International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019

Lord Stevenson of Balmacara Excerpts

Tuesday 12th March 2019 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, I declare my interest as a retired fellow of the ACCA. Although I have not practised as an accountant very much during my membership—very little, in fact—I retain an interest in the processes of accounting and the impact it has on business and the economy as a whole, which have been so well described by the noble Lord, Lord Hodgson, and the noble Baroness, Lady Bowles. Both have contributed a great deal to the debate, which leaves a number of very uncomfortable questions for the Minister to try to respond to. I am afraid we will probably not get to the bottom of them today. They have set out an agenda, particularly the noble Baroness, for work that needs to happen over the next few months if we are to get the best out of the current changes.

I will put another review on the table as well, which we have not yet had an opportunity to discuss in our House. I hope there will be an opportunity to do so in the not too distant future. Very significant changes are being made through what appears to be a process of correspondence and speech-making between the new chair of the CMA and the department, under which what looks like a substantial shift of public policy on competition issues will be introduced to put consumer interests at the heart of much competition policy—a change which I would welcome.

This would be a significant change in the powers and abilities of the CMA to investigate and to seek out remedies where malfeasance has been found, and a completely different sense and sensibility relating to the work that has previously been done under the CMA on investigations more generally. I say that because it seems a rather important leg of the various bodies involved in a broader conception around how public trust is to be generated in economic operators. One could also add that a similar responsibility towards consumer interests and consumer focus is needed for the regulatory powers in financial services, for which the Minister will be aware we have been arguing for some time, if we are to get the best out of that system. That has been much discussed in the context of whether there should be a duty of care on financial organisations dealing with consumers, a matter to which we will no doubt return.

By way of introduction, I align myself with the two speeches that have already been made, and will ask three questions on the Explanatory Memorandum. I will preface those with the point made very strongly by the noble Baroness, Lady Bowles, but raised also by the noble Lord, Lord Hodgson, that it is the cruellest of misfortunes for those who have been responsible for designing this new structure that they are trying to find analogues for the existing system in Europe, which has run and operated our overall structure for reporting on public accounts and public bodies, when the whole of that structure is being completely refigured through the FRC review and the consultation now going through. The question that concerns me most is about the structure being proposed. The Secretary of State takes on, broadly speaking, the responsibilities of the Commission, but the political control is reduced to a situation which we find more commonly in Britain than in other countries—about which the noble Baroness, Lady Bowles, has been fairly critical—where the devolved responsibilities are to a body that is being created out of nothing and allocated to a body that is in transition and will not have proper supervisory powers. There is a real problem in this, particularly since, as we read in the recent consultation about the independent review of the FRC, about a third of the recommendations are in category three. As the Minister will know, this relates to reforms that will require primary legislation and have wider ramifications, and therefore require deeper consideration and wider consultation.

I do not understand how the Government think they can get away with a process changing the nature and function of an important construct that relates to a whole economic activity and the accounting process underpinning it in terms of public trust—and do so when they are signalling that they will not be in a position to do it until they get primary legislation ready, let alone through, at a time when it seems impossible to legislate on anything except Brexit. I will leave the Minister to respond to that if he can.

My questions in response to the points raised so far are relatively straightforward. First, in paragraph 7.5 of the Explanatory Memorandum, the policy intention is for the Secretary of State to delegate the function to an independent endorsement board when it is constituted satisfactorily in 2019. Am I right in assuming that this is what is referred to in the Chapter 1 recommendations on the need for a statutory authority, which will require primary legislation? If so, can we have more information about the timing? It does not seem likely that it will be finished this year, let alone in time to enforce the work. I would be grateful for a comment on that.

Secondly, paragraph 7.6 makes the point that the instrument enables the Secretary of State to revoke the delegation to the endorsement board if he or she wishes. Is that right? I do not regard that as good law. It is certainly not parliamentary language. Can we have some examples of the sort of issues that might be raised? The only example we have here is the endorsement board being deemed unsuccessful—but by whom and under what criteria? Do we have any principles under which that judgment can be made? If so, what are the processes under which it will happen?

Thirdly—I have already touched on this point—the principles of financial reporting are taken without question as providing a “true and fair” view of undertakings and a position “conducive” to the long-term public good. These are familiar words. They are contained in the IFRS and apply in the UK GAAP but they are not without some difficulty in terms of their overall understanding. They require judgment at the local level in terms of the individual accounts and in the round about whether the processes were correct. The instrument places an obligation on the Secretary of State to consult those with an interest in the quality and availability of accounts. In pursuit of my concern that the consumer and the broader public interest require a much broader cut through this, can the Minister confirm that the consultation process will include not just the Big Four and the accounting professions, and look genuinely at the wider stakeholder interests?

[Lord Henley]

My Lords, I thank all three noble Lords for their interventions, which were based on considerably more expertise than I have. I hope they will be tolerant of my response. If I fail to answer any questions I might have to write to them.

It might be helpful if I remind them of the purpose of these regulations. As usual they have the words “EU exit” in them. They are designed for a no-deal exit and ensure that the IFRS can continue to be endorsed and adopted for use by UK-registered companies after exit from the EU. They are laid using powers under the EU withdrawal Act 2018. It is again worth reminding noble Lords of the constraints within that Act and that the powers within it would not allow the Secretary of State to go wider into some of the other matters that are of concern to all three noble Lords. That is why, as I made clear earlier, that there will be a further SI later on.

We have been talking about Kingman who, as we know, published his report on 18 December. We also know that my right honourable friend the Secretary of State issued his initial consultation on the recommendations on that only yesterday and that the closing date for responses is 11 June. No doubt all three noble Lords have copies of that. I think I saw a tweet from the noble Baroness, Lady Bowles, on it today, so I presume she has seen a copy. I regret that we are not in a position to debate it today, but there will be many other opportunities to debate it and to feed in responses in due course.

To some extent, that deals with the initial concern from the noble Baroness about whether the FRC is a suitable body to host the new endorsement board, in light of Sir John Kingman’s report and the response that will have to be made to that. As I said, there are the constraints of the EU withdrawal Act. My right honourable friend is trying to deal with the deficiencies so that we can get on with the eventualities, should there be a no-deal Brexit.

I shall say something about the consultation on the Kingman review. It is important and we are grateful for the very comprehensive review he gave. We think the recommendations are well-considered, far-reaching and transformational. As noble Lords know, the Government published our initial consultation on those recommendations, highlighting our approach in taking forward the review’s recommendations. The Government welcome and share the review’s vision for a new regulator with a new mandate, new leadership and stronger statutory powers and intend to move as fast as possible on this. I would say move swiftly, but the noble Lord will have to be tolerant because the process to implement reforms and overhaul the sector must be gone through. In the interim, until the new regulation is in place, the Government will work with the FRC to take forward 48 of the review’s recommendations, including addressing issues such as lack of transparency and shortcomings in the enforcement activities. Further detailed consultation on those measures will follow.

Brexit: Protection for Workers

Lord Stevenson of Balmacara Excerpts

Thursday 7th March 2019 Lords Chamber

[Lord Henley]

Would the noble Lord like unemployment levels at the same rate we see in France, or would he prefer to see employment and unemployment levels at the rates we have in this country, where we also have the right sort of protections for workers but do not have inappropriate protections that prevent people getting jobs?

