am delighted that the Minister has accepted that the statement about the exercise of the call-in power will not be sufficient for the investment community and that the annual report—and, indeed, the fact sheets mentioned in Committee—is not the best vehicle and that the Government have now committed to issuing market guidance.

But the market guidance notes really must do what they say on the tin. The noble Lord, Lord Leigh, had a slightly veiled criticism of how detailed these were going to be in terms of their use to those who are transacting. This has rather different wording from that applied to higher education. It seems to me that the wording is much more helpful when it talks about scenarios in higher education; this talks about drawing on analysis of patterns or trends in notifications received by the investment security unit. It is all about the notifications; it is not an end-to-end analysis of the trends as regards the Secretary of State’s decisions, call-in and so on. There is a great deal more that could be covered. I welcome the flexibility shown by the noble Lord, Lord Callanan, in his letters to the ICAEW, offering to make progress on developing guidance notes. I very much hope that will happen now that the ICAEW is part of that expert group.

I think it might be helpful to put on record significant detailed additions that could be put into the guidance notes. In addition to some of the points made by the noble Lord, Lord Leigh, I suggest that it would be useful to have contained in the market guidance notes details about at what stage in a transaction advisers or companies should contact the ISU, and how sellers seeking to retain control of the process might manage that element of the transaction—although, of course, we know that most of the emphasis is on the acquirer notifying the unit. It might also be useful to have advice for investors on the provisions that could be exercised and the circumstances in which the Secretary of State has declared deals as null and void, and commentary that recognises the need for maintaining competitive tension in an investment or sales process in order to obtain optimum terms from investors or acquirers, in terms of enabling a limited number of final bidders in a trade auction process. These are the sorts of the things that could be envisaged. It could also include advice about mechanisms to prevent bidders submitting vexatious or deliberately incomplete notifications, and advice designed to avoid frequent requests to investors and/or acquirers for additional information.

A market guidance note might be useful when it becomes clear that the Secretary of State is unwilling to permit investment and control in particular subsectors that have been identified. Additionally, I think that the ICAEW has mentioned that a market guidance note specifically for private equity investors would be useful. Of course, publishing these market guidance notes in a timely and regular fashion as circumstances change is really important. Again, on the question of the consultation, I very much hope that the Minister will say who will be consulted and when such market guidance notes might be available—that would be good.

--- Later in debate ---

[Lord Grimstone of Boscobel (Con)]

I thank my noble friend for those comments. It certainly seems a bit weird that the Constitution Committee will have a role in this. If I may, I will look into the matter, write to the noble Baroness and put a copy in the Library.

[Lord Lansley (Con)]

I wanted to inquire whether my noble friend might write to me about the question of non-exclusive licensing of technology in the higher education sector, as I mentioned earlier.

[Lord Grimstone of Boscobel (Con)]

Yes, I am very happy to give my noble friend the assurance that I will write to him on that topic.

Trade Bill

Lord Lansley Excerpts

Consideration of Commons amendments & Lords Hansard
Tuesday 23rd March 2021 Lords Chamber

Although we are a subordinate House in political power, we are a unique House among the second Chambers of the world. There is no other Chamber as large—and, of course, many of us believe that we are too large. The Campaign for an Effective Second Chamber, which I have chaired, assisted by my noble friend Lord Norton of Louth, for almost 20 years now, has campaigned on that—but that is another issue for another day. But we are unique in the extraordinary accumulation of legal wisdom. I talk not just of those who have held high judicial office, important as they are and respect them as we do. We have such Members as the noble Baroness, Lady Kennedy of The Shaws, who brings extraordinary wisdom to this subject. I hope that the Alton suggestion, made towards the end of the noble Lord’s admirable speech, will be acted on, the Liaison Committee will look at it, and we will have a committee composed largely or wholly of judicial Members. I would like to see a Joint Committee of both Houses, because I believe in the two Houses working together. We are embarking on a journey, which must not end in the victory of those who perpetrate evil.

[Lord Lansley (Con)]

My Lords, I am glad to follow my noble friend. I want to focus on the point that he rightly makes about the Government’s accountability to Parliament and, in particular, the question of how they are going to be accountable to Parliament. I join the tributes to the noble Lord and others, including in the other place, who have put the arguments extraordinarily well, which will be sustained into the future. I also pay tribute to my noble friend on the Front Bench, not least for the constructive way he has approached all our debates throughout the consideration of this Bill.

First, before I get on to Parliament’s accountability, the Foreign Secretary, in exchanges on the Statement yesterday in the other place, said:

“the arguments around genocide and the importance of its being determined by a court are well rehearsed.”—[Official Report, Commons, 22/3/21; col. 625.]

They may have been rehearsed, but they have not been resolved, and that is important. I cannot compare with the descriptions in our previous debates by the noble Baroness, Lady Kennedy of the Shaws, who will speak in a moment, but the questions that she set out of which court, under what circumstances and by what processes genocide will be determined are absolutely instrumental. It will not be in this Bill or the Act, but we need to keep pressing on that issue.

In this Bill, not least by virtue of Sir Bob Neill’s amendment, which we now see as Amendment 3C, we have a process. We have set up that process, it is important and we need to get it right, but I want to illustrate to your Lordships that it is not sufficient. Let me give two examples. First, it relates to free trade agreements; it does not relate to our treaty-making processes in general. We will come back to this regularly, but I think we are beginning to realise, not least after leaving the European Union, that we are making treaties to a greater extent and with greater importance than previously. Parliament should play a central role in those processes, which brings me to the point that my noble friend was making about how the Government are accountable. They should be accountable, but in some respects they are not, because the exercise of the prerogative means that we are not, in Parliament, involved; we simply receive. Where free trade agreements are concerned, we are going to be involved.

Secondly, Amendment 3C refers to a “prospective FTA counter-party.” What is that? It is a state with which the Government are in negotiations relating to a bilateral free trade agreement. We have all been hearing the debate about China. The Government are not in the process of negotiating a bilateral free trade agreement with China, so the question does not arise. If the Government were to enter into a bilateral investment agreement with China, would that qualify under this amendment? I think the Government would say not. If China were to seek accession to the Trans-Pacific Partnership—of which, in due course, we hope to be members—would that qualify under this amendment? I think the answer is that it would not. So we could enter into a substantive, wide-ranging free trade agreement with China without this amendment ever being invoked.

The proposition I generally make, as a member of the International Agreements Committee, is that we have an instrument in this House that I hope we will use actively to examine not only bilateral free trade agreements but the whole structure of free trade agreements and international treaties and agreements. Not neglecting the Grimstone rule, which relates to free trade agreements, we should bring forward reports on the negotiating objectives and give at least this House—and, probably by extension the other place, by remarking on what we say—the opportunity to do what my noble friend said, which is say what Parliament will not put up with. That is really important. It may not be written into law at this stage—although I suspect that it ought to be one day—but it will be a further important step in moving the public debate. Although it is not in this Bill, which will be an Act, we should be active in considering by what means we exercise scrutiny of international treaties, trade agreements and agreements generally.

[Lord Shinkwin (Con)]

My Lords, it is a pleasure to follow my noble friend Lord Lansley. I, too, pay tribute to my noble friend Lord Alton for the way he has brought noble Lords together in support of the Muslim Uighur people and the crucial principle of our common humanity.

I have only two points to make. First, I am saddened by the Government’s position, because the genocide of the Muslim Uighur people cannot be swept under the carpet as the Government’s rejection of the amendment passed by your Lordships’ House implies. The reason is simple: to be able to sweep an issue under the carpet, one has first to be able to lift the carpet. The carpet is too heavy to lift, because it is saturated with the blood of the Muslim Uighur people, who, as we have heard, are being subjected to genocide by the Chinese Communist Party regime for the supposed crime of being Muslim.

Secondly, in a few weeks’ time, on 6 May, Muslims will vote in the local elections. I trust they, and all who care about human rights, will ask their candidates what their party is doing to stop the genocide of the Muslim Uighur people.

National Security and Investment Bill

Lord Lansley Excerpts

Committee stage
Tuesday 16th March 2021 Lords Chamber

Moved by

[Lord Lansley]

39: Clause 11, page 7, line 36, at end insert—
“(aa) prescribe circumstances which are not to be regarded as gaining control of a qualifying asset which is the subject of an export control order under the Export Control Act 2002 and related provisions, and”Member’s explanatory statement
This amendment would enable the Secretary of State in regulations to set out where the control of assets under the Export Control Act should not to regarded as gaining control under this Act.

[Lord Lansley (Con)]

My Lords, this first group consists of two amendments, both in my name and both relating to the interaction of the export control regime with the investment screening regime. Amendment 39 would insert into Clause 11, which relates to the exceptions to the general definition of the control of assets, a power for the Secretary of State by regulation to prescribe where the control of a qualifying asset is not to be regarded as controlled under this regime. It would give the Secretary of State freedom to define circumstances where assets that are to be exported and are controlled by the export control regime would not be regarded as controlled for these purposes.

Amendment 87 is a bit more straightforward in that it would introduce a new clause requiring the Secretary of State when making final orders under the Act to take account of the effects of the Export Control Act and related provisions on that qualifying asset. Your Lordships will note in the Bill an interaction with the Competition and Markets Authority regime, but no similar provision is made for the interaction of the export control regime with this regime.

The Bill offers no substantive recognition of the interaction between the export control regime and assets under this regime. That is surprising, because paragraphs 3.85 and 3.86 of 2018 White Paper state—please forgive me, it is a fairly long quote:

“After the introduction of the reforms described in this White Paper, the export control regime will remain the key means of restricting trade in strategic goods where this might raise national security risks … The Government wishes to ensure that the new reforms are as proportionate as possible, and are not used instead of other, more targeted or proportionate policy levers. As such, where national security concerns relate solely or primarily to the export of goods, the Government expects that the export control regime would remain the primary means of protecting national security.”


The purpose of these amendments is to ask whether that is still the Government’s policy. If it is, why is it not reflected in the structure of the powers? Should it not be included in the Bill to make that clear?

The Minister may say that since the export control regime is under the control of Ministers, they have all the administrative means at their disposal to bring the two regimes together, whereas there is a separate statutory and independent agency in the Competition and Markets Authority. But that would not be transparent to those affected. I know from talking to people who would be affected that there is a long-standing relationship with the export control unit of the department and an understanding of how its powers are used. To the extent that that transparency and predictability are maintained explicitly, I think it would greatly assist those who are to be affected by these powers.

It is surely the case that Ministers, when making a final order, will take account of where qualifying assets are the subject of an export control order. That being so, I am looking not only for an assurance from the Minister that it is the Government’s intention to use the export control regime as the principal means by which the export of qualifying assets is controlled but for a recognition of this in some form in the legislation, to enable all those affected to be aware of the relationship between these two regimes and for it to be transparent. I therefore urge my noble friend to consider the merits of Amendment 87, which would introduce a new clause that simply did that without placing any constraint on Ministers. I beg to move.

[Lord Purvis of Tweed (LD)]

My Lords, I am grateful to the noble Lord for bringing forward these questions in such a characteristically forensic manner. The Committee will be aware that I have not participated in it so far, and I therefore intend to be brief and shall raise only a small number of questions seeking clarification from the Minister on the interaction with the Export Control Act 2002 and on an associated issue.

It has been fascinating listening to the contributions in Committee up to this point about some of the opacity in the interaction with the other legislation and, indeed, how the investment security unit will operate within the department that will cover export control licence applications, which will also make considerations on national security grounds and how they interact. It was interesting to note that in the House of Commons, on the Prime Minister’s Statement on the integrated review, Julian Lewis, the chair of the Intelligence and Security Committee, criticised the Prime Minister for not allowing there to be full scrutiny of how the investment security unit will operate. I know that my noble friend Lord Fox will raise this later and will lead on it.

How will that interaction be on the export licence regime? One area where there have been calls for the Government to have annual reports on the operation of this legislation was interesting, given the fact that under the Export Control Act 2002 there are annual reports, and there is clarity as to how many applications and the various different criteria for refusal or putting on hold applications. An interesting aspect of the Export Control Act 2002—and I reread the Explanatory Notes to the legislation after seeing the amendment from the noble Lord, Lord Lansley—is that, on one reading of the Act, which does not go into the same level of detail for defining companies as this legislation, it refers to people being part of the licence, for them and their knowledge and for their providing technical assistance. There certainly can be companies that operate almost exclusively on providing technical assistance, in the technical services industry in particular; they are covered by the Export Control Act for their work that they will then carry out, and the Government take a view as to whether that is something that should be considered as an export.

Secondly, there are companies that operate within hybrid technologies, as the Export Control Act indicated, for technologies and technical assistance, and controls can be imposed for the transfer of technology from the UK and by UK persons, anywhere and by any means. It is interesting that Section 4 of the 2002 Act says that,

“‘trade controls’ …means the prohibition or regulation of … their acquisition or disposal … their movement”,

and associated activities of any goods. The Minister may say that that means specific items, goods or technologies of a company but not the company itself—therefore, this legislation covers the company. It would be helpful if the Minister could indicate something about the interaction.

It struck me that, if any Government indicated that a certain technology or good required prohibition from being exported or their trade in that to be regulated, that would be considered under criterion 5 for national security grounds. What if the interaction of that company is then the subject of a review under this legislation, or indeed that parent company is taken over, or there are shares that meet the trigger requirement? What is the status of the export licences that that company has—because the Government have already indicated that they have sought and maybe made a decision on national security grounds? It is worth pointing out that we know from the annual report that last year there were 80 refusals on national security grounds under criterion 5 in the UK—it indicates for the national security grounds of the UK, the EU and other friendly countries. In the last set of discussions, it was interesting to hear about the interactions with decisions that other friendly countries make. The Export Control Act makes determinations for that.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

First, I thank my noble friend Lord Lansley for these two amendments, which seek to ensure seamless integration between the new regime provided for by the Bill and the existing export control regime. I shall take his amendments sequentially.

Amendment 39 seeks to ensure that the Secretary of State can, through regulations, exempt from the regime certain acquisitions of control over qualifying assets that are subject to export control orders. Clause 11 provides for exceptions relating to control of assets. Subsection (1) sets out that acquisitions made by individuals for purposes wholly or mainly outside the individual’s trade, business or craft are not to be regarded as gaining control of a qualifying asset and are therefore excluded from the scope of the call-in power. This does not apply in relation to an asset that is either land or subject to certain export controls set out in subsection (2)(b).

Subsection (3) also provides a power for the Secretary of State to amend the list of assets that are outside the scope of this exemption or to prescribe other circumstances in which a person is not to be regarded as gaining control over a qualifying asset. That includes being able to prescribe circumstances in which the acquisition of an asset subject to export control legislation is not to be regarded as gaining control over a qualifying asset. Any use of this power in subsection (3) would, of course, be guided by the operation of the regime in practice and any patterns of activity that are observed. As such, I can therefore assure my noble friend that the Bill already provides for what his amendment intends to achieve.

Amendment 87 would require the Secretary of State to ensure that any interim orders or final orders made in relation to acquisitions of control over assets take into account controls imposed under the Export Control Act 2002 and related provisions. I thank my noble friend for his proposal and commend the intent behind it. It is, of course, very important that the Secretary of State’s use of the powers provided for by the Bill is in keeping with the Government’s measures under other legislation. The Secretary of State must take into account all relevant factors when making decisions about the use of interim orders and final orders.

The legal tests in the Bill require the Secretary of State, before making an order, to reasonably consider that the provisions of the order are necessary and proportionate for the purpose. In the case of final orders, that purpose is to address a risk to national security, and in the case of interim orders, it is to prevent or reverse an action that might undermine the national security assessment process. Whether controls have been imposed under export control legislation will be relevant to whether the envisaged provisions of an order are necessary and proportionate. For example, where export controls in relation to an asset are already in place, it may not be necessary or proportionate to make an order under this Bill prohibiting the transfer of the asset overseas, but this will depend on the facts of each case.

Addressing the questions of the noble Lord, Lord Purvis of Tweed, about why we need the Bill when we already have the export control regime, I say that the export control regime is a licencing regime for certain controlled goods. It is an important part of the safe- guarding of our national security and it sits well alongside the proposed national security and investment regime. The two regimes are distinct though, and do not perform the same role. For example, the export control regime does not provide the Government with the ability to scrutinise acquisitions of UK companies or direct the use of sensitive assets used in the UK, whereas of course the NSI regime would.

On the noble Lord’s points about standard individual export licences if they have been granted for an export, I tell him that a standard individual export licence is granted to one person to export specified items to a named recipient. If the parties involved precisely follow the terms of a standard individual export licence that has already been granted following an assessment of national security risks, it is unlikely that the Secretary of State would reasonably suspect that the export might give rise to national security risks. In this situation, it is unlikely that he would be able to call that export in under the NSI regime. However, it is important to say that any decisions would need to be made on a case-by-case basis. It is important that the Secretary of State retains the ability to call in and scrutinise trigger events involving the export of assets in the event that national security risks are present.

