Draft Competition (Amendment etc.) (EU Exit) Regulations 2019

Bill Esterson Excerpts

Wednesday 5th December 2018 General Committees

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Christopher. I note that we have 82 minutes remaining for our deliberations.

I thank the Minister for writing to me in detail a few weeks ago about this important, detailed and complicated matter, which relates to how we adjust domestic competition law in the event of no deal. It is perhaps appropriate to ask the Minister to indicate what the Government’s plans will be for addressing changes to domestic competition law if there is a deal.

The SI raises a number of questions, starting with what the consequences will be for existing competition proceedings under EU law. The UK element of disputes that involve overseas businesses with UK operations will be affected, so will the Minister explain how things will work in the event of no deal when businesses are involved in disputes that cross jurisdictions between the UK and the EU? I am not entirely clear that her speech or the explanatory memorandum have addressed how the Government see that issue being resolved.

The Minister said that no impact assessment had been carried out. An awful lot of legislation is being amended merely to cover the costs of leaving the EU. Will she take this opportunity to confirm that the Government will not allow no deal, to avoid those costs? Will she set out her view on how the Government will go about avoiding no deal? [Interruption.] I note that the Government Whip is shaking her head; I cannot possibly imagine why. I would be interested to hear the Minister’s view.

If I have counted correctly, the Practical Law UK website describes a total of 18 pieces of legislation that will be amended by the draft regulations, with a further eight consequential changes and five more amendments that require secondary legislation. That is a significant shift in legislation. Is a statutory instrument appropriate for such a major change? When the Minister read out the title of the regulations, I noted that it includes the word “etc.” Now, what does “etc.” mean? [Interruption.] She points out that it covers a long list of potential areas.

The draft regulations cover a lot of ground—a vast array of legislation is being amended. The Minister used the phrase “highly integrated”, which gives us a clue about the complexity. I suggest that there is rather more involved than changing the wording from “EU” to “UK” in multiple pieces of legislation. It is a surprise to Opposition Members that a statutory instrument is considered sufficient for such an important topic. Might it have been better to scrutinise the impact on each of the specific pieces of legislation that she described? She summarised the situation in her opening remarks, but there seems to be quite a lot more to it than is perhaps implied in the explanatory memorandum.

According to the Practical Law UK website, the Competition and Markets Authority has indicated that it will have a much bigger role after Brexit. That is self-evident, given the competition law responsibilities that the UK is to take on from the EU. What assessment have the Government made of the CMA’s capacity and of its ability to address its additional responsibilities?

The CMA will also have a new role in relation to state aid. Will the Minister spell out what that role will be? We know that the Government have often been reluctant to use state aid. They are far less prepared to do so than other countries, including our European partners, or to organise tenders in a way that supports UK businesses. I remember the lengthy debates we had in 2010, when I was first elected to Parliament, about the competition between Siemens and Bombardier for Crossrail trains. The contract went to Siemens rather than to UK-based Bombardier, which shows the Government’s reluctance to support UK-based industry.

I read on Friday that the Government had issued the tender for fleet solid support ships as an international competition, on the grounds that they are not naval ships. There is no one in the navy or in the shipbuilding industry who regards fleet solid support ships as anything other than naval ships; it seems that only the Government do that. However, the consequence is that we now have an international tender, rather than a domestic opportunity for domestic shipyards, which is causing huge problems for the workers at Cammell Laird shipyard in the Liverpool city region. As the Government do not regard these ships as being naval, I wonder—because it is in the papers—whether they are covered by the liner shipping block exemption. Perhaps the Minister can answer that question.

What consultation has been undertaken regarding potential future divergence between the EU and the UK on competition law? Perhaps the Minister has the results of that consultation and can share them with us.

I put to the Minister comments made by the UK Trade Policy Observatory:

“An issue which was addressed in the EU (Withdrawal) Act 2018 is the scenario where UK courts are obliged to follow EU judgments that pre-date Brexit. The new s60A (7) provides that the relevant court or decision-maker may disapply the interpretative obligation if they consider that to be appropriate in the light of various criteria”.

What guidance will the Government give to decision makers?

The UK Trade Policy Observatory also says that

“a claimant for a private damages action will have to open new proceedings in the UK courts, and would be well-advised to do so now for any current investigations before the European Commission”,

because

“an infringement of EU competition will no longer be binding after Brexit for the purpose of follow-on actions in the UK courts.”

I would be interested to know whether the Minister agrees with that observation. If she does not agree with it, what might her analysis be?

Significant, wide-ranging changes are being proposed in the event of no deal. Parliamentary scrutiny of them involves just the small selection of Members on this Committee, following a similar Committee sitting yesterday in the other place. As I have said, several dozen pieces of legislation are affected—sometimes, as the Minister indicated in her opening remarks, in significant ways.

This SI gives rise to many questions and I question whether we are able to do it justice. I am not a lawyer and neither is the Minister, although undoubtedly she has lawyers advising her. I question whether this process allows for adequate scrutiny. It is a very good example of why the Government really must do everything in their power to avoid the prospect of no deal.

--- Later in debate ---

[Kelly Tolhurst]

I was wondering whether I might be able to start by answering the hon. Member for Saffron Central.

[Bill Esterson]

Sefton Central.

[Kelly Tolhurst]

I apologise; I often get annoyed when people refer to my constituency as Rochester and “Stroud”, rather than “Strood”.

