Trade Bill

Lord Hendy Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Tuesday 8th September 2020 Lords Chamber

[Lord Hendy (Lab) [V]]

My Lords, I offer my congratulations on the two maiden speeches today and thank the right reverend Prelate for reminding us of, among other things, the importance of human rights and our duty to protect those who lack power.

Members of your Lordships’ House have raised many matters of concern in relation to the Bill, not least the lack of parliamentary scrutiny. I wish to raise three issues, touched on by others. The first is ISDS arrangements, or investor-state dispute settlement arrangements, such as the tribunal established in the Comprehensive and Economic Trade Agreement with Canada. Originally, ISDS arrangements were set up to give a right of action to investors from developed countries sceptical of enforcing their contracts in states with underdeveloped judicial systems and laws. ISDS has now become a monster, where the decisions of and laws passed by democratic states are under threat of claims for millions, and even billions, of dollars from foreign corporations.

The Minister said in opening the debate that free trade agreements “cannot change UK law”. That is true, but they can override UK law. This is an intolerable threat to the supremacy of Parliament and the rule of law—an issue with which this Government seem to have real difficulties, as events today highlight. ISDS rests on explicit discrimination, incompatible with the European Convention on Human Rights, against our citizens, investors or not, who have no right of access to ISDS tribunals. Only foreign investors have that special and unjustifiable privilege.

The second point I wish to raise is that it is appropriate that the Bill should ensure that existing rights are protected. In relation to our labour laws, in free trade agreements there must be better protection for UK labour standards than at present. I echo the wider point made by the noble Baroness, Lady Coussins: the Bill should ensure that other state parties to free trade agreements, and indeed the UK itself, do not obtain competitive advantage by failing to comply with fundamental ILO conventions and other international treaty obligations.

The third concern is that the government procurement agreement, or GPA, should ensure that public authorities in the UK, including the devolved Administrations, have the right and power to impose public procurement conditions that require contractors to observe the current requirements of UK labour law and the ILO conventions ratified by the UK. Such conditions are permitted by current law, which has been established by EU directives on the subject, but with Brexit that might change. It would be good if the Minister were able to give us reassurances on those three points.

Trade Bill

Lord Hendy Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Tuesday 29th September 2020 Grand Committee

On the first working day that the Labour Government took office in May 1997, the new Minister for Europe, Douglas Henderson, went to Brussels to signal our commitment to the European Social Chapter, which had its origins in a 1989 EU agreement that passed despite dissent from Margaret Thatcher. It aimed to raise labour standards, boost skills, enhance job security and promote higher productivity. On the first working day of the newly re-elected Labour Government in June 2001, I went as a Minister to Luxembourg, where we agreed in the European Council of Ministers a new employment directive establishing fresh information and consultation rights for workers. It obliged companies to consult employees before deciding on closures and redundancies, which is surely of elementary importance. These are the kinds of initiatives—yes, European Union initiatives—that the Prime Minister wants to abandon. This is why he wants to take back control by ensuring that British workers lose control over their working environments. The Trade Bill is a false step, a chance missed to encourage world-class standards in British workplaces and our Amendment 5 seeks to prevent that calamity for British employees.

[Lord Hendy (Lab) [V]]

My Lords, I will speak to Amendment 5, which complements one aspect of my noble friend Lord Lennie’s Amendment 1, as explained in his excellent speech just now. As my noble friend Lord Hain has set out with his customary clarity, the purpose of Amendment 5 is to prevent the GPA undermining or limiting the capacity of public bodies to impose conditions in public contracts that require respect for the rights and protections of the workers engaged to carry out those contracts. The rights and protections identified are limited to those specified by those conventions of the ILO that have been ratified by the UK.

Public procurement is a key tool in the protection of workers’ rights, and has been at least since the fair wages resolution of 1891, which was expanded in 1909 and again in 1946. The resolution required a “fair wages clause” in government contracts which obliged government contractors to pay the wage rates and abide by the terms and conditions that were set by collective agreements or arbitration in the relevant sector. From 1909 to 1979, collective bargaining was the policy of Governments of all political parties, with the consequence that collective agreements covered well over 80% of the UK workforce for the 40 years leading up to 1979. Since then, there has been a change in government policy and law that has resulted in collective agreements now covering only about 25% of British workers.