The noble Lord asked about Northern Ireland. Qualifying entities as assets in Northern Ireland sit within the scope of the Bill, and that ensures that there are no loopholes. A trigger event under the Bill is not based on the application of EU law. For completeness, I should also say that the Secretary of State will, in any event, be subject to public law duties requiring him to consider all relevant factors when deciding whether to make an order under the Bill. Therefore, where export controls are relevant, the Secretary of State will need to take them into account when making that order.

I hope that that has explained, for the benefit of the House, the interaction between the two pieces of legislation. With the explanations that I have provided, I hope that my noble friend will feel sufficiently reassured that his concerns have been taken into account, and that he will not press his amendments.

[Lord Lansley (Con)]

My Lords, I am grateful for each of the contributions to the short debate. They were helpful and, indeed, added to the questions. The noble Lord, Lord Purvis of Tweed, referred appropriately to the Export Control Act provisions. I remember that I was on quadrilateral committee in the other place, about 15 or 16 years ago, so I remember how these issues were considered at that time. Indeed, there was a level of parliamentary oversight of the export control regime, which may be something we refer to at a later stage. He raised some good points: I thought the point about the EU export control regime was a very good one. The noble Lord, Lord Grantchester, made an interesting point about the interaction with the Department for International Trade in this context.

If I understand my noble friend correctly, he is more or less saying that the power under Clause 11(3)(b) would enable the Secretary of State to prescribe, by regulation, such circumstances as necessary, so in that sense my Amendment 39 is not necessary. I agree; it is not necessary but certainly the explanation of the interaction between the two regimes is desirable. However, Amendment 87, proposing a new clause, perhaps drafted differently to make it clearer about the interaction between the two regimes—both at the point where a call-in notice has to be considered, as well as the point at which interim and final orders are made—would be very useful. What I have heard from my noble friend suggests that, by administrative means, using the powers in the Bill and under public law requirements, the Secretary of State will have regard to the export control regime when using his powers under this regime. That is undeniably true. I think we all knew that, but there is much more that we put into legislation, particularly with a new system, that helps people who are to be affected by it to look at it and understand how it works.

What I found deeply surprising was that such an important part of the Government’s policy intentions—that the export of goods should still be primarily controlled by an export control regime—was not even referred to in the Bill or in the Government’s response to the consultation. It is as if it did not exist, but it does exist and it is important, as the Minister’s reply suggested. I shall reflect on what he said, but it may well be that there continues to be a “desirable interaction” clause in the Bill that makes it very clear to all those affected that the export control regime plays a significant part in the control of qualifying assets where they are to be exported. However, based on what my noble friend said, I beg leave to withdraw the amendment at this stage.

Amendment 39 withdrawn.

--- Later in debate ---

Moved by

[Lord Lansley]

45: Clause 13, page 8, line 21, leave out from “made,” to end of line 22 and insert “or in relation to which undertakings under section 26(1)(aa) have been accepted, that is completed otherwise than in accordance with the final order or the undertakings (as applicable), is void.”
Member’s explanatory statement
This amendment is linked to amendments in Lord Lansley’s name to Clause 26 which provide for undertakings to be accepted instead of a final order.

--- Later in debate ---

[Lord Lansley (Con)]

My Lords, this group consists of four amendments, all in my name. The few who are watching our proceedings may be slightly confused that all the amendments they have heard have been moved by those on the Conservative Benches. I think three-quarters of the amendments on our Marshalled List today are tabled by Conservative Members. It is because we all support the Bill, and we want to make it work well. I note that our noble friends are commending our intent; I promise them that our intent is positive in all these amendments. Many of them, like those in this group, are about trying to understand the structure of the policy and probing some of the considerations that we thought might go into it.

Amendments 45, 68 and 69 relate essentially to the policy question of whether the Secretary of State should accept undertakings as an alternative either to issuing a final notification, meaning nothing is going to happen, or to making a final order, meaning specific things must be done. Why should the Secretary of State have an intermediate option? The lawyer’s answer is that he does not need it. Since the power in Clause 26 is that a final order

“may include … provision requiring a person, or description of person”

to do or not to do particular things, there is no limit to the power conferred under the Act. Therefore, almost by definition, the legal answer to the question of whether the Secretary of State needs this additional power is no.

However, as so often, we come back to the question of what, in practice, works best. In that respect, the Competition and Markets Authority, which works on both merger cases and public interest cases, can seek commitments and accept undertakings in view of making the equivalent of an order. It does that, first, because it can be quicker: a proposal can be accepted much more rapidly than using the process of examination necessary to arrive at a final order. Secondly, it can be structured in a way that is more flexible. It can be purposive—it can set out what the entity or the person controlling the asset would need to do to satisfy the Secretary of State to mitigate or prevent the risks.

Those undertakings could, therefore, be purposive and long lasting, whereas an order must be prescriptive, a bit like legislation. It will have to tell people precisely what they are going to do, or else—I fear that this may too often be the resort of Ministers—put someone in a position to make decisions about an entity or an asset in place of the people who actually control that company or asset. I will come on to that a little later in this group, on Amendment 71.

The potential for a purposive, flexible and speedy reference to undertakings, which has long been established in relation to the merger control and public interest regimes under the Enterprise Act, would be a good way of proceeding. This is not without precedence in other jurisdictions. For example, we have referred in our discussions to the Committee on Foreign Investment in the United States. The number of times the United States resorts to presidential decisions is very modest. The number of times it enters into what is known as a mitigation agreement is much greater. What I am looking for is something a bit like a mitigation agreement.

Amendments 68 and 69 to Clause 26 would insert the ability to accept undertakings. Under Amendment 45, if undertakings were entered into and not adhered to, the notifiable acquisition would become void. Therefore, Amendment 45 is consequential on Amendments 68 and 69. I am looking to find out why Ministers have rejected the option of undertakings, and whether this is something that should be in their armoury, even if they use it rarely.

Amendment 71 relates to the question on Clause 26, which states that the Secretary of State can provide for

“the appointment of a person to conduct or supervise the conduct of activities … with such powers as may be specified or described in the order.”

Who is this person? This is purely a probing amendment to find out. Is this person simply a civil servant operating on behalf of the Secretary of State in all circumstances, and would the Government have such persons available with the qualifications and experience necessary to undertake these functions? If they are not civil servants, who are they? Under what circumstances would they be brought in, and with what qualifications would they be equipped? At the moment, as far as I can tell from the policy material issued with the White Paper and the response to consultation, these questions have not been addressed.

--- Later in debate ---

[Lord Grimstone of Boscobel (Con)]

My Lords, I thank the noble Lord for that question. It will be horses for courses. It will be either qualified people from inside or, if a person from inside does not have the qualifications, someone will be drawn in from outside and appointed to do it. The test will be to make sure that the person you ask to do the role has the capabilities and the qualifications to do it. I say yet again: why would the Secretary of State wish to do other than to appoint somebody who is qualified to do this task?

[Lord Lansley (Con)]

I am grateful to my noble friend the Minister for his responses to this short debate, and indeed to those who participated in it. It was helpful to elaborate some of the issues, although I am not sure that we solved many of the questions that were posed.

My noble friend correctly deduced that I did not see Amendment 71 as needed. It was designed to find out who these people are. Although my noble friend did not say so, the implication is that they are the staff of the department, working in the investment security unit. In a sense, that tells us already that, when we come on to think about some of the implementation of this and the annual reports and so on, we are dealing not only with a flow of cases through the investment security unit but with a continuing role for the unit in the scrutiny and the conduct of the activities that are the subject of final orders. I hope that we will be dealing with only some dozens of final orders a year, but it will build up over time since many of these final orders in relation to entities will have a continuing relationship.

I did not expect the “suitably-qualified” question to arrive at any other answer than that they are civil servants recruited into or drawn from the department, but if they were other than that, it would be very useful for us to be told. I am assuming that they are not.

On the question of undertakings, as I surmised at the outset, the Secretary of State has all the powers the Secretary of State requires. The point, however, is that when making final orders, it may be flexible from the Secretary of State’s point of view, since the Secretary of State can include anything the Secretary of State wishes to include in it. However, it is not necessarily flexible from the point of view of the people affected, since once the order is made, the flexibility has completely disappeared. What is flexible about undertakings is the ability of the acquirers to make commitments at the time they are contemplating an acquisition in order to bring those two things together to enable the acquisition to continue—the noble Lord, Lord Fox, made that point, perfectly reasonably. If we want to promote investment and to assist those who are acquiring entities and assets in the United Kingdom, other foreign direct investment jurisdictions such as the US allow for mitigation agreements. The American one does not impose orders, or rarely does so. There may still be merit in having the flexibility to enter into agreements with acquirers rather than imposing orders on them. I am surprised that the Government have simply dismissed that possibility. Having it on the statute book does not mean that Ministers have to use it, but if it is not on the statute book, they cannot do it. That is why we are thinking about it at this stage.

However, in the light of what my noble friend says by way of the powers in the Bill, I suppose that at this stage it is probably best to beg leave to withdraw the amendment.

Amendment 45 withdrawn.

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[Lord Lansley (Con)]

My Lords, I am very grateful to my noble friend Lady Noakes for introducing this group of amendments. She has explained very well how we want to ensure that the greatest possible certainty and the least possible delay intrudes into these processes for investors. I have four amendments in this group. Amendment 51 probably relates to the next group so, if the Minister is content, I do not propose to speak to Amendment 51 now. It is almost consequential on Amendments 50 and 63 in the next group, and is linked to Amendment 50, so I will not refer to it now.

My Amendments 54, 64 and 66 are rather like my noble friend’s amendment in trying to explore much more specifically how these timetables work. Amendment 54 relates to mandatory notifications, and Amendment 66 to voluntary notifications, but they would have the same effect. Amendment 54 looks at the review period, which Clause 14(9) says is

“30 working days beginning with the day on which the notification under subsection (8)(a) is given to the person who gave the mandatory notice.”

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Moved by

[Lord Lansley]

50: Clause 14, page 9, line 6, at end insert “including as to the information required to be provided in relation to the notifiable acquisition.”
Member’s explanatory statement
The purpose of this amendment is to ensure that the requirement for information to support a decision by the Secretary of State will need to be specified in the Regulations.

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[Lord Lansley (Con)]

My Lords, there are just two amendments in this group. They are both to the same purpose. As I explained previously, one relates to mandatory notifications, the other to voluntary notifications. My noble friend the Minister answered on Amendment 51 in his response to the previous group, but for my purposes it is linked to Amendment 50 in any case, so I will touch on it.

Amendments 50 and 63 essentially raise two questions. The first relates to circumstances where somebody gives a notice to the Secretary of State and they meet the requirements in the regulations—they have looked and said, “To give a notice to the Secretary of State, I have to tell the Secretary of State A, B, C, D”, or however many pieces of information. That should be specified in the regulations. As the Bill is drafted, the Secretary of State can then come back to them and say, “Yes, you provided all the information required under the regulations, but you didn’t provide us this further information, which would enable us to make a decision whether to accept or reject your notice.”

The purpose of these amendments is to say that we should not arrive at that situation. Somebody starting this process with a notice should be able to rely on the information specified in the regulations to accompany a notice being sufficient to start the process definitely, one way or the other. That is why Amendments 50 and 63 say what they do. As my noble friend Lord Callanan said in response to the previous group, the two initial points—does it meet the requirements of the section and the requirements prescribed in regulations?—should be enough, but the amendments would add, to make it absolutely clear,

“including as to the information required to be provided in relation to the notifiable acquisition”

or the trigger event in the case of a voluntary notification, so that there is no uncertainty about this. The regulations should say what information has to be provided. If it is provided, then the notice should be rejected or accepted.

The second question that arises from this is on voluntary notifications. Since it is not explained in the Bill, what happens if the Secretary of State receives a voluntary notification, decides that there is insufficient information, rejects it, sends a letter to the person who supplied the voluntary notification saying “You didn’t give me additional information X, Y or Z”, and the person concerned then decides not to bother? What would the Secretary of State do about this? It is not a notifiable acquisition. If it were the Secretary of State would have a degree of control, but on a voluntary notice there is no such control. I do not see what happens when a notice is rejected under those circumstances.

Perhaps when my noble friend replies on this short group he would also explain why notices should be rejected because people have not supplied the Secretary of State with information that he did not ask for, and what happens if somebody makes a voluntary notification, the Secretary of State rejects it and they then do nothing about it. I beg to move.

[Baroness McIntosh of Pickering (Con)]

I thank my noble friend Lord Lansley for tabling these two amendments. I would like to speak to Amendment 63, which gives me the opportunity to raise an issue raised with me, and I am sure with other noble Lords, by the Law Society of England. I put a direct question to the Minister in summing up this small group of amendments. Can he confirm that the Government have actually considered, and have regard to, the impact of the sheer large numbers of filings that they may receive on the new regime’s ability to dispense with these filings in a timely manner? My noble friend has done us a great service here by highlighting the level of information required in the first instance or that may be required at a later date.

The estimated volume of filings stated in the impact assessment, deemed to be between 1,000 and 1,830 transactions notified per year is, in the view of the Law Society, an underestimate. That is because, for reasons that my noble friend gave, there is likely to be a very large number of voluntary filings and requests for informal guidance, especially when the regime is new and businesses are accustoming themselves to its requirements. In my view, the Law Society has raised legitimate concerns, which are reflected in these two amendments. Can I have a reassurance that there will be sufficient resources to deal with the sheer number of requests that are expected to avoid delays and burdens for businesses, which could be avoided in this regard?

[Lord Grimstone of Boscobel (Con)]

My Lords, I extend my thanks to my noble friend Lord Lansley for his Amendments 50 and 63. I shall deal first with a couple of points that have been made. If a voluntary notification is incomplete, it is not effective. That may mean that the Secretary of State may choose to exercise his call- in powers at some point in future in relation to that.

My noble friend Lady McIntosh asked whether we had underestimated the number of transactions that were likely to come before the unit. She referred to the work that the Law Society has done on that. All I can say is that we have thought about this carefully, and I am happy to repeat the assurance that we will make sure that the unit is fully resourced. If the number is greater than we anticipate, the resources of the unit will have to be expanded to cope with those greater numbers.

I extend my thanks again to my noble friend Lord Lansley for Amendments 50 and 63 which both relate to the information that must be provided as part of a notification. Clause 14 sets out the mandatory notification procedure and Clause 18 the voluntary notification procedure. Both clauses provide powers to the Secretary of State, by regulations, to prescribe the form and content of a mandatory notice and a voluntary notice respectively. Both clauses also provide that the Secretary of State may reject a notice where it does not meet the requirements of the clause, or the requirements prescribed by the regulations.

These amendments seek to make it clear that the Secretary of State can reject a mandatory or voluntary notice where information relating to either a notifiable acquisition or a trigger event has not been provided despite being specified as required in regulations. These amendments also seek, as a result, to ensure that any such regulations include a requirement to provide the information about the notifiable acquisition or trigger event needed to make a call-in decision.

I am happy that I can reassure my noble friend, I hope completely, that the Secretary of State absolutely intends to use the regulation-making powers under both these clauses to prescribe both the form and content of mandatory notices and voluntary notices. Indeed, our view is that the regime simply cannot work and will not work without such regulations being made. The primary entry mechanisms into the regime are based on notification, so it is vital that we are clear with businesses and investors about what information they must provide and in what format.

That is why, ahead of Committee in the other place, we published a draft of the information likely to be required as part of a mandatory notice or voluntary notice. I continue to welcome comments from noble Lords about that draft, but I think I can reassure my noble friend that information about notifiable acquisitions and trigger events will certainly form part of such requirements.

With that said, I fear that my noble friend’s amendments would therefore be duplicative in this instance. Clause 14(4) and Clause 18(4) allow the Secretary of State to make these regulations. Clause 14(6) and Clause 18(6) allow the Secretary of State to reject a notice where it does not meet the requirements specified in the regulations. The Government consider that this approach provides the powers that the Secretary of State needs to reject a notice where insufficient or the wrong information has been provided, whatever the final notification forms look like.

I hope my noble friend is reassured by my explanation of these clauses and the Government’s general approach on this matter, and I hope, therefore, that he feels able to withdraw his amendment.

[Lord Lansley (Con)]

I am grateful to my noble friend. I think he slightly confused two things together at the end, in talking about insufficient or wrong information. If there is wrong information, then clearly a notice can be rejected. The question about the sufficiency of information is the point I am coming back to. My noble friend was quite clear on—and I think it is very clearly set out—what it is the Government expect to be provided by way of information for these notices. The question is: why should they have a power to reject a notice on grounds that they require more information beyond what has been asked for in the material that has already been published? That is the power they are taking.

