Enterprise and Regulatory Reform Bill

ERR 44

Submission from the Law Society


The Law Society of Scotland aims to lead and support a successful and respected Scottish legal profession.

Not only do we act in the interests of our solicitor members but we also have a clear responsibility to work in the public interest. That is why we actively engage and seek to assist in the legislative and public policy decision making processes.

To help us do this, we use our various Society committees which are made up of solicitors and non-solicitors and ensure we benefit from knowledge and expertise from both within and outwith the solicitor profession.

The Law Society of Scotland (the "Society") welcomes the opportunity to consider and respond to the Public Bill’s Committee call for written evidence on the Enterprise and Regulatory Reform Bill.

Part 1: UK Green Investment Bank PLC

Designation of the UK Green Investment Bank plc (Clause 2 (2)

Part 4 of the Companies Act 2006, especially at section 39,  40 (1) and section 40 (2) (b) implement First Company Law Directive re ultra vires. The result is that any limitation upon the powers of the bank, intended to cause it to "engage only in activities that involve, or are incidental or conducive to, making, facilitating or encouraging investments that it considers likely to contribute to the achievement of one or more of the green purposes in the United Kingdom" will operate only internally. They will have no effect in any question with a third party.

Alteration of the Object of the UK Green Investment Bank plc (Clause 3) (1)

The Society questions how this will operate in practice? No company is ever in a position to " make any alteration to its objects in its articles of association" nor indeed in its memorandum of association. Such an alteration may be made only by special resolution of its shareholders. In the Society’s opinion, even if section 3 (1) were legally meaningful, an order under section 3 (1) (b) could only be made if an order under section 2 (4) already existed. An order under section 2 (4) could have been made only if at its date the bank had been "wholly owned by the Crown". The object and effect of the provisions is obscure.

Financial Assistance to the UK Green Investment Bank (Clause 4)

Such assistance will be subject to the ‘private investor’ test on a case by case basis and if necessary to state aid compliance procedures.

Part 2: Employment

The Society welcomed the opportunity to provide oral evidence before the Public Bill Committee on the 21 June regarding Part 2 of the Bill.

Conciliation (Clause 7)

The Society agrees that the proposal for pre-claim conciliation, as provided for in clause 7 of the Bill, will provide benefits. However, the Society believes that this will require a significant resource shift within ACAS, especially with such a short period allocated, 4 weeks rising to 6 weeks. It suggested that this period is unrealistic and will not be workable in practice.

The Society further suggests that consideration should be given to a two stage process of an initial allocation to ACAS, and if there is to be no agreement, then the case proceeds directly to dispute. However, if a resolution is likely, then an increased period of 8 weeks is suggested.

Legal Officers (Clause 10)

The Society agrees that the Legal Officers have an important role to play, and the proposals will free judicial time for more important matters. However, if they are going to be in a position to determine certain employment cases, the Society suggest that there should be a provision to seek a review of that decision.

Compensation Limits (Clause 12)

The Society is concerned that imposing a radically lower limit would be a retrograde step, and would discourage employer compliance with employment protection legislation. The Society suggests that this would also likely to have an indirectly discriminatory effect because of the gender pay gap: any cap on compensation has a direct relationship to basic salary level and so is bound to impact on proportionately more men than women. This applies at any level but is more acute (and so harder to justify) the lower it is set.

Financial Penalties (Clause 13)

The Society welcomes the proposed Clause 13. However, it is noted that the scheme appears to fail to distinguish between objective breaches (e.g. failure to pay minimum wage) and subjective breaches which may be superficially compliant (e.g. a dismissal decision acceptable in form and procedure, but which is nonetheless considered unreasonable and so unfair by a tribunal). There is still culpability but of a different order and the drafting presently would deny the tribunal the power to differentiate the fine in a corresponding way.

Settlement Agreements (Clause 16)

The Society questions why the Government considers it necessary to rename ‘compromise agreements’ as ‘settlement agreement’s as this is not set out within the explanatory notes which accompany the Bill? To the best of the Society’s knowledge the well established term ‘compromise’ has never caused any issue and is readily and easily understood by the public.

