Trade Bill

Lord Stevenson of Balmacara Excerpts

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

[Lord Purvis of Tweed (LD)]

My Lords, I am very pleased to follow the noble Earl, because of his dogged approach on this issue, not only on this Bill but on the predecessor Bill and the Agriculture Bill. I commend him on his work and I will be referring to some of the points he raised, because I was reflecting on them as he spoke.

I shall primarily address Amendments 43 and 44, in my name and that of my noble friend Lady Kramer, and also reflect on what I thought was a very comprehensive speech by the noble Lord, Lord Lansley, and some of the points he raised within it. I have supported Amendment 91 in his name. This was raised at Second Reading by the noble Lords, Lord Hendy and Lord Freyberg, and the noble Earl, Lord Caithness. I commend the noble Lord, Lord Hendy, on the way he introduced this group and on allowing us to have this important debate: it is extremely important for the Bill and for UK trade going forward.

The Minister said, in summing up on Second Reading:

“ISDS is a subject which often causes excitement … I confirm that ISDS tribunals can never overrule the sovereignty of Parliament … There has never been a successful ISDS claim against the United Kingdom, but our investors operating overseas have often benefited from these agreements”.—[Official Report, 8/9/20; col. 749.]


I do not know about “excitement”, but there is genuine concern, which primarily comes down to two areas. One is that it is not clear yet what the Government’s position is on the agreements that are yet to be made, which will be continuity agreements, primarily with Vietnam, Canada, Singapore and Mexico, where, as we have heard in this debate, the European Union agreements have moved beyond ISDS. Can the Minister confirm that, in our negotiations with them, we will have follow-on from the European Union position? The second area of concern is what the Government’s position will be in the longer term. Are we moving away from the position we held when we were in the EU and towards a multilateral system?

I think it is helpful to remember the scale of this issue. It is not a minor issue. Across the European Union member states, more than 1,300 investment treaties have been signed with third countries, in addition to some 200 between EU member states. Non-EU states within Europe are party to more than 500, and we will now be in this category. This is just part of the 3,000 that exist worldwide. Most of these include ISDS provisions and often, as we have heard from UNCTAD—I shall refer to UNCTAD in a moment—it is very clear from the annual reports on the use of ISDS that companies have a view that public policy choices made by Governments will have an impact on their profits, and therefore they will use that ISDS.

The Minister seemed to suggest that the Government are in favour of ISDS because it disproportionately benefits British investors around the world. Statistically, that is true about the use of ISDS, so UNCTAD’s data is interesting. The United Kingdom is the third-highest home state of claimants of ISDS around the world. From 1987 to 2018, in the number of known cases, the UK was third, with 78. As the respondent state, we have had only one. So there have been 78 where we have been the home state and one where we have been the respondent state—so, on one reading, the Minister could be correct that this has been of benefit to British-based operations. But a bit more analysis is required as to what “British-based” means when it comes to some of the commercial operations, and where some of those cases have primarily concerned developing countries.

On the second aspect, it was helpful that the noble Earl raised some of the consequences of Covid-19, because it is not just America lining up. We have had reports that law firms have been studying decisions made by British authorities, including the London Mayor’s decision to close Crossrail construction during the pandemic, during the lockdown. While this was not underpinned by a statutory requirement, it is potentially vulnerable to those seeking compensation under the investment treaty. Will the Minister respond to the noble Earl’s question on how vulnerable the UK is at the moment?

The issue moving forward, as my noble friend Lady Kramer indicated, is that the EU has ratified four agreements with an ISDS mechanism: the Energy Charter Treaty, to which 53 European and central Asian countries are party; CETA, with Canada; and agreements with Vietnam and Singapore. Only the ECT is fully in force; the ISDS provisions in the three others will be implemented after all member states have ratified them. More importantly, those agreements include investment court systems and, last year, the Commission presented procedural proposals for the more transparent ICS for CETA. Can the Minister say what approach we will be adopting in our discussions with Canada? Are we seeking, in our agreement with Canada, an investment court system? These new transparent approaches will allow for mediation, which ISDS has largely overlooked, and an appeal mechanism that will then be binding on the parties. All of this has a public interest test, because they are party to the agreements with regards to the making of public policy, so what is our position on Canada, Vietnam, Singapore and Mexico?

