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Lord Graham of Edmonton: My Lords, perhaps the noble Baroness will allow me to intervene. If I said that, it was entirely wrong. I meant to say that I was not fully aware of the extent of the hard work done by the committees until I forced myself to read the report--which, I assure the noble Baroness, not every Member of this House does.

Baroness Denton of Wakefield: My Lords, I fully accept the noble Lord's remarks. My intention was merely to question whether that would have been the view of my own Chief Whip. I also intended to add that no one has worked harder over the past years than the noble Lord himself.

To return to the issue of the further study, I join with other noble Lords in hoping that the Minister will clarify his views, or even explain why it is acceptable that the position should not be open and transparent. There seems to be no logical reason or justification for a policy of secrecy, of protection of the contractor when chosen. I look forward to the Minister's assurance that he will examine the matter with great seriousness.

I hope, too, that he will be able to assure the House that the study will not be restricted to current statistical information. If the directive is ever to be justified, there appears to be a need for much more information from the field.

The noble and learned Lord, Lord Hoffmann, welcomed the assurance of the Department of Trade and Industry that under no circumstances would the rights of the United Kingdom consumer be lessened. A great deal of work has been done in this area. Much of it has been driven by outside organisations with concern for the consumer, but there has been much determination in the department. We shall be happy to hear the Minister confirm that.

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I do not share the ability of my noble friend Lord Aldington to assess the Minister's qualities at golf. But I have had an opportunity over the past years to assess his commitment to detail. I am sure that will be of great benefit in this area.

I hope, too, that we may receive some indication from the Minister regarding the consumer rights of the self-employed small business owner, who is a consumer in exactly the same way as any retail consumer, with no more knowledge and with a need for protective legislation.

Outside the scope of the report but very close to it in subject is the use of credit cards overseas. The real cross-border shopping tool is the piece of plastic; and it must be relevant to what is coming forward in the way of European or further UK legislation.

After an intensive investigation, the committee rejected the case for the directive. That view must be treated with the greatest of respect. The noble Lord, Lord Borrie, rightly asked whether it was the wrong means to improve the much-needed rights of the consumer in some member states. It appears to fall into the "sledge-hammer" category. Were the noble Lord, Lord Bruce, still in his place, he would agree with me that the sledge-hammer category is usually the expensive one.

I hope that other governments will read this report and that the directive will not be brought forward by default. The report is far too valuable a piece of work not to be given the widest possible circulation. I merely add my congratulations to all those involved in its production.

4.55 p.m.

Lord Clinton-Davis: My Lords, this has been a most interesting debate. It is a pleasure to see the noble Baroness, Lady Denton, taking what is a new brief for her, although I believe she may have dealt with this subject in relation to Northern Ireland. I was about to say that she is an old friend, but that would be impolite--she is a friend of some long-standing. I know that we shall work co-operatively together on a number of trade and industry issues. The debate deals with a complex but fascinating subject on which all who spoke offered some extremely important views. I assure the House that the Government will take those views strongly into account.

I offer particular thanks to the noble and learned Lord, Lord Hoffmann, who led the committee with such diligence and skill, and to the committee members, who worked in such a thorough way in carrying out their investigations, which culminated in this wide-ranging and expert report.

Before I turn to the remarks of the noble and learned Lord, I should like to say what a pleasure it was--a pleasure shared by a number of noble Lords tonight--to hear, in such good voice, my noble friend Lord Graham, whom we greatly respected as Chief Whip in Opposition days. He was not exactly a silent Chief Whip. He was

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certainly not silent outside the Chamber, but I also heard him on a number of occasions making some very telling interventions in debates from time to time.

Lord Graham of Edmonton: Very good speeches they were!

Lord Clinton-Davis: My Lords, that is an opinion. I thank my noble friend for drawing the attention of the House to some salient features at the beginning of the report. I was a commissioner responsible for consumer protection for one year before Spain and Portugal entered the Community. It would be wrong to allow the idea to emerge from this debate that the Commission has not performed a worthwhile service. Whatever conclusions we may reach on consideration of its proposals, the defined objective--to guarantee a uniform minimum level of protection for consumers throughout the Community when they buy goods--is a not ignoble one.

Clearly many noble Lords feel that the Commission arrived at conclusions that are unsatisfactory. I shall attempt to deal with those points in the course of my remarks. The objective that the Commission set itself is a worthy one, and one to which it should perhaps return in other ways in the future.

