Peter
Bottomley: May I ask the Committee to pay attention to
subsection (10)? Are the words on line
16—“treat the debt”—the 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. 10.15
am
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 evidence—it might be unfair to spring this question on
her—relating 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.
Clause
3Amount
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
possessions—essentially, 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 element—not all—of 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 countries—the sums concerned—is now so
small that the compelling nature of the public interest has
diminished.
It might be
helpful to explore that issue. EMTA—the Emerging Markets Traders
Association—has 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 Government’s
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
occasion—perhaps 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
Treasury’s 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
Treasury’s
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 1—that 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. 10.30
am
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 current—the 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.
Mr.
Boswell: Will the hon. Gentleman give
way?
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 ourselves—most 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. First—we should get this point on
the record, and I say this as a Conservative—we are
talking about not the convention but article 1 of the protocol to the
convention. Property rights are, in a sense, subordinate—I am
not suggesting they would be in a judgment—to other, perhaps
more serious issues such as murder, torture and the rights of prisoners
and of family life, which are convention rights. That may say something
about
hierarchy. 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 shopping—of people going
somewhere else if they think they will get a better deal. Can we have
an appraisal from the Bill’s 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 contrary—I am merely reflecting—but 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
choices—or 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,
“We’ll 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.
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