Enterprise and Regulatory Reform Bill

Lord Young of Norwood Green Excerpts

Thursday 31st January 2013 Grand Committee

[Lord Young of Norwood Green]

My Lords, these government amendments, brought forward in response to the DPRRC recommendations, put flesh on the points that we made in respect of the previous group. As we said, we support the introduction of measures to deal with orphan works and believe that extended collective licensing is the way forward. We also want to see the copyright hub being developed, as we have said. These amendments go some way towards ensuring greater clarity over the standards to be set for collecting societies and transparency in how the powers that the Government are taking will operate in practice, and we are happy to support them.

The amendments proposed by the noble Baroness, Lady Buscombe, aim to put more detail into the Bill on how the Government intend to supervise collecting societies and on what might constitute the minimum conditions and procedures that might be required, which would ensure that the Government can step in and require a body to adapt the Government’s standards for collecting societies. I shall listen carefully to what the Minister says in response to the amendments proposed by the noble Lord and the noble Baroness, but at present we take the view that much of what is requested is more appropriate for secondary legislation.

I take the opportunity to say, as somebody who spent a few months of my life dealing with the previous Digital Economy Bill, of which orphan works were a part, but they unfortunately disappeared in the wash-up process, it is nice to know that at long last we seem to be getting near to liberating orphan works for the collective benefit of society as a whole. I welcome the Minister’s comments.

[Viscount Younger of Leckie]

First, I appreciate the general support of the noble Lord, Lord Young of Norwood Green.

On Amendments 34 and 50, there is already provision in the Bill for consultation before the appointment of a code reviewer. We have considered the proposals to put all processes for the appointment of an ombudsman and the implementation of a statutory code on the face of the Bill. However, the Government, together with stakeholders, need to learn how the schemes work in practice and respond as they evolve. This will help us quickly to remedy any unforeseen issues that result in problems or injustices for rights holders. We have considered Amendments 35 to 42 carefully and believe that the term “licensing code ombudsman” more accurately describes the functions of the role. That role is to investigate and determine disputes about a collecting society’s compliance with its code of practice.

On Amendments 43 and 51, as I noted with regard to Amendments 34 and 50, the Bill already makes provision for consultation when appointing a code reviewer. This is important to ensure independence of process. Codes of practice will be subject to specific criteria, which will be set out in regulations subject to consultation. Therefore, the Government do not consider that additional consultation is necessary.

We have spent some time looking at Amendments 44 and 45 on the power to impose sanctions on individual directors. Where it can be demonstrated that a director is responsible for non-compliance with a code, it is only right that they should be sanctioned. The default should not be to penalise collecting society members. The Government agree with the intent behind Amendment 46, which is consistent with the comments made by the Delegated Powers and Regulatory Reform Committee. Therefore we accept this amendment.

On Amendment 47, I confirm that an appeal mechanism will be available for decisions on non-compliance and for any resulting sanction. This was earlier clarified in government Amendment 46B.

Finally turning to Amendment 48, the Government can confirm that these fees will apply only to a licensing body being regulated. If a licensing body adopts a code of practice which complies with the criteria specified in the regulations, no fees arise in connection with paragraph 1 of the schedule. In addition, paragraph 6(2) of the schedule contains a protection for licensing bodies, limiting the aggregate amount of fees payable for administration and operation of the regulations.

I shall respond to a number of questions raised by noble Lords. In her general comments, my noble friend Lady Buscombe raised the code criteria, which should be subject to consultation. Although I may well have covered this in my previous speech, the code criteria will largely be based on minimum standards on which there will already have been consultation. Specified criteria will be part of the regulations and will be consulted on.

In her general comments, my noble friend Lady Buscombe also raised the work done by the collecting societies on self-regulation. The Government welcome the work they have done and what they have achieved. I repeat that self-regulation is the preferred option, but we need a back-stop if it fails, a protection for licensees and members when dealing with monopoly suppliers. My noble friend Lady Buscombe also said that fines should be used only as a last resort. I entirely agree that they should be a last resort. We do, however, need an ultimate sanction, and fines would provide that.

My noble friend Lady Buscombe also mentioned collecting society revenues which are distributed to members, who are affected by fines, instead of giving help to failing collective societies. I agree with her; this is why, if a director is responsible, he or she, rather than the collecting society members, should be held accountable. Finally, my noble friend Lady Buscombe asked what triggers statutory regulation. The provisions for an independent code reviewer, who will independently assess the performance against the code, are the trigger. I hope that I have answered all the questions raised by noble friends and, if not, I will certainly write to them.

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[Baroness Buscombe]

My Lords, Amendment 49 relates to the jurisdiction of the Copyright Tribunal, which we feel needs attention. The Copyright Tribunal is a creature of statute; its powers and jurisdiction are defined in the Copyright, Designs and Patents Act 1988. It has the power to rule on private rights, so we believe that there should be full parliamentary scrutiny for changes to its jurisdiction. Paragraph 7(2) says that regulations may change the jurisdiction of the Copyright Tribunal, but it should be made clear that this is only in relation to the powers in the schedule and not more widely. I am proposing to tighten the drafting accordingly. I beg to move.