[Lord Stevenson of Balmacara (Lab)]

My Lords, the Statement refers to the intention to establish,

“a new body to bring together the relevant enforcement functions”,

of the gangmaster agency and others. The Minister did not give the exact position in his response to my noble friend. There is an opportunity for a new body to have trade union representation. Can he confirm that that will be under consideration?

My main point relates to two things. First, the gig economy has been raised. Is it in the Government’s mind to eliminate once and for all the gap between “employees” and “workers”, which has bedevilled many of the issues we have been talking about? There is a need to make sure that all workers are employees so that they can have the rights and protections the Government are now bringing forward.

Secondly, on the new body, is this not the time to bring in some of the other issues that have affected workers’ rights, such as giving the Small Business Commissioner statutory powers under this new body? Also, would it not be sensible, as is perhaps alluded to in the Statement, to bring in the enforcement body that the Treasury operates for flagrant breaches of the low pay regulations, including the national minimum wage and the national living wage? They should also be part of the same body.

[Lord Henley]

I think the noble Lord will find that my right honourable friend referred to HMRC as one of the bodies that might be brought into some new enforcement body. As he made clear, it is a matter for consultation. We will want to consider what possible arrangements we can come to, but I cannot go any further than that at the moment.

The noble Lord also asked about dealing with the problems of the definitions of “worker” and “employee”. It is quite difficult. I can go as far back as when I was sitting the Bar exams a very long time ago. I found it quite difficult then; it is still difficult, but it certainly needs to be considered. No doubt that is something we can consider in due course when we come to legislation following Taylor and our Good Work Plan.

Designs and International Trademarks (Amendment etc.) (EU Exit) Regulations 2019

Lord Stevenson of Balmacara Excerpts

Monday 4th March 2019 Grand Committee

[Lord Clement-Jones (LD)]

My Lords, as with the last SI, the noble Baroness has put her finger on a large number of issues. Although this SI does not compete with the 600-page one that is still to come, I am afraid that, even at 60 pages, its length demonstrates the number of rights that sadly are going to be lost and which are extremely valuable to designers, particularly fashion designers and particularly at events such as London Fashion Week.

I start by asking whether the Minister could expound the situation as far as the exhaustion of design rights of this nature is concerned. The situation was wonderfully simple for those who wished to exhibit new designs at London Fashion Week, for example, knowing that their designs would be protected on the continent—those who exhibited in Paris had them protected here, and those who exhibited on the catwalk here had them protected all over the EU. Perhaps the Minister will explain what the actual exhaustion situation will be, particularly with the new SUDRs.

The mechanisms are relatively straightforward. These are similar to those adopted for the equivalent of the EU trademark. As I read it, there is a level of automaticity about the registration of the new right. It would be churlish not to welcome the fact it will include the features that are characteristic of the European design right, in terms of lines, contours, colours, shapes, textures and so on. That is an extremely important aspect.

I assume that, although there is a level of automaticity—entirely as the noble Baroness said—the sting will come in the renewal at the end of the three years, or whenever it occurs. The Explanatory Memorandum talks about this costing a total of £500,000. It would be useful to know where that estimate derives from.

Again, we are told that relevant stakeholders were consulted. Can the Minister again unpack whatever round table it was that took place? It is rather like Colonel Mustard in the drawing room: where was the deed done on consultation? It is important that we know when examining these statutory instruments that the right people were consulted and are happy, as far as it is possible to be happy with a no-deal Brexit SI, with the proposals set out. I look forward to hearing what the Minister has to say.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am very grateful for the comments of the noble Baroness, Lady McIntosh, and the noble Lord, Lord Clement-Jones, which have covered much of the ground that I was going to raise, so I shall not go back over it. As both of them have said, this is a complicated area. My feeling from the comments made is that it is likely to become more complicated after a no-deal exit, not least because of an additional design right.

On that point, as the noble Lord, Lord Clement-Jones, pointed out, it has taken this rather odd set of circumstances to persuade the Government that there is a problem with our whole range of design rights. We have raised in the House before the question of why there is such a focus in the UK on registered design rights, as against the very much larger number of unregistered design rights used in fast-moving industries such as fashion and why those industries do not use the registration system at all. Bringing in another model just to try to fill a gap seems to overcomplicate the whole structure, although it provides additional cover, as the noble Lord said, and I welcome that.

Does the Minister recognise that an issue is looming here? Do we need another in-depth look at this whole area to try to unbottle some of the problems that we have caused in the past few years by bringing in additional layers of legislation and regulation and consider whether we need a new approach, because the industry has moved away from the current regulatory structures?

Having said that, a number of points raised need answers, and I look forward to hearing what the Minister will say. I have only a couple to mention. The noble Baroness mentioned paragraph 12 of the Explanatory Memorandum. I have two points on that. At paragraph 12.11, there is a rather odd piece of typography. It states:

“An Impact Assessment has not been prepared for this instrument because [].”


There are just two square brackets, so we do not know why it was not prepared, although we can guess. Can the Minister confirm why we have not had an impact assessment and not leave us hanging? It is a bit like a missing third act.

I have a point about cost recovery, which was well argued by the noble Baroness. The resourcing issues of this are not small: they may be £500,000, they may be £375,000, but they are still substantial. On a cost-recovery model, who pays? Are we saying that designers currently registering designs—which is about 10% of the total design component of industry—are carrying the costs not only of the existing arrangements but the additional burden of having to produce another registered design system introduced because of the possibility of defects in the relationship of those registered on the European basis? It is all very well saying that this is a benefit to the designers, but it is at a cost. I should be grateful if the Minister would confirm my reading of the situation.

I asked this question on the previous statutory instrument, but I did not get a full answer. We seem again to be engaging in asymmetry. There would be an argument for saying that if we have to have a no-deal exit, when that happens, the arrangements for design protection must be limited to the UK because no reciprocity is promised from the EU, yet here we are saying that we in the UK will continue to recognise the registration process which takes place in EU countries after we leave but are unable to offer that right to those who register designs with the UK, even with the additional right. Why are we doing that? Is that an asymmetric approach, or is there something we do not know about the arrangements that have been made for that? I am not against what has been going on. However, if I am right, I think the consequences are that, while overseas or European designers may benefit from having their designs copyrighted—the catwalk example is a good one, in that you can have a fashion show in Paris and be confident that your designs will be covered in Britain—in Britain, we will not be able to do that because there is no necessary reciprocity. That seems unreasonable and I would be grateful to know who benefits from it when we hear from the Minister.

[Lord Henley]

My Lords, I will start with consultation and explain what we did. I will not repeat what I said on the previous SI, but the important thing is that, although we were not able to consult fully in the way one might have wished, the IPO has engaged with businesses on the implications of exit ever since the referendum result. We have sought to maximise continuity in the no-deal scenario and in the early stages of negotiation on the future partnership. As I said earlier, revealing the details of our continuity approach through public consultation might have risked that. The individuals who took part in the technical review did so in a personal capacity; we invited all sorts and I hope we had a representative group. They were chosen because of their past experience as representatives of various stakeholder bodies which usually engage in consultation with the IPO.

