Insolvency (Amendment) (EU Exit) (No 2) Regulations 2019

Lord Fox Excerpts

Monday 30th September 2019 Lords Chamber

[Lord Fox (LD)]

My Lords, I thank the Minister for introducing this SI and for his explanation. I associate myself with the comments of the noble Lord, Lord McNicol, about the necessity for no-deal statutory instruments if the Government are, in good faith, going to follow the law. I notice that the noble Lord, Lord Callanan, is also sitting on the Front Bench opposite, and he has repeatedly said—when I have been in this Chamber and often when I have not—that the Government will observe the law, so I hope that means the spirit as well as the letter. However, the SI has been tabled and it is incumbent on me to make some comments.

It is, perhaps, appropriate that we should be talking about insolvency because, in the event that there is a no-deal Brexit, insolvency will be an issue for many businesses in this country, small, medium and large. Perhaps this gives us a chance to soberly reflect on the stupidity of a no-deal exit. These rules are welcome and it is very hard for us to stand in their way. The Explanatory Memorandum talks about avoiding an “inefficient insolvency process”. What is an efficient insolvency process other than a disaster? In not opposing these rules, I suggest that these Benches do not wholeheartedly endorse the current system on insolvency. There is, many people feel, an overdominance of HMRC’s call on insolvency in the current rules. This is not for debate today, but I put that down as an issue.

The Minister talked about reciprocity, a word that should be used carefully. However, it seems to me that this is a unilateral assertion of reciprocity, which, by its nature, is not reciprocity. What guarantee does the Minister have that the EU 27 will turn this into a reciprocal process and not merely watch us put our cards on the table while they decide not to? Without the EU 27 participating in this, we do not have the systems in place that we need for the Government’s definition of efficient insolvency to apply. Can the Minister tell us what assurances are in place?

Paragraph 2.11 of the Explanatory Memorandum says that we will,

“maintain a modified version of the EUIR’s jurisdictional tests”.

What are the modifications to the EUIR’s test? If they are different, how can we expect the EU 27 to reciprocate in process? I would have thought that the whole idea to keep reciprocity would be to have harmony, rather than modification, between those rules. I wonder what those differences are and how they have been presented to our EU 27 partners.

Paragraph 2.2 of the Explanatory Memorandum says that the other purpose of this statutory instrument is to avoid the creation of uncertainty. There are lots of ways of avoiding uncertainty, but changing the rules governing insolvency is not really the way to do it. There is uncertainty about standards; there is uncertainty about regulation; there is uncertainty about whether people who work for our businesses today will be able to work for them after 31 October. If the Government really are in the business of certainty, perhaps they could address those issues.

Finally, a number of Bills are currently crashed or in the holding tank of the other place. We were told that these Bills were essential to planning for no-deal Brexit. Now we are told by the Leader of the other House that the Government have all the rules they need to manage no-deal Brexit. I find these two positions irreconcilable. Perhaps the Minister can tell us how many more statutory instruments we can expect that will be substituting for those Bills. I remind your Lordships’ House that those Bills have proper scrutiny. They have the right sort of scrutiny that enables us to produce the right sort of legislation. Statutory instruments are not a substitute for primary legislation. They are an unscrutinised version of regulation. To substitute one for the other, which seems to be what the Government intend to do, is wholly unsatisfactory.

[Lord Flight (Con)]

My Lords, the UK has a great advantage over most European economies and the US when it comes to effecting a sorting out and recovery of a business that is failing. Can the Minister confirm that whatever EU rules we may be moving in tandem with will not damage our advantage in sorting out businesses?

--- Later in debate ---

[Lord Duncan of Springbank]

That is very easy and straightforward to answer. It is the Government’s policy to leave on 31 October, but the laws have been drafted to ensure that, going forward, we will not have to revisit these regulations. I reiterate that, come Halloween, we will be on the other side.

[Lord Fox]

Can the Minister clarify the point about the modified version of the jurisdictional tests?

[Lord Duncan of Springbank]

I had written that down but then forgot to mention it. The noble Lord will be aware that one element of the original regulations was the jurisdictional tests. The modification that we are talking about here is to ensure that those tests are broadly compliant with the changes that have been brought in. The jurisdictional tests themselves remain broadly intact. Their purpose is to ensure that the legal jurisdictions of the various courts function after Brexit.

[Lord Fox]

To be clear, the modification is with us rather than with Europe.

[Lord Duncan of Springbank]

Absolutely—the modification is with us. However, the point is that broadly the tests are part of retained EU law and we have made the adjustments to make sure that they are compliant with our own statute book.