However, public procurement requirements can be based on other standards than those of collective agreements, desirable as that would be. Another means of achieving the levelling up, which the Government claim is an objective, is by reference to the minimum standards set by the ILO. There can be no rational objection to reliance on these standards, since they have long been ratified by the United Kingdom. Indeed, under EU law for many years, states have been required to ensure the observance of ILO standards by public contractors. Article 18, paragraph 2 of the EU directive on public procurement of 2014 requires states to take measures to ensure

“that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law”

including the provisions listed in Annex X to that directive. In that list are the core ILO conventions, all of which have been ratified by the United Kingdom. That is not inconsistent with the revised GPA.

Amendment 5 is modest indeed, and requires no more than that the envisaged regulations should not undermine what the current law requires. I hope that the Government will accept this amendment.

[Baroness Blower (Lab) [V]]

My Lords, it is a pleasure to follow my noble friends Lord Hain and in particular Lord Hendy, whose erudition in this area of law is well known. I have lent my name to Amendment 5, because, as I said at Second Reading, the Bill is lacking in positive reference to workers’ rights. As my noble friend Lord Hain said, it is more about a race to the bottom. It is therefore important to remedy this deficiency.

The deficiency can be remedied in part by Amendment 5. The UK already has commitments as a signatory to the ILO. These are currently protected by EU directives on public procurement, but this amendment is an opportunity to insist on conformity to them in relevant domestic legislation. The much-vaunted “levelling-up” agenda of the Government may be thrown into doubt by any number of decisions they may take. Not to accept the need to protect workers’ rights would be one such decision.

There is ample evidence that workplaces organised by trade unions are generally healthier and safer places to work, so the right to organise as in Convention 87 is a core principle. The right to collective bargaining and to achieve collective agreements, as set out in Convention 98, is central to providing an appropriate forum to determine wages.

This amendment is about creating conditions to ensure the provision of employment rights by insisting that no provision of the GPA should undermine the rights of and protections for workers in relation to or under a tender or contract. If, as I am sure we would all wish, we are to see public procurement in which relevant authorities have proper regard to the rights of workers and in which we as a country are seen to honour the obligations up to which we have signed in the ILO, our course is for your Lordships to agree the amendment.

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[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I rise to speak primarily to Amendment 11, to which I attached my name, as moved by the noble Lord, Lord Stevenson of Balmacara, and in the name of the noble Baroness, Lady McIntosh. I thank the noble Lord for his very clear introduction.

We are well aware that compliance with international law is something of a sore point now, so on the basis of that sensitivity, one would hope that the Government would adopt this amendment as a matter of course. They have the opportunity, by agreeing with this amendment, to demonstrate their belief in the rule of law. However, it has to be said that we have, as the amendment includes, signed up to the sustainable development goals, but we are not on track to deliver a single one of them, even in our own country. UK trade and UK actions are damaging the push towards sustainable development goals all around the world. We need accountability and leadership, and we need a legal framework, which Amendment 11 would supply.

I will also speak briefly in support of Amendment 18, which seeks to guarantee the ILO conventions and the European Social Charter. Many years ago, I prepared a report for the ILO on child labour in Thailand. If I had needed a reminder of the importance of regulation, the rule of law and the risk of exploitation, I certainly had it with that. Given the reports that we have had from the garment sector in Leicester, those experiences are not as foreign as we might once have thought. Protecting workers’ standards around the world has impacts on workers’ standards in our own country.

I will also speak briefly in support of Amendment 33 in the name of the noble Lord, Lord Alton. In doing so, I will quote another Member of your Lordships’ House, the noble Lord, Lord Patten of Barnes, in a meeting this morning of the All-Party Parliamentary Group on Hong Kong, of which I am a co-chair. He spoke of a sense of moral values being a bigger part of our foreign policy. I very much agree. I suggest that we also need to see that in trade policy, particularly in the purchasing practices of our Government. This amendment allows democratic oversight of key government procurement.

