Lord Astor of Hever
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Defence Reform Bill
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Lord Rosser (Lab)
My Lords, I will be very brief indeed. Obviously, views have been expressed about keeping the law and its enforcement up to date with developments in the nature and conduct of warfare. Also, at the back of what has been said there is a desire to know what is going on in our name and what the outcomes have been in relation to the use of some of the unmanned systems to which reference has been made. Certainly I await with interest the Minister’s response.
There seems to have been a general acceptance that this is an issue which should be debated and discussed, although obviously doubts have been raised as to whether, as far as the amendment is concerned, how relevant it is to this Bill. The only comment I would make before concluding and leaving it to the Minister to give the Government’s response is that, of course, as far as concerns the provision of any additional information that there may be, or any developments in the law, whatever is done must be consistent with the national interest and national security.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever) (Con)
My Lords, I am grateful to my noble friends Lord Hodgson and Lady Miller, the noble Baroness, Lady Stern, and the noble Lord, Lord Dubs, for tabling the two amendments in this group. It has enabled us to have a useful and interesting debate about a number of important issues. The Defence Reform Bill deals with the future arrangements for defence procurement and the Reserve Forces, and I think it is fair to say that the debate on these amendments has drifted some way from those issues—a point made by my noble friend. In responding to them, I will try to address the specific effect of the amendments on Part 1 of the Bill, but I shall also set out more widely our position on some of the other issues that have been raised.
Before turning to the detail of the amendments, it might be helpful if I set out the UK Government’s policy on unmanned aircraft systems. I think it is important to use the correct terminology when discussing unmanned aircraft systems, or UASs. The term “drone” is often used, but the word evokes thoughts and images of computer-controlled machines free from human oversight, which is simply not the case. The term “unmanned air vehicle” had previously been used extensively in the UK, but it is no longer aligned with NATO or international thinking, and in the interests of interoperability we have now moved away from using it. Often, the actual level of human involvement is unclear when discussing unmanned aircraft systems and hence it is entirely appropriate that the term “remotely piloted aircraft system”, or RPAS, is also used as it emphasises the reality that a trained professional pilot is in control of the system. UAS and RPAS are the generic terms that define the totality of the components of an unmanned or remotely piloted aircraft together with the other necessary components, including all equipment networks and, most important, personnel.
The UK operates a range of these human-controlled systems principally for surveillance and reconnaissance purposes. There is often a misconception that remotely piloted aircraft systems are autonomous. Again, we have to be careful with the terminology as the word “autonomous” can mean different things to different people and organisations. The Government consider an autonomous system as being capable of understanding high-level intent, a system that is capable of deciding a course of action from a number of alternatives without depending on human oversight or control. Our current and future RPAS will not be autonomous. A military pilot will continue to remain in control of our armed systems, just as they are now. In fact, our current armed RPASs have greater human involvement than our other armed aircraft types. Our Reaper RPAS crews comprise highly-trained pilots, sensor operators and analysts who all make decisions in real time.
The UK currently deploys unmanned aircraft systems in support of operations in Afghanistan and of Royal Navy ships. These systems are predominantly used for intelligence, surveillance and reconnaissance tasks, providing vital intelligence in support of our troops on the ground and our sailors at sea. They provide persistent video imagery for the development of situational awareness in order to conduct planning and to protect our forces. While the sensors are broadly similar to those onboard conventionally manned aircraft, unmanned or remotely piloted aircraft systems have the ability to loiter for longer, building an intelligence picture that significantly enhances the situational awareness of our commanders.
Lord Judd
As usual, the Minister has been extremely helpful and courteous, but I hope that he will say a word more about a couple of points. First, he stressed the present policy of the UK Government on autonomous weapons. If that is the case, is there not a strong case for establishing this principle somewhere in legislation, if not in this Bill? When war takes place the situation evolves, the pressures are great, and one wants to be certain that established principles continue to be observed. Secondly, will he assure us that when he talks about US forces and what they do and do not do—those forces that operate from our territory—in future any foreign services using our territory must give a firm undertaking, with which we must be satisfied, that they will abide by the same principles that the Government have in place at the moment?
Lord Astor of Hever
My Lords, we will cover the noble Lord’s second point when we discuss later amendments and I think that I can give him an assurance on that when we discuss the later amendments. As regards his first point, this Bill is not an appropriate vehicle for the issue. He raises a very important point, but there is no need for additional laws. The existing ones are sufficient.
