Competition and Markets Authority: Legislative and Institutional Reforms

Baroness Bowles of Berkhamsted Excerpts

Wednesday 8th May 2019 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I too welcome this debate and thank the noble Baroness, Lady Hayter, for securing it. It is a pleasure to follow the noble Lord, Lord Tyrie, and I recommend his speech at the Social Market Foundation earlier today, which I attended. I declare my interest as a director of the London Stock Exchange plc.

The proposals of the noble Lord, Lord Tyrie, are part of a wider review of the competition regime, and the consumer focus also fits with the direction of travel of the inquiries into the FRC and audit, and growing concern over the power of large companies, especially in services, along with new business methods and contracts and new types of dominance and oligopoly, as the noble Lord, Lord Whitty, said.

If there is a generic flaw in the state of our laws concerning companies, it has been in expecting that the public good, or the consumer, can be served in a derivative manner—for example, by promoting competition for the benefit of consumers. It cannot be presumed that competition always serves the public well, when bad practices can be market-wide and indeed driven in that direction by the need to compete. Therefore, I welcome suggestions to have consumer protection powers that mirror those in competition and that, for both consumer protection and competition, the procedures should be capable of collecting more and earlier information and of being swifter in delivery and more effectively enforced.

Given that the noble Lord, Lord Tyrie, has delivered a raft of suggestions and has rightly observed in his letter that further consultation and details will be needed, will the Minister let us know what form of consultation is envisaged? Will it be by the Government, the CMA or both, and when? Will all the proposals be progressed together, or can some be done more quickly?

Several of the proposals would align with practice and developments in competition authorities in other countries, where there is already, to some extent, a track record. The UK has been seen as strong in competition matters and, while that might be true on observing state aid rules and permissiveness for mergers—some would say too true—somehow we have got into the position, laid out by the noble Lord, Lord Tyrie, on page 39 of his letter:

“The UK is not only one of the best jurisdictions for companies to defend a competition case; it is one of the best jurisdictions to lose one”.


That is because the review system allows opening up of the whole case, allowing new evidence even if it could have been submitted sooner to the competition authority. That is not the norm for competition cases in other countries.

Further, our system allows setting aside of remedies until the end of the review, for which procedures have become overly long and have departed from the written procedure that was originally envisaged. If a company loses a case, although the fines available match those in other competition authorities, at 10% of global turnover, the amounts levied have ended up being much lower. With some types of business, the length of the investigation, added to by any review and deferment of remedy, can be sufficient for the company to benefit substantially, taking a substantial market share or playing a part in distorting business practices by establishing new norms or even completing the whole chain of the value cycle in that business. Then, if the fine is small, it can become a price worth paying.

It is a tough call for a regulator to ask simultaneously to have more powers and to prune the scope of legal appeal, but in this instance a good preliminary case to do that has been made. I have some sympathy with the point made by the noble Baroness, Lady Neville-Rolfe, about doing the investigation and being the judge, but that does happen with other regulators as well. What irritated me even more when I had oversight of competition in the EU was the lack of transparency, in terms of not being able to find out what was going on, sometimes even for the business that was under examination—that drove me to go to Luxembourg, to the ECJ, and to sit through the Microsoft tying and bundling case. Actually, I thought the judges did a very good job of digging out the facts, but without that I would really not have had a good understanding of what had been going on, and the public are often left not knowing what has gone on.

Most of the other proposals have two common threads. The first is making the consumer interest specific and stand-alone, enabling bad practice to be dealt with, whether or not it has a competition aspect, and making procedures and remedies the same as under competition cases. I will take a great interest in how that progresses and will measure it against the Australian law of unconscionable conduct in commerce. As I have suggested before in debates about corporate liability, it would be a good idea to have some similar catch-all available in our law. I want all bad behaviour in commerce to be caught, certainly for consumer protection but also between other organisations or businesses.

The second thread is enhanced powers, applicable for both consumer and competition matters, ranging from greater information-gathering powers to more flexible procedures regarding market studies and investigations that do not tie into an inevitably long timetable. This is important considering the speed and innovation of modern business, particularly in the digital age. But how “Get it done quickly” is to translate into law while allowing thoroughness will need some care, more resources and rapid appointments to panels.

The idea of having a Financial Services and Markets Act Section 166-type inspection, paid for by the company, is floated as a possible additional tool and a way of getting expertise. This idea was put forward in the context of the Kingman and CMA reviews of the FRC and audit, and it pops up here as well. It needs examination as to how and when it would be used so that it does not get out of hand, as did the monitoring trustee arrangements that the EU Commission put in place for Microsoft. I recall criticising that arrangement for creating a “Microsoft regulator”, and in fact the Commission lost that part of the case at the ECJ. We therefore need to examine whether, because of the nature of business, it has got to a situation where we are saying that we need to create mini internal regulators, but Section 166 may have become overly fashionable.

I agree with requiring more individual responsibility, and that must cover senior managers and executive committees, not just boards. I am pleased to see the suggestion of more use of director disqualification; again, I have recommended several times that when there is a serious finding in business governance and culture, there should be an automatic review of whether the directors should be recommended to the courts for disqualification. It is possible for the Secretary of State to instigate investigations, but that should be kept for special cases. In general, it should not have to rely on government intervention.

I concur with other noble Lords that this is a robust set of proposals, and they have my support and that of these Benches.

International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019

Baroness Bowles of Berkhamsted Excerpts

Tuesday 12th March 2019 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I have followed IFRS for some significant time, and it was part of my remit as chair of the Economic and Monetary Affairs Committee of the European Parliament. I also declare an interest as a director of the London Stock Exchange plc. Not only does that entity use IFRS, it is also a benefit for international companies to be able to list and report in IFRS or other standards deemed equivalent to UK standards. Having said that, my experience with IFRS has taught me to be wary of its limitations.

This is a very important statutory instrument because it is about the accounting standards under which companies prepare their financial reports, and of course those financial reports are audited using those standards and form a key part of annual reports. IFRS therefore plays a key role in audit and the standard of audit, and it will not have escaped your Lordships’ attention that audit, audit regulators and auditors have been or are coming under scrutiny in inquiries by Kingman, the CMA, Brydon and the BEIS Select Committee.

One of the lesser realised things about IFRS is that it is meant only for group level consolidated accounts, its purpose being international comparability. It is only for group level consolidated accounts that there is an EU requirement. A recent article published on 8 February this year by Nick Anderson, a member of the International Accounting Standards Board, states:

“it is important to remember that IFRS Standards, if only because of their international nature, cannot reflect in detail specific requirements of the multitude of different capital maintenance regimes among the more than 140 jurisdictions that now require the use of our Standards”.