Finally, I will speak to Amendment 45 in the names of the noble Lord, Lord Purvis of Tweed, and the noble Baroness, Lady Kramer, reflecting the need to undertake human rights and equalities impact assessments of all trade deals before and after implementation. I am very aware that noble Lords have not yet spoken to all these amendments—I am reflecting the written material —but the same argument applies as in Amendment 33, and also the comments I made in my first contribution to this Committee. “First do no harm” is a medical phrase that, if applied to trade over recent decades, would have produced far less trade and a far healthier, less poverty-stricken, more rights-respecting, less damaged world. Given the fragile state of this planet and its people, we have no alternative but to apply that principle in our future trade policies, and the amendments I have named take us some steps in that direction.

[Lord Hendy (Lab)]

My Lords, I speak to Amendment 18, which develops one aspect of Amendment 11, so ably introduced by my noble friend Lord Stevenson and the noble Baroness, Lady Bennett.

It is usual in free trade agreements to have a chapter which contains provisions on labour standards. Chapter 23 of the much-discussed EU-Canada Comprehensive Economic and Trade Agreement is typical. It requires each state party to ensure that its labour law and practices embody and provide protection for the fundamental principles and rights at work, which it lists as

“freedom of association and the effective recognition of the right to collective bargaining; elimination of forced labour; abolition of child labour; elimination of discrimination”.

In that free trade agreement, the parties affirmed their commitment to respect, promote and realise those principles and rights, in accordance with the obligations of the members of the ILO and the commitments under the ILO Declaration on Fundamental Principles and Rights at Work, and its follow-up. They undertook that their labour law and practices would promote

“health and safety at work; minimum employment standards for wage earners, and non-discrimination in respect of working conditions, including for migrant workers.”

That is all very well, but it is not enough. The United Kingdom has ratified many ILO conventions, including the core conventions. Indeed, 70 years ago this summer it was the first nation on the planet to ratify fundamental ILO convention 98 on collective bargaining. However, its potential trading partners may not have such a fine record. The USA is sadly lacking in this respect. Any free trade agreement should require a prospective partner to ratify those conventions which the UK has ratified—otherwise, there will be asymmetry in labour standards.

Ratification by partners is not enough. We should insist that our prospective trading partners customarily observe standards we have ratified. That is an obligation in CETA too, which states:

“Each Party reaffirms its commitment to effectively implement in its law and practices in its whole territory the fundamental ILO Conventions that Canada and the Member States of the European Union have ratified respectively.”


That principle should apply to all the international treaty provisions that the UK has ratified, not just those of the ILO. We should therefore include those of the Council of Europe, its convention on human rights and the articles of the European Social Charter 1961, which we have ratified. Non-European states cannot ratify those provisions but they can certainly undertake to implement them. The effect, I hope, will be to uplift the labour standards of some potential trading partners to those we purport to uphold. It will also prevent the creation of an unbalanced playing field on labour rights, contrary to the level playing field that the Government claim to advance. Likewise, the free trade agreement should be compatible in all respects with the ILO conventions that this country has chosen to ratify; otherwise, standards can be watered down.

The amendment is surely uncontroversial in requiring that prospective FTA partners must uphold the sovereignty of Parliament, the authority of our courts, the rule of law and the principle of equality before the law. It is hard to conceive of a rational objection to the proposal that the minimum standards referred to in the amendment are required of any prospective trading partner, whatever may be said about our own Government’s record on these points. I ask the Government to ensure that these requirements are embodied in the Trade Bill.

[Baroness Kramer (LD) [V]]

My Lords, as the noble Lord, Lord Stevenson, explained, the amendments in this group cluster around the importance of issues such as human rights and other rights in trade agreements. I will focus on Amendment 45 in my name and that of my noble friend Lord Purvis of Tweed. It would require human and equalities rights assessments of all trade deals before and after implementation. The linking of trade agreements and human rights has become normal practice in recent years and is evident in almost every trade agreement signed by the EU.

I take heart from the fact that Liam Fox, when Secretary of State for International Trade, made it clear in some of his comments that the UK was fighting to ensure that human rights provisions in continuity trade agreements stayed in place as we transitioned out of the EU. I hope the Government continue to have that deep commitment and understand the importance of those clauses within the trade agreements. However, we had some disturbing comments in the same year. The then Minister for the Middle East, Andrew Murrison, discussed whether or not any future trade agreement with China would include human rights clauses. The question has been raised and I think, it needs to be answered in this legislation.