Lord Hodgson of Astley Abbotts
My Lords, I thank my noble friend for his characteristically thorough reply to the points made and I thank my co-signatories for their support. I emphasise to my noble friend that I do not think any of the signatories are against drones. We understand that they are valuable and we do not wish to expose the lives of soldiers, sailors and airmen to unnecessary risk. However, we want to know what is going on. Of course we understand that every effort is made to avoid casualties. This is not a trigger-happy amendment; it is about information, control and transparency. I was glad to hear that my noble friend’s legal advice is that the term “vehicles and aircraft” covers every aspect of drones and there is therefore no gap in this regard. It is important to have that on the record for the future.
I am grateful to my noble friend Lord Roper for drawing attention to some of the complexities of this issue and to the noble Lord, Lord Judd, for his important comments about dispassion. Some element of personal responsibility may become deadened by distance from the point at which the operation is taking place. The noble Lord, Lord Palmer of Childs Hill, very rightly said that this was not the appropriate place for the amendment. He is right, but when the bus comes along you get on board because who knows when the next bus will come along. As he rightly said, there are very few defence Bills and it is important for us to have a chance to debate things that have emerged since the previous occasion.
Lord Craig of Radley (CB)
The House has debated the issue of Crown and combat immunity a number of times in the past eight months. The Minister has shared with the House concerns that the MoD and the Government have about problems raised by legal challenges of decisions made in the heat of battle or of decisions made in the past about equipment, training or preparations for operations in which, regrettably, individuals have been killed or seriously injured. In the debate on 7 November last, the Minister said that,
“the Ministry of Defence has been grappling with rapidly increasing numbers of legal claims arising from operations, together with escalating costs, largely as a result of these legal developments and the increasing willingness of individuals to litigate”.—[Official Report, 7/11/13; col. 413.]
He rightly stressed that no intention to reinstate any form of Crown or combat immunity should affect any cases already started, and nothing that I say or propose is directed at affecting such claims.
My particular reason for raising the issue of contractor immunity is straightforward. The experience of the past few years, particularly but not solely in the shadow of the Iraq and Afghan operations, is that courts and coroners have taken to raising issues about the suitability or modification states of equipment. I said at Second Reading:
“My fear is that this legal probing, basking in the certainty of 20:20 hindsight, will extend to questioning why original designs or modifications which subsequently proved unable to match the opposition’s capability were allowed to persist or be deployed or, alternatively, why additional steps had not been approved though the technical capability existed. Such concerns should be borne in mind in any changes to responsibility for defence procurement. Indeed, they should add further stimulus to taking positive action to reinstate immunities in a field of activity where acceptance of risk to life has to be the norm if our forces are not to be gravely neutered by legal hindsight”.—[Official Report, 10/12/13; col. 757.]
My amendment is designed to probe the case of contractor immunity and how and to what extent it might be applied. It proposes one particular approach but I do not suggest that it is the only or necessarily the most appropriate one. The Committee will have noted that Clause 3 would appear to provide a company that is or has been a contractor with unlimited MoD cover for any financial claim that is brought in a court in the UK against the company. However, this immunity is circumscribed by requirements in subsections (6) and (8) of this clause. Bearing in mind the frequency of claims and findings involving defence contractors, it seems that this sweeping, broad-brush approach should be further considered in the light of current experience. Would it not give rise to a good deal of cross-claims—no doubt of value to the lawyers involved—between the MoD and the delinquent company, possibly at considerable additional expense to the taxpayer and the Defence vote?
My probing amendment considers an issue of immunity away from the immediate battlefield—the clear domain of combat immunity—in an area of defence activity, notably procurement, that has led or might lead to legal claims by those injured while on duty or by the families of deceased service personnel. The Minister will recall in the case of the loss of RAF Nimrod XV230 in Afghanistan in 2006 that the review found that a number of individuals, including those in service, civilians and contractors, had been so seriously at fault as to bear responsibility for the technical failure that caused the loss of the aircraft and all those on board. Other more recent examples of aircraft accidents will be known to the Minister and other noble Lords, where the absence or incorrect fitting of specific equipment contributed to disaster. The coroner’s findings in the tragic death of a Red Arrow pilot, reported in the past week, is one of these.
With Crown immunity available to the MoD, as it was through much of my service career, service personnel or their families were entitled to compensation judged by the criteria that unless the MoD could prove that the injury or death was not due to service, the set rate of compensation would be awarded. This approach to proof was overturned by the Armed Forces and Reserve Forces (Compensation Scheme) Order 2005. Now it must first be established that the injured or deceased were on duty at the relevant time before they are considered for any award or compensation.