The hon. Gentleman asked what we would do with the regulations if we entered into a deal, bearing in mind that we are talking about this statutory instrument as a no-deal SI. This SI is about retaining EU law. Were we to enter into a deal, we would bring further SIs to the House to modify the current regulations.

The hon. Gentleman expressed concern about how we would work cross-jurisdictionally and is unsatisfied with the explanatory memorandum. The CMA, our regime and how the UK has dealt with competition law over the years have a high regard internationally. We co-operate and are part of a number of international bodies. We are regarded as having a world-class framework and operation. There is absolute commitment from the Government to ensuring that, where we can, we co-operate with other states and the EU. Even in a no-deal scenario, the intention will be to ensure that regulators at that level will be able to seek to enter into co-operation agreements bilaterally to ensure that consumers are protected. Ultimately, the European Union and the UK are committed to protection for consumers, as I have said a number of times over the past few weeks in Committees.

[Bill Esterson]

Is the problem not that, if there is no deal, by definition there will not be an agreement to ensure that co-operation? How does the Minister envisage the CMA and our competition framework coping in that situation?

[Kelly Tolhurst]

The hon. Gentleman is right: if we enter a no-deal situation, we will not have a deal with the European Union. However, our world-respected bodies, such as the CMA and other regulators, are communicating on a daily and weekly basis with their counterparts in not only Europe but other parts of the world. There is nothing to suggest that that co-operation, communication and co-working would change, and we would seek for it to be continued. We still want to co-operate with our international partners, and I cannot foresee a situation, with or without a deal, where that would not happen. That is my understanding.

With regard to the hon. Gentleman’s question about whether it is right that we are debating this big SI in a short Committee, I highlight that the SI changes two big pieces of legislation. Remember that we are retaining EU law, so the SI is not a change in policy; it is about retaining what we have, to make it fit so that on day one, were we to leave the European Union without a deal, our statute book would function.

The first piece of legislation is the Competition Act 1998, and the SIs that sit under it. We have all sat through a number of SI Committees. In the years I have been a Member of Parliament, many small statutory instruments have altered larger pieces of legislation. The second piece of legislation is the Enterprise Act 2002, and other SIs that have been introduced that relate to the EU, and to the block exemption that I mentioned. The “etc.” refers to the other pieces of legislation, consideration of which we have all sat through. From looking at a hard copy of the Bill, a number of minor changes are clearly being made. That gives Members an idea of why we are discussing this matter in Committee, as opposed to having a wider debate.

With regard to whether the CMA is capable of continuing to do its job given the potential increase of work in a no-deal scenario, we expect that the CMA might have an increased case load of between five and seven antitrust cases in a year. We have also assessed—working with the CMA, obviously—that the CMA might have to deal with between 15 and 30 extra merger cases over a year.[Official Report, 17 December 2018, Vol. 651, c. 4MC.] The National Audit Office has looked at the CMA and believes that it has robust plans in place to operate and function after we leave the EU.

As Members will know, in 2017 in the spring statement the Chancellor put £3 billion aside over a two-year period for funding our EU exit. In the spring statement of this year, the Chancellor announced just under £24 million extra for the CMA. The CMA is going through a recruitment process to increase its number of workers. That will constitute a substantial increase in the size of the CMA, and I am reliably informed that the CMA is working to plan, and recruitment is on target at the moment.

State aid is not part of today’s SI, but I am sure that the hon. Member for Sefton Central will be pleased to hear that the Government will soon lay an SI on that issue. I look forward to having greater conversations with him about the merits—or not—of state aid, and what he would like to see in the future.

Regarding divergence, as the hon. Gentleman explained and as I understand it, post-exit decisions in the European courts will be notable by UK courts, but not binding on UK courts. The idea that previous case law becomes part of UK case law history has come about because businesses need certainty and decision makers need to be able to look at that: it is quite right that pre-exit case law remains the bank of case law. However, as we have determined, UK courts will not be bound by that case law, although they will obviously have regard to it. Going forward, we need businesses to have assurance that previous case law has set the precedent, but as we have outlined in the SI, UK courts can diverge from it.

As regards the guidance that we will be giving on that point, it is case law: obviously, it will be defined by judgments. As the hon. Gentleman knows, markets, competition and things are changing all the time, so the guidance will also change over time. At that point, if necessary, we will give guidance to the relevant individuals. The hon. Gentleman mentioned bringing claims in the UK for things happening within the jurisdiction of the European Union. That is true: they will be brought here in the UK. I believe we can do so under UK law in UK courts. Also on that point, there is an ability to bring a civil, private claim in the UK under foreign tort law anyway.

My hon. Friend the Member for Harrow East asked what we will do to make sure that the UK protects its consumers from the big corporate organisations that are perceived to potentially cause restrictions and competition issues in the UK. As I outlined, our competition law in the UK is world renowned; we are respected internationally for the way we deal with such cases, and we already have great co-operation with international organisations.

To give one example, in the Google investigation a UK market was one of the main ones being investigated, and most of the claimants came from the UK market. I hope that gives my hon. Friend some comfort that, even if we are in a no-deal situation, if this SI is agreed we will be more than ready to take on those challenges and we will continue to maintain co-operation with our international partners and the European Union to make sure that the protection of UK consumers is at the heart of what they are doing.