[Lord Young of Norwood Green]

These amendments, which relate to collecting societies, are sensible measures. Clearly, the bodies should act in the public interest and it would be outrageous if they did not have rights holders on their governing bodies. I am sure that the Government will say that this is detail for secondary legislation and they may be right, but for what it is worth we support the noble Baroness.

[Baroness Brinton]

My Lords, Amendments 56A and 56B would require the Government to ensure that regulations governing collecting societies required them to have user representation on their governing bodies if they wanted to grant extended collective licences. This is born of frustration with the operation of some collecting societies, which in effect already grant extended collective licences—the CLA, for example.

As has been mentioned, the societies are in a monopoly position. Universities negotiate licences with the CLA for the use of books, journals, magazines and so on. They have no alternative. If they do not like the terms of the licence that they are being offered, the only thing that they can do about it, once negotiation has been exhausted, is to go to the Copyright Tribunal, a very expensive and time-consuming process. If collecting societies are to get extensive new rights to offer licences for works which have not been produced by their members, they should also have new duties to act in the interests of their stakeholders and users and ensure that the public interest is also served.

It is important to bear in mind that a large volume of the work we are talking about here will never have been produced with financial returns in mind. It would be wrong for collecting societies representing these works to seek to maximise the commercial return on this kind of material. They should balance the interests of their members, the majority of whom will want financial return for their work with the interests of the producers of the unrepresented work which may not be financial at all.

These amendments are obviously intended to probe the Government and I will be interested to hear the Minister’s views.

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Moved by

[Lord Young of Norwood Green]

58BC: Clause 70, page 65, line 29, at end insert—
“(1A) A representative of the company’s employees must be consulted in the preparation of any such revision.”

[Lord Young of Norwood Green]

My Lords, I listened carefully to the previous debate because there is a link. I concur with the comments made by my noble friend Lord Mitchell. He referred to investors investing in the company. I shall preface my remarks by saying that so do employees. For the most part, it is the whole of their livelihood, so it is just as important an investment as that made by shareholders. I submit that whether employees feel that they are committed and are working as part of an organisation that values their contribution is relevant to the success or failure of a company. There is also a perception within the company that there is fairness in the remuneration policies that apply.

I am sure that the Minister will not necessarily welcome this amendment, but I would love to be proved wrong. What would an employee representative bring to directors’ remuneration? What would their strategy and policy be? They would bring a different, fresh perspective and one that I would submit many companies need. My noble friend Lord Mitchell pointed out the huge rise in the ratio of top and bottom pay in companies over the past 20 years or so. In some cases, one might argue that there was a justification if they were rewarding success, but in many cases we are seeing failure rewarded just as much as success. In my experience of pay negotiations over a number of years, there was nothing that contributed more to a feeling of resentment than situations where the workers were told that the company could afford only X% for them but, when it came to the pay of directors, they somehow deserved double or treble. The argument is often made that they bring these special skills or talents: I am just as sceptical about this as my noble friend Lord Mitchell.

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[Viscount Younger of Leckie]

My Lords, I concur with the noble Lord, Lord Young, in his interesting remarks that the interests of employees are important as a company cannot excel, or indeed properly function, without a workforce that is committed, motivated and content. This includes being content with their remuneration package in relation to their peers and superiors.

I should also like to pick up the point he raised concerning companies taking into account employees’ pay and their views. He is quite right: in revised remuneration reports, companies will now have to say whether, and if so how, they have taken into account employees’ views on executive pay and policy. In addition, they will have to publish the percentage increase in pay of the chief executive officer and that of the workforce, as I mentioned earlier. These will be discussed in more detail when we debate the regulations.

Amendment 58BC would require companies to consult an employee representative if they propose to change their remuneration policy before the next AGM. The Government agree with the view that it can be useful for companies to engage with their employees when considering directors’ pay. It is important that remuneration committees make their decisions based on a broad range of reliable and robust information. We know that some companies are already doing this and we want to encourage more to do so. That is why we have proposed that, in their annual remuneration reports, companies disclose whether, and if so how, they have sought employee views. They must also say how they have taken employee pay into account.

We also encourage employees to take up existing mechanisms to air their views, such as information and consultation arrangements, employee representative committees and works councils. However, we do not believe that it is necessary to create a statutory duty to consult employees on this matter. It is up to companies and their shareholders to decide whether, and if so how, to go about it. I therefore ask the noble Lord to withdraw Amendment 58BC.

[Lord Young of Norwood Green]

I thank the Minister for his comments, some of which I found helpful. I will read the points he has made carefully in Hansard. Some of them were a step in the right direction and we will consider whether they have gone far enough. I beg leave to withdraw the amendment.

Amendment 58BC withdrawn.