This is a fundamental change in the burden of proof, in a climate where awards in civilian life appear to far outstrip those available to the Armed Forces. The Committee may recall the case of the typist with repetitive strain syndrome being awarded a couple of hundred thousand pounds in compensation. This has led to a growing number of claims being faced by the MoD in the recent past. Of course comparisons with civil awards can be misleading because in addition to a capital sum, guaranteed income payments, tax-free for life, may be awarded to those service men or women who are most seriously injured. Even allowing for that and for less extreme levels of civilian awards and for the recent increases in compensation for the most seriously injured service personnel, it is still the case that without court actions, service awards do not come close to matching those awarded to civilians. Excessive reliance is placed on the additional support of service charities. It is no wonder, therefore, that there has been an increase in claims against the Ministry of Defence. These might have been even greater if I, with the help of Lord Morris of Manchester, had not tabled and moved an annulment Motion to the Transfer of Tribunal Functions Order 2008, which persuaded the then Government to retain rather than abolish the dedicated tribunal that adjudicates on pension and compensation disputes for Armed Forces personnel.
For these reasons, I urge the MoD to be sure to put in place more representative entitlements if they go down the route I am proposing of providing immunity for the contractor in a GOCO set-up. At the heart of this is the fact that the training and operations of the Armed Forces cannot be totally risk free. Immunity coupled with more representative compensation where death or serious injury occurs is a better compromise. But because Crown immunity is now so circumscribed by statute in the Crown Proceedings Acts mentioned in the amendment, I have proposed a possible way forward if the concept of some specific contract immunity were to be favoured. Perhaps there is a better alternative, and I look forward to the Minister’s response. I hope that he will at least be able to reassure the Committee that the Government mind is not closed to the reintroduction of immunities at some future date in a manner that caters for both peacetime and conflict operations. The Armed Services Act renewal in 2016 would seem to be the right vehicle for making such a move. I look to the Minister for some reassurance on that since it could prove to be a more comprehensive approach than the one in this probing amendment. I beg to move.
Lord Astor of Hever
My Lords, I thank the noble and gallant Lord, Lord Craig, for his amendment. It enables the Committee to consider this important issue, which he also raised at Second Reading. Although the amendment appears to be addressed at giving the GOCO contractor immunity from liability for mistakes, I believe that the real intent behind it is to debate the important issue of combat immunity so far as it concerns our own service personnel. The noble and gallant Lord is absolutely right to identify the matter as one with profound implications for the conduct of military affairs in the future.
With that in mind, let me start by saying something about the recent Supreme Court case known as Smith (No 2). The outcome of the Supreme Court case in the conjoined cases of Smith and others v MoD, Ellis v MoD, and Allbutt and others v MoD has created a new situation of which the implications are not yet clear. These are all tragic cases of deaths on the field of combat in Iraq. The Government have every sympathy with the claimants but are obliged to defend these claims on important grounds of legal principle. Briefly, the argument of the claimants is that while these tragic incidents did indeed take place in the course of combat, combat immunity should not apply because the incidents can be traced back to previous decisions about the provision of equipment and training to the soldiers which could, they argue, have protected them more effectively.
The Government are concerned that this argument could be applied to virtually any claim to which the principle of combat immunity has hitherto been understood to apply and if accepted could have the effect of opening up the conduct of combat to the scrutiny of the courts after the event. This in turn could have seriously debilitating effects on the decision-making of commanders on the ground which could in the long run seriously impair this country’s military effectiveness. They therefore sought to have the claims dismissed by the courts on the grounds that combat immunity applied. As the Committee is aware, the Supreme Court declined to do so. This leaves the claims to be decided by the lower courts after a full trial in each case. Ministers and the military chain of command have been clear that commanders and other military personnel, at whatever level, who make reasonable decisions in good faith in the course of operations will receive the full backing of the services and the Government. It is important to be clear that there has been no decision by the courts that would suggest that they would impose liability in such circumstances.
Lord Rosser
Schedule 2 is referred to in Clause 7 which is very brief and simply states:
“Schedule 2 (restrictions on disclosure or use of information) has effect”.
It is in Part 1, which deals with defence procurement. Clause 38, in Part 2, which deals with single-source contracts, is similarly brief and simply says:
“Schedule 5 contains provision about disclosure of information obtained under this Part”.