It would, for many, be a fully retrograde step if we were not to seek continuity in those new agreements: it would negate the progress that has been made by the EU moving away from the ISDS system. Why is it progress? Well, as many in this Committee have indicated, it is not just the fact that Parliament remains sovereign—of course it does—but what use is sovereignty if the constraints on using that sovereignty are so significant? It is the chilling effect, as the noble Earl said, that is potentially blocking. We have seen attempts against France, Australia and Canada, all attempts under ISDS and intellectual property disputes, seeking either policy change from the Government, or compensation. Some of those could mean that regulations would have to be changed. This is the point: public policy should be made in the public interest, not in the shareholder interest.

The noble Lord, Lord Lansley, made the point about moving towards the long term. We have included that in our Amendment 43. He may refer to it as “heroic”, but that has never stopped the Lib Dems seeking those aims in the past. However, I think we have some strong supporters in the European Union with this approach, and we had strong support in the United Kingdom. The United Kingdom took part in the Council giving the mandate to the Commission for the negotiations towards a multilateral court system for trade. On 1 March 2008, the Council approved negotiating directives for a convention establishing a multilateral court for the settlement of investment disputes. That was a unanimous decision. The Minister will have to remind me, because I have slightly lost track of which Councils the Government refused to attend after we voted out of the European Union, but I am going on the basis—and he can correct me if I am wrong—that we were part of the unanimity in the European Union to move towards a multilateral court for the settlement of investment disputes. After that mandate was secured with United Kingdom support, discussions started on existing agreements, which we have rolled over, for moving towards an ICS approach rather than an ISDS one. We have rolled over 20 agreements so far. Where there have been elements of ISDS provision, the European Union is looking at them again to move towards a court system. Can the Minister say whether we will do the same?

The benefit of moving towards this is that we will be able to be part of an aligned movement of countries looking towards a more open and transparent approach, and that approach has been taken squarely from the European Union with regard to our colleagues in TTIP. The noble Lord, Lord Lansley, is right to ask this question. This will be a choice for the Government. Because of the transparency in the European Union, we know what the position is. We know what the mandate was. We know what the Government’s position was up until the end of December. We need to know their position now with the agreements yet to come.

Finally, I support Amendment 91 and will be brief on this. The noble Lord, Lord Lansley, is right. Any consequence of taking retaliatory action or imposing sanctions under the WTO—which we will be able to do under our membership of it—will, by definition, and inevitably, be serious and impact our country-to-country relations. As I understand it, we would be able to bring these forward only if we had the previous authorisation of the dispute settlement body at the WTO, having made a public case to it. It seems incongruous to me that we would have made a public case to the dispute settlement body of the WTO for approval but will not be doing the same to our own Parliament to make a decision on the ongoing consequences of the implementation of those regulations. I hope the Minister can clarify that the Government would be open to supporting that aspect.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank all the speakers in this debate. I also echo the thanks from the noble Baroness, Lady Chakrabarti, to the staff for allowing us to get to where we are. We might have had a rocky ride and have missed a few words here and there, particularly the exchange between the noble Baroness and the noble Lord, Lord Lansley, but we are here and we are making progress and we owe them a vote of thanks for keeping us going.

The debate has been rich and the issue has been given a good going over. As the noble Baroness, Lady Chakrabarti, and others have said, my noble friend Lord Hendy spoke powerfully on the key amendment with a huge amount of knowledge. He confirmed that we took the right decision to hold his speech over from last Thursday. It would not have done well to have had the first part last week and the second part today. I am glad we were able to hear it—some of us got it twice, but it was still jolly good—and I congratulate him on that.

