Trade Bill

Lord McNicol of West Kilbride Excerpts

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

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

My Lords, good afternoon. The hybrid Grand Committee will now begin. Some Members are here in person, respecting social distancing, and others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down, and to wipe down their desk, chair and any other touch points before and after use. If the capacity of the Committee Room is exceeded, or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.

A participants list for today’s proceedings has been published by the Government Whips’ Office, as have lists of Members who have put their names to amendments or expressed an interest in speaking on each group. I will call Members to speak in the order listed. Members are not permitted to intervene spontaneously; the Chair calls each speaker. Interventions during speeches or “before the noble Lord sits down” are not permitted.

During the debate on each group I will invite Members, including Members in the Grand Committee room, to email the Clerk if they wish to speak after the Minister, using the Grand Committee address. I will call Members to speak in order of request and will call the Minister to reply each time. The groupings are binding and it will not be possible to degroup any amendments for separate debate. A Member intending to move formally an amendment already debated should have given notice during the debate. Leave should be given to withdraw amendments.

When putting the Question, I will collect voices in the Grand Committee Room only. I remind Members that Divisions cannot take place in Grand Committee. It takes unanimity to amend the Bill, so if a single voice says “Not Content” an amendment is negatived, and if a single voice says “Content” a clause stands part. If a Member taking part remotely intends to oppose an amendment expected to be agreed to, they should make this clear when speaking on the group.

We will now begin. In Grand Committee in person you do not need to unmute the microphones: the microphones are working, so when I call you, just start to speak.

Clause 2: Implementation of international trade agreements

Debate on Amendment 17 resumed.

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[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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If the Minister tells me that he is going to insist on moving towards a genuine multilateral tribunal or court system, I need to warn him that it will anger the United States, which at this moment is doing everything it can to scupper the WTO dispute resolution system by refusing to allow the appointment of new judges to the WTO’s appellate body. The WTO settlement system continues only because the EU, along with 16 other countries, has devised a workaround. That is not sustainable in the long term. We really need to hear from the Minister what position this Government are taking, because at present we have a wholly unsatisfactory state of affairs.

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

My Lords, I offer a gentle reminder that all mics in the Grand Committee are live at all times. If everyone’s mobile devices could be on silent and their notifications muted, it would be greatly appreciated.

[Baroness Chakrabarti (Lab) [V]]

My Lords, in the light of the way we have spent much of the past hour, I begin by recording my thanks to the members of your Lordships’ House’s staff who have been extraordinary in their patience and calm with the technical difficulties that we have all suffered. They have held everyone’s hand and been wonderful under fire.

It is my absolute privilege to follow the speeches we have just heard, particularly those of my noble friends Lord Hendy, Lord Hain and Lady Blower. I have lent my name to Amendment 17, drafted by my noble friend Lord Hendy. But before I speak to it, I will make a preliminary point of law that is relevant not just to Amendment 17 but to many of the amendments that your Lordships have discussed during these many hours of debate in Grand Committee, which I have had the delight of listening to very closely.

In the community and in the country at large, it is understood that it is dangerous to pontificate about the law and give legal advice without a certain level of qualification. That is so well understood that the profession is regulated and there are tight legal limits. That cannot be the case in the business of legislation, of course, because there is politics and policy on the one hand and the law on the other, with the journey—the process of legislation—in between. So, although I think that dinner-table lawyers are almost as dangerous as armchair medics or epidemiologists, I do understand that making claims about the law during legislative debates is sometimes an occupational hazard.

Your Lordships’ House is criticised in many quarters, but one thing that can often be said of it is that it contains a great many experts who contribute expertise from different areas of life and practice to the business of scrutinising legislation. My noble friend Lady Blower mentioned the noble Lord, Lord Patel. I do not think that she is alone in having benefited from his contributions, from a medical and public perspective, to your Lordships’ Grand Committee.