However the UK, under the FRC, has gone further and converted UK GAAP into IFRS-like rules. An interesting impact assessment from the FRC, published in March 2013, explains:

“The FRC is issuing FRSs 100 to 102 (the Standards) following extensive consultation to move current Financial Reporting Standards (current FRS) towards an IFRS-based framework”.


The rest of the impact assessment looks rather more like a business plan for the big four, and, of course, we know from the Kingman review that the FRC is a captured regulator that was designed to take account of the companies and professions that it regulated.

IFRS tends to flatter accounts—the accounts of stakeholders—because it allows the inclusion of unrealised profits. It is this expansion of the conceptual framework of IFRS into company-level accounts—which continue to be updated as IFRS is updated—that has distorted UK financial reporting and made it depart from company law, which requires a prudent approach not a neutral one, and is central to the ongoing inquiries concerning audit.

Why do the public think they have been let down by auditors and had no warning? Auditors have followed a righteous-by-process approach of “true and fair according to accounting standards”, which has always been the FRC’s touted recommendation. The FRC has always wanted to get rid of parts of company law that it does not like. It wrote to the DTI in 2005 saying, “In short”, the Accounting Standards Board,

“is firmly of the view that outmoded and costly company law rules must swiftly be brought up to date”.

Against that background, it has taken a fair bit of campaigning and interrogation to get fulsome recognition that the company law true and fair test is an overarching requirement. From watching the evidence heard in the BEIS Select Committee from auditors, the fact of separately complying with company law seemed lost on most of them, yet it is in the Companies Act.

So I am grateful for the clear statement made by the noble Lord, Lord Henley, in reply to my Written Question HL13690. I am sorry it is one of 96 such Questions in and around these kinds of issues, but it has done a lot of good so far. Anyway, the Answer states:

“The true and fair test in section 393 of the Companies Act is the overarching test that is applied to a company’s annual accounts. If a company produces accounts, in accordance with the legal requirements, which are inconsistent with the Companies Act requirement to give a true and fair view, then the directors must depart from the accounting standards to the extent necessary to give a true and fair view. Particulars of any such departure, the reasons for it and its effect must be given in a note to the accounts.


The IAS Regulation (EU Regulation No. 1606/2002) includes requirements to consider the accounting standards system as a whole. Article 3(2) of that Regulation provides that a new form of international accounting standard can only be adopted if it is not contrary to the principle that an undertaking’s accounts must give a true and fair view of the undertaking’s assets, liabilities, financial position and profit or loss. This requirement ensures that no new form of international accounting standard is adopted for use in the UK if the application of that standard would lead to companies in general contravening the true and fair test”.


As I said, I thank the noble Lord for the comprehensive reply.

This statutory instrument will replace the EU regulation, but two things are clear from the noble Lord’s reply: company law has an overarching true and fair test; and the true and fair principle applied in the endorsement process does not replace the company law test. Would the Minister confirm that I have stated that correctly and that the true and fair principle requirement in the UK endorsement process does not replace the Section 393 company law true and fair test? That is an essential statement in the context of how financial reporting and audit must be conducted for me to approve these regulations. It is a little pedantic, but some may say that this is a new law compared with the EU one that previously applied.

The second major part of this SI is about who we can trust to be in charge of IFRS standards, both in the UK and representing the UK in international discussions, because the instrument provides the Secretary of State the ability to delegate that decision-making and representation to a new body, named in the Explanatory Memorandum as an endorsement board to be hosted within the FRC.

I do not know when the SI was drafted, but perhaps it is unfortunate that it does not take account of the Kingman report into the FRC, which yesterday the Secretary of State confirmed would be followed. The search for the new chair and deputy has started as part of a process that has to lead to a change of culture, new terms of reference including the public interest, and the ending of self-regulation and cosy relationships with stakeholders consisting of the very companies, entities and professions to which regulation from the FRC applies.

The Explanatory Memorandum states that the endorsement board is being set up as a subsidiary body. The noble Lord, Lord Hodgson, has already drawn attention to the fact that it appears that that process is well under way. In any event, it seems that the setting up of a new and independent regulator requiring legislation would also take a certain amount of time. However, Kingman also said that there should be various immediate changes. As well as a change to the FRC leadership, he specified improvements to the FRC’s internal systems and controls, including a centrally managed complaints procedure. I am not sure how that is going because I am still seeing reports of aggressive and threatening letters from solicitors being sent to complainants. That is not the culture or central procedure that I want to see.

Kingman also recommends applying the provisions of Managing Public Money and applying the Regulator’s Code, the Freedom of Information Act and the Public Contracts Regulations. There is little evidence that that has yet been done, and there is nothing much in this statutory instrument, other than FoI, to ensure that the body receiving delegated powers is compliant with the list of things that Kingman has recommended.

I will not repeat what Secondary Legislation Scrutiny Committee’s Sub-Committee B has said, other than to recognise that it has made the point that the Secretary of State will need to be confident that the FRC is in an appropriate condition to be able to host the new body properly. In paragraph 11 of Sub-Committee B’s report, there is an explanation of the work that BEIS is doing with the yet-to-be-reformed FRC to build capacity to set up the new endorsement board. The usual stakeholders have been consulted. It looks as though they are the same ones that it is recommended the FRC gets less attached to—businesses which are the bodies to be regulated and their advisers. At a guess, might that happen to include the big four? I am not quite sure what the robust transparency provisions that the stakeholders have helped with are. The paragraph states that the SI includes the “long term public good”, but that comes from the EU regulation, not stakeholders, and anyway it refers to the standards, not the endorsement body.

The unreformed FRC will be in an oversight position, but the policy intention—it is just an intention; it is not written in the legislation—is that the chair and board members will be operationally independent. What does that mean if there is oversight from somewhere else? What does it mean if there are HR processes, which I would take to mean recruitment of the people on the board? Where is the public input? Where does it charge the body rather than the standards with the public interest? When is the FRC applying the public interest recommendations from Kingman? Will delegation be deferred until then, and, in any event, has not the setting up of the endorsement board already been influenced in the old and suspect way? The whole project seems to have been rushed, premature and, I fear, unreformed.

Finally, why hand over important negotiations on UK requirements in IFRS to a regulator that has been so publicly criticised and, despite ongoing efforts, will have a long way to go to free itself from the cognitive capture that is so embedded throughout its organisation?

I understand the sensitivity that tweaking standards can tweak profits, and the UK way is not to have politicians doing standards, but there is the relatively unique circumstance in accounting standards that the profession dominates the standard-setting process. Bankers do not set banking standards and market participants do not set market operation conduct rules, so why should accountants set their own standards? At the very least, the Secretary of State needs to retain the ability to intervene.