--- Later in debate ---

Moved by

[Lord Stevenson of Balmacara]

26: Clause 2, page 2, line 33, at end insert—
“(6A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 6 of Schedule 1), unless the Scottish Ministers consent.(6B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Welsh Ministers consent.(6C) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of a Northern Ireland department (within the meaning given in paragraph 8 of Schedule 1), unless a Northern Ireland devolved authority (within the meaning of paragraph 9 of Schedule 1) gives consent.(6D) No regulations may be made under subsection (1) by a Minister of the Crown, unless they have consulted with devolved administrations on the implementation of international trade agreements.(6E) No regulations may be made under subsection (1) by a Minister of the Crown unless the Minister has laid before Parliament a statement that, in the Minister’s view, the regulations do not undermine constitutional arrangements related to devolution.”

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, Amendment 26 is in my name and I thank the noble Baroness, Lady Finlay, for her support. This amendment would not only require Ministers to consult devolved Administrations in relation to trade matters but would provide a mechanism under which the procedures that flow from trade agreements would be dealt with in consultation, and with their consent. I shall also speak to Amendment 31, which is supported by the noble Baroness, Lady Finlay, and the noble Lord, Lord Bruce. Amendment 31 again deals with the question of consultation and would add a small section at line 40 of page 2 of the current Bill.

Amendment 50, which is also in this group, is a slightly different measure but an important one none the less; again, it is supported by the noble Baroness, Lady Finlay. Here, we try to bring forward for the consideration of the Committee the question of having a joint ministerial committee and the powers that it might need to discuss international trade issues in relation to the interests of the devolved Administrations. Before anyone in the Committee raises the question of whether we are aware of what we are doing, we are well aware that Amendments 26 and 31 deal with continuity agreements but that Amendment 50, being a proposed new clause, in fact points forward to the new free trade agreements in which we hope the Government will be engaged, and would provide a mechanism under which these could be considered in the context of the interests and involvement of the devolved Administrations.

As with all the others in this group, these amendments are about strengthening and protecting our current devolution settlement. In common with most amendments in Committee, they are probing in nature, although I hope it will be agreed around the Committee that they raise rather big issues, some of which overlap with the internal market Bill, shortly to be received in your Lordships’ House. My noble kinsman, the noble and learned Lord, Lord Hope of Craighead, has raised many of the issues covered by these amendments regularly over the years, and I look forward to his contribution later in the debate—although I think that is now likely to be on Thursday. I hope very much that he will be able to attend then.

These amendments stem from the well-known Sewel convention, which has served the country well for many years. But the problem with the Sewel convention, now incorporated into many devolution Acts, is that it covers only primary legislation. It was founded on the principle, however, that UK Ministers would not normally seek to legislate in primary legislation for issues that were not reserved under the devolution Acts. But the question of whether it should or could be made to apply to secondary legislation is still open.

At Second Reading the noble and learned Lord, Lord Hope, asked for clarification, but I am afraid that he did not receive much from the responses at that time. So I hope Ministers will take the opportunity now to be clear why, if the powers, for example, to modify retained EU law are to be used by Ministers in the UK Parliament to amend legislation in devolved areas, there is no mention of this in the Bill or a requirement to consult devolved Ministers, let alone a clear commitment not to legislate without obtaining their consent. These probing amendments give the Minister the chance to resolve these matters, which are of pressing importance given the imminent elections north of the border and in Wales. I look forward to his response.

Amendment 50 takes the argument a step further, post the implementation period, in the sense that we currently have very little understanding of what happens if consultation has been carried out but consent has not been obtained from any or all of the devolved Administrations on any matter, including, of course, trade. I am sure the Minister is aware that this is an important issue in the Internal Market Bill where mutual recognition and non-discrimination issues are the key to the smooth running of our internal sale and resale of goods and services.

We urgently need a means of settling disagreements, one that commands confidence and trust, so Amendment 50 is a probing amendment but it points the way, I think, towards reforming and restructuring the present, informal arrangements for the Joint Ministerial Committee in relation to international trade and gives it powers to approve mandates, receive progress reports and see the final agreements before they are ratified. The amendment is clearly complementary to Amendment 57, which is in my name, which deals with parliamentary scrutiny more generally and which is in a later group. I beg to move.

