Scotland Act 1998 (Insolvency Functions) Order 2017

Lord McAvoy Excerpts

Wednesday 29th November 2017 Grand Committee

[The Parliamentary Under-Secretary of State, Northern Ireland Office and Scotland Office (Lord Duncan of Springbank) (Con)]

My Lords, this order is one of a number of measures which are intended to update and modernise corporate insolvency in Scotland with particular regard to insolvency rules for the winding up of companies. This follows the Insolvency (England and Wales) Rules 2016, which modernised the process relating to company insolvency in England and Wales.

The law on corporate insolvency in Scotland and the respective legislative competences of the UK and Scottish Parliaments and Governments is complex. That is particularly the case with regard to winding up. For example, in relation to business associations, the general legal effect of winding up is reserved but the process of winding up is excepted from this reservation. Consequently, in practice, it is not always clear whether a winding-up matter is covered by reserved or devolved legislation.

To address this, and in order to facilitate the efficient, effective and user-friendly modernisation of, in particular, company insolvency rules for Scotland, both the UK and Scottish Governments agreed that we should legislate to remove the need for a complicated exercise of assessing which rules relate to a reserved matter. Accordingly, both Governments agreed to the preparation of a combined order under Section 63 and Section 108 of the Scotland Act 1998.

Section 63 of the 1998 Act enables an order to provide for any functions that are exercisable by a Minister of the Crown in or as regards Scotland to be exercisable by the Scottish Ministers concurrently with the Minister of the Crown. Section 108 of the 1998 Act enables an order to provide for any functions that are exercisable by a member of the Scottish Government to be exercisable by a Minister of the Crown concurrently with a member of the Scottish Government.

The order will therefore allow for the mutual conferring of functions between Scottish Ministers and a Minister of the Crown, so that both have the power to bring forward as appropriate winding-up rules or regulations for companies, incorporated friendly societies, and limited liability partnerships in Scotland irrespective of whether these rules or regulations relate to reserved matters under Schedule 5 to the Scotland Act 1998, or matters that are not reserved.

This approach will enable each Administration to make provision on winding-up matters without any doubt being cast on the scope of the relevant enabling powers. It will also ensure that the rules on the winding up of companies in Scotland will be contained in one instrument rather than split between two.

I hope that your Lordships share our view that this is a sensible step which will modernise the approach to corporate insolvency in Scotland. Furthermore, it demonstrates the benefits of two Governments working together to make the devolution settlement work for people and industry in Scotland. I beg to move.

[Lord McAvoy (Lab)]

My Lords, I thank the Minister for his explanation of the order, the first of many instruments to be debated today. I put on record my pleasure at operating under the chairmanship of the noble Lord, Lord Rogan. It is the first time I have operated under his chairmanship, and I hope he is kind and pleasant with me.

As we have heard, the order relates to corporate insolvency rules in Scotland and the complexities that arise due to winding up being a mixed area of competence. The Minister will no doubt have in mind the fact that the future may hold many more discussions about mixed areas of competence as we move forward with our exit out of the European Union. Fortunately, today’s order is intended to make an existing process simpler and has received general support. I place on record our support for it.

As the Minister explained, the order would confer mutual functions on Scottish Ministers and a Minister of the Crown so that both have the power to bring forward winding-up rules and regulations for Scotland in relation to companies, incorporated friendly societies and limited liability partnerships. We accept the arguments that this will alleviate an otherwise complex assessment of which matters are reserved in this specific area and assist in the modernisation of these rules as regards Scotland by ensuring the provisions are held in one single order rather than split across multiple instruments. We are content to support the order.

As I understand it, the provisions are made with an assurance that a Minister of the Crown will be able to exercise these functions only with the agreement of a member of the Scottish Government. I may be a doubting Thomas, but I am sure that occasionally a dispute may arise in the future and a challenge to the agreement. Has a procedure been envisaged for what happens if a conflict arises and the relevant Ministers find themselves in disagreement over the use of these powers? I am sure that we are all alert to the dangers not of disagreements, but of complex arrangements being misused and misquoted in Scotland as a tactic against the Westminster Parliament. Will the Minister answer that point?

[Lord Bruce of Bennachie (LD)]

May I clarify that the intention is that either the Minister of the Crown or a Scottish Minister may act, but they have to agree with each other? If so, what will be the process by which they consult? There may be circumstances where the action has to be fairly urgent. Clearly, one does not want to use a consultation process which causes delay. Does one simply have to notify the other or do they have to give consent formally either way?