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Page 48, line 13, at end insert--
. The Chapter I prohibition does not apply to agreements creating or disposing of a legal estate or equitable interest in or over land, as defined in section 1 of the Law of Property Act 1925.").
The noble Earl said: Perhaps I may first declare an interest as a practising surveyor with some ongoing involvement with commercial property. I have already
The amendment arises out of concerns expressed to me recently by the British Property Federation and the Royal Institution of Chartered Surveyors. The Minister is aware of those concerns.
There are at least two categories of commercial property agreements that I have in view in relation to the amendment. First, there are those commercial agreements which arise out of sales and joint ventures, often containing covenants and restrictions which may bind successors downstream. They are commonly encountered in property redevelopment schemes. The second category relates to commercial leases, in particular those covenants and conditions relating to what is euphemistically referred to as the interests of good estate management. They may occur in particular in multiple let developments and govern such things as the category of use of premises, the way in which insurance payments and policies are placed and maintenance service charge matters as well as assignments and alienations of leasehold interests. The question is whether those will be brought under Chapter I. Whatever the answer, it is accepted that they will be subject to the provisions of Chapter II.
Chapter I would be retroactive, so it could at worst result in some important contractual terms being declared void if challenged. That could create all kinds of management risks and materially affect investment values, certainly while a new equilibrium was threshed out in the market place. That is undesirable. In moving the amendment, it is not my purpose to defend commercial practice in property matters which may be deemed to be anti-competitive--far from it--nor even other undesirable practices which may not be competition matters. But I want to get some certainty into this matter and to achieve a proper assessment of the Bill's impact on property agreements and the scope of that impact; how far would it run if property agreements are caught in the manner that I fear might be the case?
There is an added difficulty here in that property contractual matters are not conveniently divided into vertical and horizontal agreements. They just do not respond to that type of categorisation. Therefore, the effect of the amendment is to add another category of exemption. But its purpose is merely to probe the Government's intentions and to explain that there is some urgency in connection with the need to know in the commercial property industry because there is a whole raft of law and practice, as well as property economics, which could be materially affected in that regard. I beg to move.
Lord Simon of Highbury: First, I thank the noble Earl, Lord Lytton, for his positioning of the amendment. The Government accept that a good case can be made not to subject certain agreements relating to land to the
However, as we have found with vertical agreements, the problem of finding a clear definition which will prove of real value is complex. It has not been solved by the noble Earl's amendment which I recognise was drafted by the British Property Federation. To my mind, that would provide a very unclear exclusion which would foster the uncertainty which the noble Earl wishes to avoid. It would also very possibly be narrower than the BPF intends and might not be appropriate. Nor does it deal with the position in Scotland which has a different system of law which may not be amenable to the approach set out in the amendment.
Scope of a possible exclusion for certain land agreements has been discussed with the Lord Chancellor's department and the Department of the Environment, Transport and the Regions. Those discussions have made progress and are continuing. I hope that in the not too distant future, we shall have worked out an approach to the question which my officials will then share with interested parties such as the BPF.
On the basis of those comments and the position of the amendment, I hope that the noble Earl will feel able to withdraw the amendment at this time.
The Earl of Lytton: I thank the Minister very much for that detailed reply. Certainly, I should not wish to defend the precise wording of the amendment which, as he rightly said, was drafted by the British Property Federation. However, it has enabled me to raise the point with him and I am grateful for his response.
There must be seen to be some urgency about this in terms of making sure that property interests are not gratuitously destabilised in a way that would be manifestly unsatisfactory. It is an understatement to say that there is quite a lot at stake here. I do not intend to press the amendment but I should like to feel that the Minister will be able to return with something more definite at a later stage of the Bill and not ask the property industry to hold with the situation of uncertainty until some time after the Bill has become law. That would be terribly unsatisfactory. I reserve my position to return to this matter later in the Bill's progress and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Currie of Marylebone moved Amendment No. 50:
Page 48, line 13, at end insert--
. The Chapter I prohibition does not apply to an agreement in respect of which a direction under section 21(2) of the Restrictive Trade Practices Act 1976 is in force immediately before the commencement date").
The noble Lord said: This amendment addresses the question of compliance costs for business. There are a whole raft of agreements under previous legislation,
The Bill currently provides for a five-year transitional period for such agreements before they require approval. The estimated costs in the compliance costs estimate attached to the Bill is that that process of getting scrutiny would cost between £4 to £10 million. That is quite a substantial amount of the one-off transitional costs associated with the Bill and clearly, if it were possible, it would be desirable to reduce those costs.
