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Lord McIntosh of Haringey: It is being asserted that this part of the Bill is in contravention of Article 10. The Government's view is that Clauses 91 to 98 implement Article 10 of the authorisation directive. I hope that I shall be able to demonstrate that.

I shall deal first with the present situation and the defects in it. In some cases, under the present system, by the time that effective enforcement action could be taken, those affected by the breach could already have suffered substantial and possibly irreversible adverse consequences. There are limits on the way in which we can remedy that situation, and we do seek to remedy it. As the noble Lord, Lord Avebury, said, we must conform to the directive that, other than in exceptionally serious and urgent cases, at least a month must normally elapse between the time when Ofcom issues a contravention notice and the time when the issue is finally decided before any remedial action can be taken. In the Bill, we conform to the directive.

We provide adequate safeguards for the subject of action. In particular, if the subject of notification takes appropriate remedial action within the period—whether or not they also make representations against the notification—Ofcom cannot impose any financial penalty or take any enforcement action against them. To that extent, we believe that the interpretation of the directive and of the clauses by the noble Lord, Lord Avebury, is incorrect. Of course, there is a full right of appeal on the merits.

The amendments would not only put the clock back to the unsatisfactory situation that we have at the moment but would make things considerably worse. What would the amendments provide for? First, there would have to be a formal investigation, which would have to take place after—secondly—the giving of notice and—thirdly—the

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opportunity for representation. If, as a result of that investigation, it were found that there was a potential breach, there would have to be, fourthly, notice of intention to declare a breach; fifthly, the opportunity for further representations; and, sixthly, another formal notice. The opportunities for delay and failure to enforce the regulations in the directive are very great. During that period, it would be possible for a breach to continue and for those who are the subject of a breach to continue to suffer. If, in those circumstances, we have to take sides between the operators and the customers for their networks and services, we are on the side of the punters, of those who use the services.

The noble Lord, Lord Avebury, and the noble Baroness, Lady Buscombe, seemed to think that taking action on the basis of reasonable belief was contrary to the directives. We disagree. Article 10 of the authorisation directive requires that, if the regulator "finds" that there is a breach, it shall notify the operator of that finding and give them a reasonable opportunity to state their views and remedy any breaches within a specific period. If they do not do so, the regulator is required to take measures to ensure compliance, including imposing financial penalties when appropriate.

It would be in breach of a person's right to a fair hearing and against natural justice to make a conclusive determination before allowing a person to make representations. Given that the directive requires representations to be capable of being made and remedial action to be taken, following the finding, it is legitimate to interpret the reference to "find" in that context as meaning that there are reasonable grounds for believing that a contravention has occurred or is occurring.

It would be wrong to impose remedies or penalties before reaching a final decision on the breach. If the intention of the directive was to require the regulator to take a conclusive decision on the breach before it could even begin enforcement action, it would be pointless for the directives to prescribe, as they do, a subsequent period for representations before remedies could be imposed. The urgency provisions in Clause 95 are not as open as noble Lords opposite seem to think. They are extremely limited.

The provisions correctly implement article 10 of the authorisation directive. They properly respect the natural rights of those who may have to complain—the users of networks and services. The amendments would take us not only back to the present unsatisfactory situation but to further complexity, bureaucracy and delay.

Lord Avebury: We must disagree on the matter. I disagree particularly with the idea that Clause 95 does not give a satisfactory possibility of dealing with the cases that the noble Lord mentioned, in which substantial and possibly irreversible damage may be caused to one of the customers of an operator who is alleged to have breached the conditions. In Clause 95, there are adequate powers to take action, if there are,

    "serious economic or operational problems for persons . . . who are communications providers".

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That fits exactly the case that the Minister mentioned, in which the consequences to the victim of the breach may be so serious that he would be driven out of business.

There is another fundamental disagreement between us on the ordinary use of the English language and the use of the word "finds". I use the word "finds" as meaning that one has carried out an investigation. I hope that most noble Lords would do the same. One does not find something to be true out of thin air. Evidence must be produced. In particular, if one is examining a case that involves substantial penalties, one must allow the person who is being accused the opportunity of rebutting the allegations.

I shall not waste the Committee's time this afternoon. I see clearly that we shall have to return to the matter on Report. For the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 91 [Notification of contravention of condition]:

[Amendments Nos. 106 to 116 not moved.]

Lord McNally moved Amendment No. 117:

    Page 88, line 27, leave out "the most" and insert "a more"

On Question, amendment agreed to.

Clause 91, as amended, agreed to.

[Amendment No. 118 not moved.]

Clauses 92 to 100 agreed to.

Clause 101 [Civil liability for breach of conditions or enforcement notification]:

Lord Avebury moved Amendment No. 119:

    Page 97, line 1, leave out paragraph (a).

The noble Lord said: Under the Telecommunications Act 1984, third parties can sue licence holders, once Oftel has determined that there has been a licence breach, for any damages that have flowed from the breach. Clause 101 will allow any third party to sue a communications provider, if they believe that an operating condition is being breached, before Ofcom has made any determination.