[Baroness Humphreys (LD) [V]]

My Lords, I begin by apologising for not having been able to take part at Second Reading. Amendment 27, tabled by my noble friend Lord Bruce of Bennachie, to which I have added my name, continues the theme that he and I highlighted at Third Reading of the Agriculture Bill: how we deal with conflict created by power being conferred on the Secretary of State or UK Ministers to make regulations in areas of devolved competence. I make absolutely no apologies for repeating our arguments in relation to the Bill today. It is in many ways similar in its objective to Amendment 26 and other amendments in this group to which noble Lords will be speaking. In essence, we are all seeking recognition by the UK Government of the powers of the devolved Administrations and, at the same time, a mechanism to ensure that their views are sought and taken account of.

In Clause 2, as the Senedd’s Legislation, Justice and Constitution Committee report on the Welsh Government’s LCM on the Bill points out:

“The international trade agreements potentially covered by this provision will encompass a wide range of policy areas falling within the legislative competence of the National Assembly for Wales”—


as it was at the time of writing—

“to include agriculture and fisheries.”

We all understand that the details of devolution settlements can be complex, but as the Senedd’s External Affairs and Additional Legislation Committee acknowledges and clarifies, international relations and the regulation of international trade are reserved matters, but implementing obligations arising from international agreements that relate to devolved matters, to which Clause 2 applies, are primarily the responsibility of the devolved Governments and legislatures. So why are the Government overlooking this?

The Senedd’s LJC Committee is also concerned, as I am, that the powers in Clause 2 (6)(a) allow UK Ministers to make regulations that amend the Government of Wales Act 2006, a legislative provision that is worthy of attention and scrutiny by this Committee as well. These powers, we are assured by the UK Government, will not be used to legislate in devolved areas without the consents of the devolved Governments. This wording, it has been argued, has presumably been used to exclude the devolved Parliaments from consultation. I would be grateful if the Minister will clarify this.

Herein lies another problem for those of us who wish to support and defend our devolved legislatures. Are we to believe those words, “We are assured by the UK Government”? There was a time when a response from a Minister at the Dispatch Box would be accepted as the word of the Government, but experience has shown us that we need to be wary. How easily, it seems, the hard-earned powers gained by the Senedd and the other devolved Administrations can be clawed back by this Government. For more than 20 years, successive Labour, coalition and Conservative Governments have added to the powers of the devolved Administrations, making them the effective legislatures we have today. They crave more powers and, in the case of the Senedd, more Members.

Sometimes Governments can behave in the same way as the very worst of parents in exercising their powers. Domineering and unthinking, they eventually and sometimes belatedly understand that removing rights bestowed on their children leads only to resentment. The best of parents listen to the opinions of their offspring and build a relationship of mutual respect and trust, ensuring that the family remains close. The UK has often been described as a family of four nations, but it is a union that we all agree is most unequal. For many of our citizens, it is a union that is no longer working as well as it could, hence the calls for Scottish independence and a growing openness to the prospect of independence for Wales. Chipping away at the powers of the devolved Administrations only adds to the volume of those calls.

I know how willing the Welsh Ministers are to work co-operatively with the UK Government and the other devolved nations. They have contributed effectively to the development of frameworks in many areas and are content to take that process further. In reacting to the publication of the internal market Bill the Counsel General for Wales, Jeremy Miles, said that the Welsh Government were the first to highlight the need

“to develop a new form of joint governance .... in order to manage the intersection between devolved competence and the internal market”.

His comments are equally relevant to this Trade Bill.

As a signatory to Amendment 27, it has my support. Proposed new subsection (6A) would allow for consultation with the devolved Parliaments in order to obtain their consent to regulations and proposed new subsection (6B) would provide qualified majority voting, ensuring that if more than one Parliament withheld consent the regulations could not proceed. It would provide a mechanism for that co-operation, consultation and consent.