The Society also questions whether it is realistic to aspire to ‘settlement agreements’ being reduced to a single template? When the courts first encountered statutory redundancy payments, they classified them using a property analogy: it was in its effect the compulsory purchase of an employee’s job. Continuing that analogy, the closest relation to the settlement agreement for every employee would be the house sale agreement. Common words and phrases recur, but each deed will have to have unique, bespoke elements.

Proposed new clause: 111A Employment Rights Act 1996. Confidentiality of negotiations before termination of employment .

During the oral evidence session on the 21 June, Stephen Miller, on behalf of the Society, stated that the Society anticipates that the employment judges will resist attempts to exclude evidence. It is suggested that if the Judges are so minded they have two opportunities to act: first of all the amendment does not exclude anything relating to a type of claim other than unfair dismissal. Most obviously discrimination and/or whistleblowing claims would give scope for the content of the conversation to be reported. Second, it is envisaged that the tribunal can consider anything which in its opinion was "improper" (sub para (3)). The word "improper" is not defined and the Society suggests this could encompass a wide selection of circumstances.

During the oral evidence session, the Society gave the example of disciplinary misconduct using the example of the aftermath of the office party. In the event that a misbehaving employee was asked to leave the following day and declined (that being the extent of the conversation) would the Employment Tribunal exclude evidence about that conversation if the employee subsequently said he had evidence that the employer had already made up his mind that he was to be dismissed? The Society respectfully suggests that the tribunal would take little persuasion to consider that evidence thus neutralising this apparent statutory protection.

A more minor point relates to sub-section (5). It is all very well to allow the tribunal to take into account a determination made in other proceedings, but as employment claims are almost always taken contemporaneously then, the Society suggests, there is unlikely to be a judicial determination in existence at the time of the trial of the facts in the tribunal.

Part 3: The Competition and Markets Authority

The Competition and Markets Authority (Clause s 18 - 20)

The Society , in general , welcomes the establishment of this new statutory body.

Part 4: Competition Reform

Investigatory Powers etc (Clause s 21-24)

The Society understands and agrees with the principles of c lauses 21-24.

Cross Market Investigation (Clause s 25-26).

The Society welcomes the proposals to provide the CaMA to make cross market references.

Public Interest Interventions (Clause 27)

The Society welcomes the proposal to provide additional powers to the Secretary of State to request that public interest issues are investigated along side competition issues.

Chapter 3.

The Society notes that the Government make s significant reference to ‘ a nti- t rust’. The Society respectfully suggests that the term ‘trust’ is incorrectly used out of context. The expression ‘anti-trust’ is derived from the experience in the USA where historically cartels initially took the form of trusts . It is sometimes used by the European Commission but it has no basis in the law on this side of the Atlantic where trusts have had no role in anti competitive activity.

Part 5: Reduction of Legislative Burdens

The Society has no c omments.

Part 6: Miscellaneous and General

Exploration of Design derived from Artistic Work (Clause 55).

The Society is concerned in relation to the proposed c lause 55 and the intention to increase the copyright period to life plus 70 years.  The current 25 year period corresponds to the duration of the right in a design registered under the Registered Designs Act 1949.   The Society is not aware of any actual or proposed amendment to the RDA 1949.

The relationship between copyright, registered design right and unregistered design right was carefully considered when the Copyright Designs and Patents Act   1989 was enacted. In the aftermath of Interlego A.G v Tyco Industries Inc & Ors (Hong Kong) [1988] UKPC 3, it was considered paradoxical to allow any unregistered right in a design applied industrially to outlast a registered right. Registered rights are supposed to be a stronger type of right as they alone are monopoly rights.

The Society notes also that there is no provision for transition, nor is it clear if there is to be a revival of expired rights (as when the copyright terms was extended from 50 to 70 years)

It may be that there are good reasons to review the policy embodied in the 1989 Act but one might have expected these to have merited consultation and considered discussion rather than inclusion in a Miscellaneous Provisions Bill.

The law of copyright and design right is complex. The Society suggests that  the interrelationship between the  copyright and various design right regimes should be reviewed and reformed, to ensure that any reform is coherent and continues a clear legislative protection and enforcement structure .

Power to Change Exceptions (Clause 56

Copyright and performing rights are property rights. The Society suggests that consideration be given as to whether the addition of exceptions might amount to an expropriation and their subtraction to an expansion. The proposal may be compatible with Article 1 of the first Protocol  to the ECHR

July 2012

Prepared 18th July 2012