The point that was raised about transparency in undertaking studies is one that I wholly share. As the noble Baroness, Lady Elles, has heard me say many times in the Chamber of which she is a very distinguished member, transparency in our political affairs, whether conducted here or in Europe, is a matter of the utmost importance. I therefore hope that the Commission will reflect further on the points made on this in the report and in this debate.

A point arose concerning cross-border shopping, to which I shall allude further in a moment. I sense that noble Lords have reached the general conclusion that the case was not made out on this score, a feeling which I share.

The noble and learned Lord, Lord Hoffmann, with characteristic lucidity, described the main findings of the committee. The Government have had the benefit of considering the full report and the supporting evidence. The detailed examination of the proposed directive and its recommendations carried out by the committee with a view to improving the present draft will be of great value to the Government in formulating their approach in the months to come. If I may say so in parenthesis, I hope it will, in addition, be of great value not only to the Commission but to other member states. The noble Baroness will agree with me that the experience of those who have served in Europe in one capacity or another is that reports of your Lordships' House are viewed as of great importance in formulating ideas within the Commission, the Parliament and the various bodies which have a voice in these matters. It is not the first time that I have said that but it comes from personal experience and I therefore hope that your Lordships will continue to carry out this valuable work.

As the committee suggests, there are many factors which discourage consumers from taking advantage of the single market, some of which may be more

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important than simple differences in the guarantee regimes. The restraints imposed by distance and language can be considerable, particularly for island dwellers, though less so for many people who live on the Continent, and this trend will, I am sure, persist with the development of the single market. Overall, the Government sympathise with the Commission's aims of improving the protection which legal and commercial guarantees provide to consumers throughout the Community.

I thank the noble Lord, Lord Aldington, for what he said about my golf. He was not complimentary about it, he just happened to say that I am a golfer, and he is quite right about that. The noble Lord is a very considerable golfer--or certainly was. He has also made a very valuable contribution to the deliberations of the committee and the debate today. He raised the question of subsidiarity. We take the view that there may be a case for Community action on grounds of promoting a single market, but we shall want to see whether other member states agree. I believe that it is better for us to be constructive than to go in root and branch and say that the idea is hopeless, a course which would not gain us any influence. But that is not in any way to denigrate the views expressed in the report and in this debate.

As the committee indicated, many of the matters dealt with in the proposed directive are already provided for under existing law. I believe it is right to say that in our own domestic legislation we go further in the protection of the consumer than this proposal does. If the directive were to go ahead, we should take full advantage of the minimum requirement article and not dilute present consumer protection in any way. I wish to emphasise that point to the House because I believe that it is extremely important. We wholly agree with the committee's specific recommendations that in a number of cases we should adhere to existing requirements in this country. Among the most important of those are the existing right to damages and our present limitation and prescription periods, which are respectively six years in England, Wales and Northern Ireland and five years in Scotland. Why there is a disparity between various parts of the United Kingdom is something that we should perhaps look at, but that is not a matter for me today. We believe that these rights should be retained rather than follow the thinking of the Commission, whose proposals would restrict the seller's liability to faults appearing within the first two years after delivery.

We also agree with the conclusion of the noble and learned Lord, Lord Hoffmann, that the proposal is flawed in a number of important respects and we should want to ensure that the ambiguities and uncertainties which the committee has identified are properly resolved. On that point, my noble friend Lord Graham raised the question of whether the proposed directive could be amended. I assure him that the draft will be subject to close scrutiny and intense negotiation and may well be considerably changed in the process. The work of the committee will help greatly in preparing us for those negotiations.

In some ways the proposal would confer useful additional consumer rights and protection--another matter we ought to think about--for example, the

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presumption that a fault found in the first six months was present at the time of delivery and the explicit right in the first year to repair, replacement, price reduction or rescission of the contract, according to the wishes of the consumer, where the product significantly fails to conform to the contract. Most traders probably regard it as reasonable to act as if consumers already had these legal rights. But rights inevitably become more important when one deals with a trader who adopts an unreasonable position, and that is when the crunch comes.

Like the committee, the Government believe that the proposals must be based on a sound appreciation of their costs and benefits. Legislation must be proportional to the problem and achieve the necessary consumer protection at the minimum achievable cost to business. We share the committee's doubts about the adequacy of the Commission's current impact statement. I believe that the House knows that a further study has been commissioned. However, as I have already indicated, I support the view expressed by Members of this House today and by the CBI, the British Retail Consortium and others about the lack of transparency in the conduct of the study. I am sure that noble Lords will be pleased to note that the Government have raised this at a high level with the Commission, and we shall continue to press this point.

