Peter Bottomley: May I ask the Committee to pay attention to subsection (10)? Are the words on line 16treat the debtthe best ones? Might it be considered at some stage whether they might change? They are admirably clear in English and that is good, but I wonder whether it is better to say the debt is to be treated as external unless after qualifying debt, on line 15. I leave that as a reflection. Perhaps the current wording is fine, but it can perhaps be improved.
The other issue here is in line 16. It says:
If in any proceedings there is an issue as to whether a debt is a qualifying debt,
and goes on to talk about how the debt is to be treated as external. Might it be worth adding something on the question of externality? There may be other reasons for questioning whether a debt is a qualifying debt other than just that it is external, as we see from earlier in the clause.
Mr. Gauke: It is fair to say that clause 2, which defines the debts to which the HIPC initiative will apply, is based on the World Bank and International Monetary Fund definitions. Clause 2(3)(a) states that the definition of debt excludes
a liability to pay for goods or services that arose on the delivery of the goods or the provision of services.
That is a significant carve-out. I can see why it has been made, but does the hon. Lady have any evidenceit might be unfair to spring this question on herrelating to the scale of the carve-out? A substantial amount of debt that would otherwise fall within the regime might not do so because of that exclusion. Why has that carve-out been made? As I have said, it is probably based on the World Bank and IMF definitions, but it would be helpful if the hon. Lady could shed further light on the issue.
Ms Keeble: Clause 2 deals with some of the details of what is, and is not, a debt. As the hon. Gentleman rightly says, a great deal of discussion has taken place, and much experience has been built up, with both the World Bank and the IMF. On the point made by the hon. Member for Daventry, the definition of residence is not based on currency, but on the residency of the creditor. It is quite common for debts to be incurred in different currencies from that of the country concerned. I do not, therefore, think that that is an issue. To offer complete clarification, however, the definition mirrors the IMF definitions and is not based on currency.
On subsection (10), I understand that the Government have consulted the IMF and that they have been able to apply the residence test without difficulty. They are clear about what is, and is not, an external debt. The subsection clearly sets out what should happen if there is any doubt. On the final point about the exclusion of revenue spending, the carve-out of the liability to pay for goods and services in subsection (3) mirrors the IMF initiative, which also makes those exclusions. They seem eminently practical, because if we included liability to pay for goods and services, almost all Government spending would apply to the kind of relief involved, and that would clearly be unworkable. The approach in the legislation is not about inventing new procedures, but about using tried and tested mechanisms that have been subject to scrutiny and international negotiation to deal with the issues connected to the remainder of the private sector debt.
Peter Bottomley: I hope that the hon. Lady will consider the point that I made on subsection (10). As for the issues raised about debts and subsection (3), under subsection (4)(a), a short-term debt is included in this subsection if it ought to have been discharged
more than a year before commencement.
Does that mean commencement when the Bill becomes an Act or is it some other commencement? It cannot be the commencement of the loan because that would mean repaying it before it was made, so presumably it is the commencement of the Act.
Ms Keeble: I am being told that that is the case. That is correct. I am sorry for not responding earlier; I thought that I had dealt with the points made by the hon. Gentleman.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Amount recoverable in respect of claim for qualifying debt etc
Question proposed, That the clause stand part of the Bill.
Mr. Gauke: The first two clauses are about definitions. Clause 3(1) specifies the mechanism that will apply to reduce the amount of recoverable debt. The definition of the relevant proportion is covered by clause 4. One worry about the Bill relates to article 1 of the European convention on human rights. It may be argued that deprivation of possessions are involved or at the very least the control of use of possessionsessentially, property rights are affected. We have touched on the comparison with insolvency procedures and so on. As I said, it is a fair point. However, there is an interesting assessment of the European convention on human rights in the explanatory notes to the Bill. Clearly, it is a matter to which those who drafted and introduced the Bill have given some consideration.
The explanatory notes set out the argument that the measure is not about the deprivation of possessions, but the control of use, because the creditor still has the ability to recover the debt if it is only able to recover an elementnot allof it. That is therefore a control of use rather than deprivation. I do not know whether the hon. Lady can give the Committee further details on that. I do not in any way pretend to be an expert in such matters, but it is clearly an important part of the argument to say that the clause is not contrary to article 1 of the first protocol of the convention. That must be a strong argument.
The Bill is retrospective, and we have discussed the reasons for that. The explanatory notes state:
Retrospective measures may in principle be compatible with A1P1, although the ECtHR has referred to the need for an obvious and compelling public interest for retrospective measures.