If the Government say—as my noble friend Lord Callanan said—one must set out who the chief executive is, and someone puts their given name but not their family name, they can reject it. The point is, however, that that was specified in the regulations. The question is: does it require his other information, and what is the other information? People might reasonably say, “You have rejected it because I did not provide the information that you required, but you didn’t tell me you required it.” That is my problem.

I will go away and think about this a bit more; maybe it is not important enough for us to persist with. For the moment at least, I will make my point and beg leave to withdraw Amendment 50.

Amendment 50 withdrawn.

--- Later in debate ---

However, thus far, the Minister has declined to provide an assurance that the Prime Minister will update the MoU, that the new investment security unit will be added to it, that oversight equilibrium will be restored, and that Parliament will maintain its sight and sovereignty over a crucial part of national security. If there is no movement on this—and I find it extraordinary that there has not been—I will have no choice when it comes to Report but to move this amendment and divide the House.

[Lord Lansley (Con)]

My Lords, I will speak briefly to my Amendment 86 in this group and express my support for Amendments 78 and 79, in the name of the noble Lord, Lord West of Spithead. I will not repeat his arguments; I thought they were compelling. Amendment 86 would put the investment security unit of the Department for Business, Energy and Industrial Strategy into the remit of the Intelligence and Security Committee in the Justice and Security Act.

I am grateful to the noble Lord, Lord Fox, for supporting the amendment; I am sure he agrees with me on this. We would not need it if Ministers would permit adding the investment security unit of BEIS to the memorandum of understanding, as part of the remit of the Intelligence and Security Committee. If forced to, it would be better to amend the Act to put it into the remit, rather than to put something in the legislation that directly impacts the memorandum of understanding. That is not the way that the MoU should work.

I remind your Lordships that the memorandum of understanding, which was published with the annual report in 2013-14, said:

“The ISC is the only committee of Parliament that has regular access to protectively marked information that is sensitive for national security reasons: this means that only the ISC is in a position to scrutinise effectively the work of the Agencies and of those parts of Departments whose work is directly concerned with intelligence and security matters.”


That is precisely the point being made here: the ISC must complement the other committees, including the BEIS Committee, in its scrutiny of this work. As the footnote to the MoU said:

“This will not affect the wider scrutiny of departments such as the Home Office, FCO and MOD by other parliamentary committees.”


It is consistent with scrutiny of activity generally but, for scrutiny relating to intelligence and security matters to happen, confidential material may need to be supplied to the ISC and the ISC needs to have it added to its remit. I hope my noble friend can give us that assurance, if not today, on Report.

[Lord Campbell of Pittenweem (LD)]

My Lords, I too shall begin by declaring an interest, having been a member of the Intelligence and Security Committee for seven years, five of which were enhanced, if I may say, by the presence of the noble Lord, Lord Butler of Brockwell. I have a further advantage because I have been listening, along with other noble Lords, to the three preceding speeches in this debate, which have set out the principles clearly and powerfully against what appears to be intransigence on the part of the Government. At this point, therefore, I shall adopt what has been said by the noble Lord, Lord West of Spithead, with which I agree entirely. I am also influenced to some extent by the fact that your Lordships have been exemplary in the dispatch of business today. I have been watching from the pavilion, as it were, and it seems that the conduct of this Committee stage so far could be recommended or possibly even compelled for the Committee stages of other Bills.

There is nothing that I can usefully add to the arguments put forward by the three preceding speakers, but I can make one further contribution. In advance of the debate today, I consulted the 2013 report of the Intelligence and Security Committee entitled Foreign Involvement in the Critical National Infrastructure. The noble Lord, Lord Butler, and I were members of the committee at the time and the chair was Sir Malcolm Rifkind. Among other things, the committee applied its mind to the issue of Huawei, in particular to its entry into the United Kingdom market and the fact that in doing so it entered into contractual arrangements with BT. What happened was that BT did as it was supposed to do and advised the relevant government departments of the position, but the officials then communicated what had been brought to their attention by BT not to any of the Ministers with responsibility for national security but to the then Secretary of State at the Department of Trade and Industry. That was done on the ground that the only thing which appealed to the officials to draw to ministerial attention was the possible impact on British businesses.

That having happened, for quite a long time, Huawei enjoyed not a privileged but certainly an unremarkable position in the British economy. It was only some years later that it became clear that there were other implications to be drawn from its interest in the economy of the United Kingdom. At that point, the Intelligence and Security Committee deemed it appropriate to include it as part of the inquiry whose report I have described. As a consequence, the committee was able, as has been hinted at already, to come to a much better and more informed judgment about Huawei because of its access to intelligence that would not otherwise have been available either to committees or to Parliament itself. I recommend the report as a good illustration of how an inquiry of that kind should be carried out and how profitable, if you like, the consequences are of so doing.

The issue is clear. If, at the stage of the involvement of Huawei in the economy of the United Kingdom it had been understood and perused by those with access to a very high level of classified intelligence, perhaps, since the moment of Huawei’s arrival into this economy, there would have been a much greater understanding throughout government of the significance of its entry into the United Kingdom and the implications for security which that has necessarily involved. For these and other reasons that I have indicated previously, I support the amendment tabled by the noble Lord, Lord West of Spithead, to which I have added my name.

--- Later in debate ---

Moved by

[Lord Lansley]

76: Clause 54, page 34, line 15, leave out “and” and insert—
“( ) whether the United Kingdom has a reciprocal agreement with the country or territory to whose authority the disclosure would be made, and”Member’s explanatory statement
This amendment would require the Secretary of State to take into consideration whether there is a reciprocal agreement in place when deciding to disclose information to an overseas public authority.

[Lord Lansley (Con)]

My Lords, this group should not take us very long. There are just two points in it. Amendment 76 relates to Clause 54, “Disclosure of information,” and in that clause, there is a power for the Secretary of State to disclose information

“to a public authority or an overseas public authority.”

When deciding whether to disclose information to an overseas public authority, under subsection (7) of that clause, there are two issues the Secretary of State must have regard to: the protection against self-incrimination in criminal proceedings; and whether the matter in respect of which disclosure is sought is sufficiently serious to justify making that disclosure.

Amendment 76 in my name proposes to add one further matter to which the Secretary of State must have regard—whether there is a reciprocal agreement with the country or territory concerned. It would not mean that where there was no reciprocal agreement the Secretary of State could not make a disclosure to an overseas public authority, but it should be something that he should have in mind.

I am glad that my noble friend is on the Front Bench because he will have fond memories of Amendment 77. It concerns the disclosure of information where a statutory gateway is made and how such a statutory gateway is to be considered alongside the prohibitions to be found in data protection legislation and in the Investigatory Powers Act. The amendment to Clause 57 covers this. My noble friend will recall that under the Trade (Disclosure of Information) Act 2020, where there was a power to disclose information that might contravene the data protection legislation, that would be prevented, but the duty or power in the 2020 Act was to be considered alongside that prohibition. We can see that in Clause 57(2)(a), which makes it clear that the duty to disclose in this legislation would not contravene data protection legislation or the provisions of the Investigatory Powers Act, but that the duty or power in this legislation must be taken into account.

Clause 57 puts that qualification alongside the data protection legislation, but it has not put it alongside the prohibitions in the Investigatory Powers Act; I do not know why. I know why it is there because we went through this on the Trade Bill. It is there because of the 2016 Supreme Court decision in The Christian Institute & Others v The Lord Advocate made it clear that the decision-maker should have in mind both the prohibitions and the powers in the Act, and balance the two together. In Clause 57(2)(a) this legislation enables the Secretary of State to balance the two. The question is: why not in the Investigatory Powers Act? If the answer is that under no circumstances would a prohibition under the Investigatory Powers Act be overridden by reference to the duty or powers in this legislation, I will be content with that. However, otherwise I do not understand why it is not included in Clause 57(2)(b) in the same way as it is in subsection (2)(a). I beg to move.

[Lord Fox (LD)]

My Lords, I rise to beat the rush and clamour to respond to these two amendments. Taking them in turn, from these Benches, Amendment 76 seems to make a relatively straightforward point. I will be interested to hear from the Minister what possible objection there might be to it. My suspicion about Amendment 77 concerns what normally happens to amendments like this tabled by the noble Lord, Lord Lansley. The Minister will say, “We do not need these powers because—”. I have looked at the legislation and I cannot find any evidence of where the “because” might be. I shall sit down and wait to find out.

--- Later in debate ---

[Lord Lansley (Con)]

I am grateful to my noble friend for his response. I will read it carefully, but, if I understand it correctly, I entirely agree with him on the explanation of Clause 57 and the different approach to data protection legislation on the one hand and investigatory powers on the other, so there is no problem there.

To be perfectly honest, I do not understand the argument regarding Amendment 76. If my noble friend is resting his argument on the fact that there is a public law duty and that all relevant considerations must be taken into account, why does that not equally apply to the considerations specified in Clause 54? If they are to be specified there, I do not understand why a reciprocal agreement could not be properly included. It is a matter of policy as to whether it should or should not, and it seems to me that there is a good argument that it should be considered, but I will reflect further on that and, for the moment, I beg leave to withdraw Amendment 76.

Amendment 76 withdrawn.

--- Later in debate ---

[Lord Grantchester (Lab)]

I am pleased to open this group of amendments by moving my Amendment 80, concerning the department’s annual report on this legislation. Generally speaking, Governments, regrettably, do not tend to offer widespread information in reports, whether annual or not—except, of course, where they consider that they heap praise on themselves.

Clause 61 can be made to look extensive, comprising as it does a total of 12 mandatory pieces of information—13, should the addition of the noble Lord, Lord Lansley, not be considered unlucky. This list can form the basis of information on the way the Government provide a dashboard to view the new unit. However, in considering how well it is performing and its relationship with and effect on the business community, any audit certainly needs to ask for the additional six listed in my amendment.

My Amendment 80 requires the Secretary of State to report on the time taken to process notices, which was part of our earlier discussion on the resource allocation to the new unit and the extent to which small and medium-sized enterprises are called in under the new regime. The amendment is about requiring a greater degree of accountability from the department regarding the investment security unit’s service standards and functions. It states that the report needs to include the aggregate time for decision-making, in both assessments and initial answers, acceptances and rejection notices, providing a measure to ensure that the screening process is working effectively and efficiently for SMEs.

Secondly, on elements of capacity monitoring, the amendment enhances the ability to take stock of the resources behind the unit’s work, so that Parliament and the public can appreciate the report as a mechanism for holding the Government to account for what will be a major new centre for merger investment screening for the security of the UK.

Thirdly, we are keen to maintain a business climate in which SMEs can thrive. It would be beneficial in this respect for the unit to track and monitor the focus of SMEs in its work. Information would be able to highlight any specific concerns and the experiences of the most innovative start-ups in their interactions with the new regime.

The general questions across the Committee regarding how the new unit will operate, be resourced, perform and impact those throughout the economy whom it will affect can be answered in the more comprehensive information that an annual report can offer. In addressing the Commons Committee, David Petrie of the ICAEW wanted to test the capabilities of the regime in an accountant’s way by assessing the reasonableness of his assumption that even 1,000 notifications a year amounts to four a day and a considerable workload. How will that work and what information must be provided to check it through the annual report? What will be the annual budget for this regime and what increase for the department will be necessary? Will the new unit be able to request and receive additional funding to meet the challenges it has yet to experience?

I will not steal the thunder of the mighty guns of my noble friend Lord West by saying much at this point about his Amendment 91, which is in this group. He has already spoken authoritatively on security matters. However, we are sympathetic to and support his amendment, as businesses in the defence sector have asked that the impact of the new regime on them be clarified. The amendment reflects the Defence Committee’s report on foreign investment, which called for banning investments in the UK’s defence supply chain from certain countries, namely, China and Russia. What is the Minister’s view on this?

In considering the annual report and the guidance my noble friend seeks for the defence sector, and the other reports undertaken under, for example, Amendment 78 or Amendment 82 in the name of my noble friend Lady Hayter, it would be helpful if the Minister could also outline the relevant interactions, not least with reports from the export control regime, in order to provide a comprehensive assessment. It would be unfortunate to find information disappearing into gaps between them and vulnerability opening up in the security screening process. I beg to move.

[Lord Lansley (Con)]

Noble Lords will be pleased to know that this is the last time they will hear from me in this Committee. My amendment is terribly simple. In so far as the annual report lists the number of final orders made, Clause 27 provides the power for the Secretary of State to vary orders or revoke them. One of the things that one might want an annual report to do is to enable one to understand the stock of orders as well as their flow. Therefore, I have suggested in Amendment 81 that the number of orders varied or revoked should be added to the list of subjects in the annual report.

[The Deputy Chairman of Committees (Lord Lexden) (Con)]

I call the guns of the noble Lord, Lord West of Spithead.

National Security and Investment Bill

Lord Lansley Excerpts

Committee stage
Tuesday 9th March 2021 Grand Committee

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Noakes, and to agree with her. The point she made—that competition can be a security issue as well as a trust issue—was one I was going to make myself. I was thinking in particular of the concentration of media ownership and the impact that can have on national security.

As the Committee may have guessed, I am speaking in this group, respectfully but strongly, against the inclusion of any of these amendments in the Bill. If we included these amendments, we would be heading down the road of the Dangerous Dogs Act, generally acknowledged as one of the worst pieces of legislation passed through your Lordships' House. It penalised and gave a death sentence to dogs identified as belonging to certain breeds, which completely misidentified the problem, which was not canine genetics but human owners.

The idea that where giant multinational companies are based—those are the kind we will be talking about in many cases—can give any evidence of their loyalties is a great stretch. I was in the Chamber yesterday, speaking about the stance taken by HSBC in backing the Government in Beijing against the interests of the UK, the joint declaration, the rights of the people of Hong Kong and the rule of law.

I want to note concerns about Amendments 95 and 96, which identify a number of countries—Australia, Canada, New Zealand and the US—to be automatically excluded. That is a large assumption, and we can probably all think of case studies—maybe different ones—where individual owners of companies from those countries can be of great concern. It is not a measure of risk. I cannot help noticing certain characteristics shared by those countries that the proposer might like to consider and how the grouping of those countries might play in terms of the UK’s international reputation.

[Lord Lansley (Con)]

My Lords, when we discussed the second group, I said that when we are looking at the national security risk, the purposes of the Bill are to define the relevant entities and assets; the extent of control, which is significant for these purposes; and the nature of the acquirer of those entities and assets. I think the third is proving among the most difficult. This group seeks to define that person by reference to their nationality. This is a substantial change to the nature of the legislation, since the purpose of the legislation is to address national security risks; it is not to screen foreign investment in the United Kingdom. The analogies with other regimes—for example, with the European Union’s regulations—do not stretch far because they are concerned with foreign investment.

This group has strayed considerably beyond areas of national security and into the area of what is termed “open strategic autonomy”. I am not sure how open it will prove to be, but it is potentially protectionist by nature. It strikes me that we should really aim to focus on national security, which is the purpose of the Bill, and in the Bill’s broader economic aspects, we should continue to adhere to the principle of non-discrimination. If we include UK domestic actors in the potential definitions of acquirers who raise national security issues, we will be non-discriminatory in our effects, and it is important that we should aim at that. In practice, where national security is concerned, we know that not all foreigners are hostile, and not all those who are hostile are foreigners. So, I am afraid I am not persuaded.



There is also an issue here about authorised countries, which is linked to this but could be separated, although it is not for these purposes at the moment. The Committee on Foreign Investment in the United States has since last year, I think, had excepted states. Interestingly, they are Canada, Australia and the United Kingdom. The list does not include New Zealand for reasons no doubt well known to the United States Administration but not to me, so I am not entirely sure why my noble friend included New Zealand. The criteria appear to be related to the intelligence-sharing arrangements and the extent of defence integration between those countries’ industries and the United States.

Even where the United States’ excepted states are concerned, this is only temporary. There has to be a determination in the early part of next year of whether we have sufficient investment screening arrangements to give the United States assurance to maintain our excepted state position, which I think the Bill will allow us to do. That will be useful to United Kingdom investors into what are known as TID businesses in the United States—those dealing with sensitive technologies, infrastructure and data.

I say to my noble friend that I am not persuaded by this group of amendments, nor yet by the authorised country issue. I suspect the latter issue is one that it might be useful to come back to and think about under what circumstances we differentiate between people from countries that have comparable investment screening regimes in practice.

[The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)]

The noble Lord, Lord Bilimoria, has withdrawn so I call the next speaker, the noble Lord, Lord Leigh of Hurley.

