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Lord Peston: My Lords, I noted that, and I was extremely impressed by it. What puzzled me, and the reason I did not press it any further, was his own department's evidence which said that it was concerned essentially about restrictions on possible bidders in this country engaged in cross-European purchases of firms elsewhere in the market; in other words, what puzzles me--the Minister might like to reflect upon it--is that the Commission could not point to any transnational problems but his department was bellyaching like mad about precisely that matter. I thought that I would leave well alone for the moment, but it is not a minor point. My view is that the halfway house position is unacceptable. I can go for complete subsidiarity or
complete uniformity. So I do not believe that there is a great deal between us, or certainly in this case not between me and the committee. It is the middle position of the directive which, I agree with everyone, is impossible.
Lord Fraser of Carmyllie: My Lords, there are some real problems, which my department is right to point out, if the directive is adopted. Not least, as I was pointing out--I was trying to deal with matters as briefly as possible earlier--if case law should develop, for example (that would be case law coming from the ECJ) it might come up in relation to all manner of takeovers and issues in other countries which would, in turn, necessarily have to be reflected in the way the Takeover Panel's activities were governed in the UK. I do not consider that there is in any sense a contradiction between what is included in that passage by the committee and what my department has indicated.
I shall pass now to the consultation exercise undertaken by the DTI. We consulted a wide range of interests. The overwhelming view of those who responded was that the adoption of the directive would be a retrograde step. The reasons cited were, almost without exception, the ones which both the committee and the Government have identified.
We have also received a number of letters from major companies listed on the Stock Exchange. Those companies would be subject to the directive's requirements if it were adopted. Without exception, all were opposed to the directive and have asked that the Government should oppose its adoption in negotiations in Brussels.
The noble Baroness, Lady Turner, referred to the protection of employees in takeovers. The noble Lord, Lord Peston, thought our response to that was wishy-washy. Advanced consultation with employees before a bid was announced would provide opportunities for insider dealing. The noble Lord, Lord Haskel, said that there must be a way to get round that. With the greatest of respect, I do not believe that there is such an opportunity. For that reason, we agree with the committee that it would not be feasible to require consultation in advance of information being made publicly available. Of course we understand why the noble Baroness would like to see such consultation, but there is another set of interests here. We just do not see any compatibility in achieving the two.
I should say a few words about future discussions on the directive. At present the directive is being considered by the Legal Affairs and Citizens' Rights Committee of the European Parliament. It may be on the dates to which the noble Lord, Lord Haskel, referred, but I am not sure. In any event, it will have to make its recommendations which will then have to be considered by the full parliament. So far as I am aware no date has been set for that debate. There have as yet been no discussions over the draft directive in the Council. None has been scheduled so far by the present Dutch presidency.
My noble friend Lord Pearson chided me for failing to respond to him when we last discussed a similar draft directive of which I disapproved before Christmas. At present, in looking to our future action we cannot be sure how other member states will react until negotiations in Brussels commence. It is too soon to judge whether we can muster a blocking minority. I regard the subsidiarity point as being one of such general application that even if there are other countries which are not particularly concerned one way or another about this directive, they should be concerned about the subsidiarity point. We shall voice our fundamental concerns on the effect of the directive and the limited justification for the proposal, but we shall also seek--that is why I have taken some time to spell it out--in negotiations to obtain changes to the text which would minimise the effect on our takeover regime were it to be introduced. We shall try to ensure also that the weaknesses in the text are put right.
In conclusion, I should say that there is almost unanimous opposition to the directive from business, from those who advise on takeover bids, and from the regulators. Those concerns have been explored in detail and subjected to rigorous analysis by the committee chaired by the noble and learned Lord. The committee has come out clearly against the directive. For the reasons I have given, the Government share that view, and we shall continue to argue the case against the directive as vigorously as we can.
7.47 p.m.
Lord Hoffmann: My Lords, I am most grateful to noble Lords for the thoughtful contributions that have been made to the debate, as I am sure are the members of the committee who took part in the preparation of the report. My noble friend Lord Chandos commented upon the thinness of attendance on the Benches opposite, so I should say that I know that there are noble Lords who would have wished to contribute to the debate but they were attending a memorial service for a late Member of this House and were unable to be present here.
A number of noble Lords raised questions which are of great importance in connection with takeovers but which go beyond the scope of the system of regulation with which we are here concerned. My noble friend Lord Haskel said that the report did not deal with whether takeovers were a good thing. My noble friend Lord Peston returned to the same theme. He said that if one were concerned with making the machinery of takeovers work better, it followed that one was in favour of takeovers. He said that one could not duck that question. I do not propose to duck it. I shall meet the matter head on.
The system of regulation takes as given the legal structure and the economic structures of this country, which are, as I said, encouraging to takeovers. That may be a good thing; it may be a bad thing. If it is thought to be a bad thing on competition grounds, the answer is to strengthen the competition laws. If it is thought to be insufficiently protective of the rights of employees--something I perfectly understand--the answer is to take precautions that the takeover shall not go through unless the rights of employees have been properly safeguarded.
But it is arbitrary and eccentric to discourage takeovers, if you think they are a bad thing, by encouraging tactical litigation and creating unfairness to shareholders. That is the matter with which this system of regulation is concerned, and that is all it is concerned with.Likewise, the question of competition policy: we are dealing here with a self-regulatory system. It is wholly inappropriate for competition policy to be the subject matter of a self-regulatory system. Competition policy represents the economic policy of the state, to be enforced by the state. It is not a matter to be enforced by gentlemen who have been brought together for self-regulation in the City of London.
Likewise, the question of employees: the position of employees on a takeover is serious and important. When the Acquired Rights Directive was being discussed by the Select Committee strong arguments were put forward that the rights given to employees when there is a takeover of a business--the right to be consulted and the right to have their jobs carried forward as against the new employer--should also be extended to a case in which there is a change of control in the shareholding by means of a takeover bid. From an economic point of view, if you are the employee of a company which has been taken over it does not make a great deal of difference whether what has been taken over are the assets and undertaking or the shares. That is the appropriate place in which to deal with the protection of employees on that matter. If that is going to be done, that is where it should be done. It is not a matter to be introduced into a system of self-regulation by the City.
I do not propose to pursue the noble Lord, Lord Pearson of Rannoch, into the arcane doctrine of subsidiarity. It is sufficient that he appears to regard the directive as being inappropriate, as does the committee, and I propose to leave it at that. It may be surprising to noble Lords to hear that when I practised as a lawyer I regarded it as part of my duty to keep my clients out
of the courts. That is the objective which the Takeover Panel has sought to pursue over the years and, though I am a lawyer, it remains a wholly laudable one.Finally, I thank the Minister for what appears to be the close agreement between the views of his department and those of the committee. That is an unusual position for the committee to find itself in. I conclude by wishing him every strength in the endeavours of his department to resist the implementation of this directive.
On Question, Motion agreed to.
City of Westminster Bill [H.L.]
Girobank Plc (Transfer) Bill [H.L.]
Hailsham Cattle Market Bill [H.L.]
Lloyds TSB Bill [H.L.]
London Local Authorities Bill [H.L.]
Presented and read a first time.
King's College London Bill [H.L.]
The Chairman of Committees acquainted the House that, pursuant to the resolution of Thursday 19th December, the Bill had been deposited in the Office of the Clerk of the Parliaments together with the declaration of the agent; the Bill was presented, read a first time, passed through all its remaining stages pro forma and sent to the Commons.
- House adjourned at eight minutes before eight o'clock.
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