There is no argument about the obvious and compelling public interest in the Bill, although it would be helpful for future legal arguments for the Bill to be given proper scrutiny so that matters can be debated more fully.
One of the points made in response to the Bill and the Treasury consultation is that the compelling public interest applies because the measure will help developing countries. The argument made by some respondents is that such is the narrowness of the Bill that the benefit for developing countriesthe sums concernedis now so small that the compelling nature of the public interest has diminished.
It might be helpful to explore that issue. EMTAthe Emerging Markets Traders Associationhas certainly argued that the only debt covered by the Bill is that relating to Liberia, on which there was a judgment at the end of last year, but that is about it. The Governments impact assessment takes a different view, arguing that HIPCs and potentially eligible HIPCs will benefit by about £145 million in total. We should at least consider the scale of benefit to developing countries. Is it sufficient to say that there is an obvious and compelling public interest in introducing the Bill?
Tony Baldry: I have personal knowledge of substantial debts in countries such as Sierra Leone. Much of the issue relates to the question of the jurisdiction in which parties would bring proceedings. A number of debts in Africa have the potential to result in proceedings brought either in South Africa or in this country, so it is difficult to quantify. However, I reassure my hon. Friend that there are substantially more debts simply than those that have been identified in Liberia.
Mr. Gauke: I am grateful to my hon. Friend for that intervention, partly because he did not call me a Treasury nerd on this occasionperhaps I am an aspirant Treasury nerd.
I am not necessarily endorsing that interpretation but, given the narrow definitions in the Bill, for reasons recognised in all parts of the Committee, given that liability to pay for goods and services is not dealt with, given that the Bill applies only to those debts that can be enforced in the English courts and given that it is retrospective, as well as the various other points we have debated, some criticism of the Treasurys original assessment of the numbers involved is noticeable. Those numbers were reduced from some £250 million to £145 million.
One concern is that we cannot simply look at all the various claims, because by definition they tend to be higher than the claimants and creditors would ever achieve. The Committee might be a useful opportunity to flag up the issue of the likely benefits of the Bill for developing countries, so that we can state with confidence the obvious and compelling public interest in such retrospective legislation. I wish to stress that I am not arguing that there is no such interest, but that the Committee is the right opportunity to address that concern. When the Minister responds, would he set out the Treasurys thinking?
The Treasury acknowledges that quantifying the benefit in such an area is difficult. What about the particular claim that the Bill would address the Liberia matter alone and that nothing much else would apply? That is an interesting point: if it can be refuted, great, but if particular examples of debts that would fall within the regime can be provided, so be it. Such examples would be helpful in answering any arguments made against the Bill under article 1that there is not the obvious and compelling public interest that the European Court of Human Rights would seek in order to justify retrospective legislation. Subject to those points, we have no particular difficulties with clause 3.
John Hemming: Perhaps I see things from a different perspective. Let us say that we have an insolvent country that cannot pay all its debts and we do not want any creditor to be preferred, and let us assume for a moment that the Bill will have sufficient force and that people will not jurisdiction-shop and go somewhere else to enforce the debt. In principle, we are saying that insolvent countries cannot pay all the debts. It is in the interest of all creditors to get paid their poundage, and we are saying that that should be fair and no creditor should be preferred. I do not see that as retrospective, because that is currentthe current situation is that it cannot pay its debts. Yes, that interferes with contracts, but not to the extent that the contract is enforceable. Creditors can get their money paid only because there is an agreement to have a poundage. I do not see the difficulty.
Mr. Gauke: I do not disagree with the hon. Gentleman. To be fair, the word retrospective is used in the explanatory notes. I do not think there is an argument that the provision is explicitly designed to be retrospective for the reasons we debated, and rightly so. I do not disagree with his point that the situation is the equivalent of an insolvency arrangement.
John Hemming: I thank the hon. Gentleman for that. I am looking at page 9 and I accept that that is how the measure is perceived here, whereas I see it as an insolvency procedure for a country.
Michael Connarty: I respect entirely the probing nature of the comments made by the hon. Member for South-West Hertfordshire. This issue is at the heart of the Bill and it is where the overarching public interest is clearly focused. Jubilee Scotland, the Justice and Peace Scotland movement and the Fairtrade movement all see the Bill as a small but significant step. It is about fairness and being against predatory behaviour in the market. It is against selfishness, and there is all-party agreement on it. That is why, although the Bill is a small step and there are some questions about its effect, I hope that in future, it will be built on and not washed away, with people saying, That is the job finished. The Bill is the beginning of a rearrangement of what happens to countries when they fall into deep debt and are exploited for predatory reasons.