In the EU, endorsement and representation power lies with the Commission, and the Parliament also has a veto. I do not see why in this instance, because there is this unusual circumstance of accountants setting their own standards, there should not be the intervention of some kind of Secretary of State and parliamentary procedure. Yet again, I find that Australia appears to be doing things better, because that is just what it has done. I would say that, if it is good enough for Australia, it is good enough for the UK.

--- Later in debate ---

We are obviously going to debate these matters in considerably greater detail when we get to the other SI that I have promised. As I made clear, this SI deals purely with a no-deal exit. It is important for business to provide it with the certainty that it needs. Other matters can be dealt with in due course as we develop the endorsement board and consider how it should work. I look forward to debating those matters in greater detail with all noble Lords when we come to that SI, just as in due course we will have to deal with the primary legislation required to deal with some other points that will result from the consultation and the report by Sir John Kingman, although that will be some time in the future.

[Baroness Bowles of Berkhamsted]

I have a couple of comments. The Minister referred to this being done under the withdrawal Act, and that is quite correct. There is no problem with the way in which Regulation 7 and things around it operate. That is a copy-and-paste job and exactly what the withdrawal Act provides for. I do not think that that Act requires there to be any delegation or sub-delegation. It enables such things to happen but does not require them. But it is in there and at this stage we are unlikely to resist the statutory instrument going through.

However, given everything that has been said, the next statutory instrument, which is also affirmative, will have to contain constraints and requirements ensuring proper, not-captured behaviour for there to be the confidence to allow it to go through. There is no problem with the Secretary of State doing an endorsement. There are people who can assist and advise, and the Secretary of State can perfectly well organise consultations and those kinds of things, so I would not consider delay of the next stage sacrosanct. Given the whole situation, the nature of this debate and the concerns from all who have spoken, I hope that that message about the next stage can be taken to the Secretary of State. I would be very unhappy about trying to pass something in the next month or so without there being many more safeguards.

[Lord Henley]

At this stage, all I can say is that I note what the noble Baroness has said. Regarding when the next SI will appear—whether it will be in the next month or so—I cannot say, but I will certainly keep her informed and let her know exactly what our thinking is.

Trade Marks (Amendment etc.) (EU Exit) Regulations 2018

Baroness Bowles of Berkhamsted Excerpts

Wednesday 6th February 2019 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, as with earlier instruments on exhaustion and patents, this was debated on 14 January in Grand Committee, where noble Lords raised questions about the consultation and impact assessment process. Noble Lords also put some questions on technical points specific to this SI, seeking clarification on ongoing proceedings, costs and priority dates of pending applications. I repeat my thanks to all noble Lords who shared their time and expertise with the Committee on those matters. I addressed many of the points raised in my letter of 21 January to Members of the Committee. I hope that my answers were helpful and have met the expectations of noble Lords who took part.

The Government have laid these regulations to ensure continued protection in the UK for EU trademarks, thereby providing businesses with maximum security, clarity and certainty. Under current law, businesses can obtain an EU trademark, which, as a unitary right, provides protection across the whole of the EU. When we leave the EU, that protection will no longer extend to the UK. To address this, the Government will create a comparable UK trademark for every EU right that is registered on and before exit day. These comparable trademarks will inherit earlier filing and priority dates recorded against the corresponding EU trademarks and will be fully independent UK rights that can be challenged, assigned, licensed or renewed separately from the original EU trademark. Each comparable trademark will be created automatically and free of charge, meaning that a minimum administrative burden will be placed on rights holders. Those not seeking to hold comparable UK trademarks will be able to opt out by notifying the IPO. The instrument also sets out the Government’s approach for accommodating the 85,000 trademark applications which are pending before the EU Intellectual Property Office on exit day.

A number of technical issues were raised both during and after Grand Committee. Given my answers in my letter to noble Lords, I shall focus on those outstanding concerns which were raised subsequent to my letter. The noble Baroness, Lady Bowles, inquired in Grand Committee about the effect of priority dates on pending applications and compatibility with the Paris convention. I was pleased to have a meeting with the noble Baroness and trademark legal professionals to discuss these and other matters that she raised. At that meeting I clarified that we believe the instrument is compatible with the UK’s obligations under the provisions of the Paris Convention for the Protection of Industrial Property, which contain rules on claiming international priority.

I remain confident that the chosen approach provides the most practical means for preserving the rights of pending EU trademark applications. In respect of issues identified with the conversion of EU trademarks, I have also confirmed to the noble Baroness that such rights will be preserved via provisions contained in the Interpretation Act 1978. A copy of my letter, which addresses the noble Baroness’s concerns on both the Paris convention and conversion rights, will be placed in the Libraries of both Houses. I found our discussions on these two issues most helpful, and was grateful to the noble Baroness for her valuable insight as a trademark and patent attorney. Building on those discussions, I will ensure that her points are reflected in business guidance to be published by the IPO closer to exit day.

In conclusion, these regulations are vital to ensure that businesses do not lose their trademark protection in the UK, and to ensure the continued effectiveness of our domestic trademark system if we do not secure a deal with the EU. I hope noble Lords will support the draft regulations, which I believe provide businesses with clarity and certainty regarding their intellectual property. I beg to move.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, first, I declare my interests. I am a retired European patent and trademark attorney, but, if I were to un-retire, I would find myself among those unfortunates who, going forward, would no longer be able to practise before the EUIPO in respect of trademarks and designs. This matter—that a part of professionals’ representation is cut off—is not one we have discussed before. My noble friend Lord Clement-Jones was interested to hear what the Minister had to say on the issue, and to confirm my interpretation that current UK representatives will no longer be representatives is correct.

This SI largely replicates the provision in the withdrawal agreement, so it is not really a no-deal SI; it is the shape of the SI that will happen in due course—if there is a deal—possibly with some minor changes to dates and other things, but I could not see anything that differed from what one would expect under the withdrawal agreement.

As the noble Lord, Lord Henley, has explained, I had a long meeting with him and officials from the department and the IPO; I thank them very much for their time and for listening to my views and those of some representatives. I apologise to the noble Lord, Lord Adonis, but I did a little secret consultation myself, just to make sure that, being retired, I had not lost the plot. What I wanted was a statement that there would be continuity of rights at the point of Brexit so that, although the SI was internally consistent under UK law—it gave clear instructions as to what our courts would decide—it would also neatly fit within the usual conventions. That required only an assertion, which we have effectively had, that the rights continue—rather than dying and, in some way, being resurrected.

The letter that the noble Lord, Lord Henley, has now placed in the Library, and which was addressed to me on 4 February, is interesting. First, he deals with the priority rights that I discussed in the Moses Room in Grand Committee. The second issue I raised was about an EU trademark application that was refused before Brexit but, under the rules, it can be converted to a national application by applying at the EU end for three months. There was concern that there is no mention of what happened to those applications and to that conversion right. Was is lost or was it not? Some representatives thought that it was lost.