Of course, my noble friend Lord Hendy, who drafted Amendment 17, has been a practising barrister for 48 years—he will forgive me for pointing this out—working in particular as a labour lawyer but also on legislation and legal disputes, and he has spent 33 of those years in silk as one of Her Majesty’s Queen’s Counsel. So noble Lords can imagine that he would not have drafted an amendment to the Bill if it were outside the scope of the Bill; or, if he had, or if other noble Lords had drafted amendments that were beyond the scope of the Bill, the amendments would not be entertained in this way. They would not appear on the Order Paper and your Lordships would not have been asked to waste so many hours debating them.

That brings me to my preliminary point of law. In the many hours of Grand Committee that I have listened to in recent days, I have heard claims made, at times by the Minister and at times by some of his noble friends, notably the noble Lord, Lord Lansley, and others, suggesting that various amendments trying to restrict the vires of the regulation-making powers in this Bill are somehow beyond the Bill’s scope, or are irrelevant, or would clutter up the statute book—that was one comment I heard—or are otherwise inappropriate because they seek erroneously and improperly to clip the Executive’s wings when they are out trying to make trade agreements. That is one argument to the House that has emerged in your Lordships’ Grand Committee. Another argument that has been made is that the amendments completely miss the point of this draft legislation, because this legislation is purely about so-called continuity or rollover trade agreements; therefore, there is no need to place any additional hindrances or fetters on the regulation-making powers in the Bill to implement these rollover or continuity—other similar phrases have been used—trade agreements.

Well, the politics and the policy can come later, but let us be straight about the law here. That is just not correct. As a matter of law, that is not what is provided in the Bill, which allows for trade agreements, albeit with parties that have already been in an agreement with the European Union. They are trade agreements and there are regulations to be made under those trade agreements to implement them. That is the law. That is not spin. That is not politics. That is the law and the effect of this legislation.

Therefore, it is important to pre-empt the comments that will no doubt come from the Minister in due course and point out that it is completely appropriate for your Lordships and this Grand Committee to use amendments that have clearly been ruled as within the scope of the debate to restrain the vires, or the power, to make these regulations: that is, to say that it is perfectly appropriate that the regulation-making powers to implement these trade agreements—whether you call them continuity agreements or rollover agreements or even Charlie—can be constrained. Many amendments attempt to do that.

Your Lordships are perfectly free to say that some of the constraints should not be there as a matter of politics or policy: indeed, to say that we should not protect the NHS, workers’ rights, environmental standards, et cetera. That is fair for political and legislative debate, but in my view it is not okay—it is not straight talking with Members of your Lordships’ House—to suggest that these amendments are somehow beyond scope or inappropriate for debate in this way. I am afraid that, whatever else we are, some of us are lawyers first and last, just like some of your Lordships are distinguished medics, career politicians and so on. That is quite important.

This brings me to Amendment 17, and ISDS in particular. Obviously, this is dealt with with some care and precision in my noble friend Lord Hendy’s amendment, to which I have added my name, but I noted that, during the many hours of debate, other Members of the Committee have spoken to the evils of this system of secret justice, if such a thing is even possible. It seems to me that, whatever our differences in this Grand Committee and in your Lordships’ House, all Members ought to be concerned about ISDS and should seek to rule it out from being implemented by way of regulation-making powers in this Bill. In other words, if there is to be ISDS in future, it should require a new, separate Act of Parliament that can be consulted on and aired publicly, and debated line by line in both Houses of Parliament. All Members of your Lordships’ House, whether they are socialists, Greens, Liberals or Conservatives, ought to be scandalised by ISDS.

What is more, all people in our nations should be alarmed by the practice of ISDS, whether they voted to leave the European Union or to remain. Why? In a nutshell, because this practice prioritises unelected, unaccountable corporations over democratically elected Governments and the people they serve. That is the first reason. The second reason is that, as other noble Lords pointed out, it prioritises foreign corporations over domestic businesses. That cannot be right either.