Therefore, in that compliance cost assessment exercise the Government indicated that they were examining closely whether the cost of scrutinising such agreements was justified. One course proposed in the amendment would be to exclude such agreements from the Chapter I prohibition, not just for a transitional period but on a permanent basis, subject to appropriate safeguards, if necessary, which are not to be found in this current form of the amendment and to save those compliance costs on business without in any way affecting the objectives of the Bill. It would be helpful to have an indication from my noble friend the Minister as to the Government's intentions in that direction. My noble friend may also wish to respond to a question of which I gave him notice and clarify the purpose of some aspects of Clause 15 and Schedule 2 to the Bill. I beg to move.
Lord Simon of Highbury: I am grateful to my noble friend Lord Currie for the opportunity to address the question of agreements which have received a direction under Section 21(2) of the RTPA. These agreements are ones where restrictions excepted, or information provisions made, were found not to be of such significance as to call for investigation by the restrictive practices court. Many respondents to the August consultation document, as my noble friend Lord Currie said, referred to the effort and cost that would be required to review such agreements, even after a five year transitional period, and asked that they should remain outside the scope of the Chapter I prohibition for the full life of the agreements. The CBI has also forcefully put that point to us.
The Government, of course, wish to minimise the cost to business of complying with the prohibitions. We have considered the position and believe that an exclusion for the generality of agreements which have received directions under Section 21(2) is the right approach. However, there is the possibility that there may be agreements which have received Section 21(2) directions but which may turn out in practice to have anti-competitive effects. An exclusion should, therefore, be subject to a power for the Director General of Fair Trading to claw back the exclusion in certain circumstances. The Government intend to return on Report with an amendment on that basis.
I hope that my noble friend will be content to withdraw his amendment after I have spoken to his secondary question which relates to the Schedule 2 application. The schedule disapplies the Chapter I prohibition from certain agreements which are subject to separate competition scrutiny under other enactments.
Schedule 2 amends existing provision of those enactments which provide for modifications or exclusions from the Restrictive Trade Practices Act in respect of agreements which are subject to competition scrutiny under those enactments. The RTPA is repealed under Clause 1 of the Bill. Where agreements are scrutinised under other competition scrutiny regimes specially constructed to deal with a particular category of agreement I do not believe it is right for them to be subject also to the Chapter I prohibition. That would just create an unwelcome and unjustified double jeopardy.
The competition scrutiny regimes in question offer an effective means of ensuring that agreements in those areas are not anti-competitive. However, we need to ensure that the amendments to the competition regimes and the scope of the exclusion provided by this schedule are correct.
It has come to our attention that it may be necessary to make some amendments to ensure that this is the case. For example, there may be a need to make amendments in relation to the producer responsibility regime. We are considering whether changes to the schedule are indeed required and will, if necessary, bring forward amendments at Report. After that statement, I shall speak to Clause 15. I am sure that the Committee has been waiting for this.
Clause 15 sets out the effect of the giving of guidance by the director that an agreement is unlikely to infringe the Chapter I prohibition whether or not it is exempt, or that it is likely to benefit from an exemption. The director is to take no further action under this part against the agreement except in specified circumstances. These include, for example, where he has reasonable grounds for believing that there has been a material change in circumstances since he gave his guidance. The clause prevents a penalty being imposed in respect of an infringement of the Chapter I prohibition by an agreement which this clause applies. The director is able to remove the immunity in specified circumstances. If he does so because he has a reasonable suspicion that the information on which he based his guidance, and which was provided by a party to the agreement, was incomplete, false or misleading in a material particular, he is able to backdate the removal of immunity.
I believe this provision is important and will greatly assist business by giving it the security that the DGFT will be able to take further action in respect of an agreement only in specified circumstances if the DGFT has given favourable guidance of the kind to which Clause 15 applies. We are considering whether any amendments are needed in relation to this clause. In particular, we are considering whether the use of the expressions "likely to infringe" or, "unlikely to infringe" are consistent here and elsewhere in the Bill. We are 9.45 p.m.
Lord Currie of Marylebone: I am grateful to my noble friend the Minister for that full and helpful response. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 3, as amended, agreed to.
Schedule 4 [Professional Rules]:
[Amendments Nos. 51 and 52 not moved.]
Clause 4 [Individual exemptions]:
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