[Lord Stevenson of Balmacara]

I thank the Minister for giving way. We have been over this ground before and I do not want to prolong the debate. However, the essential difference that is now emerging across all the SIs that we have been considering is the question of whether consultation has been carried out under Cabinet Office rules or not. If it is done under Cabinet Office rules, there are procedures, processes and resulting consequences, including publication and the reporting of all evidence received. I think we all agree that this would probably have helped materially in the process of going through all these statutory instruments.

The second point is that the consultation has then got to be on an open and representative basis, rather than selecting people from organisations with which the department, quite rightly, has ongoing and continuing discussions. The problem with this approach is that it tends to give the impression that those who have been consulted are speaking in their official capacity, when the Minister is making the point quite clearly that that is not the case and that this is very much an informal, personal discussion, because the consultation is not happening under Cabinet Office rules. That is the point we are all making; I do not think we need to dwell on it, but we should accept that that is the situation so that we do not get mixed up between the two systems.

[Lord Henley]

I am glad that the noble Lord is prepared to accept that point. Obviously, we could not follow the Cabinet Office rules—I was trying to make that clear. They are not strict in that respect and there was no absolute necessity to follow them on this occasion. However, we wanted to make sure that we consulted enough and consulted appropriate people to make sure that we were not going into this blind—not that we would have been doing so even if we had not consulted.

I move on to the other hardy perennial—the impact assessment. We assessed the impact using the better regulation framework in line with the Treasury’s Green Book guidance. The impact was deemed to be less than £5 million so a full impact assessment was not required. Analysis is focused on the direct impact of the relevant SI compared with the current legislation, and analysis of the wider impacts of the UK’s exit from the EU has previously been published in the form of the long-term economic analysis, which was published in November 2018. My noble friend asked how we could be so sure of that. I want to make clear that our renewal fee estimates are based on the proportion of registered community designs currently held by UK businesses. That figure is 7% and the calculation was based on that.

My noble friend then gave the figure of 375,000 or roughly half a million and asked whether the fees would increase because of this. UK-registered design fees were subject to significant reductions in 2017. We have no plans to increase these fees to accommodate the cost of converting registered community designs. My noble friend also asked whether a design would be allowed to lapse if it were not reregistered. Creation of a reregistered design will be automatic—the holder will be granted the reregistered design if he or she holds a registered community design on exit day.

Product Safety and Metrology etc. (Amendment etc.) (EU Exit) Regulations 2019

Lord Stevenson of Balmacara Excerpts

Monday 4th March 2019 Grand Committee

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

My Lords, these regulations were laid before the House on 7 February 2019.

The protection of consumers from unsafe products is at the heart of the legislation before us today. It has a single yet crucial objective—to ensure that, in the event of no deal, the UK continues to have a robust and highly effective product safety and legal metrology regime. It ensures continued protection for consumers across the UK and provides certainty and clarity for businesses.

The UK product safety and legal metrology regime is among the strongest in the world. It is vital that we continue to retain such a robust system, even if the UK leaves the EU without a deal in place. The legislation will not change the existing system or approach taken, which I know is supported by stakeholders. The changes are limited to those necessary to ensure that the 38 product safety and metrology laws it covers will still work effectively on exit.

Before I say more, I would like to explain the approach we have taken, because I appreciate that some noble Lords may have concerns that such a large instrument may be difficult to navigate.

[Lord Stevenson of Balmacara (Lab)]

My Lords, it is not the navigation but the strain on our hands.

[Lord Henley]

I make no comment.

I assure the Committee that this approach has been designed to increase understanding and reduce the number of similar instruments that would otherwise be needed. Many cross-cutting issues are the same for different products. These have similar definitions, obligations and requirements. As a result they require similar amendments, which it makes sense to group together into one instrument rather than to separate out into many different instruments. Another reason for the size of this instrument is the lengthy technical schedules. These are used widely by industry, and incorporating them here from retained EU law makes it easier for businesses to see and understand the legislation as a whole.

During development of this instrument, we have been mindful of the impact on business of changes to processes as a result of the UK’s exit from the EU. Where possible, we have given businesses time to adjust, including an 18-month transition period for importers for any labelling changes and a 90-day transition period for companies notifying key safety information for cosmetic products already on the market. We have also engaged with businesses on the drafting. Drafts of the schedules were shared with stakeholders and feedback obtained. Stakeholders, including trade associations, industry experts and enforcement agencies, took part and welcomed this approach. As a result we have a better understanding of the main requirements and concerns of stakeholders, including businesses, and have been able to reflect these in the legislation that is before us today. In addition, and given the importance of this area of law, we have completed and published a full impact assessment to ensure complete transparency—despite the impact being below the threshold at which an impact assessment is required.

On the detail of the instrument, it is important to repeat that it will not change the UK’s approach to product safety. It keeps important elements; for example, it retains the requirement for conformity assessment to ensure that products meet the essential requirements set out in the legislation, including the need for assessment by third-party organisations where that is currently required. It retains the use of standards that give rise to presumptions of conformity with the legislative requirements, making it easier for businesses to ensure that their products are safe by following a designated standard.

Taking action to protect consumers from unsafe products remains vital, and this legislation ensures that the UK’s market surveillance system will continue to work to limit the number of unsafe and non-compliant goods available to UK consumers and businesses. It also gives ongoing recognition of existing authorised representatives in the European Economic Area for any appointed before exit, while those after exit will need to be in the UK.

For cosmetic products, due to the risk they pose to human health, responsible persons—who play a key role in ensuring the safety of cosmetic products—will be required to be based in the UK from the point of exit. By addressing these issues we are able to give business certainty and—crucially—we will retain our ability to remove unsafe or non-compliant products from the market.

To conclude, I hope that the Committee will agree that maintaining a functioning product safety framework in the event of no deal is essential both for consumer safety and business confidence. Without this legislation in place, there would be major risks to the safety of consumers—the safety of the toys our children play with, the cosmetics we all use every day, and the electrical items which are found in abundance in our homes. Maintaining these protections is vital to people across the country. I beg to move.

--- Later in debate ---

[Baroness Burt of Solihull (LD)]

My Lords, I add my thanks to the Minister for conducting a consultation on this “minor” piece of legislation last week and for his explanatory letter to the noble Lord, Lord Fox, which has been passed on to me. However, after the meeting last week I have rather more questions now than I had in the first place.

In the event of a no-deal Brexit, this SI creates a new independent regime for checking product conformity, initially mirroring EU product-safety standards. The Government have combined 38 measures into one, creating a piece of legislation over 600 pages long. The concerns that I outlined at the meeting—which were subsequently outlined by the noble Baroness, Lady Crawley, as well—regarding the breadth of industries and the number of sectors covered by this instrument remain. It makes it difficult for Parliament to read and scrutinise let alone those organisations to which it actually applies. Any company, small or otherwise, looking at this piece of legislation would be daunted, and I do not accept the argument that the repetition over all the different sectors covered will be reassuring and ensure consistency of treatment between different areas, as was mentioned at the meeting last week.