--- Later in debate ---

[Lord Lansley (Con)]

My Lords, I want to say a word on this group, because I am particularly interested in Amendment 29A, which would remove Clause 8(8). This is of interest, not least because of the question of how to define “material influence”, which we will come to later.

Listening to the noble Baroness, Lady Hayter, I understand what she has done; she is testing the question why material influence is there if it is one of the ways in which control of an entity can be established under Clause 8. Currently, it is not referenced in Clause 6(2)(a) as one of the cases by which that control leads to a notifiable acquisition.

Instead, taking subsection (8) out of Clause 8 and putting it into Clause 6(2)(a) would in effect be saying that a notifiable acquisition takes place when a person gains control of an entity. Clause 8 explains how you gain control of an entity. It can be by acquiring various voting shares, as defined, or by exercising material influence over the entity. That has been left out, so putting it into subsection (2)(a)—that is not precisely what we are proposing here, but I am speculating slightly—would be a much cleaner option. It would enable one to do what my noble friend Lord Leigh is proposing, which is to take the 15% out. The 15% is there only because there are conceivably circumstances in which a 15% or more voting share constitutes material influence. As the noble Baroness, Lady Hayter, said, we know that, because the Competition and Markets Authority has on occasion determined such things. It did so on BskyB v ITV, which concerned a 17.9% shareholding, and it did so in the case, which it none the less cleared, of RWE’s stake in E.ON at 16.67%.

We know that voting shares of between 15% and 25% can represent a material influence, but that is not the issue. The point is not about the voting share: 25% is, generally speaking, the voting share that gives rise to an issue of control, but about the need to say, “Material influence is what we are talking about, so why don’t we use that?” Why introduce this potentially rarely used 15% threshold instead?

My contribution is to ask Ministers if they will go away and look at whether it would be cleaner and simpler for Clause 6 to say simply, “A notifiable acquisition takes place when a person gains control of a qualifying entity of a specified description”, and Clause 8 goes on to explain what “control” means.

[Lord Fox (LD)]

Were my noble friend Lord Clement-Jones here he would pick up his fishing rod again and say that this is a question of mesh size. But, actually, the issues raised by your Lordships should tell the Government that there is work to be done on redrafting subsections in Clauses 6 and 8 to try to clarify. Whatever we come up with, we need clarity, because there seems to be some dissonance in how this is read and regarded.

The noble Baroness, Lady Hayter, asked the right question at the beginning of her speech, which was: what is the rationale behind the 15%? My noble friend Lady Bowles set out the sliding scale of different accountabilities and rights that come with different levels of ownership and said that there was some logical mismatch with the 15%. The Minister has taken refuge in the past in the policies of the other European Union countries, and the noble Lord, Lord Leigh, can happily put his mind at rest that France uses 25%, so clearly, if it is good enough for France, it will be good enough for the Minister.

On a more serious note, the issue of material control is interesting. We have seen so-called shareholder activists reversing into companies with far less shareholding than 15% and making material changes to the strategy of businesses. So what is material and what is a change? The point that my noble friend Lady Bowles brought up about the nature of the other shareholders cannot be left out.

Tracker funds tend not to be active in the way a long or a short fund tends to be, and clearly shares get loaned in situations of activity. All these add up to the mess which the noble Lord, Lord Lansley, described well: who is in control of the business, and what is material control? To some extent, the difference between 25% and 15% is less important than where the control lies. That is harder to enumerate, and difficult for the market to understand, but it is clear that the way this stands in the Bill will not work. I hope the Government can sit down with their lawyers and drafters and come up with something that we can look at next time which takes on board the good advice the Minister has received from your Lordships.

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If the Government do not accept this amendment, how will tech businesses that get into temporary cash problems and need an immediate solution—typically because they have good business propositions, but have overtraded or have a slow-paying customer—obtain the help that they need, in the timeframe in which they need it? I hope that the Minister takes this amendment in the spirit in which it is offered, which is to facilitate inward investment into sensible UK businesses.

[Lord Lansley (Con)]

My Lords, I am pleased to follow my noble friend Lord Leigh. I am sure he is being modest; I would think that tomorrow evening is all sold out. But I agree with him; nobody seems to know anything about the Bill, which is very surprising, given that we are approaching the point at which the trigger events will be in scope and have been for three months. Knowledge about the Bill is woefully deficient. This impels us to crack on, because we have to get this into law quickly, as the period when these trigger events have been taking place, when people do not realise that they are notifiable or that a call-in notice may be issued, is extending every day.

With that said, I will be quick. I forbear to comment on the other amendments and refer just to Amendment 25, which is in my name. It has the effect of adding

“(but are not limited to)”

to Clause 7(5) to find out why it is there. We have the statement under Clause 3, the purpose of which, among other things, is to set out what the qualifying assets are, so we know that. Clause 7(4)(c) tells us that qualifying assets include

“ideas, information or techniques which have industrial, commercial or other economic value”,

which is so broad as to be almost meaningless. It is all-encompassing. Then Clause 7(5) lists a lot of things, but I do not know whether it is exhaustive, as it says they are examples. What I want to know from the Minister is why we are including examples if the list is not exhaustive. If it is not an exhaustive list, why are we not saying

“(but are not limited to)”

to ensure that people realise that it is not an exhaustive list? That is often done in legislation and for good reasons. It is just a drafting practice.

Equally, however, why does this bit of the Bill not refer back to the statement under Clause 3? That would make life a lot simpler: qualifying assets are in these categories and, to see more, look to the statement. Frankly, we will not know until we finally see the statement produced—I know we have seen drafts—whether something is or is not a qualifying asset.

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I have been as brief as possible. I look forward to the critique of the amendment in forthcoming remarks and to the Minister briefly explaining the Government’s position.

[Lord Lansley (Con)]

My Lords, I am pleased to have the chance to speak briefly to Amendment 38. This group is linked, in so far as we are all addressing issues relating to limitations on the interpretation of the “qualifying asset” in Clause 7. Amendment 38 in my name is particularly directed towards the issue of such assets in Clause 7(4)(c)—ideas and related intangible assets—where they are licensed. In particular, Amendment 38 seeks to regard such assets, which are licensed on a non-permanent basis, and where ownership of the asset is not transferred to somebody else in any permanent or substantive form, as not being controlled. This relates to the set of exceptions in Clause 11, which sets out those circumstances in which assets are not to be regarded as controlled.

We need to do that because Clause 9, “Control of assets”, is very widely drawn—deliberately, I am sure, and probably rightly so. It says that control of a qualifying asset can result in the person being able to use the asset. Of course, if an asset is licensed to somebody for their use, they could be said to be controlling it. But anybody licensing it to them will be doing so with restrictions and provisions. To that extent, they are not controlling it; the person who has licensed it to them is controlling it. So we have an issue not only of definitions but of scope.

The definition of control should not extend to where somebody had something licensed with restrictions imposed upon it. The definition of using the assets is probably, in that sense, too wide to be applied in this case to those kinds of innovative assets. To whom is this important? It is very important to those whose job it is to bring forward innovation and to license their intellectual property, and to do so in circumstances where they continue to control its use and exploitation. We do not want the routine use and exploitation of assets or intellectual property to be seriously impeded every time it is licensed or for this to be regarded as potentially the control of a qualifying asset and hence notifiable. Amendment 38 gives us an opportunity to set proper limitations on the use of licensing for assets on a temporary basis.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, my reason for speaking in this group relates to licences. I generally support the thrust of Amendment 23, if there can be appropriate definitions, but I was not quite sure whether I agreed with Amendment 38. I disagreed with the explanatory statement of the noble Lord, Lord Lansley, because whether or not the licenser maintains control depends on quite a lot of things.

An IP licenser may be able to impose conditions when a licence is first granted, but what happens after that and how much control there is over future events is up to whatever is agreed in the licence. If the price and conditions are right, it could be a fully assignable licence; it could be assignable with or without consent of the IP owner; it could be exclusive, so that the IP owner no longer has any rights to use it themselves or to license others; or it could be a sole licence that also effectively restricts supply under the IP. A licence can therefore be for something that is relevant to national security and have both ownership and security of supply implications.

In paragraph (c) of Amendment 38—the substantive economic ownership point—I am sure the noble Lord, Lord Lansley, is trying to exclude the exclusive licences that are assignable because, as he would say, economic control had been obtained. I am not sure whether that is the right way to define it, but I understand the sense of what he is trying to do. However, I wonder whether that also captures what could be restriction of supply issues. Those can also happen through licences that would not necessarily mean economic control.

The whole matter of licences is quite interesting, but they can be unique—I used to do them for a living, so I should know. We therefore have to be careful about clarifying, perhaps in a more substantive way, the things that one wants to exclude from review. I think it is necessary to exclude some, because I am absolutely certain that you would get an even bigger deluge if you did not. It may be that things that count as ordinary licences, where there are many licensees—rather like in the other amendment—and no security of supply issues, can be treated the same as any product for sale. However, wherever there is a sole or exclusive licence in particular, it would be necessary just to have a look to make sure there was nothing that you might want to do something about. There could quite possibly be something if it was in a relevant technology area. However, the noble Lord, Lord Lansley, has drawn an interesting point to our attention.

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[Lord Hodgson of Astley Abbotts (Con) [V]]

My Lords, in moving Amendment 29, I shall speak also to Amendment 72. They take us back to some of the issues touched on in our earlier debate on the group beginning with Amendment 15A, and the way that control is exercised in companies and what it means. These two amendments are designed to tease out and provide clarity and protection for third-party investors, who may find that they have invested in a company that, in turn, has been caught up in the provisions of the Bill. I seek the Government’s explanation for how this will work.

Amendment 29 amends Clause 8, “Control of entities”. There is concern about the clause arising from the wide definition of control contained in subsection (6). The real background is as follows. Investments in unquoted companies are normally governed by an investment agreement. When all goes well and the investment performs as expected, the investment agreement remains in a drawer and is never looked at but, sadly, not all investments perform as hoped, and not all directors and managers behave impeccably. Investors need protection against egregious behaviour by company managements.

What form could such behaviours take? It could be a proposal to make an acquisition—not one involving national security issues—the size of which would put the original company at risk if it were to go wrong. It could be a decision to spend a large sum of capital on a scheme that is ill thought out and ill considered, potentially putting the entire venture at risk. It might be a decision by the management to award themselves large salary increases. It might be a decision to recruit to a senior position in the company someone who has a public reputation that is not impeccable or who is perhaps related to one of the existing management team. For obvious reasons, investors need special protection against such behaviours and, as a last resort, the power to block them. It is not clear whether the existence of such blocking powers could bring the company within the control of entities provisions of Clause 8.

These protections for investors have nothing to do with national security; they are concerned with corporate governance and behaviour. An inability to allow those protections will surely be a significant disincentive to third-party investors, so Amendment 29 provides clarity that such protections will not be caught by the Bill. The arguments I have just rehearsed lie behind Amendment 72, which amends Clause 26—“Final orders and final notifications”. It seeks to make it clear that any unwinding or divestment order made by the Secretary of State in no way undermines investor rights of the sort I have been describing. I beg to move.

[Lord Lansley (Con)]

I shall refer only to Amendment 30, in my name, in this group. Earlier, we discussed the question of material influence. At this point in Clause 8, the fourth case to which we referred—the control of an entity—is, under subsections (8) and (9), effectively material influence. Looking at this, I could not understand why this bit of Clause 8 did not simply replicate Section 29 of the Enterprise Act, which is concerned with obtaining control by stages. I will not read the whole thing, but it is essentially about where a transaction or, in this case, a series of transactions—I will come back to that point—can be treated as occurring simultaneously, but which enables a person

“directly or indirectly to control or materially to influence the policy”

of the enterprise, or enables that

“person or group of persons to do so to a greater degree”.

We have here different language, and I would like the Minister to kindly explain how it works. I can see that it will be a person together with others, because of course it brings in holding an interest or a right by virtue of Schedule 1—working together with others—so that might be sufficient to say “directly or indirectly”. So, that might be covered by a common purpose, the connected arrangements and so on. But subsection (9), as it qualifies subsection (8), appears to suggest that if somebody already exercises a material influence over an entity, the fact that they increase their material influence by stages is not defined as control, unless it is one of the other cases set out in the clause. I think that is a gap. I think it ought to be included, and the clause ought to be constructed in a manner similar to the way in which the Enterprise Act enables control to be acquired by stages. I am not particularly asking for my drafting to be incorporated, but I invite Ministers to see whether it will be simpler to take out subsections (8) and (9) and insert something drawn from and similar to Section 29 of the Enterprise Act when we come back to this at Report.

[Lord Clement-Jones (LD)]

My Lords, it follows from the speeches of the noble Lord, Lord Hodgson, who introduced Amendments 29 and 72 so well, and the noble Lord, Lord Lansley, who has taken us very carefully through subsection (8), that Clause 8 is a strange beast. It is a mixture of the absolutely specific and then the rather vague in its different cases, which contrast extraordinarily. I have signed Amendment 29, in the name of the noble Lord, Lord Hodgson, which tries to deal with the vagueness in subsection (6) because the scope of that trigger event—the third case—is very broad and unclear, as he described.

It is not clear precisely what resolutions govern

“the affairs of the entity”

as set out in subsection (6). It could potentially capture typical minority investor veto rights or negative protections, which would not give rise to national security concerns. The amendment put forward by the noble Lord, Lord Hodgson, and supported by me, would narrow the scope, while ensuring that where a person can pass or block resolutions that cover matters akin to those covered by, say, ordinary and special resolutions under the Companies Act 2006, the ability to secure or prevent those resolutions would still be caught—even where the thresholds for passing those resolutions differ from the thresholds for passing ordinary and special resolutions under the Companies Act.

If shareholders of an overseas company can amend the company’s constitution, or wind up the company by passing a resolution with a threshold of 60% of the votes, any shareholder that increases their shareholding from less than 60% to 60% or more will be caught by the third case, if this amendment is accepted. At the moment, that subsection really repays some attention and I very much hope that the Minister will reply positively on this.

Amendment 72, also put forward by the noble Lord, Lord Hodgson, and explained clearly by him, would

“give investors certainty that any divestment or unwinding order will not render their contractual arrangements unenforceable”,

so they could contractually anticipate the consequences of an unwinding order. That is extremely important. If you cannot do that and everything is void, then you cannot make arrangements that stick after the voidness.

A long time ago when I knew some law, I think we talked about severable contracts. One would find that part of a contract was void but provisions that applied to circumstances in which the contract was void, or voided, would still subsist. It is important that those provisions continue after the voiding decision has been made and I very much hope that the Bill can be amended accordingly; otherwise, many companies trying to anticipate its impact will be absolutely confounded. They will have no way through what will be, in any event, a pretty difficult commercial situation.

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[The Deputy Chairman of Committees (Lord Bates) (Con)]

I have received requests to speak after the Minister, from the noble Lords, Lord Lansley and Lord Fox. I first call the noble Lord, Lord Lansley.

[Lord Lansley (Con)]

My Lords, first, I express my warm thanks to my noble friend Lady Noakes, who happily introduced Amendment 97 far better than I would have. I had neglected to notice that we had reached Schedule 1, since we had not even reached the clause that introduced it. Not noticing that was entirely my fault.

If I may, I will go away and read what my noble friend said about Amendment 98, because it is purely a matter of trying to get the drafting right. He may well be correct on that.

On the other two amendments, I kindly ask my noble friend to reflect. The issue about former spouses reflects what is said in Section 127 of the Enterprise Act 2002, but this includes cohabitees, who are not in Section 127, which was subsequently amended to include civil partners. “Associated persons” has turned into “connected persons” and has broadened in ways that nobody told us was a policy.

My other point about the Enterprise Act is that I do not understand what my noble friend is saying. Earlier, he told us that the Government would not issue new guidance about material influence, because the CMA has issued guidance. I have read the CMA’s guidance and it clearly includes reference to obtaining control by stages. Obtaining control by stages, in Section 29 of the Enterprise Act 2002, includes a reference to that

“person or group of persons … materially to influence the policy of … the enterprise … to a greater degree”.

I have not invented this; it is in the Enterprise Act 2002 now. If my noble friend proposes to use the CMA’s guidance and says that everybody is happy that we are using an established understanding of what material influence is, I suggest we go away and look at whether we can use the language and guidance of the Enterprise Act to make it consistent with the practice that people have understood for the best part of 20 years.

[Lord Grimstone of Boscobel (Con)]

I thank my noble friend very much for those comments. I will reflect on them and communicate with him.

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Moved by

[Lord Lansley (Con)]

36: Clause 11, page 7, line 20, at end insert—
“( ) For the purposes of this Act a person is not to be regarded as gaining control of a qualifying asset to the extent that the use of a qualifying asset is conducted wholly within the activity of a United Kingdom-based higher education or research institution.”Member’s explanatory statement
This amendment would provide a “safe harbour” in relation to assets wholly controlled within UK higher education and research institutes.

