Joint Committee On Human Rights Seventeenth Report

Appendix 3: Company Directors' Performance and Compensation Bill

Letter from the Chair to Mr Archie Norman MP

As part of its function to consider human rights in the United Kingdom, the Joint Committee on Human Rights examines all bills introduced to either House with a view to reporting to each House on their compatibility with Convention rights under the Human Rights Act 1998, and with other rights which arise in international law under human rights instruments by which the United Kingdom is bound. The Committee is currently considering the human rights implications of the Company Directors' Performance and Compensation Bill, which you introduced to the House of Commons.

As you know, the Bill would amend the Companies Act 1986 by inserting a new section 316A and a new paragraph 6(5) of Schedule 7A to the Act. The combined effect would be to limit any compensation or payment payable to a director for termination of his or her office or employment to 'such amount as is … fair and reasonable having regard to any failure by the director in the performance of his duties either in his office as director or as an employee or both.' That would apply, 'Notwithstanding anything contained in a company's articles, or in any contract…': proposed new section 316A(1).

This appears to make it possible to deny payment of money legally due to a director, interfering with the director's right to peaceful enjoyment of possessions and depriving the director of property protected by Article 1 of Protocol No. 1 to the ECHR. The Committee is concerned about the possibility that this might be incompatible with two sets of rights under that Article: first, the right of the director to money legally due to him or her; secondly, the right of the company to use its property and enter into contracts as seems best to it. Under Article 1, compensation for a deprivation of property in the public interest is required save in exceptional circumstances, and any control on the use of property must strike a fair balance between the rights of property owners and the general public interest (which may itself demand compensation in some circumstances).

In the light of this, the Committee is considering whether to draw the attention of each House to the human rights implications of the Bill. The Committee understands the difficulties which the sponsors of private members' bills, with limited resources, often face in responding to questions from the Committee about the human rights implications of their bills. Nevertheless, without suggesting that you are under any obligation to respond to its concerns, the Committee would of course give full weight to any representations which you might wish to put before it.

The Committee is likely to be deciding on 17 November 2003 whether, and if so how, to report to each House on the Bill, and so would be unable to take account of representations received after 14 November 2003.

5 November 2003

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