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Lord Kingsland: My Lords, I thank the noble Lord the Minister for his reply and the noble Lord, Lord Razzall, for the sharp illumination that he focused on the dustier corners of the analysis that the noble Lord, Lord McIntosh, made in Committee.

I am not as happy as I would like to be about the reply of the noble Lord, Lord McIntosh, but I am aware that I am unlikely to make much more progress. I shall reflect on this matter between now and Third Reading. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 190 [Exercise of powers by authorised person]:

[Amendment No. 156 not moved.]

Clause 191 [Privileged information etc.]:

Lord McIntosh of Haringey moved Amendment No. 157:

(a) to proceedings in the High Court is to be read as a reference to legal proceedings generally; and
(b) to an entitlement on grounds of legal professional privilege is to be read as a reference to an entitlement by virtue of any rule of law whereby—
(i) communications between a professional legal adviser and his client, or
(ii) communications made in connection with or in contemplation of legal proceedings and for the purposes of those proceedings,
are in such proceedings protected from disclosure on the ground of confidentiality."

On Question, amendment agreed to.

Clause 194 [Surveillance powers]:

Lord Kingsland moved Amendment No. 158:

    Leave out Clause 194.

The noble Lord said: My Lords, we believe that the surveillance powers that were introduced by the RIPA to combat serious crime and terrorism should not be available to a public authority whose responsibilities

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are the regulation of competition. Protection of our liberties justifies the security forces having these new intrusive surveillance powers. But surely it is not right to grant the same powers to OFT officials. Surely the fight against terrorism cannot be equated with the task of eliminating the more dubious commercial practices of, for example, a cartel of provincial taxi drivers. I beg to move.

Lord Razzall: My Lords, I support the noble Lord, Lord Kingsland. This is probably a rare example in this House on which I can observe that everything has been said that I wanted to say; I have certainly said it.

Lord McIntosh of Haringey: My Lords, I accept that with gratitude.

I do not believe that the noble Lord, Lord Kingsland, or, de facto, the noble Lord, Lord Razzall, are saying that we do not need appropriate surveillance powers to investigate cartels. The very nature of cartels is that they involve agreements reached between private individuals in private places. If one does not have surveillance powers one will simply not learn what is happening. That is very often a matter not even of documentation but of verbal agreement.

Clause 194 amends the Regulation of Investigatory Powers Act 2000 to grant the OFT access to intrusive surveillance powers for the United Kingdom. With those powers the chairman of the OFT may authorise the planting of surveillance devices in residential premises, including hotel accommodation, and private vehicles. In the chairman's absence and in an urgent case, a senior officer of the OFT designated for the purpose may also grant an authorisation.

As I indicated, cartels operate under cover and are notoriously difficult to detect. I shall not resist the temptation to talk about the cartel that I know best. In the 1960s I worked in the electric lamp industry, which was one of the most blatant cartels. Everything was written down, and that was achieved by the heads of the company that I worked for and of the other companies that produced electric lamps in this country going to a luxury hotel in Switzerland and agreeing the prices of all electric lamps and the discounts for super-wholesalers, wholesalers and retailers. As they went to Switzerland, they probably would not even be caught by these provisions.

Lord Kingsland: My Lords, in those circumstances, the Minister must be most relieved that the new provisions on the criminalisation of cartels will not be made retrospective.

Lord Razzall: My Lords, is the Minister going to confirm that this evening?

Lord McIntosh of Haringey: My Lords, they are not retrospective and I had no personal part in reaching these agreements. I hasten to add that they went back even before my time to the Phoenix agreements of the 1920s. However, the point is still the same. The meetings are held on neutral territory and records are

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not necessarily kept. Surveillance powers could provide irrefutable evidence in court of participation in a cartel. It is in the public interest to gain evidence about a cartel which can lead to a successful prosecution. In the case of the cartel for Lysine, an additive widely used in animal feed, the US authorities obtained video evidence which showed cartel members in hotel rooms concluding their deals. They provided decisive evidence in securing convictions for offences that were committed over a period of four years.

Of course, the powers are strong. They will be used only in the most serious cases and where the OFT has specific information about a meeting from an informant. But there are important safeguards, which come from the Regulation of Investigatory Powers Act 2000. The RIPA establishes a framework under which the powers can be operated to uncover crime.

For an application for intrusive surveillance under the RIPA to be authorised, its use must be proportionate to what is sought to be achieved and it must meet one of three criteria. The one that will apply for the cartel offence is that the intrusive surveillance is necessary,

    "for the purpose of preventing or detecting serious crime".

It must be the case that the information could not reasonably be obtained by other means. All applications for authorisations are subject to the scrutiny and approval of the surveillance commissioners.

The clause restricts the purpose for which the OFT can use intrusive surveillance to preventing or detecting the cartel criminal offence. The OFT is not able to apply the powers for the purpose of any of its civil investigations. When an authorisation is granted, the OFT intends to outsource the technical deployment of the intrusive surveillance activity to other public authorities which already have access to the powers and experience of exercising them.

The powers are strong but they are necessary and proportionate. Cartels are secretive arrangements which can be successfully detected and prosecuted only with adequate powers of investigation.

Lord Kingsland: My Lords, I thank the Minister for his very full reply. I find this one of the most worrying clauses in the whole Bill. The powers that the Government seek under the clause are, in my submission, wholly disproportionate to the objective that they wish to achieve. Even in circumstances where the powers, as exercised, exceed the purported control framework, there is very little that the object of their use can do about it.

There is a real possibility that we shall bring back this matter at Third Reading and put the Government to the test on it. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 158A not moved.]

Clause 199 [Disqualification]:

[Amendments Nos. 159 to 166 not moved.]

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11.30 p.m.

Lord Hunt of Wirral moved Amendment No. 167:

    Leave out Clause 199.

The noble Lord said: My Lords, I make no comment on the nearly five pages of complicated provisions on director disqualification. My purpose is to seek an explanation of why the clause differs so dramatically from the White Paper, by extending director disqualification orders to directors of companies infringing competition law.

In last year's White Paper, the Government suggested that disqualification would only come into operation for those who had committed a serious breach of competition law. Clause 199 goes much further, by extending disqualification to any breach of competition law—not only UK but European. Any such breach, however minor, could be used as a basis for disqualification. Does the Minister think that is an appropriate balance between the alleged offence and the punishment? Also, can the Minister confirm that the OFT draft guidance envisages seeking disqualification of entire boards of directors?

Given that competition law is seldom easy to determine and is never black and white, there are often legitimate differences of opinion as to whether conduct is pro-competition or anti-competitive. The blanket approach could be extremely unfair. If disqualification is to be introduced in the way suggested, changes are needed to limit it to serious breaches. I beg to move.

Lord Hodgson of Astley Abbotts: My Lords, we began the afternoon talking about corporate governance and a key part of that is a board that has independent members—non-executive directors in the modern parlance. Under Clause 199, non-executive directors, who perforce are members of the board, are equally liable. As the noble Lord, Lord McIntosh, said, things are often done secretly, away from non-executive directors. It is not always easy to determine rights and wrongs but such directors could still be the subject of a disqualification order.

In my experience—not direct experience, I hasten to add—the operation of the Company Directors Disqualification Act 1986 is sometimes capricious in the way that it lands on a particular individual. The power is likely to deter people of probity and integrity from taking on non-executive directorships because they may run foul of Clause 199. It must be in all our interests that high-quality people take up such posts, because that is an essential part of good corporate governance. Unless the clause can be made a great deal more sensitive, it is likely to deter such people.

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