Small Business, Enterprise and Employment Bill (HL Bill 103)

(5) The Pubs Code may require pub-owning businesses to provide parallel rent
assessments in relation to their tied pub tenants in specified circumstances, and
in connection with such provision may —

(a) confer on the Adjudicator functions in relation to parallel rent
5assessments,

(b) require the payment of a fee by tied pub tenants to the Adjudicator in
connection with the exercise of those functions, and

(c) make provision corresponding to that mentioned in subsection (4)(c),
(d) and (e).

43 10Pubs Code: market rent only option

(1) The Pubs Code must require pub-owning businesses to offer their tied pub
tenants falling within section 70(1)(a) a market rent only option in specified
circumstances.

(2) A “market rent only option” means the option for the tied pub tenant—

(a) 15to occupy the tied pub under a tenancy or licence which is MRO-
compliant, and

(b) to pay in respect of that occupation—

(i) such rent as may be agreed between the pub-owning business
and the tied pub tenant in accordance with the MRO procedure
20(see section 44), or

(ii) failing such agreement, the market rent.

(3) The Pubs Code may specify—

(a) circumstances in which a market rent only option must or may be an
option to occupy under a tenancy;

(b) 25circumstances in which a market rent only option must or may be an
option to occupy under a licence.

(4) A tenancy or licence is MRO-compliant if—

(a) taken together with any other contractual agreement entered into by
the tied pub tenant with the pub-owning business in connection with
30the tenancy or licence it—

(i) contains such terms and conditions as may be required by
virtue of subsection (5)(a),

(ii) does not contain any product or service tie other than one in
respect of insurance in connection with the tied pub, and

(iii) 35does not contain any unreasonable terms or conditions, and

(b) it is not a tenancy at will.

(5) The Pubs Code may specify descriptions of terms and conditions—

(a) which are required to be contained in a tenancy or licence for it to be
MRO-compliant;

(b) 40which are to be regarded as reasonable or unreasonable for the
purposes of subsection (4).

(6) Provision made under subsection (1) must include provision requiring a pub-
owning business to offer a tied pub tenant a market rent only option—

(a) in connection with the renewal of any of the pub arrangements;

(b) 45in connection with a rent assessment or assessment of money payable
by the tenant in lieu of rent;

(c) in connection with a significant increase in the price at which any
product or service which is subject to a product or service tie is supplied
to the tied pub tenant where the increase was not reasonably
foreseeable—

(i) 5when the tenancy or licence was granted, or

(ii) if there has been an assessment of a kind mentioned in
paragraph (b), when the last assessment was concluded;

(d) after a trigger event has occurred.

(7) The Pubs Code may specify what “renewal” means in relation to a tenancy or
10a licence for the purposes of subsection (6).

(8) In subsection (6) “pub arrangements”, in relation to a tied pub, means—

(a) the tenancy or licence under which the tied pub is occupied, and

(b) any other contractual agreement which contains an obligation by virtue
of which condition D in section 68 is met in relation to the premises.

(9) 15In this Part a “trigger event”, in relation to a tied pub tenant, means an event
which—

(a) is beyond the control of the tied pub tenant,

(b) was not reasonably foreseeable as mentioned in subsection (6)(c),

(c) has a significant impact on the level of trade that could reasonably be
20expected to be achieved at the tied pub, and

(d) is of a description specified in the Pubs Code.

(10) In this Part “market rent”, in relation to the occupation of particular premises
under a tenancy or licence which is MRO-compliant, means the estimated rent
which it would be reasonable to pay in respect of that occupation on the
25following assumptions—

(a) that the tenancy or licence concerned is entered into —

(i) on the date on which the determination of the estimated rent is
made,

(ii) in an arm’s length transaction,

(iii) 30after proper marketing, and

(iv) between parties each of whom has acted knowledgeably,
prudently and willingly, and

(b) that condition B in section 68 continues to be met.

44 MRO procedure

(1) 35The Pubs Code may—

(a) make provision about the procedure to be followed in connection with
an offer of a market rent only option (referred to in this Part as “the
MRO procedure”);

(b) confer functions on the Adjudicator in connection with that procedure.