The letter refers to the Interpretation Act, and it is worth pointing out what that Act says. It confirms that an Act that repeals an enactment does not affect,

“any right, privilege, obligation or liability acquired, accrued or incurred under that enactment”.

The letter goes on to say that the EU trademark regulation will constitute EU retained law for the purposes of the European Union (Withdrawal) Act 2018; and that pursuant to the power in that Act, it is repealed and replaced by the UK regulation. This solves the problem. There is a definite assertion here that the right to convert will be retained but the conversion will be done entirely before the UK IPO, instead of starting it off in the EU. This general application of the Interpretation Act would apply to any regulations, not just these; it might be applied to those on patents that we have just discussed. That is one reason why I asked that the letter be put in the Library. It is possible that we contemplated this when we were going round the loop of the withdrawal Act, but I had misplaced it in my mind, and that might be the case for other noble Lords.

I am satisfied that it is “job done” on the confirmation of continuity and the issues I sought reassurance on. I am also grateful to the Minister for explaining that the Government will take into account the various other measures we raised, which are much more to do with practice.

The salient point here is that some 60% of trademark applications are made by individuals for their own businesses, without professional assistance. So it is quite important that the advice the IPO is able to give keeps them up to speed with changes that they might not be aware of, such as that they still have the conversion right and for how long.

There is still a matter to be dealt with: for nine months, there are latent rights hanging about. If you file a trademark application, it might look like the way is clear and then, all of a sudden, it is not, because people want to continue with the one they have under the EU. The question is how the IPO is to deal with notification, so that an applicant knows the full picture before making decisions that might be otherwise prejudicial to their rights when deciding whether to go ahead and have notice sent to people or to withdraw their application. My proposal was that they have to have the right to be able to suspend until that nine-month period is over, if it looks as though there is something in their way. Obviously, this is not a matter for this statutory instrument, but it will turn out to be a matter of concern if a significant number of those 85,000 applications are continued with. From what I can gather, it is likely that more than half will be, so intervening applicants will have a difficult nine months to navigate.

[Lord Stevenson of Balmacara (Lab)]

My Lords, we discussed this SI in some detail in Grand Committee and so there is very little more to be said. The Minister, in his letter of six and a half pages—or is it eight?—covered a number of points also. We have since then had another letter—I have printed it out on my own machine and have it in front of me and so can measure it; it is a page and a half, if he wishes to know the detail—which has added a considerable amount, including the rather interesting extemporary view that the UK Interpretation Act 1978 confirms different powers about these regulations, and which might be of more relevance in some other areas of work that we still have to consider.

We are very lucky to have the expertise of the noble Baroness, Lady Bowles, available to us on this issue. She has been able to keep us right on a number of points. My point follows from hers in that this SI is moving away from simply trying to establish what continuity would mean in the context of a no-deal exit by offering something valuable to those who hold trademarks in the EU and wish to continue business in the UK after Brexit.

Intellectual Property (Exhaustion of Rights) (EU Exit) Regulations 2018

Baroness Bowles of Berkhamsted Excerpts

Monday 14th January 2019 Grand Committee

[Lord Henley]

What I am trying to deal with is the question about how we get a no deal. If there is to be no deal, we want businesses to be in as similar a position to their present one as is possible. I can speak only for the orders that I am dealing with today and tomorrow, but I imagine this will be true of a whole raft of orders coming from other departments. What we are trying to do is put those businesses in a position whereby they can cope as far as is possible with no deal. Meanwhile, as part of the ongoing, sensitive negotiations over the withdrawal agreement—and on this I can assure all noble Lords there will be consultation until the cows come home—we will try to make sure that all these matters can be dealt with. I give an assurance that the IPO has engaged with legal and business stakeholders as far as possible on the drafting of this statutory instrument and what it achieves, and will continue to do so on anything that is needed in the event of a deal—because in the event of a deal, I imagine we will be here again. I look forward to debating these matters with the noble Lords, Lord Warner and Lord Adonis, the noble Baroness, Lady Kingsmill, and others so that we can get it right.

These regulations relate to the no-deal option. We are trying to ensure that in the event of no deal, as with the technical notices we have put out, businesses know what the position will be. Obviously it will be slightly different from where we are at present. That is the inevitable result of no deal. But no deal is still on the table, and until we know that my right honourable friend’s deal has been accepted by another place, I am not in a position to go any further: that is why we want to prepare for the no deal.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I did not come to Grand Committee today expecting to speak on intellectual property. I am here to do financial services but, since I spent the best part of 40 years as a European patent attorney, it is hard not to intervene a little. I remember very well from when I started my training the famous Wella case on exhaustion of rights and parallel imports from the US, and what would happen when we had the single market and exhaustion of rights within the EU. It was a very complicated subject, a wonderful training ground and, I am sure, a huge earner for the lawyers who dealt with it. As patent attorneys, we tended to stay out of things.

[Lord Adonis]

My Lords, I thank the noble Baroness for giving way. Could she explain to the Grand Committee—some of us are not familiar with all the details of this—what parallel exporting is and where the additional costs referred to in the Explanatory Memorandum are likely to arise in a no-deal situation?

[Baroness Bowles of Berkhamsted]

The issue is where something has come from. You could export it under the terms of a licence, but you might have got it from some third country. In the Wella case, it was the US. It became very difficult to determine where the precise shampoo in question had come from and whether it had originated under a legitimate licence or in the US. It could become very difficult to tell when people took off the labels that said where it had come from. Those were the kinds of issues, and I can see that maybe BEIS is trying to avoid replication of some of that vis-à-vis the EEA.

However, the issue of symmetry and asymmetry—which I think is what the noble Baroness, Lady Kingsmill, is referring to—comes up time and again. As a member of Secondary Legislation Scrutiny (Sub-Committee A), I have seen it in, I guess, half the statutory instruments that have come before us. Sometimes you take the symmetrical option, which means you close things down. Where you think the EU’s logical approach will be to close down on it, we close down on it. Then there are asymmetrical cases—which I think this is, and which I think I have seen more of from BEIS—where priority has been given to continuity. The result is that businesses can benefit from knowing where they stand, at least from the UK side, but it may lead to a competitive disadvantage if their exports are not similarly protected. That is an issue.

