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

Lord McNicol of West Kilbride Excerpts

Monday 30th September 2019 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

My Lords, these regulations address the consequences of the change in the UK’s departure date from the EU to the insolvency regulations previously approved by Parliament. The purpose of the new regulations, as with the previous regulations, is to ensure that the UK’s insolvency law operates effectively after Brexit, in all circumstances. The regulations laid before your Lordships make two changes that are necessary to address the introduction of the modernised Scottish insolvency rules, which came into force after 31 March, and the coming into force of Article 25 of the original EU regulation, which creates an integrated insolvency register across the EU.

These latest regulations update the Scottish rules by removing references related to the EU regulation to ensure a consistent approach to the UK courts’ jurisdiction to commence insolvency proceedings. The changes are made at the behest of the Scottish Government and with the support of the Scottish Parliament, following consultation.

The changes to UK insolvency necessitated by Article 25, which seeks to integrate member states’ insolvency registers, would carry an immediate cost that would be incurred without certainty of reciprocity after exit day. The current regulations would revoke Article 25 of the EU regulation if we leave the EU without agreement.

I stress that it is not the Government’s preferred outcome for the UK and the EU to cease co-operating on cross-border insolvency issues. We have listened carefully to industry professionals, who have outlined the risks that such an outcome would pose to the efficient management of insolvency cases. None the less, we must ensure that the UK’s approach to insolvency is legally correct irrespective of the nature of our exit.

Our assessment of the impact of losing automatic recognition for UK insolvencies in the EU was carefully made; the cost to business would be in the region of £2.7 million per year. We note also that a similar cost will befall EU insolvency practitioners applying to UK courts. However, both sides can retain the benefit of reciprocity only if there is a deal. In the absence of such an arrangement it is important to provide businesses and individuals with certainty regarding the rules governing insolvency in the UK.

These two changes ensure that the impact of leaving the EU will not be exacerbated by retaining inoperable law, which would lead only to confusion and cost. On that basis, I commend the regulations to the House.

[Lord McNicol of West Kilbride (Lab)]

My Lords, I thank the Minister for taking time before the discussion on the Floor of the House to go through some of the more technical detail of the SI. As he said, the regulations make amendments to the Insolvency (Amendment) (EU Exit) Regulations 2019, which were agreed by this House in January. Those regulations were mostly welcomed by the industry and, although concerns were raised by the Joint Committee on Statutory Instruments at the time, the House ultimately passed them. They dealt with the core policy, which I will not seek to reopen, while the No. 2 instrument debated here today appears to make only minor technical amendments.

I shall move on to the substance of today’s regulations. Despite Parliament making it clear that it does not wish the UK to crash out without a deal, it appears that much of this instrument is necessary only to facilitate such a scenario. As the Minister will be aware, both Houses have repeatedly rejected the UK leaving the EU without a deal. Why spend the time and money, therefore, moving forward with SIs that should play no part in the future of our decision-making? Are there any further SIs yet to be laid that deal specifically with a no-deal scenario?

As noted, another element and purpose of this instrument is to amend the Scotland-only regulations, as insolvency is partly devolved. I note from the EM at the back of the SI paperwork that consultation was carried out with the Administration in Scotland. It would be helpful to get a little more detail about what consultation was carried out between the department here and the Scottish Administration. I am curious too about timing. Why have the regulations been brought forward only now, when the new Scottish insolvency laws came into force in April this year?

With regard to the drafting of these regulations, I mentioned earlier that the previous insolvency regulations were mostly welcomed by industry. As the Minister has pointed out, there is a financial cost. I am curious about whether any further discussion or consultation has taken place with the industry.

We have no intention of opposing these technical regulations, though I would be grateful if the Minister could offer assurances in relation to a number of the issues that I have raised.

--- Later in debate ---

[Lord McNicol of West Kilbride]

I just want to follow up on that and seek some clarification from the Minister. If, for some unknown reason, we do not exit the EU on 31 October, will we need to be back here changing the dates in the SIs all over again to whatever the next date is?

[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.