(2) 40Provision made under subsection (1) may, in particular—

(a) make provision for the tied pub tenant to give notice to the pub-owning
business that the tenant—

(i) considers that circumstances are such that the pub-owning
business is required to offer the tenant a market rent only
45option, and

(ii) wishes to receive such an offer;

(b) specify a reasonable period (“the negotiation period”) during which the
pub-owning business and the tied pub tenant may seek to agree the
rent to be payable in respect of the tied pub tenant’s occupation of the
premises concerned under the proposed MRO-compliant tenancy or
5licence;

(c) require the appointment of a person (referred to in this Part as an
“independent assessor”) to determine the market rent of the premises
concerned in a case where, at the end of the negotiation period, the pub-
owning business and the tied pub tenant have not reached agreement
10as mentioned in paragraph (b);

(d) require that appointment to be made by the pub-owning business and
the tied pub tenant acting jointly or (where they cannot agree on a
person to appoint) by the Adjudicator;

(e) require the Adjudicator to set criteria which a person must satisfy in
15order to be appointed as an independent assessor;

(f) require that the market rent must be determined by the independent
assessor within a specified reasonable period;

(g) specify that the determination of the market rent by the independent
assessor must be conducted in accordance with provisions of
20documents specified in the Pubs Code;

(h) where any document is specified for the purposes of paragraph (g),
refer to the provisions of the document as amended from time to time.

(3) The Pubs Code may make provision for—

(a) the tenancy or licence under which the tied pub is occupied, and

(b) 25any other contractual agreement entered into by the tied pub tenant
with the pub-owning business in connection with the tenancy or
licence,

as they are in force when a notice is given by virtue of subsection (2)(a), to
continue to have effect until such time as the MRO procedure has come to an
30end (regardless of whether any of the agreements would or could otherwise
cease to have effect before that time).

(4) The Pubs Code may, for the purposes of subsection (3), specify the
circumstances in which the MRO procedure is to be treated as having come to
an end.

45 35Market rent only option: disputes

(1) The Secretary of State may by regulations confer functions on the Adjudicator
in connection with the resolution of disputes relating to the offer of a market
rent only option.

(2) The regulations may, in particular, make provision concerning the resolution
40of disputes about whether—

(a) circumstances are such that a pub-owning business is required to offer
a tied pub tenant a market rent only option;

(b) a proposed tenancy or licence is MRO-compliant;

(c) a determination of the market rent of a tenancy or licence made by an
45independent assessor has been made in accordance with the Pubs
Code;

(d) any other requirement of the MRO procedure has been complied with.

(3) The regulations may, in particular, confer on the Adjudicator the function of
determining the market rent of a tenancy or licence in such circumstances as
may be specified in the regulations.

(4) Nothing in sections 48 to 52 applies in relation to provision made by virtue of
5section 43 or 44 but the regulations may include provision which is similar to
that contained in or made under those sections.

46 Review of the Pubs Code

(1) The Secretary of State must review the operation of the Pubs Code for each
review period.

(2) 10The first review period is the period beginning on the date on which the Pubs
Code comes into force and ending 2 years after the following 31 March.

(3) Subsequent review periods are each successive period of 3 years after the first
review period.

(4) As soon as practicable after a review period, the Secretary of State must—

(a) 15publish a report of the findings of the review for that period, and

(b) lay a copy of the report before Parliament.

(5) In particular, the report must set out—

(a) the extent to which, in the Secretary of State’s opinion, the Pubs Code
is consistent with the principles set out in section 42(3), and

(b) 20any revisions of the Pubs Code which, in the Secretary of State’s
opinion, would enable the Pubs Code to reflect more fully those
principles.

47 Inconsistency with Pubs Code etc

(1) The Secretary of State may by regulations make provision about terms of a
25tenancy or other agreement between a pub-owning business and a tied pub
tenant—

(a) which are inconsistent with the Pubs Code,

(b) which purport to penalise the tenant for requiring the business to act,
or not act, in accordance with any provision of the Pubs Code with
30which the business is bound to comply,

(c) which purport to provide that a rent assessment or assessment of
money payable by the tenant in lieu of rent in relation to the tied pub—

(i) may be initiated only by the business, or

(ii) may only determine that the rent or money payable in lieu of
35rent is to be increased.

