Joint Committee On Human Rights Appendices to the Minutes of Evidence

8. Memorandum from the CBI on the Enterprise Bill

The CBI has been supportive of certain provisions of the Enterprise Bill but has expressed opposition to other aspects of the proposals. Many measures in the Bill where we have concerns do not necessarily give rise to issues under the European Convention for the Protection of Human Rights and Fundamental Freedoms 1950 ("the Convention") but some, arguably, do. We would welcome your consideration of the following points.

(i)    Section 123 (Power of OFT to make references) confers insufficiently specific rights upon the OFT to commence investigations of privately or publicly owned businesses which have not infringed any rule of law. The significance of this issue is enhanced not only by the intrusive nature of such investigations (see Section 166—Investigation Powers of OFT), the cost and resources which they absorb, but more particularly by reference to the extraordinary powers conferred upon the regulators in Schedule 7 to make directions as to the future conduct of businesses and even to order the divestment or partial divestment of businesses. Any such order would, in effect, result in the "forced sale" of such businesses potentially at a significant loss to the owners or shareholders. The exercise of such extraordinary powers is only justifiable in order to address some particularly significant adverse effect on competition but, as drafted, the Bill only requires "some" adverse effect on competition to be demonstrated. Such broad powers to interfere with the conduct and ownership of businesses which have not infringed any applicable laws are inconsistent with Article 8 of the Convention. Similar issues arise in relation to Section 124.

(ii)  Section 184 (Powers when conducting an investigation) fails to provide adequate safeguards for persons under investigation in connection with a possible offence under Section 179. In accordance with Article 6 of the Convention there should be no obligation to provide information except in the presence of a solicitor representing the person concerned and it should be made clear in the Bill that in no circumstances can any person be required to make potentially self-incriminating statements.

(iii)  The powers taken in Section 195 (Disqualification) are far too broad and as a consequence may be capable of application in a manner which is entirely disproportionate to the conduct in question. In making it a ground for disqualification that a company of which the person concerned is a director has committed some breach of competition law, whether that person knew about it or not, could be applied in a manner which is grossly unfair. Whilst the section requires that a Court must also find the person's conduct makes him unfit to be concerned in the management of a company, it should be taken into account that the consequences of disqualification can be to deprive an individual of his livelihood. On any reasonable basis this would be excessive other than in the event of a serious infringement of competition law such as direct involvement in one of the hard core classes of conduct such as price fixing or bid rigging. As presently drafted the Bill is arguably inconsistent with Articles 6 and/or 8.

(iv)  Sections 233 and 234 (Overseas Disclosures) confer rights upon "a public authority" to make disclosures of information concerning UK businesses to any overseas public authority apparently without limitation even if only for the purpose of civil proceedings and not limited to competition issues notwithstanding the limited exceptions referred to in Section 233(3). This is an extraordinary power which purports to override the proprietary rights of any business in its non-public business information. Such disclosure could have consequences for UK businesses outside this jurisdiction which the UK public authority discloser is not in a position to fully appreciate or foresee, e.g. where the overseas public authority has a poor record in maintaining confidentiality or where competing activities are in public ownership in that other country. Requirements that the overseas public authority must not use such information for any purpose other than that for which it is disclosed by the UK public authority are completely unenforceable by the UK public authority. These powers infringe Article 1 of the First Protocol.

(v)  Part 8 - Enforcement of Certain Consumer Legislation—The Enterprise Bill will introduce Enforcement Orders: a new and potentially wide-ranging enforcement tool, exercisable by the Office of Fair Trading (OFT), trading standards departments and other designated bodies. They will allow activities of businesses to be challenged, injunctive orders to be sought and ultimately businesses to be closed.

The Orders will replace and extend the scope of Stop Now Orders which were introduced in June 2001 to permit injunctive relief to be sought against businesses alleged to be infringing provisions of 9 specified EU directives (on issues such as unfair contract terms, distance selling, consumer credit). This was a measure principally about cross- border infringements. The Enterprise Bill will extend the scope of this enforcement procedure to all consumer protection legislation, whether it originates from the Community or is domestic in origin.

Serious concerns have arisen on the part of business about the way in which Stop Now Orders have been enforced by the OFT. They have been operated, for 10 months, without the benefit of definitive guidance, as required by the original legislation, and with a complete lack of transparency of process. (CBI concerns where set out in August last year in a letter to the Director General of Fair Trading, a copy of which is attached).

There are almost no safeguards for business in part 8 of the Bill about the way Enforcement Orders will be operated in the future. Human rights issues are involved in ensuring that business knows the exact basis on which it is being challenged and the procedures it can follow to ensure a full and fair hearing. This is particularly the case where we are dealing with matters which affect the way in which a trader can conduct his business. Significant hurdles must be in place in the legislative framework since an Enforcement Order can lead ultimately to a business being closed down.

We have therefore urged the DTI that the Bill, supported by meaningful and clear guidance, should set out proportionate safeguards to ensure that transparency of process and respect for standards of justice are guaranteed. Such safeguards should include:

—  a clear timetable and transparent enforcement process, distinguishing clearly between preliminary discussions and the start of the formal period before proceedings are brought

—  comprehensive and clear guidance outlining procedural steps, which must be consulted on and made available well in advance of the new legislation coming into force

—  statutory underpinning of the guidance by means of penalties attached to failure by enforcers to abide by its provisions

—  a pre-action protocol to cover procedural stages once court action is contemplated

—  limitations on the powers of the OFT to call for information, to exclude "fishing expeditions"

—  assurances that the normal rules relating to costs will apply in the event of an unsuccessful application for an Enforcement Order.

These safeguards are necessary to ensure that enforcement authorities abide by the general principles of good enforcement when operating the Enterprise Bill and that the human rights of business are not infringed.

We would welcome a full investigation by the Joint Committee to ensure that these issues are thoroughly considered. In short, our view is that certain aspects of the Bill would, if enacted, lead to the potential abuse of civil rights of business undertakings in this country and businesses are, of course, just as entitled to rely upon the protection of the Convention as any individual citizen.

May 2002

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