In essence, the purpose of this amendment is to seek to replicate, in respect of disclosure of information, the criminal offence provision contained in Part 2 and Schedule 5 on single-source contracts in Part 1 and Schedule 2 in respect of defence procurement. In paragraphs 4 and 5 of Schedule 2, references are made to “unauthorised disclosure” and “unauthorised use” of information but there is no reference to any penalties or implications for disclosing or using protected information. However, in Schedule 5, which relates to wrong disclosure of information obtained under Part 2, on single-source contracts, there is a reference to penalties of imprisonment or a fine.
We do not understand why there is this distinction on unauthorised disclosure of information between Part 1 and Part 2. It is our view that failure to protect protected information from disclosure should be an offence with laid-down penalties. We appreciate the purpose of Schedule 2 in enabling a GOCO to be given confidential information provided by defence suppliers and held currently by DE&S in order to take over the management of existing MoD contracts should a GOCO come into operation.
The Government’s argument for not putting the penalties in Schedule 5 for misuse of confidential information into Schedule 2 appears to be that the Official Secrets Act, along with the GOCO contract itself and the constraints of Schedule 2, will give confidential information given to the GOCO the same protection from disclosure as it has in DE&S today. If there was a misuse of information, the owner of that information could bring an action directly against the GOCO as it can at present against the Ministry of Defence. However, that raises the obvious question of why similar arrangements are not proposed by the Government in Schedule 5 in relation to disclosures of information in respect of single-source contracts.
The information covered under Schedule 2 will include private and commercially sensitive information to which the Ministry of Defence has been given access, outside of a contractual obligation, in circumstances where the owner has a reasonable expectation that the MoD would hold it in confidence and not disclose it to a third party—which, under a GOCO, might be regarded by the owner of the information as including companies that either had been, or might be in the future, competitor organisations.
The Government say that it is not appropriate for a criminal offence to be created for the disclosure of information acquired in the normal course of defence procurement on individual projects and programmes, but that a criminal offence of the disclosure of confidential information provided to the Single Source Regulations Office is justified because the information is highly detailed supplier information and is forward-looking, covering future financial performance, anticipated business plans and planned subcontracting activity.
If that is the argument the Government are going to advance again today, I remain to be convinced by it. Sections of the defence industry have certainly expressed concerns about the prospect of disclosure of their confidential information that would be provided to a GOCO operator in respect of defence procurement contracts and believe that firm penalties are needed to deter such activity. The Government’s argument may be that the information that would have to be provided in respect of single-source contracts is likely to be more commercially sensitive, and thus potentially more damaging if disclosed, than the information provided under defence procurement contracts. However, surely that is something that should be reflected in the decision on whether to prosecute and through any decision of a court on the level of the penalty to be imposed rather than by, as the Government propose, having no provision for any criminal sanction at all in Schedule 2. I beg to move.
Lord Astor of Hever
My Lords, Schedule 2 in its current form is necessary to allow a GOCO to have access to existing confidential information provided by defence suppliers that is held by DE&S so that the GOCO can take over management of existing MoD contracts. If the GOCO does not have access to that information, it will seriously curtail the contracts that GOCO will be able to manage. It will not be able to manage contracts that involve the need to access confidential information provided by a supplier. If the MoD provides confidential information from existing programmes to the GOCO without the protection conveyed by Schedule 2 in its current form, the supplier of the confidential information may claim that the MoD has no legal right to do so. The MoD could seek to negotiate amendments to contracts or obtain licences to supply the necessary information to the GOCO; however, the volume of information concerned, the amount of time and resources required to undertake the negotiations, the costs in licence fees that may be incurred and the possibility of the owner refusing mean that this is not a practical proposition.
Schedule 2 as currently drafted provides protection for owners of confidential information because there are only limited circumstances—essentially where necessary or expedient for defence procurement—when the MoD can share the information with the GOCO. Schedule 2 also provides that the GOCO is then subject to the same confidentiality obligations as the MoD. For example, some of the information the GOCO has will be classified as “UK eyes only”, the classification applied to certain information that cannot be shared with non-UK nationals due to national security issues. The GOCO would not be able to share this information with any employee or parent company that does not meet the nationality requirements.
If the GOCO misuses the confidential information, the owner can bring an action directly against the GOCO in the same manner as it could have done if the MoD had misused the information. This is in addition to confidentiality obligations that the MoD will place on the GOCO through the management services contract. The GOCO will be contractually required to maintain the confidentiality of supplier information and not to disclose it to third parties without the permission of the MoD. The GOCO’s parent companies will be third parties, so the GOCO will not be able to disclose the information to them without the MoD’s permission. The Official Secrets Act will also apply to the GOCO and its staff. The information will therefore receive essentially the same protection from disclosure as it does in DE&S today.