I also do not think that the 241,000 businesses which will be covered by this instrument will thank the Government for making them wade through so much paperwork to find what they need. Surely one of the fundamental principles of a democratic society is that people should be able to know what the law is and easily understand how it applies to them. Today’s SI has the potential to undermine that principle.

We know that there is a premium on time before 29 March, and we certainly have plenty of SIs to get through, but the Government could have laid each of the measures separately and then grouped them together in smaller debates. Companies, and consumers, will not thank them for this tombstone of an SI.

At the meeting last week, I also raised the costs of implementation, which have been calculated at a total of £25 million. The analysis and evidence summary talks of a corporate manager or director taking an average of three hours to familiarise themselves with the new legislation. The £25 million is supposed to cover an estimated £54 billion-worth of GVA and £63 billion-worth of goods from our exporters to other EU countries, with about £104 billion imported from EU countries.

The impact assessment does not include the wider impact caused by the separation of the UK and EU product safety regimes. It is surely here where the biggest costs to businesses of a damaging no-deal Brexit would lie. No assessment that I can see is made of the cost of relabelling products—removing the old CE marker and substituting the new UKCA one. The manufacturers’ organisation Make UK told the BBC that,

“thousands of companies are going to have to spend millions of pounds collectively on changing all their markings to comply with the new mark”.

It does not include the cost to British exporters of having to seek approval from two notifying bodies: one based in the UK and one based on the EU.

My first question is: what assessment have the Government made of those costs to UK businesses and what knock-on effect will they have on consumer prices? Is this not another reason why the UK would be foolish to leave on 29 March without a deal? That is a rhetorical question: the Minister and I both know the answer to it.

My second question, to which I would appreciate an answer, regards the impact of a no-deal Brexit on our 176 notified bodies operating in the UK which provide more than 4,000 jobs between them. If the EU does not allow UKCA-marked products to be sold in the EU, there will be no incentive for foreign manufacturers to have their products certified in the UK. They will go to an EU-notified body to receive the CE mark and then import the products into the UK. Does the Minister agree with that assessment? In the light of it, are the Government seeking assurances from the European Commission that it would accept UKCA products in a no-deal scenario?

On the subject of the CE mark, I should like to ask a question on behalf of the charity Electrical Safety First. It is concerned that although the UK Government have created their own mark, it will not be a consumer mark widely recognised by the public. What plans do the Government have to raise awareness of the new mark among consumers? What are the timings and what transition plans are there? Electrical Safety First would like the Government to work with it and industry to raise awareness of the UKCA. That sounds like a fair offer to me. How does the Minister respond?

Next, I should appreciate some clarification on the expiry of the CE mark. The Government have decided that they will continue to allow products imported from the EU that bear the CE mark to be sold on the UK market and that this will happen unilaterally, regardless of whether the EU agrees to allow UKCA-marked products to be sold to the EU. At the meeting with the Minister, he referred to a transition period of 18 months using the existing marks for importers, and to one of 90 days for cosmetic product imports. We discussed that earlier today. But there appears to be no sunset clause on the SI. I presume the Government will have to change the law to ban CE marked-products from being sold in the UK should they ever wish to do so. Can the Minister clarify whether that is correct?

Finally, I will mention market surveillance. The UK will lose access to RAPEX—the EU’s rapid alert system—and ICSMS, the Information and Communication System on Market Surveillance, which we will replace with our own databases for market surveillance and public protection to help remove unsafe or non-compliant products from the UK market. The charity Electrical Safety First is unsurprisingly exercised about counterfeit goods as well, particularly those sold online. What plans are there to prevent more counterfeit and substandard electrical goods from being sold, particularly online, after Brexit?

I am sorry for the length of my remarks and promise to make it up to the Minister in the next SI, but this is, as I have mentioned, an inordinately long one. I appreciate that I have asked a lot of questions, so will the Minister undertake to write to me on any he may not manage to answer today?

[Lord Stevenson of Balmacara]

My Lords, I join other noble Lords in thanking the Minister for organising the meeting held last week on this SI—as has been said, it was very useful in covering a lot of the ground that otherwise would have needed to be raised today. It is interesting to have had the experience of going through such an extraordinarily large tome with so many details; it took me into areas of public policy where I did not think I would ever have to go. I particularly enjoyed, and of course immediately read first, the intoxicating liquor order 1988, which was closely followed by the strawberry regulations. Both were of immense interest and, for those who have not yet managed to get that far through the document, worth the journey.

I will not raise many of the points which have been made, but I will come back to a point raised during the meeting which has not yet been properly answered. There is substantial additional work implicit in the change in regulations, which has already been mentioned by the noble Earl, Lord Lindsay, and my noble friend Lady Donaghy, for the United Kingdom Accreditation Service and the Health and Safety Executive. It is not yet clear that the additional resources that may be required will be funded and that support will be offered. Could the Minister confirm that that will be the case? Additional work will clearly be required; it may be of a short-term and temporary nature, but I suspect that it will be continuing. Assurances need to be given that the additional work will be properly covered, or we will lose.

On that same theme, the Minister said as he introduced this that it was really all about consumer confidence and product safety. Of course, that will be only as good as the body and individuals which have to police it. That will largely fall to trading standards—we have already discussed some of the issues that are raised in this. I asked at the meeting, and ask again: what will the financial arrangement be for this? Clearly we want good product safety and consumer confidence, but will get them only if we pay for them. In the past it has been assumed that the additional work can be picked up by those responsible for trading standards, which are largely local authorities. When primary legislation has gone through this House in the past, we have also asked these questions and had assurances that substantive new additional work applying from primary legislation—such as the recent Bills going through this House—would be funded. Indeed, mechanisms for that have already been described and put in place. Can we again have some confirmation that the additionality implied in these regulations will also be funded?

[Lord Henley]

My Lords, I forget who it was who said, “Never apologise, never explain”, but I will start with an apology for the sheer size of this SI, which has received some comment—not just at this meeting, but at the meeting I held last week. I am grateful for the comments made by all those who came to that meeting and more widely by others, particularly the concerns of the Secondary Legislation Scrutiny Committee, on which the noble Baroness, Lady Donaghy, and the noble Lord, Lord Rooker, sit. I also discussed that with the chairman of that committee, the noble Lord, Lord Cunningham. I know he has also had correspondence with my honourable friend Kelly Tolhurst, who has ministerial responsibility for these matters within the department, and with my right honourable friend the Secretary of State.

National Minimum Wage (Amendment) Regulations 2019

Lord Stevenson of Balmacara Excerpts

Monday 4th March 2019 Grand Committee

[Baroness Burt of Solihull (LD)]

My Lords, I will fulfil the promise I made to the Minister on the previous statutory instrument and be brief. It is also a great relief from Brexit to be discussing something that is current and not contingent on anything else happening.

The statutory instrument talks about the national minimum wage amendment regulations, but the table refers to the national living wage. It does not take much to confuse me. I just want to explore that difference for a minute or two. The uplift of 4.9% for over-25s to £8.21 is very welcome and I accept and welcome the comments from the Minister on the progress that the Government are making to get to 60% of median earnings by 2020.