The Commission has not ruled out the possibility of passing on to the consultants, when it is known who they are, any cost data which interested parties may wish to submit to the Commission. I think that that deals with the point raised by the noble Lord, Lord Aldington.

Meanwhile, in order to define the Government's own estimates of the likely costs and benefits, my department will be carrying out further consultations with consumer groups, industry and others. As your Lordships will know, the intended meaning of the proposed two-year liability on the seller is now clearer than when my department carried out its initial consultation. Like the committee, we do not share the rather doom-laden views of some critics on the potential burden on business. The two-year liability is similar in some ways to our right to damages, although the duration of the latter is limited only by our statutes of limitation and prescription. I want to be sure that our compliance costings reflect that clearer understanding.

Your Lordships will know that the scope of the directive is narrower than the comparable United Kingdom legislation. The directive applies only to sales of consumer goods to consumers by traders. It will be important to get these definitions right. As the report says, they are not yet satisfactory. The Government are inclined to favour the committee's option to define "consumer goods" as

    "goods which are ordinarily supplied for private use or consumption"
and to define "consumer" as

    "any natural person acting outside his trade or business".
The guiding principle here will be at least to maintain the present scope of protection, which I believe is the most important point.

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As the committee's report indicates, the contractual obligations on fitness for purpose and other matters in Article 2 of the directive seem less favourable to the consumer and less helpful to suppliers than is our present law. So, our general approach in negotiation and in implementing any directive will be to stick very closely indeed to the Sale of Goods Act terms, including the ingredients making up the concept of "satisfactory quality".

I turn to the question of breaches resulting from incorrect installation of goods by the seller. In fact, there was no reference to that in the course of the debate but I feel that I should advert to it. The directive gives rise to questions about the boundary between sale of goods and supply of services legislation. For example, does a fitted kitchen count as goods or as a service, or is it perhaps both?

Let me turn to Article 3.3. We agree with the committee that the provision would probably have little effect on the outcome of court cases, but the Government are reserving their position pending the results of their further consultation exercise.

We now come to the core of the directive: the so-called one year right to reject, or rescission or replacement. This is, understandably, the focus for concern, particularly for business. Indeed, in the light of what I have already said about Articles 1 and 2 of the directive, and our assessment of the reversed burden of proof, the one year right to reject may be the only major remaining point of contention in the legal guarantee provisions.

The Government are especially grateful to the committee for looking for a solution to that potential problem. The approach recommended would be very similar to the United Kingdom's present "short term" right to reject, but with a longer term right where there had been a "fundamental breach". I note that this is based on the approach in the Vienna Convention on the sale of goods. We shall certainly want to consider this carefully. The Government will also want to look at the recommendation in the light of the information we have received about the cost implications of the directive and the results of our forthcoming further consultation.

The serial eleventh hour--or eleventh month--rejector of goods has come to cast a familiar shadow, particularly, I gather, over the personal computer field. In general, we do not feel that the fears that have been expressed about abuses by consumers will, in fact, materialise. It will still be necessary to show that the fault in question existed at the time of sale. But it may be that in some cases it would be unreasonable to give a right to a replacement where a repair would be practicable. The provision in the directive on "minor defects" recognises that, and the committee has suggested going a step further in the direction of United Kingdom law. We also recognise the practical problems which might be involved in accounting for the use the consumer had had from the product before it broke. The concept of damages is a more flexible one here. We will consider that matter carefully.

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The Government agree with the committee that Article 3.5, which gives the final seller a right to pursue previous sellers in the supply chain, is very problematic, particularly because it goes into the area of commercial contracts and relationships. The precise meaning of the provision is unclear, but we consider that these are matters which would be better left to the national laws of individual member states. It is not so much a matter of consumer protection but of the relative strengths of the firms in the supply chain. So, we would prefer the article to be deleted.

I come now to the time limit for consumers' claims. The obligation that the directive would impose on the consumer to notify the seller within one month would represent a significant departure from practice in this country, where the buyer must have a reasonable opportunity to examine the goods. I should prefer the directive to take a very much more flexible approach. But, as the committee observes, Article 7 would allow individual member states to give their consumers greater protection. That should enable the United Kingdom to continue present practice, although it may be necessary to allow the consumer a minimum of a month to notify the seller, given that in some cases a "reasonable time" might at present be deemed to be less than a month.