The proposed amendment to Schedule 2 involves deleting the existing schedule in its entirety and replacing it by what is largely a replication of paragraph 2 of Schedule 5, which creates an offence of disclosure of confidential information provided to the Single Source Regulations Office. The creation of such an offence is reasonable in the context where the information is highly detailed supplier information that will be received under the single-source pricing regulations and which suppliers are required to provide by statute. However, the situation is very different from the GOCO situation, and it is not appropriate for a criminal offence to be created for the disclosure of information acquired in the normal course of defence procurement on individual projects and programmes, where any confidentiality is capable of being protected by the GOCO contract coupled with the Schedule 2 constraints. We do not want to create new offences unless it is absolutely necessary to do so. The single-source provisions cover a supplier’s future financial performance, anticipated business plans and planned subcontracting activity. It is highly unusual for the MoD to receive access to information covered by Schedule 5. The offence and tariff proposed is consistent with that applied to other price-regulated industries such as water, utilities, telecommunications and railways. It is not appropriate to day-to-day defence procurement business, which is best conducted as a commercial relationship between the MoD and suppliers.
The new statutory framework outlined in Part 2 has been designed to help ensure that we get value for money on an average £6 billion a year of single-source procurement. Our single-source suppliers can price in the knowledge that they will not be undercut by a competitor—a highly unusual position, and one that is not conducive to getting good value for money. We need to address this, and to do so we need information about a supplier’s actual costs.
Lord Hodgson of Astley Abbotts
My Lords, I shall speak also to Amendments 15 and 16. The background to this group is the same as that for the first group, Amendments 10 and 11, and I shall not weary the Committee by repeating it. Amendments 10 and 11 were concerned primarily with jurisdiction—who is entitled to inquire; the second group is concerned with scrutiny—what is done with the information so gathered. This scrutiny will be achieved by inserting new clauses into the Bill.
Amendment 14 obliges contractors to inform the Secretary of State for Defence what procured goods and services are capable of and how they are being used. The amendment has been drafted to ensure that the reporting obligation will automatically broaden to cover any new technological developments in the future. We have heard from noble and gallant Lords about the various kinds of drones—surveillance drones, attack drones and drones that will fight other drones that are now being developed. It is important that the reportage also includes them.
Amendment 15 seeks to improve scrutiny. It does so in two ways: first, it inserts a new section into the Visiting Forces Act 1952 to create a mechanism for scrutinising overseas forces operating in the UK or within UK-operated facilities. The amendment includes a requirement for the RAF commander responsible for liaison with visiting forces to report at least annually to the Secretary of State and a list of factors which are to be reported upon.
It is worth while just to reflect on the position of the luckless RAF commander responsible for liaison. For a sterling officer to be the nut in the crackers—one side of the crackers being GCHQ and the UK Government, and the other being the US Government, the CIA and the National Security Agency—is an unenviable position to be in, and not a career-enhancing one if you are going to rock the boat and possibly say things that will be unpopular. Therefore, his position is very difficult, but that is by the by. However, we were tempted to buttress his position by defining the makeup of the scrutiny group to include, as it says, a member holding high judicial office—such as a judge—and a person who is capable of understanding the technology being used. The amendment defines the right of access to premises, to receive documents or to interview personnel in pursuance of the committee’s duties.
The second method by which this amendment improves scrutiny is by imposing a duty on the Interception of Communications Commissioner to report at least annually on any activity subject to the Regulation of Investigatory Powers Act 2000—RIPA. My noble friend Lady Miller has put down and had answers to a number of parliamentary questions on this particular topic, so I will leave the field clear for her to have a clean sweep in a minute or two.
Finally, Amendment 16 concerns the use to which these reports should be put. A copy of them should be laid—no doubt with redactions—before Parliament, a copy of reports, hopefully without redactions, should be laid before the Intelligence and Security Committee, and there would be a government response to any concerns raised in those reports.
Taken as a whole, these amendments are not designed to reveal details injurious to our national security or that of our allies. I recognise the delicate balance that needs to be struck in that regard. However, they are designed to ensure that at least the Secretary of State for Defence knows what is taking place in the far-flung corners of his empire. From press conferences, it is far from clear about whether he is currently being so informed. As a consequence of these amendments, the Secretary of State will be able to judge whether actions are taking place either as a result of the use of UK facilities or as the result of the transmission of information through UK facilities that are not in accordance with UK law.
