LIABILITY FOR DEFECTIVE PRODUCTS
| (22199)
6543/01
COM(00) 893
| Commission Report on the application of Directive 85/374 on liability for defective products.
|
| Legal base: |
— |
| |
| Document originated:
| 31 January 2001 |
| Forwarded to the Council:
| 1 February 2001 |
| Deposited in Parliament:
| 12 March 2001 |
| Department: |
Trade and Industry |
| Basis of consideration:
| EM of 10 April 2001 |
| Previous Committee Report:
| None; but see (20429) 10609/99: HC 34-xxviii (1998-99), paragraph 7 (20 October 1999) and HC 23-x (1999-2000), paragraph 4 (1 March 2000)
|
| To be discussed in Council:
| Not applicable |
| Committee's assessment:
| Legally and politically important
|
| Committee's decision:
| Cleared |
Background
3.1 Directive 85/374, which was transposed into
UK law by Part I of the Consumer Protection Act 1987, imposes
strict liability on producers for death, injury, loss or damage
to property caused by defective (that is, unsafe) products. As
a result, people who are injured by a defective product can sue
for compensation without having to prove that the producer was
negligent, if they can prove that the product was defective and
that the defect in the product caused the injury. The Directive
applies to consumer products and products used at a place of work.
Directive 1999/34 of 10 May 1999 amended the 1985 Directive by
extending the strict liability system to primary agricultural
products and game (that is, food sold in its raw state) so that
all food products are now covered.
3.2 In July 1999, the Commission published a
Green Paper[4] as the first
step in reviewing the Directive, as it is required to do every
five years. When we considered this document, we asked to see
the Government's response and to be told of any particular concerns
on the part of business and consumer organisations made known
to the Department. On receipt of the response, in February last
year, we noted that its general tenor was against amending the
Directive.
3.3 The current document summarises the responses
to the Green Paper and sets out the Commission's conclusions.
It is the second report since the adoption of Directive 85/374.
The document
3.4 According to the report, the Commission received
about 100 responses to the Green Paper. These came from four broad
groups: national and European consumer organisations; both sides
of industry; public administrations of Member States and other
European countries; bodies specialising in product liability.
3.5 The Green Paper raised a number of issues
with a view to possible amendment of the Directive. The report
analyses the responses in relation to these issues. Generally,
the difference of views reported to us in February 2000 by the
Parliamentary Under-Secretary of State for Consumers and Corporate
Affairs (Dr Kim Howells) still holds good: businesses consider
that the Directive works well and achieves the right balance between
the protection of consumers and the interests of producers; consumers
disagree. However, the Commission notes that little hard evidence
is provided by either side.
3.6 Given this lack of objective factual information
on which to draw firm conclusions, the Commission concludes that
changes to the Directive would be premature. Instead the Commission
proposes two short-term information-gathering initiatives to enable
it to assess better the need for any improvements.
3.7 The first involves the establishment of an
expert group on product liability with representation from Governments
of Member States, industry, consumer associations, lawyers and
insurance interests. The expert group would collect information
in all Member States on the legal application of the Directive,
on recent case law and on changes in national legislation.
3.8 The second proposal is for a study to assess
the economic impact on all interested parties of removing two
options currently available to Member States under the Directive.
One of these options allows a producer a "development risks"
defence against liability where he can show that the state of
technical and scientific knowledge, at the time the product was
put into circulation, was not such as to enable the defect to
be discovered. This option, which has been adopted by the UK,
is particularly unpopular with consumer organisations. The other
option, which has not been adopted by the UK, allows Member States
to set an upper limit for damages resulting from death or injury
caused by identical items with the same defect.
3.9 The Commission also proposes an investigation
into the feasibility and advisability of greater harmonisation
of product liability at Community level. To this end, it will
launch a study to analyse and compare the practical effects of
the different systems in Member States for bringing product liability
claims, and consider whether a uniform product liability system
could be introduced in the Community.