I wonder why we have a single shot at correcting it in the event of no deal. You could have said that continuity of supply—especially of drugs and so forth—at the point of Brexit is important, and so you will make some provisional means for trade to continue. Then at some point you will have to analyse it and close it down. I have been reading it only very quickly here, but that does not seem to be the approach taken. It looks as if a single shot is fixed in our legislation now, and I think it would give businesses cause for concern. I would have been happier to see some kind of temporary provision put in there, maybe with a sunset clause after three years, by which time we could have sorted things out. Then it would come back in another statutory instrument or in primary legislation for us to say: “Well, okay, what are we going to do? What has the EU done? Have we got some kind of arrangement with them within that three years?” Or are we going to say, “Now we understand a bit better how things have sorted themselves out, we’re going to go for the symmetrical option, not the asymmetrical option”?

I am sure that it is possible within the powers that the Government have given themselves in primary legislation for them to come back and do that, but it would have made things clearer for business and others to have that message put out there in advance, partly to get negotiations going if those were necessary and partly to say, “This is something that you all need to be thinking about”. I would be interested to hear from the Minister how in this instance such arguments have panned out—what has been said on one side, what has been said on the other and whether something is already up the Government’s sleeve to say, “Well, actually, we’ve thought about this and we are going to be coming back in three years’ time”. It would be reassuring to hear that even if in the long term we ended up deciding that it was best to stay with the way this has been adapted now.

[Lord Adonis]

My Lords, with great consideration, the Minister took a number of interventions on his speech and covered quite a number of points. However, a lot of issues are raised by the Explanatory Memorandum and the Commission note of 6 September 2017, which is the position paper on intellectual property rights, including geographical indications, and which the Treasury made available to me for this debate. I want to press the Minister on a number of points.

The section on the general principles under which intellectual property will be handled in a no-deal scenario, on pages 2, 3 and 4 of the note, all the way through uses “should” rather than “will” in respect of the mutual recognition and enforceability of rights. Perhaps I may go through them because these are all very important points. Under the first general principle, which is intellectual property rights having unitary character within the European Union, the paper states:

“The holder of any intellectual property right having unitary character within the Union and granted before the withdrawal date should, after that date, be recognised as the holder of an enforceable intellectual property right … In the specific case of protected geographical indications, protected designations of origin and other protected terms in relation to agricultural products … this principle should also imply that the United Kingdom puts in place, as of the withdrawal date, the necessary domestic legislation … The implementation of this principle should include, in particular, the automatic recognition of an intellectual property right in the United Kingdom on the basis of the existing intellectual property right having unitary character within the Union”.


Under the second general principle, it states:

“Applications for intellectual property rights having unitary character within the Union … should be entitled to keep the benefit of any priority date in respect of such pending application”,


and that, in respect of applications for supplementary protection certificates for an extension of their duration,

“a person should continue to be entitled to obtain in the United Kingdom a supplementary protection”.

This carries on in respect of a whole number of further rights. The Grand Committee and the House would obviously wish to be assured that those rights will continue, but my understanding is that whether they will crucially depends on what our EU partners do in respect of those rights if we leave with no deal. In respect of all these reciprocal rights and their enforceability, I completely understand that the Government are putting in place the necessary changes to UK law for us to do our part to ensure that rights are enforceable and recognised, but where the EU paper uses “should” in respect of all these rights, can the Minister tell us what is likely to happen after the end of May? What situation does he believe will apply if we leave the European Union without a deal?

I am not an expert like the noble Baroness, Lady Bowles, who may indeed be able to give a view on this, but it seems that we have no control over that at all, and that, crucially and solely, that depends upon the action of the European Union itself. These aspirations—which are set out in the Commission paper of 6 September and in the statements the Minister has made to the Committee about there not being an interruption in the recognition and enforceability of these rights—absolutely crucially depend on what the European Union does after the end of March, not just on what we do. Therefore, a vital issue for the Grand Committee and for the House when it discusses these regulations is to know what we expect the European Union to do. If in fact we have no reason to believe that the European Union will continue to play ball in the mutual recognition of these rights and their enforceability, do not all the concerns that my noble friend Lady Kingsmill raised apply in spades? It does not matter whether we agree to all these regulations and do everything that the Government want; all that could be superseded by an inability to have these rights enforced or recognised because the European Union itself will not undertake to do so after the end of March.

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[Lord Henley]

I accept that the noble Lord is right that business would consider a no-deal situation to have major implications. In relation to this issue, I believe that what we have set out in our no-deal regulations will have very little impact. That is the type of clarity that we are trying to give business.

[Baroness Bowles of Berkhamsted]

The point about the impact assessment concerns me. The noble Lord, Lord Bates, who is eagerly awaiting our later exchanges, knows that I have been here before. Forgive me if I am paraphrasing the Minister, but what seems to have been said is that, when the impact assessments are done, they relate to the impact of the legal instrument. That impact is often deemed to be relatively minimal. However, if you deal with the consequences on business of the legal instrument, the impact is much larger. I always thought that the whole point of impact assessments was that they dealt with the predictable consequences. The regulations that we are dealing with may be simple to understand, because there is not anything for business to do, but their impact means that businesses may have to compete on an unlevel playing field. There is a direct consequence of the legal instrument but that would appear to be excluded. That does not really seem to be the right way in which to measure it.

Maybe as a relative newcomer, I cannot start saying, “You’ve got to do your impact assessments differently”, but this issue needs to be looked at in the round because it can be used in a completely disingenuous way. I know it has been churned out this way under pressure, but this could continue throughout every statutory instrument, whether it is to do with Brexit or not. It is a laughing stock, really. I think about how some MEPs used to criticise EU impact assessments, but I never found anything that was just to do with the assessment of the legal instrument; they always dealt with consequences. So why do ours not?

Patents (Amendment) (EU Exit) Regulations 2018

Baroness Bowles of Berkhamsted Excerpts

Monday 14th January 2019 Grand Committee

[Lord Adonis]

In the want of a better solution, I shall recommend to the Government that my noble friend Lord Foulkes should take this on, because on the basis of the debate that we have had so far, we will not have confidence that this procedure will be conducted unless there is an impartial referee to see that it has taken place.

I turn to a new issue of substance in the regulations. Many Members of the Grand Committee will have been briefed, as has my noble friend Lord Warner, by those directly concerned by the issues raised in the regulations and whether, as the noble Lord, Lord Henley, said, they do indeed make minimal changes to the existing regime, allowing for the fact that we are in a no-deal situation. I draw the Grand Committee’s attention to and ask the Minister to respond to arguments being put before Members by Bristows, a law firm which specialises in patent law. It has raised a serious concern about the regulations, specifically the adjudication mechanism. I set that concern before the Grand Committee and hope that the Minister will respond.

