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Lord Haskel moved Amendment No. 4:

Page 2, leave out lines 7 and 8.

The noble Lord said: I beg to move Amendment No. 4 and also to speak to Amendments Nos. 6, 12, 16, 28 and 29. The Government intend to provide that all orders under this Act, other than the commencement order, should be subject to the negative resolution procedure of the House. This set of amendments ensures that this effect is achieved and is tidied up in the drafting of the Bill.

This is for very practical reasons, and indeed it follows the guidance from the Delegated Powers and Deregulation Committee. The commencement orders cannot be subject to the negative resolution procedure. I am sure noble Lords will understand that the right to claim interest cannot be provided by order and then simply taken away after 40 sitting days of the House due to a negative resolution. It is important that phasing is understood and acceptable.

The Delegated Powers and Deregulation Committee has reviewed the powers sought under this Bill, and its report has been placed in the Library of the House for noble Lords to see. It was its recommendation that the powers in Clauses 2 and 3 to accept contracts and debts respectively, and in Clause 5 to set the rate of interest, should be subject to the negative resolution procedure. The Government's amendment will ensure that all orders made under the Act, other than commencement orders at Clause 15(2), are subject to this negative resolution procedure.

The power to set the rate of interest under Clause 5 is particularly unsuitable for the affirmative procedure because, if economic circumstances change suddenly, it may be necessary to make an order at very short notice. The powers in Clauses 2 and 3 to accept contracts and debts respectively will involve technical definitions of exceptions, and the regulations under Clause 15(3) will comprise temporary measures incidental to phasing. These powers are not the type generally subjected to

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affirmative procedure and that is probably why the Delegated Powers and Deregulation Committee did not recommend that they should be.

Lord Meston: The noble Lord, Lord Haskel, referred to new Clause 1, but he probably meant to refer to Amendment No. 23, which provides for a new clause after Clause 13. Could he confirm that?

Lord Haskel: Yes, I do confirm that.

On Question, amendment agreed to.

Clause 2, as amended, agreed to.

Clause 3 [Qualifying debts]:

4 p.m.

Lord Fraser of Carmyllie moved Amendment No. 5:

Page 2, line 19, leave out from ("law") to end of line 20.

The noble and learned Lord said: The purpose of this amendment is to probe what appears to us at first sight to be rather unnecessarily elaborate drafting. Before the Minister says so, let me say that I recognise that, if I have a point, the amendment as it is is defective, to which I shall allude further in a moment. The purpose of our amendment would be that Clause 3(3) would read:

"Where--

(a) a right to demand interest on a debt exists by virtue of any rule of law the debt is ... an excepted debt".

That would seem to be quite a simple proposition which we could all understand. But what is drafted here is not only that you must have a right to demand interest by virtue of any rule of law, but you must then have an exercise of that right to have it regarded as an accepted debt. The subsection then states, in line 21,

"(and shall be treated as always having been) an excepted debt".

I do not understand why we do not just delete paragraph (b). It would be sensible also to delete the words in the next sentence that are in brackets,

"(and shall be treated as always having been)".

It seems to me that there is an opportunity to provide a much simpler piece of drafting here. Doubtless there is some deeply skilled legal reason for requiring the provision to be drafted in this way, but I have to say that just for the moment it escapes me. I should be grateful for some explanation from the Minister.

Lord Haskel: There is indeed some deeply skilled legal reason, and it is all tied up with Scottish law. I should have thought that the noble and learned Lord would have been in a position to know this. It may be helpful if I set out why Clause 3 has been included in the Bill.

Subsection (3) covers a specific issue that arises in Scottish common law. In Scotland, a creditor may include on his invoice for payment, after the creation of the debt, a statement noting that unless payment is made by a specific date interest will run at such and such a rate. We have not sought to override this option in Scottish law. One may assume that the creditor making the claim for interest has set a rate which at least recompenses him for being kept out of his money. Where the rate is excessive it may be struck down by

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the courts. As the right to demand interest applies in this manner under Scottish law, it is necessary to retain subsection (3)(b). If we did not, the noble and learned Lord's amendment would have the effect of disapplying the legislation to Scotland, as the right to demand interest exists under the common law.

Lord Fraser of Carmyllie: I am very interested that it should be a point that applies exclusively to Scotland, but I certainly understood that to be the position with regard to Scotland. What I had not appreciated, and what has been helpful, although I am not sure that I approve of it in principle, is that, with this subsection, there will be two routes to the securing of interest. That surprises me as a policy decision. I should have thought that if there was a right to secure interest in the fashion that the noble Lord indicated as being possible in Scotland, that should be the only fashion in which one should be entitled to secure it. One should not have these options. But I shall certainly reflect on the matter. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Haskel moved Amendment No. 6:

Page 2, leave out lines 28 and 29.

The noble Lord said: I beg to move.

On Question, amendment agreed to.

Clause 3, as amended, agreed to.

Clause 4 [Period for which statutory interest runs]:

The Earl of Home moved Amendment No. 7:

Page 2, line 37, after ("debt,") insert ("or where the provisions of section 14(2) apply,").

The noble Earl said: In moving this amendment I wish to speak also to Amendment No. 24. The Bill specifies that, when no credit period is agreed, the relevant day is in effect 30 days from the date of invoice. While this period is appropriate for most sectors, in some industries, especially in the manufacturing industry, accepted practice is 30 days from the month end following the date of invoice. Indeed the July Green Paper in paragraph 6.4.1 seemed to acknowledge this by suggesting that the default period be 30 days from invoice date unless a debtor can, and I quote,

"demonstrate entitlement to a longer credit period in accordance with trade custom and practice".

I hope the Government will agree that it is desirable not to cause a great upheaval and change existing accepted and well tried methods of trade and will consider the wording I have suggested. I beg to move.

Lord Clinton-Davis: We are aware that the Confederation of British Industry has expressed concern about this. Its desire is to ensure that trade custom and practice are recognised in the Bill and that where they exist there is no requirement for an express contract term for deferment of the day that the debt is created.

We believe that the Bill deals with this matter, though I understand the point which the noble Earl seeks to make, and in fact there is no difference of view between us about the desirability of this. Clause 14(2) purports to deal with that problem, so I have not been persuaded

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that the amendments are necessary at this stage. As regards contract terms, the word "terms" clearly includes the date or dates for payment, but if the Bill is not sufficiently clear on this point, I will want to consider the matter before we come back at Report.

The Earl of Home: I thank the noble Lord for that. Again, I have no pride in the authorship of the wording that I have suggested, and I am grateful to the noble Lord for saying that he will consider whether the existing wording is clear enough. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Meston moved Amendment No. 8:

Page 2, line 37, at end insert ("provided that the agreed date shall not be more than 90 days after--
(a) the day on which the obligation of the supplier to which the debt relates is performed; or
(b) the day on which the purchaser has notice of the amount of the debt,
whichever is the later.").

The noble Lord said: Clause 4(2) seems to allow for unlimited extension of the date for payment by agreement. That would allow the dominant party to negotiate away any risk of statutory interest. The Minister at Second Reading referred to the possibility of Part II of the Bill being available to remedy the imposition of excessive credit periods, but it is not clear how the freedom of contract given by Clause 4(2) would interact with the powers of the court to hold under Clause 8 that a contractual extension or variation of the right to interest is void in circumstances where there is no substantial remedy for late payment. It is in order to probe how these two provisions interact that I move the amendment.

I am most grateful to the Minister for writing to me after Second Reading indicating that consideration was being given to the point when I raised it at that stage. However, I suggest that an extension of more than 90 days is undesirable and that the upper limit for the relevant day should be 90 days. I beg to move.

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