It is concerning the UK has indicated it does not want to apply the European Convention on Human Rights to its FTA with the EU in any way that is legally binding. This could be an unfortunate and concerning precedent and the Government need to provide an adequate response. There are huge implications if the ECHR is not included in trade agreements. If we take the trade agreement with the EU as an example, it has serious implications for data protection and for the Northern Ireland protocol. I hope we do not see this Government take heart from Dominic Cummings, who has an ideological hostility to the ECHR. The only country in Europe not a party to the ECHR is Belarus. As we all say, the convention was initially a British project to put in place a genuine defence for ordinary people following the horrors of the Second World War.

It is therefore key that appropriate clauses are embedded in the Trade Bill; otherwise, the message will be that the United Kingdom is showing flexibility around these key issues. That is not a position that I would like to see us negotiating.

Trade Bill

Lord Hendy Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Thursday 1st October 2020 Grand Committee

Moved by

[Lord Hendy]

17: Clause 2, page 2, line 23, at end insert—
“( ) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if the international trade agreement does not contain any form of investor-state dispute settlement mechanism applicable to any part of the United Kingdom in relation to a claim brought by a foreign investor against a United Kingdom public authority except to the extent that—(a) the laws of the United Kingdom administered in the courts and tribunals of the United Kingdom so provide, and(b) a person (whether or not an investor) domiciled in the United Kingdom has equal protection under those laws and equal access to redress for any such claim in those courts and tribunals.( ) In this section “public authority” includes the Crown, Parliament, an appropriate authority as defined in section 4(1), a local authority, and any person who has functions which include functions of a public nature.”Member’s explanatory statement
This amendment would preclude the subjection of acts and decisions of UK public bodies to claims for compensation by foreign investors under ISDS or other multilateral investment courts or tribunals. It would not preclude a foreign investor relying on UK domestic law or the UK’s judicial system.

[Lord Hendy (Lab) [V]]

I am in your hands, Chair. I see what the time is, and my speech to move this amendment will not be as short as the interventions I made earlier in our discussions of the Bill. I cannot guarantee that I will finish by 7.30 pm, I am afraid. Do you wish me to proceed? Should I break in the middle of my speech? How should I conduct it?

Motion to Adjourn

Moved by

Trade Bill

Lord Hendy Excerpts

Committee stage & Committee: 3rd sitting (Hansard) & Committee: 3rd sitting (Hansard): House of Lords
Tuesday 6th October 2020 Grand Committee

[Lord Hendy (Lab)]

It is a pleasure to speak to Amendment 17 and open the batting on a group of amendments on dispute resolution. Put shortly: Amendment 17 opposes investor-state dispute settlement arrangements —ISDS; Amendments 43, 44 and 52 seek to constrain it; Amendment 91 deals with tax matters; and Amendment 94 deals with disputes between state parties.

Amendment 17 is intended to prevent regulations permitting ISDS in the agreements, envisaged by Clause 2, which the Government are negotiating to replace existing EU agreements. Existing EU agreements are listed in the Library briefing. Some of them include ISDS; others do not.

The new agreements will differ from the existing EU agreements, not least by making the UK a party. There will be other modifications too, as explained in paragraphs 37 and 38 of the Explanatory Notes. The Bill envisages modifications. It does not require replication of the content of EU agreements—contrary to the Minister’s comment last Tuesday. Amendment 17 seeks, in the new UK agreements, modification of the content of existing EU agreements by the exclusion of ISDS where those agreements provided for it and its non-inclusion where EU agreements did not.

ISDS is often found in international trade agreements. Where it exists, it is wholly objectionable. ISDS has the power to override the supremacy of Parliament, to defeat the rule of domestic law, and it discriminates on grounds of nationality. Far from taking back control, as the noble Baroness, Lady Bennett, pointed out in our last sitting, ISDS is the surrender of control.

The inclusion of ISDS in the then proposed EU-US trade deal, TTIP, was the principal reason for 3 million signatures—half a million of them in the UK—on the petition against it. The legitimacy of ISDS in EU agreements is now in doubt. The judgment of the Court of Justice of the EU in Slovak Republic v Achmea on the Netherlands/Slovakia trade agreement, held that ISDS has an adverse effect on the autonomy of EU law and is therefore incompatible with EU law. This is an EU judgment we should follow.