3.10 The report also outlines follow-up measures
in other areas which are complementary to product liability. These
include amendments to the General Product Safety Directive,[5]
and initiatives related to access to justice for consumers.
The Government's view
3.11 The Minister comments:
"The Directive is an important measure which
seeks to balance the interests of consumers on compensation rights
without discouraging innovation or imposing prohibitive costs
on businesses. Any proposals for improving compensation rights
for consumers which may result from further review following the
proposed studies will need to be carefully weighed to ensure that
they do not place undue burdens on businesses."
Conclusion
3.12 We note that the disagreement between
business and consumer organisations about the Directive (to which
the Minister alerted us in March 2000 on the basis of the responses
he had seen) is confirmed now that all the responses have been
analysed. We also note that the Government still appears unwilling
to agree amendments to the Directive which might (unduly, in its
view) favour consumers.
3.13 It is encouraging that the Commission
is seeking firmer information before deciding on specific proposals
related to the Directive ; we shall scrutinise any such proposals,
and the Government's view of them, carefully. Meanwhile, we clear
this document.
COMPANY LAW CONCERNING TAKEOVER BIDS
(22206)
6367/01
COM(01) 77
|
Commission Opinion on the European Parliament's amendments to the common position of the Council regarding the draft Directive on company law concerning takeover bids ("the Takeovers Directive").
|
| Legal base: |
Article 44 EC; co-decision; qualified majority voting
|
| |
| Document originated:
| 12 February 2001 |
| Forwarded to the Council:
| 13 February 2001 |
| Deposited in Parliament:
| 13 March 2001 |
| Department: |
Trade and Industry |
| Basis of consideration:
| EM of 30 March 2001 |
| Previous Committee Report:
| None; but see paragraph 4.2 below
|
| To be discussed in Council:
| June 2001 |
| Committee's assessment:
| Legally and politically important
|
| Committee's decision:
| Cleared |
Background
4.1 The proposed Takeovers Directive has two
main objectives:
— to harmonise national rules on takeover bids,
particularly regarding the information to be provided about a
bid, the period for acceptance of a bid, disclosure to the market,
obligations of the board of the target company (including restrictions
on defensive measures in the case of hostile bids), and the conduct
of bids; and
— to set minimum standards across the EU for
the protection of minority shareholders in companies where there
is a change in control of their company by requiring that a "mandatory
bid" be made for all remaining securities.
The Directive will apply to bids for companies incorporated
in the EU whose securities are admitted to trading on a regulated
market in the EU.
4.2 The draft Takeovers Directive was originally
proposed in March 1996. It was considered by our predecessor Committee
in March and October 1996[6]
and debated in European Standing Committee B on 12 February 1997.[7]
The proposal has undergone a series of revisions in the light
of views from the European Parliament and the Economic and Social
Committee and negotiations in Council Working Group meetings.
For some time, the main outstanding issue for the UK has been
that the proposed Directive will alter the legal basis on which
the City Code and the Takeover Panel operate, thereby making it
easier for parties to engage in tactical litigation designed to
hinder or thwart a takeover bid. However, it has also been apparent
for some time that the UK Government has no realistic chance of
persuading the other Member States and the Commission that this
proposal should be abandoned. We cleared the revised proposal
on 16 June 1999.
4.3 Lord Simon (then Minister for Trade and Competitiveness
in Europe) wrote to us on 23 July 1999 reporting that political
agreement on the Directive had been reached at the Internal Market
Council on 21 June 1999, and that the UK had secured the wording
it was looking for on litigation, but that the agreement had been
blocked by Spain as part of its dispute over Gibraltar. Following
resolution of that problem, the Council unanimously adopted a
common position on 19 June 2000. In its second reading on 13 December,
the European Parliament approved the common position with fifteen
amendments. The Council subsequently rejected these amendments,
thereby triggering the conciliation process, which is continuing.
