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Baroness Buscombe moved Amendment No. 52:

("Review of conditions giving rise to penalties.
27G.--(1) It shall be the duty of the Authority to keep under review any licence condition the contravention of which may give rise to a liability to a financial penalty under section 27A.

    (2) Where any such licence condition--

(a) is expressed in insufficiently specific terms, or
(b) may otherwise be interpreted ambiguously or without legal certainty,

    the Authority shall take appropriate steps to amend or revoke that condition in accordance with the procedures laid down in sections 23 to 26A."").

The noble Baroness said: My Lords, penalties for breach of licence conditions will be imposed on licence holders on a strict liability basis, yet licence conditions may not be expressed in terms which are precise or specific enough for the licence holders to be aware of every instance in which the authority may determine that a breach has occurred.

The drafting of such conditions will inevitably give rise to legitimate differences in interpretation between the authority and the licence holder. For example, some licence conditions require the licensee to use "best endeavours", while others require the licensee to "make sufficient arrangements" or to "take reasonable steps".

An ambiguous statutory provision would be interpreted by an independent court or tribunal and according to the cannons of statutory interpretation construed in favour of the defendant. However, in this case interpretation and adjudication will be by the authority--the body responsible for the drafting. If the penalty regime is introduced as proposed, the authority will be in a position to determine that a failure has occurred, notwithstanding the legitimate difference in interpretation, and impose a penalty. The amendment would require the authority to keep licence conditions under review and take appropriate steps to amend or revoke those which may lead to doubtful penalisation. I beg to move.

Lord McIntosh of Haringey: My Lords, I am entirely sympathetic to the intention of reducing the risk of unclear licence conditions which may lead to inadvertent contraventions and the imposition of financial penalties. However, we do not believe that the Bill runs that risk.

Our position is that, if a licence condition is worth having, it should be properly enforced. If the condition is unclear, that is something that should be taken up between the authority and the licence holder. It is not a matter which relates only to the issue of financial penalties but is fundamental to regulatory certainty. For example, if a company is in breach of its licence, the authority already has a duty to make an enforcement order stating what the licence holder must do, or must cease to do, in order to return to compliance. If the condition were thought to be unclear and companies claimed that it was lack of clarity that led to the breach, one would expect them to take up the matter with the authority, irrespective of the potential for financial penalties.

5 Jul 2000 : Column 1539

Let us not forget that if a company continued to contravene its licence conditions after it had been ordered to comply by the authority, it could face legal action for any loss or damage suffered by third parties--that is, basically the consumer--as a result of its failure to comply. Therefore, a considerable incentive already exists for the licence holder to clarify the precise effect of the licence conditions to which it is subject.

Of course, any penalty which is imposed in relation to contravention of licence conditions and other obligations must be reasonable in all the circumstances of the case. I believe that that is the mantra for this Bill. The circumstances of the case clearly would include the question as to whether it was clear that a company was in compliance. It would not be reasonable for the authority to impose a penalty on the licence holder for non-compliance if the provision in question was unclear. Such a decision would certainly be very likely to be challenged in the courts.

The financial penalties provisions in the Bill can be contrasted with the powers inserted in the Gas Act by the previous government. Under Section 28(7)(a) of the Gas Act the regulator could impose an unlimited, but appropriate, financial penalty on a company for a likely future breach of its licence conditions. Evidently there were no concerns about the clarity of licence conditions when those powers were introduced or the previous government would not have introduced them. It seems odd to assume that licences have become distinctly less clear as the regulatory system has evolved. We believe that the amendment is unnecessary.

Baroness Buscombe: My Lords, I am sorry that the Minister feels that the amendment is unnecessary. We have talked about this matter at great length with members and representatives of the utilities industries. The whole aspect of reviewing conditions which give rise to penalties is of deep concern to them. We are sorry that the Minister feels that it is unnecessary to respond. He referred earlier to "looking a gift horse in the mouth". Our interest is in good law. On that basis, I wish to test the opinion of the House.

6.23 p.m.

On Question, Whether the said amendment (No. 52) shall be agreed to?

Their Lordships divided: Contents, 64; Not-Contents, 133.