ISDS is a mechanism whereby a corporation of one state party to the FTA can bring a claim for compensation against the other state. That sounds fine, until one appreciates that such claims are not brought in the courts of either state, nor under the laws of either state. ISDS is a system of arbitration usually conducted in secret. The usual basis for claims is that the accused state has failed to ensure “fair and equitable treatment” or has expropriated some asset of the investing corporation. Such claims are not open to any but foreign corporations. The claim is not that the host state has breached the law of the land but usually the converse: that domestic law has caused the foreign corporation loss of hoped-for profits.

Take the Philip Morris case, referred to by the noble Earl, Lord Caithness—

[The Deputy Chairman of Committees (Lord McNicol of West Kilbride) (Lab)]

My Lords, we are having some technical difficulties online. A number of our colleagues who are participating remotely cannot hear you as well as we can in the Room. If we cannot resolve it in the next minute or two, I will adjourn the Grand Committee for five minutes, until 2.42 pm. I apologise to the noble Lord, Lord Hendy, but it is more important that people online hear his comments.

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[The Deputy Chairman of Committees (Lord McNicol of West Kilbride) (Lab)]

My Lords, the Grand Committee is resumed. We now resume debate on Amendment 17. I apologise to the noble Lord, Lord Hendy, for having to call on him to start again from the beginning. We have now resolved the technical difficulties so, from the top, the noble Lord, Lord Hendy.

[Lord Hendy (Lab)]

No apologies are needed. It is a pleasure to speak to Amendment 17 and open the batting on a group of amendments on dispute resolution. Put shortly: Amendment 17 opposes investor-state dispute settlement arrangements—ISDS; Amendments 43, 44 and 52 seek to constrain them; Amendment 91 deals with tax matters; and Amendment 94 deals with disputes between state parties.

Amendment 17 is intended to prevent regulations permitting ISDS in the agreements, envisaged by Clause 2, which the Government are negotiating to replace existing EU agreements. Existing EU agreements are listed in the Library briefing. Some of them include ISDS; others do not. The new agreements will differ from the existing EU agreements, not least by making the UK a party. There will be other modifications too, as explained in paragraphs 37 and 38 of the Explanatory Notes.

The Bill envisages modifications. It does not require replication of the content of EU agreements—contrary to the Minister’s comment last Tuesday. Amendment 17 seeks, in the new UK agreements, modification of the content of existing EU agreements by the exclusion of ISDS where those agreements provided for it and its non-inclusion where EU agreements did not.

ISDS is often found in international trade agreements. Where it exists, it is wholly objectionable. ISDS has the power to override the supremacy of Parliament and to defeat the rule of domestic law, and it discriminates on grounds of nationality. Far from taking back control, as the noble Baroness, Lady Bennett, pointed out, ISDS is the surrender of control.

The inclusion of ISDS in the then-proposed EU-US trade deal, TTIP, was the principal reason for 3 million signatures—half a million of them in the UK—on the petition against it. The legitimacy of ISDS in EU agreements is now in doubt. The judgment of the Court of Justice of the European Union in Slovak Republic v Achmea on the Netherlands/Slovakia trade agreement held that ISDS has an adverse effect on the autonomy of EU law and is therefore incompatible with EU law. This is an EU judgment that we should follow.

ISDS is a mechanism whereby a corporation of one state party to the international trade agreement can bring a claim for compensation against the other state. That sounds fine until one appreciates that such claims are not brought in the courts of either state, nor under the laws of either state. ISDS is a system of arbitration usually conducted in secret. The usual basis for claims is that the accused state has failed to ensure “fair and equitable treatment” or has expropriated some asset of the investing corporation. Such claims are not open to any but foreign corporations. The claim is not that the host state has breached the law of the land but usually the converse: that domestic law has caused the foreign corporation loss of hoped-for profits.

Let us take the Philip Morris case, referred to by the noble Earl, Lord Caithness, and the noble Lord, Lord Lansley. The Australian Parliament passed legislation requiring plain-paper packaging for cigarettes. Philip Morris challenged the legislation on constitutional grounds. It failed at every level, including in the High Court of Australia. It then transferred ownership of its Australian companies to a subsidiary it had set up in Hong Kong so as to enable an ISDS claim under the Australia-Hong Kong trade agreement. The claim failed, but only because the transfer of ownership of the companies to Hong Kong post-dated the activity giving rise to the claim.