Bristows states that the amendments have potential ambiguity in the following respects. They provide that a declaration of invalidity of a supplementary protection certificate may be submitted to the “comptroller or the court”, in the words of the regulation, with the court being the Unified Patent Court if the basic patent is subject to the Unified Patent Court’s jurisdiction under Schedule 4 to the Patents Act 1977. However, under Schedule 4, the UPC has exclusive jurisdiction for invalidity actions of a supplementary protection certificate based either on a unitary patent or a European patent. Therefore, Bristows argues, the court referred to in the context of the “comptroller or the court” in the draft statutory instrument, when interpreted in the light of the Patents Act 1977, will, for those supplementary protection certificates, be the Unified Patent Court.

Further, as stated in Schedule 4 to the 1977 Act, the Unified Patent Court should have exclusive jurisdiction in such cases. “However”, Bristows asks,

“what is the impact of the reference to ‘the comptroller’ in the expression ‘the comptroller of the court’? Does this leave this national UK authority … with jurisdiction as well as the UPC? The natural meaning of the Statutory Instrument … suggests that there remains additional jurisdiction in the hands of the Comptroller as well as the Court … even if this was not intended. In consequence, it may remain possible for SPCs based on unitary patents to be invalidated in the UK”.

This looks to be a serious concern. I freely confess to the Grand Committee that, not being a patent lawyer myself— my noble friend Lady Kingsmill is, so she may be able to add to this—I do not entirely understand the impact of this concern, but Bristows believes it may be serious. The Grand Committee would be very grateful for an answer to Bristows’ concerns when the Minister replies. If he cannot give one in detail today, perhaps he can include it in his written response to Members of the Grand Committee after the debate.

[Baroness Bowles of Berkhamsted (LD)]

Maybe I should start with the last thing; I understand the point but I have not investigated it myself, so I cannot say whether it is a concern or not. However, the gist of it is that if something is a unified patent it should go to the Unified Patent Court if and when that continues, and, if it is a UK matter, it should be a matter for the UK.

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[Lord Henley]

I think that the noble Lord would not expect me to respond quite as positively as he wishes. It might be an overuse of paper to write to every Member of the House. I will write to the noble Lord and other appropriate Peers, and make sure that a copy of my letter is, as always, available in the Library. The noble Lord and I understand that procedure well. A copy of this debate will be available in Hansard. Even if it is not the same Hansard in which reports of the Chamber appear, I understand that it is still Hansard and open to all noble Lords to read. If we want to be really modern about these things, it is also available for the noble Lord to read online.

[Baroness Bowles of Berkhamsted]

I have two points before the Minister sits down. First, I do not think he replied to my point about whether there was any intended alignment with the supplementary protection certificates and parallel import points. The Minister may wish to come back to me on that. Secondly, the unified patent court and its relationship to the ECJ has been mentioned. That is inevitable. The unified patent court is an international court. The European patent is not an EU invention—it is external to it—but it has been agreed under the convention to which the UK is a party that it recognises the judgments of the ECJ. As I understand it, our own Intellectual Property Office would therefore have to take those judgments into account. Whatever convolutions there may be, we will not get away from the influence of ECJ decisions, whether or not the unified patent court comes into being.

[Lord Henley]

My Lords, I will write to the noble Baroness on both those points.

Trade Marks (Amendment etc.) (EU Exit) Regulations 2018

Baroness Bowles of Berkhamsted Excerpts

Monday 14th January 2019 Grand Committee

[Lord Adonis]

He has not sat down, in the sense that he is perfectly capable of answering a question before he concludes his remarks.

He again has not dealt with the question of consultation, which as he knows is of huge concern to the Grand Committee. We would be grateful if, before we come to our debate, he could set out what consultation has taken place, so that we can discuss whether we think that consultation has been adequate.

[Baroness Bowles of Berkhamsted (LD)]

One small point struck me, not having looked at this before we commenced proceedings. I fully understand the transfer of the pending applications and the ability to file a new application and have it allocated the earlier filing date that the European trade mark had. I do not see any legal difficulty with that, but I wonder if there is a legal difficulty in allowing that to claim the priority date of the EU trade mark, in the sense that it would operate under the Paris Convention, which we and many other countries are party to. I used to take great pleasure in reminding the EU that the Paris Convention of 1883 predated the EU treaties and that they sometimes could not do things. But I wonder whether there has been any advice on that, because there is a discontinuity.

To take a parallel example, in the United States, if you file a continuation in part, there are careful rules so that you can ensure that the priority claim can go all the way through in a continuous way. I wonder whether, through the changing from a European office to the UK office, there is a discontinuity here that would mean that priority date was challengeable. If there was a later priority date UK-only national application from an applicant not from the United Kingdom but from another country that was party to the Paris convention, would there be a clash of rights? It is a question that should appeal to lawyers looking at these things. I cannot answer it without having a longer think, so I am asking the Minister whether he can advise me what advice he may have had on that.

[Lord Clement-Jones (LD)]

My Lords, my noble friend has asked an important technical question, given her long-standing expertise in this area. As with the patent statutory instrument, this does appear to be a solution for trademarks, or to take advantage of the European community trademark. It appears to be a solution devised not just for a no-deal situation, but with a deal or the transition period in mind as well. Again that gives this particular statutory instrument a greater significance because it might be there for some considerable period of time in the event that a deal was reached. Moreover, as the noble Lord, Lord Adonis, has pointed out, similar issues regarding consultation and the impact assessment arise in connection with this statutory instrument as well.

It was interesting to hear what the noble Lord, Lord Deben, had to say about the difference in wording between the different Explanatory Memoranda. Asking a,

“small group of trusted individuals with expertise in trade mark law”,

almost means that the question is asked of people who are not going to give you the wrong answer.

Quite frankly, the really important aspect of this is the impact on business. On the impact assessment, the homework has been done in such a way that it answers the question by bringing the impact under £5 million. I cannot believe that that will be the total cost to business once you have added together all the issues such as the legal advice that will need to be taken and the red tape involved. I know this is a solution that is designed to be constructive but there are inevitably going to be costs. Frankly, the importance of brands being what it is, the actual costs involved to business are going to be quite high. I cannot believe that the figure is not going to be higher than £5 million.

The same issues apply to this statutory instrument as much as they do to some of the earlier ones. However, there are other technical questions. My noble friend has asked one set about the priority date, but another important question is which court will have jurisdiction if the validity of the original EU trademark is challenged in the future. We cannot leave business in a state of uncertainty. Then of course the UK trademark comparable right will be a stand-alone right. Does that mean that in those circumstances an applicant will have to challenge a trademark’s validity both in the UK and in the EU? What is the answer to that? One right derives from another. As a result of that, does someone wishing to demonstrate the invalidity of a trademark have to go to two jurisdictions? If that is not an additional burden on business, I do not know what is.

There are a number of questions to be asked here. We have come back again to the circularity of a quick fix that could have long-term consequences and where the procedure, process, consultation and impact assessment have been grossly unsatisfactory.