[Lord Lansley (Con)]

My Lords, we come to a group that contains just one amendment in my name, Amendment 36, which touches on the issue of higher education. We will, at a later stage, deal with the question of the time taken to review notifications. That is a pretty central issue for higher education, but I do not propose to talk about that in this group.

Judging from the earlier discussion between the Minister and the noble Baroness, Lady Hayter, about the meeting to discuss research and higher education interests, I am sure that this is well known to Ministers. The purpose of Amendment 36 is to create a safe harbour for activity undertaken by and maintained within British universities and research institutes. I can perfectly well see the objection to a safe harbour for this activity. It was well illustrated by a report published by my noble friend Lord Johnson of Marylebone and looking at the extent to which there were, in his instance, Chinese interests in university research in this country. Something like 30% of all principal research activity in higher education has Chinese interest somewhere in it.

The point is this: Clause 9, which we have just agreed, extends as structured to the right to use qualifying assets. The breadth of qualifying assets, when one considers them alongside the right to use them, brings in the Lambert report principles, which universities use for research activity. They extend the right to use to their financial, or mostly industrial, sponsors, so a large number of research activities in universities might be the subject of notifications.

I will shorten this debate by saying that, if one does not go down the route of a safe harbour for universities, we need a very positive approach to Amendment 88, in the name of the noble Baroness, Lady Hayter, which says that universities need specific, detailed guidance about the circumstances in which they need to make notifications. Otherwise, the number of notifications will be very large and there will be a substantial diversion of activity of the investment security unit away from areas where the risks are greatest to volume activity, where risks are lower.

I know that universities have plenty of experience—I will come on to in the next group of amendments—of working with the Export Control Joint Unit. If they have a similar relationship with and understanding of the requirements when notification is appropriate and when they can avoid voluntary notifications in large numbers, higher education will be able to live with this regime far better than they fear at the moment.

I move Amendment 36, but I encourage the Minister to respond positively to Amendment 88.

[Lord Vaizey of Didcot (Con) [V]]

My Lords, this amendment seeks to ensure that research and development partnerships, such as those that are widely formed between companies and universities to create intellectual property and therefore qualifying assets, are not required to provide notification of the creation of these partnerships. If these partnerships lead to the creation of a qualifying asset, the trigger event should be determined to be the point of creation of the qualifying asset. It would minimise the notification burden on business and industry, and avoid discouraging these important relationships. This is the theme of many of my amendments.

To give your Lordships some background, UK companies are major funders of research and development at British universities across the world. They enter into hundreds, if not thousands, of research agreements every year. Those agreements can be a simple, straightforward funding of a PhD student or major multilateral projects valued at many millions of pounds. Business enterprise R&D represents something like two-thirds of the total, according to the latest figures from the Office for National Statistics. The biggest sectors for business enterprise R&D overlap significantly with the 17 sectors identified in the Bill. For example, computer programming is almost £2 billion, aerospace is almost £2 billion and software development is £1.5 billion.

This business investment, allied with our world-class universities, means that the UK is obviously at the forefront of many of these technologies, from quantum technology to artificial intelligence. The purpose of the research is, of course, to create new technology and new intellectual property that can be used by those British companies to grow British businesses, but at the beginning of any partnership the creation of intellectual property is simply an aspiration. It is certainly not guaranteed.

These projects risk being caught by the same minimal risk issue flagged in other debates on the Bill where companies seek pre-emptively to notify where there is a risk of a trigger event because there is a lack of clarity on this issue. All the amendment seeks to do is to postpone the need to consider notification until such time as the research has been successful, in effect by creating a qualifying asset.

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[The Deputy Chairman of Committees (Lord Bates) (Con)]

Before I call the noble Lord, Lord Lansley, to respond, I need to make the Committee aware of the Procedure Committee’s guidance about five hours of sitting, which expired five minutes ago. I do not want to put pressure on the noble Lord to respond on a very detailed debate, but if his response is brief we can probably include it. If not, it might be that the Whip needs to consider moving an adjournment.

[Lord Lansley (Con)]

My Lords, I can be brief. I do not think my noble friend really replied to Amendment 88, so I think that we will return to this on Report. I beg leave to withdraw the amendment.

Amendment 36 withdrawn.

National Security and Investment Bill

Lord Lansley Excerpts

Committee stage & Lords Hansard
Tuesday 2nd March 2021 Grand Committee

[Lord Lansley (Con)]

My Lords, like other noble Lords, I spoke at Second Reading and referred to this question. Together with the noble Lord, Lord Truscott, I took the view that there were inherent problems in attempting a definition of national security and that the best definition is rendered through the Bill as it stands. Once one defines the nature of an entity, the nature of the assets covered, the nature of the acquirer concerned and the extent of control—or the definition of control for these purposes—I think one arrives at what a trigger event is. By definition, a trigger event gives rise to the question: does this trigger event cause a problem for national security?

I do not dispute that large numbers of consultees to the White Paper and speakers in our debates have said that it would be very helpful to define national security and—I would expect nothing less from her—the noble Baroness, Lady Hayter, has done as well as one is likely to do. However, I fear that Amendment 13 in particular demonstrates all the flaws with providing such a definition. I will not seek to delay our debate too long, but I will go through a number of them.

The noble Baroness asked whether critical national infrastructure was included. In Amendment 13, critical national infrastructure is included but not defined. We do not know which bits of national infrastructure are in the regime and which are outside it. We know, broadly, the sectors in the scope of the mandatory regime even if we have further detail and amendments to them today. However, if I look at what the Government have published, I find the nuclear industry, the communications industry, data infrastructure, energy infrastructure and transport infrastructure, including ports, harbours and airports. I do not find water infrastructure and food security infrastructure. That is the question and, with the greatest respect, Amendment 13 does not answer whether they are in or out.

We will come on to debate these things but it slightly introduces the concept of whether we are using the EU regulation. My noble friend Lady McIntosh referred to it. The EU regulation includes food security and water. Even if we do not follow the EU lead, which of course now we will not be doing, it at least gives us an interesting list to work from and to question why there are differences.

This brings me to Amendment 2. One of the other differences between our proposed legislation here and the EU regulation is that the EU regulation says that it proposes to safeguard against threats to security and public order. Amendment 2 proposes including public order. However, the European investment screening regime includes freedom and pluralism in the media as one of its investment screening criteria. We are not including that in the Bill. Why are we not including it? It is already in the media public interest regime inserted into the Enterprise Act by the Communications Act 2003, on which I served. I also served on the Enterprise Act Standing Committee in 2002. In that sense, we are not pursuing a public order regime here; we are pursuing a security regime.

I now come to some of the other issues with Amendment 13. Proposed new paragraph (c) talks about the characteristics of the acquirer. If you were to say to me that in my little definition of what constitutes a security risk, we have definitions of the natures of the entities and assets concerned and quite exhaustive definitions of what constitutes control, I would say that what we do not have are definitions of the nature of the acquirer, other than that, presumably, it is hostile in intent.

Amendment 13 effectively tries to give us a list of the trigger events that might give rise to an intervention. In some senses, the amendment is far too narrow. There may be all sorts of unanticipated trigger events that would not be included in primary legislation through this amendment. In other respects, it might be far too wide. Proposed new paragraph (c) talks about

“the characteristics of the acquirer, including whether it is effectively under the control, or subject to the direction, of another state”.

There are virtually no Chinese entities for which that is not true. There are many American corporations for which one could say that that was true. One could certainly say the same of a number of state-owned European companies, including EDF and those engaged in our national infrastructure. What does proposed new paragraph (c) tell us? Does it tell us whether those characteristics are a threat to national security or not? It does not tell us either of those things; all it tells us is that we must have regard to them. We know that Ministers will have regard to them because they are having regard to that kind of issue. It does not get us very far.

The same is true on three occasions, in proposed new paragraphs (a), (e) and (f), which refers to

“the likely impact of the trigger event on”.

It does not say whether the impact is adverse, beneficial or on security. Therefore, almost by definition, all that Amendment 13 tells us is that Ministers should have regard to trigger events in relation to these activities, whether they relate to data or defence capabilities. That is what Ministers are setting out to do.

In a couple of respects, Amendment 13 takes us further than we were intending to go in the Bill. The idea that non-compliance with our international obligations is, by definition, a security risk to the United Kingdom seems to be misplaced. It may be a matter on which we have obligations or be of great policy importance but one cannot construe that compliance with our international obligations in every respect is a security risk to this country.

I am afraid that one also has to look at proposed new paragraph (h), which asks

“whether the trigger event may adversely affect the safety and security of British citizens or the United Kingdom”.

It does not say “British citizens in the United Kingdom”. For example, there are hundreds of thousands of British citizens in South Africa. I was in Natal a few years ago, where there are 500,000 British passport holders, many of whom are British citizens. Are they, by definition, therefore included in this security investment regime?

All that I seek to demonstrate is that although Amendment 13 is a helpful effort, trying to define all the trigger events is bound to fail. Therefore, we should focus on making sure that the listing of entities and assets—as, for example, those published today by the Government—is as good as we can make it, and we will have some debates on that. We should define control properly—not too broadly or narrowly—and we should understand what kind of acquirers we are talking about. We will talk about whether something is foreign or domestic, state or non-state, or hostile and in what circumstances. That is where the lack of definition in the Bill is as yet more important. I refer to the question of what kind of acquirers. I hope that we will talk about that matter in later debates but, for the present, I cannot see the merit of adding Amendment 13 to the Bill.

[Lord Callanan (Con)]

I thank all noble Lords who have taken part in this debate. Let me first say to the noble Baroness, Lady Hayter, that I anticipated that she might be a little critical—in her normal, super-polite way—about the letter coming out late. There were some delays in the internal approval process and, faced with a choice of whether to send it out now or wait until after Committee, I thought that, on balance, it was best to get it out to noble Lords. I was fully aware that when I arrived today, some noble Lords might have criticisms for me, but I thought they would like to see the letter rather than not see it before we started Committee. I hope that during a lull in proceedings, Members might have a chance to read the letter—all 100-odd pages of it.

I am grateful to the noble Baroness, Lady Hayter, as well for her amendments to Clause 1 and after Clause 5, which are Amendments 2 and 13 respectively on the Marshalled List, and I give my combined thanks to her and the noble Baroness, Lady Northover, for the proposed new clause relating to the integrated review.

I will begin with Amendment 2, which would expand the scope of the Bill to include public order and public safety, in addition to national security. The noble Baroness, Lady Hayter, is of course right that public order and public safety are exceptionally important and some of the highest priorities for any Government. However, the Bill is about national security—nothing more, nothing less. Including public order and public safety as grounds for calling in an acquisition would be a substantial expansion in the scope of the Bill, as has been pointed out. We do not wish to see any additions to national security, to ensure that we maintain the careful balance struck in this regime between the appropriateness of government powers for intervention and ensuring that the UK remains one of the best places in the world for investment.

In addition, I note that the regime has been carefully designed with the protection of national security in mind and not public safety or public order, as important as they of course are. For example, the trigger event thresholds in Clause 8 are calibrated to protect against activity that could harm national security due to an acquisition of control over a qualifying entity. It is far from guaranteed that these would also protect against risks to public order or public safety, or that they would be the most effective or proportionate way in which to do so.

For example, a certain type of investment may give rise to a risk to public safety or public order only if an entity were bought in its entirety or if, conversely, any investment could harm public order or public safety. Of course, there may be situations in which a risk to public safety or public order is considered to give rise to a risk to national security as well. I assure Members of the Committee that, in such cases, the Secretary of State will be able to call in the acquisition in question if it meets the tests in the Bill, and will be able to take action if appropriate.

I will pick up on a specific issue raised by the noble Baroness, Lady Hayter. The Bill would apply where a qualified acquisition could undermine democracy in a way that amounts to a national security risk.

Amendment 13 seeks to create a non-exhaustive list of factors which the Secretary of State must take into account when assessing a risk to national security for the purposes of the Bill. It will not come as a great surprise to the Committee to hear that the Government’s position on this issue remains consistent with their position when amendments related to this one were discussed on Second Reading and in the other place.

As drafted, the Bill does not set out the circumstances in which national security is, or may be, considered at risk. That reflects long-standing government policy to ensure that national security powers are sufficiently flexible to protect the nation. It also does not include factors which the Secretary of State must or may take into account under the Bill in assessing national security risks. Instead, factors which the Secretary of State expects to take into account in exercising the call-in power are proposed to be set out in the statement provided for by Clause 3. A draft of that statement was published on introduction of the Bill, to aid noble Lords in their parliamentary scrutiny. The draft statement includes details of what the Secretary of State is likely to be interested in when it comes to national security risks. That includes certain sectors of the economy, and the types of acquisitions that may raise concern.

While it is crucial for investor confidence that there is as much transparency in the regime as possible, there is obviously a limit to how much the Government can and should disclose in that regard, given that the regime deals explicitly with national security matters. Nevertheless, the draft statement goes into some detail about the factors which the Secretary of State expects to take into account when deciding whether to call in a trigger event. The proposed new clause would instead create, alongside this statement, a non-exhaustive list of factors which the Secretary of State must have regard to when assessing a risk to national security.

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Can we have an explanation for that choice of wording, and perhaps a tightening of the clause to stop abuse and, most importantly, provide us with some clarity? According to my dictionary, contemplation is defined as, among other things, religious meditation, so let us hope that praying that one day you might be lucky enough to own a particular UK company does not lead you into big trouble. I beg to move.

[Lord Lansley (Con)]

My Lords, we are grateful to my noble friend Lord Leigh of Hurley for his amendment, which is a helpful exploration of this issue. I rather enjoyed the way he introduced it as well, although I must say that the MP who was quoted by Isabel anonymously was clearly not in government in coalition.

I have an amendment of my own in this group; I am grateful to the noble Lord, Lord Bilimoria, for signing Amendment 8 in my name. I shall talk to that amendment and to Amendments 3 and 4, tabled by my noble friend, and leave Amendments 9 and 10 to others, although I think that both add a little to probe the way in which Ministers propose to structure their statement.

Amendment 8 is designed to clarify what constitutes the Secretary of State becoming aware of a trigger event. In the absence of a further definition, a Secretary of State might claim not to be aware in circumstances where any reasonable person would say, “You should have been”. It is a belt-and-braces operation.

What does it mean? I looked to the relevant comparator in the Enterprise Act. The equivalent, in Section 24 of that Act, is whether something has been made public, which is defined as:

“means so publicised as to be generally known or readily ascertainable”.

I simply borrowed that language. Amendment 8 would not say that those are the only circumstances in which the Secretary of State becomes aware, but the Secretary of State should not be able to claim that he was not aware in circumstances that have generally been made public. The purpose of this amendment is to explore what “becoming aware” really means.

Reverting back to Amendments 3 and 4 and the question of “or contemplation”, I think the drafting derives, if it derives from anywhere, from Section 33 of the Enterprise Act 2002 and the question of a merger reference. It is when the Competition and Markets Authority

“believes that it is or may be the case that … arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation”,

so contemplation exists in statute.

The guidance issued by the Competition and Markets Authority on this, published most recently in December 2020, said that “at phase 1”, which colleagues will recall is the earliest investigatory phase,

“the CMA will generally consider that ‘arrangements are in progress or in contemplation’ for the purposes of section 33 of the Act if a public announcement has been made by the merger parties concerned.”

When my noble friend defines “contemplation”, he does so accurately, but that is not how the Competition and Markets Authority has interpreted “contemplation”. It means somebody firmly considering such a thing, which Ministers may well be thinking of in this context, but it is important to make that clear in the guidance.

The Competition and Markets Authority and the Enterprise Act do this for mergers, which are defined acquisitions. Here, we are talking of a much wider scope of acquiring activity in relation to intellectual property, technology, assets, land and minority stakes. A merger control has bitten on 15% or thereabouts, in certain circumstances, but it is a much wider breadth of activity. If contemplation of such acquisitions is to be included, Ministers at the very least have to define it in the guidance in a way that corresponds to the way in which “contemplation” has been interpreted by the CMA for mergers.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, this group contains a range of amendments aimed at improving certainty which I broadly support. In particular I favour the removal of the expression “contemplation” because it is a broad expression that in my understanding, if it is not reinterpreted through guidelines, could range from not even a twinkle in the eye to serious preparations.

When I looked at this, it seemed that the first expression of “arrangements are in progress”, followed later on in the clause by

“which, if carried into effect”,

is already quite broad because it poses the notion that the “arrangements” do not have to be substantial enough to have an effect yet, only if carried through. That seems to cover quite a preliminary range of stages. Even if the Minister does not accept that proposition of deletion, is there case law that can point to what “contemplation” means? The noble Lord, Lord Lansley, has provided some useful indicators. I thought about “in contemplation of matrimony to a given individual”, which is accepted in wills as a means to overcome a negation of a will through marriage, but that will itself is a legal document defining intent. That would not necessarily be the case for just a random contemplation.

