Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017

Lord Stevenson of Balmacara Excerpts

Thursday 2nd March 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the noble Earl for introducing the substantive subject of our discussion—the regulations before us—but we have also been treated to a masterclass in other areas. The combined effect of the speeches from the noble Lords, Lord Hodgson and Lord Faulks, has been to raise what might be a very serious issue. The whole House owes them a debt of gratitude for doing so, even if they had to be inventive in trying to work out the main points they wished to make within the constraints of this instrument.

I was going to say very much the same things as the noble Lord, Lord Faulks, but in a much more workmanlike way, since I lack his legal and other experience. I sense in this the beginnings of a scandal that will affect the way statutory measures before us and others will be taken. These speeches gave us the benefit of the business perspective—it is clear that this is an ongoing issue—and the legal dimension, where the ethical issues raised will have to be addressed. The ongoing review of LASPO gives the Government an opportunity to move quickly on this. The noble Lord, Lord Hodgson, said that this needs to be nipped in the bud quickly if it is not going to run out of steam, particularly in the light of the changes announced on personal injury. I back what has been said and hope the Minister will be able to respond positively.

We have no particular objections to the statutory instrument itself, which is a sensible way forward based on existing UK law. The point has been made that the model derived under the Enterprise Acts and various legislation that has gone through this House in recent years has been used to bring forward a model for the whole of Europe.

I will make three or four minor points. It was good to hear during the tail end of today’s debate on consultation that consultation does work in certain instances, and that the consultation responses—albeit mainly from the professionals, not consumers—went for a rather more gold-plated result that would simplify the work being done. There is nothing wrong in that. It is good that a loophole has been closed that could have been exploited through different jurisdictions operating in different ways in Europe and in the UK.

The Minister made a good attempt to resolve an issue that might still cause problems further down the line: the rather ill-defined difference between procedural and substantive issues. I do not expect him to deal with that today, but he might reflect on how this will play out in a letter. The Explanatory Memorandum is simply a list: it does not give a sense of how the litigants or those affected will respond in practice. I would be grateful if he explained that.

There is one other point it would be interesting to have more detail on. The approach taken to SMEs is right in principle, but it is surprising to learn that the SMEs caught up in what might be regarded as cartel issues, and which therefore might be subject to penalty, will be limited to those with a 5% share. The problem is that a 5% share of market limit, presumably on a UK basis, will not deal with what happens in the real world of SMEs’ engagement with very local areas. A small business will be small in its reach, as well as in terms of employees and turnover. Therefore, there may be local effects that would not be caught by the 5% share limit. I do not expect a response on this today, but it would be interesting to hear in due course what the Government’s response would be.

I have two final points. Any response from this side of the House to a statutory instrument from this department usually asks why common commencement dates have not been followed. The Minister knows that, because I have raised the issue with him before. An account is given of why it is not necessary to wait until 6 April on this occasion, but it does not explain why the delay occurred. I do not want an answer today, but at some point it would be interesting to know what held back this provision. As the Explanatory Memorandum anticipates, people want to use it immediately. It came into effect this time last year, but it has taken since then for the statutory instrument to come forward. That is probably to be regretted.

Finally, the debate that led to the introduction of the amendment from the noble Lord, Lord Hodgson, was prompted by a clause in the Consumer Rights Act, with which the House engaged this time last year, relating to opt-in and opt-out arrangements. He explained that third-party litigation funding has had a chance to thrive and grow. He could have mentioned that when we discussed this, we were also interested in the possibility of an alternative dispute resolution approach to a number of the issues that were raised. If there was an ADR approach we would not be seeing so much of this going into the courts, so there would be less third-party funding. Again, I am not looking for a response to that, but it might be noted by the department.

We have a deficiency here. The proposal in the directive was that every sector of our economy should have adequate ADR systems in place. The Government, for their own reasons—we pressed them hard on this—have not gone down that route, so appropriate ADR solutions do not exist in all sectors. Where they exist they have been encouraged, but where they did not they have not been put in place. In retrospect, that might have been a better solution, although of course one can say that in hindsight of many things.

[The Earl of Courtown]

My Lords, I thank all noble Lords who have taken part in the debate: my noble friends Lord Faulks and Lord Hodgson, and the noble Lord, Lord Stevenson. I will deal with the points he raised first—in particular, the procedural issue. I will write to him on that; likewise on the SME 5% share point.

The noble Lord is well known to me regarding commencement dates and such like, as he said, but as far as the directive being implemented later is concerned, in our consultation we proposed to follow standard practice and copy out the directive. Respondents to the consultation highlighted the risks this presented to the UK’s established case law. We listened to these concerns and changed our approach. The regulations do what they need to do to supplement the court rules and case law in order to implement the directive in full. Drafting these regulations has been complex. We wanted to get them right rather than rush them through.

I understand the concerns of my noble friends Lord Faulks and Lord Hodgson. I welcome their questions on whether the Government could have used the implementation of the directive to bring forward proposals for a regulatory framework. The damages directive does not include measures relating to third-party litigation funding. Taking any action through these regulations would be going beyond the powers we have to regulate. The Government are not persuaded that any changes to the regulation of third-party litigation funding are warranted at this time. However, the Government will keep this matter under review as the market for third-party funding develops, and are ready to investigate further should the need arise.

My noble friend Lord Hodgson mentioned that the introduction of opt-out in private actions has led to the increase in third-party litigation funding. Opt-out collective actions were introduced to encourage more consumers to seek redress. During the introduction of these actions, the Government put in place measures to deter claims at the Competition Appeal Tribunal whose aim was to make money for litigation funders.

My noble friend also mentioned that there are no safeguards in relation to third-party litigation under the CRA. The Competition Appeal Tribunal has powers to ensure that, first and foremost, consumers have access to damages awarded following opt-out competition claims. For example, under CAT controls, the assumption is that residual money that is not claimed by the consumers will be given to charity.

I thank my noble friends Lord Faulks and Lord Hodgson for raising their concerns about the impact of third-party litigation funding. The last Government accepted the recommendation of Lord Justice Jackson that a voluntary code of practice be agreed. This work was undertaken by the Civil Justice Council, and the code came into force in 2011. Although the Government have not done a formal review of the effectiveness of third-party litigation funding, they have said that they will keep this under review, as I mentioned earlier. If noble Lords have particular concerns, I urge them to set these out in writing and I will ensure that they are passed on to the Justice Minister.

The Government are committed to reviewing the operation of the regime covering private actions for competition damages by the end of March 2019. I have heard noble Lords’ concerns, but the government position is clear, and it would not have been possible to use the damages directive as a vehicle for this issue. I ask my noble friend to withdraw his amendment to the Motion.

In closing, I stress that, as I mentioned in my opening speech, the statutory instrument contributes further to the recent major reforms to consumer and competition law introduced through the Consumer Rights Act 2015. It will make it easier for consumers and businesses to bring private actions for damages where they have suffered loss as a result of breaches of the competition prohibitions set out in Chapters 1 and 2 of the Competition Act 1998 and in Articles 101 and 102 of the Treaty on the Functioning of the European Union. I commend the draft statutory instrument to the House.