As to the terms of commercial guarantees, the Government share the committee's reservations about the requirement that a commercial guarantee should place the beneficiary in a more advantageous position than the "statutory guarantee". We believe that this provision could lead to a decline in the availability of commercial guarantees, while also failing to address the risk that the terms of some guarantees could mislead consumers about their statutory rights.

The committee says that if there is a problem of spurious guarantees, it needs to be tackled more directly. I agree. The Government favour the approach of a straightforward notice, as required by the Consumer Transactions (Restrictions on Statements) Order 1976, under which a guarantee must carry a statement that it does not affect the consumer's statutory rights. The present form of words may, however, need to be re-thought, since I am not sure that they currently fulfil their intended function of informing consumers of their rights.

The most difficult aspect of the Commission's proposals on commercial guarantees is the requirement that they should be available for consultation before purchase. I share the committee's doubts about whether the problems posed by that provision could be overcome without disproportionate cost; nor do the Government believe that the benefits would justify the measure. We shall be urging more realism when detailed negotiations start.

Let me briefly allude to some of the other contributions that have been made in the debate. I was very interested to hear my noble friend Lord Borrie with his great knowledge about these matters and in particular his comments about grammar, vocabulary and concepts being at variance. He knows a great deal about that. One important comment concerned the imprecision and ambiguities to which I have already referred.

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I hope that I have dealt with most of the points raised. I note that the noble Baroness, Lady Carnegy, was very concerned about lack of transparency, and I have gone into that matter in considerable detail.

This has been a very interesting and worthwhile debate. I have taken careful note of what has been said. We shall certainly take all those views into account in the negotiations that lie ahead. Again, I extend my thanks to the noble and learned Lord, Lord Hoffmann, and the members of the committee for their invaluable work. Naturally, we shall keep the committee in touch with developments as the discussions progress in Brussels.

5.18 p.m.

Lord Hoffmann: My Lords, I am grateful to noble Lords who have taken part in this debate for their thoughtful and careful contributions. I also thank my noble friend the Minister for the general welcome he gave to the report. Perhaps I may endorse what my noble friend Lady Elles said about the thanks that we owe to our legal adviser, Dr. Kerse. The noble Lord, Lord Graham of Edmonton, commented on the enormous amount of work evidenced by the report and Members of the House will well know that the great burden of that work is borne by the legal adviser.

I also endorse what the noble Lord, Lord Graham, said about the importance of the lay members of the committee. There is no subject so technical that it does not benefit from the presence of lay members on a committee. Indeed, the more technical the subject is, the more necessary it perhaps is that they should be there, so that the lawyer members of the committee are obliged to explain themselves in terms which other people can understand. In that respect, I hope your Lordships will allow me to express my great personal regret that the iron law of rotation has removed from the committee my noble friend Lord Aldington. It was a pleasure to have him on the committee. Your Lordships may appreciate the particular piquancy of that pleasure by his contribution this afternoon when he drew attention to a point I never noticed; namely that the Select Committee is still called the "Select Committee on the European Communities" notwithstanding that the European Union has been in existence for several years. It requires a layman to draw to the attention of lawyers the extent to which they are sloppy with words and meanings.

My noble friend Lord Aldington also drew attention to a peculiar feature of some of the reactions produced by the committee to proposals emanating from Brussels. Members of the Commission may well feel that they are being subjected to a kind of Morton's Fork. If they produce a draft directive which harmonises the law in great detail, so that it is exactly the same everywhere, they are said to be over-prescriptive and doing things which ought to be left to member states. On the other hand, if they leave a great deal to the discretion of the member states and merely have an outline or a basic minimum proposal, then it is said that the proposal does not serve any purpose because there still remain discrepancies between the laws of the various member states. Either way therefore it may seem to them that

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they cannot win. The solution to the problem is to be more selective in relation to the specific target that they tackle and the way in which they tackle it.

I am grateful to my noble friend the Minister for accepting what seemed to me to be the overwhelmingly persuasive arguments of my noble friend Lady Carnegy of Lour for greater transparency in the way the Commission is dealing with the economic impact report. That seemed to me unanswerable. I am grateful too to my noble friend Lady Denton of Wakefield for drawing attention to something that I should perhaps have mentioned in my introduction; that is, the great assistance the committee received from an extremely timely report by the Northern Ireland Consumers' Association in relation to cross-border shopping in Northern Ireland. It is the only part of the United Kingdom where cross-border shopping takes place because there is a land border.

I am grateful to your Lordships for the contributions made to the debate and I commend the Motion to the House.

On Question, Motion agreed to.

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