The concept of the national living wage was introduced by the Government in 2015. I appreciate the Minister’s comments on how the amount has increased but my understanding is that it is not a national living wage because it is not based on actual living costs. The Living Wage Foundation currently calculates it—although presumably it is due for an uplift as well—at £9 per hour and £10.55 in London. It says that the living wage is what people need to earn to live. Citizens UK says that there is a moral imperative on employers to pay that if they can and 4,700 businesses and 104 local authorities do.

We know that 20% of all low-paid workers are in the public sector. Can the Minister say what percentage of public sector workers are in receipt of the living wage? It was very good to hear the Minister’s comments on enforcement. Can he tell me how many companies have been found to be paying below the minimum wage and how many of these have actually been prosecuted?

In conclusion, I hope that we will be moving towards the living wage very soon. It is proven to be good for business because it improves staff morale and retention. It is good for society and for the Government’s coffers too, because 35% of those earnings will go to the Treasury.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I declare an interest as one of my children is an apprentice aged over 19. He is in the first year of the apprenticeship and so would benefit from the figures that we have in front of us today. I have not discussed it with him but I am sure he will be delighted to hear that there is more money on its way.

My noble friend Lady Donaghy’s comments were well made and it is astonishing that we are 20 years into what was seen at the time as quite a revolutionary policy and which is now, in the words of the Minister who introduced the order, settled between all parties as a feature of our working environment. It is a good thing as it works for all sections of society, particularly those at the lower end of the pay spectrum.

This is the fourth consecutive year that I have been reviewing this order, so I took the change of looking back to last year’s Statement, when the Minister was also responding, although that was only his first time. I will repeat some of the things that were said then because I think that the issues are still relevant. There are two important points to put on record. The document in front of us is an excellent piece of work. Again, I congratulate the team responsible for it. It reads very well indeed. It is a bit scary to go back to what we learned at university about the economics of wage policy and the impact of living and national wages but, nevertheless, it is important to see it all there. The document itself is good but also it plays back to the work done by the Low Pay Commission, in place for 20 years now, but doing fantastic work. It is very good to see its ability to move from the national minimum wage conditions when it was set up in 1998 to now, with the national living wage, which progressively moves the lower paid on full rates up to 60% of the median wage. The commission has adapted and continues to do its work in a way that is important and effective for society as whole.

Three points were made last year which I think have been picked up in the current document. One concerned whether the approach that has been taken to calculate the impact of the national minimum wage has stood the test of time. It was good that the department decided to take external advice from an expert body, and it is good to read the report and evaluation, which goes some way to answer some of the points I raised last time. That gives us a good basis on which to go forward.

Companies, Limited Liability Partnerships and Partnerships (Amendment etc.) (EU Exit) Regulations 2019

Lord Stevenson of Balmacara Excerpts

Monday 11th February 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, the points made by the noble Lord, Lord Fox, and my noble friend Lord Adonis are very important and I hope that the Minister will be able to respond to them. I have a couple more questions to add that the Minister might wish to respond to when he sums up. To add to the comments made by my noble friend Lord Adonis about the consultation, will the Minister also confirm that, if the Law Society was the only body consulted, why were the CBI and the FSB and others not consulted and can he give adequate reasons for that?

Paragraph 7.22 of the Explanatory Memorandum refers to,

“permitted disclosures to credit reference agencies, credit institutions, financial institutions”,

and the current legislation giving “preferential treatment” to EEA agencies. I take the point made in the Explanatory Memorandum that there seems to be no particular reason for that, but will the Minister comment on whether that raises an issue about data protection adequacy? The Government are on record as saying that they want to ensure that movement of personal data between the UK and the EEA is uninterrupted. If a distinction is to be made in terms of access, does that not bear on adequacy? If so, will the Minister comment?

Secondly, paragraph 7.24 refers to political parties and expenditure. My understanding—I may be wrong and I look forward to the Minister’s comments—is that shareholder authorisation is required for donations to political parties, organisations and candidates by any companies established in the UK to ensure that their intentions in relation to those activities are transparent. I take the point that, if we are crashing out of the EU and becoming an independent body, there is a question about the relevance of payments made to political bodies operating in the EU, but that does not take the trick in relation to transparency. Surely, shareholders of UK companies should know whether their companies are making payments to political parties whether or not they are in the UK, particularly if they are operating in the EU. I would have thought that was of interest to shareholders.

I am not in any sense saying that there is anything wrong with what the Government are doing, but it would be helpful if the Minister could explain their rationale. If it is a transparency measure, it is not relevant to exclude payments made to political parties and organisations for referendums and other things, wherever they take place, simply because we are no longer in the EU. That information would be of value to shareholders. I look forward to the Minister’s response.

[Lord Henley]

My Lords, I thank all three noble Lords for their contributions. I was not surprised that there was comment about the consultation. I repeat that, as we made clear in the Explanatory Memorandum, we were unable formally to consult on the provisions in the statutory instrument. But as my honourable friend Kelly Tolhurst said in the other place:

“On consultation, as I outlined, we have consulted, worked with and used the expertise of Companies House to ensure that we are making the best provisions to enable UK companies to implement the regulations that we require for them to be legal if we leave the European Union without a deal”.—[Official Report, Commons, Delegated Legislation Committee, 4/2/19; col. 8.]


We extensively engaged with Companies House—I think it is the right place, initially—on the changes that will impact EEA and UK businesses. In addition, impacted businesses—I will get on to numbers in due course—were notified of many of the changes in this instrument through the publication of the Structuring Your Business If There’s No Brexit Deal technical notice published in October, including filing changes, the route of access to BRIS and the revocation of the cross-border merger regime.

The noble Lord, Lord Adonis, seems to think that we did not consult the CBI, the FSB and other similar bodies. I shall give him an assurance that applies not just to this order but to a range of other orders and orders that will cover other departments. The CBI, the FSB and others—I could go through a whole list of them—are in the department on a weekly basis seeing the Secretary of State. The noble Lord will find that they are also in the department on a regular basis seeing officials and making officials aware of their concerns. I can give a cast-iron guarantee that any concerns they have will have been noted and we will have been made aware of them. As I said, this applies not just to this order but to a range of orders. We are the Business Department. My right honourable friend the Secretary of State has made it clear that his door is always open to representative organisations, just as I made clear last week when dealing with the intellectual property regulations how recently I saw, for example, the ABPI and the BIA. Irrespective of Brexit or whatever, it is important to us to have regulations. The noble Lord, Lord Adonis, is an old hand and has been a Minister. He will have done that in the various departments in which he served, and he knows that those engagements go on with great regularity.

I shall now start working through the various points and questions that the noble Lord, Lord Fox, put. I shall start with his concerns about BRIS. It will continue to be open to scrutiny by all non-UK interests after exit. In addition, most EEA registries are open and can be accessed through the relevant websites in the EEA states, but that will have to be a matter for where the company is based. GOV.UK lists those websites for the EEA and the rest of the world. There are no changes in the information available.