The document
4.4 The document indicates the Commission's views
on the European Parliament's amendments. Overall, the Commission
accepts three of the fifteen amendments in full and one in part,
but rejects the others.
The Government's view
4.5 The Government assesses the amendments as
follows:[8]
"Amendment 1 deletes certain words from Recital
5. The Government does not agree with the amendment. It would
in any event have no substantive effect because Parliament did
not amend the corresponding wording in Article 5. The Commission
said it could not accept this amendment.
"Amendment 2 deletes certain words from the
definition of 'takeover bid' in Article 2. The Government does
not agree with the amendment because it renders the definition
less clear. The Commission said it could not accept this amendment.
"Amendment 3 adds to the definition of 'securities'
in Article 2. The Government does not agree with the amendment
because it would require Member States to bring 'convertibles'
(i.e. instruments convertible into vote-carrying securities) within
the scope of their rules for all purposes. Convertibles come within
the scope of some, but not all, of the provisions in the Takeover
Code. The common position gives Member States discretion as to
how to apply their rules to non-voting securities such as convertibles
(see Recital 8), The Commission said it could not accept this
amendment.
"Amendment 4 would require that employees (as
well as shareholders) should be given sufficient time and information
to enable them to reach a properly informed decision on a bid.
The Government does not agree with the amendment because employees
do not have a decision to take on the bid, in the same way that
shareholders have a decision to take. The Commission said it could
not accept this amendment.
"Amendment 5 would require the board of an offeree
company to act in the interests of 'corporate policy and its continuation'
as well as employees and 'with a view to safeguarding jobs'. The
Government does not agree with the amendment because it would
fundamentally alter the nature of directors' duties when considering
a takeover offer, and by requiring them to put their interests
above those of company restructuring could seriously impact the
efficiency and competitiveness of EU companies, ultimately having
a damaging effect on employment in the Community. The Commission
said it could not accept this amendment.
"Amendment 7 would limit the circumstances in
which supervisory authorities may grant derogations from their
rules. The Government does not agree with the amendment because
it appears to prevent derogations in individual cases. This would
prevent the supervisory authority applying its rules flexibly
in order to take account of new and unforeseen circumstances which
can arise during the course of a bid. Although the Commission
stated that it can accept this amendment, it has since confirmed
that it will support a modified version of the common position
which clarifies that a reasoned decision is required for all derogations.
"Amendment 8 would specify in more detail the
'equitable price' that must be paid, and the circumstances in
which cash or a cash alternative must be offered, pursuant to
a mandatory bid. The Government could accept these amendments
in principle, subject to minor changes. The Commission said it
could not accept this amendment.
"Amendment 12 would insert a new provision requiring
Member States to have a so-called 'squeeze-out' power, whereby
an offeror could compulsorily acquire the shares of minority shareholders
who had not accepted his offer. Whilst the Government is not averse
to a harmonising provision in respect of such compulsory acquisition
powers, it believes the present Directive is not the appropriate
place. Moreover, Parliament's amendment in its present form would
require retrograde changes to our own law on compulsory acquisition,
and so is not acceptable. The Commission said it could not accept
this amendment.
"Amendment 13 would require additional information
to be provided in the offer document about the offeror's intentions
concerning employees and jobs. The Government could not accept
the amendment as it stands because the wording is not sufficiently
clear, but it could accept a modified version. The Commission
said it could not accept this amendment.
"Amendment 14 would require the offer document
to state which law governs contracts for the sale and purchase
of shares following acceptance of the offer. The Government and
the Commission said it could accept this amendment.
"Amendment 15 would require the parties to a
bid to provide the board of the offeree company and the workers'
representatives at any time on request with all information they
possess concerning the bid. The Government could not accept the
amendment because it is a corruption of the requirement in Article
6(4) which is designed to ensure the supervisory authority has
all the powers it needs to demand information from the parties
so as to carry out its supervision and enforcement responsibilities.
The Commission said it could not accept this amendment.