(2) The regulations may include provision about the effect of a term of a tenancy
or other agreement being void or unenforceable as a result of the regulations.

(3) Regulations under subsection (1) may make provision about terms of tenancies
or other agreements entered into before the date on which the regulations come
40into force.

(4) A term of any agreement between a pub-owning business and a tied pub
tenant is void to the extent that it purports to—

(a) prevent the tenant from referring a dispute to the Adjudicator for
arbitration in accordance with regulations under section 45 or in
accordance with section 48, or

(b) penalise the tenant for making such a referral.

(5) 5A term of an arbitration agreement between a pub-owning business and a tied
pub tenant is unenforceable to the extent that it is inconsistent with—

(a) regulations under section 45,

(b) section 50,

(c) section 51, or

(d) 10regulations under section 51(7).

(6) Subsections (4) and (5) apply to agreements entered into before the date on
which those subsections come into force, as well as those entered into on or
after that date.

(7) The Secretary of State may by regulations make provision about the effect of a
15term of an agreement being void or unenforceable as a result of subsection (4)
or (5).

Arbitration by Adjudicator

48 Referral for arbitration by tied pub tenants

(1) In accordance with the following provisions of this section and section 49, a
20tied pub tenant may refer a dispute between the tenant and the pub-owning
business concerned to the Adjudicator for arbitration.

(2) If the Pubs Code specifies that particular provisions of the Pubs Code are
arbitrable, a dispute may be referred to the Adjudicator only to the extent that
it relates to an allegation by the tenant that the pub-owning business has failed
25to comply with an arbitrable provision of the Pubs Code.

(3) If the Pubs Code specifies that particular provisions of the Pubs Code are not
arbitrable, a dispute may be referred to the Adjudicator only to the extent that
it relates to an allegation by the tenant that the pub-owning business has failed
to comply with any other provision of the Pubs Code.

(4) 30If the Pubs Code does not specify whether any of its provisions are arbitrable
or not arbitrable, a dispute may be referred to the Adjudicator only to the
extent that it relates to an allegation by the tenant that the pub-owning business
has failed to comply with any provision of the Pubs Code.

(5) Where a dispute is referred for arbitration under this section, the Adjudicator
35must either—

(a) arbitrate the dispute, or

(b) appoint another person to arbitrate the dispute.

49 Timing of referral for arbitration by tied pub tenants

(1) This section makes provision as to the period within which a tied pub tenant
40may refer a dispute to the Adjudicator in accordance with section 48.

(2) Except in the case mentioned in subsection (3), the dispute may not be referred
until after the expiry of the period of 21 days beginning with the date on which
the tenant notifies the pub-owning business of the alleged non-compliance.

(3) Where the Pubs Code requires a pub-owning business to provide a parallel
rent assessment within a period of time specified by the Adjudicator, a dispute
which relates to an allegation that the pub-owning business has failed to
comply with that requirement may not be referred until the day after the day
5on which the specified period ends.

(4) In all cases, a dispute may not be referred after the expiry of the period of 4
months beginning with the first date on which the dispute could have been
referred.

50 Arbitration commenced by pub-owning businesses

(1) 10This section applies where—

(a) there is an arbitration agreement between a tied pub tenant and a pub-
owning business, and

(b) the business commences arbitral proceedings about a matter which is,
or which includes, a Pubs Code dispute between the business and the
15tenant.

(2) In this section a “Pubs Code dispute” means a dispute—

(a) which relates to an allegation by the tied pub tenant that the pub-
owning business has failed to comply with a provision of the Pubs
Code, and

(b) 20which the tenant would have been able to refer for arbitration by the
Adjudicator in accordance with section 48 (were it not for the
commencement of arbitral proceedings by the business).

(3) Subsection (4) applies where—

(a) in accordance with the arbitration agreement, the Adjudicator is
25appointed to arbitrate the Pubs Code dispute, or

(b) the tied pub tenant wishes the Adjudicator to be appointed to arbitrate
that dispute, and has given notice to that effect in accordance with
subsections (5) to (7).