Companies (Miscellaneous Reporting) Regulations 2018

Baroness Bowles of Berkhamsted Excerpts

Monday 9th July 2018 Lords Chamber

[Lord Haskel (Lab)]

My Lords, I welcome any attempt to raise the reputation of business and to increase the trust and confidence in business in the eyes of the public, so I very much welcome these regulations, but I wonder how effective they will be.

These regulations require public companies and large private companies to publish pay ratios and other data to show that the directors are taking into account the broader interest of customers, employees and communities, as the Minister has explained. These data are useful to provide more information to enable shareholders to question the directors and, if necessary, to vote at shareholder meetings. But who are the shareholders? Many shares are held by institutions, which are reluctant to act as long as the financial returns are as expected. Frequently they have a limited and sometimes short-term interest in the company. Also, much share trading is carried out by algorithms—and who knows on what formula they base their decisions? There are still many day traders active, and their trading, again, is based purely on numbers. As I understand it, this is the way the majority of shares now change hands.

I ask the Minister: even if the published data leads to naming and shaming, how effective will these regulations be in changing behaviour? I know there is a lot of concern about misleading comparisons between companies, but perhaps we should ask for other data to be published, such as benchmarking data on productivity so that shareholders can compare how well their company is doing in comparison with competitors.

Surely, there must also be concern about the reliability of the numbers. The big four accountancy firms almost exclusively audit for the large companies that are the subject of these regulations; they are also their financial advisers. In their role as financial advisers to these companies, I am sure that they will have lots of schemes to make the ratios look a lot more attractive. This joint relationship has come in for a lot of criticism recently. Is there any sign of any change so that these regulations will become more effective?

I welcome the rules applying to large privately held businesses. Most respondents in the consultation wanted to see more data about these companies and I hope that these regulations will produce it. Generally, I welcome these regulations, but would like to see them widened and made more effective.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I first apologise to the Minister for being caught out—

[Baroness Vere of Norbiton (Con)]

Is it really appropriate that the noble Baroness speaks, given that she was not here for any of the Minister’s introduction of the statutory instrument at all?

[Baroness Bowles of Berkhamsted]

I apologise: I got caught out because I was advised of a rather different timescale. With the permission of the House, may I speak?

[A noble Lord]

Yes, I think you had better.

[Baroness Bowles of Berkhamsted]

Thank you. I notice that I am not the only one who had to run in. I declare my interests, as in the register, in particular as a non-executive director of London Stock Exchange plc. I welcome the provisions in these regulations and will speak mainly about the Section 172(1) report and stakeholder engagement.

Recent events surrounding BHS and Carillion have reminded us, yet again, that it is not just share- holders but the public purse, ordinary workers and pensioners that bear the brunt of corporate failures and misdemeanours. Incorporation and limited liability is a bargain with society, meant to encourage entrepreneurism and growth for the common good. The public-interest side of that bargain has to be upheld. That is the message from the Green Paper responses: 86% and 85% respectively of respondents agreed with steps to strengthen stakeholder voice and governance for private companies.

In fact, looking after the public interest has always been the majority view. I took the time a couple of years ago to go through the evidence in the Law Commission consultation leading up to the Companies Act 2006. It was a minority—a concerted one—who supported “one master, the shareholder”, which then became “enlightened shareholder value”. The majority wanted a more express public-interest requirement, but lost out as they were not co-ordinated around a single suggestion. So here we are again, just as with the creation of the strategic report, trying to fix it again.

I am not sure whether it counts as an interest, but I was the author of the Liberal Democrat response to the Government’s Green Paper, in which I put a long— 32-paragraph—section on interpretation and enforcement of Section 172 of the Companies Act 2006. It included a call for legislation to correct the distortion that has occurred in practice to the intentions of the so-called enlightened shareholder value and for the discharge of the duty in Section 172 to be susceptible to checking and challenge. That is a regulator’s job: they look after the public interest on behalf of the Government, and that matter needs some revision and upgrading for companies.

I doubt that all the deficiencies in Section 172 could be dealt with by secondary legislation, but these regulations are a decent attempt to remedy the fact that the “have regard to” formulation is weak, to the point of being non-existent. I sincerely hope that the 172(1) reporting proves, as I put it, “susceptible to checking and challenge”, and that the perfunctory statements which, in effect, say “we thought about it and dismissed it” are not left unchallenged. I say this also with regard to the requirements in paragraph 13 of Part 3 regarding engagement with employees, suppliers, customers and others. These clarify that there must be not only an explanation of the engagement with employees and wider stakeholders, but statements explaining how directors have performed the “have regard to” requirements and a summary of the effect of that regard on principal decisions. These statements must not be allowed to say “no effect” without substantive reasoning—no getting away with the sort of simplistic, “we take the best person for the job” explanations that have been prevalent on gender equality.

In paragraph 9.2 of the Explanatory Notes, it says that the FRC has agreed to include guidance on how companies should make a Section 172(1) statement. The forthcoming revised corporate governance code will have a “comply or explain” requirement concerning the mechanism of employee engagement, choosing from the three options of a designated non-executive director, a formal employee advisory council or a director from the workforce. I have no problem with having options, and suggest that again, this has to be a “comply or say what you are doing instead that is just as effective” type of comply or explain, not a “we didn’t think it suited our business” type of explanation. Indeed, a weak explanation would seem to offend against the employee involvement provisions in Part 3 of these regulations.

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[A noble Lord]

Too long!

[Baroness Bowles of Berkhamsted]

The time shown on the timer is not all mine.

With regard to employee engagement, I take this opportunity to suggest that it is worth looking at employee-owned businesses—that is, businesses where, alongside some share ownership, employees have a significant say through various different mechanisms. I commend to noble Lords the report The Ownership Dividend, launched at the end of July, which followed a year’s inquiry and, for the first time, substantial collection of UK data. I had the honour to chair the inquiry so I declare an interest. The inquiry showed that many governance problems are solved, including those around wider stakeholders, and that productivity increases when there is employee ownership. So embracing the formal involvement of employees is nothing to shy away from, even if it is not within a formal employee-owned structure.

I have spent some time on the Section 172 and stakeholder matters because they are key to culture. The fact that these regulations need more pages dedicated to executive pay than the other governance matters is itself a sad reflection on corporate and executive culture. I welcome the additional transparency and ratio comparisons; the truth needs to be told, and unfairness and mechanistic escalators exposed. Hopefully, some rebalancing will happen, whether that be through shareholders or shaming.

[Baroness Neville-Rolfe (Con)]

My Lords, I declare my interests as set out in the register, and as a director of companies over a number of years and as a chartered secretary. I will not delay the House, but I am doubtful of the value of some of these changes, which represent micromanagement and/or bureaucracy, and there is a decidedly mixed level of support for some of them, as can be seen on pages 49 to 51 of the impact assessment.

