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Lord Howie of Troon moved Amendment No. 3:

Page 5, line 41, at end insert ("including acts or omissions where the knowledge required to bring an action for damages in respect of any claim for loss or damage they occasion is not available until after the commencement of this Part").

The noble Lord said: My Lords, in moving Amendment No. 3, it may be for the convenience of the House if I speak also to Amendments Nos. 4 and 5. They are all related, as I shall attempt to show.

As your Lordships will know, I am not a lawyer and would not normally intervene in legal matters of this complexity. However, your Lordships may recall that I have a long-standing connection with the construction industry. I was asked by a construction company to raise these matters for clarification due to certain fears it had arising out of the Bill. The company is called Cape. It is a fire engineering company and supplies fireproof materials to the construction industry.

Although I shall refer to the company specifically, its position is quite general in relation to other companies. Cape used to own a company in South Africa which supplied asbestos to customers in the United States of America. That company was sold in 1982 to a South African interest. Cape has been named as the defendant in numerous personal injuries claims in the United States on the basis of United States law in respect of the damage caused by the asbestos supplied by the South African subsidiary. It resisted those claims on the grounds that it has no presence or assets in the United States and is not prepared to submit to the jurisdiction of the US courts. A case was brought against Cape in the High Court in England in 1988—Cape v. Adams — and the judgments in the High Court and the Court of Appeal confirmed that Cape was not liable for the default judgments made against it in the United States. It was confirmed by those judgments that litigants in the United States could not penetrate what is called the "corporate veil" which exists between a parent company and its subsidiaries under English law.

Cape and its lawyers, who drafted these amendments for me, fear that a claim could be brought against the company. When a cause of action arises in the case of industrial disease where there has been exposure to asbestos, the cause for action may not arise until many years after the exposure when the effects of the exposure manifest themselves. In some cases that can take as long as 25 to 30 years. It is feared that the Bill as it stands may leave a company which supplied asbestos to the United States many years ago, prior to the passing of the Bill, exposed to claims arising after the Bill is passed.

As many noble Lords will be aware, a person may be exposed to asbestos as a result of stripping out material from an old building. That may occur at any time because many buildings throughout the world still contain asbestos. In this country the exposure could take place after the passing of the Bill, even though the supplier ceased to have any control over the material many years prior to the exposure. In the United States and Italy, for instance, a parent company is fully liable for the debts of its subsidiaries. In effect there is no

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corporate veil. The Bill will place English companies in a situation where they will cease to be protected by the laws of England in respect of acts carried out by subsidiaries abroad. Also, the Bill makes no reference to damages, which is extremely important when a company is exposed to the laws of the United States where damages may be severe.

Leaving the general background, I turn specifically to Amendment No. 3. In the Second Reading debate the noble and learned Lord the Lord Chancellor said that the Bill was not retrospective. The amendment seeks to make that clear on the face of the Bill rather than in the columns of the Official Report. However, this afternoon I received a letter from the noble and learned Lord—I thank him for his courtesy in sending it to me—which relieves my anxieties in part on this matter. However, at the same time I should like his observations on retrospection to be recorded in the Official Report.

Amendment No. 4 relates to what is known as the corporate veil. For instance, in America liability against a defendant can be established on grounds alien to English law. In broad terms, any parent company obtaining a financial benefit from the activities of a subsidiary can be made liable for the activities of that subsidiary and can be made responsible for any damages awarded against the subsidiary. That is achieved in various states in America by piercing the corporate veil. In England, while that may occur, it is rare and was expressly not allowed in the case of Cape v. Adams where the supply of asbestos was by a South African subsidiary. That should be compared with the practice in the United States, where, on the same facts, American courts entered judgment against Cape for the activities of its subsidiaries even though Cape did not itself supply the product. If the English courts apply American law to the cases in England, it is part and parcel of that law that a parent company can be made liable for the acts of its subsidiaries. English courts will have to apply that law if the Bill is enacted. Amendment No. 3 asks for clarification.

Amendment No. 5 refers to damages. Mr. John Taylor, the Parliamentary Secretary in the Lord Chancellor's Department, wrote to Michael Grylls MP on this matter some weeks ago. Mr. Taylor said that very large damages will not be awarded by English courts, as they are in America. However, the Bill offers no protection in that respect. I take it that the damages will be entirely a matter for the court.

The danger to Cape and other companies lies in the United States where, according to the current issue of the Economist published at the weekend, asbestos victims in the United States are five times as likely to sue as they are in the United Kingdom. Great danger lies there to companies in this position. If Mr. Taylor is saying that, for the purposes of establishing liability between the parties, the applicable law as set out in Clause 11 of the Bill should apply but that such law should not apply to the assessment of damages which would be in accordance with English law, it would be better if the Bill were to say so clearly on its face. I am told that the public policy provisions would not apply under paragraph 13(a) (i) as there is at least one English court decision enforcing Texas levels of damages.

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It is not my intention to press the amendments today. My intention is to probe the meaning of the part of the Bill to which I have referred for the comfort of Cape and for the comfort of other British companies which might find themselves in the same position, especially in the United States. I beg to move.

4 p.m.

The Lord Chancellor: My Lords, it may be for the convenience of the House if I take Amendment No. 3 and then deal briefly with the other amendments. Amendment No. 3 suggests inserting at the end of Clause 13 the words:

    "including acts or omissions where the knowledge required to bring an action for damages in respect of any claim for loss or damage they occasion is not available until after the commencement of this Part".

The provision in the Bill states:

    "Nothing in this Part applies to acts or omissions giving rise to a claim which occur before the commencement of this Part".

I do not think that one can have knowledge of acts or omissions before the acts or omissions occur. Accordingly, the amendment is already more than covered by Clause 14(1). As the noble Lord said, I sought to explain that to him in a letter which I wish he had received even earlier.

With regard to Amendment No. 4, questions of the liability of a holding company for its subsidiary will be an issue which will be separate from the issue of straightforward liability in the area to which the case referred. I would think it highly likely that the correct way to apply this Bill to that would be by determining the relationships between the holding company and the subsidiary on the basis of the law governing that particular relationship in the place where the relationship was constituted.

With regard to damages, issues relating to the quantum or measure of damages are at present and will continue under Part III to be governed by the law of the forum; in other words, by the law of one of the three jurisdictions in the United Kingdom. Issues of this kind are regarded as procedural and, as such, are covered by Clause 14(3) (b).

It follows from this that the kind of awards to which the noble Lord referred of damages made in certain states, in particular in parts of the United States, will not become a feature of our legal system by virtue of Part III. Our courts will continue to apply our own rules on quantum of damages even in the context of a tort case where the court decides that the "applicable law" should be some foreign system of law so far as concerns the merits of the claim.

Some aspects of the law of damages are not regarded as procedural and, in accordance with the views of the Law Commissions in their report on the subject, Part III does not alter this. These aspects concern so-called "heads of damages"—the basic matter which is being compensated for—such as special damage relating to direct financial loss. Whether a particular legal system permits such a head of damage is not regarded as procedural but substantive and therefore not

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automatically subject to the law of the forum. This seems right given the intimate connection between such a concept and the particular nature of the case in issue. But again, I foresee no significant increase in awards of damages because a particular head of damage permitted by some foreign system of law would continue, so far as the quantum allocated to it in any finding is concerned, to be regulated by our own domestic law of damages.

I hope the noble Lord will feel reassured on the three matters he has raised and will feel able in particular to withdraw Amendment No. 3.

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