On Report in another place, the Government recognised that such litigation might cause problems and moved an amendment—now subsection (4) of Clause 101—that required third parties to obtain Ofcom's consent to proceedings alleging breaches of licence conditions. That was an improvement on the Bill, but there was no indication as to what criteria Ofcom would use in deciding whether to give consent to the action, and the communications providers remain exposed to the cost and risk of litigation.

It also raises the question of whether Ofcom, by giving leave to bring the case, would prejudice a fair hearing even though it had taken no formal decision. This new encouragement to third parties to litigate against communications providers has been stuck into the Bill without any justification in terms of the potential benefits to consumers who, in any event, have access to a free ombudsman or alternative dispute resolution. Nor have the Government identified cases of existing detriment which might be remedied by the

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litigation they are encouraging. No attempt has been made to found the novel concept of pre-determination in litigation on any general principle or to say whether it is now the Government's policy to introduce similar measures in other areas of regulation.

I can see no requirement in the EU directives for such a provision, which is likely to be deployed by large corporations attempting to use the courts as an alternative to regulatory procedures. Enforcement powers, including Ofcom's right to impose substantial fines, are already being strengthened in the Bill. We do not need this extra process. I beg to move.

4 p.m.

Baroness Buscombe: Her Majesty's Opposition supports this amendment.

Lord McIntosh of Haringey: That was a very wide-ranging attack on what is a simple provision in the Bill. I am surprised to find both opposition parties adopting this position.

Amendment No. 119 appears to be aimed at removing the right conferred by Clause 101 on those who may be adversely affected by a breach of a condition of entitlement under Part 2 to bring court proceedings for damages or other appropriate redress without Ofcom having first found a breach. We have already discussed the time element of this, so I shall not go into it again.

Clause 101(1)(a) allows affected persons to bring proceedings against providers of networks, services and associated facilities who are in breach of a condition of entitlement set out under Clause 42. By removing that provision, the amendment would limit the right to bring proceedings to cases in subsections (1)(b) and (c); that is, where Ofcom had previously issued an enforcement notice or a direction and the conditions of that instrument had been breached. That would be roughly equivalent to the position as it is.

Section 18 of the Telecommunications Act 1984 provides a right of action where the director general has issued an order to enforce compliance with a licence condition imposed under the Act and the licensee has breached that order. The noble Lord, Lord Avebury, asked why we are proposing to change it.

We propose to do so because, as a matter of principle, we consider it important that obligations such as those laid down by conditions of entitlement set by Ofcom under Clause 42 should provide worthwhile safeguards and benefits to businesses and consumers who deal with the suppliers of network services and associated facilities. In order to make those worthwhile, they must be readily and effectively enforceable, which means that all those adversely affected by a breach should be able to attain adequate financial or other redress for their loss without delay or difficulty.

That is not what happens at the moment. Oftel has no power to award compensation and the only express right set out in the 1984 Act for third parties to bring

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proceedings is where a licensee is in breach of an enforcement order issued by the director general. It means, in effect, that a licensee in breach of an order, which is the only time that it can in fact be made to work, will in effect be committing a second or subsequent breach of the licensed condition in respect of which the order was made. What that will do is give a "free strike" to the operator. There will be no right of redress for the initial breach, however serious its consequences for those who suffer as a result.

I do not apologise for the fact that we have introduced measures to improve the rights of customers and others in this area. Those are the provisions for customer redress schemes set out in Clauses 49 to 52, and for Ofcom to require the payment of compensation when it orders a provider's service to be limited or suspended in urgent cases under Clause 95, or for serious or repeated contraventions under Clause 97.

The provisions of Clause 101(1), in particular those set out in paragraph (a), are not only desirable, but a necessary complement to these measures. They extend the possibility of obtaining compensation to those who are not "consumers" and so would not be entitled to use the redress schemes envisaged elsewhere in the Bill. They allow third parties the possibility of bringing proceedings in the civil courts on their own account rather than having to depend on Ofcom to take action and secure redress.

It may not always be appropriate for Ofcom to take the lead in this. If, for example, a small number of people or firms have suffered, then the wider public interest might declare that it was not a matter for Ofcom. But that would mean that for those people the loss of the right to compensation and the possible extra delay in ensuring additional compliance could be very serious. This should be a matter for the courts. It is right to allow third parties to take action on their own account if they think that it is worth their while.

In saying that I am not issuing an open invitation to anyone to take action against operators. People do not resort to court action unless they are seriously aggrieved. Why should they involve themselves in the risk and possible expense of doing so? In order to take advantage of this, they must show that they have suffered loss or damage; there is a defence of due diligence provided in subsection (3); and in subsection (4) they have to acquire Ofcom's consent. I suggest to the Committee that those protections are sufficient to justify the protection which we are providing for consumers and third parties.

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