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[Lord Grimstone of Boscobel (Con)]

The noble Lord raises two good points. On the first point, I will, if I may, write to him setting out in more detail the disadvantages and advantages that I see of the negative as opposed to the affirmative process. On the court, I make it clear that we welcome changes in the ISDS mechanism and potentially the formation of an MIC if, once the details are worked out, it seems that nations will sign up to it and it will be workable and in the best interests of the UK. We do not have our head in the sand in these matters. Like the noble Lord, I recognise that, if improvements can be made to the ISDS process, it is incumbent on us to do that. The point that I was trying to get across was that these are still early days in the discussions at the UN on this and it did not seem right to put our weight firmly behind it until we see how the discussions move forward. But I assure the noble Lord that we are open-minded about this and we will see where it gets to.

[Lord Hendy (Lab)]

My Lords, I am very grateful to the Minister for his response and to my noble friends Lord Hain, Lady Blower and Lady Chakrabarti for supporting Amendment 17. I am also grateful to all noble Lords who made such elegant and persuasive contributions to this debate, which has been wide-ranging and has covered a lot of issues.

I will not presume on the time of the Committee by commenting on particular contributions, save for two. The noble Lord, Lord Lansley, mentioned the fact that the central issue in the Philip Morris case was litigated in the World Trade Organization dispute mechanism, where the case was lost. His knowledge of the WTO is certainly greater than mine, but my understanding is that the rules, and hence the basis of the claim in the WTO, were different from the basis of the claim under the ISDS, not least because the claim in the WTO—as I understand it; I could be wrong—was brought by nation states rather than investing corporations.

The Minister made many points in his summary that I would like to take up, but I must resist. I will make just three points. First, he said that there were great benefits to UK investors overseas. Of course I accept that that is the case, but there appear to me to be four points to bear in mind.

First, this country should not support a mechanism that provides an avenue of challenge to other democratic states, just as it should not support a mechanism that enables a challenge to our democratic state. A remedy under ISDS is not available to citizens of either state except for investing corporations, but many citizens are affected by the matters covered by these trade agreements—food standards, environmental standards and labour standards.

Secondly, the Minister overlooked the globalised economy that we now have. UK corporations can establish almost anywhere in the world, just as foreign corporations can. So UK corporations can take advantage of ISDS arrangements by establishing a subsidiary to bring a case against the United Kingdom. There are dangers there, too.

Thirdly, when overseas investors make their investments, they of course evaluate the risk that things could go wrong or that the state might change the law. That is a matter for them. I do not see why we should put at risk our democratic standards by inviting a mechanism to protect overseas commercial investors.

Fourthly, this country has an admired legal system, as do many other countries. It is wrong in principle to provide a mechanism of legal challenge that is outside the domestic laws of any country.

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[The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)]

My Lords, we will now resume the Committee. I call on the noble Lord, Lord Hendy, to complete his remarks.

[Lord Hendy (Lab)]

My Lords, I will make two final points in respect of the Minister’s speech. My second point is that he said that ISDS cannot force the privatisation of public services. That is absolutely right, of course, but we cannot overlook the fact that ISDS permits a challenge to taking previously privatised services back into public ownership—something that Governments of all persuasions have done from time to time in the past, especially in times of emergency.

Finally, the Minister said that the Government were considering the merits of a multinational investment tribunal in place of the secret arbitration under ISDS. Of course, one accepts immediately that the EU’s proposal for an MIT gives transparency instead of secrecy, which is very desirable. But it does not resolve the central evil that ISDS challenges, on very broad terms, parliamentary decisions by the chilling effect of a threat of compensation which is measured in billions—a disincentive for any Government.

The issue of ISDS is obviously controversial and the Minister is plainly aware of the concerns of members of the Committee. I hope that those concerns, and those reflected in other amendments, will cause the Government further reflection. In those circumstances, I beg leave to withdraw the amendment.

Amendment 17 withdrawn.