(4) The Adjudicator must either—

(a) 30arbitrate the Pubs Code dispute, or

(b) appoint another person to arbitrate that dispute.

(5) Notice under subsection (3)(b) must be given in writing to—

(a) the pub-owning business, and

(b) the Adjudicator.

(6) 35In a case where the arbitration agreement provides for the arbitrator to be
appointed by a person other than the pub-owning business or the tied pub
tenant, notice under subsection (3)(b) must be given within 21 days beginning
with the date on which that person notifies the tenant of the person proposed
to be appointed as arbitrator.

(7) 40In any other case, notice under subsection (3)(b) must be given within 21 days
beginning with the date on which arbitral proceedings commenced.

(8) Section 14 of the Arbitration Act 1996 makes provision about the
commencement of arbitral proceedings.

51 Arbitration: supplementary

(1) Subsection (2) applies where a tied pub tenant—

(a) refers a dispute to the Adjudicator under section 48, or

(b) gives notice as mentioned in section 50(3)(b) that the tenant wishes the
5Adjudicator to be appointed to arbitrate a dispute.

(2) The tenant must pay a fee to the Adjudicator of an amount prescribed in
regulations made by the Secretary of State (except in specified cases as
mentioned in subsection (3)(b)).

(3) The regulations may make further provision as to the fee, and may in
10particular—

(a) specify when the fee must be paid,

(b) specify cases in which the tenant is not required to pay the fee,

(c) specify cases in which the fee is to be refunded to the tenant.

(4) The following subsections apply in all cases where the Adjudicator or a person
15appointed by the Adjudicator arbitrates a dispute.

(5) Except where this Part makes different provision, the arbitration must be
conducted in accordance with—

(a) the rules regarding arbitrations issued from time to time by the
Chartered Institute of Arbitrators, or

(b) 20the rules of another dispute resolution body nominated by the
arbitrator.

(6) The pub-owning business concerned must pay the reasonable fees and
expenses of the arbitrator in respect of the arbitration, except where—

(a) the arbitration follows a referral by the tenant under section 48, and

(b) 25the arbitrator concludes that the referral was vexatious.

(7) The Secretary of State may by regulations make provision in relation to the
costs payable by a tied pub tenant in respect of the arbitration, and the
regulations may in particular—

(a) provide that those costs are limited to an amount prescribed in, or to be
30determined in accordance with, the regulations, and

(b) specify circumstances in which the arbitrator may make an award
requiring the tenant to pay costs exceeding that amount.

52 Information about arbitration

(1) If the Adjudicator appoints another person as arbitrator under section 48(5)(b)
35or 50(4)(b), the Adjudicator may require the arbitrator, or the pub-owning
business and tied pub tenant concerned, to provide information to assist the
Adjudicator in carrying out functions under this Part.

(2) The Adjudicator may enforce the requirement to provide information by
bringing civil proceedings to obtain an injunction.

Investigations by Adjudicator

53 Investigations

(1) The Adjudicator may investigate whether a pub-owning business has failed to
comply with the Pubs Code if the Adjudicator has reasonable grounds to
5suspect that—

(a) the business has failed to comply with the Pubs Code, or

(b) the business has failed to follow a recommendation made under section
56.

(2) The Adjudicator may not carry out an investigation until the guidance
10required by section 61(1) has been published.

54 Investigation reports

(1) Following an investigation, the Adjudicator must—

(a) publish a report on the outcome of the investigation, and

(b) consider whether to use any of the enforcement powers mentioned in
15section 55.

(2) An investigation report must, in particular, specify—

(a) any findings that the Adjudicator has made,

(b) any action that the Adjudicator has taken or proposes to take, and

(c) the reasons for the findings and any action taken or proposed.

(3) 20An investigation report need not identify the pub-owning business concerned.

(4) If a pub-owning business is identified in a report, the business must have been
given a reasonable opportunity to comment on a draft of the report before
publication.

55 Forms of enforcement

(1) 25If, as a result of an investigation, the Adjudicator is satisfied that a pub-owning
business has failed to comply with the Pubs Code, or has failed to follow a
recommendation made under section 56, the Adjudicator may take one or
more of the following enforcement measures—

(a) make recommendations;

(b) 30require information to be published;

(c) impose financial penalties.