The noble Lord then asked how many would be affected and whether Companies House has the capacity to deal with these matters. I can assure him that we are in constant touch with Companies House and it assures us that all is well. The impact will be small. For example, there are only five companies in scope of the change around intermediaries being a member of their holding companies and we found no companies in scope of the change to investment in companies’ distribution of profits. Going a bit further, in relation to the filing changes, we reckon there are about 1,900 companies in scope of the changes which will have three months to update their information. Again, I am assured that there are no problems in that area.

The third point made by the noble Lord was about technical changes in relation to cross holding. He asked what analysis we have done. We have made only two changes, which relate to intermediaries dealing in securities being a member of their parent holding company and how investment companies can distribute profits. The regulations will ensure that, after exit, only intermediaries that are members of or have access to a UK-regulated market will benefit from this exemption, and certain investment companies will no longer benefit from some relaxations on controls of their distribution of profits unless they are listed on the UK market.

The noble Lord’s final point was on cross-border mergers. I have a note on that which has been temporarily misplaced. I apologise to the noble Lord; I might have to write to him on that.

I turn to the concerns relating to political parties raised by the noble Lord, Lord Stevenson. The regulations amend Part 14 of the Companies Act, which sets out the shareholder authorisation required for a company’s donations to political parties, organisations or candidates for electoral office. Under the current legislation, that reflects that the UK is part of an integrated European political system. In practice, that means that the same authorisations are required whether the political expenditure relates to the UK or other member states. After exit, these authorisations will apply only to donations and expenditure relating to UK-based political parties, organisations and candidates for electoral office. We are making these changes because, after exit, it will no longer be appropriate for the UK to set shareholder authorisations on donations outside the UK, as the UK will no longer form part of the wider EU political system.

[Lord Stevenson of Balmacara]

It was very helpful of the Minister to read out what is already in the Explanatory Memorandum. However, that was not my point; I was asking why the Government are making the change. If the regulations are there in the first place for reasons of transparency of political contributions, it does not really matter where they are.

[Lord Henley]

As I said, we have to get the statute book in the right place in the event of no deal, and therefore that small change had to be made. I do not think that I need go any further than that, unless I have misunderstood the noble Lord. I will look carefully at what he has said and will possibly write to him.

The final point that I wanted to deal with related to cross-border mergers. The noble Lord, Lord Fox, asked what happens to mergers that are in progress now. Mergers between UK and EEA companies may not be recognised by the destination member state after exit. We informed stakeholders of the change via the Structuring Your Business If There’s No Brexit Deal technical notice, which was published in October and to which I referred earlier. In that, we told them what they ought to do and what advice the impacted companies ought to take.

I believe that I have answered all the points. I will write to the noble Lord, Lord Stevenson, if I have misunderstood him.

Recognition of Professional Qualifications (Amendment etc.) (EU Exit) Regulations 2018

Lord Stevenson of Balmacara Excerpts

Monday 11th February 2019 Lords Chamber

The Government must now reassure the public about this document and in more general terms.

[Lord Stevenson of Balmacara (Lab)]

My Lords, we have covered a lot of ground in the last half hour or so. One important point which has not been made follows on from those made by the noble Lord, Lord Adonis, and other noble Lords. It is puzzling that the Government have chosen to ignore the question of how our important services trade will survive, both in the event of a no-deal Brexit and, more generally, if and when we leave the EU. This SI in some senses plays to that concern.

In the Trade Bill, which is currently paused in your Lordships’ House and may reach Report shortly, there is virtually no mention of trade relating to services at all, yet that is 80% of our GDP and consumes a huge amount of our resource and activity. At the heart of services activity is the General Agreement on Trade in Services, which we are members of through our WTO membership and which will apply to us once we leave the EU. However, without any statement at all in the Trade Bill and no confirmation that the Government understand and support the very important services work that relies so heavily on professionals and their ability to move and support their work, knowing exactly where the Government are coming from is a bit puzzling.

My noble friend Lord Adonis is right to raise the connection here between the right to free movement of persons and the freedom of establishment, which are key pillars of the GATS deal. He is also right to ask why the opportunity was not taken in this SI—as, indeed, it has not been taken in the Trade Bill—to support those who must deliver services in this country, in the EU and wherever they trade to generate the return and income we will need if we are to continue to enjoy our current standard of living. In that sense, the idea that somehow, through this statutory instrument, we will encourage non-tariff discrimination and barriers seems perverse. I hope that the Minister will have some answers to that question when he responds.

Paragraph 7.16 of the Explanatory Memorandum sets out the issue but then ducks out of it, for all the reasons given by others in this debate. It is not just about farriers, although it is a curious feature of life that they are not regulated in one part of our United Kingdom but they are in the other three. Discriminating against the rights of free movement, persons and services and the freedom of establishment to provide those services is one thing. However, we currently enjoy a system—whether through the EPC or through the EU’s general regulatory arrangements—whereby established regulated professionals in professions with established training standards automatically qualify to trade wherever they are able to do so. We are trading that for the system we are introducing, which will be devolved to professional bodies. Admittedly, some of these are of great stature and longevity and will, I am sure, act in the first instance. However, because it is not a national system and will not be subject to national standards, it is bound to be variable and to raise the concerns mentioned by my noble friend and raised in the other place of a possible tit-for-tat arrangement under which regulations made in this country—regarding accountants or lawyers, for example—are seen as unsatisfactory by others in the EU, who may introduce tit-for-tat regulatory change to prevent our nationals qualifying. That seems an extraordinary situation to open up and I would be grateful if the Minister would respond to that point.

The underlying issue is the approach we will take if we leave the EU—with no deal or with a deal—to protect the way our citizens are treated. My noble friend Lord Adonis is right: it would be a strange Government who set out deliberately to devalue the possibility of their citizens earning a living and a valuable income for this country in the way this instrument appears to suggest. This is probably not the place to raise all the wider issues mentioned by the noble Lord, Lord Dykes, but he certainly has a point when he asks why we are going through the pain to achieve something that does not seem in any sense optimal for those involved in it. Clearly, minimal consultations were carried out and were mainly focused on whether these regulations will apply in Scotland, Wales and Northern Ireland without difficulty.

I would be grateful if the Minister would respond to this statement towards the end of the Explanatory Memorandum:

“Devolved Administrations have confirmed their agreement for UK Parliament to lay this legislation UK wide”.


That is what this statutory instrument does. It goes on to say:

“This has been sought under the terms of the Intergovernmental Agreement”.


I am not sure which intergovernmental agreement that refers to, but if the Minister could write to me with the details, I would be grateful.

[Lord Henley]

My Lords, as the noble Lord, Lord Stevenson, put it, this is not about farriers—I will not deal with that question, unfortunately; my noble friend Lord Gardiner will possibly have to deal with it on some other occasion—or about why they are not regulated in Northern Ireland but are regulated in England, Wales and Scotland. I do not think anyone knows the answer to that question, and I will not try to answer it, just as I do not know why, for example, hairdressers are regulated in Italy but not here. In France, they are doubly regulated; you find that if you want to be a hairdresser who makes home visits you must have one form of qualification, and if you want to operate from a shop, you must have another. Again, we do not consider that necessary, but obviously we have to make provisions for UK citizens who want to work abroad to do so when that is possible.