Division No. 3


Astor of Hever, L.
Attlee, E.
Biffen, L.
Blatch, B.
Boardman, L.
Brabazon of Tara, L.
Bridgeman, V.
Burnham, L. [Teller]
Buscombe, B.
Byford, B.
Campbell of Alloway, L.
Carlisle of Bucklow, L.
Clark of Kempston, L.
Colwyn, L.
Cope of Berkeley, L.
Craig of Radley, L.
Dean of Harptree, L.
Denton of Wakefield, B.
Dixon-Smith, L.
Eccles of Moulton, B.
Elliott of Morpeth, L.
Freyberg, L.
Glentoran, L.
Goschen, V.
Hanham, B.
Haslam, L.
Henley, L.
Higgins, L.
Home, E.
Hooper, B.
Hunt of Wirral, L.
Kimball, L.
Knight of Collingtree, B.
Lucas, L.
Lyell, L.
McColl of Dulwich, L.
Mackay of Ardbrecknish, L.
Marlesford, L.
Miller of Hendon, B.
Montrose, D.
Newton of Braintree, L.
Northbrook, L.
Norton of Louth, L.
Park of Monmouth, B.
Pearson of Rannoch, L.
Peel, E.
Perry of Southwark, B.
Peyton of Yeovil, L.
Pilkington of Oxenford, L.
Rawlings, B.
Renton, L.
Roberts of Conwy, L.
Seccombe, B. [Teller]
Shaw of Northstead, L.
Skelmersdale, L.
Stodart of Leaston, L.
Strathclyde, L.
Swinfen, L.
Thomas of Gwydir, L.
Trefgarne, L.
Vivian, L.
Waddington, L.
Weatherill, L.
Young, B.


Acton, L.
Amos, B.
Andrews, B.
Archer of Sandwell, L.
Bach, L.
Barker, B.
Bassam of Brighton, L.
Berkeley, L.
Billingham, B.
Blackstone, B.
Blease, L.
Borrie, L.
Bragg, L.
Brett, L.
Brooke of Alverthorpe, L.
Brooks of Tremorfa, L.
Burlison, L.
Carter, L. [Teller]
Chandos, V.
Christopher, L.
Clarke of Hampstead, L.
Clement-Jones, L.
Clinton-Davis, L.
Cocks of Hartcliffe, L.
Crawley, B.
Currie of Marylebone, L.
David, B.
Davies of Coity, L.
Davies of Oldham, L.
Dean of Thornton-le-Fylde, B.
Desai, L.
Dixon, L.
Donoughue, L.
Dormand of Easington, L.
Dubs, L.
Elder, L.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Evans of Watford, L.
Ezra, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Filkin, L.
Gale, B.
Geraint, L.
Gibson of Market Rasen, B.
Gilbert, L.
Gladwin of Clee, L.
Goodhart, L.
Gordon of Strathblane, L.
Gould of Potternewton, B.
Grenfell, L.
Hamwee, B.
Hardy of Wath, L.
Harris of Haringey, L.
Harrison, L.
Hogg of Cumbernauld, L.
Hollis of Heigham, B.
Howells of St. Davids, B.
Hoyle, L.
Hughes of Woodside, L.
Hunt of Chesterton, L.
Hunt of Kings Heath, L.
Irvine of Lairg, L. (Lord Chancellor)
Islwyn, L.
Janner of Braunstone, L.
Jay of Paddington, B. (Lord Privy Seal)
Jenkins of Putney, L.
Judd, L.
King of West Bromwich, L.
Kirkhill, L.
Layard, L.
Lea of Crondall, L.
Levy, L.
Lockwood, B.
Lofthouse of Pontefract, L.
Macdonald of Tradeston, L.
McIntosh of Haringey, L. [Teller]
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
McNally, L.
Maddock, B.
Mar and Kellie, E.
Massey of Darwen, B.
Merlyn-Rees, L.
Miller of Chilthorne Domer, B.
Molloy, L.
Morris of Castle Morris, L.
Morris of Manchester, L.
Murray of Epping Forest, L.
Nicol, B.
Orme, L.
Parekh, L.
Patel of Blackburn, L.
Pitkeathley, B.
Plant of Highfield, L.
Prys-Davies, L.
Ramsay of Cartvale, B.
Randall of St. Budeaux, L.
Razzall, L.
Redesdale, L.
Rendell of Babergh, B.
Rennard, L.
Roper, L.
Sainsbury of Turville, L.
Scotland of Asthal, B.
Sharp of Guildford, B.
Shepherd, L.
Simon, V.
Smith of Leigh, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Strabolgi, L.
Strange, B.
Symons of Vernham Dean, B.
Thomas of Walliswood, B.
Thornton, B.
Tomlinson, L.
Tordoff, L.
Turnberg, L.
Turner of Camden, B.
Uddin, B.
Walker of Doncaster, L.
Warwick of Undercliffe, B.
Watson of Richmond, L.
Whitaker, B.
Whitty, L.
Wilkins, B.
Williams of Crosby, B.
Williams of Mostyn, L.
Williamson of Horton, L.
Woolmer of Leeds, L.
Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.

5 Jul 2000 : Column 1541

6.34 p.m.

Clause 62 [Obligation in connection with electricity from renewable sources]:

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