(2) Where an investigation concerns two or more pub-owning businesses, the
Adjudicator may decide—

(a) to take different enforcement measures against different businesses,

(b) 35not to take any enforcement measures against one or more of the
businesses.

56 Recommendations

(1) If the Adjudicator chooses to enforce through making recommendations, that
means recommending what the pub-owning business should do in order to
40comply with the Pubs Code, and specifying the time by which the business
should do it.

(2) The Adjudicator must monitor whether a recommendation has been followed.

57 Requirements to publish information

(1) If the Adjudicator chooses to enforce through requiring information to be
published, that means requiring the pub-owning business to publish
5information relating to the investigation.

(2) The publication requirement is imposed by giving the pub-owning business
written notice specifying—

(a) what information is to be published,

(b) how it must be published, and

(c) 10the time by which it must be published.

(3) The Adjudicator may enforce the requirement to publish information by
bringing civil proceedings to obtain an injunction or any other appropriate
remedy or relief.

58 Financial penalties

(1) 15If the Adjudicator chooses to enforce through imposing financial penalties, that
means imposing a penalty on the pub-owning business of an amount not
exceeding the permitted maximum (see subsection (6)).

(2) The financial penalty is imposed by giving the pub-owning business written
notice specifying—

(a) 20the grounds for imposing the penalty,

(b) the amount of the penalty,

(c) the period within which it must be paid, and

(d) how it must be paid.

(3) The pub-owning business may appeal to the High Court against—

(a) 25the imposition of a financial penalty, or

(b) its amount.

(4) Financial penalties under this section are recoverable by the Adjudicator as a
debt.

(5) Financial penalties received by the Adjudicator must be paid into the
30Consolidated Fund.

(6) The Secretary of State must make regulations—

(a) specifying the permitted maximum, or

(b) specifying how the permitted maximum is to be determined.

59 Recovery of investigation costs

(1) 35The Adjudicator may require a pub-owning business to pay some or all of the
costs of an investigation (including any costs incurred in exercising the
enforcement powers) if satisfied that—

(a) the business has failed to comply with the Pubs Code, or

(b) the business has failed to follow a recommendation made under section
4056.

(2) The Adjudicator may require a person to pay some or all of the costs of an
investigation if—

(a) the Adjudicator carried out the investigation as a result of a complaint
by the person, and

(b) 5the Adjudicator is satisfied that the complaint was vexatious or wholly
without merit.

(3) A requirement to pay costs is imposed by giving written notice specifying—

(a) the grounds for imposing the requirement to pay costs,

(b) how much is to be paid,

(c) 10by when the costs are to be paid, and

(d) how they are to be paid.

(4) A person required to pay costs under this section may appeal to the High Court
against—

(a) the imposition of the requirement, or

(b) 15the amount to which it relates.

(5) Costs required to be paid under this section are recoverable by the Adjudicator
as a debt.

Advice and guidance by Adjudicator

60 Advice

20The Adjudicator may give advice on any matter relating to the Pubs Code to—

(a) tied pub tenants,

(b) any organisation representing the interests of tied pub tenants,

(c) pub-owning businesses,

(d) any organisation representing the interests of pub-owning businesses.

61 25Guidance

(1) The Adjudicator must publish guidance about—

(a) the criteria that the Adjudicator intends to adopt in deciding whether
to carry out investigations,

(b) the practices and procedures that the Adjudicator intends to adopt in
30carrying out investigations,

(c) the criteria that the Adjudicator intends to adopt in choosing whether
to use the enforcement powers and which ones, and

(d) the criteria that the Adjudicator intends to adopt in deciding the
amount of any financial penalty under section 58.

(2) 35In addition, the Adjudicator may publish guidance about the practices and
procedures that the Adjudicator intends to adopt in carrying out other
functions.

(3) The Adjudicator may publish guidance about—

(a) the application of any provision of the Pubs Code;

(b) 40steps that pub-owning businesses need to take in order to comply with
the Pubs Code;

(c) any other matter relating to the Pubs Code.