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

Lord Berkeley Excerpts

Tuesday 4th December 2018 Lords Chamber

[Baroness Burt of Solihull (LD)]

My Lords, unlike my noble friend Lord Kirkwood, I have not sat on the scrutiny committee so some of my questions may appear a trifle naive to more learned Members, for which I apologise in advance. I ask the Minister to bear with me.

The regulations address deficiencies in competition legislation arising from our exit from the EU. As I understand it, we will no longer be part of the EU competition system. Can the Minister say how this is likely to affect our ability to tender for EU contracts? Currently we do very well in tendering for and obtaining EU contracts. Am I correct in supposing that we will lose our ability to tender for EU contracts? If so, what estimate have the Government made of the loss of value that this will have on the UK economy? Perhaps the Minister can help me; there is no impact assessment because, according to the text, the SI is supposed to have no effect on private businesses and charities.

The regulations come into force on exit day. But when, if ever, will exit day be? Unless the very worst happens, presumably it will not be 29 March 2019. We understand that we are not going to crash out—that is not going to be allowed—but, on the legal information to which we have not been privy and on which they are voting right now in the other place, presumably exit day could be years away, if ever. The only way that the British people can know is to have a say on the deal that Mrs May has negotiated and vote to end the madness and remain.

We have the advice of the chief legal adviser to the EU that we could pull out of Brexit with no penalty right now. I appreciate that if Brexit continues to prevail, we have to have a plan. Having retained much existing EU law, we have to pick through the bits of legislation which will not apply or which are unlikely to work once we have left. These regulations relate to inconsistencies in competition law in the event of the worst possible piece of self-harm that the British people have done for generations—a no-deal Brexit.

The regulations relate to infringements of and exemptions from competition and merger law. Part 2 of the regulations is “Amendment of the Competition Act 1998”. Part 3 is “Amendment of the Enterprise Act 2002”. Part 4 is “Amendment of other primary legislation”. Part 5 is “Amendment of subordinate legislation”. Part 6 relates to amending and revoking retained EU law, and part 7 is “Saving and transitional provision”.

I am no legal expert, as I am sure has already become apparent to noble Lords, but the fact that no impact assessment has been produced because no significant impact on the voluntary or private sector is foreseen suggests to me that it is hoped that this is merely a tidying-up exercise. It may be technical, but I still fail to see why there is no impact assessment on what impact this competition crisis will have on our ability to trade and compete with our biggest market, indeed, the biggest single market in the world.

[Lord Berkeley (Lab)]

My Lords, my understanding is that these draft regulations will apply only if we crash out or similar with no deal at the end of March next year. As the noble Baroness said, there are some interesting questions, to which we need answers.

I should like to get some answers from the Minister about what happens to some of the cases that are being considered at present by either the CMA or the European Commission competition authorities. Such cases run for years. They may have started now, but they certainly will not finish. Presumably anything that starts before 29 March next year will continue to some conclusion by the competition authority in the Commission. Is there a time limit on that? How will the relationships between the UK parties, if you like, and the Commission and the other parties be handled in that transition period, which may go on for a great deal longer than any transition that the Prime Minister may be negotiating? Some of these competition cases go on for years.

One case I have got slightly involved in watching is between two railway manufacturing companies, Siemens and Alstom. Siemens has its head office in Germany and Alstom has its head office in France, I think. They have been proposing a merger of all their businesses for several years now. The European Commission has got to the stage of issuing something that is not technically an opinion, but seems to me to be an opinion, which suggests that a merger would be a bad idea for competition across Europe in the whole railway sector. The companies appear to have been trying to promote the merger as a way of preventing Chinese industries taking over everything in Europe, including the UK. Both companies have subsidiaries in the UK; some make trains, some make signalling and some do other things. If that merger went ahead on the continent—in Europe—could the CMA stop a merger between their subsidiaries in this country, or vice versa? How would it work? If they wanted to merge in this country, would the CMA’s decision apply in Europe?

Presumably, if any of this is to work at all, there has to be some communication between the CMA and the European Commission’s competition department on issues such as this. I would welcome a comment from the Minister as to how that conversation—it may be only a conversation—would happen and the extent to which a decision by one party would be binding on the other. I look forward to his comments.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am very grateful to the Minister for letting me have a letter before this debate; it came in good time and was correctly addressed. I am sure he will be delighted to know that our discussion across the Dispatch Box in the Moses Room on our previous SI has borne perfect fruit, and I have enjoyed being able to get myself up to speed before dealing with the matter at hand.

I am looking forward to the Minister’s comments on the points raised by the noble Baroness, Lady Burt, and my noble friend Lord Berkeley. Between them, they have exposed some of the difficulties with this SI. Although there is very little that one would object to in what it tries to set out, it raises a number of doubts and concerns about the process that has been going on which are not entirely related to Brexit. Many of the SIs that we are seeing under the general heading of “EU exit regulations” are effectively cut-and-paste, substituting “UK and its institutions and authorities” for “EU”. But in a case such as this, which, as my noble friend says, could go on for years and may have to be transferred across and dealt with under joint arrangements, there is material that is subject to fine investigation and discussion. It affects thousands of consumers in many countries and many areas, and there are difficulties in trying to calibrate that effectively. It is not quite the same as the general ones. I just wanted to make that point.

There are general questions here as well as specific ones about the documentation, and I will cover both sets of questions as I go through it. My main concern relates to paragraphs 7.3 and 7.4 of the Explanatory Memorandum, which is otherwise very good and very clear. I thank the officials for their work on it. We miss impact statements, which are often a source of much more information about the issues before us, but in their absence the Explanatory Memorandum is very good. The first and main point here is the Government’s decision—there are other ways of dealing with this issue—to repeal Section 60 of the Competition Act, which provides that, as far as possible, the CMA and UK courts must interpret UK competition law in a manner consistent with EU competition law. There is a straightforward issue here about whether that would be appropriate in a no-deal Brexit situation. The Government could have had a number of options here, one of which would have been to be more generous in terms of the wish to see the best jurisprudence brought to bear on any cases that might be in front of the CMA. They could choose not to disallow the interpretive obligation but take it as appropriate, or some other wording. That would have been a way of ensuring that the best decisions were reached even though it might transgress a red line on the role of the courts in the EU post a no-deal Brexit.

If that is the issue, have the Government got it right by repealing Section 60 and bringing forward a modified section, Section 60A, to replace it, which provides in some detail that the competition regulators and the UK courts will continue to be bound by an obligation to ensure that there is no inconsistency with pre-exit EU competition case law but makes it impossible to bring in any jurisprudence that takes place afterwards except in limited circumstances? I am sure that Ministers have thought about this carefully and I would be grateful if the Minister would share with us a little of that thinking. It seems to me that, in an attempt to give expression to the red-line areas, they are causing what might turn out to be a legal—I am trying to think of the appropriate word—

[Lord Berkeley]

Minefield?