In her advice, which I have already referred to, Jemima Stratford QC points out that the USA has placed much reliance on the doctrine of what is called “anticipatory self-defence”. Except in the rarest of cases, it will be extraordinarily difficult to see how an individual being hit with a drone strike can be said to present an imminent threat to US interests, but never mind. More importantly, the UK Government have rejected that formulation of the doctrine of anticipatory self-defence. In his written report to Prime Minister Tony Blair when evaluating the lawfulness of the invasion of Iraq, the then Attorney-General wrote:
“I am aware that the USA has been arguing for recognition of a broad doctrine of a right to use force to pre-empt danger in the future. If this means more than a right to respond proportionately to an imminent attack (and I understand that the doctrine is intended to carry that connotation) this is not a doctrine which, in my opinion, exists or is recognised in international law”.
To conclude, as warfare once again begins to be waged in secret, the citizens of a democracy are entitled to know that the actions being taken in their name are lawful. Confidence in our parliamentary system demands no less. I beg to move.
Baroness Miller of Chilthorne Domer
I apologise to the Minister, but I am afraid that there is a lot more to say on these amendments before he comes to reply.
I want to address two issues in these amendments in particular. First, the technology has advanced much faster than the legislation designed to regulate its application. In this case, I am not talking about drones but about interception capabilities. Secondly, a lot of the technology appears to be applied by American forces who operate from UK soil but for whom the force of UK law does not seem to apply. For both those reasons, I suggest that the legislative framework is in urgent need of amendment.
Lord Rosser
It was not my intention to intervene in this debate since it seemed to be going on to rather wider issues than strictly covered in the amendment. For that reason, I am not going to go through the specific wording of the amendment and respond to the particular points in it as to where we stand because clearly the issues being raised in this debate go way beyond the amendment and, in my opinion, way beyond the provisions of this Bill.
Lord Astor of Hever
My Lords, these amendments have enabled us to have a debate about a number of issues. The Defence Reform Bill deals with the future arrangements for defence procurement and the Reserve Forces. As with Amendments 10 and 11, which we debated earlier, the issues in this group of amendments go some way from the issues covered by the Bill. Therefore, I will address the impact of the amendments on the Bill, and I shall also try to deal with some of the other issues that have been raised.
First, I turn to Amendment 14 which would require the contractor—the GOCO—to report annually, or more frequently if specified, to the Secretary of State on the technical characteristics, capabilities and use of the equipment and services procured under the provisions of Part 1 and to ensure that anyone who provides defence procurement services to either the GOCO or the MoD provides all the information necessary to enable such a report to be made. Currently, DE&S does not report to the Secretary of State on the details of all equipment and services procured. Procurements are classified on the basis of value, and approvals take place at the appropriate level, with approvals for very high value, novel or contentious procurements elevated to the Defence Council. Where appropriate, DE&S seeks legal assessments of equipment and services procured. An established project management and acceptance process exists for equipment and services with the customer.
It is envisaged that this process would continue to exist under the GOCO arrangements. These arrangements will be agreed in the defence procurement services contract in place between the contractor and the MoD. It is currently not practical or necessary for DE&S to report to the Secretary of State on the details of all equipment and services procured and likewise it will not be practical or necessary for the GOCO to report these details to the Secretary of State.
I turn now to Amendments 15 and 16. The proposed addition to the Visiting Forces Act runs contrary to the purpose of the Act and would impose an onerous and unnecessary obligation on the Secretary of State for Defence. The UK welcomes foreign military personnel from a large number of countries. Their position in the UK is covered by the Visiting Forces Act and the NATO Status of Forces Agreement. Some are here as exchange officers, others for major exercises and some for training and education. This financial year some 3,000 foreign military personnel will have trained in the UK. For example, 65 foreign students are at the Royal College of Defence Studies here in London. Some 80 foreign officer cadets are at the Royal Military Academy Sandhurst and eight foreign officers attend the Royal Navy’s principal warfare officer course at Fareham. These military personnel are so enmeshed into the activities of the UK Armed Forces that a separate reporting mechanism concerning procurement, command and control, and premises and property, is not needed. The amendment is broad since it concerns,
“all premises and property used by visiting forces for defence purposes”.