However, before anyone thinks it is all sunshine out there under the current system—the noble Lords, Lord Fox and Lord Adonis, in their little exchange seemed to imply that as a result of these regulations we would get further restrictive practices—I remind noble Lords of the restrictive practices that happen already. One has only to look at the position of UK ski instructors—to take one example from the 600 or so professions that can be affected—and the problems they have had trying to operate in France, where, for some reason, throughout these wonderful years restrictive practices have always come into effect to try to exclude UK ski instructors from operating.

Intellectual Property (Exhaustion of Rights) (EU Exit) Regulations 2018

Lord Stevenson of Balmacara Excerpts

Wednesday 6th February 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am happy to follow the noble Lord. He has made some detailed comments and posed some questions which I hope the Minister will be able to respond to. Having said that, I accept that the Minister’s letter of 21 January—running to eight pages and covering a lot of detail—as well as subsequent meetings have done a lot to clarify some of the issues that were before us when this was first considered in Committee. But good scrutiny leads to further debate and discussion, so it is not inappropriate that we should come back and point out areas that are not as good as perhaps they should be as we pass this important, time-limited piece of legislation. I also agree that the clarification about the Silhouette case, which was a confusing passage of discussion in Committee, has made things much clearer and will be helpful to those involved in that issue.

The Government should take away from this process three main things. First, if there is an SI of the sort of significance represented by the three intellectual property regulations before us today, the fact that consultation need not be carried out is not sufficient to assuage the concerns of those who have had to respond, even as late as yesterday, to these issues. There is a lesson to be learned here about the need for more engagement and a more considered approach to the context of these amendments. I accept the pressure of time and the difficulty of fitting everything in, but the consequence of not consulting according to the style and process that people have become accustomed to, just because this is a special case, has meant that we have not had the best advice that would have been available to us in ordinary circumstances.

Related to that, the question of whether one needs an impact assessment is also important. There is of course a de minimis figure, which was in the Cabinet Office rules. But when one thinks about the impact that these new regulations will have, even for a time-limited period, the Government should be prepared at the very least to bring forward for consideration evidence that the de minimis figure has been met. At the moment, all we get is an assertion; we are left to guess whether the figures that might be construed will work. That is not satisfactory in terms of general process.

Thirdly—this does not apply to the SI before us at the moment but applies to the other two—considerable variations in approach have been taken by the different departments on the EU exit SIs. There should be some overall consideration of this when the time comes to review how, in some areas, the limited licence available to ensure that the statute book is in good order as we leave the EU, if we do, on a no-deal basis, has been interpreted differently in different departments. We heard even today that the Treasury has a completely different approach from that of others on the issues of consultation and preparation of estimates that I have been talking about. The public interest would be better served by a slightly different approach.

[Lord Adonis (Lab)]

My Lords, first, I thank the Minister for his extensive letter to noble Lords responding to the debate in Grand Committee. I have a specific question and will then make some comments on the wider issue of consultation which has bedevilled all our proceedings on these no-deal statutory instruments, because the consultation has been so haphazard and unsatisfactory. My question is in response to the Minister’s opening remarks, when he said that it was “not sensible” to put a sunset clause on the current exhaustion regime. That is a judgment which the Government have made but, since this is clearly a matter of extreme importance to the industry, can he tell us what the view was of stakeholders who were consulted on the issue of the sunset clause? I understand that that issue has bedevilled these proceedings throughout.

On consultation, the Minister’s letter was significant; it accepted that the consultation which had taken place had been in confidence. Having secret consultations which are not open to all relevant people, or all those who wish to take part, particularly from the industries consulted, is contrary to almost all of the principles of public consultation. The Minister’s letter has an extremely convoluted paragraph about how this secret consultation was conducted. It says that the Intellectual Property Office, or IPO,

“identified the relevant representative organisations or businesses it would usually engage with, and who would give a range of views. Because of the confidential nature of the review”—

which was entirely self-imposed by the Government; this did not need to be confidential but could have been an open, public review—

“the IPO then identified and invited 12 individual experts who had previously liaised with the IPO in a role within one (or more) of those relevant organisations”.

The letter then lists the organisations. It continues:

“I believe this is consistent with what I said in my … clarifying remarks about this process during my closing speech; the IPO’s understanding was that these individuals were ‘from’ those organisations but they were, as I clearly said, ‘a group of individual stakeholders’ and the IPO ‘consulted them in their personal capacity’. I therefore also agree with Lord Warner that the organisations themselves were not consulted in the way that would usually happen”.


Reading that twice, one realises the truly extraordinary nature of the consultation which has taken place. The Government have arbitrarily and secretly selected 12 individuals because—to cut to the chase—officials happened to know them and had dealt with them previously. They then chose to consult them, telling Parliament that the consultation process was adequate. However, when pressed, it is clear that these people do not in any respect represent the organisations from which they have come. We are not told who the individuals are and they are not in any way accountable for their advice. We are told that the advice was given individually, but we are not told what it was. When it comes to disputes on major aspects of policy embedded in these regulations, the Government blandly assure us that the decisions they have taken are sensible. In my experience, Governments always think that their decisions are sensible; I have not yet met a Treasury Minister who said that their decisions were not sensible. However, the Government will not even tell us whether the “sensible” decisions they have made reflect the secret consultation that took place before the preparation of the statutory instruments.

Because of the unsatisfactory nature of this whole procedure, we will have to approve this regulation. However, in any normal circumstances, we would not approve a regulation on the basis of a secret consultation with 12 individuals—selected secretly by the Government, whose names we do not know and who are not in any way accountable—when there should be a public consultation. I raise this point not only to highlight the unsatisfactory nature of this, which goes to the heart of all this no-deal planning, but because of the cascade of regulations still to come. Every time your Lordships meet, a plethora of regulations appears before us. In the health Bill, which we debated yesterday —I did not participate, but I read the Bill during the proceedings—there was provision for a whole slew of further regulations, with procedures as yet undecided.

I invite the Minister to respond on this, as I think it is important to get this on the record. Can he give some undertakings that consultation on future regulations laid before your Lordships will be done in an open, transparent way, so that we are not faced again with consultations with secretly selected individuals? As noble Lords will recall, when we were debating one of the instruments, we were told that the individuals were “selected and trusted” respondents—presumably on the grounds that a general public consultation with people who were willing to share their views would not engender trust.

This is not good government. In any circumstances other than this national emergency, I am confident that your Lordships would not agree to process, let alone consent to, regulations on this basis. We need some assurance that, in the time remaining, consultations will be conducted in a proper manner, rather than in the secret, cloak and dagger, totally unaccountable fashion that we have seen in respect to this instrument.

Patents (Amendment) (EU Exit) Regulations 2018

Lord Stevenson of Balmacara Excerpts

Wednesday 6th February 2019 Lords Chamber

[Lord Clement-Jones (LD)]

My Lords, the noble Lord, Lord Warner, has expressed the impact on the life sciences industry extremely effectively and eloquently, and I do not wish to repeat anything of what he said. Quite apart from the damning quote from the chief executive, Mike Thompson, the key sentence that I saw in the ABPI’s briefing was:

“The signal the Government has sent to global pharmaceutical companies large and small is that the UK will be less committed to IP protection after Brexit than it has been to date”.