"Amendment 16 would restrict the circumstances
in which extensions to the offer period may be made. The Government
could not accept the amendment because extensions to the offer
period may be needed in a range of circumstances, for example,
while awaiting regulatory clearance for the takeover from competition
authorities, and to enable minority shareholders who have not
accepted an offer to change their minds once it is clear the takeover
has succeeded. The Commission said it could not accept this amendment.
"Amendment 17 would give Member States much
greater discretion to allow defensive measures to frustrate a
hostile takeover bid without the consent of shareholders. It would
also require them to give the courts an explicit role in deciding
whether the board of the offeree company had acted properly. The
Government could not accept this amendment because it fundamentally
undermines one of the key principles of the Directive —
that shareholders should decide on the merits of a bid,
and should not be denied the opportunity to do so. It would also
introduce the courts into the process in a way the Government
has sought to avoid. The Commission said it could not accept this
amendment.
"Amendment 18 would reduce the transposition
period from four years to two. The Government could not accept
this amendment because it may give insufficient time to draw up,
consult on and adopt the legislation required to implement the
Directive. The Commission stated that it could accept this amendment.
"The first part of Amendment 20 would bring
forward the time from which the board of an offeree company is
prevented from taking frustrating action without the consent of
shareholders. The Government and the Commission could support
this amendment. The second part of Amendment 20 would require
the supervisory board (if any) of a company to approve defensive
measures. The Government does not support this amendment because
it could mean the wishes of shareholders were thwarted. The Commission
rejected this part of the amendment. The third part of the amendment
would require the board of the offeree company to include in its
document setting out its opinion on the bid, the opinion of employees'
representatives if available. The Government could not accept
this amendment in its present form, but could do so if modified
to make clear that the employees cannot use this right to hold
up the bid. The Commission said that it could not accept this
amendment."
4.6 In his Explanatory Memorandum of 4 April
2001, the Minister of State for Energy and Competitiveness in
Europe at the Department of Trade and Industry (Mr Peter Hain)
states:
"One of the key aspects of takeover regulation
in the UK is the absence of litigation during takeover bids. The
courts have indicated that, whilst [Takeover] Panel decisions
are in principle subject to judicial review, in practice the character
of the Panel and its situation in, and the time-scales of, financial
markets may limit the scope and opportunities for judicial review.
The only way to be sure of avoiding such a threat from the Directive
would be to have no Directive at all. This was not an option because
the measure is subject to qualified majority voting in the Council
and it was clear that a large majority of Member States supported
it. In view of this, the Government's primary negotiating aim
has been to include wording in the Directive designed to minimise
the scope for litigation during bids. The common position adopted
in June 2000 includes a clause intended to achieve this, the wording
of which the Government agreed with the Takeover Panel. Having
successfully secured wording in Article 4.6 (formerly Article
4.5) that it and the Takeover Panel considered acceptable, the
Government was able to vote for the common position. Article 4.6
was not the subject of any amendment by the [European] Parliament."
Conclusion
4.7 We considered it would be useful to report
the latest developments to the House. The Government will submit
a further Explanatory Memorandum if the conciliation process produces
an agreed joint text. Meanwhile, we clear the document.
4 (20429) 10609/99; see headnote to this paragraph. Back
5 (21297)
8585/00; see HC 23-xxii (1999-2000), paragraph 4 (21 June 2000)
and HC 23-xxx (1999-2000), paragraph 13 (22 November 2000). Back
6 (17000)
5147/96; see HC 51-xiv (1995-96), paragraph 5 (27 March 1996)
and HC 51-xxix (1995-96), paragraph 1 (16 October 1996). Back
7 Sub-Committee
E of the House of Lords Select Committee on the European Communities
reported on the proposal (13th Report, Session 1995/96, HL Paper
100); that Report was subsequently debated on 14 January 1997. Back
8
The amendments are numbered in the same way as in the Commission
opinion, Gaps in the sequence reflect the fact that the Parliament
did not adopt all the amendments that were proposed. Back
| 