From my various adventures as a patent attorney I know better the interpretations of “serious preparations” or “effective and serious preparations”. They are used in patent and trademark law, which has received attention and clarification—or rather verification—in courts. If we have to use something, I prefer to use something akin to those terms, although this shows that it is quite difficult to define when a line is crossed.

As has already been raised, the intention of “contemplation” or anything else could be clarified by guidelines, but if that route is needed, is it not just simpler to delete “contemplation” and explain in guidelines what “arrangements are in progress” is intended to cover? To me, that sounded exactly like what the CMA had done: it had taken “arrangements are in progress” or “contemplation” as one and the same thing and then defined that, which implies something much further down the track than simple contemplation. I am therefore on the side of those who think that the wording just looks too vague, and if it has precedent elsewhere, it needs to be clarified that it does not mean anything more substantial. The CMA has pointed the way to showing that the word is not very much use.

I also support Amendment 8 relating to publication, which aims to give some certainty about when the Secretary of State can be regarded beyond doubt as having been aware of a trigger event. As the noble Lord, Lord Lansley, explained, that reflects the wording of the Enterprise Act and it would help to reduce unnecessary notifications.

--- Later in debate ---

It is not just a question of the undesirability and uncertainty of everything being kept in some kind of deep freeze if this goes through—you could not merge the paint colours in the way the noble Lord, Lord Hodgson, described or choose one over the other. You would have to keep them as separate entities, so commercially you would not be able to achieve any of the objectives you set out to. On the grounds of practicality, going from five years to two, as the noble Lord, Lord Hodgson, has so eloquently described, seems to be absolutely essential.

[Lord Lansley (Con)]

My Lords, I am glad to follow the noble Lords, who presented a compelling case that mergers of companies should not be sought to be unwound after five years. However, that is not how I interpret the effect of the legislation.

For Amendment 7, we have to direct ourselves to Clause 2 and the structure of Clause 2(2). It requires that a call-in notice given by the Secretary of State cannot be

“given after the end of the period of 6 months beginning with the day on which the Secretary of State became aware of the trigger event”.

Noble Lords will recall that I was interested in the question of when the Secretary of State “becomes aware”. My noble friends have so far rebuffed the idea that we can define “becoming aware” rather better.

In the case of a merger, particularly between listed companies, but between companies of the kind so ably described by my noble friend, the Secretary of State should become aware of it, because it would appear to be publicly known. The Secretary of State could become aware because the parties to the transactions could themselves provide notification to the Secretary of State. Either way, the question of five years does not arise. That arises only in relation to circumstances where the Secretary of State does not become aware.

It is not a matter of people being exposed to an uncertainty; they can remedy the uncertainty by notifying the Secretary of State. That is why we are going to get a lot of notifications and, to some extent, Ministers accepted that when they revised the number of notifications they are anticipating from the original White Paper, which I think was a few hundred, to about 1,800. I think that is partly anticipating that there will be such notifications.

The circumstances we are talking about are probably not mergers but the trigger events relating to assets. As we previously discussed, this involves quite a wide range of acquisitions of assets including technology, transfers of technology, intellectual property or even potentially land that people did not necessarily understand was sensitive. The five years is not an irrelevance because, as Clause 2(2) says, there is a five-year period which would apply in circumstances where the Secretary of State had not become aware of the trigger event.

At this point, I want to ask my noble friend a question. In so far as the trigger event relates not only to the acquisition and the entity or asset but to the understanding of the nature of the acquirer—I keep coming back to this question of who the acquirer is; we talked about it in the second debate—can the Secretary of State apply the five years in relation to the nature of the acquirer being somebody other than the person whom the Secretary of State thought it was at the point at which the Secretary of State became aware of an acquisition? That is when the five years really begins to bite and the uncertainty begins to become more manifest.

That is true not only because the acquirer might be somebody who the Secretary of State did not understand to be hostile but who turned out to be, but because when we get to Clause 10 and we understand the implications of Schedule 1, which Clause 10 brings in, a person may be held to have acquired an interest or right in relation to an asset or entity by virtue of things such as the fact that they are connected persons, they are in a common purpose or they have an arrangement, all of which might not have been evident in public or to the Secretary of State when the Secretary of State saw the acquisition in public material. Indeed, maybe he did not see it at all but became aware of this interest only at a later stage.

There is a reason for the five years being there, because two years is not very long in relation to these kinds of acquisitions. The Minister might entirely reasonably say that five years is not without precedent: there is five years in the French, Italian and German regimes. With this Government, if it is good enough for the Europeans it is good enough for us, as we often say. However, leaving that to one side, we have to be aware that understanding who is in a common purpose, what is the nature of arrangements that might not have been disclosed and what is their nature in relation to assets, not just mergers, gives one a reason to think hard about the circumstances in which the Secretary of State might have to intervene, even though a significant period of time has elapsed. For those reasons I am inclined to live with five years, on the strict understanding that, to get rid of uncertainty, people make a voluntary notification and then six months is the limit.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, it is always very interesting to follow the noble Lord, Lord Lansley. He is approaching this partly in a similar way to me and partly in a different way. I was, and still am, attracted to the notion of trying to get this time of uncertainty down from five years to two. Part of what I would say to the noble Lord is that, if it is going to take five years to work out who might actually have bought something, that is something we should look at in its own right. If you cannot work out whether somebody is hostile and they have had it for five years, you have missed the boat if it is a question of whether they have learned the technology and found out things you do not want them to find out.

I would be interested to hear from the Minister the reasoning behind the length of the period. It could not really be due to a workload of investigating, because one must presume some sort of steady state pipeline with adequate staffing, but how much of it is fear that something new is not recognisable as having a security application until some time later. That thought was going through my mind: was there fear about missing things? This goes back to one of the issues I flagged at Second Reading about sifting being done by the right kind of skilled people—those who have the right kind of applied science or engineering knowledge, plus knowledge of potential usage in national security fields.

I have to say, these things are not necessarily all that obvious. I have experience of working as a patent attorney in the field of defence. I have worked with people whose job it was to invent—put two and two together and have something inventive at the end of it. If you work in a field where those kinds of things are deemed inventive, you will be very short of the people who have that kind of knowledge because, for the main part, they will probably want to be involved in more interesting and economically useful things than participating in what seems to be an overwide fish-sorting process, as it has been termed. I am turning this back to the Minister. On volume, if you cast the net wide, will you have sufficiently skilled people to be able to do the sorting, or will you find that important fish get missed? Will you then be trying to do things to backtrack on what has not been done or give yourself more time to do things?

That is a slightly different take. I know that there are some safeguards in there, but five years is quite a long time to live with uncertainty. If that uncertainty comes about because of ownership, one should sort the ownership or shareholding issues; I am actually among those people who think that we should have a lot more transparency on those kinds of things.

--- Later in debate ---

Moved by

[Lord Lansley]

11: Clause 4, page 3, line 28, at end insert—
“(3A) If either House of Parliament resolves not to approve the statement under subsection (2), the Secretary of State may publish a new statement making any changes which appear to the Secretary of State to be necessary in view of the debates in either House of Parliament. (3B) A statement made in pursuance of subsection (3A) above is not subject to the requirements of subsection (1)(a) and (b).”Member’s explanatory statement
This amendment would permit an expedited process for making a new statement where this is required following a resolution not to approve a statement.

[Lord Lansley (Con)]

My Lords, I am particularly grateful that the Government agreed to group my amendment with their technical amendments, Amendments 12, 37 and 75. I do not propose to refer to Amendments 37 and 75, which are purely technical in nature. Amendment 12 is not strictly technical but relates to exactly the same part of the Bill as my amendment. We are considering Clause 4, and the Government in Amendment 12 are changing subsection (7), which states that the requirement for consultation could be satisfied by consultation carried out before the clause comes into force. The effect would be that not only that consultation but changes to the draft policy statement—such a statement was published at the same time as the Bill—in the light of the consultation can take place before the clause comes into force. That is perfectly reasonable.

My amendment looks at the case that arises under Clause 4(2), whereby:

“Either House of Parliament may at any time before the expiry of the 40-day period”,


that is, after the statement is laid,

“resolve not to approve the statement.”

Under those circumstances, the Government, as subsection (3) makes clear, “must withdraw the statement.” My working assumption is that the Government, having withdrawn a statement, would have to make a statement in the same way in which they have made previous statements—that is, engage in consultation, respond to the consultation and make such changes as are required—and then lay the statement again. That is unnecessary.

My amendment would provide that if a statement was not approved by either House, the Secretary of State should lay a new statement on the basis of making such changes as the parliamentary debates on the previous draft statement required. The Secretary of State would not have to go through a public consultation process or make changes in response to one. That is because the parliamentary objection to a statement may be particular. One can speculate on what that might be but I shall not do so in any way. However, if something led one House of Parliament not to approve a statement, a particular and significant change would be likely to be required. If Ministers make that change, as the amendment would require them to do, they should be able to lay that statement directly. The 40 days would continue to apply because all that would happen would be the resumption of the same process in relation to a new statement.

I hope the amendment means, from the point of view that it does not in any way impinge on the parliamentary scrutiny, that a statement could be in place sooner. That is important because a whole range of things flow from the fact that a statement has been not only published but approved. I hope that Ministers may see merit in the amendment. I beg to move.

--- Later in debate ---

[Lord Callanan (Con)]

First, I thank my noble friend Lord Lansley for his Amendment 11. With the permission of the Committee, I will speak first to the three minor technical amendments that the Government wish to make to the Bill: Amendments 12, 37 and 75. Briefly, before I begin, I reassure the Committee that the Secretary of State must lay and publish a statement before using the call-in power.

Amendment 12 is to Clause 4, which concerns consultation and parliamentary procedure for the statement pursuant to Clause 3, in which the Secretary of State sets out how he expects to use the call-in power. At present, Clause 4 enables the Secretary of State to meet the requirement to carry out such consultation as he considers appropriate, in relation to a draft of the statement under subsection (1)(a), before Clause 4 is commenced.

However, it does not make it clear that the Secretary of State is able to make any changes that he considers necessary in view of the responses to that consultation under subsection (1)(b) before the clause is commenced. Amendment 12 clarifies this point, ensuring that stakeholders will be able to see a revised draft statement before it is laid before Parliament.

Amendment 37 is to Clause 11, which provides an exemption for certain asset acquisitions which would otherwise be trigger events. Subsection (2), however, provides that assets that are either land or are subject to certain export controls should not fall within the exemption, and subsection (2)(b) sets out the relevant export control provisions. One of these provisions, Article 9 of the Export Control Order 2008, was revoked on implementation period completion day as a result of EU exit by Regulation 4 of the Export Control (Amendment) (EU Exit) Regulations 2019, with which I am sure all Members are very familiar. The amendment would remove the reference to this revoked provision from Clause 11.

Amendment 75 is to Clause 53, which enables the Secretary of State to make regulations, subject to the negative resolution procedure, prescribing the procedure for giving notices and serving orders under the Bill. At present this clause enables the Secretary of State to specify how a notice or order must be given or served, but does not make it clear that these powers are intended to extend to all documents given under the Bill. The amendment would clarify that point, ensuring that the Secretary of State has the power to make regulations in Clause 53(1) in relation to the procedure for service of documents for all the different types of notices, orders and other documents under the Bill. These are relatively small tweaks to the Bill, and I hope that the Committee will see fit to agree to them.

Amendment 11 was tabled by my noble friend Lord Lansley, and I will begin by briefly setting out its context. Clause 4 sets out a consultation requirement and parliamentary procedure for a statement about the exercise of the call-in power which must be published before the Secretary of State may issue a call-in notice. It requires the Secretary of State, before publishing the statement, to carry out such consultation as he thinks appropriate in relation to a draft of the statement, to make any changes to the draft that appear to him to be necessary in view of the responses, and to lay the final statement before Parliament.

My noble friend’s amendment seeks to clarify the process by which the Secretary of State may publish a new statement if either House resolves not to approve the previous version that he lays before Parliament. The apparent stumbling block that the amendment seeks to remove is that the Secretary of State is under a duty to carry out such consultation as he thinks appropriate in relation to a draft of the new statement, and make any changes to the draft that appear to him to be necessary in view of the responses to such consultation. However, I point out that the Secretary of State must carry out such consultations as he “thinks appropriate”, according to Clause 4(1)(a).

The Bill therefore provides the Secretary of State with some measure of flexibility in deciding whether, for how long and how widely the draft statement should be consulted on. Therefore, the Bill as drafted does not in appropriate circumstances prevent the Secretary of State from publishing a new updated statement, reflecting the debate in Parliament, almost immediately without first undertaking a consultation if he does not think that a consultation is appropriate.

In short, while my noble friend’s amendment seeks to ensure that a new statement may be laid speedily if either House resolves not to approve the previous version, the Bill as drafted already allows for this. I am grateful that he has afforded me the opportunity to make the functioning of this clause clear. Therefore, in the light of the explanation that I have been able to provide, I hope that he will feel able to withdraw his amendment.

[Lord Lansley (Con)]

My Lords, I am grateful to all noble Lords who have participated in this short debate. It is quite helpful just to focus on the question of making a statement because, if one looks back at Clause 1(6), it clearly states:

“The Secretary of State may not give a call-in notice unless a statement has been published (and not withdrawn) for the purposes of section 3.”


Although the word “may” is used in Clause 3, all it means in practice is that, if the Secretary of State chooses not to bring any of this into force, he would not publish a statement—but if he wants to issue call-in notices, he has to publish a statement. My noble friend the Minister is right in the sense that he must do this for the system to operate. The words I want to focus on, however, are “and not withdrawn”. If either House of Parliament resolves not to approve a statement, he must withdraw it. At that moment, the Secretary of State can issue no further call-in notices. My noble friend says the amendment is unnecessary because the Secretary of State has the power to consult only as he thinks appropriate.

Trade Bill

Lord Lansley Excerpts

Consideration of Commons amendments
Tuesday 23rd February 2021 Lords Chamber

Moved by

[Lord Lansley]

At end insert “, and do propose Amendment 1D in lieu—

1D: After Clause 2, insert the following new Clause—
“Parliamentary approval of international trade agreements and treaties
(1) If a decision has been made by the Secretary of State to commence negotiations towards a free trade agreement, a statement must be made to both Houses of Parliament.
(2) Negotiations for that trade agreement may not proceed until the Secretary of State has laid draft negotiating objectives in respect of that agreement before Parliament, and a motion endorsing the draft negotiating objectives has been approved by a resolution of the House of Commons.
(3) The Constitutional Reform and Governance Act 2010 is amended as follows.
(4) In section 21 (extension of 21-day sitting day period), after subsection (2) insert—
“(2A) Where a relevant Committee of either House of Parliament has recommended that a treaty constituting an international trade agreement as defined by the Trade Act 2021 should be debated in that House, the Minister of the Crown must ensure that the period does not expire before that debate has taken place.”””

[Lord Lansley (Con)]

My Motion A1 would insert Amendment 1D in lieu—it is on page 4 of the Marshalled List—which would do two things. It would require a debate on draft negotiating objectives in relation to future international trade negotiations where such a debate has been requested, and that Ministers would not be able to proceed with negotiations until such a debate had taken place. It would also require that where a relevant committee of either House seeks a debate under CRaG within the 21-day period, that period should be extended until the debate has taken place.

Noble Lords will recall that on two previous occasions this House sent amendments requiring additional parliamentary scrutiny to the other place. On each occasion, they were supported on a cross-party basis. I am very grateful for the support that I have received from all sides of this House for this purpose. In the other place, 11 Conservatives supported the amendment on the first occasion, while 13 supported it on the second occasion, and although they did not vote for it, both Liam Fox, the former Secretary of State for International Trade, and Jeremy Wright, the former Attorney-General, expressed support in particular for the proposition that there should be a debate on the negotiating objectives at the commencement of plans for an international trade agreement.

In preparing the amendment in lieu, we intended to narrow down simply to those two points, leaving out—not because they are not important but because we believe that the Government have already given assurances on this—first, that the Government would publish in their Explanatory Memoranda under CRaG details of the legislative implementation of any agreement and, secondly, that in the negotiating objectives they would consult with the devolved Administrations. Given those two issues, let me say how much I appreciate the support that I have received in this House and the constructive and helpful conversations that I have had with the Minister and the Bill team. I appreciate the positive way in which they responded.