Trade Bill

Lord Hendy Excerpts

Report stage & Report: 2nd sitting (Hansard) & Report: 2nd sitting (Hansard): House of Lords
Tuesday 15th December 2020 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, the authors and mover of these two amendments have done the House a great service. I welcome my noble friend the Minister to his place for the first of these debates that he will be summing up this afternoon. This is a very vexatious area in trade disputes, and it has been very much at the fore of this critical stage of an agreement on free trade with our EU partners— I know that is not the subject of this afternoon’s debate. It is worrying that, at this late stage, we are still arguing—and have been for two years, since the European Union (Withdrawal) Act was passed—about what the dispute resolution mechanism will be.

I will make a general point: it is extremely important at this stage that we know what the dispute resolution mechanisms will be. I place on record my acceptance as less than satisfactory of the arrangements of the World Trade Organization. I think it fair to say that the current position of the United States in this regard is less than clear. As I understand it, in his time, President Obama made moves to remove the US from the general World Trade Organization dispute resolution mechanism scheme—the next stage after disputes have been raised. It is by no means clear, and I have not yet heard—I may have missed it—what the incoming Biden Administration will do in this regard.

My noble friend Lord Caithness mentioned the Huawei decision, and, obviously, we are also caught, as I understand it, in the Boeing situation, with infringement tariffs being whacked on us for the Airbus scenario—and, latterly, we have come forward, seeking to do the same to Boeing, for similar infringements of the World Trade Organization arrangements there. As such, I am very uneasy that, in the current state of the Bill, I do not see any reference to what the dispute resolution mechanism will be in the agreements that fall under this—unless I have missed it—so I would like confirmation of what that resolution mechanism will be.

I welcome that the noble Baroness, Lady Kramer, said that the UK has been at the forefront of setting this in the EU-Canada arrangement—but then my noble friend Lord Lansley said that those arrangements have never been brought into effect in relation to the EU. This is a very grey area, and it is vital that, before the Bill leaves Parliament, we know what the dispute resolution mechanism in this regard will be. Mindful of the lengthy debate that we had in Committee, I seek further clarification at this stage, using these two amendments as an opportunity to probe in this regard.

[Lord Hendy (Lab) [V]]

My Lords, I am grateful to the noble Baroness, Lady Kramer, and my noble friend Lord Stevenson, for moving and speaking to Amendments 15 and 19, respectively. They significantly improve, but do not eliminate, ISDS. On that basis, I support them, since my assessment is that the elimination of ISDS is not currently politically feasible.

We now know a lot about ISDS, which is relatively common in international trade agreements. We know how objectionable it is and the chilling effect it can have. It is objectionable because it overrides the supremacy of Parliament, defeats the rule of domestic law—a concept familiar to all of us after recent debates—and discriminates on grounds of nationality. Far from taking back control and asserting British sovereignty, the current catchwords of government, ISDS surrenders both.

A couple of years ago, a petition against the inclusion of ISDS in the then-proposed EU-US trade deal, TTIP, attracted 3 million signatures—500,000 of them in the UK. The legitimacy of ISDS in EU agreements is now doubted by the Court of Justice of the European Union as well as by EU citizens. In Slovak Republic v Achmea, the court held that ISDS in the Netherlands-Slovakia trade agreement

“has an adverse effect on the autonomy of EU law”

and is therefore incompatible with it. By like reasoning, ISDS in UK trade deals will adversely impact the autonomy of UK law.

ISDS is a mechanism whereby a corporation of one state party to the international trade agreement can bring a claim for compensation against the other state. It sounds fair, but it is not fair. ISDS claims bypass the courts of both state parties, and bypass the laws of both states. ISDS is a special privilege accorded only to foreign corporations, for use, in the case of the UK, against a democratic sovereign Government. ISDS is a right to claim compensation against the host state in which the corporation has made its investment—a right denied to the corporations and citizens of that state. That point is important and goes beyond the insult to sovereignty.

ISDS offends against the rule of law because a right and remedy against a host state is given to one class of putative claimant—foreign investment corporations—and denied to all the citizens, companies, co-operatives, trade unions and other organisations in the host state. ISDS offends against the rule of law, whereby that right and remedy is exempt from the courts and the legal system of the host country. It offends the principle of non-discrimination because that right and remedy is only available to non-nationals of the host state.