I will make a sectarian party comment here. The latest person who declared herself for the Conservative party in Scotland, a lady who runs the Scottish fashion show, said that she wants to support the Conservative party because she wants the UK to be more selfish. I intend to send her the speech made by the hon. Member for South-West Hertfordshire on Second Reading, because clearly, Governments over the period and of all ilks realise that we are not about being selfish: the UK is about building on a generous view of what we do when countries fall into deep debt.
Michael Connarty: Not at the moment. I do not mind if the hon. Gentleman wants to make comments, but I do not want to take too much time.
The hon. Member for South-West Hertfordshire put the problem down to bad management by Governments, but let us be frank: having talked to people who are concerned about this issue, I have always felt that it is 200 years of exploitation by the developed world that has reduced most of these countries to their level of indebtedness. We have exploited their resources, and at one point stole their people to use them as slaves. Let us not kid ourselvesmost of their indebtedness has arisen because we have taken their wealth and given them nothing in return. We are not just being generous; we are also dealing with our own conscience.
Mr. Boswell: In seeking to intervene on the hon. Gentleman I was, if anything, about to reinforce his point. I, too, think that this is in our long-term national interest. The existence of depressed, poor countries that can find no relief from their long-term situation is not a satisfactory state of affairs. I would not have risen to speak were it not for the fact that I ought to declare an interest as a member of the Parliamentary Assembly of the Council of Europe, which, in a sense, is the guardian of the European convention.
I have a couple of general and one or two specific remarks to make. I am no lawyer, although, as it happens, I have a daughter who is a human rights lawyer and takes an interest in the convention. I find the European approach interesting. Firstwe should get this point on the record, and I say this as a Conservativewe are
My second point is that, looking at the European convention, which I do quite often, I find it striking how it is understood that there are clashes. There is no absolute way of resolving an issue according to some principle, because there are clashes here between the rights of predators and the laws of contract: the prudential virtues of the laws of contract on the one hand; and, on the other, the situation in which some developing countries find themselves. So it is not unfamiliar to people in European jurisprudence to be saying, We have to try to sort out these relative pressures.
I wish to commend the Treasury for once. One normally gets a peremptory certificate from a Minister, but here we have a full explanatory memorandum following consultation in which the issue is seriously agonised about and explained in a way that I find very reassuring. We come back to the point that there is an overriding public interest. It is in our public interest, as well as that of developing countries, to get this issue sorted out in a fair, orderly and equitable manner between the various creditors, as the hon. Member for Birmingham, Yardley said. I am comfortable with that approach.
I have two questions, the first of which concerns forums, and perhaps the hon. Member for Northampton, North will come back to it. If my constituency neighbour, my hon. Friend the Member for Banbury, is right, there are many potential debts that might come to our courts. There is always the danger of forum shoppingof people going somewhere else if they think they will get a better deal. Can we have an appraisal from the Bills promoters as to whether that is likely? If that happens, in a sense it will devalue the Bill and create potentially awkward international anomalies.
My second point may be contraryI am merely reflectingbut I would like the promoters response. Let us make a comparison with the historic position of, say, Chinese Boxer debt or pre-Russian revolution bonds. I hasten to say I do not own nice share certificates or stock certificates, but if I happened to be the owner of some of that ancient and completely useless sovereign debt, I would have two choicesor I might have had two choices if I were lucky. One is to be paid off something by a country that wishes to re-establish its credit rating and be able to service debts in future. If it says, Well give you something, I could assent to that debt. On the other hand, if I decided to hold out, or liked the stock certificate better, I could as an individual stay non-assented to that debt and I would still have my full entitlement. According to the term of art used in the explanatory memorandum for the right to sign for debt, I would not have anything in my hands because it would not be paid, but I could still in principle claim the whole lot and I could be in either the assented or non-assented category. I wonder whether the hon. Member for Northampton, North will reflect on that. If that situation existed it would further untidy the position, in that I am sure it would be better for the country in question to be able to know exactly where it stood with all the creditors involved with it.
My basic view is that we should be taking this on the chin as the right thing to do. There are difficult, complex and detailed issues that need to be thought about intensively to get the final outcome resolved, but I would not in any sense wish them to devalue the need to get on with things and seek a common haircut for all holders of debt. At the moment in the real world, that debt cannot be serviced or discharged. It is doing more damage than good to the international economy.
|©Parliamentary copyright 2010||Prepared 10 March 2010|