Noble Lords will have heard the Minister say two things that are, from my point of view, of great importance: first, that where the International Agreements Committee, of which I have the privilege to be a member, makes a report on the Government’s draft negotiating objective for an agreement, the Government will facilitate such a debate; and secondly, that where a debate has been requested under CRaG within the 21-day period, Ministers will not ratify such an agreement until such time as the debate has taken place. In both respects—speaking as a former leader of the House of Commons, I should say that the Minister has, quite properly, reserved the position of the business managers—these things would happen only when parliamentary time allowed.

These assurances go a long way to meeting what we have been asking for. They are not technically everything that we are asking for. There remains a significant loop- hole: if a debate under CRaG takes place after the 21-day period has expired and Ministers have not sought an extension to that period, which they can do, then, strictly speaking, even if the other place passed a Motion that ratification should be delayed, there would be nothing legally to stop Ministers proceeding to ratification or, indeed, ratifying it before the debate took place.

Given what the Minister has said, I think we have moved to a happy position where, if I can put it in the context of this House, we have moved from what has been up to now, particularly where CRaG is concerned, conventional—that is that Ministers should not ratify until a debate has taken place and should legislate for implementation before ratification—to what I might think of as a rule. It is not in statute but, in the same way that the Ponsonby rule existed for quite a long time before the CRaG legislation was passed, we have now acquired—if he will forgive me—the Grimstone rule for debate on negotiating objectives and for ratification not to take place before a debate has taken place under CRaG where requested. So I am most grateful to my noble friend. I am especially grateful to the noble Lord, Lord Stevenson of Balmacara, and to the noble Lord, Lord Purvis of Tweed, particularly because a debate on the negotiating objectives was in his original Amendment 1, which was sent to the other place with the Bill when it left this House in the first place. I hope that he and other noble Lords will join me in expressing satisfaction at the outcome that has been achieved.

[The Deputy Speaker (Lord Alderdice) (LD)]

The noble Baroness, Lady Jones of Moulsecoomb, has indicated that she wishes to speak in the gap prior to the rest of the listed speakers.

--- Later in debate ---

[Lord Grimstone of Boscobel (Con)]

My Lords, I first unreservedly apologise if noble Lords thought that I was, in any way, disparaging the role of this House and the valuable work that it has done on scrutiny, by referring to the votes in the other place. Nothing could have been further from my thoughts, and I hope that noble Lords will accept that.

This has been a good debate and reflects the calibre of discussions that we have repeatedly had on the important issue of scrutiny. The Government have listened to the concerns expressed on this issue and we have moved significantly to set out enhanced transparency and scrutiny arrangements for free trade agreements. This has come almost entirely because of the quality of the debates and the points that have been put by Members of our House.

What have we done? It includes committing to allow time for the relevant Select Committees to report on a concluded FTA before the start of the CRaG process; strengthening the commitments, as I said earlier, which were set out before this debate in a Written Ministerial Statement; and placing the Trade and Agriculture Commission on a statutory footing and ensuring that it is required to transparently provide independent advice to the Government on whether new FTAs maintain statutory protections in key areas, such as animal welfare and the environment. In addition, the Government have moved on other linked areas such as standards, which we will come to later.

While this is the last time, I hope, that we debate this issue in this Bill, scrutiny is an issue that we will return to when we debate the implementing legislation for future FTAs. The EU model of trade agreement scrutiny evolved over our 50-year membership. I assure noble Lords that we have no intention of taking that long but now, in only month two after the transition period, I urge your Lordships’ House to see the current arrangements as an evolution of our trade treaty scrutiny practices—no doubt an evolution that has further to go. As we find our feet as an independent trading nation, working with parliamentarians in both Houses, I am sure that we will continue to build upon our scrutiny processes, in ensuring that they remain fit for purpose.

As a concluding comment, I would be covered in embarrassment to think that my small contribution to this debate has led to a rule being named after me.

[Lord Lansley (Con)]

I am grateful to my noble friend the Minister and to other colleagues who have spoken in this short debate. As the noble Lord, Lord Stevenson of Balmacara, said, good will has characterised these debates, and it can be sustained—even in the case of the noble Baroness, Lady Jones of Moulsecoomb. It was never with ill will; it was controversial sometimes, but always well meant.

From my point of view, with good will, and the application of the Grimstone rule—he cannot get away from it now—I welcome the specific additions today that the Government will facilitate a debate where requested on draft negotiating objectives, subject to parliamentary time, and that the Government cannot envisage the circumstances in which they would ratify an international trade agreement when a debate requested by the relevant committee in either House had not yet taken place.

National Security and Investment Bill

Lord Lansley Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 4th February 2021 Lords Chamber

[Lord Lansley (Con)]

My Lords, I am glad to have the opportunity to contribute to what is already an interesting debate. I am grateful to my noble friend the Minister for his introduction because it has helped us to see the Bill’s shape very well. I also welcome the noble Lord, Lord Woodley, and look forward to his contributions to our debates on this Bill and in the future.

I was a member of the Standing Committee on what became the Enterprise Act 2002. I do not think that we lacked an understanding at that time, in the wake of the terrorist attack in 2001, of the nature of the emerging risks of asymmetric and unconventional threats to this country. The point is that the Enterprise Act is limited since it relates to qualifying mergers, and of course to some extent it is a post hoc regime when what we need is something that gives people clear notice of and predictability about the nature of any intervention. The scope and the need for these interventions under this legislation is warranted and I support the Bill.

My noble friend the Minister said that there are, as it were, complementary or parallel regimes in other countries. Actually, they are different, and what is being proposed here by the Government for this country is better. For example, the EU regulation relates essentially to the screening of investments across a wide range, but of course, that is not limited to national security. It includes, for example, the media sector because that concerns national security and public security, and it drifts into public order. The fact that we are focused on national security is important. Indeed, one can see from the way the scheme is implemented in France, where it is focused on foreign ownership, that it also drifts into strategic autonomy, which is the new phrase of the moment in the European Union.

We might want to be more autonomous in terms of our supply chains, but this is not the mechanism for doing that. This Bill is about national security and it is rightly focused on that—“project defence”, as my noble friend on the Front Bench referred to it. If we want resilient supply chains, we must have mechanisms which focus on that, but let us not confuse them with the proposition that these necessarily represent a threat to our national security; let us focus on these things separately. For example, promoting foreign direct investment remains an objective that we all support, and the Office for Investment within the Department for International Trade is a welcome step in that direction.

We have a series of distinct purposes with distinct regimes. I will not go on at length because many noble Lords have already helpfully illustrated where we need to look in Committee, particularly at how the regime is going to work. I shall mention some points that I think will be important.

The first is that we have to think about how this regime interacts with all the others. How does it interact with the public interest regime, for example? My noble friend talked about the financial services sector, and of course there is a public interest intervention regime under the Enterprise Act as well, and there is the question of how the competition regime is to work. We want to secure ourselves against risks, but we do not want so to diminish competition as to harm consumers.

We need to look at other regulatory regimes. For example, we need to look carefully at the question of critical infrastructure in the water industry and the utility regulators.

A number of noble Lords have referred to SMEs. If indeed literally 1,000 or more SMEs a year are having to make notifications, we have to think very hard about how we look after their interests and help them through the process.

A number of noble Lords have mentioned the higher education and university sector. The relationship between the kind of technologies that we are dealing with here and higher education and research and development is an important interaction that we need to understand.

That brings me to the point that a number of noble Lords have talked about: defining national security. In this respect I think I agree with the noble Lord, Lord Truscott. We cannot define national security directly but it is already the case in the Bill that, if one looks at the consultation on the specified descriptions, the 17 sectors and how they are described—I have to say, a document that exceeds any other in including terminology that I do not understand—and asks whether there would be a risk if control of all these assets, technologies, activities and infrastructure were to pass into the hands of hostile actors, then by definition you have defined national security. You do not need another definition because it is already there in the Bill.

My final point is that I entirely agree with the noble Lord, Lord West of Spithead. What he proposes in respect of parliamentary oversight on the security aspects of this is absolutely right, and I hope the Government will listen positively to what he had to say.

Trade Bill

Lord Lansley Excerpts

Consideration of Commons amendments & Ping Pong (Hansard) & Ping Pong (Hansard): House of Lords
Tuesday 2nd February 2021 Lords Chamber

[The Minister of State, Department for Business, Energy and Industrial Strategy and Department for International Trade (Lord Grimstone of Boscobel) (Con) [V]]

My Lords, with the leave of the House, I will also speak to Motion A1. For those noble Lords present in the Chamber, I apologise for my discourtesy in not being at the Dispatch Box. I was travelling overseas on ministerial business last week, but while I was away my exemption was withdrawn so I am presently in quarantine. I apologise for my absence from the Chamber today.

The Bill has been returned to our House from the other place, and we are moving ever closer to getting this crucial piece of legislation on to the statute book. As my ministerial colleague the Minister of State for Trade Policy so eloquently put it during the last debate on the Bill in the other place, the Bill is this Parliament’s first opportunity to define the UK’s approach towards international trade as an independent trading nation, no longer a member of the EU and out of the transition period. The passage of the Bill will be a boon to the UK economy, giving certainty to business with regard to our continuity trade agreements, which we have now signed with no fewer than 63 partner countries, confirming the UK’s access to the £1.3 trillion global procurement markets, providing protection for businesses and consumers from unfair trading practices, and ensuring that we have the appropriate data to support traders at the borders.

The other place has resolved against non-government amendments to the Bill. It is my hope that this House concurs with the opinion of the other place and chooses not to further amend the Bill. I say with the greatest respect that we must be mindful of the role of this House within Parliament. We are not the democratically elected House and we do not express the will of the people in the same way as the other place does. Our primary role is to scrutinise and, where appropriate, ask the other place to reconsider an issue. The other place has done this, so we must think long and hard before disregarding its clear pronouncements.

I turn to the revised amendment, tabled by my noble friend Lord Lansley, on parliamentary scrutiny. It is of course only right and proper, now that we have left the EU, that Parliament should have the powers to effectively scrutinise the Government’s ambitious free trade agreement programme. However, the amendment has significant deficiencies that we believe are inappropriate for our Westminster style of government and would limit the Government’s ability to negotiate the best deals for the UK.

That is not to say that the Government have ignored the concerns of noble Lords and the other place. Quite the contrary: the Government have significantly enhanced their transparency and scrutiny arrangements because of the scrutiny that your Lordships’ House has given to the Bill. I point noble Lords to my Written Ministerial Statement of 7 December last year and the progress that we have made, for example, in putting the Trade and Agriculture Commission on a statutory footing as evidence of that.

The enhanced arrangements that we have set out are as strong as and, in several areas, stronger than those of comparable Westminster-style advanced democracies such as Canada, Australia and New Zealand. Several of the areas covered in the amendment duplicate things that the Government are already doing or are established precedent of the UK as a dualist state. This includes the statutory requirement to produce an Explanatory Memorandum when a treaty is laid in Parliament; it is through that Explanatory Memorandum that we outline the legislation needed to implement the agreement, as illustrated through the Explanatory Memorandum for the Japan agreement. Consequently, the Government already undertake what my noble friend is seeking in his amendment. As I said on Report, and I am happy to repeat it again, I remain open to discussing with noble Lords how we could improve the presentation of this information.

In addition, if the domestic implementing legislation were not passed before the FTA entered into force, the UK would be in breach of its treaty obligations. For that reason, implementing legislation is normally put in place before ratification of a treaty. I believe that there is no sense in changing that process. The Government have continued to stand by their commitments to accommodate debates on their trade agenda, subject to available time, and I am happy to confirm that that will not change.

Last week I met my noble friend Lord Lansley and the noble Lords, Lord Stevenson and Lord Purvis, to discuss the scrutiny amendment. At that meeting I said I would provide some additional information on the ministerial forum for trade, which I know has been of interest to your Lordships. The forum has been warmly welcomed by the devolved Administrations and has now met four times, most recently in December. As part of the Government’s commitment to improved transparency of intergovernmental relationships, I am pleased to say that there will be a new dedicated page on the GOV.UK website for the ministerial forum for trade. It will be used to publish communiques following future meetings, as well as other relevant documents such as the forum’s terms of reference.

To enable discussions on FTAs between the UK and devolved Ministers, we have shared negotiating objectives with the devolved Administrations for all our rest-of-world FTAs. We have also shared text concerning devolved matters during negotiations and stable text once we reach agreement in principle. I confirm that we intend to continue that approach in future.

In summing up on this amendment, it is already the case that if Parliament is not satisfied with an FTA that we have negotiated, the powers in the Constitutional Reform and Governance Act 2010—CRaG—give Parliament the power to make its views clear by resolving against ratification. In the other place this process can of course be repeated indefinitely, effectively acting as a veto. Your Lordships will also know that we do not have the powers in this Bill to implement any FTA with the United States or any other country which we had no agreement with through our EU membership. The House will therefore have the opportunity to scrutinise any future legislation needed to implement these agreements.

I am sure that noble Lords will scrutinise these future agreements just as forensically as they did the continuity agreements which are the subject of the Bill. As I mentioned earlier, failure to pass any necessary implementing legislation for these future FTAs would prevent ratification of the agreement taking place.

Motion A1 (as an amendment to Motion A)

[Lord Lansley]

Moved by

At end insert “and do propose Amendment 1B in lieu—

1B: After Clause 2, insert the following new Clause—“Parliamentary approval of international trade agreements and treaties(1) If a decision has been made by the Secretary of State to commence negotiations towards a free trade agreement, a statement must be made to both Houses of Parliament.(2) Negotiations for that trade agreement may not proceed until the Secretary of State has laid draft negotiating objectives in respect of that agreement before Parliament, and an amendable motion endorsing the draft negotiating objectives has been approved by a resolution of the House of Commons.(3) Prior to the draft negotiating objectives being laid, the Secretary of State must consult each devolved authority on the content of the draft negotiating objectives, and seek their consent.(4) The Constitutional Reform and Governance Act 2010 is amended as follows.(5) In section 20 (treaties to be laid before Parliament before ratification), after subsection (1)(b) insert—“(ba) where the treaty is an international trade agreement as defined in the Trade Act 2021, a Minister of the Crown has published an analysis of the requirement for the treaty to be implemented through changes to domestic legislation, and(bb) where the treaty is an international trade agreement as defined in the Trade Act 2021, the House of Commons has resolved, within period A, that the treaty should be ratified, and”(6) In section 21 (extension of 21 sitting day period), after subsection (2) insert—“(2A) Where a relevant Committee of either House of Parliament has recommended that a treaty constituting an international trade agreement as defined by the Trade Act 2021 should be debated in that House, the Minister of the Crown must ensure that the period does not expire before that debate has taken place.”””

[Lord Lansley (Con)]

My Lords, it is Groundhog Day and we are debating the Trade Bill. We have nearly concluded it, I hope, but it is in fact more than four years since we first debated the original trade Bill. I earnestly share my noble friend the Minister’s hope that we will bring it on to the statute book soon.

Your Lordships sent two amendments to the other place concerning the parliamentary scrutiny of international trade agreements, and the other place disagreed to them both. I am therefore grateful to the noble Lords, Lord Purvis of Tweed and Lord Stevenson of Balmacara, who have enabled us to combine and somewhat simplify those two amendments, and to focus their provisions in one amendment in lieu. Noble Lords will find it as Amendment 1B on the Marshalled List. It shows clearly that we wish to find common ground with the Government on the issue. As my noble friend the Minister has said on a number of occasions, we are not far apart, as demonstrated in our positive discussions last week, for which I am grateful to him.

Amendment 1B would provide that prior to entering the negotiations on a trade agreement, Ministers would be required to lay the negotiating objectives and that those would need to be approved by a resolution in the House of Commons. In preparing those objectives, Ministers would have to consult the devolved Administrations and seek their consent. Also, when the Government have signed a trade agreement and it is to be scrutinised under the CRaG process, Ministers would have to publish an analysis of the changes required to domestic legislation; and if a committee in either House called a debate on the treaty, Ministers would not be able to ratify it until that debate had taken place.

The House will be aware that the Government are now moving ahead with negotiations on new trade deals, not just continuity agreements. That is very welcome but it means that now is the time, and this is the legislative opportunity, to strengthen Parliament’s role. The amendment does not impinge on the prerogative power. The Executive can still determine whether to enter a trade negotiation and the Government can propose the objectives. They conduct the negotiations and sign the agreement; only then does the Commons—not this House—have the power under the existing CRaG statute to stop ratification, or, technically speaking, to delay it.

The amendment would ensure that the Government consult the devolved Administrations. Given the breadth of trade issues, who could seriously argue that they should not, and that they take the Commons with them on their objectives? Many trade experts argue that this explicit support from Parliament, and occasionally Parliament’s explicit red lines, give force to the trade negotiators’ position.

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[The Deputy Speaker (Baroness Morris of Bolton) (Con)]

My Lords, I see that there have been no requests to ask a question of the Minister, so I call the noble Lord, Lord Lansley.