The Visiting Forces Act and the NATO Status of Forces Agreement do not place foreign forces beyond the reach of UK law. The Act and agreement permit foreign laws and military discipline to apply to foreign military personnel in the UK, but these do not displace UK law. There is nothing unusual or sinister about this, and we require similar provisions for our forces when they are overseas. For these reasons, the Government oppose this element of the amendment. It might be helpful in this context if I clarify that RAF bases are made available to the United States visiting forces under the terms of the NATO Status of Forces Agreement and that USVF personnel in the UK are subject to the provisions of the Visiting Forces Act. I assure my noble friend that the RAF commander takes his responsibilities very seriously, and he receives very substantial training before he takes them on; I have been assured on that point.
With specific regard to oversight of the intelligence activities undertaken at RAF Menwith Hill, this is already provided by the parliamentary Intelligence and Security Committee. The committee does not comment on the details of its work programme, although it does publish information and, when appropriate, occasionally comments in its annual report on visits it has undertaken. I am able to inform noble Lords that the committee has made such occasional visits to the joint UK-US facility at RAF Menwith Hill.
Lord Astor of Hever
My Lords, the provision in Clause 9 is necessary to ensure that any initial transfer of civil servants to the contractor will be under the Transfer of Undertakings (Protection of Employment) Regulations 2006, or TUPE. These implement the EU-acquired rights directive 2001/23EC, which ensures that employees’ rights are safeguarded in the event of transfers of undertakings, businesses, or parts of undertakings or businesses.
The TUPE regulations protect employees if the business in which they are employed changes hands or if the services that they provide are to be provided by another organisation. Their effect is to transfer employees and any rights, powers, duties and liabilities associated with them from the old employer to the new employer. This includes any rights specified in their contract of employment, statutory rights, and the right to continuity of employment. It also includes employees’ rights to bring a claim against their employer for unfair dismissal, redundancy or discrimination, unpaid wages, bonuses or holidays, and personal injury claims. Liabilities arising from such claims also transfer to the new employer. TUPE gives employees a legal right to transfer to the new employer on their existing terms and conditions of employment and with all their existing employment rights and liabilities intact, although there are special provisions dealing with old-age pensions under occupational pension schemes.
Where the sole or principal reason for a dismissal is the transfer itself, it will automatically be deemed to be unfair. This is also the case where the sole or principal reason for the dismissal is a reason connected to the transfer, unless it is for an economical, technical or organisational reason—an ETO reason—requiring a change in the workforce, such as an organisational restructuring resulting in a reduced workforce requirement, or a business relocation. This ETO defence is narrow in scope, and it can be difficult for the new employer to demonstrate. Even if the employer can rely upon an ETO defence and the dismissal is not automatically unfair, it may still be unfair for other reasons, such as a failure to consult properly in a redundancy situation.
Similarly, the new employer cannot change the terms and conditions of employment of transferred employees if the sole or principal reason for the change is the transfer. This is also the case where the sole or principal reason is connected to the transfer, unless there is an ETO reason for the change, usually requiring a change in numbers of the workforce. This often makes it difficult, if not impossible, for new employers to harmonise terms and conditions of employment of staff immediately after a TUPE transfer.
There is a risk that the transfer could be regarded as being outwith the TUPE regulations and be classed as a public administrative transfer. Therefore, it is necessary to make clear provision through the Bill and give the employees certainty that their rights will be protected by the TUPE regulations. The TUPE regulations list explicitly situations to which the regulations do not apply, and a public administrative transfer is one such situation.
Clause 9 also ensures that if the contractor seeks to make redundancies or alter terms and conditions of service, the TUPE regulations will apply. Further, because the protection of employees’ pensions is limited under TUPE, the amendments to the Treasury’s fair deal policy as a result of the Public Service Pensions Act 2013 mean that the employees will also retain membership of their public sector pension scheme upon transfer, and the GOCO will enter into an employer admission agreement with the Ministry of Defence and the Cabinet Office, which will form a contractually binding agreement to continue to allow access to the public sector pension schemes for the transferred employees.
In summary, this clause is required to avoid any doubt that the TUPE regulations will apply to the transfer of Ministry of Defence civilian employees to a GOCO. It will not apply to service personnel, who will remain with their respective services, and will be placed in the contractor’s organisation as required to provide military expertise. They will remain Crown servants and will continue to be managed by their owning military service, and their terms and conditions of service will remain.
The contract between the Secretary of State and the contractor will set out a routine for managing the placement of service personnel in the contractor’s organisation, and will make provision to remove personnel at short notice from the contractor’s organisation if required for operational reasons. Service personnel placements in the contractor’s organisation will last for two to three years, in accordance with usual personnel appointing routines.