I am a huge supporter of good governance, but it should be geared towards long-term value creation, and in a responsible way. Good companies create value, and the tax-take from such companies—not only company taxes but all the taxes they collect: VAT, rates and income tax—finances our schools, hospitals and public services.

There is no sunset clause but perhaps the Minister can confirm that there will be a review of these arrangements in five years’ time. Further, does he agree that creating long-term value and companies’ contribution to our economy, including productivity, which was mentioned by the noble Lord, Lord Haskel, should form part of that review?

Nuclear Research and Technology (Science and Technology Committee Report)

Baroness Bowles of Berkhamsted Excerpts

Tuesday 17th October 2017 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I congratulate the committee on the report and its apt subtitle, Breaking the Cycle of Indecision. There are excuses for that indecision—public opinion features large—but it resulted in having to make decisions about electricity generation while staring in the face of concerns about a “lights out”, as well as global warming.

The Economic Affairs Committee report on the electricity market is referenced in Chapter 3 of the report we are discussing and, as a member of that committee, it is fair to say that that the effect of indecision played a part in our putting greater emphasis on reliability and security of supply. Nuclear power normally fits into the reliability slot; I say “normally” because of concerns that still flow around Hinkley Point C. The Hinkley build demonstrates all the frustrations that arise from buying in technology. We have analysed and reanalysed Hinkley C, looking at cost penalties and financial risk, while always having to take promises about delivery. Being on the outside of development and intellectual property makes that evaluation very difficult, as well as cutting us out of spinoffs and significant construction jobs.

I have some small personal experience of spinoffs in the nuclear industry. At the start of my career as a patent attorney, I drafted some of the very first European patent applications ever filed. I thought it was neat that they were in the name of Euratom. They were for things from the JET project, but one reason for seeking patents was their technical relevance well beyond nuclear fusion. For other clients, I drafted patents for robotics and communications in the nuclear environment—again, all with spinoff relevance for use in other industries. The combination of ability to evaluate, security of supply for electricity, supply chain and spin-off potential leads me to conclude that there is a strong case for the UK to be a nuclear technology maker, not a nuclear technology taker. That includes the case for SMRs.

The UK already has extensive nuclear commitments, and there have been several debates on the effect of leaving Euratom. At this late hour, I will not revisit the things that I have spoken about before, but we have been told that various options might be negotiated with the EU—perhaps associate membership or something more—although those options might require freedom of movement commitments, as was the case for Switzerland.

I welcome that the Nuclear Safeguards Bill has been published to establish a new nuclear regulator. Can the Minister update us on how preparations are going for the actual setting-up of inspection regimes, given that inspection has to involve international bodies? Having those inspections in place is required before we can make nuclear co-operation agreements.

Finally, as with all things Brexit, businesses want to know what is going to happen. Some cannot wait until 2019 to find out and are making plans to establish themselves in other countries. There was a report just last week on “Sky News”, the gist of which included that, although the Government said there would not be restrictions, industry said there would be. Reasons include, of course, that even where nuclear regulations do not interfere, customs delays and other considerations come into the mix, such as delay for short-lived isotopes trying to get over the border. Unfortunately it is not in the Government’s gift to provide any guarantees other than that they will negotiate hard, and that makes it all the more important to remove uncertainties that the Government can control and show that there are things worth hanging on for. Earlier rather than later commitments to a substantial nuclear sector deal would be valuable. Regrettably, I am not reassured by the 22 February minutes of the Nuclear Industry Council, which record the Government’s high-level expectations for the potential nuclear sector deal as:

“Many important issues such as skills, exports and technology should be considered, with the overarching objective of cost reduction across the industry firmly in mind”.


After mentioning short, medium and long-term objectives and opportunities to enhance the supply chain outside the nuclear sector—it is good that that is there—the minutes end with another call for ideas for cost reduction. Competitiveness is yet again emphasised in the Government’s response to the relevant part of today’s report. While understanding competitiveness, I sincerely hope that the Minister is able to give something a bit more visionary about a nuclear sector deal than the expectation management that these comments suggest.

Euratom

Baroness Bowles of Berkhamsted Excerpts

Thursday 20th July 2017 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I have previously argued that the separate Euratom treaty gave the Government an opportunity and useful alternatives for transition by not triggering Article 50 simultaneously with Euratom. I know that left some institutional untidiness to sort out, but it would have meant both sides looking for the solution, and it is still an option. They are, however, two treaties, so another contingency plan could be to negotiate a Euratom exit independently, especially if there is no main agreement.

Today we are debating, among other things, continuing access to medical isotopes. My noble friend Lord Teverson has explained that the observatory role of the Euratom Supply Agency has been enlarged to cover supply of medical isotopes, with a particular objective of securing supply of molybdenum-99 and technetium-99 —the material used for some 700,000 diagnostic procedures per annum in the United Kingdom—across the EU. We obtain our supplies, as has been said, from several EU countries. We do not have our own reactor facilities or any plan for them, and this gives rise to various considerations.

First, will we still get equal treatment in EU supplies after Brexit, especially if there is an international shortage, which happened before, hence the observatory role? Secondly, past incidents such as the fire in the Channel Tunnel and disruption at Calais have hindered supplies. If we are not in the customs union, delays may be more common, and isotopes are the ultimate “just in time” materials because if they are not delivered promptly they cease to exist. A moly cow generator lasts only two weeks, with material halving every 66 hours, so long delivery times are wasteful. That is why we do not import from faraway places such as Australia or Korea. We are signatories to the international high-level group, but is that enough? Will we try to stay in the EU observatory to secure the EU supply?

Turning to the position paper on Euratom withdrawal, it says that we will negotiate a new voluntary offer agreement with the IAEA to replace those aspects done via Euratom. Has there already been an exchange of documents with the IAEA about the content of that agreement? Are there aspects other than replicating or taking over Euratom safeguarding procedures? Is the transfer of accounting straightforward, and what happens if ownership agreements with Euratom are unsuccessful?

On Monday, we debated the electricity market report from the Economic Affairs Committee, which gives prominence to security of supply—that was without any Brexit consideration. Given that a nuclear fleet is part of our energy future, have discussions started on replacing the nuclear co-operation agreements that presently run via Euratom, in particular with the United States, from where we get a lot of our supplies? Is there a break clause in the EDF contract if any nuclear technology is denied to the UK by France, Euratom or the Commission during the building of Hinkley Point C?

Finally, will the UK fund JET from 2018 to 2020 if the extension to Euratom funding that was being negotiated does not now happen? What would be the effect of not funding that extension on the UK position in international fusion technology?