[Lord Lansley (Con)]

My Lords, I am grateful to all noble Lords who have participated in this debate, which illustrated the issues well. I am grateful in particular to my noble friend Lord Caithness and the noble Baroness, Lady Jones of Moulsecoomb, for their support.

The noble Lords, Lord Stevenson and Lord Purvis, and I have worked together. We are not insisting on the previous amendment sent. I want to be clear that we are looking for a reasonable compromise, but one which gives Parliament its say.

I make no criticism of the way in which the Government have gone about the processes of scrutiny and partnership with both Houses in relation to the continuity agreements, but we are about to enter the process of negotiating wholly new deals. That brings one forcibly to the question: should the Government enter negotiations with the confidence that at least the House of Commons has approved the negotiating objectives? On that, the quoted remarks of the former Secretary of State, who launched the previous Trade Bill four years ago, are relevant—he did not vote for Amendment 1 in the other place because there were other parts of it he did not agree with—so I think we can find a compromise that recognises that there is a democratic deficit which is best met by giving the two Houses a debate but, certainly, by giving a role in approving negotiating objectives to the elected House. That would strengthen the negotiating hand of government rather than bind it.

My noble friend Lord Grimstone was clear about all the ways in which the Government will work with the House, but by at one point saying “personally” I think he recognised the loophole that exists; namely, that if Ministers want to ratify a treaty without scrutiny and debate in the House, they can do it by laying a Statement under Section 22 of CRaG. If, however, they do not want to do that explicitly, they can allow 21 days to pass without a debate and ratify anyway. There is nothing in CRaG to stop them doing so. The purpose of this amendment is simply to close that loophole. If the International Agreements Committee in this House, of which I am privileged to be a member, or the International Trade Committee in the other place were to seek a debate, this amendment would provide that Ministers could not ratify the treaty prior to such a debate. If Ministers agree that there is such a loophole, I am afraid to say that they should agree with the amendment. Disagreeing with the amendment and leaving the loophole open simply affords the possibility for mischief at some point in the future—maybe not by this Government but by another Government at another time.

The need for the other place to have an opportunity to look at this issue on the basis of a new, more restricted amendment on which we can reach a reasonable compromise gives us a basis for asking the other place to think again. I therefore seek to test the opinion of the House on Motion A1.

Trade Bill

Lord Lansley Excerpts

3rd reading & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords
Monday 18th January 2021 Lords Chamber

[Lord Collins of Highbury (Lab)]

My Lords, on behalf of my noble friend Lord Grantchester, who has unfortunately been delayed on his way to the House, I beg to move Amendment 1. This is a technical amendment to correct an error that was made in the original drafting, and I understand that the Minister and the Government will not be opposing it.

[Lord Lansley (Con) [V]]

My Lords, I am pleased to have the opportunity to say just a few words about this amendment. Although it is technical, the intention is to provide clarity to that part of Clause 8 which sets out the procedure whereby the Government propose to implement an international trade agreement which has an impact on standards in domestic legislation relating to, for example, social, environmental or animal welfare standards. I completely understand that the intention of the noble Lord, Lord Grantchester, in tabling this amendment is to make it clear that the legislation relating to standards should complete its parliamentary processes, as the clause says, prior to the trade agreement being laid.

I am not really speaking about that aspect of it. Indeed, I draw attention to the fact that, notwithstanding Clause 8, Clause 7 has what I would regard—not least because I moved the relevant amendment at Report—as a better formulation, which requires the subordinate legislation, secondary instruments, to have been laid before the ratification of the trade agreement and for the primary legislation required for its implementation to have been passed before ratification. However, Clause 8, as clarified by this amendment, has the effect of meaning that the parliamentary procedure in relation to domestic legislation has to be completed before those texts are laid before Parliament. I think that is unnecessary and rather burdensome, and it would be better to rest on the text in Clause 7, which requires the legislation to have been passed prior to ratification.

The point I want to make is actually about impact assessments. If, in response to this short debate, the noble Lord, Lord Grantchester—who I see is, happily, now in his place—can explain why impact assessments should not be laid before Parliament prior to the completion of parliamentary processes relating to the implementation of domestic legislation, I would welcome that. That seems unnecessary—indeed, undesirable. It would be better were impact assessments formulated and laid before Parliament relating to domestic legislation which implements any change in standards in this country consequent to an agreement in an international trade context. For them not to be required by legislation to be laid before Parliament until the text of the trade agreement itself is laid seems unnecessary and undesirable.

I do not oppose the amendment, as it has the effect of making clear that subsection. However, what the subsection suggests, particularly for impact assessments, is undesirable. As it happens, as we dispatch the Bill to the other place, this clause rather duplicates what is set out in Clause 7. It would be better to retain Clause 7, rather than the formulation in this part of Clause 8.

[Baroness McIntosh of Pickering (Con) [V]]

My Lords, I welcome Amendment 1, as it brings greater clarity, and thank the noble Lord, Lord Grantchester—who I am delighted to see in his place—for bringing it forward.

I take this opportunity to put a question to my noble friend the Minister, and to thank him for the openness he has shown throughout proceedings on the Bill. Does he have a timeframe in mind as to when the code of practice, as envisaged under Clause 8, is to be brought forward? I imagine that is also subject to Amendment 1 before us this afternoon. Will the code of practice envisaged be general, or does he envisage that a separate code of practice for each future international trade agreement may need to come before the House?

As my noble friend is aware, I care passionately about maintaining the standards in paragraphs (a) to (f): in particular, food, animal welfare and the environment. Does he share my concern at the noises off, which are saying that, now we have left the European Union, we do not have to maintain those high standards? Can he, from the Government’s perspective, quash any such move, paying tribute to British farmers and to the high standards to which they produce our food, to which consumers have become accustomed and wish to continue to purchase? With that, I give Amendment 1 a warm welcome.

Trade Bill

Lord Lansley Excerpts

Report stage & Report: 3rd sitting (Hansard) & Report: 3rd sitting (Hansard): House of Lords
Wednesday 6th January 2021 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

I am delighted to follow the noble Baroness, Lady Bennett. I shall speak to Amendments 28, 29 and 30, which are intended as probing amendments. I refer in passing to the report on the Trade Bill from the Select Committee on the Constitution, published in September of last year. The committee says at paragraph 11:

“We remain of the view that the Bill’s skeletal approach to empowering the Trade Remedies Authority is inappropriate.”


It goes on to say at paragraph 12:

“We recognise that there continue to be significant uncertainties regarding the UK’s trading relationships at the end of the Brexit transition period”,


which of course has now passed, and it concludes:

“However, it is not clear why, more than two years after the previous version of the Bill was introduced, the functions and powers of the Trade Remedies Authority cannot be set out in more detail in this Bill.”


Therefore, I gently nudge my noble friend the Minister to say, when he responds to Amendments 28, 29 and 30, what the intention behind the original Clause 6 was.

With Amendments 28 and 29, I seek in particular to focus on understanding better what limits might be appropriate to a request to the Trade Remedies Authority to provide advice on matters of international trade, and, with Amendment 30, to clarify the purpose of the initial consultation before proceeding to a request. At this stage, I should say that I am most grateful to the Law Society of Scotland for its assistance in briefing me and preparing these amendments.

With regard to Amendment 30, it is not immediately clear from the legislation why the Secretary of State would consult the Trade Remedies Authority under Clause 6(3) and how this is different from issuing the original request under subsection (1). I might be missing something but, if you are issuing a request, that seems a little odd. I am grateful to the Law Society of Scotland for raising this with me and, in turn, for the House this afternoon. Surely, if you make a request to the Trade Remedies Authority, you do not need to consult the authority beforehand on the nature of that request.

Can my noble friend clarify whether there is any distinction between the two actions, making it clear that the duty to consult in Clause 6(3) relates to framing or scoping a request to the Trade Remedies Authority, just so we can understand why it is appropriate to shape that request when, in fact, the Trade Remedies Authority is meant to be independent and impartial? By going through this process of consultation, I am slightly concerned that that impartiality and independence may be impugned or compromised.

Amendments 28 and 29 point to the fact that the Trade Remedies Authority has already existed, and exists in abstract, having been incorporated by reference in the Taxation (Cross-border Trade) Act 2018, although we are formally constituting it in the Trade Bill before us today. If it is the case that the Trade Remedies Authority is responsible for carrying out investigations and advising on remedies as set up under the cross-border trade Act, while it is an essential aspect of international trade, it is only one part of that. The proposed amendment therefore would ensure that requests for advice are limited to matters on which the Trade Remedies Authority is competent to advise, having regard to its remit and functions.

The purpose of this group of three amendments is simply to explore a better understanding from my noble friend and the Government through the department as to what the remit of the TRA should be and to ensure that the independence and impartiality of that body will not be infringed through the present drafting of Clause 6(3).

[Lord Lansley (Con) [V]]

My Lords, I am grateful for the opportunity to contribute to this debate. The amendments in this group all relate to the composition, functions and approach taken by the Trade Remedies Authority. I am very glad to follow my noble friend Lady McIntosh of Pickering. She rightly referred to the powers and approach set out in the Taxation (Cross-border Trade) Act 2018. I have to say equally gently that that is the answer to the points made by the Constitution Committee of this House—that they do not need to be set out in this legislation, because, way back when we first started considering the previous Trade Bill, as the noble Lord, Lord Purvis of Tweed, and I fondly remember, it was introduced at almost exactly the same time as the Taxation (Cross-border Trade) Bill. They were intended to proceed in parallel and are now entirely separate.

To some extent, that also gives a further reason why we should briefly consider at this stage the Trade Remedies Authority’s understanding that it has, in the form of the trade remedies investigation directorate of the Department for International Trade, been up and running, working on the transition review from the European Union and making recommendations relating to the imposition of countervailing, anti-dumping or safeguarding duties inherited from the European Commission. To that extent, we seek to influence not something new but something that has an ongoing role.

In this debate, I want to raise several issues. I hope that my noble friend on the Front Bench will not regard it as necessary to elaborate on all these issues now. If he wishes to write later, that is absolutely fine, but I do want to make one or two points.

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[Lord Lansley (Con) [V]]

My Lords, as the noble Lord, Lord Stevenson of Balmacara, said, this short debate follows on from the debate that we had in this House on the Trade (Disclosure of Information) Bill on 17 December. Like the noble Lord, Lord Stevenson, I am most grateful to the Minister for his letter of 4 January.

There are just two things that I want to say following on from that. The first is that I am grateful, but not surprised, that in his letter the Minister said that, although the wording in the amendments that we are now making to the Trade Bill varies slightly from the wording of the clauses in the Trade (Disclosure of Information) Act, the legal effect is exactly the same. I do not think we ever thought that the legal effect would be different. What we find somewhat surprising is that, to achieve the same effect at virtually the same time in two pieces of legislation, the wording is not the same. That was a slightly surprising aspect of the drafting that we were presented with when we saw the Trade (Disclosure of Information) Bill last month.

Secondly, I raised the question of what is meant by, and what is the purpose of, the amendments that put into the Bill the saving provision in Clauses 8 and 9 —that

“nothing in this section authorises the making of a disclosure which … contravenes the data protection legislation”

or aspects of the Investigatory Powers Act. The purpose of the government amendments is to ensure that, when these pieces of legislation and their constraints on disclosure are considered, Ministers can also take into account the powers conferred in this clause.

The Minister’s letter refers to the Supreme Court case of the Christian Institute and others v the Lord Advocate in 2016. I have had the chance to read the judgment and it does indeed refer to the situation where there is in effect, under legislative provisions such as the data protection legislation, a statutory gateway that allows those provisions to be escaped from in circumstances where there are powers for disclosure in other enactments. In the absence of these provisions, the data protection legislation and the Investigatory Powers Act might well make it very difficult for the necessary disclosures to be made in certain specific circumstances. Therefore, it allows for them to be seen together.

Paraphrasing, I think, the language of the Supreme Court, it is necessary for anyone wanting to understand the effect of this clause to have this legislation in one hand and the data protection law—indeed, I would add the Investigatory Powers Act—in the other. It does not tell you how any particular instance would be resolved but it does tell you that both must be considered together, and that is entirely reasonable.

The only issue that one is left with when one reads both the legislation and the Supreme Court judgment is that the clauses we are looking at do not say that the disclosures made by public authorities must be necessary and proportionate. Therefore, I think that it would finally close the gap and make matters very clear if the Minister would confirm that, where these disclosures are made, or indeed where further public authorities have information disclosed to them for their trade functions, the disclosures must be necessary and proportionate to meet those functions.

[Baroness Neville-Rolfe (Con) [V]]

My Lords, I welcome the government amendments, which are technical in nature but allow proper co-operation between HMRC and the devolved authorities. As I was not able to be in the House in person during debates on the Trade (Disclosure of Information) Act, I have probably not understood the purpose of Amendment 36A in the name of the noble Lord, Lord Stevenson of Balmacara—but I have a question that perhaps he or my noble friend the Minister could kindly respond to.

I always worry about the wisdom of giving a power to amend primary legislation by order, particularly on the collection or disclosure of information by HMRC, which seems to be the issue in Clause 7(4). As a former international retailer, I know how commercially sensitive such information is and how onerous ill-thought-out form-filling requirements can be. I want to make sure that the power could not be misused by the Executive—we have seen a certain amount of evasion of scrutiny during Covid. I want an assurance from the Minister, assuming that the power to amend primary legislation is retained in what is now being proposed, that the power would be used sensibly. If it disappears, then that would also meet my concern.

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Moved by

[Lord Lansley]

41: After Clause 10, insert the following new Clause—
“International disputes
In section 32 of the Taxation (Cross-border Trade) Act 2018 (regulations etc), subsection (3), at the end insert—“(d) regulations under section 15 (international disputes etc).””Member’s explanatory statement
This new Clause would amend the Taxation (Cross-border Trade) Act 2018 to require that, where the Secretary of State proposes tariff increases in pursuance of an international dispute (not as a trade remedy), such a regulation must be made subject to an affirmative procedure.

[Lord Lansley (Con) [V]]

My Lords, Amendment 41 in my name relates to the powers in the Taxation (Cross-border Trade) Act 2018, under which Ministers can impose import duties. Section 15 of that Act gives the power to impose tariffs in furtherance of an international dispute. Amendment 41 would require that a statutory instrument made under Section 15 of that Act be subject to the “made affirmative” procedure.

We had a debate on this in Committee. When the original Taxation (Cross-border Trade) Act went through, Section 15 was wrapped together with a number of others in the argument made by the Government—and, indeed, set out in the Explanatory Memorandum—that there would be frequent changes of detailed tariffs. While that is generally true in other sections of that Act, it carries no weight in relation to tariffs applied in international disputes, which are and should be few in number.

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[Lord Grimstone of Boscobel (Con)]

I thank the noble Lord for those comments. The Government will of course reflect on this debate. I perfectly understand the requirement for the annulment power, but I believe that both Houses of Parliament would wish to use that annulment power sensibly and sensitively, in light of the circumstances which might underlie it.

[Lord Lansley (Con) [V]]

My Lords, I am most grateful to all those who contributed to this short debate. It demonstrated the value, even at this late hour, of some of the additional issues brought out in the context of the scenarios and specific instances that my noble friend put in his response to the debate.

I think I have been inadvertently responsible for misleading the House. I intended to talk about parliamentary approval, but in doing so got carried away and talked about this House. Of course, this House would have no role. The regulations made under the Taxation (Cross-border Trade) Act, if “made affirmative”, would be subject to the approval only of the House of Commons.

Therefore, in response to my noble friend Lady Noakes, I make two points. First, we are accustomed, from time to time, to making amendments to Bills that run the risk of being declined by the other place on grounds of financial privilege. However, that does not mean that we never make such amendments and invite the Commons to think again. The second point that I should make to her is that, in this instance, the effect of the amendment would be to give the House of Commons—but not our House—the right to consider regulations made under this power.

That said, I do not resile from the view that sensitive matters can, none the less, be debated in Parliament, and it is not beyond the wit of Ministers and civil servants to ensure that, in explaining the choices that have been made in the regulation, they do not disclose information of value to those who would do us harm. That happens on many occasions and, in fact—even in the scenarios to which my noble friend refers—the choices we have made and why we have made them would very often not have been lost upon other parties in trade disputes. I do not resile from the view that because something is sensitive and important it should be debated in Parliament—in this instance, because it relates to what are effectively attacks, only in the other place.

None the less, the helpful response from my noble friend —who genuinely tried to explain why the Government took the approach they did, rather than what was set out originally in the Explanatory Memorandum—took us some way towards thinking about this matter in a way described by the noble Lord, Lord Stevenson of Balmacara. We may yet come back to this matter, but not during the passage of the Bill. I beg leave to withdraw the amendment.

Amendment 41 withdrawn.