Clause 10 and its related schedule provide a number of necessary safeguards, including the power for the Secretary of State to create a transfer scheme which will enable the transfer of the business to another contractor or, in extremis, back to the Ministry of Defence. When a contract expires or is terminated, for whatever reason, it may be necessary for the Ministry of Defence to manage operations itself or to transfer the undertaking to a new company.
Under this power, it is intended that the Secretary of State would have the ability to direct the transfer of certain specified property, rights and/or liabilities such as real property, intellectual property, contracts and people, to either himself, a company, including a publicly owned company, or to a new contractor. This power would allow the Secretary of State to decide exactly what is to be transferred at the point that the transfer scheme is created. The power may be exercised in unforeseen circumstances and maximum flexibility is therefore required. The contractor will be conducting work which is critical to national security and it would not be appropriate to rely on contract provisions alone.
For example, in a situation where the entity becomes potentially insolvent and elements of the business are liable to fall into the control of an administrator, a statutory provision offers more certainty and control and therefore less risk, while contractual provisions are more easily amended or subject to dispute. Furthermore, third-party rights can usually only be transferred with the consent of the third party, whereas a transfer scheme can direct that such rights are transferred. The intention would be to use such a scheme in only a very limited number of scenarios, such as the early termination of a contract. The critical national importance of defence procurement makes it inappropriate to rely on contractual provisions alone. Moving assets by a transfer scheme will avoid the need for third-party consent and ensures the continued delivery of defence procurement services.
The noble Lord, Lord Rosser, asked whether Clauses 8, 9 and 10 on property rights apply to the new DE&S in April. The answer is no, because the new DE&S will remain part of the department, so there is no change of employer for the staff and no property is legally transferred. The noble Lord also asked about freedoms and flexibilities. The new organisation will have significant freedoms and flexibilities, agreed with the Treasury and the Cabinet Office, around how it recruits, awards, retains and manages staff along more commercial lines, to reflect its role of running some of the most complex procurement activity in the world. As part of the MoD, DE&S will remain a Crown body and its staff will continue to be civil servants. However, there will be a number of significant changes, including that governance will be through a non-executive chairman, a CEO and a Chief of Defence Materiel, supported by a board and other non-executive directors. DE&S will be accountable to Ministers through an owners’ council, with an agreed corporate plan and framework document to enshrine its freedom to operate.
Funding will be via MoD estimates, in due course through charging MoD customers for the work it does. DE&S will publish its own plans and produce annual reports and accounts, which will be consolidated within those of the MoD. DE&S will be accountable to Parliament through the CEO as an additional accounting officer. DE&S will have the freedom to pay, grade, promote and manage Civil Service staff. These changes will reinforce the customer-supplier relationship between the military command customers and DE&S and allow it to move earlier to a hard-charging regime.
The noble Lord asked if there was one competition for each phase. There will be a single competition for all four domains provided that the performance of the domains are satisfactory as they transfer. That is, before each subsequent domain transfers, an assessment is made of the GOCO-contracted performance, which is required to meet an agreed standard. The noble Lord asked about discussions on Civil Service pay freedoms. Discussion is ongoing on whether DE&S will be able to go outside the Civil Service pay framework. The noble Lord also asked about the retention of staff. The decision has not yet been made on the remuneration package for retained staff. Any decision will depend on the freedoms agreed with Her Majesty’s Treasury and the Cabinet Office. The noble Lord also asked about pensions. Civil servants transferred to the GOCO will retain their pension arrangements. He asked about a two-tier workforce. There will inevitably be staff on different terms and conditions but that will not necessarily create a two-tier workforce. Part of the purpose of the freedoms being sought is to recognise and incentivise performance through reward.
I said that I would return to Schedule 2. The noble Lord asked why, if there is a criminal penalty under Part 2 of the Bill, one should not apply to GOCOs under Part 1 as supplier contractors are very concerned that GOCOs may misuse the relevant information. Under single-source provisions, contractors are compelled to provide information. They have no choice in that. However, under Part 1 the information is voluntarily given to the MoD by the contractors as part and parcel of the particular procurement being negotiated. It should also be remembered that the Part 1 provisions for disclosure of information to the GOCO apply only to existing and legacy contracts at the date of vesting. After the date of vesting for all new contracts it will be up to the supplier contractor to negotiate for appropriate confidentiality clauses to be included in their contracts, just as for any other contract in any other area of business.