For a major industry to consider that seems extremely damning.

As the noble Lord, Lord Warner, pointed out, the Minister said that it is correct to raise these issues and he is keen to start exploring them, so there is some intention now to have some consultation post the SI rather than proper consultation before it. I think we are looking forward to hearing a bit more of a concrete proposal from the Minister with regard to what precisely is planned.

The Minister’s six and a half-page letter, as we must now call it, dealt with the question of participation in the unified patent court, as set out in the White Paper last autumn. I made the point in Committee that if the UP convention is ratified by Germany and comes into force ahead of our exit date, the UK will need to work out how to remain a member of the UPC or withdraw from the systems, which could have significant impacts on business. In that context, I questioned in Committee whether the UK will have to acknowledge the supremacy of EU law and the ECJ as part of the signing up process. In his letter, the Minister advises that,

“when ruling on domestic cases, UK courts will not be bound to follow decisions of the UPC, or rulings of the European Court of Justice applied by the UPC”.

The last time we discussed this SI, I brandished a 39-page opinion on the subject, so I am rather baffled by the advice that the IPO and the Minister have received in those circumstances, if we have signed up to the unified patent court agreement. I would very much like to hear a bit more clarification on that subject from the Minister.

[Lord Stevenson of Balmacara (Lab)]

My Lords, this is another good debate on these issues. I will not fall out with the Minister about the length of his letter—we can brag about size elsewhere if we wish to—but it came out of my printer at eight pages. I leave that curious intellectual puzzle to him to sort out. Maybe there were other issues that had to be added in.

The Minister could well have dealt with other matters, including various aspects of whether the Silhouette case would apply in this area of the law; one of the points raised in the correspondence was the question of whether Silhouette, which applies to one aspect of our intellectual property, in fact has resonance through its relationship to the other aspects of the IP world and will also be applied. However, that may be for the future.

The noble Lord, Lord Clement-Jones, is right to raise questions about the unified patent court, which could change the game here. If the Minister is minded to confirm any of the points raised by the noble Lord, can he also confirm that premises for the unified patent court have been acquired in London? Are they fully available and ready to be moved into? We are expecting the courts to be operational very shortly, but it would be useful to have confirmation that this is still the case.

Trade Marks (Amendment etc.) (EU Exit) Regulations 2018

Lord Stevenson of Balmacara Excerpts

Wednesday 6th February 2019 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, first, I declare my interests. I am a retired European patent and trademark attorney, but, if I were to un-retire, I would find myself among those unfortunates who, going forward, would no longer be able to practise before the EUIPO in respect of trademarks and designs. This matter—that a part of professionals’ representation is cut off—is not one we have discussed before. My noble friend Lord Clement-Jones was interested to hear what the Minister had to say on the issue, and to confirm my interpretation that current UK representatives will no longer be representatives is correct.

This SI largely replicates the provision in the withdrawal agreement, so it is not really a no-deal SI; it is the shape of the SI that will happen in due course—if there is a deal—possibly with some minor changes to dates and other things, but I could not see anything that differed from what one would expect under the withdrawal agreement.

As the noble Lord, Lord Henley, has explained, I had a long meeting with him and officials from the department and the IPO; I thank them very much for their time and for listening to my views and those of some representatives. I apologise to the noble Lord, Lord Adonis, but I did a little secret consultation myself, just to make sure that, being retired, I had not lost the plot. What I wanted was a statement that there would be continuity of rights at the point of Brexit so that, although the SI was internally consistent under UK law—it gave clear instructions as to what our courts would decide—it would also neatly fit within the usual conventions. That required only an assertion, which we have effectively had, that the rights continue—rather than dying and, in some way, being resurrected.

The letter that the noble Lord, Lord Henley, has now placed in the Library, and which was addressed to me on 4 February, is interesting. First, he deals with the priority rights that I discussed in the Moses Room in Grand Committee. The second issue I raised was about an EU trademark application that was refused before Brexit but, under the rules, it can be converted to a national application by applying at the EU end for three months. There was concern that there is no mention of what happened to those applications and to that conversion right. Was is lost or was it not? Some representatives thought that it was lost.

The letter refers to the Interpretation Act, and it is worth pointing out what that Act says. It confirms that an Act that repeals an enactment does not affect,

“any right, privilege, obligation or liability acquired, accrued or incurred under that enactment”.

The letter goes on to say that the EU trademark regulation will constitute EU retained law for the purposes of the European Union (Withdrawal) Act 2018; and that pursuant to the power in that Act, it is repealed and replaced by the UK regulation. This solves the problem. There is a definite assertion here that the right to convert will be retained but the conversion will be done entirely before the UK IPO, instead of starting it off in the EU. This general application of the Interpretation Act would apply to any regulations, not just these; it might be applied to those on patents that we have just discussed. That is one reason why I asked that the letter be put in the Library. It is possible that we contemplated this when we were going round the loop of the withdrawal Act, but I had misplaced it in my mind, and that might be the case for other noble Lords.

I am satisfied that it is “job done” on the confirmation of continuity and the issues I sought reassurance on. I am also grateful to the Minister for explaining that the Government will take into account the various other measures we raised, which are much more to do with practice.

The salient point here is that some 60% of trademark applications are made by individuals for their own businesses, without professional assistance. So it is quite important that the advice the IPO is able to give keeps them up to speed with changes that they might not be aware of, such as that they still have the conversion right and for how long.

There is still a matter to be dealt with: for nine months, there are latent rights hanging about. If you file a trademark application, it might look like the way is clear and then, all of a sudden, it is not, because people want to continue with the one they have under the EU. The question is how the IPO is to deal with notification, so that an applicant knows the full picture before making decisions that might be otherwise prejudicial to their rights when deciding whether to go ahead and have notice sent to people or to withdraw their application. My proposal was that they have to have the right to be able to suspend until that nine-month period is over, if it looks as though there is something in their way. Obviously, this is not a matter for this statutory instrument, but it will turn out to be a matter of concern if a significant number of those 85,000 applications are continued with. From what I can gather, it is likely that more than half will be, so intervening applicants will have a difficult nine months to navigate.

[Lord Stevenson of Balmacara (Lab)]

My Lords, we discussed this SI in some detail in Grand Committee and so there is very little more to be said. The Minister, in his letter of six and a half pages—or is it eight?—covered a number of points also. We have since then had another letter—I have printed it out on my own machine and have it in front of me and so can measure it; it is a page and a half, if he wishes to know the detail—which has added a considerable amount, including the rather interesting extemporary view that the UK Interpretation Act 1978 confirms different powers about these regulations, and which might be of more relevance in some other areas of work that we still have to consider.

We are very lucky to have the expertise of the noble Baroness, Lady Bowles, available to us on this issue. She has been able to keep us right on a number of points. My point follows from hers in that this SI is moving away from simply trying to establish what continuity would mean in the context of a no-deal exit by offering something valuable to those who hold trademarks in the EU and wish to continue business in the UK after Brexit.